Weekly Round-up on Tax and Corporate Laws | 27th March to 1st April 2023

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 27^th March to 1^st April 2023, namely:

(a) Lok Sabha passes the Competition (Amendment) Bill, 2023;

(b) CBDT notifies the consequences that will apply to a person if his PAN becomes inoperative;

(c) CBDT notifies procedure for filing of the application in Form 15C/15D for grant of nil TDS certificate under Section 195;

(d) SEBI takes major decisions in the Board meeting to protect the interests of investors;

(e) CBIC waives late fees for the registered persons who fail to furnish the return in Form GSTR-4;

(f) CBIC provides an extension for the filing of an application for the revocation of cancellation of registration till 30-06-2023;

(g) CBIC prescribes procedures/timelines for Aadhaar authentication & submission of registration applications;

(h) CBIC reduces late fees for filing annual returns from FY 2022-23 onwards; and

(i) ICAI issues the Implementation Guide on Reporting under Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014.

1. Lok Sabha passes the Competition (Amendment) Bill, 2023

The Lok Sabha has passed the Competition (Amendment) Bill, 2023. The Bill seeks to enhance the effectiveness of the existing legal framework by expanding the scope of anti-competitive agreements, introducing a value-based evaluation of combinations and reducing the time limit for the approval of combinations.

The key highlights of the Bill are as follows:

(a) Reduction of time limit for approval of combinations from 210 days to 150 days;

(b) Introducing a deal value threshold;

(c) Transactions above Rs 2,000 crore will require CCI’s approval;

(d) Enhancing the scope of the definition of ‘relevant product market’;

(e) Proposal to decriminalise certain offences under the Act;

(f) Increasing the powers of the Director General for investigating contraventions under the Act;

(g) Mandatory deposit of 25% of the amount levied by CCI before filing an appeal to the NCLAT;

(h) Allowing the use of intellectual property rights as a defence in cases of anti-competitive agreements;

(i) Intimation about combinations to be made before Consummation of the combination;

(j) Establishing presumption to be part of the anti-competitive agreements in certain cases;

(k) Computation of penalties based on global turnover;

(l) Crediting recovery of legal costs along with penalties by the Commission to the Consolidated Fund of India;

(m) Modification of the definition of “Control” to include material influence over management, affairs, or strategic commercial decisions; and

(n) Prohibition of inquiries into certain agreements and dominant positions based on information submitted after 3 years.

Read the Story

2. CBDT notifies the consequences that will apply to a person if his PAN becomes inoperative

The CBDT has substituted Rule 114AAA to notify consequences that apply if a PAN of a person becomes inoperative due to non-linking with his Aadhaar.

Rule 114AAA(4) lists the following consequences during the period that PAN remains inoperative:

(a) No refund shall be granted against inoperative PANs;

(b) Interest shall not be payable on such refund for the period during which PAN remains   inoperative;  and

(c) Tax shall be deducted/collected at a higher rate.

It should be noted that those persons who have been exempted from PAN-Aadhaar linking will not be liable for the consequences mentioned above. This category includes an Individual residing in the States of Assam, Jammu and Kashmir and Meghalaya; a non-resident individual as per the Income-tax Act; an Individual whose age is 80 years or above at any time during the previous year; an individual who is not a citizen of India.

Read the Notification

3. CBDT notifies procedure for filing of the application in Form 15C/15D for grant of nil TDS certificate under Section 195

Section 195(3) of the Income-tax Act provides for the grant of a certificate to a person entitled to receive interest or other sums without deduction of tax at source.

As per Rule 29B, the following persons, entitled to receive any interest or other sum on which tax is deductible under this provision, may make an application for obtaining a certificate for deduction of tax at nil rate:

(a) A banking company or an insurer may apply in Form No. 15C; and

(b) Any other person who carries on business or profession in India through a branch may apply in Form No. 15D.

In the exercise of the power delegated by the CBDT under Rule 131, the Director General of Income-tax (Systems) has prescribed procedure, format and standard for filing Form 15C and Form 15D. A few of such procedures are as follows:

(a) Form no. 15C and Form no. 15D to be furnished electronically at the TRACES website along with supporting documents using any of the following:

• • • Digital Signature;
    • Electronic Verification Code;
    • Aadhaar-based authentication;
    • Mobile OTP.

(b) Applicants accessing TRACES from outside India shall submit the application along with supporting documents using a digital signature only.

(c) The application will be assigned to TDS AO in the International Taxation charges. AO can process the application through TRACES and can obtain the following data from CPC(TDS):

• • • Processed data of Income Tax Returns of the previous 6 financial years (if available);
    • PAN demand;
    • E-filed Income-Tax Returns of previous 6 financial years;
    • Audit Report/Form 3CD (if applicable) of the previous 6 financial years;
    • Assessment Orders of the previous 6 financial years (if available).

(d) By default, the applications shall be assigned to the DClT/ACIT (International Tax) exercising jurisdiction over TDS matters. However, if the jurisdiction orders are otherwise, the assigned AO can transfer the applications to the AO concerned on AO Portal.

(e) AO shall approve/reject the application based on the parameters defined in Rule 29B and any other instructions/guidelines in this regard.

Read the Notification

4. SEBI takes major decisions in the Board meeting to protect the interests of investors

The SEBI has notified various decisions taken by the SEBI in its board meeting to safeguard the interests of investors and to manage market disruptions effectively. These decisions include making the ASBA facility for secondary markets optional for brokers and investors, amending the mutual fund regulations to provide clarity on the roles and responsibilities of Trustees and Boards of asset management companies and amending Stock Brokers Regulations, LODR & ICDR Regulations, etc. The key decisions are discussed below:

(a) Introduction of a framework for ESG Disclosures; Business Responsibility and Reliability report to ensure credibility

SEBI has implemented a well-balanced system for disclosing Environmental, Social, and Governance (ESG) information. To ensure the credibility of ESG disclosures, a Business Responsibility and Reliability Report will be introduced. Initially, this regulation will apply to the top 150 listed companies from FY 2024 and will be extended to the top 1,000 listed companies by FY 2027.

(b) Proposal to implement ASBA-like facility for trading in the secondary market

An Application Supported by the Block Amount (ASBA) facility is proposed to be implemented in the secondary market. This facility was previously available only in the primary market for IPO/FPO applications directly issued by companies. With this new implementation, when applying for any market instrument, the required funds will be blocked in your savings or current account instead of being transferred to the broker.

(c) Approval of framework for upstreaming clients’ funds to Clearing Corporations (CCs) to minimise risks and enhance transparency

To minimise the risk of credit and potential misuse of clients’ funds by intermediaries, the Board has approved a regulatory framework for upstreaming clients’ funds from SBs/non-bank CMs to CCs. The funds can only be upstreamed as cash, a lien on Fixed Deposit Receipts (subject to certain conditions), or pledge of units of Mutual Fund Overnight Schemes (MFOS).

(d) Announces the implementation of a Broker Surveillance System to prevent fraudulent activities

The SEBI has announced implementing a surveillance system to identify and prevent fraudulent activities by brokers, recognising their significant role in the day-to-day functioning of the stock market. The responsibility of establishing this system will rest with the senior management of the brokerage firms. The implementation of this decision will commence on 1^st October 2023.

(e) SEBI approves establishment of framework for “Corporate Debt Market Development Fund”

The SEBI has approved amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 to establish the Corporate Debt Market Development Fund (CDMDF) in the form of an Alternative Investment Fund. The aim is to enhance liquidity in the Corporate Bond Market by providing a backstop facility for purchasing investment-grade corporate debt securities during market stress.

(f) SEBI amends Mutual Fund Regulations to bring clarity on the roles and responsibilities of Trustees and the Board of AMCs

The SEBI (Mutual Funds) Regulations, 1996 have been amended by the Board to provide clarity on the duties and obligations of Trustees and the Board of Asset Management Companies (AMCs) in Mutual Funds. The amendments identify specific areas that are the core responsibilities of Trustees and require an independent evaluation and due diligence by them.

(g) SEBI enhances eligibility criteria for Mutual Fund Sponsors and permits self-sponsored AMCs to continue business

The SEBI (Mutual Funds) Regulations, 1996 have been amended by the Board to enhance the eligibility criteria for sponsors and provide an alternative route for a diverse range of entities to become mutual fund sponsors. This includes private equity funds, with safeguards in place to ensure compliance.

(h) SEBI approves changes to listing obligations to improve transparency and simplify processes in the securities market

SEBI has proposed and approved several changes to the listing obligations of companies in the securities market. These changes aim to improve transparency and simplify certain processes in the market. Under the latest changes, all material agreements, regardless of whether the company is aware of them or not, must be disclosed if they have an impact on the control and management of the company.

Read the Press Release

5. CBIC waives late fees for the registered persons who fail to furnish the return in FORM GSTR-4

The CBIC has issued a notification to provide a waiver for the registered persons who fail to furnish the return in Form GSTR-4 for the quarters from July, 2017 to March 2019 or for the Financial years from 2019-20 to 2021-22.

It is provided that the late fees shall stand waived which is in excess of Rs. 500 (Rs. 250 in CGST & Rs. 250 in SGST), and shall stand fully waived where the total amount of central tax payable in the said return is nil subject to the condition that return is filed between 1^st April 2023 and 30^th June 2023.

Read the Notification

6. CBIC provides an extension for the filing of an application for the revocation of cancellation of registration till 30-06-2023

The CBIC has issued a notification to prescribe a special procedure in respect of revocation of cancellation of registration which was cancelled on or before 31^st December 2022, and the taxpayer has failed to file a revocation within the time prescribed.

It is provided that the taxpayer can apply for revocation of cancellation of such registration up to 30^th June 2023 but only after furnishing the returns due up to the effective date of cancellation of registration and payment of taxes with interest, penalty & late fees.

Read the Notification

7. CBIC prescribes procedures/timelines for Aadhaar authentication & submission of registration applications

The CBIC has issued a notification to provide that if the applicant opts for authentication of the Aadhaar number, then the date of submission of the application shall be the date of authentication of the Aadhaar number, or fifteen days from the submission of the application, whichever is earlier.

It is also provided that if any person has opted for authentication of an Aadhaar number and is identified on the common portal, based on data analysis and risk parameters, then its application shall be followed by biometric-based Aadhaar authentication and taking a photograph of the individual applicant or of such individuals in relation to the applicant where the applicant is not an individual.

Read the Notification

8. CBIC reduces late fees for filing annual returns from FY 2022-23 onwards

The CBIC has issued a notification to reduce the late fees for filing an annual return for taxpayers having a turnover of up to Rs. 20 crores. This rationalisation of the late fee is applicable from FY 2022-23 onwards.

The late fees shall be Rs. 50 per day (i.e. Rs. 25 in CGST and Rs. 25 in SGST) subject to a maximum of 0.04% (i.e. 0.02% in CGST and 0.02% in SGST) of the turnover for taxpayers having turnover up to Rs. 5 crores. However, the late fees shall be Rs. 100 per day (i.e. Rs. 50 in CGST and Rs. 50 in SGST) subject to a maximum of 0.04% (i.e. 0.02% in CGST and 0.02% in SGST) of the turnover for taxpayers having turnover up to Rs. 20 crores.

The CBIC has also notified the amnesty scheme for filing of final return in Form GSTR-10, and it is provided that the late fee which is in excess of Rs. 1,000 (Rs. 500 in CGST & Rs. 500 in SGST) shall be waived for the registered persons who fail to furnish the final return in Form GSTR-10 by the due date but furnish the said return between the period from 1^st April 2023 to 30^th June 2023.

Read the Notification

9. ICAI issues the Implementation Guide on Reporting under Rule 11(g) of the Companies (Audit and Auditors) Rule, 2014

The Auditing and Assurance Standards Board (AASB) of ICAI developed an Implementation Guide to provide appropriate guidance to the auditors on new reporting requirements under Rule 11(g), whether the company, in respect of financial years commencing on or after the 1^st April, 2022, has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software, and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention, so that the auditors can discharge their responsibilities in an effective manner.

(a) Applicability: Audit reporting will be required from the financial year 2022-23, and the auditor is not required to assess the appropriateness of the audit trail of previous years and the assessment will be only for prospective financial years.

(b) Responsibility of Auditor: The auditor is required to report on the audit trail under the section ‘Report on Other Legal and Regulatory Requirements’. In order to fulfil his duty the auditor shall verify the following:

i. whether the audit trail feature is configurable (i.e., if it can be disabled or tampered with)

ii. whether all transactions 2 recorded in the software are covered in the audit trail feature

iii. whether the audit trail has been preserved as per statutory requirements for record retention

iv. whether the audit trail feature was enabled/operated throughout the year

(c) Audit Approach: The primary responsibility of maintaining books of account which has a feature of recording audit trail (edit log) facility throughout the year for all transactions, is with management. Accounting software has the option to enable or disable the audit trail feature at the discretion of the management. The management of the company may put in place certain controls, such as monitoring changes to configurations and restricting access to the administrators, that may impact the audit trail.

(d) Illustrative Wordings for Reporting: The Guide provides illustrative wordings for reporting by auditors – Unmodified reporting, Modified reporting, Examples of such circumstances where exceptions would need to be reported & Special Consideration in case of Fraud.

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