Appointment of foreign national as a director of Indian company

10th Jan, 2023

Under Indian Companies Act, 2013, six types of Directors are appointed in a company, i.e., Women Director, Independent Director, Small Shareholders Director, Additional Director, Alternative and Nominee Director. The Act does not bar a foreign national to be appointed as any of the above-mentioned directors in Indian Companies by complying with the Companies Act, 2013 (hereinafter referred as “The Act”) read along with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (hereinafter referred as “The Rules”)

Corporate Laws

Incidence of Section 112A to be taxed at MMR u/s 115UA of IT Act 1961

11th January, 2023

Section 115UA of the income tax act, 1961, INTER-ALIA, provides that notwithstanding anything contained in any other provisions of this act, any income distributed by a business trust to its unit holders shall be deemed to be of the same nature and in the same proportion in the hands of the unit holder as it had been received by, or accrued to, the business trust. Further, subject to the provisions of Section 111A and Section 112, the total income of a business trust shall be charged to tax at the maximum marginal rate (MMR). Maximum marginal rate or MMR, in relation to a trust, shall refer to maximum marginal rate applicable as per finance act 2022, which is 42.744%. Thus, it is interesting to note that while Section 115UA taxes all income at MMR, it however provides exceptional relief for income in the nature of long-term capital gain u/s 112 and short-term capital gain in cases of income from transfer of equity shares or unit of equity oriented fund or unit of business trust (where STT is payable on such transfer) u/s 111A, as an exception and allows them to be taxed at their usual rates. The usual rates are 20% for long-term capital gain u/s 112 and 15% for short-term capital gain in the nature of income referred to in Section 111A above. Thus, it makes clear that the purpose of this Section is to tax any income pertaining from the special purpose vehicle to the business trust (other than the usual interest and dividend it receives) at MMR except long term capital gain and short-term capital gain u/s 112 and 111A respectively.

Income Tax

Transfer Pricing in India: A Comprehensive overview with key case studies

10th January, 2023

Transfer pricing refers to the pricing of goods and services traded between related parties, such as subsidiaries of the same multinational corporation. It is an important aspect of international business, as it can significantly impact a company's profitability and tax liability. In recent years, transfer pricing has come under scrutiny by governments worldwide, as it can be used as a means of tax avoidance or evasion. In India, transfer pricing is regulated by the Income Tax Act 1961 and the rules prescribed thereunder. The Central Board of Direct Taxes (CBDT) is responsible for enforcing India's transfer pricing regulations.

Hero Moto Corp Vs. DCIT, Delhi [2020] 117 taxmann.com 101 (Delhi - Trib.) In this case, the Delhi Tribunal considered the issue of whether the cost plus method was the most appropriate transfer pricing method for determining the arm's length price of a transaction involving the procurement of raw materials by the taxpayer, Hero Moto Corp. The taxpayer argued that the cost-plus method was the most appropriate method, as it took into account the specific circumstances of the transaction and the taxpayer's contribution to the value of the raw materials.

Income Tax

Online registration of units through MCA portal for ESI registration and inspection of units

10th January,2023
Newly incorporated Public Limited, Private Limited and One Person Companies registered with effect from February 15, 2020 ['Companies'] are being allotted ESIC registration number by default at the time of its incorporation. Once these Companies are registered under Employee State Insurance Act, 1948 ['ESI Act'] they will have to comply with the provisions of ESI Act mandatorily as their registration becomes active automatically on generation from the date of incorporation, irrespective of whether these Companies fall under the ambit of the thresholds limits as applicable[1]. However, it raised a new challenge before the Employee State Insurance Corporation to identify whether these Companies fall under the thresholds or not? To meet the above issue, Employee State Insurance Corporation had released a Circular in this regard dated December 22, 2022 which states that Companies who have got default registration under ESI Act on incorporation through MCA portal need not comply with the provisions of ESI Act for a period of six months from the date of registration or until it exceeds the thresholds as specified under ESI Act, whichever is earlier.

Corporate Laws

Checklist of documents for directorship in Indian companies by persons resident outside India

11th January, 2023

In the recent years, the Government of India has liberlised its policies for the Foreign Investors whereby they can come to India and invest in various sectors. Presently every sector except a few like railway, defence, agriculture, real estate etc are allowed by the Government, where Foreign Direct Investment can be made through automatic/ approval routes. However, by making FDI, a Person Resident Outside India can only become the shareholder, but theday to days affairs of the company shall lie with the Directors only. So while making investment the investor would like to be part of the Board of Directors of the company. Hence, the Ministry of Corporate Affairs have enacted the various provisions under the Companies Act, 213 through which Persons Resident Outside India can be allocated Directorship in Indian Companies by complying with the Companies Act, 2013 (hereinafter referred as "The Act") read along with the Companies (Appointment and Qualifications of Directors) Rules, 2014 (hereinafter referred as "The Rules")

Corporate Laws

Economists bat for hike in tobacco taxation for achieving Modi's USD 5 trillion economy vision

New Delhi: A substantial hike in tax on all tobacco items and stronger laws will not only bring the best out of human capital by ensuring better health of citizens, but also help in achieving Prime Minister Narendra Modi's vision of a five trillion dollar economy by 2025, experts have asserted. Noting that the health care burden due to tobacco consumption in India is around 1.04 per cent of GDP, pushing many into poverty, Arvind Mohan, Professor and Head, Department of Economics, University of Lucknow said a substantial increase in tax on these lethal items will close the gap.

Speaking at a webinar, he echoed views of the World Health Organisation (WHO) as well as many other international bodies like World Bank that tobacco taxation is an efficient tool, reducing tobacco consumption faster than any other single measure.

General

Dubai ends 30 per cent tax on alcohol sales, fee for liquor licenses

2nd Janurary, 2023

Dubai ended its 30 per cent tax on alcohol sales in the sheikhdom and made its required liquor licenses free to obtain, ending a long-standing source of revenue for its ruling family to apparently further boost its tourism to the emirate. The sudden New Year's Day announcement, made by Dubai's two state-linked alcohol retailers, came apparently from a government decree from its ruling Al Maktoum family. However, government officials did not immediately acknowledge the decision and did not respond to questions from The Associated Press

International Tax

Tax implications of mutual fund investments

02 January, 2023

Investing in mutual funds is as good as investing in the underlying security itself. So, the taxation aspect of each scheme depends upon the asset classes in which the scheme invests. Like any other investment, it is important to consider the tax implications of mutual fund investments before making them.

For taxation purposes, mutual fund schemes can be categorised into two main types—equity-oriented schemes and non equity-oriented schemes. The former are those that invest at least 65% and above of their net assets in shares of listed Indian companies. Schemes that invest less than 65% or don’t invest in equity are non-equity schemes, such as liquid funds, debt funds, gold funds, etc. Both types are taxed differently.

General