THE INSIGHT

June 2018

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 INDEX

1. Direct TAX…………………………………………. 03

2. Indirect TAX……………………………………….. 05

3. Labor Law……………………...………………….. 07

4. Company Law……………………...……………. 09

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 Direct Tax

Central Board of Direct Tax amends section 56 for valuation of unquoted

equity shares under Discounted Cash Flow method

Income Tax Rule 11UA deals with valuation of jewelry, archaeological collections and
shares and securities for the purpose of Section 56. As per Clause (b) of Sub-Rule 2 of Rule
11UA earlier merchant banker and Chartered Accountant were allowed to do valuation
of unquoted equity shares under Discounted Free Cash Flow method but vide
Notification No. 23/2018 dated 24th May, 2018 it is provided that now only merchant
banker can do valuation of unquoted equity shares under Discounted Free Cash Flow
method and Chartered Accountants are no more allowed to do the same

No Tax on issue of share capital by eligible start-ups at excess premium –

Central board of direct taxes

Central Board of Direct Tax notified that the provisions of clause (viib) of sub-section (2) of
section 56 shall not apply to consideration received by a company for issue of shares that
exceeds the face value of such shares, if the consideration has been received for issue of
shares from an investor in accordance with the approval granted by the inter-ministerial
board of certification under the notification issued by the Department of Industrial Policy
and Promotion

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 Protocol to amend India-Kuwait Double Taxation Avoidance Agreement
notified

The Protocol updates the provisions in the Double Taxation Avoidance Agreement for
exchange of information as per international standards. Further, the Protocol enables
sharing of the information received from Kuwait for tax purposes with other law
enforcement agencies with authorization of the competent authority of Kuwait and vice
versa

Case Laws:

Reference to Transfer Pricing Officer in case of Safe Harbor Rules applied –

Supreme Court

In the recent Supreme Court Ruling, the Honorable Supreme Court held that if the
assessee has exercised the safe harbor option under Rule 10THD(1) & the Assessing Officer
has not passed any order under rule 10THD(4) declaring the exercising of option to be
invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not
apply & the Assessing Officer has no authority to make any reference to the Transfer
Pricing Officer to ascertain the arm's length price of the assessee’s specified domestic
transactions. Central Board of Direct Tax's circular dated 10.3.2006 could not have and
does not lay down anything to the contrary.

Section 195 Payment towards Import of Software Amounts to Royalty –

Income Tax Appellate Tribunal Bangalore

Bangalore Tribunal in the recent ruling held that “the amount paid to obtain computer
software cannot be added to the block of assets of computer as the Karnataka High
Court has held that the nature of payment for computer software is that of Royalty.
Further, since assessee failed to deduct tax at source U/S 195/194J in relation to payments
made for the purchase of this computer software, so this purchase amount, which
otherwise the assessee could have claimed as expenditure, cannot be allowed as
expenditure as provisions of section 40 (a)(ia) of the Act get attracted

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 Indirect Tax

Goods and Service Tax applicable on Transfer of Tenancy Right - Central

Board of Indirect Taxes
The activity of transfer of ‘tenancy rights’ is squarely covered under the scope of
supply and taxable per-se. Transfer of tenancy rights to a new tenant against
consideration in the form of tenancy premium is taxable. However, renting of
residential dwelling for use as a residence is exempt [Sl. No. 12 of notification No.
12/2017-Central Tax(Rate)]. Hence, grant of tenancy rights in a residential dwelling for
use as residence dwelling against tenancy premium or periodic rent or both is exempt.
As regards services provided by outgoing tenant by way of surrendering the tenancy
rights against consideration in the form of a portion of tenancy premium is liable to
Goods and Service Tax

Maharashtra rolled out intra-state e-way bill w.e.f. 25th May 2018
The Maharashtra Government notified vide notification dated 27th March 2018 that
there will be no requirement of E-way Bill from 1st April 2018 until further orders for the
intra- State movement of Goods that commences and terminates within the State of
Maharashtra, in respect of any goods of any value. In Modification of that Notification
Maharashtra Government has now notified that E-way bill for intra-State supplies
applicable from May 25, 2018 in Maharashtra

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 Late fees for GSTR-3B waived if TRAN-1 submitted but not filed
Central Board of Indirect tax and Customs waives late fee payable for failure to furnish
FORM GSTR-3B by the due date for each of the months from October, 2017 to April, 2018,
for the class of registered persons whose declaration in FORM GST TRAN-1 was submitted
but not filed on the common portal on or before the 27 day of December, 2017

Notification for Intrastate E-way Bill Applicability in Rajasthan

The notification to waive the requirement of e-way bill for intra-state movement of goods
has been rescinded by Rajasthan Government with effect from 20th May, 2018.
Accordingly, intra-state movement of goods shall attract e-way bill provisions w.e.f. 20th
April 2018 in Rajasthan state.

IGST would be applicable only when goods are cleared from custom
bonded warehouse

The ex-bond bill of entry and the value addition accruing at each stage of supply shall
form part of the value on which the integrated tax would be payable at the time of
clearance of the warehoused goods for home consumption. In other words, the supply of
goods before their clearance from the warehouse would not be subject to the levy of
integrated tax and the same would be levied and collected only when the warehoused
goods are cleared for home consumption from the customs bonded warehouse

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 Labor Law

Pension Fund Regulatory Authority allows partial withdrawal to National

Pension Scheme subscribers subject to rider
Partial withdrawals will now be allowed to National Pension Scheme subscribers who
wish to improve their employability or acquire new skills by pursuing higher education/
acquiring professional and technical qualifications. Further, individual National Pension
Scheme subscribers who wish to set up a new business/ acquire new business will also be
allowed to make partial withdrawals from his contributions. Other terms applicable to
partial withdrawals will remain unchanged

Draft Labour code on Social Security - Benefits to Employee

Government has notified vide its Notification No. Z-13025/12/2015-LRC Dated: 23rd April,
2018 Draft Labour Code on Occupational Safety, Health and Working Conditions, 2018
for Objections or suggestions, if any by 31st May, 2018. Main Features of Draft Labour
Code on Occupational Safety, Health and Working Conditions, 2018 are described in
the attached notification. The “Code” replaces 15 Existing Labour Code’s which
includes important statutes like The Employees’ State Insurance Act, 1948, The
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, The Maternity
Benefit Act, 1961, The Payment of Gratuity Act, 1972.

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 View Pension Passbook Service for pensioners through mobile application
Employees’ Provident Fund Organisation (EPFO), which is providing a host of e-services for
its stakeholders, has now introduced a new service through ‘UMANG app’. On clicking
‘View Passbook’ option, it requires PPO Number and Date of Birth information to be
entered by the pensioner. After successful validation of the information fed, an OTP will
be sent to the registered mobile number of the pensioner. On entering OTP, ‘Pensioner
Passbook’ will display the details of the pensioner like Name, DOB along with last pension
credited information. The facility to download the financial year wise complete pass
book details is also available.

Admin charges payable by employer on Employee Provident Fund

amended w.e.f. 1st June 2018
Government reduces normal administrative expenses payable by the employer with
effect from 1st June, 2018 at 0.50 per cent of the pay subject to a minimum sum of
seventy-five rupees per month for every non-functional establishment having no
contributory member and five hundred rupees per month per establishment for other
establishments. Earlier the charge was revised to 0.65 per cent from 01.04.2017 and will
remain applicable till 31 May 2018

Government notifies 8.55% interest on Provident Fund for 2017-18

The Ministry of Labour and Employment, Government of India, has conveyed the
approval of the Central Government under Para 60(1) of Employees’ Provident Funds
scheme, 1952 to credit interest @ 8.55% for the year 2017-18 to the account of each
member of the Employee Provident Fund Scheme as per the provisions under Para 60 of
Employee Provident Fund Scheme, 1952

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 Company Law

Appointment of Foreign National as Director of Indian Company

A company, being an artificial person, is managed and controlled by its officers called
the directors of the company. According to the inclusive definition under the
Companies Act, 2013, a Director means a Director appointed to the Board of a
company. The Directors are the head of a company. They are the supreme authority
controlling the managerial and other affairs of the company. They are jointly known as
the Board of Directors (BOD) of a company under Section 2 (10) of the Companies Act,
2013. The Board of Directors oversees the management activities of the company as
well as protects the long-term interests of the shareholders of the company

Ministry of Corporate Affairs issues clarification regarding applicability of

Condonation Of Delay Scheme on struck off companies

A company, being an artificial person, is managed and controlled by its officers called
the directors of the company. According to the inclusive definition under the
Companies Act, 2013, a Director means a Director appointed to the Board of a
company. The Directors are the head of a company. They are the supreme authority
controlling the managerial and other affairs of the company. They are jointly known as
the Board of Directors (BOD) of a company under Section 2 (10) of the Companies Act,
2013. The Board of Directors oversees the management activities of the company as
well as protects the long-term interests of the shareholders of the company. The
company’s law in India does not bar foreign nationals to become directors in Indian
companies. A foreigner or a non-resident Indian can become an executive or a
nonexecutive/independent director of Indian companies whether public or private.

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 In the case of foreign national applying for DIN to become a director in an Indian
company, details of a valid passport should be filled in Form DIR-3, and a certified copy
of same should be attached with DIN application. All supporting documents including
photograph should be certified by the Indian Embassy or a notary in the home country of
the applicant or by the Managing Director / CEO / Company Secretary of the company
registered in India, in which applicant is a director.

A foreign national can be an independent Director of a company if he possesses skills,

experience, and knowledge in one or more fields of finance, law, management, sales,
marketing, administration, research, corporate governance, technical operations or
other disciplines related to company’s business.

Managing Director or Whole-Time Director: A foreign national, intending to become a

managing or a full-time director, should be a resident of India i.e. who has been staying in
India continuously not less than twelve months, immediately preceding the date of his
appointment. He should not be less than twenty-one years of age nor more than seventy
years of age.

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 Thank you.

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