ECB

http://www.indialiaison.com/ECB.htm

setting up of 100% foreign subsidiaries

A foreign company can form a WOS in sectors where 100% foreign direct investment is permitted under the FDI policy. A WOS gives the most flexibility and protection to a foreign investor in India. A WOS can be defined as an entity whose entire share capital is held by foreign corporate bodies. A WOS can be formed either as a private or public company, limited by shares or guarantee, or an unlimited liability company. Considering the various exemptions available to a private company limited by shares (a “private company”) under India’s Companies Act, 1956 (the “Act”), it is recommended that a WOS be established as a private company. Key Features of WOS : In India companies are incorporated and regulated under the provisions of the companies Act, 1956 and are subjected to certain procedural formalities under the Act. The personal liability of member is limited to the amount unpaid on their shares It can undertake all types of business activities as may be permitted by its charter, which may include marketing, manufacturing, providing services, etc. No RBI approval is needed where 100% direct investment is permissible. It is treated as domestic company under Indian tax law and is eligible for all the tax deductions and benefits as provided to any other Indian company. Individual director are required to obtain DIN (Director Unique Identification Number) from the Ministry of Company Affairs. Funding can be in the form of share capital, loans and business operations.  Services required: Formation of WOS in accordance with the requirements of Ministry of Corporate Affairs Assistance in procuring office spaces Obtaining various registrations such as PAN, TAN, ESI / PF, Excise, Service Tax, VAT Registrations, etc. Assistance in managing Bank Accounts Consultancy on utilization of funds Assistance in ECB from overseas bodies and approvals from Indian Authorities Payroll Support Data Entry Support Maintenance of Books of Accounts General Advise on various law matters Ensuring proper compliance with various statutes Preparation and finalization of Balance Sheet and Profit & loss Account Tax Planning and management Filing returns as required by various applicable statutes Representation before Revenue Authority Obtaining advance rulings

export/import of foreign exchange

http://www.eximguru.com/exim/guides/export-finance/ch_14_foreign_exchange_management_act.aspx

Modification of IEC

STATUS MODIFICATION OF IEC:
In addition to updation of IEC, if there is any change in the existing IEC, like change of directors, change of name or constitution, change of address or addition/deletion of branch, the following documents are required to be submitted.

1. Request letter on Letter Head for Status Modification.
2. Application as per Appendix 2 and 3 in duplicate.
3. Documentary evidence preferably Electric bill, telephone bill, lease agreement copy, Sales Tax/Excise Certificate/SSI for change or inclusion of addresses. For change of directors please submit copy of Form-32. In case of change of name or change of constitution, ROC/Partnership deed copy as applicable should be submitted.
4. Also refer to para 9.1(b) of H.B.2002-2007 regarding change in name and constitution is reproduced below.

" If there is any change in the name/address or constitution of IEC holder/licencee/Actual User eligible for import without a licence/recognised status holders, the concerned IEC holder/licencee/Actual User/status holders, as the case may be, shall cease to be eligible to import or export against the licence/IEC N0. or any other facility permitted under the Policy and Handbook, after expiry of 60 days from the date of such change in his name or constitution, unless in the meantime,

1. the IEC holder/licencee/status holders has got the consequential changes affected in the IEC NO/licence or the recognition certificate, as the case may be , by the concerned licensing authority;
2. the Actual User has got the consequential changes affected from the concerned authority in the industrial licence issued by the Secretariat for Industrial Assistance (Ministry of Commerce and Industry) or Certificate of Registration as an Actual User issued by Director of Industries of the State Government or has received an acknowledgement for filing of a memorandum with the Secretariat for Industrial Assistance. Provided, however, the licensing authority issuing the IE Code may, condone the delay on payment of a penalty of Rs.5000/-.

However, the change in the director of a public limited company shall not be considered as a change in the constitution of the company."

1. Penalty of Rs.5000/- payable in favour of Licencing office (Jt.D.G.F.T, Mumbai in case of Mumbai office) by Challan or DD, in case of delay beyond 60 days as per para 9.1(b) of H.B.2002-2007 reproduced above is applicable in the following catagories.
   Change of address of Registered Office of the firm/company.Note: Date of change of address shall be either the date of agreement or the date of occupation of the new premises. In case of change of address of registered office to a branch/factory/residence address of the IEC holder already included in the IEC, self declaration of the IEC holder regarding date of change of address will be accepted.
2. Change of Partners.
3. Change of directors of a Private Limited Company.
4. Change of Proprietors in the Proprietorship concern.
5. Change of name of the firm/company.
6. Change of constitution.

Note: Penalty in case of delay will not be applicable in case of Inclusion/Deletion of branches/divisions/factory address

1. Self addressed envelope affixed with Rs.25/- Postal stamp.
2. Original IEC Certificate.
3. RBI declaration on the Letter Head as per sr.no.6 of Foot note to Appendix-3 in case of change of directors/partners/prop./Karta of the firm/company.
4. Self Certified copy of PAN.

10)In case of Mumbai office Submit Documents on the 2^nd floor, North East Wing, IEC Counter, between 10.00a.m. and 12.30p.m. from Monday to Friday.

(Please tag all the documents to a folder)

  Domain Name + 1GB Linux India Web Hosting in Rs.349   

application for IEC code

Definition of IEC Code

IEC Code is unique 10 digit code issued by DGFT – Director General of Foreign Trade , Ministry of Commerce, Government of India to Indian Companies.



Full form of IEC Code

Full From of IEC Code is  “Importer Exporter Code ”. To import or export in India, IEC Code is mandatory. No person or entity shall make any Import or Export without IEC Code Number.



IEC Code No Notification

Directorate General of Foreign Trade(DGFT) issued a Policy Circular No.15 (RE-2006)/2004-2009 Date: 27th July, 2006) for New System for issuance of Importer-Exporter Code Number.



Eligibility, Legal Provisions and Conditions for IEC Code Number

Eligibility condition and Legal Provisions are given for IEC Code Number Application in Foreign Trade (Regulation) Rules, 1993 Ministry of Commerce, Notification No. GSR 791 (E), dated 30-12-1993.




Application for Grant of IEC Number

An application for grant of IEC number shall be made by the Registered/Head Office of the applicant and apply to the nearest Regional Authority of Directorate General Foreign Trade, the Registered office in case of company and Head office in case of others, falls in the ‘Aayaat Niryaat Form - ANF2A’ and shall be accompanied by documents prescribed therein. In case of STPI/ EHTP/ BTP units, the Regional Offices of the DGFT having jurisdiction over the district in which the Registered/ Head Office of the STPI unit is located shall issue or amend the IECs.

Only one IEC would be issued against a single PAN number. Any proprietor can have only one IEC number and in case there are more than one IECs allotted to a proprietor, the same may be surrendered to the Regional Office for cancellation.



IEC Code Online Application Form

The application  can  be download  Form in PDF or Word. This is called "Aayaat Niryaat Form - ANF2A". Along with IEC Code Number Application Form it is necessary to submit Appendix-18B Attested by Applicant's Banker in his letter head with two passport size photo).




List Of Regional Authorities Of DGFT And The Corresponding Office of Reserve Bank Of India, Exchange Control Department

You can find the list of Foreign Exchange Control Department of the RBI as given in Appendix-18D.



Validity of IEC Code No

An IEC number allotted to an applicant shall be valid for all its branches/divisions/units/factories as indicated in the format of IEC given in Appendix- 18B. 



Duplicate Copy of IEC Number

Where an IEC Number is lost or misplaced, the issuing authority may consider requests for grant of a duplicate copy of IEC number, if accompanied by an affidavit.



Surrender of IEC Number

If an IEC holder does not wish to operate the allotted IEC number, he may surrender the same by informing the issuing authority. On receipt of such intimation, the issuing authority shall immediately cancel the same and electronically transmit it to DGFT for onward transmission to the Customs and Regional Authorities.



Application Fee For IEC Code Number

Application Fee :  Rs 250.00
Mode of Payment : In Demand Draft/ Pay Order from any designated bank in favour of Zonal Joint Director General of Foreign Trade or Payment through EFT ( Electronic Fund Transfer by Nominated Bank by DGFT Like HDFC Bank, ICICI Bank, State Bank of India, UTI Bank, Punjab National Bank, Central Bank etc) or Application fee can deposited by TR6 Challan with Duplicate Copy in any branch of Central Bank of India and TR6 Challan need to be submit along with IEC Code Application.

Specified fee shall be paid for making an application under any provision of the Policy and Handbook of Procedure Volume-I.. The scale of fee, mode of payment, procedure for refund of fee and the categories of persons exempted from the payment of fee are contained in Appendix-21B.



Territorial Jurisdiction of Regional Authorities

Every application, unless otherwise specified, shall be submitted to the Regional Authority of Directorate General Foreign Trade, as per the territorial jurisdiction of the Regional authorities indicated in Policy and Handbook of Procedure Volume-I.



Filing of Application

Application can be filed online in DGFT website, details of online links are given below.

Every application for an Import/Export licence/ certificate/ Authorisation/ permission or any other purpose should be complete in all respects as required under the relevant provisions of the Policy/Procedures and shall be signed by the applicant as defined inparagraph 9.9 of the Policy. An incomplete application is liable to be rejected giving specific reason for rejection. However in case of manual applications, the applicant would furnish a soft copy of the application in MS word format.



Profile of Importer/ Exporter

Each Importer/Exporter shall be required to file importer/ exporter profile once with the Regional Authority in Part 1 of ‘Aayaat Niryaat Form - ANF2A’. Regional Authority shall enter the information furnished in Part 1 of ‘Aayaat Niryaat Form ANF-2A’ in their database so as to dispense with the need for asking the repetitive information. In case of any change in the information given in Part 1 of ‘Aayaat Niryaat Form ANF-2A’, importer/exporter shall intimate the same to the Regional Authority.



Self Addressed Stamped Envelope

The applicant shall furnish a self addressed envelope of 40 x 15 cm with postal stamp affixed on the envelope as follows for all documents required to be sent by Speed Post:



a	Within local area	Rs. 25.00
b	Up to 200 Kms.	Rs. 25.00
c	Between 200 to 1000 Kms	Rs. 30.00
d	Beyond 1000 Kms.	Rs. 50.00


IEC No: Exempted Categories

The following categories of importers or exporters are exempted from obtaining Importer - Exporter Code (IEC) number:

1. Importers covered by clause 3 (1) [except sub-clauses (e) and (l)] and exporters covered by clause 3(2) [except sub-clauses (i) and (k)] of the Foreign Trade (Exemption from application of Rules in certain cases) Order, 1993.
2. Ministries/Departments of the Central or State Government.
3. Persons importing or exporting goods for personal use not connected with trade or manufacture or agriculture.
4. Persons importing/exporting goods from/to Nepal provided the CIF value of a single consignment does not exceed Indian Rs.25,000.
5. Persons importing/exporting goods from/to Myanmar through Indo-Myanmar border areas provided the CIF value of a single consignment does not exceed Indian Rs.25,000.
   
   However, the exemption from obtaining Importer-Exporter Code (IEC) number shall not be applicable for the export of Special Chemicals, Organisms, Materials, Equipments and Technologies (SCOMET) as listed in Appendix- 3, Schedule 2 of the ITC(HS) except in the case of exports by category(ii) above.
6. The following permanent IEC numbers shall be used by the categories of importers/ exporters mentioned against them for import/ export purposes..
   
   

   S.No	Code Number	Categories of Importers / Exporters
   1	0100000011	All Ministries / Departments of Central  Government and agencies wholly or partially owned by them.
   2	0100000029	All Ministries / Departments of any State Government and agencies wholly or partially owned by them.
   3	0100000037	Diplomatic personnel, Counselor officers in India and officials of UNO and its specialised agencies.
   4	0100000045	Indians returning from / going abroad and claiming benefit under Baggage Rules.
   5	0100000053	Persons / Institutions / Hospitals importing or exporting goods for personnel use, not connected with trade or manufacture or agriculture.
   6	0100000061	Persons importing / exporting goods from /to Nepal
   7	0100000070	Persons importing / exporting goods from /to Myanmar through Indo-Myanmar border areas
   8	0100000088	Ford Foundation
   9	0100000096	Importers importing goods for display or use in fairs / exhibitions or similar events under provisions of ATA carnet This IEC number can also be used by importers importing for exhibitions/fairs as per Para 2.29 of HBPv1.
   10	0100000100	Director, National Blood Group Reference Laboratory, Bombay or their authorized offices.
   11	0100000126	Individuals / Charitable Institution /Registered NGOs importing goods, which have been exempted from Customs duty under Notification issued by Ministry of Finance for bonafide use by victims affected by natural calamity.
   12	0100000134	Persons importing / exporting permissible goods as notified from time to time, from / to China through Gunji, Namgaya Shipkila and Nathula ports, subject to value ceilings of single consignment as given in Para 2.8(iv) above.
   13	0100000169	Non-commercial imports and exports by entities who have been authorized by Reserve Bank of India.

Note: Commercial Public Sector Undertaking (PSU) who have obtained PAN will however be required to obtain Importer Exporter Code number. The permanent IEC number as mentioned above, shall be used by non-commercial PSUs.


Guidelines for Application of IEC Code Number.


Mandatory Requirements to apply for IEC Code Number

1. Covering letter
2. Fill Part A, B & D of the application form.
3. Application must be accompanied by documents as per details given below:
   1 Bank Certificate from the bank on Bank letter head as per proforma (Part B) given in the application.
       a.  In case of Proprietorship firms, please furnish
              i) Date of Birth of individual
             ii) Number of IECs held along with their details
      b.  In case of Companies, please furnish
             i) Extract of Board of Resolution.
            ii) MOA with Form 32 and ROC in case of change in Directors.
     c.  In case of others
           i) Notorised Partnership Deed showing date of formation.
           ii) No Objection Certificate from other partners/HUF.
   3.2 Self certified copy of Permanent Account Number (PAN) issued by income Tax Authorities.
   
   3.3 Two copies of passport size photographs of the applicant. The photograph pasted on the banker’s certificate must be attested by the banker with Seal and Signature of the applicant.
   
4. The application must be submitted in Duplicate.
   
5. Each individual page of the application must be signed by the applicant.
   
6. Self addressed envelope stamped with Rs. 25 (Local Address) & for others Rs.30/-. These documents may be kept secured in a file cover.
Check List of Documents to apply for IEC Code
1. Covering Letter on your company's letter head for issue of new IEC Code Number.
2. Two copies of the application in prescribed format ( Aayaat Niryaat Form ANF 2A) must be submitted to your regional Jt.DGFT Office.
3. Each individual page of the application has to be signed by the applicant.
4. Part 1 & Part 4 has to be filled in by all applicants. In case of applications submitted electronically.
5. No hard copies of Part 1 may be submitted. However in cases where applications are submitted otherwise, hard copy of Part 1has to be submitted.
6. Only relevant portions of Part 2 need to be filled in.
7. Rs 250.00 Bank Receipt (in duplicate)/Demand Draft/EFT details evidencing payment of application fee in terms ofAppendix 21B.
8. Certificate from the Banker of the applicant firm in the format given in Appendix 18A.
9. Self certified copy of PAN issuing letter or PAN (Permanent Account Number) Card issued by Income Tax Authority.
10. Two copies of passport size photographs of the applicant duly attested by the Banker of the applicant.
11. Self addresses envelope with Rs.25/- postal stamp for delivery of IEC certificate by registered post or challan/DD of Rs.100/- for speed post.
How to submit IEC Code application
Application can be submitted in person/by Authorised Employee of the Company at the R & I counters in the office Or It can be sent by post/courier.

Processing of IEC Code Application
The application can be submitted at the counter in person at the office or it can be sent through Post/Courier. An acknowledgement in form of a receipt having File Number is generated on receipt of application. The file number is used for any correspondence/query regarding the IEC application submitted to the office. The application is then sent to IEC section where it is processed. If the application is found complete in all aspects (as per requirements prescribed) an IEC is generated, or else a deficiency letter stating the nature of deficiency is prepared and sent to the applicant. Replies are awaited in cases where deficiency letter is issued and after due compliance by the applicant the IEC is allotted.

Issue and Despatch of  IEC Code
IEC allotment letter is sent through post at the registered office mentioned by the applicant in the application. Similarly deficiency letters are sent to applicant by post.

About IEC Application Status
File No for IEC application
A new option to know the file number has been introduced for all exporter who are sending their application through Post/Courier. The applicant has to input PAN number to get the file number.

Status of IEC Application
The applicant can know the status of the IEC application using option “Status of IEC Application” on the website of CLA.
IEC issued day wise
IEC’s issued daily can be viewed on the website using option “IEC issued day wise”
File No for IEC application
Applicant’s who have sent their application through post/courier can know their file number using option “File No for IEC application”

IEC Code Number Related links
DGFT Online IEC Code Number Application Form -ANF-2A
View Your IEC Status : http://dgft.delhi.nic.in:8100/dgft/iecprint IEC Status at Custom(BIN) : http://164.100.9.176/iecstatus.html
http://www.dgft.gov.in/dgftcla
http://www.dgft.gov.in
http://www.icegate.gov.in

DGFT  Zonal Office New Delhi :- IEC Help contact
PBX No. Tel-011-23379111, 23379112, 23379113
e-mail : jdgftcla@hotmail.com
Public Relation Officer : Tel-011- 23378740

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Business Line : Industry & Economy News : One-person companies may soon become a reality

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Cloud computing and Chartered Accountants

Cloud computing and Chartered Accountants

Responsibility of Professional Signing Annual Return

Responsibility of Professional Signing Annual Return

Responsibility of Professional Signing Annual Return

Responsibility of Professional Signing Annual Return

Short Note on Chairman of the Company

Short Note on Chairman of the Company

Normalising a dormant company

A dormant company is one which has not made any statutory annual filings ie., has not filed both annual returns and balance sheets for the years 2006-2007, 2007-2008 and 2008-2009.

Such Company can change its status to "active" by filing Form 61 and completing the fillings within 21 days from the date of approval of Form 61.

Application for normalising a dormant company:

Our company --------------was incorporated on ---------------with the main object of carrying on----------------and is continuing to carry on its business till date.

The company has duly convened its Annual General Meetings till date. However, the company failed to file its annual report/annual returns with the Registrar of Companies due to oversight.

Hence, the Board of Directors has decided to submit a request to the Registrar of Companies, Andhra Pradesh for regularising its status from 'Dormant' to 'Active' in the Master Data appearing in the MCA portal. The company hereby files Form 61 along with this application and the Board Resolution dated-----

Kindly accept our application and do the needful.

The Annual Return

What shall the Annual Return contain:

Relevant Section: Section 159 , Part 1, Schedule V of the Companies Act, 1956

• registered office of the Company
• register of its members
• register of its debenture holders
• its shares and debentures
• its indebtedness
• its members and debenture holders, past and present
• its directors, managing directors, managers,secretaries past and present 

The past and present details of its members need not be given if in any of the preceding 5 annual returns the full details of past and present members and the shares held and transferred by them are contained.The return in question may contain only particulars of persons ceasing to be members since that date and shares transferred since that date or changes in shares held by members since that date.
Who is required to sign the Annual Return :

Relevant Section: Section 161(1) of the Companies Act, 1956

 The Annual Return must be signed by 

• a director and by the Manager or Secretary
• where there is no manager or secretary, by  two directors of the company one of whom shall be a managing director if there is one.
• in case of listed companies, the annual return shall also be signed by a Company Secretary in Whole time practice.

Additional certification by the signatories:

Relevant Section: Section 161 (2)  of the Companies Act, 1956
  

• The return states the facts as they stood on the day of the AGM correctly and completely
• Since the date of the last annual return, the transfer of all shares and debentures and the issue of all further certificates of shares and debentures have been appropriately recorded in the books maintained for the purpose.
• in case of private company also that 1) the company has  not since the date of the AGM with reference to which the last annual return was filed, issued any invitation to the public to subscribe for any shares or debentures of the Company and that 2) where the annual return discloses the fact that the number of members of the company exceeds fifty, the excess consists wholly of persons who under Section 3 (1) (iii) (b) are not to be included in reckoning the number of fifty 

 

Procedure for change/removal of auditors

Procedure for change in auditors 

Situation 1: New appointment in the AGM other than the retiring auditor

That is the annual accounts as laid before the AGM have been signed by the retiring auditor. The appointment will be for the current year.

Relevant Section: Section 225

1. The Company must receive a special notice from a member or shareholder not less than 14 days before the AGM intending his intention to move a resolution for changing the existing auditor of the company and for appointing another auditor in his place.

2.Such notice must be forwarded to the existing auditor of the Company.

3.A certificate is obtained from the new auditor that his appointment if made will be within the limits of Section 224 (1B)

4. Company must issue notice 21 days before the AGM about the proposal to change the auditors.

5. The retiring auditor has a right to make a representation to the company either in writing or orally. If written representation is received, the same must be enclosed with the notice or company to inform shareholders of the representation by publishing the same in a newspaper having appropriate circulation.

6. Three copies of the notice to be forwarded to the Stock Exchanges if Company is listed

7.Only after a proper resolution is passed in the AGM, the new Auditor shall be considered as duly appointed. New auditor to inform ROC about his appointment within one month of receipt of intimation from the Company about his appointment.

Situation 2: Removal of an Auditor before the expiry of his term

Relevant Section: Section 224 (7)

1.Hold a Board Meeting to approve draft application to the Central Government for removal of auditor

2.Make an application to the Regional Director seeking his approval for removal of auditor

3. On receiving approval, hold an EGM for seeking approval of members for removal of existing auditors and appointment of new auditors.

Situation 3: Auditor resigns before the expiry of his term

Relevant Section:  Section 224 (6)

1. Hold Board Meeting to consider the resignation of the existing auditor and convene an EGM for appointment of new auditor in his place.

2. Obtain a letter from auditor under section 224 (1B)

3. Hold EGM and pass ordinary resolution

4.Intimate auditor within 7 days of his appointment

5. Auditor to file Form 23B within 30 days of receiving such intimation

Situation 4 : Casual vacancy in case of death or disqualification of auditors

Relevant Section: Section 224 (6) (a)

 The Board may fill a casual vacancy in the office of an auditor caused by death or disqualification of such auditors

But while such vacancy continues, the remaining auditor or auditors may act.

Definition: The term casual vacancy has not been defined in the Companies Act, 1956. It simply means a vacancy created by the death, disqualification, resignation etc of the auditor of the company.

Case law:  
ICAI vs Jnanendranath Saikia [1955] 25 comp cas 53, 56 Assam

Deliberate omission on part of the company to appoint an Auditor in its AGM is not a casual vacany

Resolution: 
"RESOLVED THAT M/s............., Chartered Accounts (Firm Regn No...) be and are hereby appointed as statutory auditors of the Company to fill up the casual vacancy caused by the resignation of M/s-------Chartered Accountants, until the conclusion of the next Annual General Meeting of the Company at a remuneration as the Board of Directors may determine."

Meaning of casual vacancy in the office of auditor(s) The expression 'casual vacancy' has not been defined in the Companies Act, 1956. Simply stated, a casual vacancy in the office of an auditor means a vacancy caused in the office of an auditor by his death, disqualification, resignation, etc. It has been held in the case of the Institute of Chartered Accountants of India v Jnanendranath Saikia (1955) 25 Comp Cas 53, 56 (Assam) that casual vacancy is not a vacancy created by any deliberate omission on the part of the company to appoint an auditor at its annual general meeting.

Read more at: http://www.caclubindia.com/forum/resignation-by-statutory-auditors-26714.asp#.UJNZkWcZk1U

The expression 'casual vacancy' has not been defined in the Companies Act, 1956. Simply stated, a casual vacancy in the office of an auditor means a vacancy caused in the office of an auditor by his death, disqualification, resignation, etc. It has been held in the case of the Institute of Chartered Accountants of India v Jnanendranath Saikia (1955) 25 Comp Cas 53, 56 (Assam) that casual vacancy is not a vacancy created by any deliberate omission on the part of the company to appoint an auditor at its annual general meeting.

Read more at: http://www.caclubindia.com/forum/resignation-by-statutory-auditors-26714.asp#.UJNZkWcZk1U

The expression 'casual vacancy' has not been defined in the Companies Act, 1956. Simply stated, a casual vacancy in the office of an auditor means a vacancy caused in the office of an auditor by his death, disqualification, resignation, etc. It has been held in the case of the Institute of Chartered Accountants of India v Jnanendranath Saikia (1955) 25 Comp Cas 53, 56 (Assam) that casual vacancy is not a vacancy created by any deliberate omission on the part of the company to appoint an auditor at its annual general meeting.

Read more at: http://www.caclubindia.com/forum/resignation-by-statutory-auditors-26714.asp#.UJNZkWcZk1U

The Law of digital signature

The Law of digital signature

liability of company to pay income tax shifted to directors in case of default

Liability of the director(s) u/s 179 of the Income Tax Act is towards the amount of “tax” only and not towards “interest” and “penalty”

SANJAY GHAI Vs. ASSTT. CIT & ORS. in W.P.(C) 2303/2012 & 5175/2012 Dated 11.10.2012 (DHC)

Decided in favour of : Assessee

Issue Involved: In this case, the issue involved was that if there is a default on the part of a private limited company in payment of its income tax dues to the Income Tax Department then the liability of the company can be shifted to its director(s) u/s 179 of the Income Tax Act and accordingly, the Income Tax Department can hold the said director(s) liable to pay income tax dues of the company. The question arose as to whether it is the amount of “tax” only that can be shifted upon the director(s) or even other components of income tax demands such as “interest” and “penalty” can also be recovered from the director(s) u/s 179 of the Income Tax Act.

Held : Hon’ble Delhi High Court after analyzing Section 179 and other provisions of the Income Tax Act held that it is the amount of “tax” only which can be recovered form the director(s) u/s 179 and no other demand i.e. “interest” or “penalty” can be recovered from director(s) u/s 179 of the Income Tax Act.

This judgment would provide some relief and mental peace to the director(s) in case their companies have defaulted in payment of income tax dues because in many cases the portion of “interest” and “penalty” becomes much larger than the amount of tax. It is because of the reason that due to time lag the amount of interest becomes very large and penalty can be levied upto 300% of the amount of tax.

Is Trust a Body Corporate?

Can a 'Trust' under the Indian Trusts Act, 1882 be a 'Body Corporate' under the Companies Act, 1956?

Sub-section (7) of Section 2 of the Companies Act, 1956 defines a Body Corporate or Corporation as follows:-

“Body Corporate” or “Corporation” includes a company incorporated outside India but does not include---

(a) a corporation sole;

(b) a co-operative society registered under any law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf.

Institution or body which can be regarded body corporate---- Department’s Circular:---  The question whether a particular institution or body other than that specified in sub-clauses (a), (b) and (c) of clause (7) of section 2 is a “body corporate” under the Companies Act, 1956 has to be decided with reference, among other things, to the status, mode of incorporation, constitution, etc., of the institution. It is not possible for the Department to lay down any general definition other than that given in the Act or to furnish a list of bodies which are deemed to be “bodies corporate” under section 2(7). Generally speaking, the Department would consider that any corporate body, i.e., a body which has been or is incorporated under some statute and which has a perpetual succession, a common seal and is a legal entity apart from the members constituting it, will come within the definition of the term "body corporate".  The term will not, however, include a society registered under the Societies Registration Act, 1860, or any of the bodies which have been specifically excluded by sub-clauses (a), (b) and (c) of clause (7) of section 2. (Circular No. 8(26)/2(7)/63-PR, dated 13-03-1963)

The Supreme Court of India in Ashoka Marketing Ltd v Punjab National Bank, (1990) 4 SCC 406 held that “The expression ‘body corporate’ is used in legal parlance to mean a public or private corporation.”

Further, the Supreme Court of India, in Board of Trustees, Ayurvedic and Unani Tibia College v. State of Delhi, AIR 1962 SC 458 while posing the question as to what is a corporation, the court answered it with the statements contained in HALSBURY 4th Edn., Vol.9, para 1201 as:- “A Corporation may be defined as a body of persons (in the case of a corporation aggregate) or an office (in case of a corporation sole) which is recognized by the law as having a personality which is distinct from the separate personalities of the members of the body or the personality of the individual holder for the time being of the office, in question.”

The Supreme Court of India again in S. P. Mittal v. Union of India, AIR 1983 SC 1, summed up the essential elements in the legal concept of a corporation, which are: “(1) a continuous identity, i.e., the original member or members or his or their successors are one; (2) the persons to be incorporated, (3) the name by which the persons are incorporated, (4) a place, and (5) words sufficient in law to show incorporation. A corporation aggregate can express its will by deed under a common seal.”

Corporation also means any body corporate established by or under Central, Provincial or State Act. It can be brought into existence by a statute.

In legal parlance, a legal person is any subject-matter other than a human being to which the law attributes personality. The law, in creating legal persons, always does so by personifying some real thing. The thing personified may be termed the corpus of the legal person so created; it is the body into which the law infuses the animus of a fictitious personality. Thus a Corporation, being the creation of law is undoubtedly a legal person. It comes into existence by the lawful authority of incorporation. A corporation, having neither soul nor body, cannot act save through the agency of some representative in the world of real men. Whatever a corporation is reputed to do in law is done in fact by the directors or the shareholders as its agents and representatives.

Trust literally means a confidence which one reposes in another. Creation of a Trust is regulated by the Indian Trusts Act, 1882. According to Section 3 of the Act, a Trust is an obligation annexed to the ownership of property and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner. A trust is a curious instance of duplicate ownership which allows for the separation of the powers of management and the rights of enjoyment. Trust property is that which is owned by two persons at the same time, the relation between the two owners being such that one of them is under an obligation to use his ownership for the benefit of the other. The former is called the trustee, and his ownership is trust-ownership; the latter is called the beneficiary, and his is beneficial ownership.

The trustee is destitute of any right of beneficial enjoyment of the trust property. His ownership, therefore, is a matter of form rather than substance, nominal rather than real. If we have regard to the essence of the matter rather than to the form of it, a trustee is not an owner at all, but a mere agent, upon whom the law has conferred the power and imposed the duty of administering the property of another person. In legal theory, however, he is not a mere agent but an owner. He is a person to whom the property of some one else is fictitiously attributed by the law, to the extent that the rights and powers thus vested in a nominal owner shall be used by him for the benefit of the real owner. As between trustee and beneficiary, the law recognizes the truth of the matter; as between two, the property belongs to the latter and not to the former. But as between the trustee and third persons, the fiction prevails. The trustee is clothed with the rights of his beneficiary, and is so enabled to personate or represent him in dealings with the world at large.

The purpose of trusteeship is to protect the rights and interests of persons who for any reason are unable effectively to protect them for themselves. The law vests those rights and interests for safe custody, as it were, in some other person who is capable of guarding them and dealing with them, and who is placed under a legal obligation to use them for the benefit of him to whom they in truth belong.

In a celebrated case, Sir Edward Coke C.J enunciated that the first essential for a valid corporation is a “lawful authority of incorporation”.

The courts in India in various decisions held that the instrument of registration does not by itself lend legal entity to a trust. The Supreme Court of India in AIR 1957 SC 887 (891) held that “A trustee is legal owner of trust property and the property vests in him. He holds trust property for the benefit of beneficiaries but does not hold it on their behalf.

In Duli Chand v Mahabir Prasad etc. Trust AIR 1984 Del 145 (DB) the court observed that a trust is “not like a corporation which has a legal existence of its own and therefore, can appoint an agent. A trust in not in this sense a legal entity. It is possible for some of the trustees to authorize the others to file a suit but this could only be done by the execution of a power of attorney.”

It was also held in H. N. Bhiwandiwala v Zoroastrian Co-op. Bank AIR 2001 Bom 267 that, a suit against a trust is not maintainable as it is not a legal entity. Observed, “all the trustees must be made a party.”

It was further held in N. T. P. C. v Canara Bank (1999) 97 Comp. Cas. 930 at Pages 937-38 that “Trusts created under Indian Trusts Act, 1882 are not legal entities as public trusts registered under the Societies Registration Act are.

It would be pertinent to speak about the section 10 of the Indian Trusts Act, 1882 which provides that every person capable of holding property may be a trustee, but where the trust involves the exercise of discretion, a trustee must be a person competent to contract. Thus there is no statutory prohibition upon the appointment of any person as a trustee, who should be a person capable of taking and holding legal estate, possessed of natural capacity and legal ability to execute the trust, and domiciled within the jurisdiction of the court.

In view of the above discussion as well as the decisions that a Trust is an obligation annexed to the ownership of property and a trustee is a person who accepts a confidence which gives rise to obligation annexed to the ownership of property. But a trust is not a legal entity in the eye of law as it has no lawful authority of incorporation. Generally, the assumption that an entity will behave substantially as expected. Trust may apply only for a specific function. As such a Trust under the Indian Trusts Act, 1882 cannot be a ‘Body Corporate’ under the Companies Act, 1956.

SEBI Updates 10-10-12

Rule 19A of the Securities Contracts (Regulation) Rules, 1957.

Clarification issued: "Public Shareholding" would be computed as "Shares held by public" as a total percentage of "total number of shares held by promoters, promoter group and public." Capital issued outside India will not be be included.

Regulation 26(1) of the SEBI (ICDR) Regulations, 2009

Listed entities coming out with further public offers (FPOs) will not be required to meet the profitability criteria stated in Regulation 26(1) of the SEBI (ICDR) Regulations, 2009. However they will be guided by the provisions of Regulation 27.

This will enable loss making companies to raise funds by way of FPOs.

FDI-Relaxation in Capitalization norms for subsidiaries of foreign owned NBFCs
An NBFC is a Company registered under Companies Act, 1956
engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government,

untraceable shareholders, sale of shares, japan

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Co-operative Dairy Companies Act 1949  022
Commenced: 20 Oct 1949 16   Forfeiture of shares of untraceable shareholders

   16. Forfeiture of shares of untraceable shareholders---(1)  This
 section shall apply in every case where---
   (a) The registered owner for the time being of shares in a company
         registered under this Act---
           (i) Has ceased for the whole of the immediately preceding
         period of 5 years to be a supplying shareholder of the company;
         and
           (ii) Has left his last address known to the company and has no
         agent whose address is known to the company; and
           (iii) In any case where a dividend has been declared by the
         company during the said period of 5 years, has failed to claim
         the said dividend:
   (b) The registered owner for the time being of shares in a company
         registered under this Act has been deceased for more than 5
         years and no application has been made to the company for
         registration of any transmission in respect of the shares and no
         probate or letters of administration in his estate have been
         produced to the company for noting.

   (2) In any case to which this section applies the company may publish
 a notice in 3 consecutive issues of a newspaper circulating in the
 district in which the company operates of its intention to forfeit the
 shares under this section at the expiration of 3 months from the date of
 the first publication of the notice, unless within that time the
 registered owner or his legal personal representative or some person
 claiming to be entitled to the shares establishes to the satisfaction of
 the directors good cause to the contrary. Every such notice shall set
 out the name of the registered owner, the number of shares, and the
 amount paid up thereon.

   (3) Unless within the said period of 3 months the registered owner or
 his legal personal representative or some other person establishes his
 title to the shares to the satisfaction of the directors, the directors
 may by resolution, at any time after the expiration of the said period
 of 3 months, declare the said shares to be forfeited, and, subject to
 the next 2 succeeding subsections, the shares shall thereupon be deemed
 to be forfeited to the company.

   (4) At any time within one year after the passing of a resolution of
 the directors under the last preceding subsection any person claiming to
 be entitled to the shares so forfeited may apply to the Co-operative
 Dairy Companies Tribunal for an order cancelling the forfeiture and
 restoring the shares to the share register of the company. Notice of the
 application shall be served by the applicant on the company at its
 registered office.

   (5) After considering the application the Tribunal shall make such
 order as it considers just and equitable in all the circumstances of the
 case, either dismissing the application or ordering the cancellation of
 the forfeiture and the restoration of the shares to the share register.

   (6) If no application under subsection (4) of this section is made
 within the said period of one year, or if every application made under
 that subsection in respect of those shares is dismissed by the Tribunal,
 the directors may, at any time after the expiration of the said period
 of one year or after all such applications have been dismissed by the
 Tribunal, whichever is the later, reissue or sell the shares on such
 terms as they think fit, and the company may receive the consideration
 given for the shares on the reissue or sale thereof, and may re-allot or
 execute a transfer of those shares in favour of the person to whom the
 shares are reissued or sold as aforesaid, and may register that person
 as the owner thereof. The title of any person so registered as the owner
 of the shares shall not be affected by any irregularity or invalidity in
 the proceedings in reference to the forfeiture, reissue, or sale of the
 shares.

   (7) The powers of forfeiture conferred by the foregoing provisions of
 this section shall be in addition to and not in substitution for any
 other powers which the company may have to forfeit shares.

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