Case studies & problems on tax law, financial management, company, economic, labour&general laws (with solutions)

Yes, I believe you would have read tax notes from Tax law notes for Company Secretary (ICSI) executive program exams

Now, do you like to solve from direct taxation (Income Tax) problems for your CS Executive Program Module-1 (Tax Laws) paper???

 

If yes, your problem solving is solved by Mr. GK Raju through his blog http://gkr8164.blogspot.com/.  The blog contains numerous problems to workout.  Kindly note, it also includes problems & solutions from Service Tax, Sales Tax, etc…

 

CS Professional Exam friends too can enjoy solving Financial, Treasury & Forex Management (FTFM – Module 2) problems & solutions from the same.  Hopefully, you would have also read CS Final Financial, Treasury & Forex Management [FTFM] Notes & Study in a nutshell, to win Exams

 

Further, do you like to solve practical case studies on various laws, including, Company Law, Economic Law, Labour Law and anyother General Law, then the best place to enjoy learning is   Mr. Tejpal Sheth’s blog http://tejpalsheth.blogspot.com/ which is having a really good collection of interesting practical aspects to make learning, very interesting.

 

Enjoy passin…

[FEMA]Non-resident Depositors/Any can get loan upto 100 lakhs against NR(E)RA & FCNR(B) deposit accounts now

Foreign Exchange Management (Deposit) Regulations, 2000- Loans to Non Residents / third party against security of Non Resident (External) Rupee Accounts
[NR (E) RA / Foreign Currency Non Resident  (Bank) Accounts [FCNR(B)] -Deposits

RBI/2008-09/462 A. P. (DIR Series) Circular No.66 dated 28th April 2009

The banks may now grant loans against NR(E)RA and FCNR(B) deposits either to the depositors or third parties up to a maximum limit of Rs.100 lakh (erstwhile Rs.20 lakhs). The banks are also advised not to undertake artificial slicing of the loan amount to circumvent the aforesaid ceiling.

 

To understand the erstwhile provision, kindly look into Para 6 (a), (b), (c) and (d) of Schedule 1 and Para 9 of Schedule 2 to Foreign Exchange Management (Deposit) Regulations, 2000 notified vide Notification No. FEMA 5 / 2000-RB dated May 3, 2000, as amended from time to time regarding loans against security of funds held in deposit accounts. Further, attention of the banks is also invited to A. P. (DIR Series) Circular No.29 dated January 31, 2007 prohibiting banks from granting fresh loans or renewing existing loans in excess of Rs.20 lakh against NR(E)RA and FCNR(B) deposits either to the depositors or third parties. The banks were also advised not to undertake artificial slicing of the loan amount to circumvent the ceiling.

 

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[FCCB]Buy back upto USD 100 million under RBI Approval Route based on larger discounts

RBI/2008-09/461 A. P. (DIR Series) Circular No 65 dated 28th April 2009

The total amount of permissible buyback of FCCBs, out of internal accruals, is increased to USD 100 million (from erstwhile USD 50 million) of the redemption value per company, under the approval route by linking the higher amount of buyback to larger discounts. Accordingly, Indian companies may henceforth be permitted to buyback FCCBs up to USD 100 million of the redemption value per company, out of internal accruals, with the prior approval of the Reserve Bank, subject to:

Minimum Discount on Book Value	Maximum Redemption Value
25%	USD 50 million
35%	USD 50 to 75 million
50%	USD 75 to 100 million

To read all about FCCB, click here.

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[ECB]All-in-cost ceilings dispensed till 31st December 2009 under Approval Route

RBI/2008-09/460 A.P. (DIR Series) Circular No. 64 dated 28th April 2009

Now, it has been decided to extend the relaxation in all–in-cost  ceilings, under the approval route,  until December 31, 2009. This relaxation will be reviewed in December 2009.

 

Erstwhile provision: Click here

It was decided earlier to dispense with the requirement of all-in-cost ceilings on ECB, under the approval route, until June 30, 2009. Accordingly, eligible borrowers, proposing to avail of ECB beyond the prescribed all-in-cost ceilings could approach the Reserve Bank, under the approval route.

 

To read all about ECB, click here.

 

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Prepaid Instruments-Debit/smart cards shall comply with RBI directions now

Issuance and Operation of Pre-paid Payment Instruments in India (Reserve Bank) Directions, 2009

All persons proposing to operating payment systems involved in the issuance of Pre-paid Payment Instruments shall seek authorization from the Department of Payment and Settlement Systems, Reserve Bank of India, under the Payment and Settlement System Act 2007.

 

Pre-paid Payment Instruments: Pre-paid payment instruments are payment instruments that facilitate purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card.

The pre-paid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments which can be used to access the pre-paid amount (collectively called Payment Instruments hereafter).

The pre-paid payment instruments that can be issued in the country are classified under the three categories viz. (i) Closed system payment instruments (ii) Semi-Closed system payment instruments and (iii) Open system payment instruments.

 

Only banks which have been permitted to provide Mobile Banking Transactions by the Reserve Bank of India shall be permitted to launch mobile based pre-paid payment instruments (mobile wallets & mobile accounts) subject to compliance of Capital Adequacy Requirements of RBI.

Non-Bank Finance Companies (NBFC) would be permitted to issue only semi-closed system pre-paid payment instruments subject to compliance of Capital Adequacy Requirements of RBI.

 

All other persons shall have a minimum paid-up capital of Rs. 100 lakhs and positive net owned funds would be permitted to issue only semi-closed system pre-paid payment instruments.

 

Persons authorized under FEMA to issue foreign exchange pre-paid payment instruments and where such persons issue such instruments as participants of payment systems authorised by the Reserve Bank of India, are exempt from the purview of these guidelines as they are subject to Current Account Transaction Rules.

 

The guidelines on Know Your Customer/Anti-Money Laundering/Combating Financing of Terrorism guidelines issued by the Reserve Bank of India to banks, from time to time, shall apply mutatis mutandis to all persons issuing pre-paid payment instruments.

 

All pre-paid payment instruments issued in the country shall have a minimum validity period of six months from the date of activation/issuance to the holder and the maximum value of any pre-paid payment instrument shall not exceed Rs 50,000/-.

Source:

RBI/2008-09/458 DPSS.CO.PD.No. 1873 /02.14.06/ 2008-09 dated 27th April, 2009

Certified Copies of Entries / Print out to Courts as Evidence by co-operative banks under Bankers Books Act

All State and Central Co-operative banks should comply with the provisions of the Bankers' Books Evidence Act, 1891 while furnishing certified copies and computer printouts to courts. In the absence of such statutory certificate, the court would not be obliged to admit the document in evidence without any further proof.

 

The Certificate shall be as prescribed under Section 2A(a) and (b) of the Act ibid (relevant extract enclosed).

 

Click here to read about Banker’s Books Evidence Act, 1891 http://yehseeyes.blogspot.com/2007/09/interesting-act-in-banking-now-you-will.html

 

Source:

RBI/2008-09/457/RPCD.CO.RF.BC.No. 100 /07.38.03/2008-09 dated 24th April 2009

New Clause 5A&20A in Listing Agreement as amended-unclaimed shares,common notice period, dividend per share basis&voting rights pattern are the updates…

Click here for the amendments in Listing Agreement as on 24th April 2009 http://www.sebi.gov.in/circulars/2009/circfd04.pdf

All the following amendments shall come into force with immediate effect.

To put it simply,

• The unclaimed shares in escrow account shall be transferred to Demat Suspense A/c. after 3 reminders, including corporate benefits, if any and its voting rights will be frozen until claimed.
• The timelines of notice period for record date & board meeting, which were applicable only to rights issue is now made applicable for all corporate actions including mergers, demergers, bonus, buy back, etc…
• “The Issuer agrees to declare and disclose the dividend on per share basis only”.  So, you won’t see hereon 100% or 200%, etc…
• Shareholding pattern to be given for each class of security and voting rights pattern also to be given.

Uniform procedure for dealing with unclaimed shares – Insertion of clause 5A in Listing Agreement
It has been brought to the notice of the Board that there is a large quantum of shares issued pursuant to the public issues, which remain unclaimed despite the best efforts of the Registrar to Issue or Issuers and that there is no uniform practice for dealing with such shares.

It has been decided to provide a uniform procedure for dealing with unclaimed shares i.e., shares which could not be allotted to the rightful shareholder due to insufficient/incorrect information or any other reason (in escrow A/c.). Accordingly, the new Clause 5A is to be inserted, which, inter alia, provides the following:

• The unclaimed shares shall be credited to a demat suspense account opened by the issuer with one of the depository participants after giving 3 reminders at the address mentioned in the depositories database. [Cl 5A(a)]
• Any corporate benefit in terms of securities, accruing on unclaimed shares such as bonus shares, split etc., shall also be credited to such account. [Cl 5A(b)]
• Details of shareholding of each individual allottee whose shares have been credited to such suspense account shall be properly maintained by the issuer. [Cl 5A(c)]
• The allottee’s account shall be credited as and when he/she approaches the issuer, after undertaking the proper verification of identity of the allottee. [Cl 5A(d)]
• The voting rights of these shares will remain frozen till the rightful owner claims the shares. [Cl 5A(f)]
• Details (in aggregate) of shares in the suspense account including freeze on their voting rights, shall be disclosed in the Annual Report as long as there are shares in the suspense account. [Cl 5A(g)]

Notice period for Record Date and Board Meeting – Amendments to clause 16 and clause 19
It has been decided to reduce the timelines for notice period for all corporate actions like dividend, bonus, rights, mergers, demergers, splits, etc, for all scrips whether in demat or physical, whether in F&O segment or not.

The notice period for record date has been reduced to 7 working days (now there is no confusion of whether 30 days or 21 days or 15 days or 7 days) and for board meeting has been reduced to 2 working days (now there is no confusion of whether 7 days or 2 days). 

Kindly note, it is the board meeting intimation where buy back is proposed to be considered as per Cl 19(d) is also 2 working days (not 7 days as earlier).

Uniformity in dividend declaration – Insertion of clause 20A
It has been decided to mandate that listed companies shall declare their dividend on per share basis only. This is expected to bring uniformity in the manner of declaring dividend amongst the listed companies.

 

Cl 20A - “The Issuer agrees to declare and disclose the dividend on per share basis only”.

 

Shareholding pattern for each class of shares and voting rights pattern – Amendment to clause 35
It is clarified that clause 35 of the listing agreement which gives a format for disclosures of shareholding pattern, is required to be given for each class of security separately. Further, it has been decided to amend clause 35 to provide an additional format for disclosures of voting rights pattern in the company.  For the new formats, click http://www.sebi.gov.in/circulars/2009/circfd04.pdf or wait for the amendments in Listing Agreement.

[IDR]Only audited financial statements, neither affairs/status & IOSCO recognised & Interim audit, if more than 180 days

G.S.R 251 (E) - Companies (Issue of Indian Depository Receipts) (Second Amendment) Rules, 2009.  dated 15th April 2009

In the Schedule to IDR Rules (Matters to be specified in Prospectus), under Point No.6 – REPORTING,

6 (i) - Where the law of a country, in which the Issuing company is incorporated, requires annual statutory audit of the accounts of the Issuing company, a report by the statutory auditor of the Issuing company, in such form as may be prescribed by SEBI on -
(A) the audited financial statements and financial status (deleted) of the Issuing Company in respect of 3 financial years immediately preceding the date of prospectus, and
(B) (amended) the interim audited financial statements in respect of the period ending on a date which is less than 180 days prior to the date of opening of the issue, if the gap beween the ending date of the latest audited financial statements disclosed under clause (A) and the date of the opening of issue is more than 180 days.

Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is 180 days or less, the requirement under clause (B) shall be deemed to be complied with if a statement, as may be specified by SEBI, in respect of changes in the financial position of issuing company for such gap is disclosed in the Prospectus.

Provided further that in case of an Issuing Company which is a foreign bank incorporated outside India and which is regulated by a Central Bank which, in turn, is (deleted) a member of Bank for International Settlements or a member of the International Organisation of Securities Commission (IOSCO) which is a signatory to a Multilateral Memorandum of Understanding with India, the requirement under this paragraph, in respect of period beginning with last date of period for which the latest audited financial statements are made and the date of prospectus shall be satisfied, if the relevant financial statements are based on limited review report of such statutory auditor.

 

6(ii) - Where the law of the country, in which the Issuing company is incorporated, does not require annual statutory audit of the accounts of the Issuing company, a report, in such form as may be specified by SEBI, certified by a Chartered Accountant in practice within the terms and meaning of the Chartered Accountant Act, 1949 on -
(A) the financial statements (affairs) of the Issuing Company, in particular on the profits and losses for each of the 3 financial years immediately preceding the date of prospectus and upon the
assets and liabilities of the Issuing Company and

(B) (amended) the interim financial statements in respect of the period ending on a date which is less than 180 days prior to the date of opening of the issue, if the gap beween the ending date of the latest audited financial statements disclosed under clause (A) and the date of the opening of issue is more than 180 days.

Provided that if the gap between such date of latest audited financial statements and the date of opening of issue is 180 days or less, the requirement under clause (B) shall be deemed to be complied with if a statement, as may be specified by SEBI, in respect of changes in the financial position of issuing company for such gap is disclosed in the Prospectus.

For the status hitherto, click http://yehseeyes.blogspot.com/2009/01/idr-rules-amendednon-residents-can.html

[FEMA]FC-TRS reporting amended & is subject to KYC & to be submitted within 60 days of consideration for transfer of equity instruments involving foreign nationals or NRI’s

Foreign Direct Investment in India -
Transfer of Shares / Preference Shares / Convertible Debentures
by way of Sale - Modified Reporting Mechanism

Vide RBI/2008-09/447 A. P. (DIR Series) Circular No.63 dated April  22, 2009

1.In order to capture the details of investment received by way of transfer of the existing shares / compulsorily and mandatorily convertible preference shares (CMCPS) / debentures [hereinafter referred to as equity instruments], of an Indian company, by way of sale, in a more comprehensive manner, the form FC-TRS has been revised (format in Annex I). Accordingly, the proforma for reporting of inflows / outflows on account of remittances received / made in connection with the transfer of equity instruments by way of sale, submitted by IBD/FED/nodal branch of the AD Category – I bank to the Reserve Bank has also been modified (format in Annex III).
2.The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check (format in Annex II) by the remittance receiving AD Category – I bank at the time of receipt of funds. In case, the remittance receiving AD Category – I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category – I bank carrying out the transaction along with the form FC-TRS.
3.Further, in order to ensure that the form FC-TRS is submitted within a reasonable timeframe, it has been decided that henceforth, the form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration.  The onus of submission of the form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India.
4.In case of transfer of equity instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required, as hitherto. Further, in case approval is granted for a transaction, the same should be reported in form FC-TRS, duly certified by the AD Category – I bank, within 60 days from the date of receipt of the full and final amount of consideration.
5. These directions will become operative with immediate effect.

Kindly note,

Attention of the Authorised Dealer Category – I (AD Category - I) banks is invited to paragraph 6 of the Annex to A. P. (DIR Series) Circular No.16 dated October 4, 2004, wherein, it has been stipulated that in case of transfer of shares from a resident to a non-resident / non-resident Indian and vice versa, the transferee / his duly appointed agent is required to approach the investee company to record the transfer in their books along with the certificate in form FC-TRS from the designated AD branch that the remittances have been received by the transferor / payment has been made by the transferee.  In addition, the designated AD branch is also required to submit two copies of the form FC-TRS received from their constituents / customers together with the statement of inflows / outflows on account of remittances received / made in connection with transfer of shares, by way of sale, to IBD/FED or the nodal office designated for the purpose by the AD Category – I bank. The IBD/FED or the nodal office of the AD Category – I bank in turn submits a consolidated monthly statement in respect of all the transactions reported by the branches to the Reserve Bank, in the prescribed proforma.  Further, it may be noted that in terms of Regulation 2 of Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time, "preference shares" mean compulsorily and mandatorily convertible preference shares and "debenture" means compulsorily and mandatorily convertible debentures.

[ECB] No objection for Corporate Guarantee after Board Resolution

External Commercial Borrowings Policy – Liberalization Issue of Guarantee for operating lease

As all of you aware that in term of AP DIR Circular No.24 dated March 01, 2002 AD Category – I banks have been permitted to allow payment of lease rentals, opening of letters of credit towards security deposit, etc. in respect of import of aircraft / aircraft engine / helicopter on operating lease basis subject to the terms and conditions mentioned therein.

Further, in terms of AP DIR Circular No.01 dated July 11, 2008, as a measure of rationalization of the existing procedures, AD Category - I banks have been allowed to convey ‘no objection’ under the Foreign Exchange Management Act (FEMA), 1999 for creation of charge on immovable assets, financial securities and issue of corporate or personal guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised by the borrower, subject to compliance of prescribed conditions.

As part of further rationalization, vide AP (DIR Series) Circular No.62 dated April 20, 2009, it has been decided to allow AD Category – I banks to convey ‘no objection’ from the Foreign Exchange Management Act (FEMA), 1999 angle for issue of corporate guarantee in favour of the overseas lessee, for operating lease in respect of import of aircraft / aircraft engine / helicopter.

The ‘no objection’ to the Indian importer for issue of corporate guarantee under FEMA, 1999 may be conveyed after obtaining –

• Board Resolution for issue of corporate guarantee from the company issuing such guarantees, specifying names of the officials authorised to execute such guarantees on behalf of the company.
• Ensuring that the period of such corporate guarantee is co-terminus with the lease period.

Click here - AP (DIR Series) Circular No.62 dated April 20, 2009

Supreme Court gives statutory shield to SEBI from SAT

THE Supreme Court on Tuesday said the Securities Appellate Tribunal (SAT) has no discretionary power to interfere with orders passed by market regulator Securities & Exchange Board of India (SEBI). Allowing SEBI’s plea, the court said the tribunal has to do what is prescribed under the statute.

“When something is to be done statutorily in a particular way, it can only be done that way. There is no scope for taking shelter under a discretionary power,” said a bench comprising Justice Arijit Pasayat and Justice LS Panta. The court rejected the plea that the tribunal can interfere with the order passed by SEBI. The court also turned down the plea that under section 15 T (4) of the Act, the tribunal is empowered to pass such orders on the appeal as it thinks fit, confirming, modifying or setting aside the order of SEBI.

SEBI had filed two appeals against order passed by the tribunal. In one case, Saikala Associates acted as a sub-broker at the National Stock Exchange with 2 NSE Members — MIS PCS Securities and M/S Zen Securities — without being registered as a sub-broker with SEBI between 2000 and May 2002. It had created the value of Rs 403.29 crore in breach of section 12(1) of the Securities and Exchange Board of India Act, 1992 (read with Rule 3 of the Securities and Exchange Board of India (Stock Brokers & Sub Brokers) Rules, 1992.)

In the second case Shilpa Stock, registered as a SEBI broker while executing trades on behalf of its client Kamlesh Shroff had dealt with Jairam Enterprises, an un-registered sub-broker. Again, it was in violation of SEBI rule. The tribunal had said the proved charges were not serious enough to warrant suspension of certificate of registration and had set aside the SEBI order. SEBI challenged this in the apex court. The regulator had said in terms of Regulation 25 of the SEBI regulations & circulars, (stock brokers and sub-brokers), which was applicable prior to the amendment with effect from November 2, 2003, it was provided that any contravention of any provisions of the Act, rules and regulations is to be dealt with in the manner provided in Regulations 26 to 32 of the Regulation prior to the amendment with effect from September 27, 2002.

 

The provisions of section 12(3) of the 1992 Act confer power on SEBI, by an order, to suspend or cancel a certificate of registration in such manner as may be determined by regulations, provided that no order under the said section will be made unless the person concerned has been given a reasonable opportunity of being heard, the appellant had said. It had further said as per Rule 3 of the Securities and Exchange Board of India (Stock Brokers & Sub Brokers) Rules, 1992, the existing brokers & sub-brokers were allowed to continue business pending registration but no new person commencing the business of the broker or sub-broker after August 20, 1992 could do the business pending registration and could commence only after being registered.

The court said, “In the instant case, the position of broker/sub-broker in case of violation is statutorily provided under Section 12 of the Act, which has to be read along with Rule 3 of the Rules. No power is conferred on the tribunal to travel beyond the areas covered by section 12 and Rule 3.”

Source: The Economic Times

The concerned citation of the case is S.E.B.I  Versus Saikala Associates Ltd. with CIVIL APPEAL NO. 4640 OF 2006 and the date of judgement is April 21, 2009. For complete judgement one can check SC website or else follow the below URL :-
 

http://judis.nic.in/supremecourt/helddis3.aspx

 
Thanks - CS Monika Bhardwaj of CS Mysore

File Offer Documents (50 crores) at SEBI Western Regional Office, Ahmedabad from 1st May 2009

Schedule XXII of SEBI (DIP) Guidelines, 2000 (click here for the latest guideline) got amended enabling Merchant Bankers  to file the draft offer documents (public issue & rights issue) of size up to Rs. 50 crores, of the companies whose registered office falls in Gujarat and Rajasthan, with the regional office of SEBI in Ahmedabad.

Securities and Exchange Board of India

Western Regional Office

Unit No: 002, Ground Floor, SAKAR I,

Near Gandhigram Railway Station,

Opposite Nehru Bridge, Ashram Road,

Ahmedabad – 380 009.

Phone: (079) 26583633, 26583634 and 26583635.

Click here for the said circular http://www.sebi.gov.in/circulars/2009/cfdcir04.pdf