Contents at a glance Brief profile of contributing professionals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi PART I EMPLOYMENT LAWS Author: Kiron Prabhakar Chapter 1
Employees’ Compensation Act, 1923. . . . . . . . . . . . . . . . . . . . . . . . . 3
Chapter 2
Factories Act, 1948. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Chapter 3
Employees’ State Insurance Act, 1948. . . . . . . . . . . . . . . . . . . . . . . 19
Chapter 4
The Employees’ Provident Funds Act, 1952. . . . . . . . . . . . . . . . . . 27
Chapter 5
The Punjab Shops and Commercial Establishment Act, 1958 . . . 35
Chapter 6
Maternity Benefit Act, 1961. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chapter 7
Payment of Bonus Act, 1965 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Chapter 8
Contract Labour (Regulation and Abolition) Act, 1970. . . . . . . . . 59
Chapter 9
Payment of Gratuity Act, 1972 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Chatper 10
Equal Remuneration Act, 1976. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Chapter 11
The Sexual Harassment of Women at Work Place Act, 2013. . . . 85 PART II OTHER IMPORTANT LAWS Author: Kiron Prabhakar
Chapter 1
Copyright Act, 1957 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Chapter 2
Limitation Act, 1963. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Chapter 3
Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Chapter 4
Information Technology Act, 2000. . . . . . . . . . . . . . . . . . . . . . . . . 111
Chapter 5
The Competition Act, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Chapter 6
Prevention of Money Laundering Act, 2002. . . . . . . . . . . . . . . . . 121
Chapter 7
Right to Information Act, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Chapter 8
The Black Money (Undisclosed Foreign Income and Assets and Imposition of Tax) Act, 2015. . . . . . . . . . . . . . . . . . . . 131
vii
Bloomsbury’s Desk Referencer for Professionals PART III INDIRECT TAX SERVICE TAX Author: Sanjeev Sharma and Kavita Sharma Chapter 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Chapter 2
Negative list of services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Chapter 3
Place of Provision of Services Rules, 2012. . . . . . . . . . . . . . . . . . . 151
Chapter 4
Declared services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Chapter 5
Mega exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Chapter 6
Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Chapter 7
Rules of interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
Chapter 8
Reverse charge mechanism and abatement . . . . . . . . . . . . . . . . . 191
Chapter 9
Interest and penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Chapter 10
CENVAT credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 VALUE ADDED TAX Author: Nikita Jain
Chapter 1
VAT Compliances, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Chapter 2
Entry Tax, Professional Tax, WCT-TDS and Road Permit Compliances, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 EXCISE Author: Lokesh Kasat
Chapter 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
Chapter 2
Classification and valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Chapter 3
Computation of excise duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Chapter 4
Payment of excise duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
Chapter 5
Invoice system under excise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
Chapter 6
CENVAT credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
Chapter 7
Records, returns and appeal under excise. . . . . . . . . . . . . . . . . . . 283 CUSTOMS Author: Lokesh Kasat
Chapter 1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
Chapter 2
Types of custom duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Chapter 3
Warehousing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
Chapter 4
Assessment of Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
Chapter 5
Customs valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
viii
Contents at a glance
Chapter 6
Duty drawback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
Chapter 7
Refund of custom duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
Chapter 8
Seizure, confiscation and offences . . . . . . . . . . . . . . . . . . . . . . . . . 341 PART IV DIRECT TAX Author: Gaurav Makhijani and Dipesh Makhjani
Tax Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Chapter 1
Brief overview of Income-tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
Chapter 2
Residential Status and Scope of Total Income . . . . . . . . . . . . . . . 363
Chapter 3
Rates of taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
Chapter 4
Exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
Chapter 5
Expenditure relating to exempt income . . . . . . . . . . . . . . . . . . . . 383
Chapter 6
Income from salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
Chapter 7
House property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
Chapter 8
Profits & gains from business or profession [PGBP]. . . . . . . . . . 415
Chapter 9
Capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
Chapter 10
Income from other sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
Chapter 11
Clubbing of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457
Chapter 12
Set-off and carry forward of losses. . . . . . . . . . . . . . . . . . . . . . . . . 462
Chapter 13
Deductions to be made in computing total income. . . . . . . . . . . 465
Chapter 14
Payment of tax & interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
Chapter 15
Return of income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485
Chapter 16
Assessment proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489
Chapter 17
Appeals & revision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
Chapter 18
TDS and TCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497
Chapter 19
Dividend distribution tax and taxability of dividend income . . . . 507
Chapter 20
Penalty under Income Tax Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
Chapter 21
Survey, search & seizure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515
Chapter 22
Taxation of companies & other persons . . . . . . . . . . . . . . . . . . . . 519
Chapter 23
New PAN requirements and AIR statement . . . . . . . . . . . . . . . . 525
Chapter 24
Income Computation and Disclosure Standards. . . . . . . . . . . . . 531
Chapter 25
Depreciation, STT, CII, NSC, KVP . . . . . . . . . . . . . . . . . . . . . . . . . 537
Chapter 26
How to deal with notices received from the Income-tax department. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
Chapter 27
Tax planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545
ix
Bloomsbury’s Desk Referencer for Professionals PART V FOREIGN EXCHANGE MANAGEMENT LAWS Author: Arun Gupta Chapter 1
Foreign Exchange Management Laws. . . . . . . . . . . . . . . . . . . . . . 553
Chapter 2
Capital Account Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 563
Chapter 3
Current Account Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 PART VI SECURITIES LAWS Author: Arun Gupta
Chapter 1
Background and introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599
Chapter 2
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
Chapter 3
SEBI (Prohibition of insider trading) Regulations, 2015. . . . . . . 613
Chapter 4
SEBI (Listing Obligations and Disclosure Requirements) regulations, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619
Chapter 5
SEBI (Depositories and Participants) Regulations, 1996. . . . . . . 633
Chapter 6
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 PART VII COMPANY LAW Author: Milind Kasodekar and Shilpa Dixit
Chapter 1
List of sections, rules and forms under the Companies Act, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655
Chapter 2
Table of fees under the Companies Act, 2013. . . . . . . . . . . . . . . . 677
Chapter 3
List of fines and penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683
Chapter 4
Registers (books, documents, records) & returns to be maintained by Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717
Chapter 5
Types of resolution under the Companies Act, 2013. . . . . . . . . . 731
x
Table of contents Brief profile of contributing professionals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Contents at a glance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii PART I EMPLOYMENT LAWS Author: Kiron Prabhakar Chapter 1
Employees’ Compensation Act, 1923. . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.2
Implementation of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3
To whom this Act applies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4
Salient features of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.6
Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Chapter 2
Factories Act, 1948 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2
Limited jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4
Liabilities of persons responsible for management of a factory . . . . . . . . . 8
2.5
Salient features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.5.1 Approval, licensing and registration of factories. . . . . . . . . . . . . . . . 9 2.5.2 Employer has to ensure the health of the worker. . . . . . . . . . . . . . . . 9 2.5.3 Employer has to ensure the safety of the worker. . . . . . . . . . . . . . . . 9 2.5.4 Employer to ensure welfare of the worker . . . . . . . . . . . . . . . . . . . . 10 2.5.5 Working hours for the adult workers . . . . . . . . . . . . . . . . . . . . . . . . 11 2.5.6 Provisions relating to employment of a young person. . . . . . . . . . 11 2.5.7 Provisions relating to protection of women workers [Section 66]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6
General penalties for offences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.8
Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
xi
Bloomsbury’s Desk Referencer for Professionals Chapter 3
Employees’ State Insurance Act, 1948 . . . . . . . . . . . . . . . . . . . . . . 19
3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2
Implementation of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.3
Applicability of the Act [Section 1(4) read with Section 2(4)] . . . . . . . . . . 20
3.4
Salient features of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.4.1 Registration of Factories and Establishments [Section 2A]. . . . . . . 20 3.4.2 Benefits [Section 46] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.4.3 Eligible Employees [Rule 50 of ESI (Central) Rules, 1950] . . . . . . . 21 3.4.4 Purposes for which the fund may be expanded [Section 28]. . . . . 21 3.4.5 Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.4.6 Rate of Contribution [Rule 51 of ESI (Central) Rules, 1950]. . . . . . 21 3.4.7 Time and mode of deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.4.8 Employees Sate Insurance Fund [Section 26]. . . . . . . . . . . . . . . . . . 22 3.4.9 Offences and Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.5 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.6
Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Chapter 4
The Employees’ Provident Funds Act, 1952. . . . . . . . . . . . . . . . . 27
4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.3 applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.4 Schemes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.4.1 Employees Provident Fund Scheme, 1952 [Section 5]. . . . . . . . . . . 28 4.4.2 Employees Deposit-Linked Insurance Scheme, 1976. . . . . . . . . . . . 29 4.4.3 Employees Pension Scheme, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.5
Income tax Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.6
Reduction of wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.7 Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.8 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.9
Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Chapter 5
The Punjab Shops and Commercial Establishment Act, 1958. . 35
5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.4 Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.5
Opening and closing hours [Section 9]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.6
Closed day [Section 10]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
xii
Table of contents
5.7
Interval [Section 8]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.8
Working hours for a young person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.9 Child. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.10 Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.11 Leave (Section 14). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.12 Health. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.13 Records [Section 20]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.14 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.15 Penalties [Section 26]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.16 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.17 Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Chapter 6
Maternity Benefit Act, 1961 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 6.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 6.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 6.4 entitlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 6.5 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 6.6
Claim notice for maternity benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 6.8 Leave(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 6.9
No Deductions In Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.10 Forfeiture [Section 18] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.11 Duties of employer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.12 Penalty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.13 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 6.14 Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Chapter 7
Payment of Bonus Act, 1965. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 7.2
Implementation of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.3
Applicability of the act [Section 1(3)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.4
Act not apply to certain class of employees [Section 32] . . . . . . . . . . . . . . 54
7.5
Salient features of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.6 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.7
Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
xiii
Bloomsbury’s Desk Referencer for Professionals Chapter 8
Contract Labour (Regulation and Abolition) Act, 1970 . . . . . . . 59
8.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 8.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 8.3
Applicability [Section 1(4)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.4
Important definition(s) under the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.5
Registration of certain establishments [Section 7]. . . . . . . . . . . . . . . . . . . . 60
8.6
Revocation of registration in certain cases [Section 8] . . . . . . . . . . . . . . . . 61
8.7
Prohibition of employment of contract labour [Section 10]. . . . . . . . . . . . 61
8.8
Licensing of contractors and grant of licenses[Section 12 and 13] . . . . . . 62
8.9
Welfare and health of the contract labour. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.10 Liability of principal employer in certain cases [Section 20]. . . . . . . . . . . 63 8.11 Responsibility ofpayment of wages [Section 21]. . . . . . . . . . . . . . . . . . . . . 64 8.12 Registers, records and collection of statistics. . . . . . . . . . . . . . . . . . . . . . . . 64 8.13 Offences and penalties [Section 23, Section 24 and Section 25]. . . . . . . . . 65 8.14 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 8.15 Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Chapter 9
Payment of Gratuity Act, 1972. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 9.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 9.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 9.4
Relevant definition(s) under the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.5
Payment of gratuity [Section 4] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.6
Compulsory insurance [Section 4a]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.7
Nomination [Section 6] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
9.8
Determination of the amount of gratuity [Section 7] . . . . . . . . . . . . . . . . . 73
9.9
Penalties [Section 9]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.10 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 9.11 Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Chatper 10
Equal Remuneration Act, 1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 10.2 Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 10.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.4 Relevant definition(s) under the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.5 Act to have overriding effect [Section 3]. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 10.6 Duty of employer to pay equal remuneration to men and women for same work or work of a similar nature [Section 4]. . . . . . . . . . . . . . . . . . . 80 xiv
Table of contents
10.7 No discrimination to be made while recruiting men and women workers [Section 5]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 10.8 Duty of employers to maintain registers [Section 8]. . . . . . . . . . . . . . . . . . 81 10.9 Penalties [Section 10]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 10.10 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 10.11 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Chapter 11
The Sexual Harassment of Women at Work Place Act, 2013. . . 85
11.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 11.2 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 11.3 Fundamental provisions of the act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 11.4 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 11.5 Compliance table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 PART II OTHER IMPORTANT LAWS Author: Kiron Prabhakar Chapter 1
Copyright Act, 1957. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 1.2
Fundamental provisions of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 1.2.1 What is the meaning of ‘copyright’?. . . . . . . . . . . . . . . . . . . . . . . . . . 95 1.2.2 Who is the first owner of the copyright?. . . . . . . . . . . . . . . . . . . . . . 96 1.2.3 Can a copyright be assigned? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 1.2.4 Term of copyright. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 1.2.5 Can a copyright be licensed?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 1.2.6 Registration of copyright. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 1.2.7 Infringement of copyright. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 1.2.8 Offences and penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 1.2. 9 Civil remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 1.2.10 Appeal mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
1.3 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Chapter 2
Limitation Act, 1963. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 2.2
Relevant definition(s) under the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
2.3
Bar of limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
2.4
Condonation of delay [Section 5]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
2.5
Legal disability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 xv
Bloomsbury’s Desk Referencer for Professionals 2.6
Computation of period of limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
2.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Chapter 3
Environmental Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 3.2
Water (Prevention and control of pollution) Act of 1974 (“Water Act, 1974”). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3.3
The water (Prevention and Control of Pollution) Cess Act (“Water Act-II, 1977”). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
3.4
Air (Prevention and Control of Pollution) act of 1981 (“Air Act, 1981”). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
3.5
Environment Protection Act, 1986 (“EPA, 1986”). . . . . . . . . . . . . . . . . . . 107
3.6
Hazardous Wastes (Management, Handling and Transboundary Movement) Rules of 2008 (“Hazardous Rules”) . . . . . . . . . . . . . . . . . . . . 109
3.7 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Chapter 4
Information Technology Act, 2000. . . . . . . . . . . . . . . . . . . . . . . . 111
4.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 4.2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 4.3
Non-applicability of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
4.4
Evolution of key terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
4.5 E-contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 4.6
Breach of privacy and confidentiality under the Act . . . . . . . . . . . . . . . . 113
4.7
Cyber crime and punishment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
4.8 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Chapter 5
The Competition Act, 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 5.2 Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 5.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 5.4
Main features of the Competition Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
5.5
Competition commission of India (CCI) [Section 7 and Section 8]. . . . . 118
5.6 Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Chapter 6
Prevention of Money Laundering Act, 2002. . . . . . . . . . . . . . . . 121
6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 6.2
Fundamental provisions of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 6.2.1 Relevant definition(s) under the Act . . . . . . . . . . . . . . . . . . . . . . . . 121 6.2.2 Offence of money laundering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 6.2.3 Punishment for money laundering. . . . . . . . . . . . . . . . . . . . . . . . . . 122
xvi
Table of contents 6.2.4 Attachment of property involved in money laundering. . . . . . . . 123 6.2.5 Obligations of banking companies, financial institutions and intermediaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 6.2.6 Power of director to impose fine. . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 6.2.7 Appellate mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 6.2.8 Cognizable and non-bailable offence. . . . . . . . . . . . . . . . . . . . . . . . 124 6.2.9 Punishment for vexatious search . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 6.2.10 Punishment for false information or failure to give information. 124
6.3 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Chapter 7
Right to Information Act, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 7.2
Background of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
7.3
Important provisions of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 7.3.1 Relevant Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 7.3.2 Obligation of public authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 7.3.3 Public information officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 7.3.4 Request for obtaining information [Section 6 of the Act 2005]. . . 127 7.3.5 Disposal of request [Section 7 of the Act, 2005] . . . . . . . . . . . . . . . 128 7.3.6 Exemption from disclosure of information. . . . . . . . . . . . . . . . . . . 128 7.3.7 Appeal [Section 19 of the Act, 2005]. . . . . . . . . . . . . . . . . . . . . . . . . 129
Chapter 8
The Black Money (Undisclosed Foreign Income and Assets and Imposition of Tax) Act, 2015. . . . . . . . . . . . . . . . . . . 131
8.1
Introduction to the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
8.2
Fundamental provisions of the Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 8.2.1 Meaning of ‘Undisclosed Foreign Income and Assets’. . . . . . . . . 131 8.2.2 Scope of total undisclosed foreign income and assets. . . . . . . . . . 132 8.2.3 Applicability of the Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 8.2.4 Basis of charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 8.2.5 Computation mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 8.2.6 Assessment procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 8.2.7 Appeal mechanism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 8.2.8 Liability of manager of a company. . . . . . . . . . . . . . . . . . . . . . . . . . 134 8.2.9 Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 8.2.10 Offences and prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
8.3 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
xvii
Bloomsbury’s Desk Referencer for Professionals PART III INDIRECT TAX SERVICE TAX Author: Sanjeev Sharma and Kavita Sharma Chapter 1 1.1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Overview of the service tax and its scope. . . . . . . . . . . . . . . . . . . . . . . . . . 139 1.1.1 Administration of service tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 1.1.2 Constituents of service tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
1.2
Definition of “service” [Section 65B(44)]. . . . . . . . . . . . . . . . . . . . . . . . . . . 141
1.3
Taxability of services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 1.3.1 Point of taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
1.4
Service tax compliances and procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Chapter 2
Negative list of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Chapter 3
Place of Provision of Services Rules, 2012 . . . . . . . . . . . . . . . . . 151
Chapter 4
Declared services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Chapter 5
Mega exemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Chapter 6
Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
6.1
Section 67 of the Finance Act, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
6.2
Service Tax (Determination of the value) Rules, 2006. . . . . . . . . . . . . . . . 176 6.2.1 Determination of value of service portion in the execution of a works contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Chapter 7
Rules of interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187
7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 7.2
I Principle: Exemption to service does not mean exemption to services for providing that service [Section 66F(1)]. . . . . . . . . . . . . . . . . . 187
7.3
II Principle: Specific description prevails over general description [Section 66F(2)]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
7.4
Taxability of bundled services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
7.5
Determination of taxability of ‘composite transactions’ wherein element of provision of service is combined with an element of sale of goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189
Chapter 8 8.1
Reverse charge mechanism and abatement . . . . . . . . . . . . . . . . 191
Reverse charge mechanism (RCM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 8.1.1 No threshold limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 8.1.1.1 Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
xviii
Table of contents 8.1.1.2
Payment of service tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
8.2
List of services on which reverse charge mechanism is applicable. . . . . 192
8.3
Service tax abatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Chapter 9 9.1
Interest and penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Interest payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 9.1.1 Late payment of service tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 9.1.2 Non deposit of service tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
9.2 Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 9.2.1 Penalty for failure to pay service tax – Section 76 of Finance Act, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 9.2.2 Penalty for non-registration, non-maintenance of books and residuary penalty etc - Section 77 of Finance Act, 1994. . . . . . . . . 206 9.2.3 Penalty in form of late fee for delay in furnishing of service tax return- Section 70(1) of Finance Act, 1994. . . . . . . . . . . . . . . . . . . . 207 9.2.4 Penalty for suppressing value of taxable service by malafide reasons [Section 78 of Finance Act, 1994]. . . . . . . . . . . . . . . . . . . . . 207 9.2.5 Penalty for offences by director/Manager/Secreatary etc., of company - Section 78A of Finance Act, 1994. . . . . . . . . . . . . . . . . . 209 Chapter 10
CENVAT credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211
10.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 10.2 What is CENVAT Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 10.3 Availment of CENVAT Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 10.4 Documents for availing CENVAT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 10.5 Use of CENVAT Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213 VALUE ADDED TAX Author: Nikita Jain Chapter 1
VAT Compliances, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
1.1
Value Added Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
1.2
Central Sales Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Chapter 2
Entry Tax, Professional Tax, WCT-TDS and Road Permit Compliances, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
2.1
Entry Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
2.2
Professional Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
2.3 Waybills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 2.4 WCT-TDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 xix
Bloomsbury’s Desk Referencer for Professionals EXCISE Author: Lokesh Kasat Chapter 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
1.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 1.2
Meaning of goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235
1.3
Excise duty administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236
1.4
Chargeability of excise duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
1.5
Registration and ECC Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 1.5.1 Exemption from registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 1.5.2 Application for registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 1.5.3 Points to ponder in relation to registration certificate. . . . . . . . . . 239
1.6
New Excise Control Code [ECC Number]. . . . . . . . . . . . . . . . . . . . . . . . . 240
1.7
Procedure for allotment of New ECC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241
1.8
Small Scale Industry (SSI). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242
Chapter 2 2.1
Classification and valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
Classification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 2.1.1 Need for classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 2.1.2 Interpretative rules for classification . . . . . . . . . . . . . . . . . . . . . . . . 244 2.1.3 Scheme of classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 2.1.3.1
Schedule to Central Excuse Tariff Act, 1985. . . . . . . . . . 246
2.1.3.2
Eight Digit Classification System. . . . . . . . . . . . . . . . . . . 246
2.1.3.3
Rate of duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247
2.2 Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 2.2.1 Transaction Vale [TV] (Section 4). . . . . . . . . . . . . . . . . . . . . . . . . . . 248 2.2.2 Valuation Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 2.2.3 Valuation Rules - Determination of Value. . . . . . . . . . . . . . . . . . . . 251 Chapter 3 3.1
Computation of Excise Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Basis of computing excise duty liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 255 3.1.1 Specific duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 3.1.2 Compounded levy scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 3.1.3 Duty based on capacity of production. . . . . . . . . . . . . . . . . . . . . . . 256 3.1.4 Duty based on Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256
3.2
Price cum duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
3.3
Provisional Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Annexure Extracts from the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008. . . . . . . . . . . . . . . . . 261 xx
Table of contents
Chapter 4
Payment of Excise Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
4.1
Due dates of payment of duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263
4.2
Payment of rents, fines or penalties and other provisions. . . . . . . . . . . . 264
4.3
Procedure for deposit of central excise duties during bank strikes, natural calamities etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 4.3.1 When is payment of cheque not permitted. . . . . . . . . . . . . . . . . . . 264
4.4
Person liable to pay excise duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
4.5
Export without payment of duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266
Chapter 5
Invoice system under excise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
5.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267 5.2
Invoice details. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 267
5.3
Number of invoice copies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
5.4
Authentication of Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
5.5
Intimation of serial numbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268
5.6
Preparation of invoices when goods dispatched through more than one vehicle because of their size. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
5.7
Cancellation of Invoices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270
Chapter 6 CENVAT Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 6.1 Rule 3: CENVAT Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 6.1.1 Utilization of CENVAT credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 6.1.2 Reversal of CENVAT credit on inputs/capital goods/input services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 6.2 Rule 4: Conditions for allowing CENVAT credit. . . . . . . . . . . . . . . . . . . . 275 6.3 Rule 5: Refund of CENVAT credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 6.3.1 Safeguards, conditions and limitations for claiming refund of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277 6.3.2 Procedure for filing the refund claim. . . . . . . . . . . . . . . . . . . . . . . . 278 6.3.3 Refund of CENVAT credit to service providers providing services which taxed on reverse charge basis. . . . . . . . . . . . . . . . . 279 6.4 Rule 6: Obligation of manufacturer/producer of final products and provider of output service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 6.5 Rule 9: Documents and accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 6.7 Applicability of Cenvat Credit Rules, 2004 in various scenarios. . . . . . . 281 Chapter 7
Records, returns and appeal under excise. . . . . . . . . . . . . . . . . . 283
7.1
Private records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283
7.2
Returns under excise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284
7.3
Appeals under excise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
7.4
Summary table of appeals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288 xxi
Bloomsbury’s Desk Referencer for Professionals CUSTOMS Author: Lokesh Kasat Chapter 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
1.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 1.2
Scope and coverage of customs law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
1.3
Levy/taxable event. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295
1.4
Custom duty not leviable in certain cases. . . . . . . . . . . . . . . . . . . . . . . . . . 296
1.5 Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 Chapter 2
Types of custom duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Chapter 3
Warehousing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
3.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 3.2
Warehousing stations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303
3.3
Appointment of public warehouses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304
3.4
Appointment of Private Warehouses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304
3.5
Licences for storage of sensitive and non-sensitive goods. . . . . . . . . . . . 305
3.6
Warehousing bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
3.7
Permission to deposit goods in a warehouse. . . . . . . . . . . . . . . . . . . . . . . 307
3.8
Period for which goods may remain warehoused. . . . . . . . . . . . . . . . . . . 307 3.8.1 Extension of warehousing period. . . . . . . . . . . . . . . . . . . . . . . . . . . 307
3.9
Interest for storage beyond permissible period. . . . . . . . . . . . . . . . . . . . . 308 3.9.1 Waiver of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309
3.10 Owner’s right to deal with warehoused goods. . . . . . . . . . . . . . . . . . . . . 310 3.11 Transfer of goods from one warehouse to another. . . . . . . . . . . . . . . . . . 310 Chapter 4
Assessment of duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
4.1
Self Assessment [Section 17 of the Customs Act, 1962] . . . . . . . . . . . . . . 313
4.2
Provisional Assessment (Section 18). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
4.3
Examination of goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315 4.3.1 Procedure under EDI system (Electronic Data Interchange) . . . . 316
4.4
Execution of bonds [Section 18 which is to be read with Section 46 and 68 of the Custom Act] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
Chapter 5 5.1
Customs Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319
Valuation of imported/export goods in general. . . . . . . . . . . . . . . . . . . . 319 5.1.1 Methods of valuation of imported goods . . . . . . . . . . . . . . . . . . . . 320
xxii
5.1.1.1
Transaction value of identical goods [Rule 4] . . . . . . . . 320
5.1.1.2
Transaction value of similar goods [Rule 5]. . . . . . . . . . 321
Table of contents 5.1.1.3
Application of Rule 8 before Rule 7 (at request) [Rule 6]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
5.1.1.4
Deductive Value [Rule 7] . . . . . . . . . . . . . . . . . . . . . . . . . 321
5.1.1.5
Computed value [Rule 8] . . . . . . . . . . . . . . . . . . . . . . . . . 322
5.1.1.6
Residual Method [Rule 9]. . . . . . . . . . . . . . . . . . . . . . . . . 322
5.1.2 Methods of valuation of export goods. . . . . . . . . . . . . . . . . . . . . . . 323 5.1.2.1
Determination of export value by comparison [Rule 4]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
5.1.2.2
Determination of export value by Computed Value Method [Rule 5] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324
5.1.2.3
Determination of export value by residual method [Rule 6]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324
5.1.2.4
Declaration by the exporter and rejection of declared value [Rule 7 & 8]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324
5.2
When transaction value can be rejected by officer. . . . . . . . . . . . . . . . . . . 325
5.3
Relevant date for determining rate of duty and tariff valuation. . . . . . . 326
Chapter 6
Duty drawback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
6.1
Drawback on re-export of imported goods [Section 74]. . . . . . . . . . . . . . 327
6.2
Duty drawback on export of manufactured goods [Section 75]. . . . . . . 328
6.3
Procedure for claiming duty drawback. . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
6.4
Supplementary claims of duty drawback. . . . . . . . . . . . . . . . . . . . . . . . . . 330
6.5
Limitations on admissibility of duty drawback. . . . . . . . . . . . . . . . . . . . . 330
6.6
Interest on drawback. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331
6.7
Certain aspects relating to duty drawback. . . . . . . . . . . . . . . . . . . . . . . . . 331
6.8
Difference between drawback under Section 74 and 75. . . . . . . . . . . . . . 332
Chapter 7
Refund of custom duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 7.2
Procedure for claiming refund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
7.3
Interest on delayed refund (Section 11BB). . . . . . . . . . . . . . . . . . . . . . . . . 337
7.4
Expeditious disposal of refund applications . . . . . . . . . . . . . . . . . . . . . . . 337
Chapter 8
Seizure, confiscation and offences. . . . . . . . . . . . . . . . . . . . . . . . 341
8.1
Seizure of offending goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
8.2
Confiscation of seized goods and conveyances/packages. . . . . . . . . . . . 341
8.3
Confiscation of seized goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
8.4
Confiscation of conveyances/packages . . . . . . . . . . . . . . . . . . . . . . . . . . . 342
8.5
Confiscation of improperly imported goods and penalties. . . . . . . . . . . 342 xxiii
Bloomsbury’s Desk Referencer for Professionals 8.6
Confiscation of improperly exported goods and penalties (Section 113). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 344
8.7
Seizure v Confiscation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 PART IV DIRECT TAX Author: Gaurav Makhijani and Dipesh Makhjani
Tax Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 Chapter 1
Brief Overview of Income-tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 357
1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 1.2
Components of law of Income-tax in India . . . . . . . . . . . . . . . . . . . . . . . . 357
1.3
Concept of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358
1.4
Charge of Income-tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358
1.5
Person who are liable to pay Income-tax . . . . . . . . . . . . . . . . . . . . . . . . . . 358
1.6
Concept of Assessment Year (AY) and Previous Year (PY). . . . . . . . . . . 359
1.7
Gross Total Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359
1.8
Heads of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360
1.9
Income which do not form part of total income . . . . . . . . . . . . . . . . . . . . 360
1.10 Clubbing of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 1.11 Set-off and carry forward of losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360 1.12 Allowable deductions from total income. . . . . . . . . . . . . . . . . . . . . . . . . . 361 1.13 Rate of Income-tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 1.14 Rebate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361 1.15 Computation of total income and tax liability. . . . . . . . . . . . . . . . . . . . . . 361 Chapter 2 2.1
Residential Status and Scope of Total Income. . . . . . . . . . . . . . 363
Determining Residential Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 2.1.1 Resident/non-resident. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 2.1.2 Ordinarily/not ordinarily resident. . . . . . . . . . . . . . . . . . . . . . . . . . 365
2.2
Scope of total income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
2.3
Meaning of income deemed to be received . . . . . . . . . . . . . . . . . . . . . . . . 367
2.4
Meaning of income deemed to accrue or arise in India . . . . . . . . . . . . . . 367
Chapter 3
Rates of taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
3.1
Rates of tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
3.2
Special rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371
3.3
Normal rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372 3.3.1 Individual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372
xxiv
Table of contents 3.3.2 For Co-operative Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 3.3.3 Residuary (for HUF, AOP/BOI, Artificial Juridical person) . . . . 374
3.4 Surcharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 3.4.1 Rate of surcharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 3.4.2 Marginal relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 3.5
Rebate under section 87A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Chapter 4
Exempt income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
4.1
Agricultural Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377
4.2
Other Exempt Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378
Chapter 5
Expenditure relating to exempt income. . . . . . . . . . . . . . . . . . . . 383
5.1
Expenditure incurred for earning exempt income . . . . . . . . . . . . . . . . . . 383
5.2
Mode of computing expenditure for earning exempt income. . . . . . . . . 383
Chapter 6
Income from salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
6.1
Basis of charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
6.2
Consideration for taxing income as salary. . . . . . . . . . . . . . . . . . . . . . . . . 387
6.3
Meaning of the term ‘salary’. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387
6.4
Salary when accrue or arise in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 388
6.5
Steps to compute Income under the head Salary. . . . . . . . . . . . . . . . . . . . 388
6.6
Taxability of allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389
6.7
Leave Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393
6.8
Taxability of various retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 393 6.8.1 Gratuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393 6.8.2 Retrenchment compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394 6.8.3 Voluntary retirement compensation . . . . . . . . . . . . . . . . . . . . . . . . 394 6.8.4 Pension. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395
6.9
Provident fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396
6.10 Deductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 6.11 Perquisites. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 397 6.12 Arrear of salary - rebate under section 89. . . . . . . . . . . . . . . . . . . . . . . . . . 407 Chapter 7
House property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
7.1
Basis of charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
7.2
Owner/deemed owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409
7.3
Taxability in the case of co-owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410
7.4
Self-occupied and let out. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410
7.5
Computation of income from house property. . . . . . . . . . . . . . . . . . . . . . 410 xxv
Bloomsbury’s Desk Referencer for Professionals 7.5.1 For let out property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 7.5.2 For self-occupied property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412 7.6
Subsequent recovery of unreailsed rent:. . . . . . . . . . . . . . . . . . . . . . . . . . . 413
7.7
Arrears of rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413
7.8
Composite rent - house property let out along with movable assets such as machinery, plant, furniture or fixtures etc. . . . . . . . . . . . . . . . . . . . . . . 413
Chapter 8 8.1
Profits & gains from business or profession [PGBP] . . . . . . . . 415
PART A: How to arrive at profit and gains from Business and profession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415 8.1.1 Income chargeable under the head PGBP. . . . . . . . . . . . . . . . . . . . 415 8.1.2 Deductions allowable against income under PGBP. . . . . . . . . . . . 416 8.1.3 Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 8.1.4 Important concepts of depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 418 8.1.5 Certain deductions allowable only on payment. . . . . . . . . . . . . . . 419 8.1.6 Special Category of deduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 419 8.1.7 Disallowances of expenditure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423
8.2
PART B: Speculative Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425
8.3
PART C: Accounts & audit of accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 8.3.1 Method of accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 8.3.2 Books of accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 8.3.3 Audit of accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427
8.4
PART D: Presumptive taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428 8.4.1 Section 44AD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428 8.4.2 Section 44ADA [inserted by Finance Act, 2016 w.e.f. AY 2017-18]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 8.4.3 Business of plying, hiring or leasing goods carriages. . . . . . . . . . 430
Chapter 9
Capital gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
9.1
Basis of charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
9.2
Meaning of capital asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 9.2.1 Inclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433 9.2.2 Exclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433
9.3
Meaning of transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 9.3.1 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435
9.4
Short Term/long term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 436
9.5
Computation of capital gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
9.6
Cost of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438
9.7
Cost if improvement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
xxvi
Table of contents
9.8
Cost of acquisition and cost of improvement in special cases. . . . . . . . . 440
9.9
Rates of capital gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442
9.10 Deductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443 9.11 Capital gain in special cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 Chapter 10
Income from other sources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
10.1 Basis of charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451 10.2 Income specifically covered under “Income from other sources” . . . . . 451 10.3 Gifts and their taxability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453 10.4 Deductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454 10.5 Expenditure not deductible. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 Chapter 11
Clubbing of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457
11.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 11.2 Situations where income/losses is to be clubbed in the hands of transferor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 Chapter 12
Set-off and carry forward of losses. . . . . . . . . . . . . . . . . . . . . . . . 461
12.1 Set-off of Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 12.2 Carry forward of losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 12.3 Manner and conditions for set-off and carry forward of losses . . . . . . . 461 Chapter 13
Deductions to be made in computing total income . . . . . . . . . 465
13.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 13.2 Deductions on payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465 13.3 Deductions on certain income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471 Chapter 14
Payment of tax & interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477
14.1 PART A: Advance tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 14.1.1 Who is liable to pay advance tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 14.1.1.1 Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 14.1.1.2 Computation of tax liability for the purpose of advance tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 477 14.1.2 Instalments and date of deposit of advance tax. . . . . . . . . . . . . . . 478 14.1.3 Certain issues on advance tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 14.2 PART B: Self-assessment tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478 14.3 PART C: Interest under section 234A, B & C. . . . . . . . . . . . . . . . . . . . . . . 479 14.3.1 Interest under section 234A – Interest for default/delay in furnishing ROI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 14.3.1.1 Chargeability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 xxvii
Bloomsbury’s Desk Referencer for Professionals 14.3.1.2 Computation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 14.3.1.3 Base amount for computation of rate of interest. . . . . . 479 14.3.2 Interest under section 234B – Interest for default in payment of advance tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 14.3.2.1 Chargeability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 14.3.2.2 Computation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 14.3.3 Interest under section 234C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 14.3.3.1 For corporates assesse. . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 14.3.3.2 For non-corporates assessees (Upto AY 2016-17) . . . . . 481 14.3.3.3 For person claiming presumptive taxation under section 44AD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 14.3.4 Illustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481 14.3.4.1 Computation of Interest under section 234A, 234B and 234C – A Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 14.3.4.2 Interest under section 234C. . . . . . . . . . . . . . . . . . . . . . . . 482 14.3.4.3 Computation of Interest under section 234A, 234B and 234C – B Ltd.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 14.3.4.4 Interest under section 234C. . . . . . . . . . . . . . . . . . . . . . . . 483 Chapter 15
Return of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485
15.1 Obligation to file income tax return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 15.2 Return Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 15.3 Concept of paperless returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486 15.4 Due date of furnishing income tax return. . . . . . . . . . . . . . . . . . . . . . . . . . 486 15.5 Mode of filing income tax return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 15.6 Belated return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 15.7 Revised return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 487 15.8 Defective return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 488 Chapter 16
Assessment proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489
16.1 Self-assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 489 16.2 Processing – Intimation/Deemed Intimation. . . . . . . . . . . . . . . . . . . . . . . 489 16.3 Scrutiny/Regular Assessment in response to notice under Section 143(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490 16.4 Best Judgement Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491 16.5 Income escaping assessment/re-assessment. . . . . . . . . . . . . . . . . . . . . . . 491 16.6 Steps to be taken by the Assessee upon receipt of the Assessment order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492
xxviii
Table of contents
Chapter 17
Appeals & revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495
17.1 Appeals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 495 17.2 Revision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 Chapter 18
TDS and TCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497
18.1 What is TDS & TCS?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 18.2 Rates of TDS/TCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 18.2.1 Rate of TDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497 18.2.2 Rates of TCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 18.3 When TDS/TCS is to be deducted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501 18.4 When TDS/TCS is to be paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 18.4.1 How to pay TDS/TCS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 18.5 Filing of TDS/TCS Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 18.5.1 Quarterly statement forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 18.5.2 How to file TDS/TCS statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 18.6 TDS/TCS Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 18.7 Other Important Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 505 Chapter 19
Dividend distribution tax and taxability of dividend income . . 507
19.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 19.2 Meaning of dividend for DDT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 19.3 Taxability of dividend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507 19.4 Taxability of dividend received from a subsidiary company . . . . . . . . . 507 19.5 Tax Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508 19.6 Time limits under DDT regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508 19.7 Credit/deduction – Whether available. . . . . . . . . . . . . . . . . . . . . . . . . . . . 509 Chapter 20
Penalty under Income Tax Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
Chapter 21
Survey, search & seizure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515
21.1 Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 21.2 Search and Seizure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 Chapter 22
Taxation of companies & other persons . . . . . . . . . . . . . . . . . . . 519
22.1 PART A: Taxation on Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 22.1.1 Minimum Alternate Tax (MAT). . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 22.1.1.1 Rate of MAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519 22.1.1.2 How to calculate Book Profit . . . . . . . . . . . . . . . . . . . . . . 520 22.2 PART B: Taxation on Other Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521 22.2.1 Alternate Minimum Tax (AMT). . . . . . . . . . . . . . . . . . . . . . . . . . . . 521 xxix
Bloomsbury’s Desk Referencer for Professionals 22.2.1.1 Rate of AMT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521 22.2.1.2 How to calculate Adjusted Total Income. . . . . . . . . . . . 522 22.2.2 Remuneration to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522 22.2.2.1 Maximum Remuneration Allowable. . . . . . . . . . . . . . . . 522 22.2.2.2 Dividend Income (in excess of 10 Lakhs) in special cases [inserted by Finance Act, 2016 w.e.f. AY 2017-18]. . . . . 523 Chapter 23
New PAN requirements and AIR statement . . . . . . . . . . . . . . . 525
23.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525 23.2 Mandatory quoting of PAN (Rule 114B). . . . . . . . . . . . . . . . . . . . . . . . . . . 525 23.3 Verification of PAN in respect of specified transaction . . . . . . . . . . . . . . 526 23.4 Requirements where counter party does not have PAN . . . . . . . . . . . . . 527 23.5 Furnishing of statement of financial transactions. . . . . . . . . . . . . . . . . . . 527 Chapter 24
Income Computation and Disclosure Standards. . . . . . . . . . . . 531
24.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 531 24.2 General facts about ICDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 24.3 Key deviations of ICDS from Indian Accounting Standards (ICAI). . . . 532 Chapter 25
Depreciation, STT, CII, NSC, KVP. . . . . . . . . . . . . . . . . . . . . . . . 537
25.1 Depreciation as per Income Tax Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 25.2 Depreciation as per Companies Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538 25.3 Cost Inflation Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 25.4 Securities Transaction Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 25.5 NSC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 25.6 KVP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540 Chapter 26
How to deal with notices received from the Income-tax department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541
26.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 26.2 Notices received from income-tax department and how to deal with the same . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 26.3 Summons under section 131 of the income-tax act. . . . . . . . . . . . . . . . . . 544 26.4 Power to call for information under section 133(6) of the income-tax act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544 Chapter 27
Tax planning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545
27.1 What is tax planning?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 27.2 Slab rate benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545 27.3 Rebates available under Income-tax Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 546 xxx
Table of contents
27.4 Permissible deductions from Gross Total Income. . . . . . . . . . . . . . . . . . . 546 27.5 Exempt Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546 27.6 Benefits available for HUF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 546 27.7 Benefits available for companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 547 27.8 Benefits available for partnership firms/LLP. . . . . . . . . . . . . . . . . . . . . . . 547 27.9 Tips for salaried person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 27.10 Tips for business income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 27.11 Tips for capital gain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 PART V FEMA Author: Arun Gupta Chapter 1
Foreign Exchange Management Laws. . . . . . . . . . . . . . . . . . . . . 553
1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 1.2
Applicability (with effective date). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553
1.3
Important terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554
1.4
Overall structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555
1.5
Regulatory framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556
1.6
Rules and regulations made under FEMA. . . . . . . . . . . . . . . . . . . . . . . . . 557
1.7
Types of transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 558 1.7.1 Capital Account Transactions (CAT). . . . . . . . . . . . . . . . . . . . . . . . 558 1.7.2 Current account transactions (CuAT) . . . . . . . . . . . . . . . . . . . . . . . 559
1.8
Contravention, penalties, appeals etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 1.8.1 FEMA 1999 provisions relating to penalties. . . . . . . . . . . . . . . . . . 559 1.8.2 Compounding provisions under FEMA. . . . . . . . . . . . . . . . . . . . . 560
Chapter 2 2.1
1.8.2.1
Governing law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560
1.8.2.2
Authorities who can compound under FEMA . . . . . . . 560
1.8.2.3
Compounding requirements . . . . . . . . . . . . . . . . . . . . . . 561
Capital Account Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 563
Foreign direct investment in india – FDI . . . . . . . . . . . . . . . . . . . . . . . . . . 563 2.1.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 2.1.2 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 2.1.3 Type of instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 2.1.4 Type of entities in India in which FDI can be received. . . . . . . . . 564 2.1.5 Who can make investment in Indian entities. . . . . . . . . . . . . . . . . 564 2.1.6 Sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565 xxxi
Bloomsbury’s Desk Referencer for Professionals 2.1.7 Modes of Foreign Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 2.1.7.1
Case I - Subscription of shares. . . . . . . . . . . . . . . . . . . . . 566
2.1.7.2
Case II - Transfer of shares. . . . . . . . . . . . . . . . . . . . . . . . 566
2.1.7.3
Case III - Downstream Investment . . . . . . . . . . . . . . . . . 568
2.1.8 Analyses for downstream investment. . . . . . . . . . . . . . . . . . . . . . . 568 2.1.9 Calculation of Indirect Investment. . . . . . . . . . . . . . . . . . . . . . . . . . 568 2.1.10 Entry routes for investments in India. . . . . . . . . . . . . . . . . . . . . . . . 569 2.1.10.1 Automatic route. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 2.1.10.2 Approval route. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569 2.1.11 Compliances – Adhoc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 2.1.11.1 CASE I – FDI by subscribing to the shares of new or existing entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 2.1.11.2 CASE II – FDI by purchase of shares from the existing shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 2.1.11.3 Case III – Downstream investment. . . . . . . . . . . . . . . . . 571 2.1.12 Compliances – Annual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 2.1.13 Obligation of compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 2.1.14 Pricing Norms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 2.1.14.1 In case of Subscription of Shares. . . . . . . . . . . . . . . . . . . 572 2.1.14.2 In case of further issue and allotment made by the company through private placement/ Preferential issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 2.1.14.3 In case of Transfer of shares. . . . . . . . . . . . . . . . . . . . . . . 572 2.1.14.4 In case of downstream investment . . . . . . . . . . . . . . . . . 572 2.2
Overseas direct investment outside India – ODI. . . . . . . . . . . . . . . . . . . . 573 2.2.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 2.2.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 2.2.3 ODI and related definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 2.2.4 Financial commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573 2.2.4.1
Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 573
2.2.4.2
Components of financial commitment. . . . . . . . . . . . . . 574
2.2.4.3
Prescribed limit of financial commitment. . . . . . . . . . . . 574
2.2.5 Routes of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574 2.2.6 Sector which require prior RBI approval for making investment outside India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575 2.2.7 Compliances – transaction based. . . . . . . . . . . . . . . . . . . . . . . . . . . 575 2.2.8 Compliances – annual. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 xxxii
2.3
Table of contents External commercial borrowing from outside India – ECB. . . . . . . . . . . 576 2.3.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 2.3.2 Types of ECB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576 2.3.3 Routes of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 2.3.4 Limits prescribed for obtaining ECB . . . . . . . . . . . . . . . . . . . . . . . . 577 2.3.5 Procedure for availing of ECB under automatic route . . . . . . . . . 577 2.3.6 Procedure for availing of ECB under approval route. . . . . . . . . . 578 2.3.7 Information which are required initially from the applicant. . . . 578 2.3.8 Important parameters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579 2.3.8.1 Compliances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583
2.4
Opening of foreign offices in india. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 2.4.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 2.4.2 Available routes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583 2.4.3 Permitted activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584 2.4.4 Reporting requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584
2.5
Acquisition and transfer of immovable property in india or outside India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 2.5.1 Acquisition and transfer of immovable property in India . . . . . . 585 2.5.1.1
Governing law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585
2.5.1.2
Person eligible to acquire immovable property in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585
2.5.1.3
Permitted modes of acquisition. . . . . . . . . . . . . . . . . . . . 585
2.5.1.4
Acquisition of property requires RBI approval. . . . . . . 586
2.5.1.5
Reporting requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 586
2.5.2 Acquisition and transfer of immovable property outside India. . . . 587
Chapter 3 3.2
2.5.2.1
Governing law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587
2.5.2.2
Modes of acquiring property outside India by a resident . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587
Current Account Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 589
Export of goods and services from India . . . . . . . . . . . . . . . . . . . . . . . . . . 589 3.2.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 3.2.2 Prescribed currency for doing export activities. . . . . . . . . . . . . . . 590 3.2.3 Realization and repatriation of proceeds of export of goods/software/services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590 3.2.4 Export modes and process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590
3.3
Import of goods and services in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 3.3.1 Governing law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591 xxxiii
Bloomsbury’s Desk Referencer for Professionals 3.3.2 Time Limit for settlement of Import Proceeds. . . . . . . . . . . . . . . . 591 3.3.3 Provisions in case of advance remittances. . . . . . . . . . . . . . . . . . . . 591
3.4
3.3.3.1
Advance remittance for import of goods and evidence of import. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591
3.3.3.2
Advance remittance for the import of services. . . . . . . 592
Miscellaneous remittances outside India . . . . . . . . . . . . . . . . . . . . . . . . . . 593 3.4.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593 3.4.2 Transactions which are permitted under the said rules . . . . . . . . 593
3.5
Liberalised remittance scheme (LRS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 3.5.1 Applicability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 3.5.2 Transactions covered under LRS . . . . . . . . . . . . . . . . . . . . . . . . . . . 595 3.5.3 Limit prescribed under LRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 3.5.4 Documentation by the remitter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 PART VI SECURITIES LAW Author: Arun Gupta
Chapter 1
Background and Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 599
1.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 599 1.2
SEBI Act 1992 & important SEBI Regulations . . . . . . . . . . . . . . . . . . . . . . 600
Chapter 2
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
2.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605 2.2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605 2.3
Open offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606
2.4
Compliances, timeliness, penalties and disclosures. . . . . . . . . . . . . . . . . 607 2.4.1 Informal guidance issued by SEBI specific to a company. . . . . . . 609 2.4.2 Event based compliances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610
Chapter 3
SEBI (Prohibition of Insider Trading) Regulations, 2015 . . . . 613
3.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 3.2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 3.3
Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614
3.4
Important regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 3.4.1 Trading plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614 3.4.2 Code of fair disclosure and conduct. . . . . . . . . . . . . . . . . . . . . . . . . 614 3.4.3 Trading windows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615
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Table of contents
3.5
Disclosure obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615
3.6
Practical examples of events of disclosure in different situations. . . . . . 617 3.6.1 1st Case: Series of transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 3.6.2 2nd Case: One transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 617 3.6.3 3rd Case: Incremental transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . 618
Chapter 4
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619
4.1 Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619 4.2
Current listing regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620
4.3 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620 4.4
Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 620
4.5
Compliances, timelines and penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621
Chapter 5 5.1
Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 . . . . . . . . . . 633
Background and introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633
5.2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634 5.3
Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634
5.4
Compliances, timelines and penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634
Chapter 6
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637
6.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 6.2 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 637 6.3
Effective date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638
6.4
Procedures under ICDR 2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638 6.4.1 Preferential issue of specified securities . . . . . . . . . . . . . . . . . . . . . 638
6.5
6.4.1.1
Pricing of equity shares- frequently traded shares. . . . 638
6.4.1.2
Conditions required before preferential issue. . . . . . . . 639
6.4.1.3
Ineligible persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 639
6.4.1.4
Lock-in of specified securities. . . . . . . . . . . . . . . . . . . . . . 639
Right issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 640 6.5.1 Restriction on rights issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 643
Annexures: Important glossary terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645
xxxv
Bloomsbury’s Desk Referencer for Professionals PART VII COMPANY LAW Author: Milind Kasodekar and Shilpa Dixit Chapter 1
List of Sections, Rules and Forms under the Companies Act, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653
List of Forms, Rules with references of Chapters & Sections under the Companies Act, 2013 which are in force . . . . . . . . . . . . . . . . . . . . . . . 653 Chapter 2
Table of Fees under the Companies Act, 2013. . . . . . . . . . . . . . 675
2.1
Table of fees to be paid to the registrar at the time of registeration. . . . 675
2.2
Filing fees for submission of reports/returns to the ROC. . . . . . . . . . . . 677
2.3
Delayed filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677
2.4
Fees on applications (including appeal) made to central government. . . 678
Chapter 3
List of Fines and Penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681
Compounding of offences under the companies act, 2013 . . . . . . . . . . . . . . . . . 681 Annexure I List of compoundable offences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684 Annexure II List of non-compoundable offences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704 Annexure III List of offences punishable for fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . 709 Chapter 4
Registers (Books, Documents, Records) & Returns to be maintained by Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 715
Chapter 5
Types of Resolution under the Companies Act, 2013. . . . . . . . 729
5.1
Matters requiring ordinary resolution under Companies Act, 2013. . . . 729
5.2
Matters required special resolution under Companies Act, 2013. . . . . . 733
5.3
Items of business to be transacted by postal ballot. . . . . . . . . . . . . . . . . . 737
5.4
Items of ordinary business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738
xxxvi
PART I Employment Laws
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Chapter 1
Chapter 1
Employees’ Compensation Act, 1923
CHAPTER 1
Employees’ Compensation Act, 1923 “The measure of compensation must be co-related to the magnitude and the capacity of the enterprise.....” Justice Bhagawati
1.1
INTRODUCTION
With the phenomenal increase in the industrial growth, the use of machineries increased in the industry. This increase resulted in consequential danger to the employees from accidents etc. In order to provide social security to the employees, in 1921, the Government of India framed some proposals in respect of employees’ compensation, circulated them for opinion from the public. Pursuant to that, the Workmen’s Compensation Act, 1923 came into force on July 01, 1924 however, vide the Workmen’s Compensation (Amendment) Act, 2009, the word ‘Workmen’ in the long title of Workmen’s Compensation Act, 1923 has been replaced with the word “Employees” and the new name which was given to the Act was Employee’s Compensation Act, 1923 (“Act”). This is one of the initial labour welfare legislations which aimed to provide protection to the employees and their dependants from hardships arising from injury by accidents which resulted in disablement or death, by payment of monetary compensation. In the case of Sunita Devi v Autar Singh and Anr. II (2004) ACC 198, the Jharkhand High Court categorically held that the Act was a piece of social security and welfare legislation. Its dominant purpose was to protect the workman and therefore, the provisions of the Act should not be interpreted too narrowly so as to debar the workman from compensation which the Parliament thought they ought to have.
1.2
IMPLEMENTATION OF THE ACT
The Social Security Division was set up under the Ministry of Labour and Employment and was made responsible for the enforcement of this Act. Though, it is a central legislation, the Act provides that various state governments shall be responsible for carrying out administration of this Act through the ‘Commissioner 3
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for Employee’s Compensation’, who is appointed by various state governments by notifications in the Official Gazette.
1.3
TO WHOM THIS ACT APPLIES
This Act applies to persons employed in factories, mines, plantations, mechanically propelled vehicles, construction works, mechanised harvesting and threshing operations, cultivation of land or rearing and maintenance of live-stock or forest operations or fishing, cleaning of jungles or reclaiming land or ponds, circus, electrical energy and gas companies and certain other hazardous occupations and 1 other works as mentioned in the Act .
1.4
SALIENT FEATURES OF THE ACT (i)
Employer’s liability to pay compensation [Section 3] An employer shall be liable to pay compensation to its employees under two conditions (i) if personal injury is caused to a workman by accident arising out of and in the course of his employment; (ii) if a workman employed in any specified employment, contracts any disease specified as an occupational disease peculiar to that employment. The employer is not liable to pay compensation in the following cases: •
If the injury of a workman does not result in the total or partial disablement of the workman for a period exceeding three days.
•
If the injury, not resulting in death or permanent total disablement, is caused by an accident which is directly attributable to:
(i)
the workman at the time of the accident was under the influence of drink or drugs;
(ii)
the full disobedience of the workman of relevant orders/rules regarding securing the safety of employees;
(iii) the wilful removal of any safety device provided for the purpose of securing the safety of employees. (ii)
Amount of compensation [Section 4]. The Act provides for compensation for (i) death; (ii) permanent total disablement; (iii) permanent partial disablement; and (iv) temporary disablement.
1
4
As given in sec 2(1) (dd): Definition of ‘employee’ and Schedule-II of the Act
Chapter 1
Employees’ Compensation Act, 1923
The amount of compensation to be paid to a workman depends on (i) the nature of the injury caused by accident; (ii) monthly wages of the concerned workman; and (iii) age of the workman. The lumpsum amount of compensation calculated in accordance with the formula specified in the Act is to be paid to the workman (in case of death to the dependents of the workman).This compensation shall be subject to revision from time to time. (iii) Time to pay compensation [Section 4A] The compensation shall be paid as soon as it falls due and shall be computed as on date of accident. In cases where the employer does not accept the liability for compensation to the extent claimed, provisional payment based on the extent of liability which he accepts shall be deposited with the Commissioner or made to the workman, as the case may be. Acceptance of this provisional payment shall be without prejudice to the right of the workman to make further claims. (iv) Penalties for late payment of compensation [Section 4A(3)] If the compensation is not paid within one month from the date it was due, the Commissioner shall, in addition to the amount of the arrears, direct the employer to pay simple interest thereon at the rate of 12% p.a. or at such higher rate not exceeding the maximum of the lending rates of any scheduled bank. If there is no justification for the delay, the Commissioner may direct that the employer, in addition to the amount of the arrears and interest thereon, to pay a further sum not exceeding fifty per cent of such compensation. (v)
Returns as to compensation [Section 16] The State Government may direct employers to send at such time and in such form and to such authority, as may be specified in their notification, a correct return specifying the number of injuries in respect of which compensation has been paid by the employer during the previous year and the amount of such compensation together with such other particulars as directed by the State Government in this regard.
(vi)
Reference to Commissioner [Section 19] If any dispute arises in any proceedings under this Act regarding, •
the person injured is a workman or not;
•
the liability of any employer to pay compensation;
•
the amount involved;
•
the duration for which such compensation is to be calculated; 5
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•
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the nature or extent of disablement;
are all to be settled by a Commissioner. No Civil Court shall have jurisdiction to settle any question which under this Act is required to be settled by a Commissioner or to enforce any liability incurred under this Act.
1.5
CONCLUSION
Human life cannot be valued and no monetary value can be assigned to it. Adequate care needs to be taken by the employer to avoid any accidents and in case of any such untoward incident, adequate compensation is required to be provided by the employer in accordance with this Act.
1.6
COMPLIANCE TABLE
Name of the Act and Appropriate Government: Employees/Workmen Compensation Act, 1923, and Employees/Workmen Compensation Rules, 1924. This Act aimed to provide protection to the employees and their dependents from hardships arising from injury by accidents which resulted in disablement or death, by payment of monetary compensation. Applicability: The Act is applicable to any employee (s) who is injured by accident while in employment. S. No
Section and Rule Number
Compliance and Responsibilities
1.
Section 10B
Report of accident
2.
Section 10A (1)
Statement regarding accident
Section 16
Return as compensation
3.
6
fatal
Form Applicable
Penalty
Form EE
Within 7 days of the Punishable with death or serious fine which may bodily injury. extend to INR 5,000.
N.A.
Whenever asked by Same as above. the Commissioner by notice
N.A.
Whenever asked by Same as above. the State Government by Notification.
fatal to
Frequency/Time of Compliance
CHAPTER 2
Factories Act, 1948 2.1
INTRODUCTION th
In the last three decades of 18 Century, there was a rapid industrial growth in Europe. It was exponential and unregulated due to which there was no control over the conditions of employment in the industries. Such discordant industrial growth resulted in poor conditions of workers and as well as unsafe and unhealthy working conditions. In India, the Factories Act was passed in 1881 which was only applicable to those factories which employed 100 or more workers and addressed the issues concerning health and safety of these workers. Subsequently, a fresh legislation in 1891 even covered those factories which employed 50 or more workers. Finally, the Factories Act, 1948 (“Act”) came into force on 1 April 1949. It was a comprehensive Act to consolidate the laws relating to workmen employed in factories. The unfortunate Bhopal Gas Tragedy which occurred in 1984 revealed the shortcomings of the existing Act and resulted in several new provisions being introduced in the Act which covered hazardous industries and also, escalated the penalties accordingly. Currently, the Act and State Factories Rules (“Rules”), which are framed by various state governmentsmay vary from state to state, providing a comprehensive labour welfare legislation. They cover the following aspects related to workers employed in the factories: •
ensure safety and health of workers;
•
regulate working hours of workers;
•
guarantee annual leaves with wages for the worker; and
•
provide for: ▪
protection from hazardous processes;
▪
prohibition on employment of children in factories;
▪
protection for women workers etc.
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2.2
Chapter 2
LIMITED JURISDICTION
The Act applies to factories only. As per sec 2(m) of the Act, this Act is applicable to premises where a manufacturing process is carried on: (a) by employing 10 or more persons with the aid of power; (b) by 20 or more persons without the aid of power.
2.3
DEFINITIONS (a) Adult: means any person who has completed his 18th year of age. (b) Adolescent: means any person who has completed his 15th year of age but has not completed his 18th year of age. (c) Child: means a person who has not completed his 14th year of age. (d) Young person: means a person who is either a child or an adolescent
2.4
LIABILITIES OF PERSONS RESPONSIBLE FOR MANAGEMENT OF A FACTORY
Occupier: An occupier is appointed in every factory and has the ultimate responsibility for the affairs of the factory. It shall be the duty of the occupier to ensure safety, health and welfare of workers as well have the ultimate responsibility for the implementation of the provisions of the Act. The Chief Labour Inspector has to be sent a written notice containing the prescribed information regarding such occupier, at least fifteen days before the occupier begins to occupy or use any premises as a factory. In the case of J.K. Industries Ltd v The Chief Inspector of Factories & Boilers & Ors (1996) 6 SCC 665, the Supreme Court categorically held that in case of a company which owns a factory, it is only one of the directors of the company who can be notified as the occupier of the factory for the purpose of the Act and the company cannot nominate just any employee to be the occupier of the factory. Manager: In addition to the occupier, a manager also needs to be appointed as per this Act. The manager is responsible to the occupier for the working conditions in the factories. The manager is responsible for the maintenance of statutory registers, submission of returns and accident reports etc.
8
Chapter 2
Factories Act, 1948
2.5
SALIENT FEATURES
2.5.1
Approval, licensing and registration of factories
The state government may make rules for approval, licensing and registration of factories. Rules require the registration and licensing of factories and prescribe the fees payable for such registration and licensing and for the renewal of licenses.
2.5.2
Employer has to ensure the health of the worker
It is obligatory for the occupier to ensure and provide for the health of the workers in the factory. Section 11-20 of the Act deals with provisions relating to the health of the workers, some of them are as follows: •
Every factory to be kept clean and free from effluvia arising from any drain, privy or other nuisance [Section 11];
•
Effective arrangements should be made in every factory for the treatment of effluents due to the manufacturing process carried on to render them innocuous and for their disposal [Section 12];
•
Effective and suitable provisions to be made for securing and maintaining in every workroom adequate ventilation by the circulation of fresh air and provide such temperature which will secure for the workers reasonable conditions of comfort and prevent injury to their health [Section 13];
•
Effective measures to prevent inhalation of dust fumes that may be produced in the course of the manufacturing process [Section 14];
•
Artificial humidification as per State Government standards [Section 15];
•
Provide and maintain at a sufficient supply of wholesome drinking water [Section 18];
•
Sufficient toilets as prescribed separately for male and female workers [Section 19].
2.5.3
Employer has to ensure the safety of the worker
It is obligatory for the occupier to ensure and provide for the safety of the workers in the factory. Section 21-41 of the Act deals with provisions relating to the safety of the workers and some of the safety requirements are: •
Proper fencing of machinery in the factory;
•
Only trained adult male workers to be allowed to work near the machinery in motion;
•
No young person without proper training and full instructions to be employed on dangerous machinery; 9
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•
Suitable arrangements for cutting off the power in case of emergencies;
•
Necessary protective equipment provided to protect the eyes of the workman, where work involves risk of injury to the eyes;
•
Suitable precaution against dangerous fumes, gases etc
•
Practicable measures to prevent the outbreak of fire and its spread, both internally and externally;
•
Sufficient precautions provided for automatic machines to avoid accidents;
•
All machinery driven by power to be encased and effectively guarded;
In addition to the safety requirements mentioned above, the Act contains provisions relating to safety management. Some of them are as follows: •
Appointment of safety officer;
•
Declaration of safety and health policy;
•
Preparation of on-site emergency plan;
•
Medical examination and surveillance;
•
Constitution of safety committee etc.
2.5.4
Employer to ensure welfare of the worker
Section 42-49 of the Act makes it obligatory for the occupier to ensure and provide for the welfare of the workers in the factory. Important provisions with regard to welfare of the workers are as follows:
10
•
Adequate washing facilities and provisions for storing and drying clothing to be provided and maintained in every factory;
•
Suitable arrangements for sitting/resting to be provided and maintained for all workers obliged to work in a standing position.
•
First-aid box with prescribed contents for every 150 workers and an ambulance room in a factory employing more than 500 workers, to be duly provided;
•
Canteens to be provided in every factory employing more than 250 workers;
•
Suitable rest rooms and lunch rooms, with provision for drinking water, to be provided in every factory employing more than 150 workers;
•
Crèches for children below the age of 6 years to be provided in factories employing more than 30 women workers;
•
Welfare officer to be employed for every 500 or more workers.
Chapter 2
2.5.5
Factories Act, 1948
Working hours for the adult workers
The important provisions relating to working hours for the adult worker are covered in sections 51-66 of the Act and are as follows: •
No adult worker shall work in a factory for more than forty-eight hours in a week. No worker shall work more than nine hours in a day.
•
The workman should have one holiday per week. If asked to work on the scheduled weekly holiday, then the workman to be given a compensatory holiday within three days, either before or after, the scheduled weekly holiday;
•
After approval from the Inspector of Factories, the workman to be allowed compensatory holidays unavailed by him, within that month during which the compensatory holidays are due or within two months immediately following that month.
•
No adult worker should be required to work continuously for more than five hours; and to be given after every five hours, rest of at least half-an hour;
•
Aggregate hours of work inclusive of rest are not to stretch beyond ten and a half hours per day.
2.5.6
Provisions relating to employment of a young person
The important provisions relating to a young person’s working in the factory are set out under sections 67-77 of the Act and are as follows: •
Prohibition on employment of a young person below 14 years of age;
•
A young person who has attained 14 years of age may be allowed to work in a factory if (a) A certificate of fitness by a qualified medical practitioner of the rank of a certifying surgeon, granted in respect of the young person in the custody of the manager of the factory; and (b) Such young person carries, while at work, a token referring to such certificate.
•
No young people shall be employed to work for more than four and a half hours in a day; and
•
No young person shall be employed to work during the night;
•
The manager of every factory where young persons are employed shall maintain a register of young people showing prescribed details.
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2.5.7
Chapter 2
Provisions relating to protection of women workers [Section 66]
All provisions regarding the employment of adults apply to adult female workers except the following provisions: •
A woman shall be required to work only between 6 am to 7 pm The state government may by notification vary these hours, but no such variation shall authorize the employment of any woman between the hours of 10 pm and 5 am;
•
Women not to work on dangerous manufacturing processes or operations and on or near the machinery in motion.
2.6
GENERAL PENALTIES FOR OFFENCES (i)
Contravention of any provision of this Act or of any rules/written orders made there under, the occupier and manager of the factory shall each be punishable with imprisonment which may extend up to two years or with a fine which may extend to INR one lakh or with both, and if the contravention continues after conviction, then with a further fine which may extend to INR. 1,000/- for each day of such contravention . r Where such contravention has resulted in an accident causing death or serious bodily injury, the fine shall be less than INR 25,000/- in case of an accident causing death and INR 5,000/- in the case of an accident causing serious bodily injury.
(ii)
2.7
Enhanced penalty after previous conviction: Every subsequent contravention of the same provision will attract a penalty of imprisonment for a term up to three years or with a fine of not less than INR 10,000/- which may extend to INR 2,00,000/- or with both.
CONCLUSION
In India, the issues relating to occupational safety and health in respect of factories are primarily governed by the Act. However, there is a need to extend the occupational health and safety coverage to the other sectors as well. Further, to keep pace with the liberalized economic regime, a system of self-regulatory and third party certification needs to be systematically developed in the field of occupational health and safety so that it can match with the growth of the industrial pace and reduce the burden of inspection by statutory authorities.
12
Chapter 2
2.8
Factories Act, 1948
COMPLIANCE TABLE
Name of the Act and Appropriate Government: Factories Act, 1948 and Punjab Factories Rules, 1952. This Act to consolidate the laws relating to workmen employed in factories. Applicability: The Act shall be applicable on workers/employees and occupier and/ or manager of the factories. S. Section No and Rule Number
Compliance and Responsibilities
1.
The occupier of the factory, within 15 days before he begins to occupy or use the premises as factory shall send a written notice to the Chief Inspector stating the name and situation of the factory, name and address of the occupier, the name and address of the owner of the building, the nature of manufacturing process, total horse power of the power used in the factory, name and address of the manager of the factory, number of workers to be employed and average number of daily wages workers to be employee in the factory.
Section 7
Form Frequency/ Penalty Applicable Time of Compliance N.A.
Within 15 days of occupying the premises as factory and 15 days before start of factory.
Punishable with imprisonmen t which may extend upto 2 years or with a fine which may extend to INR 1,00,000 or with both. Further, if the contraventio n is continue after conviction then with a further fine which may extend to INR 1,000 for each day on which contraventio n so continue.
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S. Section No and Rule Number
Compliance and Responsibilities
2.
Rule 7
The occupier of the factory shall make an application for registration of the factory to the Chief Inspector. The licence of the factory shall be granted by the Chief Inspector in Form 4 for a period of 1-5 years.
Form 2
N.A.
Same above.
as
3.
Section 7A
The occupier shall ensure that the health, safety and welfare of all workers while in work are there in a factory. He shall prepare a written statement of the policy in respect of health, safety of the workers.
N.A.
N.A.
Same above.
as
4.
Section The factory shall be 11 and kept clean and free from effluvial Rule 18 coming from drain, privy or other nuisance. In this regard the record of washing, warnishing, white wash shall be
Form 7
N.A.
Same above
as
14
Form Frequency/ Penalty Applicable Time of Compliance
Chapter 2
S. Section No and Rule Number
Factories Act, 1948
Compliance and Responsibilities
Form Frequency/ Penalty Applicable Time of Compliance
entered in a register and maintain. 5.
Rule 58
The registers of workers attending on machines in motion.
Form 7A
N.A.
Same above.
as
6.
Section A register regarding 28, Rule examination of hoists and lifts shall 60 be maintained.
Form 37
N.A.
Same above.
as
7.
Section A canteen(s) shall 46, Rule be provided in all type of factory 71 where more than 250 works are employed.
N.A.
N.A.
Same above.
as
8.
Section Every factory where 48, Rule more than 30 women workers are 79 employed shall provide crèches accessible to mothers of the children accommodated therein.
N.A.
N.A.
Same above.
as
9.
Section The manager of the 79, Rule factory shall 94A & 95 maintain a register of leave with wages wherein name and month of each
Form 15
Same above.
as
N.A.
15
Bloomsbury’s Desk Referencer for Professionals
S. Section No and Rule Number
Compliance and Responsibilities
Chapter 2
Form Frequency/ Penalty Applicable Time of Compliance
worker shall be entered who is taken as a worker in the employment. The manager shall also maintain leave register of such workers. 10. Section The manager of the 110, Rule factory shall submit to the Chief 107 Inspector an annual return in duplicate.
Form 21
On or before Same th 15 January above. of each year
as
11. Rule 107 The manager of factory shall submit (3) half yearly return to Chief Inspector in duplicate.
Form 22
On or before Same th 15 July of above. each year.
as
12. Rule 107 The manager of factory shall submit (4) annual return of accidents to the chief inspector every year.
Form 31
On or before Same th 15 January above. of each year
as
13. Section The manager of the 112, Rule factory shall maintain a muster 110 roll of all workers employed in the factory.
Form 25
N.A.
Same above.
as
14. Section The manager of the 112, Rule factory shall
Form 35
N.A.
Same
as
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S. Section No and Rule Number
Factories Act, 1948
Compliance and Responsibilities
Form Frequency/ Penalty Applicable Time of Compliance
112
maintain inspection book which shall be produced when required by the inspector or certifying surgeon.
15. Section 88, 88A and Rule 103.
Where in a factory any accident occurs which causes death or bodily injury of worker, the manager of the factory shall send notice to the concerned authority or to the Chief Inspector/ Inspector.
Form 18, 18A
N.A.
Same above.
as
16. Section The occupier of the 87, Rule factory shall send a return of medical 102 examination of workers conducting dangerous operations.
Form 34
On or before Same the 5th of above. every month
as
above.
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Chapter 2
CHAPTER 3
Employees’ State Insurance Act, 1948 “Having insurance doesn’t guarantee good health outcomes, but it is a critical factor” Irwin Redlener
3.1
INTRODUCTION
Giving due consideration to today’s economy and medical expenses that are borne by a low income group employees, Mr. Woody Allen has rightly said ‘there are worse things in life than death’. To overcome such uncalled-for situations and with an objective to provide social security and a respectable life to the employees, the Indian government has passed various Acts/Legislations related to employees’ welfare. Employees’ State Insurance Act, 1948 is one of these legislations for the welfare of a specified class of employees. Enactment of Employees’ State Insurance Act, 1948 (“Act”) has a history prior to the Indian independence. In the year 1923, a committee was formed to study various health schemes related to the employees working in different industries. On the basis of the report of the committee, after Independence, the ruling government passed the Act which became the first major legislation for social security of employees working in different industries. The main objective of the government was to provide certain benefits in case of sickness, maternity and employment related injury etc. Earlier, the Act was applicable to employees working in factories and later included in its ambit employees working in various shops, establishments etc., subject to fulfilling the conditions laid down under the said Act.
3.2
IMPLEMENTATION OF THE ACT 1
The Central Government through the Employees State Insurance Corporation (“ESIC”) administers the cash benefit under the Act. Though, it is a central legislation, the Act 1
http://www.archive.india.gov.in/business/legal_aspects/employees_insuranceact.php
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Chapter 3
provides that various State Governments and Union Territories shall be responsible for carrying out administration of the medical care under the Act. ESIC is the utmost authority which makes the policy and oversees the functioning of the ESI scheme under the Act. ESIC comprises of members representing central and state governments, employers, employees, members of Parliament and the medical professionals. The Union Labour Minister is the Ex-Officio Chairman of ESIC. In exercise of the power conferred under the Act, the Central Government has issued ESI (Central) Rules, 1950 which deal with the provisions relating to election of members of ESIC and the standing council, meetings, quorum and procedure of meetings, salary, allowances, accounts and audits etc. Further, ESIC has issued the Employees’ State Insurance (General) Regulations, 1950 (“Regulations”) for effective administration of the scheme which deals with the provisions relating to collection and payment of contribution, return of contribution and benefits etc.
3.3
APPLICABILITY OF THE ACT [SECTION 1(4) READ WITH SECTION 2(4)]
The Act applies to all factories (including factories belonging to the Government other than seasonal factories) which run with power and employ 10 or more persons and to those factories which run without power and employ 20 or more persons. The appropriate Government may after notification in the Official Gazette, extend the provision of the Act to any other establishment or class of establishments, industrial, commercial, agricultural or otherwise [Section 1(5)].
3.4
SALIENT FEATURES OF THE ACT
3.4.1
Registration of Factories and Establishments [Section 2A]
Every factory or establishment shall apply to the appropriate regional office for registration not later than 15 days from the date after the Act becomes applicable to such factories or establishment as the case may be.
3.4.2
Benefits [Section 46]
Under the Act, the insured persons and their dependants shall be entitled to the following six types of social security benefits:
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•
Sickness benefits;
•
Maternity benefits;
Chapter 3
Employees’ State Insurance Act, 1948
•
Disablement benefits;
•
Dependantsbenefits;
•
Medical benefits; and
•
Funeral Expenses.
3.4.3
Eligible Employees [Rule 50 of ESI (Central) Rules, 1950]
All employees, including those engaged through the contractor but whose remuneration does not exceed INR 15,000/- per month are eligible.
3.4.4
Purposes for which the fund may be expanded [Section 28]
The ESIC may, in addition to the scheme of benefits specified in this Act, utilise the funds gathered under the Act for various purposes stated under sec 28 of the Act.
3.4.5
Contributions
The contribution payable under this Act in respect to an employee shall comprise of contribution payable by the employer and contribution payable by the employee and shall be paid to ESIC [Section 39(1)]. The contributions shall be paid at such rates as may be prescribed by the Central Government [Section 39(2)].
3.4.6
Rate of Contribution [Rule 51 of ESI (Central) Rules, 1950]
The present contribution rates are as follows: •
Employees’ contribution – 1.75 % of their wages;
•
Employers’ contribution – 4.75 % of wages paid/payable in respect of every wage period.
3.4.7
Time and mode of deposit
ESIC has launched an online application for receipt of Electronic Challan cum Return (ECR). ESIC has made it mandatory to submit online returns and challans using e-sewa and e-return tool for employers. The amount of contribution is to be paid into ESI Account with an authorized st branch of SBI on or before the 21 of the month following the month in which the wages are due through an ESI challan in quadruplicate. This contribution can be paid through cash, cheque, demand draft or online through SBI internet banking.
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3.4.8
Chapter 3
Employees Sate Insurance Fund [Section 26]
All contributions paid under this Act and all other amounts received on behalf of ESIC shall be paid into a fund called the ‘Employees State Insurance Fund’ which shall be held and administered by the ESIC for purposes of this Act.
3.4.9
Offences and Penalties
Any person making a false statement/representation shall be punishable with imprisonment for a term up to six months or with fine up to INR 2,000/- or with both. If any person fails to pay any contribution due under this Act, he shall be punishable with imprisonment for a term which may extend up to three years but the term: (a) shall not be less than one year, in case of failure to pay the employee’s contribution which has been deducted by him from the employee’s wages and shall also be liable to fine of ten thousand rupees; (b) shall not be less than six months, in any other case and shall also be liable to fine of five thousand rupees.
3.5
CONCLUSION
This Act provides for a comprehensive scheme to provide social security to various employees working in all the factories, shops/hotels/restaurant employing 20 or more employees or such other establishments which are specified by the government. Benefits mainly covered under the ESI Act are sickness benefit, maternity benefit, disablement benefit, medical benefit, funeral benefit and other benefits such as rehabilitation allowances, old age, medical care etc. Benefits under the Act are not only for the employees but also for their dependent/family members. The right to receive benefits under this Act, however is not transferable.
3.6
COMPLIANCE TABLE
Name of the Act and Appropriate Government: Employees’ State Insurance Act, 1948 and Employees’ State Insurance (Central) Regulation, 1950. The Act was enacted to provide social security and respected life to the employees in uncalled for situations. The Act provides certain benefits to the employees in case of sickness, maternity, injury during employment etc. Applicability: The Act applies to all factories (including factories belonging to the government other than seasonal factories) which run with power and employ 10 or
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Employees’ State Insurance Act, 1948
more persons and to those factories which run without power and employ 20 or more persons. S. No
Section and Rule Compliance Form Number and Applicable Responsibilities
Frequency/ Time of Compliance
Penalty
1.
Section 2A, Regulation 10 B (Registration of factory/ establishment)
Every factory or Form 1 establishment shall apply to the appropriate regional office for registration not later than 15 days from the date after the Act becomes applicable to such factories or establishment as the case may be.
Within 15 days after the factory or establishment come under the Act.
Imprisonment for a term which may extend to 6 months or with fine not exceeding INR 2,000/or both.
2.
Regulation 11
The employer Form 3 shall receive declarations from their employees of the factory or establishment to be furnished to the Regional Officer
N.A.
Same above.
as
3.
Regulation 14
The employer Form 3 shall send the declaration forms of the employees together with return in duplicate within 10 days from the date of receipt of the declaration to the regional office of the ESI.
10 days
Same above.
as
4.
Regulation 15
On receipt of Form 6
N.A.
N.A.
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Bloomsbury’s Desk Referencer for Professionals S. No
Section and Rule Compliance Form Number and Applicable Responsibilities
Chapter 3 Frequency/ Time of Compliance
Penalty
declaration the regional office of ESI shall allot an insurance number to each person of whom declaration form have been submitted. 5.
Regulation 15 A
The employees Form 1A are also required to furnish the particulars of his family along with photographs
Within 10 days Imprisonment of submission of for a term declarations. which may extend to 6 months or with fine not exceeding INR 2,000/or both.
6.
Regulation 17
The regional Form 4 office of ESI shall arrange to issue identity card for each person whom an insurance number is allotted. This card shall also include the particulars of family of the employee.
Within 3 months
Same above.
as
7.
Regulation 26
Every employer Form 5 shall send a return of contribution with copies of challan for amount deposited in bank to the regional office in respect of all
Within 42 days Same of the above. contribution period.
as
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Chapter 3 S. No
Employees’ State Insurance Act, 1948
Section and Rule Compliance Form Number and Applicable Responsibilities
Frequency/ Time of Compliance
Penalty
employees whom contribution are payable. 8.
Regulation 31
The employer is N.A. liable to pay the contribution in respect of its employees for which contribution is due.
Within 21 days Same of last day of above. calendar month.
as
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Chapter 3