CA Online

The Special Investigation Team (SIT) on black money has suggested amechanism for proactive detection of shell companies and deterrent penal provisions against persons involved in setting them up. It also wanted those making donation and recieving it in cash to be prosecuted under the prevention of corruption act ( PCA), particularly in the context of private schools and colleges. In its third report, made public on Friday by the finance ministry, the SIT wanted the Serious Frauds investigation Office (SFIO) to use MCA 21 filings to detect black money and more teeth for the Directorate of Revenue Intelligence ( DRI) to investigate in special economic zones. Pointing out that schools and colleges are accepting large donations by cash, running in even more than ? 1 crore, SIT wanted them to be booked under PCA, deeming them to be public servant. The SIT recommended the SFIO, which comes under the ministry of corporate affairs (MCA), actively and regularly mine the ministry’s ( MCA21) ...

Asks market regulator to check creation of such wealth via stock exchanges, P- notes A Supreme Court- appointed special investigation team (SIT) on unaccounted money has come down heavily on the creation of such funds through stock exchanges and participatory notes ( P- notes). In a report, the SIT said the Securities and Exchange Board of India ( Sebi) should have an effective monitoring mechanism to study unusual rises in stock prices and the use of stock exchanges to evade taxes through long- term capital gains. Sebi has also been asked to put in place a mechanism to monitor the beneficial owners of P- notes. The SIT has recognised the recent steps taken by the regulator to scrutinise cases of tax evasion through exchanges. Sebi has been sharing such information with the income tax department. Now, the SIT has directed it to share that with the Financial Intelligence Unit, too. The investigation into market manipulations shows the modus operandi involves companies with...

Governor can’t supersede RBI-govt joint panel’s decisions, can only cast vote in the event of a tie The government has proposed to effectively take away the Reserve Bank of India (RBI) governor’s overriding powers on interest rate decisions, a move that could dilute the central bank’s status as an independent and autonomous monetary authority. The government instead has proposed to give an additional vote to the RBI governor in case of a tie in any meetings of a yet-to-be set up monetary policy committee, which will decide on interest rate hikes and cuts. These proposals are part of the revised draft Indian Financial Code (IFC) that the finance ministry put out on Thursday. The ministry has sought further comments from public by August 8. The government is likely to follow this up by moving to enact a an Indian Financial Code (IFC) Bill which will subsume more than 60 archaic legislations to make them contemporary. The IFC is based on the recommendations of the Financial Se...

For compliance to be valid, pay the entire penalty plus tax within the allowed deadline One of the concerns regarding the one- time settlement window under the Undisclosed Foreign Income and Foreign Assets Bill, 2015 ( Black Money Act) is that the information could be misused. Tax payers are worried they could be subject to stringent scrutiny by assessing officers ( AOs) on their income, assets, and bank accounts. According to experts, this problem can be addressed to some extent by filing directly, online or physically, with a separate cell and not through the regular procedure. Suresh Surana, founder of RSM Astute Consulting, says, “By allowing e- filing for the one- time settlement and not going through AOs but to a separate government cell directly, the sanctity of the information will be maintained. The information will not be leaked and AOs will not be able to use this information to ask questions about other assets or bank accounts of tax- payers,’’ he says. Under the on...

The Securities and Exchange Board of India ( Sebi) has suggested the newly introduced institutional trading platform ( ITP) be used by the central government for its disinvestment programme in unlisted public sector undertakings ( PSUs), sources have said. “Currently, there is no real way for actual price discovery of unlisted companies. Therefore, the ITP platform can be used for divesting stake in these,” said asource. Introduced in 2013, the ITP is a mechanism for listing of companies without an initial public offering (IPO) or fund raising. The Budget this year had set an ambitious target for divestment at Rs.41,000 crore and strategic sales at Rs.28,500 crore. Sebi says the ITP platform could be used by strategic investors such as private equity or venture capital funds to take stake in unlisted companies. The Centre has been seeking help from Sebi in removing irritants in the share sale process. The department of disinvestment had asked Sebi to allow suspension in tra...

The Consumer Electronics and Appliances Manufacturers’ Association ( CEAMA) has said free trade agreements with major electronics goods manufacturing countries like Japan, South Korea and Thailand, costly credit, and lack of raw material and components are hindrances for Prime Minister Narendra Modi’s Make in India campaign. The consumer durables industry is grappling with low rural demand and fierce competition. Since 2013, unseasonal rain and low spending on employment have pulled down rural demand. Experts said slow increases in minimum support prices for crops had reduced the real income of rural households. Last month, the CEAMA urged the commerce and industry ministry to revise the tax structure that favoured imports. Finance Minister Arun Jaitley reduced the excise duty on electronic components from 5 per cent to 2.5 per cent in this year’s budget. Business Standard, New Delhi, 24th July 2015

The Securities and Exchange Board of India ( Sebi) plans to introduce within two months new norms to regulate algorithmic trading. “Algorithm- based trade or high frequency trades are prone to high risks. We are examining a number of options to bring down these risks,” said Sebi Chairman U KSinha on Thursday. These are trading systems that utilise advanced mathematical models for transaction decisions in financial markets. As of May, 15.1 per cent of the BSE turnover came through the algo route. These trades account for 19.8 per cent of the total on the National Stock Exchange, with an additional 24.3 per cent of volumes coming through co- located servers. The Reserve Bank of India had recently cautioned against these trades. “ The increased complexities of algo coding and reduction in latency due to faster communication platforms need focused monitoring, as they may pose risks in the form of increased possibilities of error trades and market manipulation,” it had said in June. S...

SIT on black money seeks details of probe by Sebi; investigation into 100 entities underway The crackdown on tax manipulation by listed entities using the stock exchange platform has picked up steam, as regulatory bodies and investigative agencies have intensified their scrutiny of the companies involved. According to sources, the Special Investigative Team (SIT) on unaccounted ( black) money has sought a probe report from the Securities and Exchange Board of India ( Sebi), which has so far been leading this probe. “SIT has sought a probe report on these listed companies that are using the stock exchange platform to evade taxes by way of misusing longterm capital gains tax ( LTCG) provision,” said a source. Over the past six months, under whole- time member Rajeev Kumar Agarwal, Sebi passed orders related to around 10 companies; 36 companies involved in irregular trades were suspended and 900 entities were banned. According to estimates, the money involved in these orders adds ...

Employees’ Provident Fund Organisation is likely to launch online PF withdrawals in three months for its 60 million subscribers. Business Standard, New Delhi, 23rd July 2015

Factories with up to 300 workers can fire without government approval After failing to get the Centre’s approval to the ordinance route, the Madhya Pradesh Assembly on Wednesday passed a single Bill to amend eight major labour laws; seven other laws would be changed through compounding provisions, etc. With this, Madhya Pradesh became the third state in a year, after Rajasthan and Gujarat, to pass its own labour law amendments in Assembly. After the amendments, those companies in Madhya Pradesh that employ up to 300 people will be allowed to retrench workers or shut shop without government approval ( the current provision is for those employing up to 100 to do so). To be able to do so, employers will have to give a higher compensation package —workers will get a threemonth notice and at least three months’ salary in the event of retrenchment. At present, either of two is provided; and employees are paid 15 days of wages for every year worked. Also, in case of a dispute, a worke...

A select committee of the Rajya Sabha has observed that the standard Goods and Services Tax ( GST) rate should be within 20 per cent, while the lower one should not cross 14 per cent. These rates are quite lower than the Revenue Neutral Rate (RNR) of around 27 per cent, arrived at by the sub- panel of the Empowered Committee of State Finance Ministers on GST, earlier. Besides, the panel suggested changes in the two important provisions of the Constitution Amendment Bill on GST — one per cent additional tax over GST on interstate supply of goods to help the producing states, and reduction in compensation to states in the fourth and fifth years. In its crucial report on the Constitution Amendment Bill on GST, submitted to the Rajya Sabha on Wednesday, the committee recommended that the proposed GST council may opt for a broad- based and moderate rate as the high rate will surely erode the confidence of the consumers badly and may lead to high inflation. In its dissent note, the Congr...