Analysis of Supreme Court Judgment in Union of India vs. Parmar Construction Company
For appointment of an arbitrator, the High Court has to first resort to the mechanism as prescribed in the Contract and if the arbitrator appointed in terms of the agreement failed to discharge its obligations or to arbitrate the dispute, then an application under Section 11(6) of the Arbitration and Conciliation Act can be considered for seeking appointment of an ‘Independent Arbitrator’.
Read full case analysis at : https://dasgovernance.com/2019/04/02/analysis-of-supreme-court-judgment-in-union-of-india-vs-parmar-construction-company/
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👉CBDT collects Rs 1,117,416.5 Crore (11.17 Lakh Crore) in Total Direct Taxes in FY 2018-19, a shortfall of around Rs 83,000 Crore or 7.4% of the Rs 12 Lakh Crore Collection Target. The collection is, however, 18.3% higher than last year.
👉The persons who have not filed income tax returns for the last assessment year can expect an e-notice from the income tax department very soon. While scanning around 11 lakh cases of non-filing the Income Tax Return (ITR), the newly incepted Centralised Verification Centre (CenVC) at the Income Tax Department is going to send e-tax notices to the non-filers of the ITR.
👉In connection with a tax default of Rs. 3.62 Crores, the Income Tax Department attaches a house of Kashmiri separatist Syed Ali Shah Geelani located in Delhi.
👉Paytm Money Gets SEBI Approval for Stock Broking. Not only this, Paytm also receives Membership approval from Bombay Stock Exchange (BSE) & National Stock Exchange (NSE). The new move will enable Paytm Money to start offering features such as the ability to trade in Equities And Cash Segments, Derivatives, and Exchange-Traded Funds (ETFs) among other exchange-traded products.
👉SEBI issues a circular regarding Empanelment of Insolvency Professionals to be appointed as Administrators under the regulator's framework. An Administrator has to be a person registered as an Insolvency Professional with the IBBI and empanelled with the SEBI from time to time.
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Bombay High Court has upheld an order of the income tax tribunal, which said that Aditya BirlaNSE 4.98 % Group’s telecom unit did not violate rules while receiving an investment of Rs 2,098.25 crore from a subsidiary of global private equity firm Providence Equity Partners.
GST: Please change series of sales invoices w.e.f. 1.4.2019 as required by Rule 46(b) of CGST Rules, 2017.
MCA has notified the Companies Indian Accounting Standards (Ind AS) First and Second Amendment Rules, 2019, applicable w.e.f. 1 April, 2019, to amend the ‘Annexure B on Indian Accounting Standards (Ind AS)’ to the Companies (Ind AS) Rules, 2015 (the principal rules), by way of inserting/ substituting various paragraphs, annexures, etc. in different Ind AS.
SEBI proposed amendments to norms governing self-Regulatory Organisations, including recognising such entities on a nomination basis. Coming out with a consultation paper, the watchdog said that an SRO would be defined as an organisation of intermediaries or an entity promoted by a stock exchange, recognised by the board.
SEBI has proposed a self-regulatory body for distributors and advisors of mutual funds products. There are about 1.24 lakh distributors of mutual fund products as on February 28, 2019 and 1,136 investment advisers registered with Sebi as on March 19, 2019.
RBI asked banks to disclose bad loan divergences in their financial statements if the additional provisioning exceeds 10% of profit before provision and contingencies. In a notification, the RBI said it is observed that some banks, on account of low or negative net profit after tax, are required to disclose divergences even where the additional provisioning assessed by RBI is small, which is contrary to the regulatory intent that only material divergences should be disclosed.
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💡Analysis of Supreme Court Judgment in Bir Singh vs. Mukesh Kumar
It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer.
Read full case analysis at : https://dasgovernance.com/2019/04/03/analysis-of-supreme-court-judgment-in-bir-singh-vs-mukesh-kumar/
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🍎IMPORTANT DUE DATES IN THE MONTH OF APRIL 2019
A. Due dates for Compliances under GST
10-04-2019 - GSTR 8 for E-Commerce operators for the m/o March 2019
10-04-2019 - Filing GSTR-7 (for assessee who is required to deduct TDS under GST) for the m/o March 2019
11-04-2019 - GSTR-1 for the month of March 2019 for taxpayers with Annual Aggregate turnover More than 1.50 Crore
13-04-2019 - GSTR-6 for Input Service Distributor
18-04-2019 - Quarterly return for taxpayers opting for Composition Scheme(GSTR-4)
20-04-2019 - GSTR-3B for the m/o March 2019
30-04-2019 - GSTR-1 for the quarter ending March 2019 for taxpayers with Annual Aggregate turnover upto than 1.50 Crore
B. Due dates for Compliance under Income tax
14-04-2019 - Issue of TDS Certificate for tax deducted under section 194-IA/194-IB in m/o Feb'19
30-04-2019 - Deposit of TDS/TCS for m/o March 2019
30-04-2019 - Furnishing challan-cum-statement in respect of tax deducted u/s 194-IA/194IB in month of March'19
30-04-2019 - Due date for uploading declarations received from recipients in Form. 15G/15H during the quarter ending March, 2019.
C. Due dates for Compliance under Companies Act
22-04-2019 - Filling Form DPT-3 : Initial Return for disclosure of details of outstanding money or loan received by company but not considered as deposits from 01st April, 2014 till 22nd January, 2019
25-04-2019 - Filling Active form INC 22A : Every company incorporated on or before 31st December, 2017 shall file the particulars of the company and its registered office.
30-04-2019- Filling Form DIR 3 KYC : Application for KYC of Directors for the year ending 31.03.2019
D. Due dates for Compliances under ESI, PF Acts
15-04-2019- ESI/PF Payment for m/o March 2019
25-04-2019- EPF return filing for the month of March 2019
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👉CBIC asks Tax Officers to be cautious while processing application for fresh GST registration by those businesses whose earlier registration has been cancelled due to non-compliance. CBIC also directs Tax Officers to analyse the information by an applicant in the fresh registration form regarding details of proprietor, director/members of managing committee of associations/board of trustees etc vis-a-vis any cancelled registration having same details.
👉CBDT enters into 18 APAs in the month of March 2019, which includes 03 Bilateral APAs (BAPAs). With the signing of these APAs, the total number of APAs entered into by the CBDT in the year 2018-19 stands at 52, which includes 11 BAPAs. The total number of APAs entered into by the CBDT as of now stands at 271, which inter alia includes 31 BAPAs.
👉SEBI extends the timeline for the Implementation of Phase 1 of Unified Payments Interface (UPI) by 3 months i.e. till June 30, 2019, as an Alternative Payment Mechanism for Retail Investors buying shares in a public issue.
👉RBI issues Draft Regulations on Interest Rate Derivatives (IRDs) aimed at achieving consistency and ease of access for better management of interest rate risk in the economy. An IRD is a financial derivative contract whose value is derived from one or more benchmark interest rates, price, interest rate instruments or interest rate indexes.
👉5 large NBFCs, including Bajaj Finance and Piramal Capital Housing Finance, are planning to raise up to $2.5 Billion in Maiden Dollar-Bond Sales as they diversify financing base and cut reliance on local funds that had become difficult to obtain late last year.
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Analysis of Delhi High Court Judgement in Directorate of Enforcement vs. Axis Bank & Anr.
The objective of PMLA being distinct from the purpose of RDBA, SARFAESI Act and Insolvency Code, the latter three legislations do not prevail over the former. By virtue of section 71, has the overriding effect over other existing laws in the matter of dealing with “money-laundering” and “proceeds of crime” relating thereto.
Read full case law at : https://dasgovernance.com/2019/04/04/analysis-of-delhi-high-court-judgement-in-directorate-of-enforcement-vs-axis-bank-anr/
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GST Update On Portal
Taxpayers liable to pay tax @ 6%, covered under notification no. 2/2019 dt 07-03-19, as amended on 29-3-19, will be able to opt for the scheme in GST CMP-02 on this portal shortly...
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(GSTmitra Series-Advance Ruling-“6”)
📒 AAR MAHARASHTRA
📒 IN RE: M/S. BAJAJ FINANCE LIMITED
⛳ Dated:- 06-08-2018
⛳ GST-ARA-22/2018-19/B-85
🌴 Penal interest- Taxable supply or not - activity of collecting penal interest by the Applicant - default in repayment of EMI - tolerate an act or a situation of default - penal interest for the purpose of exemption under Sr. No. 27 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017, Sr. No. 27 of Maharashtra State Notification No. 12/2017-State Tax (Rate) dated 29.06.2017, and Sr. No. 28 of Notification No. 9/2017 Integrated Tax (Rate) dated 28.06.2017.
🌴 Held that:- The Applicant, a non-banking financial company are providing various types of loan such as auto loans, loan against the property, personal loans, consumer durable goods loans, etc, to their customers and charge interest on such loans disbursed, for which they enter into agreements with borrower/customers. The agreements provide for repayment of the loan in the form of Equated Monthly Installments (EMI) vide cheque/ Electronic Clearing System (ECS), etc. - The EMI paid by the customers is a fixed amount payable at a specified date, which includes both interest and the principal amount. In cases of delay in repayment of such EMI by the customers, the Applicant collects penal/default interest (penal interest), in terms of the agreements executed by the customers. The same is calculated at a percentage not exceeding a fixed percentage, on the overdue loan amounts of the customer. The percentage of penal interest varies from customer to customer.
🌴 The amounts collected by the applicant from their customers are nothing but amounts towards Penalty / Penal Charges and can in no way be construed as additional interest. Such penalty/ penal charges are collected by them from their customers for the reason that the said customers have delayed the payment of EMI and the applicant has tolerated the said act of their customers of delaying payment of such EMI.
🌴🍎 The applicant has agreed to do an act (the act of tolerating, of delayed payment of EMIs by their customers) and such act, by the applicant, squarely falls under clause 5(e) of the Schedule II mentioned above and therefore the amounts received by the applicant for having agreed to do such an act, would attract tax liability under GST laws- The receipt of penal charges on delayed payment of EMIS would be receipt of amounts for tolerating the act of their customers for having delayed/defaulted on their EMI payments within due dates. In view thereof, the same would definitely be a ‘supply’ under the GST Act and therefore, there arises an occasion to levy tax under the GST Act on the impugned transactions.
🌴 There is a clear understanding or agreement between the parties to foresee and tolerate an act or a situation of default on the part of loanees for a monetary consideration which is actually aconsideration received by the applicant, though in the agreement they may be giving this consideration, other names such as ‘penal interest’, penal charges, penalty, etc. as thought proper by them, but these different nomenclatures in their Agreement would in no way change the actual nature of monetary “consideration” which would clearly be taxable for the supply of services as per Sr No. 5(e) of Schedule Il of the CGST Act, 2018.
🌴 The exemption for financial transactions under GST laws is only in respect of the interest/discount earned or paid for loans, deposits or advances. If the transaction, as in the subject case deviates from the above the same fails the test of being a “loan”, ‘“deposit” or “advance”, or the consideration is not an interest or discount, the exemption is not admissible - In the subject case the amount of penal charges cannot be said to form a part of interest on “loan”, “deposit or “advance”. It is recovered/imposed only because the loanee has delayed the payment of EMI (which consists of the principal amount and interest amount). This recovery of penal charges is made in view of toleration of the act of the loanee by the applicant and therefore construes as ‘supply’ as per as per Sr. No. 5(e) of Schedule II of the CGST Act and is therefore taxable under the GST Act.
🌴 Ruling:- The Penal Interest will not be treated as interest for the purpose of exemption under Sr. No. 27 of Notification No. 12/2017Central Tax (Rate) dated 28.06.2017, Sr, No. 27 of Maharashtra State Notification No. 12/2017-State Tax (Rate) dated 29.06.2017, and sr. No. 28 of Notification No. 9/20171ntegrated Tax (Rate) dated 28.06.2017.
🌴 💡The activity of collecting penal interest by the Applicant would amount to a taxable supply under the GST regime - The said activity squarely falls under clause 5(e) of the Schedule II of the GST Act, 2018 and therefore such amounts received, would attract tax liability under GST laws.
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Analysis of NCLT Judgement in Lion Services Limited vs. Aura Management Services Private Limited
Pendency of execution proceeding under the provisions of the Arbitration and Conciliation Act, 1996 would not exclude the jurisdiction of the Tribunal under the Insolvency and Bankruptcy Code, 2016.
Read full case analysis at : https://dasgovernance.com/2019/04/05/analysis-of-nclt-judgement-in-lion-services-limited-vs-aura-management-services-private-limited/
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CBI arrests Two Income Tax Officers in a Bribery Case
Read more at: https://www.taxscan.in/cbi-arrests-two-income-tax-officers-bribery-case/34838/
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CBDT has notified new Income Tax Return (ITR) forms for FY 2018-19/ AY 2019-20 (i.e. ITR 1 Sahib, 2, 3, 4 Sugar, 5, 6, 7), vide Notification No. 32/2019 Income Tax dot. 1 April, 2019, in line with the amendments made by the Finance Act, 2018.
Mumbai has once again emerged as the top contributor to the exchequer and accounted for 32 per cent of the overall tax collection in the financial year ended March. It was up 17 per cent in FY19 at Rs.10.95 lakh crore against Rs.9.36 lakh crore logged in FY18.
CBIC has asked tax officers to be cautious while processing application for fresh GST registration by those businesses whose earlier registration has been cancelled due to non-compliance. CBIC also directed tax officers to analyse the information by an applicant in the fresh registration form regarding details.
SEBI extended the timeline for the implementation of phase 1 of Unified Payments Interface (UPI) as an alternative payment mechanism for retail investors buying shares in a public issue. To ensure a smooth transition to UPI in ASBA till June 30, 2019.
Reserve Bank of India, on expected lines, reduced the repo rate by 25 bps from 6.25% to 6% in its monetary policy meeting. This is the second such rate cut by the Central Bank in 2019.
RBI has refused to disclose banks’ annual inspection reports, as directed by the Supreme Court under the Right to Information Act, arguing it has the discretion to provide details depending on the nature of information and the consequences it would have in the economic interests of the country.
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LFAR Key Points To Be Considered
LFAR, the main focus is on identification of the lacunae in the operations and internal control system of the Bank. Statutory Audit Report may not communicate this aspect.
1. Whether Cash Balance is within the limits prescribed by Controlling Authorities.
2. Regular reporting of Excess Cash Balance
3. Insurance for Cash-in-custody and Cash-in-Transit (Generally at H.O. level)
4. Balance with RBI, SBI and Other Banks- Verify Balance Confirmation Certificates and Reconciliation Statements, in case of difference. Analyze Pending/ Outstanding entries in Reconciliation and Explanation to be obtained from the Branch. If there are any revenue entries pending in Reconciliation which require Write Off – the same should be reported in LFAR. If there are pending entries in Reconciliation Statement outstanding for a period of more than 6 months, specific details of such pending entries should be given in LFAR.
5. Investments:Normally, Investments of Bank are accounted at H.O. Level. If there are any such transactions at Branch, the Auditor should physically verify such Investment Certificates and should obtain a certificate from the Branch regarding the Investments of Head Office held at the Branch. Examine that income from Investments is regularly received and matured Investments are encashed on time.
6. Advances- Reporting on four areas:
(a) Credit Appraisal– At the time of application and sanction. – And also on Review/Renewal
(b) Sanction / Disbursement– Authority to Sanction, Compliance of Sanction Terms before Disbursement.
(c) Documentation- Execution & Renewal of Documents, Vetting of Documents by Legal Dept.- Disbursement without Documentation??
(d) Review / Monitoring / Supervision of Advances.
Credit Apraisal
1. Whether Application from borrower in prescribed form?2. Whether KYC Compliance as Per RBI Requirements?
3. Whether Evaluation of Financial Data, Project Report- CMA data, Projected P&L, BS & Cash Flow etc. done?
4. Board Resolution for the availment of the facility
5. Latest I. Tax Records & Net Worth of Borrower/Guarantor
6. Confidential report and NOC from the existing banker
7. CIBIL Report, Title clearance report & valuation report
8. Whether Analysis of important Financial ratios done?
9. Whether Security Valuation & Title Verified?
10. Whether Appraisal done by Competent person?
Advances - Sanction & Disbursement
1. Examine the sanction procedure and powers.
2. Check that the Limits sanctioned are within the powers of the sanctioning authority
3. Any change in the terms of sanction whether ratified by proper authority
4. Examine the system of Pre & Post-Disbursement unit inspection and reports.
5. Whether Acceptance of the terms & conditions of sanction obtained from Borrower?
6. Verify that Disbursement done only after compliance of all the Sanction terms and conditions
Advances - Loan Documentation
1. Whether All loan documents, as required by the sanction letter and loan policy have been executed
2. Whether Loan documents are properly executed and approved by legal department or legal expert?
3. Fresh loan documents obtained on change in limit, change in the constitution of the borrower?
4. Whether Original title deeds, title clearance certificate valuation report are held on record?
5. Whether Charge on securities registered with ROC/ RTO/ LIC/ other appropriate authority
6. Lien marking/ NOC of housing society
Advances - Monitoring/ Supervision
1. Verify that Regular QIS, Stock & Debtors statements are submitted and scrutinized - Examine Stock Inspection reports
2. Whether Periodic Review of Overdue/ NPA accounts is done by Bank
3. Adequacy and Validity of Insurance Cover.
4. Review/ Renewal of facilities carried out as per Bank policy
5. End use of Funds – Ensure that No Diversion of Funds
6. Penal interest charged for breach of DP limits/ non-submission of Stock Statements?
7. Stock statements older than 3 months - Account will be NPA.
8. Non-renewal/ Non-regularization of regular/ ad-hoc limit within 180 days from the due date will make the account NPA.
9. Verify Stock audit report (once in 12 months) and Valuation Report (once in 3 yrs) for Accounts with limits> Rs.5.00 Crore
10. Other Assets:
A) Stationery & Stamp Items:
- Examine the control on custody and issue of Stationery Items like Drafts, Pay Orders, TDRs, Cheque Books, TravellerCheques etc.
B) Sundries & Suspense Debit Items:
- Obtain details of age-wise analysis of Pending Entries in Sundries and Suspense Debit Account.
- Examine the reasons for Long Outstanding / Pending Entries and its Recoverability.
- Suggest Write Off / Provisioning for Irrecoverable Items.
Liabilities – Deposits:
- Verify Compliance of KYC Norms in case of Deposit Accounts.
- Compliance of H.O. Guidelines for operations in Dormant/ Inoperative Deposit Accounts.- Inoperative Accounts – Possible Fraud Area.- Examine Unusual Large Movements in Deposit Accounts at the year end.
- Obtain and Examine the list of Overdue/ Matured Deposits (Figure to be reported in LFAR)- Whether Bank has a system of providing for Interest on Overdue / Matured Deposits?
Other Liabilities – Bills Payable, Sundry Deposits etc :
- Obtain and Examine the list of age-wise pending entries in Bills Payable and Sundry Deposit Accounts.
- Identify Unusual Items if any in these accounts.
- Also Examine How these items have been disposed off (e.g. Deposit of Money without Account Number in Sundry Deposits A/c.) – Possible Fraud Area.
- Also suggest Disposal of Long Outstanding Entries.
Contingent Liabilities:
- Examine the List of Contingent Liabilities (Other than Constituent Liabilities such as Guarantees, LC etc.).
- Discuss with Branch about any legal matters pending against the Branch and possibility of any loss in respect of any such items –Whether such items have been disclosed as Contingent Liability or whether Provision made for the probable Loss?
Profit and Loss Account:
- Interest and Commission income to be verified on Test Check basis.
- Examine the system of changing the rate of interest on deposits/ advances from time to time as per Head Office Circulars.
- Examine the implementation of Income Recognition Norms with respect to Income from NPA Accounts.- Whether there are any Divergent Trends in respect of major items of Income or Expenditure? – Comparison and Ratio Analysis are Important Tools for finding out such Divergent Trends in Revenue Items.
Audits/ Inspections:
- Examine the observations/qualifications in Previous Audit Report and Reports of Concurrent Audit, Internal Audit, RBI Inspection, Stock Audit, Credit Audit, Revenue Audit etc. and find out that whether they have been complied with in time?- Consider the major adverse comments and non-compliances of such reports while finalizing your Audit Report.
Frauds:
- Examine the Fraud Register maintained by the Branch and report the frauds discovered during the year under Audit.
- Examine the corrective steps taken by the Branch to minimize the occurrence of such frauds in future.
- Auditor may give useful suggestions to minimize the possibility of Occurrence of Frauds with respect to various aspects.
Miscellaneous:
- Examine proper maintenance of Fixed Asset Records and Calculation of Depreciation.
- Examine the Possibility of Window Dressing by the Branch.- Any other matter to be brought to the notice of the Management or Central Statutory Auditors.
Annexure to LFAR: (to be obtained from Branch Management)- For Branches dealing in Large Advances/Asset Recovery Branches – for all advances with outstanding balance of Rs.2 Crores and above
- For Advances upgraded or downgraded during the year with with outstanding balance of Rs.1 Crores and above.
- For All other Branches – in respect of advances with outstanding balance of Rs.10 Crores and above.
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Delhi HC stays Notification cancelling F Forms issued by Dealers [Read Order]
Read more at: https://www.taxscan.in/delhi-hc-stays-notification-cancelling-f-forms-dealers/34854/
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The Central Board of Direct Taxes (CBDT) has notified the new Income-tax return (ITR) forms for Assessment Year 2019-20
Read More at https://www.expertmile.com/articles/2666
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Analysis of Bombay High Court Judgement in N.H. Securities Ltd. & Ors. vs. SEBI & Ors.
It was observed that SEBI cannot be compelled to settle the dispute via compounding and that the Court also cannot proceeding with compounding in the absence of the consent from SEBI.
Read full case law at : https://dasgovernance.com/2019/04/06/analysis-of-bombay-high-court-judgement-in-n-h-securities-ltd-ors-vs-sebi-ors/
