Annual Report - An Insight as per New Companies Act, 2013.........(Series 3)

Hello Folks,
In my previous blogs, I had mentioned about contents of Financial Statements and matters that are required to be reported under CARO, 2015. Now, I would like to analyze all the matters that are to be taken care of by the auditor while reporting under respective clauses of CARO, 2015 -

1. FIXED ASSETS

The clause requires the auditor to comment whether:-
 a) The fixed assets of the company have been physically verified by the management at reasonable intervals;
 b) Any material discrepancies were noticed on such verification & if yes, the same have been properly dealt with in the books of accounts;
 c) Physical verification of the assets has to be made by the management and not by the auditor. It is, however, necessary that the auditor satisfies himself that such verification was done and that there is adequate evidence on the basis of which he can arrive at such a conclusion.
 d) “Reasonable intervals” depends upon the circumstances of each case and perception of the management.

 Auditor’s Duty
 > To examine the instructions given by the management to the staff for verification and manner in which verification was conducted;
 > To be physically present at the time of verification, if possible;
 > In case it is impracticable for the auditor to attend the physical verification, the auditor should examine the working papers of the staff to substantiate the fact that the verification was done,
 > To examine whether the method of verification was reasonable,
 > To obtain Management Representation Letter from the management confirming that the assets are physically verified by the company.
> Check whether Fixed Asset register is maintained properly or not

2. INVENTORY

The clause requires the auditor to report upon “Reasonability” of the following matters:-
a) Frequency with regard to physical verification of inventory;
b) Procedures adopted by the management for physical verification of inventory.
c) Inventory Records

3. LOAND AND ADVANCES GIVEN BY THE COMPANY

a) This clause is applicable where the company has granted any type of loan to any person covered in the register maintained u/s 189 of the Companies Act,2013
b) Auditor is required to report upon the regularity of principal amount and interest due thereon i.e. principal and interest should be received as and when they fall due
c) Auditor is also required to state whether in case amount of such loan or interest exceeds Rs. 1 Lacs then reasonable steps have been taken by the company for recovery. Steps taken might be legal steps or some other measures as the facts & circumstances warrants.

4. ADEQUACY OF INTERNAL CONTROLS

a) This clause requires the auditor to comment upon the adequacy of internal control system with regards to the :-
- Purchase of Inventory,
- Purchase of fixed assets &
- Sales of goods & services
b) The requirement of this clause is confined only to internal control procedures related to areas as mentioned above. But auditor is also required to comment any weaknesses that he identifies in other areas other than those mentioned above.
c) Special emphasis has to be given by the auditor on internal control system with regards to the items specified in the clause
d) Above mentioned clause has two aspects i.e. adequacy of internal controls and continuing failure to correct major weakness(es).
e) The first aspect requires the auditor to comment on the adequacy of internal controls with regard to specified areas whereas the second aspects requires the auditor to comment whether there was a continuing failure to correct major weakness in internal control system.

5. DEFAULT IN REPAYMENT OF DEPOSITS

The clause, in addition to requiring the auditors to report on compliance with the requirements of section 73 to 76 of the Companies Act,2013 and the directives of the Reserve Bank of India for acceptance of public deposits, also requires the auditor to:
a) Report on compliance with the provisions of section 58AA of the Act; and
b) Report on compliance with the order, if any, passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

6. ADEQUACY OF COST RECORDS

a) The CARO requires the auditor to report whether cost accounts and records have been made and maintained. The word “made” applies in respect of cost accounts (or cost statements) and the word “maintained” applies in respect of cost records relating to materials, labour, overheads, etc.
b) The auditor has to report under the clause irrespective of whether a cost audit has been ordered by the Central Government or not.
c) Where the auditor finds that the records have not been written up or are not prima facie complete, it will be necessary for the auditor to make a suitable comment in his report.

7. PAYMENT OF STATUTORY DUES

a) This clause requires the auditor to report upon the regularity of the company in depositing undisputed statutory dues.
b) As per this clause, the scope of the auditor’s enquiry is restricted to only those statutory dues, which the company is required to deposit regularly to the authority.
c) Obligation to pay a statutory due is created or arises out of a statute, rather than being based on an independent contractual or legal relationship.
d) Any sum, which is to be regularly paid to an appropriate authority under a statute (whether Central, State or Local or foreign) applicable to the company, should be considered as a “statutory due” for the purpose of this clause.
e) Auditor is also required to report non-payment of statutory dues on account of any dispute.
f) It is clarified here that mere representation to the concerned Department does not constitute dispute. According to the Order, it is necessary that there should be an appeal before the relevant appellate authority.
g) The amounts to be reported under clause 4(ix)(b) of the Order are those which have not been deposited on account of any dispute, irrespective of the treatment of such disputed tax in accounts.
h) It is also possible that an amount is disputed, has been deposited and on consideration of the likely outcome of the dispute, has been shown as a recoverable. Though such an amount is not contemplated for reporting under the clause, since it has been deposited, the fact of such deposit having been made under protest should be brought out by the auditor in his report under the clause

8. LOSSES BY THE COMPANY

a) This clause is applicable to all the companies that have been in existence for 5 years or more from the date of registration till the last day of financial year covered by the audit report.
b) The clause requires the auditor to report whether :-
> The accumulated losses at the end of the financial year are not less than 50% of its net worth; &
> The company has incurred cash losses during the period covered by the report & in the immediately preceding financial year

9. ANY DEFAULT BY COMPANY IN REPAYMENT OF LOANS

This clause is applicable only when company has defaulted in repayment of dues to financial institutions, banks or debenture holders.

10. GUARANTEE GIVEN BY THE COMPANY

a) This clause is applicable when the company has given guarantee on account of loan taken by others from financial institution.
b) But the scope of the auditor’s inquiry under the clause does not extend to the guarantees given by the Auditee company for loans taken by “others” from any sources other than bank or financial institutions.
c) The clause requires the auditor to determine :-
> whether the company has given any guarantee for loans taken by others from bank or financial institutions and if yes,
> Whether the terms and conditions of the guarantee are prejudicial to the interest of the company

11. TERM LOAN APPLICATION

a) Term loan means a loan that have normally a fixed or predetermined maturity period repayment schedule.
b) This clause is applicable only when the company is availing any term loan facility. However the above clause is silent as to whether the clause will be applicable on the company which has obtained a term loan from persons/entities other than banks/ financial institutions.

12. FRAUDS

a) This clause requires to auditor to report on 2 things:-
> Whether any fraud on or by the company has been noticed or reported during the year;
> If yes, the nature and the amount involved should be reported by the auditor
b) The point to be noted is that this clause does not require the auditor to discover the frauds of the company & by the company. The scope of auditor’s enquiry under this is clause is restricted to frauds noticed & reported during the year i.e. The use of the words “noticed or reported” indicates that the management of the company should have the knowledge about the frauds on the company or by the company that have occurred during the period covered by the auditor’s report.
c) On the other hand, this clause doesn’t relieve the auditor from his responsibility to consider fraud & error in an audit of financial statements i.e. the auditor is mandatorily required to comply with the requirements of SA 240,”The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements"

Therefore, looking at the above mentioned areas covered under CARO and provisions laid down in the New Companies Act, 2013 a lot of duties and responsibilities have been casted upon the auditor. Now, auditors are required to develop special skill set and regularly update himself with the latest amendments, challenges and issues which are popping up day by day.

CA Mahershi Vijay
(mahershi@akvassociate.com)

FIRST WOMAN CHARTERED ACCOUNTANT OF INDIA

R. Sivabogam

R. Sivabhogam was born on 23rdJuly, 1907. She had her schooling in Lady Wellington School Chennai and was a student of Sister Subbalakshmi, a doyen in the field of Social Service. She graduated from The Queen Mary’s College Chennai. Motivated and inspired by the clarion call of Mahatma Gandhi, she along with her friends participated in the Non-Cooperation Movement and was imprisoned for a year.

The year, 1930. Fresh after the release from Vellore prison, a 23-year-old wondered what the future held for her. Her mind was full of patriotic feelings but her family compulsions were different. She boards a train to Taliparramba, a remote place in Kerala, where her eldest sister lived. The issue before Sivabhogam was whether to get married, sacrifice her personal life to fight for the country's freedom, or pursue a career.

A difficult proposition indeed for a person who was already a graduate and jailed for participating in the Civil Disobedience movement. These two aspects themselves were sufficient for marriage proposals to be rejected those days. One proposal was rejected on the ground that she was physically challenged. This upset her.

Her dilemma was compounded by the powerful words Swami Vivekananda she had read while in prison: "Faith in Yourself". She held discussions with her sister and with her mentor, the legendary Sister Subbalakshmi, and finally took the bold decision of pursuing a career in accounting, primarily dominated by men at that time.

People around her were surprised and advised her against the decision, as the general feeling was that it is a tough exam and very difficult to pass (a situation no different even today). However, she stuck to her decision and with the able support of her sister created history. R. Sivabhogam became the first woman chartered accountant of India.

After passing the examination, yet another person helped her was C. S. Sastri, who took her on as an apprentice. After completing training, she took on the British again this time it was a different fight. She filed a writ petition to squash the then prevailing law, that is, those who have undergone imprisonment cannot register for practice. She won the appeal and started practice.

Sivabhogam later became the Chairperson of the Southern India Regional Council (SIRC) of the Institute of Chartered Accountants of India (the then Madras Council). She is the only woman so far to have held this position, that too for a continuous period of three years. Sivabhogam practised for almost three decades.

During her chairmanship, the SIRC had a galaxy of freedom-fighters, patriots and eminent scholars as chief guests for its Annual General Meetings. Notable among them are Dr S. Radhakrishnan, Sir C. P. Ramasamy Iyer, A. S. P. Iyer, Chakravarthy C. Rajagopalachariar, C. Subramaniam and K. Santhanam.

During her practice of over three decades, Sivabhogam carried out a number of audits. Her forte was Reserve Bank of India audit, in which she was an authority. However, her mind was more on conducting audits of charitable institutions. She concentrated on the same in the last three years of her life.

She also motivated quite a few youngsters to take up the chartered accountancy course, and provided coaching classes by putting together an erudite faculty. She was keen that girls join the CA course and instituted a prize for the best women candidate in the Final examination.

A true patriot, Sivabhogam wore khadi through out her life and travelled only by bus. Sivabhogam died on June 14, 1966. It is indeed a befitting tribute to her that her centenary year is being celebrated by the SIRC of the ICAI. An endowment in her name is being created for awarding scholarships to economically weak women students desirous of pursuing the CA course.

Annual Report - An Insight as per New Companies Act, 2013.....(Series 2)

In continuation to my previous blog which briefed about financial statements and its contents I would like to update about The Companies (Auditor’s Report) Order,2015 which has replaced about a decade old Companies (Auditor's Report) Order, 2003.

Now, there are less reporting requirements as per CARO, 2015 in comparison to the CARO, 2003 as many of such reporting requirements have already been incorporated in the Companies Act, 2013.

DATE OF APPLICABILITY
CARO,2015 is applicable for the financial year commencing on or after 1st April,2014. Therefore, auditor's report accompanying Annual Report for the year 2014-15 shall report on the matters specified under CARO, 2015

COMPANIES ON WHICH APPLICABLE
Order is applicable on every company including foreign company which is required to prepare annual report for Indian operations.

However, such order is not applicable on following -
1.) Banking Company
2.) Insurance Company
3.) Company licensed u/s 8 of the Companies Act, 2013
4.) One Person Company
5.) Small Company (i.e. a private company having turnover not exceeding 2 crores and paid up share capital not exceeding 50 lacs),and
6.) A private Company having (at any point of time during financial year)
I) (Paid up capital and reserves) less than or equal to 50 lacs, and
II) (Loan outstanding from any financial institution or bank) less than or equal to 25 lacs, and
III) (Turnover) less than or equal to 5 crore.

MAIN PROVISIONS
The Statutory Auditor of the company, while preparing the audit report on the accounts of the company examined by him, shall report on the matters specified under the CARO.

In case, the answer to any of the questions on the matters mentioned in the CARO is unfavorable or qualified, the auditor’s report shall state the reason for such unfavorable or qualified comment.

Where the auditor is unable to express any opinion in the answer to a particular question, his report shall indicate such facts together with the reasons why it is not possible for him to give an answer to such question.

There are 12 matters to be specifically reported under CARO.

CONTENTS OF THE ORDER

1.) FIXED ASSETS
a. Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

b. Whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account


2.) INVENTORY
a. Whether physical verification of inventory has been conducted at reasonable intervals by the management;
b. Are the procedures of physical verification of inventory followed by the management reasonable and adequate in relation to the size of the company and the nature of its business. If not, the inadequacies in such procedures should be reported;
c. Whether the company is maintaining proper records of inventory and whether any material discrepancies were noticed on physical verification and if so, whether the same have been properly dealt with in the books of account;


3.) LOAND AND ADVANCES GIVEN BY THE COMPANY
Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.
a. If so, whether receipt of the principal amount and interest are also regular; and
b. If overdue amount is more than rupees one lakh, whether reasonable steps have been taken by the company for recovery of the principal and interest;


4.) ADEQUACY OF INTERNAL CONTROL
Is there an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. Whether there is a continuing failure to correct major weaknesses in internal control system.

5.) ANY DEFAULT IN REPAYMENT OF DEPOSITS
In case the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed thereunder, where applicable, have been complied with? If not, the nature of contraventions should be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or RBI or any court or any other tribunal, whether the same has been complied with or not.

6.) ADEQUACY OF COST RECORDS
Where maintenance of cost records has been specified by the Central Government under sub-section (1) of section 148 of the Companies Act, whether such accounts and records have been made and maintained.

7.) PAYMENT OF STATUTORY DUES
a. Is the company regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues with the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.
b. In case dues of income tax or sales tax or wealth tax or service tax or duty of customs or duty of excise or value added tax or cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned. (A mere representation to the concerned Department shall not constitute a dispute).
c. Whether the amount required to be transferred to investor education and protection fund in accordance with the relevant provisions of the *Companies Act, 1956 (1 of 1956) and rules made thereunder has been transferred to such fund within time.

8.) LOSSES BY THE COMPANY
Whether in case of a company which has been registered for a period not less than five years, its accumulated losses at the end of the financial year are not less than fifty per cent of its net worth and whether it has incurred cash losses in such financial year and in the immediately preceding financial year.

9.) ANY DEFAULT BY COMPANY IN REPAYMENT OF LOANS
Whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reported.

10.) GUARANTEE GIVEN BY THE COMPANY
Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company.

11.) APPLICABILITY OF FUNDS BY COMPANY
Whether term loans were applied for the purpose for which the loans were obtained.

12.) FRAUD
Whether any fraud on or by the company has been noticed or reported during the year. If yes, the nature and the amount involved is to be indicated


I have tried to cover the bare points as briefly as possible. For point wise analysis of the duties and responsibilities of the auditor refer to my next blog.

CA Mahershi Vijay

BLACK MONEY BILL

1) Definition of Black Money

Black money is unaccounted money, illegally acquired wealth or other assets made through accepting bribery or other morally deprived acts and as such is not taxed.

2) Black Money Bill

THE UNDISCLOSED FOREIGN INCOME AND ASSETS (IMPOSITION OF TAX) BILL, 2015 also known as Black money Bill which shall come into force on the 1^st Aril, 2016 for those who stashed away black money in Foreign Accounts.

3)Applicability

The persons who are resident in India under the Income Tax Act, 1961 other than the persons who are not ordinarily resident in India.

4)Taxation Rate

Undisclosed foreign Income shall be taxed at 30%.

5) Basis of Charge

A tax shall be charged on total undisclosed income and asset located outside India which has not been disclosed in return of income.

6) Penalty

The penalty of non disclosure shall be equal to 3 times of tax payable thereon.

Other penalties:-

a) Failure to furnish return in respect of Foreign income or assets- Rs.10.00 Lacs

(However, it is not applicable in case of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year)

     b) Failure to furnish any details or furnishing inaccurate details regarding assets located outside India-  Rs.10.00  Lacs

(However, it is not applicable in case of an asset, being one or more bank accounts having an aggregate balance which does not exceed a value equivalent to five hundred thousand rupees at any time during the previous year)

c)  Default in payment of tax Arrear- Amount of Tax Arrear

   

     d)  Default in answering any question put to him by a tax authority, sign any statement made by him in the course of any proceedings which a tax authority may legally require him to sign, attend or produce books of account or documents -Not  less than fifty thousand rupees but which may extend to two lakh rupees.

7) Prosecution-

a) Failure to furnish in due time the return of income in relation to foreign income and assets- 6 Months to 7 Years.

b) Failure to furnish in return any information related to assets located outside India- 6 Months to 7 Years.

c) Willful attempt to evade tax, penalty or interest- 3 Years to 10 Years.

d) Willful attempt to evade payment of tax, interest or penalty- 3 Months to 3 Years.

e) False Statement in verification- 6 Months to 7 years.

f) Any abatement of any other person to file false return or false account or false statement- 6 Months to 7 years.

8) Other safeguards and internal control mechanisms

a) One time compliance opportunity – The Bill also provides a onetime compliance opportunity for a limited period to persons who have any undisclosed foreign assets which have hitherto not been disclosed for the purposes of Income-tax. Such persons may file a declaration before the specified tax authority within a specified period, followed by payment of tax at the rate of 30 percent and an equal amount by way of penalty. Such persons will not be prosecuted under the stringent provisions of the new Act. It is to be noted that this is not an amnesty scheme as no immunity from penalty is being offered. It is merely an opportunity for persons to come clean and become compliant before the stringent provisions of the new Act come into force. 

b) Amendment of PMLA – The Bill also proposes to amend Prevention of Money Laundering Act (PMLA), 2002 to include offence of tax evasion under the proposed legislation as a scheduled offence under PMLA. Thus, in keeping with the commitment of the government for focussed action on black money front, an unprecedented and multi‐pronged attack has been launched to root out the menace of black money.  The Government is confident that this new law will act as a strong deterrent and curb the menace of black money stashed abroad by Indians. Disclosure of foreign assets and liabilities has already been introduced in Income Tax Returns for all assessee by Income Tax department which needs to be carefully filled and filed. 

BY CA Shivani Agarwal

Annual Report - An Insight as per New Companies Act, 2013..........(Series 1)

Companies Act, 2013 castes a hell lot of responsibilities in the form of numerous disclosures and presentation requirements which has resulted in a lot of complexities to the auditors and Board of Directors of the company. To add further, MCA has been issuing notifications in the form of providing amendments, clarifications etc. and regularly updating oneself with such changes is also an uphill task. With audit season round the corner, we must appraise ourselves with the new reporting requirements. Let me summarize few of them: 

Financial Statements shall consist of -

1. Balance Sheet
2. Profit and Loss A/c (or Income and Expenditure A/c)    
3. Cash Flow Statement      [Note 1]
4. Statement of Changes In Equity (if applicable)     [Note 2]
5. Explanatory notes attached thereto

Note 1: Cash Flow statements are not required to be prepared by following class of companies-

• One Person Company
• Small Companies ( Companies having paid up share capital not exceeding Rs. 50 lacs               and turnover not exceeding Rs. 2 crores)
• Dormant Companies

Note 2: Statement of Changes on Equity is required to be prepared by those companies on which IND AS applies.

Further, following procedure shall be followed regarding authentication of Financial Statements-

1. In case of Private Company, Financial Statement should be signed by at least 2 directors of the company.
2. After the signature it should be submitted to the auditor for his report thereon.
3. Directors who are signing the annual report should be present in the meeting.

Financial statement should be circulated to all of the following-

1. Every member of the company,
2. To every trustee of the debenture holder,
3. To all persons other than as mentioned above, entitled to receive financials like financial institutions, representative nominees etc.

Time period for Circulation of financials-

The financial statements (including consolidated financial statements, if any) auditor's report, director's report any every other documents required by law to be annexed or attached to financial statements , which are to be laid before members in the AGM shall be sent "Not Less Than 21 clear days" before the date of the meeting (except in case of meeting on short notice).

I have tried to summarize as concise as possible. In case of any query, you can mail me your queries at mahershi@akvassociate.com. For further updates, refer to my upcoming articles. 

  

Exemption to Private Companies under Section 462 of Companies Act, 2013

MCA has provided exemption to Private Companies other than subsidiary of public companies under section 462 of the Companies Act 2013 as follows:

1) RELATED PARTY TRANSACTIONS

The definition of related parties under Section 2(76)(viii) not to include the following w.r.t a private company:

a) Holding Company

b) Subsidiary Company

c) Associate Company

d) Fellow subsidiaries

2) PARTICIPATION OF INTERESTED DIRECTORS

Section 184(2) to apply on private companies with the exception that interested directors can participate and vote on matters in which they are interested after providing the disclosure of interest.

3) PARTICIPATION OF RELATED SHAREHOLDERS

Second proviso to Section 188(1) not to apply on private company which states that no member of the company shall vote on such special resolution, to approve any contract or arrangement which may be entered in to by the company, if such member is a related party.

4)  OF SHARE CAPITAL AND VOTING RIGHTS

 Section 43 and 47 of the Act, dealing with kinds of share capital and voting rights respectively, shall not apply to private companies if Memorandum and Articles of Association so provide.

5) RELAXATION IN PROVISIONS OF RIGHT ISSUE

With respect to Section 62, the notification provides that if 90% of members of a private company provide their    consent in writing or in electronic mode, then the company can:

a) Disregard the limit on time period of offer may be;

b) Dispatch notice of a less than 3 days prior to the opening of the issue.

Note: The time limits cannot be increased, they can only be reduced. –

6) LENDING AGAINST THE SHARES OF THE COMPANY

Section 67(1) clearly prohibits buy back of shares and lending against its own shares by a   company. The notification provides exemption to private company from lending against  its own shares subject to the following:

a) there is no body corporate shareholder in the lending/guaranteeing company;

b) the lending company’s aggregate borrowings from other bodies corporate or banks or financial institutions is less than to:

i) twice of net worth of company; or

ii) Rs 50 crores

Whichever is lower;

c) Such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.

7) ACCEPTANCE OF DEPOSITS FROM MEMBERS

Earlier Private Limited Company could accept deposits from the Member after follow up the procedure mention under Section 73. –

Now Private Limited Company can accept deposit from the Members upto 100% of  aggregate of the paid up share capital and free reserves without the followings:

a) Issuance of Circular

b) Filing of circular with ROC

c) Maintaining deposit repayment reserve

d) Providing deposit insurance

8) GENERAL MEETING PROVISIONS (SECTIONS 101 TO 107 AND 109)

If anything else mentioned in AOA then AOA prevail over the section 101-107 & 109.

a) Content & Length of Notice (Section 101)

b) Explanatory Statement (section 102)

c) Quorum (Section 103)

d) Chairman (Section 104)

e) Proxies (Section 105)

f) Restriction on Voting Rights (Section 106)

g) Show of Hands & Poll (Sections 107 and 109)

9) FILING OF FORM MGT-14 FOR BOARD RESOLUTIONS (SECTION 117(3)(G))

Now there is NO NEED TO FILE FORM MGT-14 for the purposes of resolutions passed u/s 179(3) read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 – After a complete year of filing MGT-14 with the MCA, the private companies are now exempt from such filing with respect to board resolutions.

10) RELIEF IN LIMITS OF STATUTORY AUDIT

Earlier Auditor can’t be appoint as auditor in more than 20 (Twenty) Companies.

Section 141(3)(g) permitted the audit of 20 companies per partner of an audit firm. Now under the limit of 20 (Twenty) Companies following will not include 2013.

a) One person companies;

b) Dormant companies;

c) Small companies;

d) Private companies having a paid up share capital of less than 100 crores.

11) CANDIDATURE NOT REQUIRED FOR APPOINTMENT OF DIRECTOR AT GENERAL MEETING

Section 160 dealing with any person other than a retiring director or any member of the company to propose candidature of such person for directorship along with deposit of    Rs. 1 lac shall not apply on private company. It means Now there is no need to deposit Rs.      100,000/- by the Director at the time of appointment

12) APPOINTMENT of Directors vide single resolution (Section 162)

Appointment of directors needs not to be voted individually in private company. Accordingly, more than one director can be appointed via single resolution in private company.

13) NO RESTRICTION ON POWERS OF BOARD

Section 180 of the Act has been finally aligned with its corresponding section of the erstwhile Act, 1956, i.e., Section 293. The Board of private companies shall now be free to address and decide upon matters mentioned under Section 180 and the requirement for  shareholders’ approval has been dispensed with.

Following are the matters are prescribed under Section 180:

a) Selling, leasing or otherwise disposing whole or substantially the whole of undertaking of the company;

b) Investing the compensation amount received by it as a result of any merger or amalgamation;

c) Borrowing money in excess of its paid up capital and free reserves;

d) Remitting or giving time for repayment of any debt due from a director.

14) RELAXATION IN LOAN TO DIRECTORS

Loan to directors under Section 185 are allowed for private company if it fulfills the below mentioned conditions:

a) Body Corporate should not be Shareholder

b)Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:-

i) Twice it’s paid up capital

ii) Rs. 50  crores

c)  No repayment default subsisting of such borrowings at time of giving loan.

15) Appointment of MD, WTD and Manager

Now there is no need to Pass Resolution in General Meeting for appointment of      Managerial Personnel and no need to file form MR-1. Managerial Personnel can be    appointed in Private limited Company without:

a)  Shareholders’ ratification;

b)  Schedule V not applicable.

c)  Filing of MR-1 with ROC;

d) No need to mention Terms & Conditions of appointment and remuneration in the resolution.

RETURN FILING UNDER SERVICE TAX

The Person who is liable to pay Service Tax has to submit half yearly return i.e. 1st April to 30^th September and 1^st October to 31^st March of Financial Year in Form-ST-3 within 25 days of the end of the Half Year.

Note: Input Service Distributor is also required to file half yearly returns, even if he is not liable to pay service tax.

Assessee providing more than one services

If assessee is providing more than one taxable service, he should file only one return. However, details of each taxable shall be shown separately.

Nil return essential even if no turnover

Even if there was no business during the period, assessee will have to file ‘Nil’ return as long as registration certificate is valid.

Last date for filing return is a Bank Holiday

If last date of payment and filing return is a public holiday, tax can be paid and return can be submitted on next working day.

Revised Return

Rule 7B allows an assessee to rectify mistakes and file revised return within 90 days from the date of filing of the original return.

No requirement of filing return for period prior to registration

Assessees applying late for registration are liable to pay service tax for the period prior to registration with interest. He should then inform the department giving details of such payment as per provisions of Section 73(3) of Finance Act, 1994.

It is neither necessary not possible to file return for the period prior to registration. Intimation is sufficient.

Mandatory Electronic Filing of Service Tax Return

E- Filing of return has been made mandatory w.e.f. 1-10-2011 vide Notification No.43/2011-ST dated 25^th August 2011 for all assessees whereas e-payment of taxes has been made mandatory w.e.f. 1-10-2014 for all assessees.

Late Fee and Penalty for filing Late Return

 Section 70(1) of Finance Act, 1994 provides that in case where returns are filed after due date, late fee not exceeding Rs.20000.00 is payable for delayed filing of return , as may be prescribed.

The late fee payable is as follows:-

a) Delay up to 15 days: Rs.500.00

b) Beyond 15 days but up to 30 days: Rs.1000.00

c) Delay beyond 30 days: Rs.1000.00 plus Rs.100 per day of delay beyond 30 days, from 31^st day onwards. This Rs.100.00 per day continues till limit of Rs.20000.00 is reached.

By CA Shivani Agarwal

shivani@akvassociate.com