Tuesday, November 18, 2014

Time gap of 30 days isn't intended between book closure date and record date for declaration of dividend, says SAT

As per clause 16 of 'Listing agreement' time gap of 30 days is intended to be between two book closures and two record dates and not between a book closure and a record date


a)The appellant-company, listed on BSE and NSE (‘respondents’), had declared book closure date for the purpose of its AGM. The AGM was held and on the same day interim dividend was declared and the record date was fixed.

b)Thereafter, both the respondent's alleged that time gap between book closure date and record date was less than 30 days which was violative of clause 16 of the 'Listing Agreement'.

c)The SEBI held that appellant-company had violated clause 16 and, accordingly, called upon appellant to comply with it.

On appeal the Securities Appellate Tribunal held as under:

1)On perusal of clause 16 of ‘Listing Agreement’ it was seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc.

2)If more than one book closure was postulated under clause 16 of the listing agreement, then the time gap of 30 days under clause 16 would be referred to as the time gap between two book closure dates and it could not be inferred that time gap should be between book closure date and record date.

3)Where a company kept its transfer books closed during AGM as per clause 16 and also sought to declare dividend, then stipulating record date for such dividend after 30 days of book closure date as well as payment of dividend would be violative of section 205A of the Companies Act, 1956 – ORACLE FINANCIAL SERVICES SOFTWARE LTD. V. SECURITIES AND EXCHANGE BOARD OF INDIA [2014] 51 TAXMANN.COM 24 (SAT - MUMBAI)

Forex losses arising from services provided to foreign AEs are operative in nature; to be part of PLI for TP study

Foreign exchange loss in case of providing services to AEs is to be considered as operative in nature and, hence, is to be included in PLI calculation of an assessee.


One of the grounds raised for appeal was as under:

The DRP/AO had erred in confirming the action of the TPO in considering the foreign exchange loss as operating, though the loss was mainly due to the re-instatement of balances at the year end and did not pertain to the operations of the Appellant.

The Tribunal held as under:

1)The Bangalore Bench of the Tribunal in the case of SAP Labs India P. Ltd v. ACIT [2011] 44 SOT 156 (Bang.), observed as follows:

a)The foreign exchange fluctuation gain was nothing but an integral part of the sales proceeds of an assessee carrying on export business.

b)The Courts and Tribunals have held that foreign exchange fluctuation gains form part of the sale proceeds of an exporter-assessee. The foreign exchange fluctuation income could not be excluded from the computation of the operating margin of the assessee-company.

2)Thus, following the aforesaid decision of the Tribunal, it was to be held that while computing the margin for determining the ALP, the foreign exchange gain/loss has to be taken as part of the operating margin. Therefore, foreign exchange loss in case of providing services to AEs was to be considered as operative in nature and, hence, was to be included in the PLI calculation of the assessee. - KENEXA TECHNOLOGIES (P.) LTD. V. DY.CIT [2014] 51 taxmann.com 282 (Hyderabad - Trib.)