Extraordinary Situation Ordinary Provisions!

“The problem with experts is that they do not know what they do not know.”

— Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable

COVID-19 Corona Virus pandemic, the Black Swan event! The whole world has been swept by the Corona Virus. The extraordinary situation has arisen. The sudden closure of small and large economies across the globe is an unprecedented event. Virtually the whole world is under lockdown. The restrictions on mobility, fall in income and absence any kind of activity will result into contraction of demand. The rate of unemployment, in most of the developed countries, is spiked at decades high. We are going to witness the worst recession post Great Depression. One after another, Governments of developed nations are coming up with massive stimulus packages to keep the economy on track. They are even differing tax payments by their citizens without any additional burden of interest to leave liquidity in their hands. For policy makers, now priority is revival of the economy rather than controlling inflation and managing deficits.

Indian policy makers are no exception to the above. Government of India has taken conscious call of placing the life over livelihood by taking early on decision of nationwide lockdown. During the virulent times, the Government’s priority has been public health over the economy. The whole of India is under the lockdown for 40+ days. This has given rise to various socio-economic problems. At this juncture the world economies are contracting and International Agencies have reduced India’s GDP projection to less than half in the span of two months.

Sensing the tax and regulatory issues, the Finance Minister has announced relief measures by way of press release dated
24-03-2020. Post issue of press release all India lockdown was ordered. On 31st March 2020, the Government of India promulgated the Ordinance “The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020”. The Ordinance acknowledges the fact that it has been promulgated in the wake breakout of pandemic COVID-19 across many countries of the world including India, which is causing loss of life and livelihoods of people. Hence, it has become imperative to relax certain provisions, including the extension of the time limit, in the taxation and other laws. Government has been swift in announcing measures. But certain decisions of the establishment expose their myopic vision. I am reminded of the lines from Nassim Nicholas Taleb’s book The Black Swan: The Impact of the Highly Improbable, “Why do we, scientists or non-scientists, hotshots or regular Joes, tend to see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the possible significant large events, in spite of the obvious evidence of their huge influence?” Besides Ordinance various circulars/notification relaxing the provisions has also been issued.

In this article I would be covering direct tax relaxation and relaxation under Companies Act.

PART A – Direct Taxes

Before I move to the provision of Ordinance, I would deal with 2 decisions of the Supreme Court relevant to the subject.

  1. Allahabad High Court in case of Darpan Sahu v. State Of U.P. & Others1 has on account of pandemic disease of Corona Virus (COVID-19), had held that “All the recovery proceedings at the end of the district administration, financial institutions and other administrative bodies/authorities/agencies and otherwise at the end of the instrumentalities of the State shall be deferred for two weeks i.e. till 6.4.2020.” It has also granted a stay on auction, eviction demolition etc. Similar decision was given by the Kerala High Court in case of P. D. Sunny2.

    Against above mentioned both the decisions, the Central Government has moved before the Supreme Court3. Before Supreme Court, it took a stand, that the Government of India is fully conscious of the prevailing situation and would itself evolve a proper mechanism to assuage concerns and hardships of everyone. Considering the stand taken by the Government of India, the Supreme Court has granted stay against both rulings on 20/03/2020.

  2. Supreme Court considering situation arising out of the challenge faced by the country on account of COVID-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings has suo moto in ReCognizance for Extension of Limitation4has extended the period of limitation on 3/03/2020. It held that the period of limitation in all such proceedings, irrespective of the limitation prescribed under the general law or Special Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order/s to be passed by the Supreme Court in present proceedings. Said order was passed by the Supreme Court under Article 142 read with Article 141 of the Constitution of India and it declared that this order is a binding order within the meaning of Article 141 on all Courts/Tribunals and authorities.

    The Hon’ble Supreme Court in the above mentioned order at para 1 has referred to “petitions/applications/suits/appeals/all other proceedings”. Thus Supreme Court covered not only “petitions/applications/suits/appeals” but also “all other proceedings”. Further, under para 3 it stated that its order is binding on “Courts/Tribunals and authorities”. Thus Supreme Court Order is not only binding to the “Courts/Tribunals” but also on “authorities”. The authorities may also include tax officers.

    Article 142(1) empowers the Supreme Court to pass such decree or make such order as is necessary for doing complete justice in any cause. Further, any decree so passed or order so made shall be enforceable throughout India until Legislature acts upon the same5. The power under Article 142 has been granted to Supreme Court to issue necessary directions to fill the vacuum till such time the legislature steps in to cover the gap or the executive discharges its role6.

    An order which Supreme Court can make to do complete justice between the parties, must not only be consistent with the fundamental rights guaranteed by the Constitution, but it cannot even be inconsistent with the substantive provisions of the relevant statutory laws7. Indeed, these constitutional powers cannot, in any way, be controlled by any statutory provisions but at the same time these powers are not meant to be exercised when their exercise may come directly in conflict with what has been expressly provided for in a statute dealing expressly with the subject8.

    On promulgation of the Ordinance suo motto Supreme Court Order may seize to apply in some cases. Supreme Court Order provided relief w.e.f. from 15.03.2020 but ordinance has provided relief only in respect from the period commencing from 20.03.2020. Hence relief may be available for the period between 15.03.2020 and 20.03.2020 as per the Supreme Court Order. Further, in case extra-ordinary situation persists beyond the 29-06-2020 and no further necessary relief provided above ruling would not only help the taxpayers but also the tax officers.

The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020

The Ordinance generally relaxes or extend due dates in respect of anytime limit has been specified in, or prescribed or notified under, the specified Act for the completion or compliance of action which falls during the period between 20 March 2020 and 29 June 2020 to 30 June 2020 or in case such other date after the 29 June 2020 the Central Government has authorised to relax compliance by such date as may be notified, specify in this behalf. The Specified Act means

(i) the Wealth-tax Act, 1957;

(ii) the Income-tax Act, 1961;

(iii) the Prohibition of Benami Property Transactions Act, 1988;

(iv) Chapter VII of the Finance (No. 2) Act, 2004;

(v) Chapter VII of the Finance Act, 2013;

(vi) the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015;

(vii) Chapter VIII of the Finance Act, 2016; or

(viii) the Direct Tax Vivad se Vishwas Act, 2020

Broadly relaxation in dates are enumerated under:

Particulars

Current due date

Extended due date

Remarks

Filing of Belated / Revised Return of Income for FY 2018-19

31/03/2020

30/06/2020

Due date extended for filing belated returns u/s 139(4) as well as revised return u/s 139(5) for FY 2018-2019

Payment of Advance Tax, Self-Assessment Tax, Regular Tax for payments due between 20/03/2020 to 29/06/2020

31/03/2020

30/06/2020

Taxes paid after the original due date but on or before revised due date shall be subject to interest (e.g. u/s 234B) at the rate of 0.75% for the month or part thereof instead of 1%*. No penalty shall be levied or prosecution shall be sanction for such delay in payment.

Payment of TDS for the month of:

  

30/06/2020

TDS paid after the original due date but on or before revised due date shall be subject to interest at the reduced rate of 0.75% for the month or part thereof instead of 1.5%*. No penalty shall be levied or prosecution shall be sanctioned for such delay in payment.

i) March 2020

(i) 30/04/2020

ii) April 2020

(ii) 07/05/2020

Filing of 15G/H for FY 2020-2021

07/04/2020

30/06/2020

If valid Forms 15G/H were submitted for FY 2019-2020, then the validity period of such forms is extended up to 30/06/2020

For the quarter ended 31st March 2020, filing of:

  

30/06/2020

  

(i) TDS Returns in Form 24Q/26Q

i) 31/05/2020

(ii) TCS Statement u/s 206C r.w.r. 31AA

ii) 15/05/2020

Filing of TDS Returns in Form 26QB/QC/QD for the months of:

  

30/06/2020

  

i) February 2020

i) 30/03/3030

ii) March 2020

ii) 30/04/2020

iii) April 2020

iii) 30/05/2020

For the quarter ended 31st March 2020, issue of:

  

30/06/2020

  

(i) TDS Certificates in Form 16 in respect of tax deducted from salary for FY 2019-20 / in respect of tax deducted other than salary in Form 16A

(i) 15/06/2020

(ii) Issue of TCS certificate u/s 206C r.w.r. 37D

(ii) 30/05/2020

    

Issue of TDS certificate in Form 16B/16C/16D in respect of payments made for the transfer of immovable property u/s 194-IA, Payment of rent by individual/HUF u/s 194-IB, Payment of other sums by individual/HUF u/s 194M for the month of:

  

30/06/2020

  

i) March 2020

i) 15/05/2020

ii) April 2020

ii) 14/06/2020

Furnishing of Form 24G u/s 206C r.w.r. 37CA & u/s 192(1A) r.w.r. 20 by an office of the Government for the month of

  

30/06/2020

  

i) March 2020

i) 30/04/2020

ii) April 2020

ii) 15/05/2020

iii) May 2020

iii) 15/06/2020

Due date to send the intimation for processing of statement of TDS u/s 200A/ TCS u/s 206CB filed during the FY 2018-19

31/03/2020

30/06/2020

  

Payments under Chapter VI-A under heading B (Section 80C to Section 80GGC), i.e. various Tax Saving Instruments u/s. 80C, medical insurance u/s. 80D, donations u/s. 80G

31/03/2020

30/06/2020

One will have to ensure that the same deduction is not claimed twice for FY 2019- 20 as well as for FY 2020-21.

However, the taxpayer has the option either to claim in FY 2019-20 or FY 2020-21

Investments / payments construction purchase u/s. 54 to 54GB for claiming Long Term Capital Gains Exemption for the FY 2019-20

Due dates fall between 20.03.2020 and 29.06.2020

30/06/2020

In case due date falls after 29.06.2020 Central Government is authorised to notify such other date for completion or compliance

Linking of PAN with Aadhar Number u/s 139AA

31/03/2020

30/06/2020

However, no corresponding amendment has been made to section 139AA r.w.r. 114AAA non Aadhar linked PAN would be treated as invalid, current due date remains 31.03.2020.

Application of new PAN on triggering of specified events or holding positions like being director etc. of a specified person referred in rule 114(3)(v)

31/05/2020

30/06/2020

  

Commencement of manufacturing/ production or providing any services by SEZ units for claiming deduction u/s.10AA

31/03/2020

30/06/2020

Letter of approval issued under the provisions of the Special Economic Zones Act 2005 should have been issued on or before 31/03/2020.

Seems no relaxation has been provided where the later of approval could not be issued before 31/3/2020 due to lockdown.

Availing Vivad se Vishwas Scheme without paying 10% additional liability

31/03/2020

30/06/2020

Post 30/06/2020 taxpayer can avail the settlement of the dispute on payment of a specified rate of disputed tax along with an additional 10%

Completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval, by any authority, commissioner or tribunal

Any date falling within the specified period between 20.03.2020 and 29.06.2020

30/06/2020

This would cover various cases e.g.

(i) Issuing an intimation u/s 143(1) after processing of return of income, in respect of the return is filed:

a) During FY 2018-19 under section 139;

b) During FY 2018-19 in response to a notice issued under section 142(1)

(ii) Time-limit to issue a reassessment notice u/s 149 for the:
     

a) Income escaped is less than Rs. 1 lakh for AY 2015-16

b) Income escaped is more than Rs. 1 lakh for AY 2013-14

c) Income escaped is related to any foreign asset (including financial interest) for AY 2003-04

d) To a person who has been treated as an agent of a non-resident under section 163 for AY 2013-14

Filing of any reply or application or furnishing of any report, document, return, statement or such other record

falling within the specified period between 20.03.2020 and 29.06.2020

30/06/2020

The time limit for submission to be made under scrutiny assessment proceedings, revision application, rectification application etc. gets extended

Filing of appeals against any assessment / appellate order under Income Tax Act 1961 before the CIT(A)/ITAT

Within 30/60 days of receipt of order

30/06/2020

  

Furnishing of Statement of Financial Transactions (SFT) for the Financial Year 2019-20

31/05/2020

30/06/2020

  

* Period of delay means the period between the due date and the actual date of payment. Reduced interest rate is applicable only for payments made up to 30th June 2020. Original rates shall apply for any made payments made after 1st July 2020 even for the tax period, payments of which are due between 20th March 2020 and 29th June 2020. In other words, a lower rate of interest would not be applicable in case of delay in payment has occurred before March 20, 2020 and after June 30, 2020.

The due date for payment of TDS for payments made or provided during March 2020 falls on 30 April 2020 and during this period there is extended lockdown. Considering the instruction of lockdown by the Government of India and also that State Government, taxpayers would face practical difficulties to pay tax as on 30 April 2020 and failure to pay the tax they would be liable to pay interest. E.g. TDS in respect of contract payment is paid on 4th May 2020 i.e. estimated date of release for lockdown. In the instant case, there is a delay of 4 days and that to on account of lockdown. The assessee would be subject to paying interest for 3 months. Is this justified? Lex not cogit ad impossibila which means that law does not compel a man to do that which he cannot possibly perform. However mandatory the provision may be, where it is impossible of compliance that would be a sufficient excuse for non-compliance, particularly when it is a question of the time factor9. The other similarly recognized legal maxims are “Impotentia Excusat Legim” and “neon tenatur ad impossibilia.” Where the law creates a duty or charge and the party is disabled to perform it, without any default in him and has no remedy over it, there the law will in general excuse him. The maxim of law impotentia excusat legam is intimately connected with another maxim of law lex non cogit ad impossibilia. Therefore, when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the persons interested had no control, like the act of God, the circumstances will be taken as a valid excuse. Where the act of God prevents the compliance of the words of a statute, the statutory provision is not denuded of its mandatory character because of supervening impossibility caused by the act of God10. Where parties are prevented from doing a thing in a particular day, not by any act of their own, but by the act of the Government or other they are entitled to do it at the first subsequent opportunity, then taxpayer should not be subject to any penal provision11.

Issue of certificates for lower/Nil TDS deduction/collection (TCS) u/s. 195, 197 and 206C(9) Considering the hardship caused to the taxpayers and constraints faced by the tax officer CBDT has extended benefit of earlier issued NIL/lower deduction certificates and has issued instructions u/s 119(1)12

Particulars

Current due date

Extended due date

Remarks

For applications already filed for FY 2019-2020 but not disposed of till 31/03/2020

  

30/06/2020 or disposal date, whichever is earlier

The applicant has to intimate the concerned Assessing Officer (AO) vide an email along with the documents and evidence of applying. AO has to dispose of the applications by 27/04/2020 and communicate the issuance/rejection vide email to the applicant.∑

For applications already filed for FY 2020-2021 but not disposed till 31/03/2020 and assessee is having lower/Nil deduction certificate for FY 2019-20

  

The validity of a certificate issued for FY 2019-20 shall extend till 30/06/2020 or disposal date, whichever is earlier3

  

For those who could not apply for lower /Nil deduction of TDS/TCS for FY 2020-2021 and assessee is having lower/Nil deduction certificate for FY 2019-20

  

The validity of a certificate issued for FY 2019-20 shall extend till 30/06/2020

Subject to the condition that application to be filed at the earliest as soon as normalcy is restored or 30/06/2020, whichever is earlier∞∞

For those who could not apply for lower /Nil deduction of TDS/TCS for FY 2020-2021 and assessee is not having lower/Nil deduction certificate for FY 2019-20

  

–

The modified procedure introduced: Assessee shall apply to vide an email addressed to the concerned Assessing Officer (AO). The email shall contain filled Form 13, projected financials of FY 2020-2021, provisional financials of FY 2019-2020, financials and ITR of FY 2018-2019, Form 26 AS for FY 2018-19 & 2019-2020. The AO shall issue the certificate on or before 30/06/2020 and communicate the same vide email to the applicant.

On payment to Non-Residents incl. Foreign Companies, having PE in India and not having lower deduction certificates for FY 2019-20

  

–

Tax to be deducted @ 10% including surcharge and cess on payments made till 30/06/2020 for FY 2020-2021 or disposal date, whichever is earlier

∑ The certificate issued shall be applicable for the amounts credited/debited after the date of making application u/s. 195, 197 and 206C(9) during the FY 2019-2020 but is unpaid/not received till the date of issuance by the AO.

∞ (i) For certificates valid for a particular period during FY 2019-20, the same shall also be valid for a further period from 01/04/2020 to 30/06/2020. For example, if the certificate for lower/Nil TDS was issued for the period 01/10/2019 to 15/12/2019 for the FY 2019-2020, then the same shall also be valid for the period from 01/04/2020 to 30/06/2020 for the FY 2020-2021.

(ii) The threshold limit/transaction limit mentioned in the certificate issued for FY 2019-2020 will be taken fresh for the period from 01/04/2020 to 30/06/2020 for FY 2020-2021and the amount shall be same as assigned for the certificate for FY 2019-2020.

(iii) In case the taxpayer had a certificate for the lower deduction for FY 2019-2020 and application has been made for FY 2020-2021 for a new TAN different from that for which the certificate issued in FY 2019-2020 or where the rates mentioned in the lower/Nil TDS certificate issued for FY 2019-2020 are higher and the taxpayer wants a revision/reduction in the rates, the relaxation provided shall not be applicable and the taxpayer shall have to apply afresh as per the procedure mentioned in the order.

Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund

Considering pandemic a new fund has come up with Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND). This fund has been inserted in section 10(23C)(i) and 80G(2)(a)(iiia) along with Prime Minister’s National Relief Fund and thus the person contributing under the said fund would be eligible for 100% deduction of the contribution made. Further various employees of the government and other organizations have contributed their part of salary to PM Cares Fund through their employer. The contribution is not made directly by such employees. In cases where donation is made to the Fund by an employee through his/her employer, the Fund will not issue a separate certificate to every such employee in respect of the donation so made, as the contributions made to the Fund are in the form of a consolidated payment. The CBDT has clarified13 that the deduction in respect of such donations will be admissible u/s 80G of the Act based on the Form 16/Certificate issued by the Drawing and Disbursing Officer (DDO)/Employer in this regard. Various organization/institutions are also approaching to various people for gathering donation for PM CARES Fund. Issue may arise with respect to deduction u/s 80G for the person who contribute to such institution and who in turn would contribute to PM CARES Fund. In the records of PM CARES Funds individual names may not be available and Fund would not issue receipt in the name of such individual persons.

Further the contribution to PM CARES FUND & State Disaster Management Authorities to tackle COVID-19 qualifies as Corporate Social Responsibility expenditure. Hence such contribution will not be allowed as deduction while computing taxable income. It was also clarified that the contribution to ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ not be admissible as CSR expenditure. Hence any contribution to ‘Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ may be eligible as deduction while computing taxable income.

Cash System of Accounting

Assessee following cash system of accounting can claim a deduction of expenses which has been actually paid during the year and only such income would be taxed during the year which has been actually received. Many of the assessees are following cash system of accounting, especially professionals. Due to the lockdown, planned expenditure could not have been paid by the close of the financial year. The ordinance has not provided any new relief to the assessees who are following cash system of accounting. Expenditure paid post 31/03/2020 cannot be claimed as deduction during FY 2019-20, while following cash system of accounting.

The issue may arise whether any sums as referred u/s 43B paid after 31/03/2020 but before the due date of filing return of income can be claimed as deduction under section 43B by an assessee following cash basis of accounting? The provision of section 43B is overriding and applies to sums specified therein irrespective of the method of accounting followed by the assessee. In respect of payment of tax as referred u/s section 43B(a), Explanation 2 states that “any sum payable” means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. Explanation 2 and proviso 1 under Section 43B conferred a privilege on the assessee irrespective of the method of accounting followed by him. The privilege thus available under these provisions can as well come to the rescue of the assessee even though he maintains his accounts on a cash basis. In the case of ITO v. B V Reddy 44 ITD 682 (Hyd), it was held that when assessee following cash system of accounting and paid sales tax outside the accounting year but before the due date of filing of return of Income, deduction of such taxes can be claimed by the taxpayer.

During the virulent times’, the clamour for tax relief measures is getting louder and louder. Government measure should provide a stage for economic recovery. The regulator should work with foresight. In the end, I would like to close with the “our world is dominated by the extreme, the unknown, and the very improbable (improbable according to our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This”― Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable.

Part B

Relaxation relating to Companies Act due to COVID 19

Companies Affirmation of Readiness towards COVID-19

With the breakout of COVID-19 Ministry of Corporate Affairs have come up with an Advisory on Prevention measures to contain the spread of COVID- 19. To generate greater awareness and confidence on the state of readiness, the Ministry of Corporate Affair has deployed obnoxious form Companies Affirmation of Readiness towards COVID-19 Form. This form was to be filed by an authorised signatory (Director/ Partner) of Companies and LLP’s. Further, Companies and LLP’s were requested to report compliance using the web service w.e.f 23rd March till 30th March. Compliance was required to be made during the lockdown period. Subsequently, it was clarified that as such no penalty or enforcement-related action is applicable. The web service Company Affirmation of Readiness towards COVID-19 has been discontinued w.e.f. 14th April 2020.

Companies Fresh Start Scheme

General Circular No. 11/2020 dt. 24/03/2020 issued stating that no additional fees shall be charged for late filing during a moratorium period from 01st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date. COVID-19 has provided the opportunity for the Companies /LLP to file old pending document and have a fresh start. Subsequently on 30/03/2020 MCA unveiled the scheme Companies Fresh Start Scheme 2020 (CFSS) Circular No. 12/2020.

CFSS applies to the Defaulting Company which has made a default in filing of any of the documents, statement, returns, etc. e.g.

  • Annual statutory documents (AOC-4 & MGT- 7)

  • Return of allotment (PAS-3)

  • Filing of resolution /agreements (MGT-14)

  • Appointment of Auditor (ADT-1)

  • Declaration of commencement of business (INC-20A)

  • Active Company (INC 22A)

on the MCA-21 registry on due time. It shall commenced from April 01, 2020 and end on September 30, 2020. During this period Defaulting Company is permitted to file all belated documents which were due for filing without any additional fees. Filing of various forms under MCA is event base. CFSS does not extends due date for filing such forms. It merely allows to submit form without payment of additional fees.

The scheme shall not be applicable in the following cases:

  • Action for striking-off has already been initiated by the Designated Authority;

  • Application (STK-2) for strike off of Company with ROC has been filed by the companies;

  • Companies which have amalgamated as per the provision of law;

  • Companies which has applied u/s 455 for obtaining dormant status;

  • Vanishing Companies;

  • Where an increase in authorized capital is involved (Form SH-7) and all charge related documents (CHG-1, CHG-4, CHG-8 and CHG-9);

Immunity from prosecution:

After filing of the pending forms (making default good) and where forms are taken on record or approved by an appropriate authority, defaulting company within 6 months is required to file Form CFSS 2020. Based on the filing of Form CFSS 2020 designated authority shall grant immunity from prosecution.

However in case the Defaulting Company or its officer in default has filed any appeal against any notice issued or complaint filed or any order passed by Court or by an adjudicating authority, an application in Form CFSS 2020 can be filed only after submission of proof for withdrawal of such appeal.

No application for immunity can be filed –

  • where any appeal is pending before the court of law

  • in case of management disputes of the company pending before any court of law or tribunal;

  • in case any court has ordered conviction in any matter or an order imposing penalty has been passed by an adjudicating authority under the Act and no appeal has been preferred against such order

Immunity will be provided to defaulting companies only concerning the belated filings by waiving off additional fees. However where proceedings involving the interest of any shareholder or its director, or key managerial person or any other person belonging to the company than immunity shall not be provided e.g. as per Section 42(8) of Companies Act 2013 every company is required to file PAS-3 – Return of allotment within a specified period. Section 42(4) also provides that utilization of money raised through private placement shall not be made unless the return of allotment is filed. Immunity under CFSS will only be related to delay the filing of return of allotment and not concerning the utilization of money raised through private placement before the filing of return.

Temporary halt on the prosecution

In the matters where penalties were imposed by an adjudicating officer due to delayed filing, and no appeal has been made before the Regional Director then

(i) If the due date for filing the appeal falls between March 01 and May 31, 2020, an additional 120 days shall be allowed for filing the appeal, and

(ii) During this additional period, no prosecution shall be initiated against the company or its officers, insofar as it relates to delay in filing.

Hence during this the Company can avail benefit of CFSS for delayed filing.

Scheme for Inactive Company

While applying under this CFSS the option has been provided to the companies to apply for Dormant Status or Strike off by paying fees which is applicable on respective Forms.

DIN Holders- DIR 3 KYC Form/ ACTIVE non-compliant [General Circular No. 11 dated 24th March, 2020 & General Circular No.12 dated 30th March 2020]

Issue of disqualification of directors due to non-filing of DIR3 KYC cannot be resolved by filing form under CFSS. DIN holders of DINs marked as ‘Deactivated’ due to non-filing of DIR-3KYC/DIR-3 KYC-Web and those Companies whose compliance status has been marked as “ACTIVE non-compliant” due to non-filing of Active Company Tagging Identities and Verification(ACTIVE) eform, can file respective forms without any filing fee of INR 5000/INR 10000 respectively latest by 30/09/2020

LLP Settlement Scheme 2020 [General Circular No. 6/2020 dated 04th March,2020 notified LLP Settlement Scheme 2020, General Circular No. 13/2020 dated 30th March, 2020 Modification in LLP Settlement Scheme]

Inline that of CFSS, LLP Settlement Scheme 2020 has been revised. Under the revised scheme, LLPs are allowed to file all documents which are due for filling up to 31st August 2020 by 30 September 2020. Initially, the scheme was applicable in respect of a few forms viz.

  • Form-3: Information with regard to limited liability partnership agreement and changes, if any, made therein;

  • Form-4: Notice of appointment, cessation, change in name/ address/designation of a designated partner or partner. and consent to become a partner/designated partner;

  • Form-8: Statement of Account & Solvency;

  • Form-11: Annual Return of Limited Liability Partnership.

Now it has been extended to all documents or forms which are required to be filed by the LLP as per the provisions of the LLP Act and Rules made thereunder. Accordingly, some of the other forms as mentioned under would also be covered:

  • Form-5: Notice for Change of Name.

  • Form-12: Form for intimating other address for service of documents.

  • Form-15: Notice for change of place of registered office.

  • Form-22: Notice of intimation of Order of Court/ Tribunal/CLB/ Central Government to the Registrar

  • Form-23: Application for direction to Limited Liability Partnership (LLP) to change its name to the Registrar.

  • Form-29: Notice of (A) alteration in the certificate of incorporation or registration; (B) alteration in names and addresses of any of the persons authorized to accept service on behalf of a foreign limited liability partnership (FLLP) (C) alteration in the principal place of business in India of FLLP (D) cessation to have a place of business in India

VARIOUS OTHER RELAXATIONS

Various other relaxations are announced by the Ministry of Companies Affairs by General Circular No. 11/2020 dt. 24/03/2020

  1. Interval between 2 board meetings: As per the provisions of Companies Act, the interval between two board meetings cannot exceed 120 days. The time limit has been relaxed by providing an additional 60 days till next two quarters i.e., till 30th September 2020. Hence now during the prescribed period gap between two board meetings can be up to 180 days.

  2. CARO 2020: New Companies (Auditor’s Report) Order, 2020 was issued and it was made applicable from the financial year 2019-20. Now Companies (Auditor’s Report) Order, 2020 would be applicable from the financial year 2020-2021 instead of from 2019-2020.

  3. Meeting of Independent Directors: As per Schedule 4 to the Companies Act, 2013, Independent Directors (ID) are required to hold at least one meeting without the attendance of non-independent directors and members of management. For the year 2019-20, if the IDs of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.

  4. Deposit reserve: The requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 is allowed to be complied with till 30th June 2020.

  5. Specified Investments: The requirement to invest 15% of debentures maturing during a particular year in specified instruments before 30th April 2020, may be done before 30th June 2020.

  6. Commencement of Business: Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months has been allowed to file a declaration.

  7. Resident Director: As per the provisions of section 149 every company shall have at least one director who stays in India for a total period of not less than 182 days during the financial year. Non-compliance of minimum residency in India for at least 182 days by at least one director of every company, shall not be treated as a violation.

Corporate Social Responsibility

The funds spent on measures to combat the COVID-19 outbreak will be counted towards Corporate Social Responsibility (CSR). Accordingly, it was then clarified that corporate donations to PM-CARES will qualify as CSR expenditure. But it was also clarified that the contribution to “Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not be admissible as CSR expenditure. However, the contributions made to State Disaster Management Authorities to tackle COVID-19 will qualify as CSR expenditure.

Further, it was also clarified that payment of salary and wages to the employees and workers (including contract labour/ temporary/ casual/ daily wage workers) of the organization during the lockdown period will not be considered as expenditure eligible for CSR. But in case any ex-gratia payment made over and above the disbursement of wages to temporary/casual workers/daily wage workers, specifically to fight COVID-19, will be considered as CSR expenditure. This is subject to an explicit assertion by the board of the company and certified by the statutory auditor.

Board Meetings

To overcome the outbreak of the coronavirus the requirement of holding Board meetings with the physical presence of directors under section 173 (2) r.w.r. rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 for approval of the annual financial statements, Board’s report, approval of prospectus, audit committee meeting for consideration of financial statements, approval of amalgamation merger demerger, acquisition and takeover was relaxed. Such meetings can be held through video conferencing or other audiovisual means until 30 June 2020.

General Meeting

Vide General Circular No. 14/2020 dt. 08/04/2020 clarification on the passing of an ordinary and special resolution by the companies on account of the threat posed by COVID 19. The Act does not contain any specific provision for allowing conduct of members meetings through video conferencing (VC) or other audiovisual means (OAVM). Considering the current situation where the holding off of an extraordinary general meeting (EOGM) of the company is considered unavoidable, the additional procedure has been laid for holding such meeting on or before 30.06.2020 via VC or OAVM.

Two separate procedures have been provided for the companies which are required to provide the facility of e-voting under the Act or any other company which has opted for such facility and for the companies which are not required to provide such facilities. EOGM to be held using a combination of VC and e-Voting/simplified voting through registered emails to enable companies to conduct their EOGMs. As the meetings will be conducted over VC/OAVM, the facility for the appointment of proxies has been dispensed with, while representatives of bodies corporate will continue to get appointed for participation in such meetings. All resolutions passed through this framework will be required to be filed with the RoC within 60 days, so that such resolutions may be viewed publicly. Such meeting requires the attendance of at least one independent director (where a company is required to appoint one) and auditor or his authorised representative who is qualified to be the auditor and maintenance of recorded transcripts of the EGM and, in case of a public company, such transcripts to be uploaded on the company website (if any).

Vide General Circular No. 17/2020 dt. 13/04/2020 further relaxation has been provided for the issue of notice for convening General Meeting. It provides that notice of EGMs to be held through VC/OAVM (and for passing shareholder resolutions through postal ballot/ e-voting) may now be given to shareholders only through email addresses of the shareholders registered with the company or with the depository participant/ depository. Other safeguards have also been included in the Circular to ensure transparency, accountability and protection of interests of investors.

Ministry of Companies has provided relief on identified issues. However various practical issues may arise. E.g. Companies following December as financial year ending are required to hold their Annual General Meeting (AGM) by 30 June 2020. Possibility of holding AGM by that date may not be possible under current scenario. Act also provides gap been 2 AGMS. There is no relaxation in holding AGM. Companies may be required to file application for extensions in holding AGM.

Conclusion

All the amendments have been made on the conjecture that life will return to a normal in a couple of months. However, the writing on the wall is get ready for a long haul. Normalcy, in near future is a mirage. Microbe has become more deadly than an atom bomb. Suddenly, we slept in one world and woke up in another. Old normal like handshake, hugs, physically meeting people are no longer normal. Social distancing and virtual meetings, virtual education classes have swept the wave. We have being paying huge premium for physical meeting in form of time and costs than virtual meeting using technology, for physical education classes and training than that for virtual classes. Let’s see what’s in store for tomorrow!

The author acknowledges with thanks the assistance and support offered by CA Prity Dharod and CS Prachi Shah for this article.

  1. Writ – C No. – 7014 of 2020 order dt. 18.3.2020

  2. Writ Petition (Civil) No. 8231 of 2020 order dt. 19.03.2020

  3. Special Leave Petition (Civil) Diary No(s). 10669/2020 Order dt. 20.03.2020

  4. Suo Motu Writ Petition (Civil) No(s).3/2020 order dt. 23.03.2020

  5. Article 142. Enforcement of decrees and orders of Supreme Court and orders as to discovery, etc.-

    (1) The Supreme Court in the exercise of its jurisdiction may pass such decree or make such order as is necessary for doing complete justice in any cause or matter pending before it, and any decree so passed or order so made shall be enforceable throughout the territory of India in such manner as may be prescribed by or under any law made by Parliament and, until provision in that behalf is so made, in such manner as the President may by order prescribe.

  6. Vineet Narain v. Union of India, (1998) 1 SCC 226, para 51

  7. Prem Chand v. Excise Commr., U.P. AIR 1963 SC 996 at p. 1002, para 12

  8. Supreme Court Bar Assn. v. Union of India, (1998) 4 SCC 409, SCC p. 432, para 48

  9. State Of Rajasthan & Anr vs. Shamsher Singh 1985 AIR 1082 SC

  10. Board of Control for Cricket India vs. Netaji Cricket Club & Ors Appeal (Civil)237-239 of 2005 SC Order dt. 10/01/2005; The Inter College vs The State Of U.P. Order Dt. 6.01.2006

  11. Reliance van be placed on Sambasiva Chari vs. Ramaswami Reddi (1898) 8 MLJ 265 (Madras)

  12. F. No. 275/25/2020-IT(B) dt. 31/03/2020

  13. F. No. 178/7/2020-ITA-I dt 9/04/2020

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