A. Key Income-Tax Updates
1. Angel Tax exemption
January 31, 2019 : CBDT: ‘Angel tax’ exemption granted vide notification dated May 24, 2018 has modified pursuant to revised DIPP notification dated January 16, 2019. As per the modified notification, provisions of Sec. 56(2)(viib) of the Act shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares, if such issue of shares is approved by the CBDT under modified para 4(3) of DIPP notification of January, 2019. This notification shall be deemed to have come into force retrospectively from the 16th January, 2019.
2. Definition of start-ups widened and conditions for exemption from “angel tax”amended
February 19, 2019 : DIPP: The definition of start-ups has been expanded. Further, the conditions for claiming exemption under section 56(2)(viib) of the Income-tax Act, 1961 for start-ups has been amended. The notification is issued in supersession of the previous notifications dated 11 April, 2018 and 16 January, 2019.
3. HC rules that a Trust is “revocable” in case contributions are revocable, and the income of such Trust should be taxable in the hands of the contributors
May 18, 2019 : High Court: Madras High Court dismissed the Revenue’s appeal and held that in case the funds transferred by the contributors to the Trust were revocable, section 62(2) read with section 61(1) of the Income Tax Act, 1961 (the Act) would become applicable. Accordingly, the income of such Trust should be taxable in the hands of the contributors and not in the hands of the Trust. The HC, in its decision, further noted that section 164 of the Act does not apply, as the contributors, their respective shares and the extent of their beneficial interest in the Trust are identifiable.
4. Non-allowability of set-off of losses against the deemed income under section 115BBE prior to AY 2017-18
June 14, 2019: CBDT: In order to remove any ambiguity of interpretation, it is clarified that since the term ‘or set-off of any loss’ was specifically inserted by the Finance Act, 2016, with effect from 1 April 2017, the taxpayer is entitled to claim set-off of loss against the income referred under section 115BBE of the Income-Tax Act, 1961 till the AY 2016-17.
B. Key Indian Regulatory Updates
1. Relaxation from requirement to furnish a copy of PAN for transfer of equity shares of listed entities executed by non-residents
February 11, 2019 : SEBI: In order to address the difficulties faced by non-resident investors (such as NRIs, PIOs, OCIs and foreign nationals), it has been decided to grant relaxation to non-residents from the requirement to furnish PAN and permit them to transfer equity shares held by them in listed entities to their immediate relatives subject to conditions prescribed.
2. Transfer of securities held in physical mode – clarification
March 27, 2019 : SEBI: Certain clarification has been issued with respect to transfer of securities held in physical mode:
1. The above decision does not prohibit the investor from holding the shares in physical form; investor has the option of holding shares in physical form even after April 01, 2019.
2. Any investor who is desirous of transferring shares (which are held in physical form) after April 01, 2019 can do so only after the shares are dematerialized.
3. The transfer deed(s) once lodged prior to deadline and returned due to deficiency in the document may be re-lodged for transfer even after the deadline of April 01, 2019.
3. Informal Guidance in the matter of VCF JM Financial India Fund
May 2, 2019 : RBI: In the said informal guidance note, it has been clarified by SEBI that VCFs may invest unutilised funds of investable fund in the units of liquid mutual funds or bank deposits or other liquid assets of higher quality such as treasury bills, commercial papers, etc. during the term specified in the private placement memorandum.
4. Consultation Paper on Innovators Growth Platform (IGP)
May 20, 2019 : SEBI: SEBI has floated a consultation paper on norms for startups listed on IGP, to trade under regular category of main board of stock exchanges. Some of the key proposals are as under:
• The regulator proposed that the companies listed on IGP, wanting to list on the mainboard, should complete at least one year of listing on the former platform, and should have minimum 200 shareholders.
• The company, its promoters or directors should not have been debarred from accessing the capital markets, and should not have been a willful defaulter or fugitive economic offender.
• Minimum promoters’ contribution will be 20 per cent of the total capital, and if there is shortfall, it can be made up to 10 per cent through contribution from alternative investment funds (AIFs), foreign venture capital investors, commercial banks, public financial institutions or insurance companies. Such capital shall be locked for a period of 3 years.
5. Discussion paper on review of buy-back of securities
May 22, 2019 : SEBI: SEBI has issued discussion paper to seek comments / views from the public on suggestions relating to review of conditions for buy-back of securities. The issue raised is whether SEBI should consider different approach or similar approach if the subsidiaries of a listed company proposing buybacks are NBFCs, HFCs and Infrastructure companies.
6. SEBI signs MoU with Ministry of Corporate Affairs (MCA)
June 7, 2019 : SEBI: SEBI has signed a MoU with MCA for data exchange between the two regulatory organizations. It will enable sharing of specific information such as details of suspended companies, delisted companies, shareholding pattern from SEBI and financial statements filed with the Registrar by corporates, returns of allotment of shares, audit reports relating to corporates. The MoU will ensure that both MCA and SEBI have seamless linkage for regulatory purposes.
7. Annual Return on Foreign Liabilities and Assets
June 28, 2019 : RBI: RBI has operationalized a web-based system online reporting portal – Foreign Liabilities and Assets Information Reporting (FLAIR) system for submission of foreign liabilities and assets (FLA) return by 15 July of every year, to enhance the security-level in data submission and improve data quality. This replaces the present email-based reporting system for submission of FLA return. Further, the circular has now specifically mentioned AIFs and Investment Vehicles as reporting entities required to file FLA return.