Impact of opening LLP route for Chartered Accountants

Recent Changes

Pre-amendmend Legal Position

As per section 2(7)(c) of the Companies Act 1956, the Central Government may by notification, notify that a Body Corporate, will not be recognized as Body Corporate for the purpose of the Companies Act 1956.

The text of section is given below:
s. 2(7)  “body corporate” or “corporation” includes a company incorporated outside India but does not include—
(a)  a corporation sole ;
(b)  a co-operative society registered under any law relating to co-operative societies ; and
(c)  any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;

On the other hand, Section 226 (3) of the Companies Act 1956 provides for the disqualification for appointment of auditor of a company and as per clause (a) of this sub section, a body corporate cannot be appointed as Auditor

Notifications by MCA

MCA vide its notification dated 23-5-2011, has, in exercise of its powers under 2(7)(c) of the Companies Act 1956,notified that LLP, which is  a Body Corporate as per the Limited Liability Partnership Act 2008, shall not be treated as Body Corporate, for the purpose of section 226(3)(a) of the Companies Act 1956,

Thus MCA by its aforesaid notification has taken LLP out of the purview of the Body Corporate under this sub section and therefore, LLP can be appointed as the Auditor of the company.

Further MCA vide its circular no No 10/2011 dated 04/04/2011 has allowed CA/CS/CWA to practice under LLP in partnership with other fellow members of same institute and in case of CS, also with members of such recognized profession as may be prescribed.

DIRECTOR IDENTIFICATION NUMBER: RECENT CHANGES AT A GLANCE

1. MCA vide circular 5/2011 dated 4-3-11, provided that DIN application can be digitally signed by the applicant or Practicing CA/CS/ICWA or CS in Full time employment. Scanned documents required to be submitted along e-form and physical submission of documents dispensed with.           If din is signed by applicant the din shall be allotted after one or two days but if application is signed by professional din shall be immediately allotted. If false information is furnished, penal action shall be taken including professional misconduct against professional along cancellation of DIN.

2. There after vide notification dated 26-3-2011, it was mentioned that photo, proof of ID, proof of residence, verification by applicant in prescribed format shall be scanned and enclosed. It further notified the matter mentioned in circular dated 4-3-11 and further mentioned that defects shall be notified through mail and on web site and if defect is not rectified in 15 days, DIN shall be cancelled. DIN 4 to be signed by practicing CA/CS/ICWA only NO cost for DIN-4
3. There after vide circular 11/2011 dated 7-4-2011, PAN made mandatory for Indian nationals and passport made mandatory for foreign nationals and all DIN holders required to furnish PAN till 31-5-2011 if they had not earlier furnished PAN.

4.    Vide circular 32/2011 dated 31-5-2011,  furnishing of Din for PAN information extended to 30-9-2011 failing which DIN to be diabled along heavy penalty.

5. Later vide notification dated 2-6-2011 made effective from 12-6-2011, the digital sign by director dispensed with and signing by practicing CA/CS/ICWA or CS in full time employment made mandatory. For DIN-4 also full time employee CS allowed to sign DIN-4 beside PCA/PCS/PICWA

Exemption from filing ITR for Total Income up to Rs. 5 lacs

Notification dated 23-6-2011 for AY 2011-12 and Notification 9/2012 dtd 17-2-2012 for AY  2012-13

- Only Individual assessees have been exempted
- Exemption is available only for assessment year 2011-12 & 2012-13. It is not available for ITRs of AY 2010-11 which   are filed during 2011-12
- Exemption is available for total income equal to or less than rs. 5 lacs. Hence Gross total Income can exceed Rs. 5,00,000 in such cases.
- Further exemption is available only if assessee has following income only:
    a) Salary Income
    b) Saving Bank Account Interest up to Rs. 10,000
- Where assessee is having exempt income also say receipts from LIC or dividend income or interest from post office saving account (declared taxable recently) whether the exemption shall be available is not certain.

20% SURCHARGE TO BE DEPOSITED IN PMIDF (NOTIFICATION 20-6-11)

DIFFCULT WAYS OF DOING EASY THINGS

                        The state government of Punjab appears to have mastered the art of finding difficult ways of doing easy things. Gone are the days when administrators used to think not only twice but also used to invite comments by issuing draft notifications. Order of the day is first issue ordinance, then convert it into law and if people make hue and cry about it then just quash it or make it optional.

                        Continuing its vendetta with dealers in Punjab, the excise and taxation department has come out with another notification adding some more burden to already crippling trade and industry of Punjab. The notification effective from 20-06-2011, requires additional tax under section 8B under Punjab Vat Act, 2005 popularly known as surcharge @ 10%, to be bifurcated in ratio 0f 80:20, out of which 80% shall go to vat department and 20% shall go to Punjab Municipal Infrastructure Development Fund, which is a fund altogether different from Punjab Municipal Fund and Punjab Infrastructure Development Fund. This fund finds its genesis from Punjab Municipal Infrastructure Development Fund Act 2011 created on 11-04-2011 for a period of 10 years with annual commitment to contribute 200 crore.

E-DATA ENTRY OF TRANSACTIONS (NOTIFICATION 5-5-11)

                             In another move to devastate the already crippling trade and industry in state of Punjab, a public notice has been promulgated by the purists in excise and taxation department. The notification mandates that all the dealers making transactions with in state of Punjab for value exceeding more than 2 lakhs through single bill shall compulsorily upload the information on the website of Punjab government before the goods leave the premises of a dealer. In respect of deals in commodities of iron and steel, cotton bales and yarn, edible oils, timber, marble and tiles every transaction exceeding Rs. 20,000 is required to be uploaded.

                        This notification is applicable from 01-06-2011.

Comprehensive analysis of section 44AD

Context of the Section: The family of provisions on presumptive taxation applicable to residents originated as under:

Insertion by Finance Act 1994 wef. 01-04-1994 i.e. A.Y. 1994-95:

44AD: Presumptive taxation of civil construction (8% of Gross Receipts)
44AE: Presumptive Taxation of Transport Business

WEF ASSESSMENT YEAR	Presumptive Income for month or part of month during which owned
	Heavy Goods Vehicles	Others
1994-95	2000	1800
2003-04	3500	3150
2011-12	5000	4500

There after in Finance Act 1997, w.e.f. 01-04-1998, i.e. A.Y, 1998-99 another section in row was inserted

44AF: Presumptive taxation of retail business (5% of total Turnover)
Recent Changes made:

Now by virtue of Finance Act 2009, section 44AD has been substituted with new avatar to encompass entire range of businesses wef  AY 2011-12. In this new era, while section 44AE still holds the ground, section 44AF has been put to rest w.e.f. AY 2011-12.