MOU between the Ministry of Corporate Affairs and Central Board of Direct Taxes (CBDT) for Automatic and Regular Exchange of Information

Taking forward the initiative launched by the Government of India to curb the menace of shell companies, money laundering and black money in the country and prevent misuse of corporate structure by shell companies for various illegal purposes, the Ministry of Corporate Affairs and Central Board of Direct Taxes (CBDT) have now concluded a formal Memorandum of Understanding (MoU) for data exchange, on 6th September, 2017.

The MoU will facilitate the sharing of data and information between CBDT and MCA on an automatic and regular basis. It will enable sharing of specific information such as Permanent Account Number (PAN) data in respect of corporates, Income Tax returns (ITRs) of corporates, financial statements filed with the Registrar by corporates, returns of allotment of shares, audit reports and statements of financial transactions (SFT) received from banks relating to corporates. The MoU will ensure that both MCA and CBDT have seamless PAN-CIN (Corporate Identity Number) and PAN-DIN (Director Identity Number) linkage for regulatory purposes. The information shared will pertain to both Indian corporates as well as foreign corporates operating in India. In addition to regular exchange of data, CBDT and MCA will also exchange with each other, on request, any information available in their respective databases, for the purpose of carrying out scrutiny, inspection, investigation and prosecution.

The MoU comes into force from the date it was signed and is an ongoing initiative of MCA and CBDT, which are already collaborating for near real time allotment of PAN and TAN also at the time of Incorporation of companies itself. A Data Exchange Steering Group also has been constituted for the initiative, which will meet periodically to review the data exchange status and take steps to further improve the effectiveness of the two agencies.

Ministry of Corporate Affairs (MOCA) identifies more than one lakh directors of shell companies for disqualification

Pursuant to the action of the Ministry of Corporate Affairs of cancellation of registration of around 2.10 lakh (2,09,032) defaulting companies and subsequent direction of the Ministry of Finance to banks to restrict operations of bank accounts of such companies by the directors of such companies or their authorized representatives, the Ministry of Corporate Affairs has identified 1,06,578 Directors for disqualification under Section 164(2)(a) of the Companies Act, 2013 as on September 12, 2017.

Ministry of Corporate Affairs is further analyzing the data of these companies available with the Registrar of Companies to identify the Directors and the significant beneficial interests behind these companies. Profiles of Directors such as their background, antecedents and their role in the operations/functioning of these companies are also being compiled in collaboration with the enforcement agencies. The money laundering activities performed under the aegis of these companies are also under the scanner. The Professionals, Chartered Accountants/Company Secretaries/Cost Accountants associated with such defaulting Companies and involved in illegal activities have been identified in certain cases and the action by Professional Institutes such as ICAI, ICSI and ICoAI is also being monitored.

The above exercise is part of the strategy formulated by the Ministry of Corporate Affairs and presented to the Union Finance Minister, Shri Arun Jaitley and the Minister of State for Corporate Affairs Shri P.P. Chaudhary. The Minister of State Shri Chaudhary is closely monitoring the situation emerging-out of cancellation of registration of such companies under the Companies Act, 2013. He is holding regular meetings with the officials of the Ministry of Corporate Affairs and its subordinate organizations such as Serious Fraud Investigation Office (SFIO), Registrars of Companies (ROCs), Department of Financial Services, Indian Banks Association and other Departments involved in the crackdown against such companies.

MOS (CA) Shri Chaudhary said that all the concerned agencies are handling this issue on priority. He said “The present Government has vowed to fight Black Money and fighting the menace of Shell Companies is an imperative element of such fight. The fight against black money shall be incomplete without breaking the network of shell companies. Possibility of using the Shell companies for laundering the black money cannot be undermined.

I am happy that all the concerned agencies are handling this issue on priority. The disqualification under Section 164 of the Act is by operation of law. We are identifying the defaulting Directors of these shell companies. My officers have assured me that by the end of this month, we would be ready with the relevant details of all defaulting Directors of these shell companies.

This whole exercise shall go a long way in creating an atmosphere of confidence and faith in the system paving the way for ease of doing business in India. The interest of stakeholders would be protected and the image of the country in the global business arena and fora would substantially improve.”

It may be recalled that as per Section 164 of the Companies Act, 2013, any person who is or has been a director in a company which has not filed financial statements or annual returns for any continuous period of three financial years shall not be eligible for re-appointment as a director in that company or appointed in other company for a period of five years from the date on which the said company fails to do so. Also, Section 248 of the Act provides that, the liability, if any, of every director, manager or other officer who was exercising any powers of management and of every member of the de-registered/dissolved company, shall continue and may be enforced as if the company had not been de-registered/dissolved. Further, Section 167 of the Act provides that on suffering the aforesaid disqualification, the Director shall vacate the office.

It may be noted that prior to action against defaulting companies, there were about 13 Lakh companies in the Registry. However, after closing of around 2.10 Lakh Companies, there are about 11 Lakh companies having Active status in the Registry.

Department of Financial Services advises all Banks to take immediate steps to put restrictions on bank accounts of over two lakh 'struck off' companies

Government has stepped up decisive action against companies falling within the ambit of Section 248 of the Companies Act. The names of 2,09,032 companies have been struck off from the Register of Companies under Section 248 (5) of the Act. The existing Directors and Authorized Signatories of such struck off companies will now become ex Directors or ex Authorized Signatories. These individuals will therefore not be able to operate bank accounts of such companies till such companies are legally restored under Section 252 of the Companies Act by an order of the National Company Law Tribunal. The restoration, as and when it happens shall be reflected by change in the status of the company from ‘Struck off’ to ‘Active’. 

Since such ‘Struck off`’ companies have ceased to exist, action has been initiated to restrict the operation of Bank accounts of such companies. The Department of Financial Services has, through the Indian Banks Association, advised all Banks that they should take immediate steps to put restrictions on bank accounts of such struck off companies. A list of such companies, Registrar of Companies wise, has been published on the website of the Ministry of Corporate Affairs. 

In addition to such struck off companies, Banks have also been advised to go in for enhanced diligence while dealing with companies in general. A company even having an active status on the website of the Ministry of Corporate Affairs but defaulting in filing of its due Financial Statement (s) or Annual Return (s) of Particular of Charges on its assets on the secured loan should be seen with suspicion as, prima facie, the company is not complying with its mandatory statutory obligations to file this vital information for availability to its stakeholders

Late fee waived for all tax-payers who could not file the GSTR 3B for the month of July 2017

The Goods and Services Tax (GST) tax was introduced on 1st of July 2017. The last date for payment of GST for the month of July 2017 was 25th August 2017. Payment of GST is complete only when amount of tax payable is debited from electronic cash / credit ledger.

Now late fee for all taxpayers who could not file GSTR 3B for the month of July 2017 has been waived, but not the interest on late payment of Tax liability.

GSTR 1 is to be filed by all taxpayers by 5th of September 2017 and GSTR 2 and GSTR 3 to be filed by all taxpayers by 10th and 15th of September 2017 respectively.

Taxpayers who have committed errors in GSTR 3B will be able to put the correct details in GSTR 1-2-3. However, interest will be leviable from all taxpayers who have not discharged their complete Tax liability for July 2017 by 25-08-2017.

Furthermore, vide Circular dated 01-09-2017, procedure for systems based reconciliation of GSTR 1-2 with GSTR 3B has been clarified.

Click here for Circular dated 01-09-2017

CBDT extends date for (a) Linking of Aadhaar with PAN and (b) Due date for filing Income Tax Returns and Tax Audit Reports.

To facilitate ease of compliance by the taxpayers, CBDT has extended the date in the following cases:-

• Aadhaar was to be linked with PAN by 31st August, 2017. The date for linking Aadhaar with PAN has been extended till 31st December, 2017
• The ‘due-date’ for filing Income Tax Returns and various reports of audit prescribed under the Income-tax Act,1961 has been extended from 30th September, 2017 to 31st October, 2017 for all taxpayers who were liable to file their Income Tax Returns by 30th September, 2017.

Clarification on Migration, New Registration, Opting for Composition Scheme and Issue of Bills of Supply under GST

The Rules related to Registration and Composition Scheme have been notified on 19th June, 2017. These Rules have been brought into effect from 22nd June, 2017. The intent of notifying these rules is to start the process of issue of registration certificate, called Goods and Services Tax Identification Number (GSTIN), to taxpayers who have already been issued provisional ID for registration(PID) as well as to the new taxpayers.

Any person who has been granted PID and who opts for composition scheme, should submit an intimation of option in a prescribed form on GSTN on or before 21st July, 2017.

Any persons who has PID may submit the required documents on GSTN for getting the certificate of registration. It is clarified that a period of three months is allowed to complete this procedure i.e. the formalities can be completed on or before 22nd September, 2017. In the interim, they can issue tax invoice using the PID already allotted to them.

A person seeking fresh registration can apply for registration within thirty days from the date on which he becomes liable for registration. They can also opt for composition scheme at the time of filing of registration form.

The applicant for grant of new registration can issue a bill of supply for supplying goods or services during the period from the date of liability to obtain registration till date of issuance of the registration certificate, if he has applied for registration within thirty days from the date he has become liable for registration. On grant of certificate of registration, he can issue revised tax invoices for the supplies made during this period.

Direct Tax Collections up to June 2017 for F.Y. 2017-2018

The provisional figures for Direct Tax collections up to June, 2017 show that net collections are at Rs. 1.42 lakh crore which is 14.8% higher than the net collections for the corresponding period of last year. Net direct tax collections represent 14.5% of the total Budget Estimates of direct taxes for F.Y. 2017-18 (Rs. 9.8 lakh crore). 

While the gross collection under Corporate Income Tax (CIT) grew at 4.8%, the growth under Personal Income Tax (PIT) including Securities Transaction Tax (STT) is 12.9%. However, after adjusting for refunds, the net growth in CIT collections is 22.4% while that in PIT is 8.5%. Refunds amounting to Rs.55,520 crorehave been issued during April to June, 2017, which is 5.2% lower than the refunds issued during corresponding period of F.Y. 2016-17.

An amount of Rs. 58,783 crore has been received as Advance Tax up to 30th June, 2017 reflecting a growth of 11.9% over the Advance Tax payments of the corresponding period of last year. The growth in Corporate Advance Tax is at 8.1% and that in Personal Advance Tax is at 40.3%.