CBDT Extends Refund Processing Deadline: Circular Dated 1.12.23

In a welcome relief for taxpayers, the Central Board of Direct Taxes (CBDT) has extended the deadline for processing income tax refunds through its circular dated December 1, 2023.

Extended Deadline: The circular primarily addresses the delays in processing electronically filed income tax returns with refund claims under Section 143(1) for Assessment Years 2018-19, 2019-20, and 2020-21. It allows for the processing of these returns beyond the initially prescribed time limits.

The intimation regarding the processing of returns, which could not be sent within the timeframe specified under Section 143(1), is now permissible. The extended deadline allows for processing with prior administrative approval from Pr.CCIT/CCIT.

The intimation to the assessee regarding the processing under Section 143(1) is expected to be sent by January 31, 2024.

Non-Applicability in Certain Cases: However, it's important to note that this extension does not apply universally. There are specific scenarios where the relaxation granted by the CBDT does not extend:

1. Returns Under Scrutiny:

   • The extension is not applicable to returns selected for scrutiny.

2. Unprocessed Returns with Payable Demand:

   • Returns that remain unprocessed where demand is shown as payable or is likely to arise post-processing are excluded.

3. Assessee-Attributable Reasons:

   • The extension does not cover returns that remain unprocessed for reasons attributable to the assessee.

While the circular provides relief for many taxpayers, those falling under the mentioned exceptions need to adhere to the regular processing timelines. This clarity ensures that the extended deadline is targeted towards specific cases, streamlining the overall refund processing system

Share Transfers and Allotments- A Legal Guide

In the dynamic landscape of corporate dealings, the recent verdict in the case of M. Nandana Reddy v. Sri Lakshmi Narasimha Mining Co. (P.) Ltd. underscores the intricacies and challenges surrounding share transfers and allotments. Here, we distill the key insights from the case into a comprehensive guide, providing readers with precautionary measures and essential checkpoints to navigate the complexities of share transactions.

1. Understanding Your Company’s Articles of Association (AoA):

Before embarking on any share-related endeavors, familiarize yourself with your company's Articles of Association. This foundational document outlines the rules and regulations governing share transfers and issuances. Be particularly attentive to clauses specifying the process of offering new shares to existing shareholders.

2. Diligence in Board Meetings:

Participation in board meetings is not just a formality; it's a crucial aspect of safeguarding your shareholder rights. In the M. Nandana Reddy case, the appellant's awareness of share allotment was a pivotal point. Actively engage in board discussions, review meeting minutes, and ensure transparency in decision-making.

3. Shareholding Changes and Impact:

Changes in shareholding structure can have profound implications. Whether due to transfers or allotments, monitor these changes diligently. In the case at hand, the appellant's shareholding percentage dwindled significantly, leading to a legal dispute. Regularly check the status of your shares and be alert to any alterations.

4. Adherence to Legal Timelines:

Time is of the essence in the corporate realm. Ensure that all share transactions adhere to legal timelines and procedural requirements. The M. Nandana Reddy case emphasized the importance of timely action, and any deviation could lead to legal repercussions.

5. Legal Recourse and Filing Appeals:

In situations of perceived injustice or violation of rights, understanding the legal recourse available is essential. The appellant in this case filed an appeal challenging the National Company Law Tribunal's decision. Know your rights, and if necessary, seek legal advice to explore the viability of filing an appeal.

6. Continuous Vigilance Over Company Affairs:

The case dismissed arguments of res judicata, delay, and laches, highlighting the continuous impact of oppressive acts. Stay vigilant over your company's affairs, even if the issues arise years after the fact. A "continuing cause of action" may justify legal intervention.

7. Board Approval and Compliance:

Any share transfer or allotment must secure proper board approval and adhere to the company's legal framework. In the M. Nandana Reddy case, the National Company Law Appellate Tribunal declared the share allotment null and void due to non-compliance with the Articles of Association.

Conclusion:

Embarking on share transfers and allotments requires a meticulous approach and a keen understanding of the legal landscape. The M. Nandana Reddy case serves as a stark reminder of the potential pitfalls and consequences of non-compliance. By staying informed, actively participating in company affairs, and seeking legal guidance when needed, shareholders can navigate the complexities of share transactions with confidence and safeguard their rights effectively

UAE's Guide on Foreign Income

The UAE's Federal Tax Authority has recently unveiled a guide that acts as a compass for companies operating within the country. Let's dive into the key points:

Purpose Unveiled: This guide serves as a beacon for companies, shedding light on the intricacies of the Corporate Tax Law. It unravels the importance of foreign income under this law and clarifies which companies need to pay taxes on income earned beyond the UAE borders. The guide also delves into the when and how of taxing foreign income, helping companies determine both their taxable and exempt income.

Who's the Guide For? If you're a company in the UAE, especially one receiving income from outside the country, this guide is your go-to. It's not a standalone document, though, so it's best to read it in conjunction with other tax laws and advice provided by the Federal Tax Authority.

2. Norway's Progressive Move: A Global Minimum Tax

Norway is taking a significant leap toward ensuring fairness in global taxation for large multinational enterprises. Here's the comprehensive breakdown:

Norway's Strategic Move: On November 24, 2023, the Norwegian Government presented a groundbreaking proposal to the Parliament. This proposal aims to implement globally agreed-upon rules regarding a minimum tax that large companies should pay. The initiative stems from long-term collaboration on an international scale within the OECD Inclusive Framework, a cooperative body comprising over 140 member countries and jurisdictions.

Decoding the 15% Rule: Norway is set to enforce a minimum tax rate of 15% on profits earned by international companies with consolidated group revenues exceeding EUR 750 million. This concerted effort is designed to thwart profit-shifting tactics and ensure a fair tax contribution from these large entities. The rules, crafted through extensive collaboration with over 140 jurisdictions, will come into effect in Norway from January 1, 2024.

3. Malaysia's Generosity: Tax Incentives for Food Production

In a bid to encourage and support food production projects, the Malaysian Inland Revenue Board has rolled out tax incentives. Here's an in-depth look:

Tax Breaks for Food Projects: Malaysia is extending a generous hand to approved food production projects, offering a substantial tax exemption. Here are the details:

• New Projects: If your food project is a newcomer, you're in for a treat with a complete 100% tax exemption for the initial 10 years!
• Expanding Projects: Even if your project is expanding, you still get to enjoy a full 100% tax exemption for the first 5 years!

Approved Projects Encompass:

• Cultivation of crops, fruits, and herbs
• Aquaculture
• Rearing of animals like cattle and goats
• Deep-sea fishing ventures
• Beekeeping endeavors
• Cultivation of special feed
• High seas fishing initiatives
• Planting seeds for agro-food

The commencement dates for these tax breaks vary based on the project type, and you can find the specifics in the Public Ruling. Consider it a fiscal incentive to cultivate and grow more food projects in Malaysia.

Can Companies Give Away Everything as Gift or Otherwise donation ?

Introduction: Delving into Corporate Generosity

In the business world, companies are like big family ventures owned by their shareholders. But can these owners decide to generously give away the whole business and assets of the company? This article dives into the legal side of such corporate benevolence.

1. Shareholders and Their Giving Spirit

Shareholders, the owners of a company's shares, can indeed donate their shares. We've seen big shots like Mark Zuckerberg sharing their wealth for a good cause. However, when it comes to giving away the entire business or assets of a company, things get a bit tricky.

2. Unwrapping Corporate Gift Rules

In the legal world, giving without getting something in return can be a bit complicated. But there are exceptions, like gifts made out of love, compensations for past services, or dealing with old debts. Understanding these exceptions helps us figure out if companies can be generous too.

3. Companies Can Gift? What the ITAT Says

The ITAT Mumbai bench has said that companies can indeed give and receive gifts. They pointed out that companies can meet the essential requirements for a valid gift – transfer, voluntary intent, and acceptance.

4. Giving Away Assets: What Shareholders Need

Even though companies can give, shareholders can't just empty out the whole company without limits. The rules laid out in the Memorandum of Association (MoA) and the need for shareholder approval are crucial. These rules protect the company's interests.

5. Considerations for Giving Away Everything

If a company wants to donate all its assets, here are some important things to think about:

• Getting Approval: Shareholders need to agree, especially for significant donations under Section 181 of the Companies Act.
• Big Disposal Rules: Disposing of substantial parts of the company needs special approval under Section 180(1)(a).
• Clearing Debts: Donating assets without settling debts could lead to legal trouble under the IBC and the Companies Act.

6. Taxes and Giving: What Companies Should Know

When it comes to taxes on corporate generosity:

• No Capital Gains: Giving assets as a gift usually doesn’t attract capital gains tax. But pretending to gift while restructuring might raise eyebrows.
• Other Sources Income: If gifts go beyond limits, Section 56 of the IT Act may tax them as 'income from other sources.' Companies need to follow the rules.

Conclusion: Finding the Right Balance

While it's okay for companies to be generous, they need to follow the rules. Giving away everything is legally okay, but companies must be careful not to look like they're avoiding taxes. Philanthropy is good, but it has to go hand in hand with the law

A Guide to Liaison Office Operations in India - Operations and compliances

The World of Liaison Offices

Foreign investors exploring opportunities in India have various entry points, with unincorporated entities like Liaison Offices (LO) being a popular choice. This article sheds light on the compliance aspects surrounding Liaison Offices, offering a simplified understanding of their role and obligations.

1. Understanding the Liaison Office (LO)

Foreign investors often choose Liaison Offices to gain initial insights into India's business landscape. LOs, defined under FEMA 22, act as communication channels between the foreign entity and Indian businesses. However, they are restricted from engaging in any commercial, trading, or industrial activities.

Activities Permitted for LOs:

• Representing the parent company/group in India
• Facilitating export/import activities
• Encouraging technical/financial collaborations
• Acting as a communication bridge between the parent company and Indian entities

2. Tax Implications: The Income Tax Act, 1961

Initially exempt from filing Income Tax returns, LOs faced changes in 2011 with the introduction of Section 285. Now, they must submit an annual statement of activities within sixty days from the financial year-end using Form 49C.

Form 49C Information Requirements:

• Financial year details
• Non-resident person's information
• LO registration details
• Nature of activities undertaken
• Details of transactions with Indian parties
• Employee details, including salaries
• Details of agents/representatives in India
• Specifics on liaisoning activities and more

3. Foreign Exchange Management Act, 2000 Requirements

LOs must adhere to the Foreign Exchange Management Act, submitting an Annual Activity Certificate (AAC) by September 30 each year. The AAC, obtained from a Chartered Accountant, certifies that the LO has complied with RBI guidelines.

Precautions for Compliances:

• Regular Internal Audits: Conduct regular internal audits to ensure ongoing compliance with RBI guidelines and other regulatory requirements.

• Document Retention: Maintain comprehensive documentation to demonstrate the purpose and intent of activities, minimizing the risk of unintended tax implications.

• Proactive Review: Periodically review LO activities to prevent any unintentional deviations from permissible activities, reducing the risk of constituting a Permanent Establishment (PE) in India.

4. Companies Act, 2013 Compliance

As per the Companies Act, foreign companies must prepare financial statements, audited by an Indian Chartered Accountant, and file Form FC-3 within six months of the financial year-end. This form includes details of related party transactions, repatriation of profits, and fund transfers.

Precautions for Compliances:

• Timely Filing: Adhere to the filing timelines to avoid penalties. Seek extensions, if necessary, through written applications.

• Comprehensive Record Keeping: Maintain detailed records of related party transactions, profit repatriation, and fund transfers to facilitate smooth auditing and filing processes.

Conclusion: Navigating Year-End Obligations for LOs

Compliance is the key for Liaison Offices. Filing Form 49C, AAC, and Form FC-3 are essential, and any lapses can result in penalties. Regular reviews of LO activities ensure adherence to RBI guidelines, preventing unintended tax implications for the parent company. Remember, the RBI won't grant closure permission until all statutory requirements under the Companies Act, 2013 are met.

By staying informed, conducting regular audits, and proactively addressing compliance challenges, foreign entities can successfully navigate the compliance maze and make the most of their liaison office presence in India