Now listed Cos. have to disclose impact of audit qualification in a separate format, SEBI clarifies

SEBI vide. Circular No. CIR/CFD/CMD 56/2016 has required listed entities to disclose the cumulative impact of all audit qualifications on relevant financial items in a separate form called 'Statement on Impact of Audit Qualifications' instead of the present form. Such disclosures will have to be made along with annual audited financial results filed in compliance with the listing regulations.

The new mechanism will be applicable for all the annual audited standalone/consolidated financial results submitted by the listed entities for the period ended March 31, 2016 and thereafter. The new requirement has to be given in a separate form called ‘Statement on Impact of Audit Qualifications’. Disclosures are required to be made in a table form and need to be enclosed with the annual audited earnings, filed in compliance with the listing regulations. The operational details for implementing the aforesaid amendment shall be as under:

1. Estimation of impact if qualification isn’t quantified by auditor : Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments

2. Declaration in case of unmodified opinion : For audit reports with unmodified opinion, the listed entity shall furnish a declaration to that effect to the stock exchange(s) while submitting the annual audited financial results.

'Magicbricks' isn't a dominant player in market of real estate brokers in India: CCI

Facts:

a) The Confederation of Real Estate Brokers' Association of India ('Informant'), was a confederation of thirty five real estate brokers association, having combined membership of approximately 20,000 real estate brokers. The informant filed case against Magicbricks.com, 99acres.com, Housing.com,Commonfloor.com and Nobroker.in ('OP's) alleging that advertising 'No Brokerage Policy' (NBP) on their websites, mobile applications, newspapers, etc., were imposing unfair and discriminatory conditions on the traditional real estate brokers who were doing real estate business on the basis of commission.

b) It was alleged that because of the practice of these top players and other online real estate listing portals of not charging broking charge/commission or charging much less compared to traditional brokerage fee of 2 per cent of the sale/purchase value of a property, the traditional real estate brokers had not been able to compete with them and, therefore, they had been losing their business. The informant also alleged that OPs were dominant players as they were top real estate listing websites in India.

The Competition Commission of India (CCI) held as under:

1. CCI observes that India is one of the fastest growing e-commerce markets. With the growth of e-commerce, the number of online portals engaged in the activities of real estate listing, property finder solution, etc., have been increasing. It is observed that besides OPs, there are also many other real estate listing sites which are offering similar services, providing various options to the consumers.

2. Since both the online platforms and the off-line traditional brokers are offering similar services to the customers, CCI is of the opinion that on-line and off-line services of brokers cannot be distinguished while defining the relevant product market in the instant case. Both are alternative channels of delivering the same service. So, the market for 'the services of real estate brokers/agents' is considered as the relevant product market in the instant case.

3. It is observed that the traditional brokers/agents provide services within their respective localities whereas OPs offer their services anywhere in India. Therefore, the relevant geographic market in instant case is considered as 'India'.

6 things you must know about Krishi Kalyan Cess

The Central Government had announced,at the time of budget 2016, a new cess, namely, ‘Krishi Kalyan Cess’ (“KKC”), which is to be levied at rate of 0.5% on the value of all taxable services w.e.f June 1, 2016. Earlier the rate of service-tax was 14.5% (after including Swacch Bharat Cess at 0.50%).But after the introduction of KKC the effective rate of service tax would beat 15%. For example- If a service of Rs.100 is provided then amount of tax would be computed as follows:

Service tax - Rs 14 (@ 14% ),

Swachh Bharat Cess (SBC) - Rs.0.05 (@0.5%),

Krishi Kalyan Cess would be Rs.0.05 (@0.5% rate).

Recently, the CBEC has issued various notifications on KKC. Impacts of such notifications are given hereunder:

1) KKC will be levied, charged, collected and paid separately to the Government independent of service tax. CBEC has allotted separate accounting codes for KKC [Circular No. 194/01/2016-ST]

2) KKC is not leviable on services which are exempt from the whole of service tax by a notification or special order issued under Finance Act, 1994. In case of services, where service tax is leviable on abated value, KKC will also be leviable only on that taxable value [Notification No. 28/2016 – Service Tax]

3) KKC is also leviable on services on which service tax is leviable as per reverse charge mechanism. –[Notification No. 27/2016 – Service Tax].

No discrimination if SBI lending rate is basis to tax concessional loan of all bank employees: HC

Facts:

a)   Petitioner (‘All India Union Bank O icers Federation’) filed a writ petition before the High Court challenging constitutional validity of section 17(2)(viii) of the Income-tax Act, 1961, read with Rule 3(7)(i) of the Income-tax Rules, 1962.

b)  Section 17(2)(viii) provides the method for computation of perquisite value of interest free or concessional loan provided by an employer to his employee on the basis of interest rate charged by the State Bank of India (SBI).

c)  Petitioner challenged the constitutional validity of aforesaid section by contending that it was unfair to compare the rate of interest charged by the individual banks on the loans advanced to their employees with the rate of interest o ered by the State Bank of India as each bank fixed its own rate of interest, depending upon the economies of their operation.

NO TDS liability on software purchases on basis of retro-amendment in definition of ‘royalty’

Facts

a)       The assessee had purchased software from residents of different countries for its business of oil and gas exploration. It made payment for such purchases without deducting tax at source.

b)       Assessing Officer (AO) was of the view that the Explanation 4 has been inserted with retrospective effect in section 9(1)(vi) which specifically includes computer software in the definition of royalty. These payments would be liable for TDS deduction u/s 195. Thus, assessee was to be treated as assessee-in-default.

c)       On appeal, the CIT(A) held that the payment made by the assessee for purchase of software would not amount to royalty.

d)       The aggrieved-revenue filed an instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

1)    A perusal of the definition of royalty as provided in Article 12 of the India-USA 'DTAA' reveals that it is the payment which is received as consideration for the 'use of' or the 'right to use' 'any copyright of literary, artistic, scientific work including….'(emphasis supplied)

Computation of book profits by Ind AS compliant companies for levy of MAT

1) Introduction

The provisions of Section 115JB provide for levy of MAT on basis of "book profits", i.e., the profit disclosed in profit and loss account prepared in accordance with provisions of The Companies Act. Ind AS compliant companies shall be required to bifurcate their Profit or Loss account into following two parts -

(i)		Net profit or loss for the year;
(ii)		Net Other Comprehensive Income.

Now question arises whether 'Net other comprehensive income' should be considered for computation of book profit under Section 115JB? On June 8, 2015, the CBDT had constituted a committee to,inter alia, suggest the framework for computation of book profit for the purpose of levy of MAT on the Ind AS compliant companies in the year of adoption and thereafter.

Now the committee has submitted its report after having consultation with MCA. Recommendations of committee and other related terms have been discussed in this article in the form of Q&As.

Time-limit for claiming rebate in case of export starts when docs confirming such export are furnished to assessee

Facts:

1.   Assessee was engaged in manufacturing and exporting lead and its alloys. It exported goods on July 14, 2008 a er payment of duty and filed rebate claim under Rule 18 of the Central Excise Rules, 2002 on September 10, 2009.

2.  The adjudicating authority rejected the claim on the ground of limitation stating that the rebate claim was filed a er expiry of one year from the date a er export of goods as per Section 11B of the Central Excise Act, 1944. The assessee filed writ petition contending that provisions of Section 11B would not be applicable to the instant case.

3.  The assessee also argued that the refund claim could not be filed until export documents and shipping bills were received from Custom authorities. Since the relevant documents were received in first week of September, 2009, refund claim could not be filed. The assessee contended that even if Section 11B was considered to be applicable, then the date of release of the necessary documents by the department would be the date for computation of limitation.

SEBI’s board proposes top 500 listed Cos. to have mandatory dividend distribution policy

SEBI held its board meeting at Mumbai, on May 19, 2016 and approved of the following proposals:

1. Dividend distribution policy for top 500 listed Cos. SEBI proposed a new regulation that mandates listed firms to have a ‘dividend policy’. The new regulatory framework is likely to be applicable to top 500 listed companies initially based on their market value and then to other listed companies. SEBI said that dividend policy would help investors to get clear picture of return on investments and to make well informed decisions.

2. To amend Infrastructure Investment Trusts Regulations: In order to make the process of registration of Infrastructure Investment Trusts easier, the SEBI has approved for bringing out a consultation paper proposing certain changes/proving clarification in the SEBI (Infrastructure Investment Trust) Regulation, 2014. Further SEBI has proposed relaxation by way of reducing the mandatory sponsor holding to hold 10 % and allowing InvITs to invest in the 2 level special purpose vehicle.

3. Tighten norms for Offshore Derivative Instruments (ODIs): SEBI has proposed to tighten norms for offshore derivative instruments(ODI). Now Offshore derivative instruments issuers would need to adhere to the Indian know your client (KYC) norms and subscribers will have to take prior approval from ODI issuers in case of transfer of the instrument to another offshore investor. Further ODI issues will have to report all the transfers made among the instruments issued by them on a monthly basis to the SEBI.

No denial of exemption u/s 11 to an educational trust if it lets out its auditorium for educational activities

Facts

a)    Assessee-trust, established for educational purposes, had let out its auditorium to a management institute on a nominal rent.

b)    Assessing Officer (AO) found that the first proviso to section 2(15) was attracted in view of the income earned by the assessee from letting out of the said premises. Accordingly, exemption under section 11 was denied to assessee.

c)    The Tribunal, after examining the facts, had come to a conclusion that the main object of the assessee-trust was to promote educational activities. It was in the course of this activity that the premise was let out. Hence, proviso to section 2(15) wouldn’t be attracted in case of assessee.

d)    Aggrieved by the order of the Tribunal. The revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

Protocol to India-Mauritius DTAA: A move towards avoidance of double non-taxation

Introduction:

A thirty three year old journey, peppered with much fund inflows, tax benefits, and simultaneously, ample criticism, is set to change its course, aligning with the emerging global tax order. The India-Mauritius tax treaty has finally been amended to remove capital gain exemption, albeit in a phased manner, particularly in the wake of India's commitment to BEPS²Action plan which advocates Stateless income, treaty abuse and round tripping of funds.

The Indian Government needs to be lauded and given credit for the manner in which the treaty has been sought to be amended (in a phased manner and not an abrupt shift), namely levying capital gains tax on transfer of Indian shares, which are acquired after 1st April, 2017. In other words, all investments made through Mauritius in shares of Indian companies till 31st March, 2017, have been grandfathered, thus the existing interests of investors have not been infringed at all. Further, it is proposed to introduce capital gains tax with respect to investments made in Indian shares on or after 1st April, 2017, in a phased manner, namely 50% of the tax for capital gains arising between 1st April, 2017 and 31st March, 2019, subject to fulfilling the limitation of benefit clause; and post 1st April, 2019, capital gains tax shall be levied at full rate. The aforesaid amendment to the tax treaty with Mauritius is likely to impact the India-Singapore tax treaty in a similar manner, as per the protocol signed between India & Singapore.