In the celebrated decision of the Supreme Court in the case of Vodafone International Holdings BV, it was held that the transfer of shares held outside India by a non resident would be outside the purview of the Indian income tax law and thus, not liable to tax. In order to neutralize the aforesaid judgment, the provisions of Section 9(1)(i) the Act were retrospectively amended by the Finance Act, 2012, to enable charge of capital gain tax upon transfer of shares held outside in India, which derive their value substantially from assets located in India.

Thereafter, vide the Finance Act, 2015 a legislative framework was provided for taxation of such transactions, wherein, certain conditions and exceptions were introduced for applicability of such provisions.

In terms of Explanation 6 to Section 9(1)(i) of the Act, a monetary threshold for application of such provisions was also introduced, which is based upon the ‘value of the assets located in India’. One may note that certain Rules have been recently framed to provide the mechanism for valuation of such assets.

It may be mentioned that the applicability of such indirect transfer provisions on Foreign Portfolio Investors (‘FPI’) had always been a matter of deliberation. Upon such aspects being raised by stakeholders, the Central Board of Direct Taxes (‘CBDT’) has issued a circular addressing certain concerns with regard to the applicability of such provisions to offshore funds and FPIs.

The salient points of the circular (which are in the form of responses to ‘Frequently Asked Questions’) are as under:

• It has been clarified that investors of a registered FPI directly investing into India, who satisfy the exceptions carved out in Explanation 7(a)(i) of Section 9(1)(i) shall not be liable to tax under the aforesaid indirect transfer provisions. In other words, where such investors do not hold the right of management or control, neither hold any voting power or share capital or interest in excess of 5%, the provisions of Section 9(1)(i) shall not be pressed into service upon sale of units of the funds by such investors. 
• As regards the proposal for increasing the aforesaid threshold of 5%, the CBDT has clarified that such threshold is reasonable.
• In terms of the monetary limits for applicability of indirect transfer provisions provided in Explanation 6, the value of ‘assets located in India’ must exceed INR 100 million. The proposal of Stakeholders for enhancement of such threshold to INR 1 Billion did not find favour with the CBDT, which has clarified that the existing limits are reasonable.
• Under Section 47 of the Act, an exemption has been provided to schemes of amalgamation of foreign corporate entities which result in an indirect transfer of Indian shares. It has been clarified that such exemption shall not be applicable to merger of offshore funds, as the same cannot be regarded as ‘corporate entities’.
• Stakeholders had recommended that FPI’s listed on overseas stock exchanges should be brought outside the purview of the indirect transfer legislation, owing to the volume and frequency of trading of shares. However, the aforesaid recommendation was not found by the CBDT to be feasible.
• The CBDT has also refused to relieve FPIs from withholding tax obligations in such transactions. Moreover, it has been clarified that interest and penal provisions for non compliance with withholding tax provisions shall continue to apply.

Apart from the aforesaid clarifications, the applicability of the exceptions laid down in Explanation 7 to Section 9(1)(i) of the Act has been explained through certain illustrations.

In recent times, Singapore has emerged as a popular tax efficient jurisdiction for foreign investment into India, given the tax neutrality of the disinvestment. This was on account of the fact that the existing Agreement for avoidance of Double Taxation (‘tax treaty’) between the two countries stipulated a residence based capital gain tax regime. In other words, capital gains arising on transfer of shares held in India by a Singapore Resident were not liable to tax in India.

However, a rider to the aforesaid provision was imposed, in terms of which, the exemption from capital gains tax would b available as long as a similar exemption was available under the Indo-Mauritian tax treaty.

With an objective of curbing round tripping and tax evasion, the Indian Government did recently renegotiate its tax treaty with Mauritius, wherein a source based capital gain tax framework has now been enshrined, instead of residence based taxation. This step has paved the way for renegotiation of the tax treaty with Singapore on similar lines.

As anticipated, the Indian Government has signed a Protocol on December 30, 2016, amending the tax treaty with Singapore. Key provisions of the protocol have been highlighted hereunder:

• The Provision dealing with Capital Gains (Article 13) have been amended to provide for source based capital gains tax on sale of shares, for shares acquired on or after April 1, 2017;
• Thus, Shares acquired prior to April 1, 2017 shall continue to enjoy exemption from capital gains tax in India.
• A limited period concessional tax rate of 50% of the applicable capital gain tax rate has been provided, for shares acquired on or after April 1, 2017 and sold on or before March 31, 2019;
• However, in cases of shares acquired prior to April 1, 2017 (which are entitled to exemption) or shares acquired on or after April 1, 2017 and sold on or before March 31, 2019 (which are entitled to a concessional tax rate), the exemption / concession shall be subject to a Limitation of Benefit Clause (‘LOB’).
• In terms of such LOB clause, the aforesaid exemptions / concessions shall be available only if affairs of the taxpayer are not arranged with an objective of treaty abuse. Moreover, such exemption/concession shall not be available to conduit companies or deemed conduit companies.
• Furthermore, the protocol also amends Article 9 (Associated Enterprises) of the tax treaty to facilitate relieving of economic double taxation in transfer pricing cases. The elimination shall be effectuated through mutual consultation under the Mutual Agreement Procedure (‘MAP’) route. This amendment is in line with the recommendations of Action Plan 14 of the Base Erosion and Profit Shifting (‘BEPS’) initiative of the OECD.

The aforesaid protocol shall be ratified by the Government in due course and is yet to enter in force.  

(Contributed by: Mr. Anuj Mathur/ Ms. Purnima Bajaj)

The facts of the case are as under:

• Reliance Infrastructure Limited ('the Assessee') during AY 1983-84 executed projects in Saudi Arabia, the income out of which was subjected to tax in Saudi Arabia.
• The Assessee claimed deductions u/s 80 HHB (available on execution of foreign projects) of the Income Tax Act, 1961 ('the Act') and also under 35B(which provides for export markets development allowance) of the Act on profits earned from such projects executed in Saudi Arabia.
• Further, the Assessee also sought benefit of double taxation relief u/s 91 on profits against which above export incentives were claimed.
• The Assessing Officer(AO) rejected Assessee's claim on the ground that relief is available only when income is taxed in both the countries.
• The CIT(A) and Hon'ble Income Tax Appellate Tribunal also rejected Assessee's claim.

On appeal before Hon'ble High Court (HC):

• HC accepted Revenue’s stand that for claiming relief u/s 91, the same income must be taxed in both the countries; As the income is subject to deduction  u/s 80HHB and Sec.35B  and did not suffer any tax  in India, no relief can be granted u/s 91;
• HC further distinguished Assessee’s reliance on Karnataka HC ruling in Wipro Ltd (382 ITR 179) which dealt with the manner in which the benefit u/s 10A is to be treated u/s 90 i.e. cases covered by Double Taxation Avoidance Agreement (DTAA) and held that though there may be certain observations with  regard to Sec 91 in the said decision but the same are in the nature of obiter;
• However, HC upheld Assessee's alternate claim (which was not raised before AO nor decided by the CIT(A)) that expense deduction should be allowed for taxes paid in Saudi Arabia for which benefit u/s 91 is not available on basis of 'Real Income Theory'. HC ruled that taxes paid abroad are not hit by the bar contained in Sec 40(a)(ii) (which denies deduction of ‘taxes’ paid) as foreign taxes do not fall under the ambit of ‘tax’ u/s 2(43) (which defines ‘tax’ as income-tax chargeable under the provisions of this Act) and distinguished the decision of Inder Singh Gill relied upon by revenue, as the same was rendered under Income Tax Act, 1922 wherein there was no definition of "tax" (47 ITR 284);
• HC also took note of the Explanation to Sec 40(a)(ii) inserted vide Finance Act, 2006, and explanatory notes to Finance Act 2006 as recorded in Circular No 14 of 2006 dated 28th December,2006 issued by CBDT which clarifies that whenever Assessee is otherwise entitled to the benefit of double income tax relief under section 90 or 91 of the Act, then the tax paid abroad would be governed by section 40(a)(ii) of the Act. Further, as the Explanation uses the words  “for removal of doubts”  which makes it clear that the same as declaratory and hence retrospective in application.
• Therefore, the benefit of the Explanation would be available and on application of real income theory, the quantum of tax paid in Saudi Arabia, attributable to income arising or accruing in India would be reduced for the purposes of computing the income on which tax is payable in India in case of the Assessee.

Siemens Public Communication Networks Ltd ('the Assessee') was a subsidiary of a German company. During the Assessment Years (AYs) 1999-2000 to 2001-02, the assessee received subvention amount from its parent company. The assessee claimed the subvention payment as capital receipt, received to make good the loss incurred by it.

The Assessing Officer (AO) treated such subvention as a revenue receipt. Commissioner of Income-tax (Appeals) [CIT(A)] and Income-tax Appellate Tribunal (the Tribunal), however agreed with the view of assessee. 

The Karnataka High Court on the contrary held that subvention received from the parent company to recoup the losses of the subsidiary is taxable as revenue receipt, since the subvention was extended to run the subsidiary’s business more profitably. Further, the purpose of the subvention was to meet the working capital needs and hence the payments were on revenue account. The Hon’ble High Court observed that the purpose of the subvention determines the character of the payment.

Aggrieved by the order of High Court, an appeal was made by the Assessee to the Hon’ble SC.

SC while placing reliance on the ruling by Delhi High Court in Handicrafts and Handlooms Export Corporation of India Ltd [(2014) 49 Taxmann.com 488(Delhi)] opined that the voluntary payments made by the parent company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment of the assessee and therefore the same are not revenue in nature. Further SC also distinguished the case laws relied by High Court of Karnataka as in those cases subsidies received were in nature of grant-in-aid from public funds. 

Accordingly, SC reversed the finding of the High Court and held the decision in favour of the assessee.

(Contributed by: Ms. Ritu Gyamlani)

In a recent decision in the case of Jeans Knit Private Ltd. vs. DCIT, the Hon’ble Supreme Court held that writ petition before High Court against issuance of reassessment notice under section 148 by the assessing officer, is maintainable.

In the instant case, the Hon’ble Supreme Court noted that High Court had dismissed the assessee’s writ petitions against notice issued under section 148 as not maintainable. The Hon’ble Supreme Court held that the said view of the High Court is contrary to the law laid down by Supreme Court in an earlier decision in the case of Calcutta Discount Company Ltd. vs. ITO.

With respect to the High Court’s reliance on co-ordinate bench ruling in CIT vs. Chhabil Dass Agarwal, wherein it was held that no writ shall lie where alternate remedy is available, the Hon’ble Supreme Court clarified that “the principle laid down in the said case does not apply to these cases.”

The Hon’ble Supreme Court thus, without making any observations on merits, set aside the impugned judgments and remits the cases to the respective High Courts to decide the writ petitions on merits.

The Hon’ble Supreme Court further held that stay against the reassessment proceedings shall continue till disposal of writ petitions before the High Courts.

(Contributed by: Ms. Manali Gupta)

In the instant case, the Hon’ble High Court of Mumbai upheld its earlier decision that transfer pricing adjustments should be restricted to the international transactions entered between the Associated Enterprises (‘AEs’).

On the facts, the assessee is engaged in the business of cutting rough diamonds, subjecting the same to manufacturing process and then exporting the cut and polished diamonds. The assessee had exported cut and polished diamonds to its AE and had benchmarked the said transactions using Profit Split Method (‘PSM’) as most appropriate method (‘MAM’). The assessee had also corroborated the arm’s length price (‘ALP’) of international transaction by using Transactional Net Margin Method (‘TNMM’) in its Transfer Pricing Study Report.

The Transfer Pricing Officer (‘TPO’) observed that the assessee has not applied PSM correctly and as such rejected PSM as the MAM. The TPO selected TNMM as MAM, however rejecting Operating Profit over Operating Cost as Profit Level Indicator (‘PLI’) selected by the assessee, the TPO selected Return on Capital employed (‘ROCE’) as the PLI reasoning that the industry of the assessee was highly working capital intensive.

Aggrieved, the assessee appealed before the Income Tax Appellate Tribunal (‘ITAT’). Before the ITAT, the assessee argued that if the difference in ROCE of the assessee and the comparable selected by the TPO, is applied to average capital employed by the assessee in relation to the transactions with AEs, the resultant adjustment would be less than 5% of international transaction. As such, as per the proviso to section 92C of the Income-tax Act, 1961, no adjustment would be warranted. The ITAT accepted assessee’s plea and accordingly, directed the TPO to verify the working submitted by the assessee.

Against the aforesaid order of ITAT, the revenue filed an appeal before the High Court and raised question of law that whether the ITAT was right in restricting the adjustment only to international transactions when the assessee had selected TNMM and applied it on entity level. The Hon’ble High Court took cognizance of the various decisions taken on this issue, wherein it was held that transfer pricing adjustment has to be done only in respect of the international transactions and not in respect of all transactions of the entity. It was argued that the revenue is considering to file an appeal in Supreme Court against such order of High Court in the matter of CIT v/s. Alstom Projects India Ltd., (ITXA No.362 of 2014). The Hon’ble High Court, however, decided the matter in favour of the assessee by indicating that no appeal before Supreme Court had been filed by the revenue against similar decision in the matter of CIT v/s. M/s. Tara Jewellers Exports Pvt. Ltd (ITXA No.1814 of 2013).

In the instant case, the ITAT, Bangalore Bench upheld the order of TPO determining the ALP of management fees at Nil, observing that the assessee has not discharged it’s onus to establish that services were actually rendered by the AE.

On the facts of the case, the assessee is engaged in the business of manufacture and sale of trucks, buses and distribution of construction equipment, etc. The assessee had entered into various international transactions and applied TNMM on aggregate basis to justify arm’s length price for all the international transactions. All the transactions except management fee paid by assessee to parent company were accepted to be at arm’s length by TPO. In relation to management fees, the TPO, during the assessment proceedings, had asked the assessee to submit details of expenditure incurred. However, the assesse was unable to furnish the evidence and details for the same. As such, the TPO concluded that no actual services were rendered by the AE, nor any benefit has been derived by the assessee. Accordingly, the ALP of the management fees was determined at Nil. The Commissioner of Income-tax (Appeals) confirmed the transfer pricing addition made by the TPO.

Aggrieved, the assessee appealed before ITAT. Before the ITAT, assessee relied upon the decision of Hon’ble High Court in the case of CIT v. EKL Appliance Ltd.  345 ITR 241 (Del) and contended that the TPO cannot determine ALP at ‘Nil’ by questioning the necessity and benefits derived from the expenditure incurred. The assessee also submitted that the ALP of transaction of management fee should be determined by applying TNMM on aggregate basis.

The ITAT accepted that it is a settled position that it is beyond the scope and powers of TPO to question the necessity of expenditure and determine the ALP at Nil. However, the ITAT mentioned that the onus lies on the assessee to prove that the services were actually rendered by the AE. The ITAT observed that the assessee had failed to discharge this onus. The ITAT also stressed upon the finding of the TPO that the invoice for management fees was raised much after the closure of the relevant accounting year and the payment of the management fee is nothing but siphoning of the profits from India with the intention of avoiding tax. The assessee had not controverted such findings of the TPO before ITAT. Based upon the said facts the ITAT held that TPO was justified in determining the ALP of management at Nil.

Regarding assessee’s contention that the transaction of management fee should be benchmarked by applying TNMM on aggregate basis, the ITAT, relying upon the decisions in the matter of Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT [374 ITR 118] and Knorr Bremse India (P) Ltd., v. Asst. CIT 2016 [380 ITR 307], held that bundling of transactions is permissible only when the transactions are closely related, which is not the case of assessee. Therefore, the ITAT held that this contention of the assessee is also not acceptable.

(Contributed by: Ms. Shweta Kapoor)

In the instant case, the ITAT, Bangalore Bench upheld the order of TPO determining the ALP of management fees at Nil, observing that the assessee has not discharged it’s onus to establish that services were actually rendered by the AE.

On the facts of the case, the assessee is engaged in the business of manufacture and sale of trucks, buses and distribution of construction equipment, etc. The assessee had entered into various international transactions and applied TNMM on aggregate basis to justify arm’s length price for all the international transactions. All the transactions except management fee paid by assessee to parent company were accepted to be at arm’s length by TPO. In relation to management fees, the TPO, during the assessment proceedings, had asked the assessee to submit details of expenditure incurred. However, the assesse was unable to furnish the evidence and details for the same. As such, the TPO concluded that no actual services were rendered by the AE, nor any benefit has been derived by the assessee. Accordingly, the ALP of the management fees was determined at Nil. The Commissioner of Income-tax (Appeals) confirmed the transfer pricing addition made by the TPO.

Aggrieved, the assessee appealed before ITAT. Before the ITAT, assessee relied upon the decision of Hon’ble High Court in the case of CIT v. EKL Appliance Ltd.  345 ITR 241 (Del) and contended that the TPO cannot determine ALP at ‘Nil’ by questioning the necessity and benefits derived from the expenditure incurred. The assessee also submitted that the ALP of transaction of management fee should be determined by applying TNMM on aggregate basis.

The ITAT accepted that it is a settled position that it is beyond the scope and powers of TPO to question the necessity of expenditure and determine the ALP at Nil. However, the ITAT mentioned that the onus lies on the assessee to prove that the services were actually rendered by the AE. The ITAT observed that the assessee had failed to discharge this onus. The ITAT also stressed upon the finding of the TPO that the invoice for management fees was raised much after the closure of the relevant accounting year and the payment of the management fee is nothing but siphoning of the profits from India with the intention of avoiding tax. The assessee had not controverted such findings of the TPO before ITAT. Based upon the said facts the ITAT held that TPO was justified in determining the ALP of management at Nil.

Regarding assessee’s contention that the transaction of management fee should be benchmarked by applying TNMM on aggregate basis, the ITAT, relying upon the decisions in the matter of Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT [374 ITR 118] and Knorr Bremse India (P) Ltd., v. Asst. CIT 2016 [380 ITR 307], held that bundling of transactions is permissible only when the transactions are closely related, which is not the case of assessee. Therefore, the ITAT held that this contention of the assessee is also not acceptable.

(Contributed by: Ms. Shweta Kapoor)

Delhi Transport Corporation ("DTC" or "the Petitioner") had entered into contracts with the advertisers to provide taxable service by providing space for display of advertisements on its buses, bus queue shelters and time keeping booths. As per the contract, the advertisers were responsible to pay taxes/ levy including service tax payable or imposed by any authority in addition to the license fee. In other words, the service tax liability was shifted to the service receiver, contractually.

DTC was issued notice to pay service tax along with interest and penalties. DTC contended that either the Department should wait till it had received the service tax amount from the service receivers or the Department should recover the service tax from the service receivers.

The judicial authorities up to High Court confirmed that DTC as service provider was statutorily liable to pay the service tax, irrespective of what was contractually agreed to by DTC with its customers. DTC went in appeal to the Supreme Court by filing a Special Leave Petition. The Special Leave Petition was dismissed by the Supreme Court.

The above law clearly establishes that a service provider may contractually transfer the service tax liability to service receivers, but it is bound to get itself registered, pay service tax, file returns etc., and it cannot ask the Revenue to recover the service tax from the service receivers or request the Revenue to wait till the service provider has collected the service tax amount from the service receivers.

In the last Corporate Update for the month of November 2016, it was mentioned that the next meeting of the GST Council would be held on December 22 and 23, 2016. It is now learnt that the GST Council did meet on December 22 and 23, 2016 as scheduled.

Following are some of the key takeaways from the GST Council meet:

• The Council seems to have reached a broad consensus on the revised draft of CGST and SGST Laws as referred to in the last Corporate Update for November, 2016.
• The Council, however, seems to have failed to arrive at a consensus on dual control regarding division of jurisdiction and administrative powers over tax assessors with annual turnover of INR 1.5 Cr between the Centre and States.

GST Council meet again on January 3 and 4 January, 2017 and following was the reported outcome of the meeting:

• GST council did not reach any consensus on issue of dual control.
• State Govt. Representatives were of the view that cess should be levied on more items in addition to demerit goods as the demonetization drive would reduce the tax collection in first year of GST implementation.
• The next meeting of the GST Council is scheduled to be held on January 16, 2017.

Central Government is committed to implement GST by mid of 2017 and GST enrollment procedure is in full swing. As a step towards implementation of GST in India, the GST website (www.gst.gov.in) is functional.

The Website provides for a State-wise enrolment plan for migration to GST.

As per the GST enrollment plan, the migration schedule for the month of January & February, 2017 is as under, for migration from VAT/Central Excise/Service Tax to GST:

For states not mentioned above like Delhi, Maharashtra, etc the enrolment date was up to 31 December, 2016. However as per the information available on GST website only around 50% dealers across India have migrated to GST till date. Accordingly, it is believed that authorities will come up with the revised enrolment date for such states.

In brief, steps to complete provisional registration are as under:

• Respective Departments would provide/communicate the provisional ID and password to every registered Dealer/assessee. In case Provisional ID & password in not received by the dealer/assessee, he is required to approach concerned department for the same.

- In case of VAT, once the dealers would login on their respective state VAT portal, portal will reflect provisional ID & password.

- In case of Service Tax/Excise assesses, once assessee will login into aces.gov.in website, they need to update their email address and mobile number in order to get the provisional ID & password for GST enrollment.

• The dealer/assessee is required to access the GST portal and create their username and password (new username and password) using the said provisional ID and password.

• The dealer/assessee is required to enter Mobile Number and Email Address of its authorized signatory. All future correspondence from the GST portal will be sent on this registered Mobile Number and Email Address.

• The dealer/assessee is required to access the GST portal (using the new username and password) and register their Digital Signature Certificate (DSC) with the Portal. (DSC is mandatory for Companies and LLP’s only)

• Post that, dealer/assessee is required to fill the Enrollment Application and attach mandatory documents as mentioned below. The Application would be required to be signed electronically either using E-sign or DSC, as may be applicable.

• Upon successful submission of signed Application, an ARN (Application Reference Number) would be generated and Status would appear as “Migrated”.

Further, please note that following are mandatory documents required to be uploaded on the website at the time of enrollment:

• Proof of constitution of Business:

- In case of Partnership deed – Partnership deed
- In case of others: Registration Certification of the business entity

• Photograph of Promoters/Partners/Karta of HUF
• Proof of appointment of authorized signatory
• Photograph of Authorized Signatory
• Opening page of passbook/Statement containing the following information:

- Bank account number
- Address of branch
- Address of account holder
- Few transaction details

(Contributed by: Mr.Shashank Goel/ Mr.Karan Chandna)

Government of India, vide Press Note No, 5 (2016 Series), dated June 24th, 2016 had made certain amendments in the Consolidated FDI Policy Circular of 2016, issued on June 07, 2016. Now, Reserve Bank of India vide its notification dated December 07, 2016 has statutorily notified the amendments made in this regard in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (‘the Principal Regulations’). However, as per Press Note No. 5 (2016 Series), the amendments to the Consolidated FDI Policy came into force with immediate effect i.e. from 24th June 2016, whereas, as per RBI Circular dated December 07, 2016, the amendments to the Principal Regulations came into force from the date of their publication in the Official Gazette, which is December 07, 2016.

[Source: RBI Notification No. FEMA.381/2016-RB dated December 07, 2016 and Press Note No. 5 (2016 Series) dated June 24th 2016, issued by DIPP, Ministry of Commerce and Industry, Government of India]

(Contributed by: Mrs. Ruchi Sanghi)

Some of the key Changes brought about in relation to Compromises, Arrangements and Amalgamations Procedure are as under:-

1. Normally, majority of creditors representing three-fourths in value of creditors may agree to any compromise etc which shall be binding on the Company. However, the Tribunal may dispense with creditors meeting if creditor’s having 90% in value agrees to the Scheme and confirms it by way of affidavit.

2. Where a meeting is proposed to be called by the order of Tribunal every notice of such meeting sent to creditor/shareholder/debenture holder individually at their address registered  with the Company, shall inter alia, be accompanied by a copy of the valuation report and also disclose the effect of valuation report on creditors, key managerial personnel, promoters and non-promoter members, and the debenture holders and the effect of the Compromise or Arrangement on any material interests of the Directors of the Company or the debenture trustee.

3. The valuation report shall be made by a registered valuer, and till the registration of persons as valuers as prescribed under section 247 of the Act, the valuation report shall be made by an independent merchant banker who is registered with the Securities and Exchange Board or an independent Chartered Accountant in practice having a minimum experience of ten years.

4. At the stage of application to the Tribunal, simultaneously with the notice to shareholders/ creditors, notice of proposed arrangement shall also be sent to the Central Government, Income-tax authorities, Official Liquidator and RoCs. Notice shall also be served to Reserve Bank of India and Competition Commission of India, if necessary. All the authorities need to convey their representation within 30 days, else it will be presumed that they have no objection. A second notice shall also be served at the Petition stage to the objectors who have made their representations at the Application stage. Previously, the notice was required to be given only after the admission of the petition. However, as per new regulations, the notice would be required to be served twice, i.e. at the Application stage and then at Petition stage.

5. Statutory auditor’s certificate confirming that accounting treatment is in accordance with Accounting Standards is required to be filed with the NCLT. Previously, such certificate was necessary in case of listed companies under SEBI regulations.

6. Persons holding at least 10% of shareholding or 5% of the total outstanding debt as per the latest audited financials only can raise objections. This should reduce the unnecessary litigation created by small stakeholders.

7. The Company in relation to which the Scheme is sanctioned, shall until the scheme is fully implemented, file with the Registrar of Companies, a statement enumerating the actions completed under the scheme and actions pending under the scheme alongwith such fees as may be prescribed, within 210 days from the end of each financial year.

Section 434 deals with transfer of certain pending proceedings from Company Law Board/ District or High Court to National Company Law Tribunal. The whole of this section was substituted with effect from 15th November, 2016 by the amendment passed through the Insolvency and Bankruptcy Code, 2016.

MCA has notified the Companies (Transfer of Pending Proceedings) Rules, 2016 dated 07th December, 2016 effective 15th December, 2016 and the Companies (Removal of Difficulties) Fourth Order, 2016 dated 07th December, 2016. Pursuant thereto, all proceedings under the 1956 Act with High Courts shall stand transferred to the Benches of the National Company Law Tribunal (“NCLT”) exercising respective territorial jurisdiction with effect from December 15, 2016, other than proceedings relating to winding up which have been dealt with separately. However, proceedings which are reserved for orders for allowing or otherwise of such proceedings by High Courts shall not be transferred. All cases of winding up under the 1956 Act (instituted on the ground of inability to pay debts) which are pending before the High Courts as on December 15, 2016 and wherein petitions have not been served to the respondents shall be transferred to NCLT, and such petitions shall be treated as applications under the relevant provisions of the Insolvency and Bankruptcy Code, 2016 (“Bankruptcy Code”). All other winding up petitions filed under clauses (a) and (f) of section 433 of the 1956 Act pending before a High Court and where the petition has not been served on the respondent shall be transferred to NCLT and such petitions shall be treated as petitions under the provisions of the 2013 Act.

MCA has come out with notification dated 19th December, 2016 for delegation of certain powers of Central Government to Regional Directors. The powers so delegated to the Regional Director are those of Central Government under the following sections:

(a) clause (i) of sub-section (4) of section 8;
(b) sub-section (6) of section 8;
(c) sub-sections (4) and (5) of section 13;
(d) section 16;
(e) section 87;
(f) sub-section (3) of section 111;
(g) sub-section (1) of section 140;
(h) sub-section (5) of section 230;
(i) sub-sections (2), (3), (4), (5) and (6) of section 233;
(j) first and second proviso of sub-section (3) of section 272;
(k) sub-sectisectionon (1) of section 348;
(l) sections 361, 362, 364 and 365;
(m) clause (i) of the proviso to sub-section (1) of section 399; and
(n) section 442.

MCA has notified the National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 on 15th December, 2016. Pursuant to section 66 of the Companies Act, 2013 in terms of these rules, an application to the Tribunal to confirm a reduction of share capital of a company shall be in Form No. RSC-1 and shall be accompanied with the prescribed fees and documents. The Tribunal shall, within fifteen days of submission of the application, give notice, or direct that notice be given to the Central Government, Registrar of Companies, SEBI, & creditors of the company for seeking their representations and objections, if any.

Ministry of Corporate Affairs ('MCA') vide its notification dated 26th December, 2016 has notified Section 248, 249, 250, 251 and 252 of Companies Act, 2013. These Sections deal with Removal of Names of Companies from the Register of Companies. MCA has appointed 26.12.2016 as effective date for Section 248 to 252 on which these Section shall come into force.

(Contributed by: Ms. Rakhi Chanana and Mr. Archit Tandon)