Compensation received in lieu of diminution in value of stock option is taxable as perquisite: Madras High court
– Assessee was salaried employee of step-down subsidiary of Flipkart Singapore (FPS). Assessee held stock options of FPS.
– Thereafter, FPS announced disinvestment of its wholly owned subsidiary. Pursuant to said disinvestment value of stock options fell.
– Consequently, assessee received compensation towards loss in value of options. Assessee then requested for a ‘nil’ certificate of tax deduction at source by filing an application under section 197.
– It was noted that assessee received a substantial monetary benefit at pre-exercise stage by way of discretionary compensation for diminution in value of stock options.
– Assessee contended the receipt of compensation as capital receipt and not liable to tax as there was no transfer of capital asset. Consequently, Nil certificate should be granted.
– High court held that since assessee did not make any payment towards ESOPs and continued to retain all ESOPs even after receipt of compensation, entire receipt qualifies as perquisite and becomes liable to be taxed under head salaries.
Amendments to the Finance Bill 2024
– If a resident Individual or HUF transfers a long-term capital asset being land or building bought before July 23rd, 2024, they can choose to be taxed at either the new 12.5% rate without indexation benefit or the old rate of 20% with indexation benefits. However, assets acquired on or after July 23rd, 2024, will continue to be taxed at the 12.5% rate without any indexation benefit.
– The income tax on long-term capital gains from unlisted securities or private company shares, calculated without giving effect to Indexation and exchange fluctuation shall continue to be taxed at 12.5% even for transfers after July 23rd, 2024.
– The Finance Bill initially proposed that employers could consider unrelated TDS and TCS credits when calculating salary TDS but ensured the salary TDS wouldn’t be lower than if these credits were excluded. The Amended Bill now permits employers to account for the full amount of other TDS/TCS, even if it reduces salary TDS, aligning with the original intent.
– The ambiguity about the reassessment procedure for searches conducted before September 01, 2024 but initiated after that date has been resolved. The Amended Bill clarifies that such cases will follow the reassessment regime as it existed before the FB (No. 2) 2024 amendments.
– The finance bill as amended proposed to enhance the scope of Undisclosed Income where any exemption, deduction or allowances claimed by the taxpayer incorrectly, shall now be treated as the taxpayer’s income. Further, it has clarified that undisclosed income can now be determined based on any material or information available to the tax authority or discovered during block assessment proceedings after the search is initiated.
Notification no S.O. 2751(E) dated 15th July 2024
GIST: MCA vide notification on July 15th, 2024, has amended the Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019 and substituted MSME Form-1.
COMPARATIVE EXPLANATION:
– A proviso has been added that the specified companies which are having payments pending to any micro or small enterprises for more than 45 days from the date of acceptance or the date of deemed acceptance of the goods or services shall furnish the information in MSME Form-1.
– The form has been shifted to MCA V3 portal and additional fields for the amount paid within 45 days along with mode of payment, amount paid after 45 days, outstanding for 45 days or less and outstanding for more than 45 days have been added.
Notification no G.S.R 403 dated 15th July 2024
GIST: MCA vide notification on July 15th, 2024, introduced Companies (Management and Administration) Amendment Rules, 2024, and substituted Form MGT-6.
COMPARATIVE EXPLANATION:
– The form MGT-6 has been revised and migrated from MCA V2 to V3 portal.
– Additional personal information with respect to the registered owner and beneficial owner is required to be incorporated in newly introduced additional fields.
– The concept of BO ID, a unique ID has been incorporated which will be allotted to a Beneficial Owner, that will be tagged to the PAN/ Passport number of the Beneficial Owner.
Notification no G.S.R 404(E) dated 15th July 2024
GIST: MCA vide notification on July 15th, 2024, introduced Companies (Significant Beneficial Owners) Amendment Rules, 2024, and substituted Form BEN-2.
COMPARATIVE EXPLANATION:
– The Form BEN-2 has been shifted to MCA V3 portal and format of the form has been revised for reporting the changes in SBO particulars.
Notification no G.S.R 412(E) dated 16th July 2024
GIST: Rule 12A of Companies (Appointment and Qualification of Directors) Rules, 2014 amended.
COMPARATIVE EXPLANATION:
– Effective from 1st August 2024, the applicants will have the flexibility to update their mobile number and email ID with MCA at any time during the financial year by filing e-Form DIR-3 KYC with a payment of Rs. 500.
ACRA (Registry and Regulatory Enhancements) bill facilitating digital communications and enhancing ACRA regulatory framework
As part of the Ministry of Finance’s (MOF) and ACRA’s regular review of legislation administered by ACRA, the ACRA (Registry and Regulatory Enhancements) Bill (the Bill) was passed by Parliament on 2nd July 2024.
The amendments aim to:
1. Strike a balance between corporate transparency and data protection;
2. Facilitate digital communications with businesses and other stakeholders by allowing statutory correspondences and notices (other than summons) to be sent to and accessed via a digital mailbox;
3. Improve filing convenience and data accuracy by empowering the Registrar to use information from prescribed public agencies to keep ACRA’s registers up to date;
4. Enhance the accuracy of the registers of directors by empowering the Registrar to reflect the disqualification status of individuals for all types of disqualifications under the Companies Act (CA); and
5. Streamline the financial reporting requirements for foreign companies registered under the CA.
The Bill makes amendments to the Accounting and Corporate Regulatory Authority Act 2004, the Accountants Act 2004, the Business Names Registration Act 2014, the Companies Act 1967, the Insolvency, Restructuring and Dissolution Act 2018, the Limited Liability Partnerships Act 2005, the Limited Partnerships Act 2008 and the Variable Capital Companies Act 2018.
MAS Proposes to Impose Minimum Interest Coverage on All REITs
On 24th July 2024, the Monetary Authority of Singapore (MAS) has published a consultation paper to subject all REITs to a minimum interest coverage ratio (ICR) threshold of 1.5 times and an aggregate leverage limit of 50%, as it simplifies leverage requirements for the sector.
MAS proposes that a minimum ICR of 1.5 times apply to all REITs. This underscores the responsibility of REIT managers in ensuring that REITs can adequately meet their interest payments. The proposed threshold is set at 1.5 times as it will now be applied at all times to all REITs. Currently, the ICR requirement of 2.5 times is to be met only by REITs which intend to increase their aggregate leverage from 45% to 50%.
The ICR and aggregate leverage work complementarily to indicate a REIT’s financial strength. To simplify the requirements, MAS proposes that a single aggregate leverage limit of 50% apply to all REITs going forward. A leverage limit of 50%, together with the ICR floor, will continue to foster prudent borrowing by REITs.
To provide investors with information on how a REIT’s credit profile could be affected by changes in market conditions, MAS proposes that REITs perform and disclose sensitivity analyses on the impact of changes in EBITDA and interest rates on REITs’ ICRs. This disclosure is to be made in their interim financial results and annual reports.
Introduction of the India International Arbitration Centre (Conduct of Micro and Small Enterprises Arbitration) Regulations, 2024:
In pursuance of the India International Arbitration Centre Act, 2019 and with the approval of the Central Government, the India International Arbitration Centre issued India International Arbitration Centre (Conduct of Micro and Small Enterprises Arbitration) Regulations, 2024 effective from 04 June 2024 (“Regulations”).
The Regulations provide the manner in which the arbitration proceedings will be conducted when a dispute is referred to under the Micro, Small and Medium Enterprises Development Act, 2006, for micro and small enterprises. Such disputes will be resolved in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and the said Regulations.
The Regulations set out procedural requirements such as the appointment of a sole arbitrator, place and seat of arbitration; filing statements of claims, defense and counterclaims; fast track resolution process; interim measures by the arbitral tribunal; and manner of granting the award.
