Statutory Ammendments to Companies Act
July 4, 2003
Direct tax notifications
February 24, 2004
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Statutory ammendments to company law

Recent Notifications:

Date : Jan 14th, 2004.

STATUTORY AMENDMENTS

COMPANY LAW

Companies (Acceptance of Deposits) Rules, 1975-Amendment

The words “the maximum rate of interest prescribed by the Reserve Bank of India that the non-banking financial companies can pay on their public deposits” were substituted for the words “twelve and a half per cent”. In rule 3(1)© by the Companies (Acceptance of Deposits) (Third Amendment) Rules, 2003 : [2003] 117 Comp Cas (st.) 236.

Companies (Appointment and Qualifications of Secretary) Rules, 1988-Insertion of second and third provisions in rule 2(3)

The Companies (Appointment and Qualifications of Secretary) (Amendment) Rules, 2003 ([2003] 117 Comp (St.) 266) has inserted second and third provisos in rule 2(3) of the Companies (Appointment and Qualification of Secretary) Rules, 1988, with effect from 14th October, 2003.

The second proviso provides that a company with its registered office and corporate office and works situated in towns with a population of less than one lakh in accordance with Census of India 2001, report and having a paid-up share capital of rupees two crores or more but less than rupees five crores, may appoint any individual, who possesses any one ofr more of the qualifications specified in clauses (i) to (x) of sub-rule (4) as its whole-time secretary to perform the duties as such under the Companies Act, 1956 and the third proviso provides that if a company having a paid-up share capital of rupees two crores or more but less than rupees five crores shifts either its registered office or corporate office or works from towns with a population of less than one lakh, it will appoint a person as a whole-time secretary under sub-rule (1).

Consolidated Commercial Digest Vol. No 6, Part 7 Page 63
CUSTOMS

Effective date of payment of Government dues by cheque – Circular No 86/2003, dated 3rd October, 2003.
This circular has clarified that in view of specific provisions in the Central Excise and service tax laws, the Circular No 28/2002, dated 24th May, 2002, will not apply to payments of Central excise duties and service tax.

Consolidated Commercial Digest Vol. No 6, Part 5 Page No 78
Import of second-hand personal computers (PCs)/Laptops-Clarification No 16 (RE-2003)/2002-07, dated 29th September 2003

Are second-hand personal computers (PCs)/Laptops covered under the definition of “second-hand capital goods” and allowed freely as per the provisions of para. 2.33 of hand Book of producers (Vol I) 2002-07, provided these are not more than ten years old ?

It is clarified that the second-hand personal computers (PCs)/Laptops are covered under the definition of “second-hand goods” and their import is governed by the provisions of para. 2.17 of EXIM Policy, 2002-07 and not covered under the definition of “capital good” as defined under para. 9.10 of EXIM Policy and para. 2.33 of Hand Book of Procedures (Vol.I). In view of this, second-hand personal computers (PCs)/laptops can also not to be permitted for import under EPCG scheme under the provisions of para 5.1 of the Exim Policy, even for service providers.

Consolidated Commercial Digest Vol. No 6, Part 5 page No 79
FEMA

Evidence of import-Liberalisation-A P (DIR Series) Circular No 9 dated 18th August 2003

Attention of authorized dealers is invited to paragraph A10 2(i) of the annexure to A P (DIR Series) Circular No 106, dated 19th June 2003 ([2003] 116 Comp Cas (St.) 18), in terms of which authorized dealers may accept either exchange control copy of bill of entry for home consumption or a certificate from the Chief Executive Officer (CEO) or auditor of the company that the goods for which remittance was made have actually been imported into India provided the amount of foreign exchange remitted is less than USD 100,000 or its equivalent. The RBI through this circular has enhanced the said amount of USD 100,000 to USD 1,000,000 (USD one million) :

[2003] 117 Comp Cas (St.) 30.

Consolidated Commercial Digest Vol. No 6, Part 6 Page No 71
Export of goods and services – A P (DIR Series) Circular No 12, dated 20th August 2003

Attention of authorized dealers is invited to A P (DIR Series) Circular No 12 ated 28th August 2002 ([2002] 112 Comp Cas (St.) 12), in terms of which the facility for realization and repatriation of full value of goods/software exported to the countries included in the list annexed to the above circular was extended for a period of one year from September 1, 2002. On a review, this circular exyends the above facility for a further period of one year with effect from September, 2003, to August 31, 2004, subject to review for export of goods/software to the countries included in the list annexed to this circular :
[2003] 117 Comp Cas (St.) 60

INCOME TAX

3,000 amendments to the I-T Act

The business, trade and commerce and the NRI community are in a tizzy by the amendments in the Income-tax Act, 1961 that negates everything that the Supreme Court and High Courts give them.

A tax expert has informed us that the Income-tax Act, 1961 is perhaps the most mauled piece of legislation in the country and may be a fit entry in the Guinness Book of Records as the legislation which contains the maximum number of amendments in the world. It is estimated that there are more than 3,000 amendments, many of them thoughtless. But 3,000 is a conservative figure say some experts and the figure could easily be 5,000. There were 100 amendments in the recent finance bill alone.

(BCAJ, November 2003, Vol. 36, Part 2, Page No-215)

Filing of returns relating to Tax deduction at Source on computer media. 0 TDS-Return via computer media-Text of Circular No 8/20003 dated 19-9-2003 issued by the Central Board of Direct Taxes.

1. Finance Act, 2003 has amended S 206 of the Income-tax Act, 1961 with a view to provide for mandatory filing of returns relating to tax deduction at source by principle officers of companies responsible for deducting tax on computer media. For this purpose, the Board has been empowered to notify an appropriate scheme in the Official Gazette.

2. Pursuant to this. Rule 37B of the Income-tax Rules, 1962 has been amended to provide that where a person responsible for deducting tax under Chapter XVIIB is required to file a return or statement referred to in Rule 37 or 37A on a computer media, he shall deliver or cause to be delivered the same in accordance with such scheme as may be specified by the Board. It has been further provided in Rule 37B that the return or statement filed on computer media shall contain all the information required under Rule 37 or Rule 37A, as the case may be.

3. The forms of TDS returns prescribed under Rules 37 and 37A have also been amended and notified vide S O No 878(E) and S O No 877(E) dated 31.7.2003, respectively.

4. The board has, under the powers conferred by section 206 of the Income-tax Act, framed and notified the “Electronic Filing of Returns of Tax Deducted at Source Scheme,2003”, vide S O No 974(E) dated 26-8-2003.

5. With a view to ensure that the TDS returns filed on computer media conform to the required specifications, the person responsible for deduction of tax at source and filing of TDS return on computer media shall ensure the following :

i) Form No 27A is duly filled in all columns, verified and enclosed in paper format with the return on computer media.

ii) Tax deduction account number (TAN) of the person responsible for deducting tax at source is clearly mentioned in Form No 27A as also in the TDS return, as required by sub0section (2) of section 203A of the Income-tax Act.

iii) The particulars relating to deposit of tax at source in the bank are correctly and properly filled in the table at item No 6 of Form No 24 or item No 5 of Form 26 or item no 5 of Form No 27, as the case may be.

iv) The data structure of the return for tax deduction at source in Form No 24 or Form No 26 or Form No 27 prepared on computer readable media conforms to the data structure prescribed by the e-filing administrator authorised under the scheme for electronic filing of TDS returns notified by the Board vide S O No 974 (E) dated 26-8-2003.

v) The Control Totals of the amount paid and the tax deducted at source as mentioned at item No 3 of Form No 27A tally with the corresponding totals in the return for tax deduction at source in Form No 24 or Form No 26 or Form No 27, as the case may be.

6. In case the return on the computer readable media is found to be corrupted or does not fulfill any of the above guidelines, the computer readable media shall be returned to the deductor for appropriate correction and resubmission.

7. The guidelines relating to filing of returns relating to tax deduction at source on computer media laid down in Board’s earlier Circular No 797 dated 10.10.2000 shall stand modified to the above extent.

(BCAJ, November 2003, Vol. 36, Part 2, Page No-224)
Order Under Section 119(2)(a) of the Income-tax Act, 1961 – Text of Circular dated 16-10-2003 issued by Central Board of Direct Taxes.

In exercise of powers conferred under clause (a) of Sub-section (2) of Section 119 f the Income-tax Act, 1961, the Central Board of Direct Taxes, hereby orders that the due date of filing of return of Income in case of all corporate assessees and those assessees whose accounts are required to be audited under section 44 AB of the Income-tax Act, 1961 is extended till 30.11.2003.

(BCAJ, November 2003, Vol. 36, Part 2, Page No-224)
Audit report U/s 33AB – Form No 3AC

Part III of Form No 3AC being Audit Report u/s 33AB(2) of the Income-tax Act, 1961 has been modified.

[Notification No 240 dated 1st October, 2003 )184 CTR (St.) 100) (263 ITR (St.) 128) (132 Taxman (St.) 74)]

I T Review – November 2003 Vol. XXIX No 8 Page No 16

Extension of due date for filing of Returns u/s 139(1)
The due date for filing of income tax returns in case of all corporate assessees and those assessees whose accounts are required to be audited under section 44AB of the Income-tax Act, 1961 is extended till 31.11.2003

(F No 220/3/2003ITA-II dated 16th October, 2003 (184 CTR (St.) 110) (132 Taxman (St.) 105)]

I T Review – November 2003 Vol. XXIX No. 8 Page No 17
Extension of specified date for filing Audit report u/s 44AB

The due date of filing of tax audit report U/s 44AB of the Income-tax Act, 1961 is extended till 30.11.2003. In continuation of the order u/s 119(2)(a) dated 16.10.2003, it is further clarified that the date for filing returns in the case of partners of firms required to file report u/s 44AB, also stands extended to 30.11.2003.
(Order F NO 220/3/2003/ITA-II, dated 20-10-2003 (184 CTR (St.) 110) (132 Taxman (St.) 105)]

I T Review – November 2003 Vol. XXIX No 8 Page No 17

Filing of TDS returns on computer media

With a view to ensure that the TDS returns filed on computer media conform to the required specifications, the person responsible for deduction of tax at source and filing of TDS return on computer media shall ensure the following :

i) Form No-27A is duly filled in all columns, verified and enclosed in paper format with the return on computer media.

ii) Tax deduction account number (TAN) of the person responsible for deducting tax at source is clearly mentioned in Form No-27A as also in the TDS return.
iii) The particulars relating to deposit of tax at source in the bank are correctly and properly filled in the table at item No-6 of Form No 24 or item No 5 of Form No 26 or item No 26 or item no 5 of Form No 27, as the case may be.

iv) The data structure of the return for tax deduction at source in Form No-24 or Form No-26 or Form No-27 prepared on computer readable media conforms to the data structure prescribed by the e-filing administrator authorized under the scheme for electronic filing of TDS returns notified by the Board vide S O 974(E) dated 26-8-2003.

v) The control totals of the amount paid and the tax deducted at item No. 3 of Form No. 27A tally with the corresponding totals in the return for tax deduction at source in Form No 24 or Form No 26 or Form No 27, as the case maybe.

In case the return on the computer readable media is found to be corrupted or does not fulfill any of the above guidelines, the computer readable media shall be returned to the detector for appropriate correction and resubmission.

The guidelines relating to filing of returns to tax deduction at source on computer media laid down in Board’s earlier Circular No 797 dated 10-10-2000 shall stand modified to the above extent.
[Circular No 8 of 2003 dated 18th September, 2003 (184 CTR (St.) 22) (132 Taxman (St.) 63) (263 ITR (St.) 61)]

I T Review – November 2003 Vol. No XXIX No 8 Page No 17

Extension of due date for filing of TDS returns

The CBDT has extended the last date of filing TDS retuns on computer media as per the provisions Section 206(2) of the Income-tax Act in respect of previous year 2002-03 to 31st January, 2004.

The last date of filing of TDS returns other than returns on computer media shall remain to be 30th November, 2003.

(F. No 385/30/2003-IT(B) dated 28th October, 2003)
I T Review – November 2003 Vol No XXIX No 8 Page No 18

Tax collection at source section 206C – Rules 37C, 37CA & 37D

A declaration prescribed u/s 206C(1A0 to be furnished by a buyer to the effect that the goods referred to in section 206C are to be utilized for the purposes of manufacturing, processing or producing articles or things and not for trading purposes shall be in Form No 27C.

One copy of this declaration received by the seller shall be delivered to the Chief Commissioner or Commissioner on or before the seventh day of the month next following the months in which the declaration is furnished to him.

All the sums collected at source shall be paid to the credit of the Central Government within one week from the last day of the month in which the collection is made.
[Notification No 239 of 2003 dated 30th September, 2003 (184 CTR (St.) 96) (263 ITR (St.) 119) (132 Taxman (St.) 69)]

I T Review – November 2003 Vol No XXIX No 8 Page No 18

Deletion of certain forms
Form Nos. 13C, 13D, 13E, Form Nos. 15, 15AA, 15B, 15E Form Nos. 27F and 27G have been omitted.

[Notification No 244 of 2003 dated 1st October, 2003 (184 CTR (St.) 102) (263 ITR )St.) 130 (132 Taxman (St.) 76)]
I T Review – November 2003 Vol XXIX No 8 Page No 18

Filing of returns relating to tax deduction at source on computer media – Circular No 8 of 2003, dated 18th September, 2003

With a view to ensure that the TDS returns filed on computer media conform to the required specifications, the person responsible for deduction of tax at source and filing of TDS return on computer media shall ensure the following :

· Form No 27A is duly filled in all columns, verified and enclosed in paper format with the return on computer media.

· Tax deduction account number (TAN) of the person responsible for deducting tax at source is clearly mentioned in Form No 27A as also in the TDS return, as required by section 203A92) of the Income-tax Act.

· The particulars relating to deposit of tax at source in the bank are correctly and properly filled in the table at item No 6 of Form No 24 or item No 5 of Form No 26 or item no 5 of Form No 27, as the case may be.

· The data structure of the return for tax deduction at source in Form No 24 or Form No 26 or Form No 27 prepared on computer readable media conforms to the data structure prescribed by the e-filing administrator authorized under the scheme for electronic filing of TDS returns notified by the Board by S O No 974 (E) dated 26th August, 2003 ([2003] 263 ITR (St.) 14)

· The control totals of the amount paid and the tax deducted at source as mentioned at item No 3 of Form No 27A tally with the corresponding totals in the return for tax deduction at source in Form No 24 or Form No 26 or Form No 27 as the case may be.

In case the return on the computer readable media is found to be corrupted or does not fulfill any of the above guidelines, the computer readable media shall be returned to the deductor for appropriate correction and resubmission.

The guidelines relating to filing of returns relating to tax deduction at source on computer media laid down in Board’s earlier Circular No 797 dated 10th October,2000 ([2000[ 246 ITR (St.) 1) shall stand modified to the above extent :
(2003) 263 ITR (St.) 61.

Consolidated Commercial Digest Vol. No 6, Part 7 page No 66

Income –tax Act, 1961 –Last date for filing of TDS returns on computer media
The Central Board of Direct Taxes has extended the last date for filing of TDS returns on computer media as per the provisions of section 206(2) of the Income-tax Act, in respect of previous year 2002-03 to 31st January 2004

Consolidated Commercial Digest Vol. No 6, Part 7 page No 67

Finance Act, 2003 –Explanatory Notes on provisions relating to Direct Taxes-Circular No 7 of 2003, dated 5th September, 2003

This circular explains the substance of the provisions of the Finance Act, 2003, relating to direct taxes. For full text of the circular, refer to [2003] 263ITR(St.) 62-119.

Consolidated Commercial Digest Vol. No 6, Part 7 page No 67

Tax deduction at source under section 194H-Turnover commission payable by Exemption from TDS-Circular No 6 of 2003 dated 3rd September 2003

Under Circular No 6 of 2003 dated 3rd September 2003 the Central Board had clarified that tax would not be required to be deducted by RBI on the amount of turnover commission paid or credited by it : [2003] 263 ITR (St.) 33.
Consolidated Commercial Digest Vol. No 6, Part 7 page No 67

INDIRECT TAX

Grant of refund of duty on petrol supplied to President, Vice-President, Governors, Diplomatic missions, including diplomatic officers and U N specialized agencies – Sanctioning authority – Circular No 761 /77/ 2003-CX, dated 5th November 2003

With a view to ensure expeditions disposal of claims and in the light of the increase in prices of petrol since 1985, the CBEC has, in partial modification of the earlier Instruction No 111/4/85-CX-3, dated 5th June 1985, instructed that henceforth, all such petrol refund claims upto a limit of Rs 5000/- (from the previous Rs 2000/-) may be sectioned by the Deputy / Assistant Commissioner of central Excise (Technical) wherever such a post exists and in such cases, the claims above Rs 5000/- may continue to be sanctioned by Additional / Joint Commissioner (P&E) / (P&V) of the Commissionerate.

Consolidated Commercial Digest Vol. No 6, Part 5 Page No – 78

CAPITAL ISSUES

Applicability of Accounting Standards to SMEs – Summary of Release issued by Institute of Chartered Accountants of India
Small and medium commercial enterprises and small unlisted corporate entities are being exempted from the rigours of complying with some of the accounting standards issued by the Institute of Chartered Accountants of India (ICAI)

The disclosures to be made by this category of commercial entities are also being partially eased. A decision to this effect was taken by the central council of the institute on recommendation of the accounting standards board at a meeting in the capital.

The decision will reduce compliance cost for the SMEs. More scientifically, it will give relief to chartered accountants in small towns, who do not have the skills to prepare the accounts of the company in compliance with some of the new and complex accounting standards. On the global front, international standard setting bodies such as International Accounting Standards Board are already working on relaxing compliance rules for small and medium enterprises. ICAI claims it is the first regulator in the world to take such a decision.

ICAI president R Bhupathy said that the institute had received representation from small enterprises, including partnership firms and sole proprietors seeking exemptions from certain standards.

It was felt that the same set of accounting standards that are applicable to large corporates should not be applicable to a small enterprise, Mr Bhupathy said.

The modifications and exemptions would be applicable with effect from the accounting period commencing on or after April 1, 2004.

For the purpose of providing exemptions, the institute has classified all business into three categories. Level 1 will have to comply with all the accounting standards and disclosure norms as is notified by the institute. Level 2 and Level 3 companies and other business entities are eligible for several exemptions.

Level 1 entities include all entities that have its securities listed on the exchanges in the country or outside, those that are in the process of listing its securities and a board resolution has been passed, banks and cooperative banks, financial institutions and insurance companies. Also, any commercial enterprises with turnover, excluding other income of Rs 50 crore or borrowings including public deposit in excess of Rs 10 crore will be in level 1. Holding and subsidiary enterprises of a level 1 entity would also be required to comply with all the accounting standards.

Level 2 includes all enterprises with a turnover in the immediately-preceding accounting period in excess of Rs 40. lakh and less than Rs 50 crore and those with borrowings, including public deposits, in excess of Rs 1 crore but less than Rs 10 crore. Holding and subsidiary enterprises of these entities will also be in level 2.

All business enterprises that are not covered by level 1 or 2 are in level 3.

ICAI has decided that level 2 and level 3 companies will not be required to comply with accounting standards on cash flow statements (AS3), segment reporting (AS17), related party disclosure (AS18) and discontinuing operations (AS24).

Also, they will be granted exemption from making certain disclosures under the accounting standard on leases (AS19) and provisions, contingent liabilities and contingent assets (AS29). In addition, they are not required to disclose diluted EPS and certain under information required under AS 20, the standard for earnings per share.

The effective date for adopting the accounting standard on the impairment of assets is to be extended to April 2006 for level 2 entities and to April 2008 for level entities.

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