Weekly Round-up on Tax and Corporate Laws | 28th March to 02nd April 2022

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 28th March to 02nd April 2022, namely:

(a) Consequences of PAN becoming inoperative to be effective from 01-04-2023: CBDT

(b) CBDT notifies ITR forms for Assessment Year 2022-23

(c) Key Highlights of the Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Bill, 2021

(d) SEBI clarifies the new norms for Related Party Transaction

(e) New GST rates structure introduced for Brick Kilns Sector

(f) Key highlights of the SEBI Board Meeting dated 29-03-2022

(g) Enhanced Reporting in Other Matters to be included in Auditors Report from the FY ending 31st March 2022

1. Consequences of PAN becoming inoperative to be effective from 01-04-2023: CBDT

Every person who has been allotted a PAN as of 1st July 2017 and is eligible to obtain an Aadhaar number shall link his PAN with Aadhaar. If such a person fails to do so, the PAN allotted to the person shall be made inoperative after the notified due date. The due date for such linking has been extended multiple times, and the latest date was 31-03-2022. If a person fails to intimate his Aadhaar after this date, he shall be liable for payment of fee under Section 234H.

The CBDT has notified the Income-tax (Third Amendment) Rules, 2022 to insert sub-rule (5A) in Rule 114 to provide that if a person intimates his Aadhaar number after the due date, then he shall be liable to pay a fee of:

(a) Rs. 500, if such intimation is made between 01-04-2022 and 30-06-2022; and

(b) Rs. 1,000, in all other cases.

Further, Sub-rule (2) of Rule 114AAA provides that where a person is required to furnish, intimate or quote his PAN, and his PAN has become inoperative, it shall be deemed that he has not furnished, intimated or quoted the PAN. Consequently, he shall be liable for all the consequences for not furnishing, intimating or quoting the PAN. The CBDT has notified that all the consequences for not furnishing, intimating or quoting PAN shall come into effect from 01-04-2023 if PAN becomes inoperative due to non-linking of PAN with Aadhaar. However, the taxpayer is liable to pay a fee of Rs. 500 or Rs. 1,000, as the case may be, if PAN is linked with Aadhar between 01-04-2022 to 31-03-2023.

Read the Notification 17/2022

Read the Circular 07/2022

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2. CBDT notifies ITR forms for Assessment Year 2022-23

The CBDT has notified the Income-tax Return (ITR) Forms (‘New ITR Forms’) for the Assessment Year 2022-23 vide Notification No. 21/2022, dated 30-03-2022 & Notification No. 23/2022, dated 01-04-2022.

The new ITR forms do not change the applicability of ITR forms to different taxpayers. No new condition has been added to squeeze the applicability of simple ITR forms (ITR 1 and ITR 4) to existing small taxpayers. The new ITR forms seek additional disclosures of the date of purchase and sale of land and building. An individual has to choose the suitable option in support of his selection of residential status, i.e., an individual has to choose one out of four options if he is an ordinarily resident in India. Many changes in the ITR forms are consequential to the amendments made by the Finance Act 2021 and Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

We have done a thorough analysis of new ITR Forms (ITR 1 to 6) and highlighted all key changes and new requirements in current ITR forms viz-a-viz last year ITR Forms.

Read the article

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3. Key Highlights of the Chartered Accountants Cost and Works Accountants, and the Company Secretaries (Amendment) Bill, 2021

Introduction

The Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Bill, 2021 (‘Bill’) was introduced in the Lok Sabha on 17th December 2021. The Bill proposes to amend the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959, and the Company Secretaries Act, 1980 (‘Acts). The Lok Sabha has passed the Bill on 30-03-2022. The key highlights of the Bill include:

a) Higher penalties for misusing the name of the Council and awarding the false degree of CA/CWA/CS;

b) Penalty to be imposed on companies and LLPs (having a company as its partner) engaged in the profession of CA/CS/CWA;

c) A Coordination Committee to be constituted to develop the professions of Chartered Accountants, Cost Accountants, and Company Secretaries;

d) Firms are included in the purview of the disciplinary mechanism to enabling them to prefer an appeal before the authority;

e) The Bill fixes a timeline for completion of inquiry by Disciplinary Committees;

f) Higher penalty to be levied on a person falsely claiming to be a member of CA/CWA/CS Institute;

g) The Bill modifies the meaning of ‘professional or other misconduct’ to include any act or omission by a member either in his individual capacity or as a partner or owner of a firm;

h) The Bill introduces the provisions relating to the registration of firms and maintaining the register of firms;

i) The audit of annual accounts of the Council is to be done by a firm of Chartered Accountants appointed annually by the Council from the panel of auditors maintained by the C&AG;

j) The Bill includes bankruptcy as a ground for disqualification of a member;

k) Increase in the disqualification period of a member from contesting the election if he is found guilty of any misconduct;

l) The Bill provides that the Council shall decide the fee required for entry of names in the register of members. The condition of prior approval of the Central Government to determine such fees has been dispensed with; and

m) The Bill seeks to remove the upper limit and empower the councils to decide the fee for the grant of certificate of practice (COP).

Read the Story

4. SEBI clarifies the new norms for Related Party Transaction

SEBI vide. Notification dated 9th November 2021, amended Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015. The objective of the amendment is to enhance the scope of a related party, related party transactions (RPTs), and the materiality threshold for seeking shareholder approval. These amendments would be applicable in a phased manner, with certain amendments coming into effect from 1st April 2023 and the remaining amendments from 1st April 2022. Based on the representation received from various stakeholders, the SEBI has decided to provide specific clarification and guidance for the smooth implementation of the amended Regulation 23 as under:

a) No fresh shareholder approval is required for an approved RPT;

b) RPT, which becomes material after revised threshold limits, is to be placed in General Meeting for members’ approval; and

c) Cos. to provide relevant information in the explanatory statement to enable shareholders to make an informed decision.

Read the Circular

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5. New GST rates structure introduced for Brick Kilns Sector

The Government has notified a revised tax structure for the Brick Kilns sector effective from 1st April 2022. In this new tax structure, the Government has provided the GST rate of 12% (with ITC) or 6% (without ITC) for the supply of bricks, roofing tiles etc.

With the introduction of the new rates, the persons engaged in the manufacturing and supply of the specified products would not be entitled to avail of the composition scheme. Further, the threshold limit for the persons engaged in the supply of specified goods has been reduced from Rs. 40 lakhs to Rs. 20 lakhs.

Read the notification

Read the story

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6. Key highlights of the SEBI Board Meeting dated 29-03-2022

SEBI in its board meeting held on 29-03-2022 has approved the proposal to amend the SEBI (LODR) Regulations, 2015 to simplify the procedure for transmission of securities.

SEBI has also approved an amendment to SEBI (Collective Investment Schemes) Regulations 1999 to strengthen the regulatory framework for Collective Investment Schemes (CIS) in line with the Mutual Fund regulations. Further, the SEBI (Custodian) Regulations 1996 have been proposed to be amended to enable custodians to provide custodial services in respect of silver exchange-traded fund schemes of mutual funds. The key decisions taken by the SEBI in the Board Meeting include:

(a) The Board has approved an amendment to simplify the process for transmission of securities to ensure that uniform processes are followed by the Registrars to an Issue and Share Transfer Agents (RTAs) / listed companies;

(b) The threshold limit for simplified documentation for transmission of securities has been revised from Rs. 2 lakhs to Rs. 5 lakhs for securities held in physical mode per listed issuer and from Rs. 5 lakhs to Rs. 15 lakhs for securities held in the dematerialized mode for the beneficiary account;

(c) The Board enhances the net worth to register as a Collective Investment Management Company (CIMC);

(d) To avoid conflict of interest among CIMC and its group, the Board has restricted the shareholding of CIMC and its group shareholders to 10%, and they shall not have representation on the Board of another CIMC;

(e) SEBI has introduced skin– in-the game rules for CIS, which states that CIMC, together with its designated employees, should have a mandatory investment in the CIS to align their interest with that of CIS;

(f) SEBI has prescribed the minimum number of investors, maximum holdings of a single investor, and minimum subscription amount at the CIS level;

(g) SEBI has announced the rationalization of fees and expenses which is required to be charged to the scheme;

(h) SEBI has reduced the timeline for the offer period of the collective investment scheme, allotment of units, and refund of money to investors;

(i) The Board has approved an amendment to the SEBI (Custodian) Regulations, 1996 to enable SEBI registered Custodians to provide custodial services in respect of silver or silver related instruments held by Silver Exchange Traded Funds of Mutual Funds.

Read the Press Release

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7. Enhanced Reporting in Other Matters to be included in Auditors Report from the FY ending 31st March 2022

To bring more transparency in reporting, a few amendments were made in the Companies (Audit and Auditors) Rules, 2014 by the MCA vide notification no. GSR 206(E) dated 24th March 2021. The said amendment was applicable from the financial year beginning on or after 1st April 2021, and accordingly, the enhanced reporting is effective from the financial year ending on 31st March 2022. Now, the auditor has to report on the following other matters:

(a) Whether the management has represented that, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested by the company to or in any other person or entity, including foreign entities, with the understanding that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) Whether the management has represented that, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person or entity, including foreign entities, with the understanding that the company shall, whether directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(c) Based on such audit procedures, nothing has come to the notice of the auditor that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material misstatement; and

(d) Whether the dividend declared or paid during the year by the company is in compliance with Section 123 of the Companies Act, 2013.

Also, now, the auditors are not required to report on whether the company has provided requisite disclosures in the financial statements as to holdings as well as dealings in Specified Bank Notes during the period from the 8th November 2016 to 30th December 2016.

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