Saturday, October 29, 2016

RBI allows start-ups to raise 3 million USD through ECBs

The RBI has allowed banks to allow start-ups to raise up External Commercial Borrowings (ECBs) upto 3 million USD or equivalent during each financial year for a minimum average maturity period of 3 years. An entity recognised as a Start-up by the Central Government on date of raising ECB is eligible to raise such ECBs.

 Such borrowing should be denominated in any freely convertible currency or in Indian Rupees  (INR) or a combination thereof. The money raised can be used for any expenditure in connection with the business of company. The borrowing can be in the form of loan or nonconvertible, optionally convertible or partially convertible preference shares.
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Promoter’s a/c can be freezed if an entity doesn't pay fine for non-compliance with disclosure norms

SEBI has observed that some of the listed entities have not paid the fines levied by the stock exchanges for non-compliance with disclosure norms. In order to ensure effective enforcement of listed regulation, it has been decided to freeze the holdings of promoters and promoter group entities of companies in the manner specified below:

• In case non-compliant listed entity fails to pay fine levied by stock exchanges within time frame specified in notice issued by the exchange, the concerned stock exchange shall, upon expiry of the period, freeze holdings in other securities in the demat accounts of promoter and promoter group to the extent of liability which shall be calculated on a quarterly basis.

• In case of non-compliance for two consecutive periods, and failure to comply with the notice issued by the stock exchange within time frame, the recognized stock exchange shall forthwith intimate the depositories to freeze the entire shareholding of the promoter and promoter group in such listed entity. In addition to the freezing of shares of the non-compliant listed entities, the holdings in the demat accounts of promoter and promoter group in other securities shall also be frozen to the extent of liability which shall be calculated on a quarterly basis.

• While freezing the holdings the recognized stock exchange shall have discretion of determining which of the securities and holdings of a promoter or promoter group entity are to be frozen.

India gets taxation rights on investments routed via Korea; CBDT notifies revised India-Korea DTAA

The existing Double Taxation Avoidance Agreement (‘DTAA’) between India and Korea was signed on 19th July, 1985 and notified on 26th September 1986. A revised DTAA between India and Korea signed on 18th May 2015 during the visit of the Hon’ble PM to Seoul has entered into force on 12th September 2016, on completion of procedural requirements by both the countries. Provisions of new DTAA will have effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

Some of the salient features of new DTAA are as under:

a) The existing DTAA provided for residence based taxation of capital gains on shares. In line with India’s policy of taxation of capital gains on shares, the revised DTAA provides for source based taxation of capital gains arising from alienation of shares comprising more than 5% of share capital.

b) In order to promote cross border flow of investments and technology, the revised DTAA provides for reduction in withholding tax rates from 15% to 10% on royalties or fees for technical services and from 15% to 10% on interest income.

No capital gain tax if capital contribution by partner is current asset and not capital asset: ITAT


The issue before the ITAT was as under:

Whether the CIT(A) has erred in deleting the addition of Short Term Capital Gains earned by the assessee on transfer of land to the Partnership firm as their Capital Contribution, by holding that the provisions of section 45(3) was not applicable?

The ITAT held as under:

1) Section 45(3) is applicable only in respect of a capital asset. The said provision has no application in the instant case since what was transferred by the partners was a current asset and not a capital asset.

2) Section 45(3) did not come into operation for the assessment year 2008-09 by reason of conversion of the developed land and building into fixed assets by the said firm or due to revaluation by the said firm of the asset so converted during the previous year ended March 31, 2008.

3) Section 45(3) of the Act is applicable in the year of transfer by the partner of his capital asset to the partnership firm by way of capital contribution. In the instant case, the year of transfer was the financial year ended March 31, 2006. The ITO was wholly unjustified in invoking section 45(3) which had no application in the assessment year 2008-09 or for that matter in the assessment year 2006-07. - [2016] 74 187 (Kolkata - Trib.)