Wrapping up of an existing business

An establishment exists by the legitimate procedure laid down by the laws of land and when it wants to end its life, it is just conceivable through the pre-established lawful mechanism. When a company is in torment, the management team undertakes many competing challenges hampering their ability to recognize what is usually a very stressful and complex transition. Winding is considered as the last stage of an organisation’s existence.

Winding up of any business refers to liquidation of its life and administrating its property for the benefit of its creditors and members. Dissolution of a business includes selling all assets, paying off creditors and distribution of remaining assets to the partners or shareholders. Ultimately, company has no legal existence in the eyes of law. Section 270 of the Companies Act, 2013 governs the procedure of winding up of a company in India which provides two ways of winding up i.e. voluntary winding up and winding up by the tribunal.

Classification of winding up strategies

1. Winding up by the court – Insolvency of a company into a compulsory liquidation when an organization is unable to pay off its debts. Upon the commencement of winding up, the company’s officers have no power to carry on the business of the company. The liquidator takes over reign of the company.
2. Voluntary winding up – A special resolution is initiated by the members or creditors of the company for voluntarily winding up the business.
3. Member’s voluntary wind up – In this case, organisation has to pay its debts in full within 12 months after commencement of winding up proceedings. Consequently, the Board of Director (“Board”) file a declaration of solvency.
4. Creditor’s voluntary wind up – When a company is unable to pay its debts off within 12 months and still wishes to wound up, it may proceed as creditor’s voluntary wind up.

Petition for winding up
According to section 272, a petition is presented by:

• The company;
• Any creditors or creditors including any contingent or prospective creditor or creditors;
• Any contributory (s);
• The registrar; or
• Any person authorised by the Central Government.

If a company is unable to pay its debts, the registrar shall not present a petition unless it appears to him, either from the financial condition of the company as it is divulged in its balance sheet or from the report of an inspector appointed under section 210 articulating the company is unable to pay off the debts. The registrar obtains the previous sanction of the Central Government to the presentation of a petition.

Methodology for winding up a company

1. A meeting of the Board is convened. The company would resolve that there are no debts remaining of the company by passing a resolution that suggests the same.
2. A notice of a general body meeting is issued proposing the resolution of the company.
3. Make sure that there is atleast 3/4th of the votes in favour of closing the company.
4. A meeting is conducted with the creditors of the company next day.
5. File a notice to registrar for appointing a liquidator within 10 days of passing of company’s winding up resolution.
6. Within 30 days of passing the winding up resolution, file certified copies of the special and the ordinary resolutions.
7. Complete the financial affairs of the company with the aid of the liquidator.
8. Summon a final general body meeting.
9. Pass a special resolution to dispose the records and accounts of the company.
10. Within 14 days of passing the special resolution, take the certified copies of the records and accounts to the National Company Law Tribunal (NCLT).
11. NCLT shall then order for company’s dissolution.
12. The liquidator then shall take the order and submit it to the registrar.
13. The registrar shall then publish a notice that the company is dissolved.

The various provisions have been collaterally working for settlement of winding up issues. Despite the progress of winding up of companies, there are several concerns coming in front of the judiciary trying to mitigate the friction in the process of winding up of companies.
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Discerning Insolvency and Bankruptcy Code, 2016

For consolidating the existing framework of bankruptcy and insolvency in India, a single bankruptcy law was created, known as the Insolvency and Bankruptcy Code, 2016 (“Code” or “IBC”). IBC was introduced in December 2015 and passed in May 2016 by Lok Sabha. Subsequently, it received the assent of the President of India and came into effect.

The Code provides 360 degree solution for settling insolvencies which is a lengthy and an economically exorbitant process these days. In India, robust insolvency structure where the time and cost dedicated is curtailed in achieving liquidation has been long overdue. The Code is empowered to protect the small investors and make business processes conducive.

Vision of current Code
IBC is applicable to companies as well as individuals and provides for a time-bound procedure for resolving insolvency issues. In case of default in repayment, creditors secure access and control over debtor’s property and are required to take actions for resolving insolvency within 180 days. To ensure steady resolution process, IBC shields debtors from resolution claims of creditors during this procedure. Also, the Code integrates provisions of contemporary legislative structure, thus establishing a common forum for creditors as well as debtors of all categories to resolve insolvency.

Facilitators of insolvency resolutions
Following are various institutions created by the Code that facilitate insolvency resolution:

• Professional agencies: Exams are conducted by these agencies to test and certify insolvency professionals. A code of conduct is also enforced by these agencies to administer the performance of the professionals. Insolvency professionals are required to be registered with such agencies.
  
• Professionals: The Code proposes creation of a specialized core of licensed professionals. Their role includes administration of resolution process, managing the property belonging to the debtors as well as providing information for creditors to abet them in decision making process.
  
• Adjudicating authorities: For companies, National Company Law Tribunal (NCLT) will arbitrate the proceedings of resolution process whereas Debt Recovery Tribunal (DRT) will adjudicate the proceedings for individuals. Approval for initiating the process of resolution, appointment of insolvency professionals and approval of final decision of the creditors are some of the duties performed by the above mentioned authorities.
  
• Information utilities: Creditors are mandatorily required to report and communicate financial information of the debt owed to them by the debtors. All the records pertaining to liabilities, defaults and debts shall form part of such information.
• Insolvency and Bankruptcy Board (“Board”): The Board is responsible for regulating insolvency professional agencies, professionals and information utilities established under the Code. Representatives of Reserve Bank of India (RBI), Ministries of finance, corporate affairs and law constitute the Board.
  

Any business requires institution of faith and fulfilment of obligations by the transacting parties for best business practices. Many a time’s circumstances hinder the proper discharge of duties undertaken by the parties due to uncertain changes in the environment. Insolvency or bankruptcy conditions obstruct the desired performance of the agreed promises between the parties. Also, the other party to the transaction is left helpless for the losses it may suffer. Since its inception many alterations have been suggested for fabricating the already existing Code, the same are in motion. Successful execution of insolvency and bankruptcy proceedings are a product of favorable steady amendments in the Code.

If you have any questions or would like to discuss more about any of the above provisions our team of experts can guide you.

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Challenges faced in e-assessment

With the advent of e-assessment concept in the domain of tax evaluation, things have taken a toll on the conventional tax assessment practices. With day-by-day advancing technology and a cooperative audience, the success of e-assessment does not seem far-fetched. While the progress has been commendable, in order to drive this concept, challenges thrown by the set procedures need to be addressed simultaneously. Some of the challenges are stated as under:

• Perceiving the right technology: Government’s information technology (IT) infrastructure will determine the accomplishment of e-assessment idea. Specifically, the ability to handle data traffic in terms of size as well as volume would be critical. If we look at the past experiences, government servers have often crashed when they experienced high volumes of data traffic, especially closer to filing deadlines. The government cannot afford such similar crashes considering the sensitive nature of assessment operation. Hence, the requirement of a robust IT infrastructure cannot be undervalued.
• Eliminating legal loopholes: From a legal outlook, a bona-fide service of notice is a prerequisite in constituting a valid assessment proceeding. Despite necessary amendments being inculcated in the income-tax law to credit e-mail communication as a valid mode of service, there are times where notices are uploaded on the portal but a parallel e-mail is not directed to the taxpayer. Oddities like these could pave the way to litigation and potentially render the proceedings void. For mitigating such situations, either IT systems must be streamlined to ensure that emails are automatically sent, without exception, as and when notices get uploaded or the law must be amended to emphatically state that uploading a notice on the online portal includes a valid communication service.
• Attaining procedural perfections: While practice leads to perfection, revolutionary plans do not generally provide a large incubation cushion. Therefore, from a methodological perspective, government needs an ‘ace’ before the bets are called. For instance, the current system does not have any provision for granting adjournments. In case of submission taxpayer seeking more time, the portal neither accepts nor rejects the request, leading to uncertainty in the mind of the taxpayer regarding the next date for filing of submission.
• A genuine collaboration: Though not a major threat at the initial stages, this could be a crucial lever in determining the success or failure of this initiative. On-boarding the appropriate abilities with a viable sector, domain proficiency as well as ensuring mechanisms to expedite collaborative working conscientiously would be the segment for the government to concentrate on as it moves into the progressive stages of implementation.

Over the past few years, IT department has taken a lot of steps to go digital. E-filing of income tax returns (ITR), payment of taxes online, processing of tax deduction at source (TDS) electronically, provision of facilities for filing forms electronically, submitting online grievances, online tracking of refunds and matching of credits are a few measures amongst numerous others undertaken to eminently establish a technologically driven IT department. The initiatives taken by the government aim to ensure ease in compliance of IT rules and effective management of the data. The initiatives taken by the government project their intentions loud and clear that India is all set for improving its tax administration services by making the tax system as simple and tech-enabled.
For detailed information on introduction, impact and latest changes in e-assessment, kindly visit Introduction of e-assessment

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Introduction of e-assessment

In the era of age-old beliefs, online assessment is a step towards an advanced tomorrow. While the transformation from conventional practices is inevitable, introduction of e-assessment concept will impact the entire procedure and make assessments more taxpayer-friendly and transparent.

Concept of e-assessment was introduced earlier in 2016 on a pilot basis and further extended it to 102 cities in 2017. With the experience gained so far as per the statistics Finance Minister Arun Jaitley mentioned in his Budget speech for 2018-19 to extend the domain of e-assessment across the country. Greater efficiency and transparency can be achieved by widening the scope of e-assessment to reduce interface between the Income Tax Department (“Department”) and tax payers. Requisite amendments in the Income Tax Act (“Act”) to be made by the government thereby, facilitating the process of systematic and lucid online assessment.

E-assessment will revolutionize the age-old assessment procedure of the Department and the approach which they interface with taxpayers and other stakeholders. As per experts, lack of interaction between taxpayer and tax officer would lead to reduced chances of alleged corruption.
Presently, processing of income tax returns (“IT returns”) takes at least a few months. But the path breaking and technology-intensive project approved by the government will transform the Department into a more assessee friendly zone. IT returns will be processed in 24 hours and refunds furnished concurrently. Previously, 99.54% of IT returns were accepted as they were filed.
Resulting in the introduction of such a system direct tax collection for current fiscal exceeded the budgeted target by INR 50,000 crores to INR 12 lakh crores, while the mop-up has been pegged at INR 13.80 lakh crores for the financial year 2019-20. The government had originally budgeted to collect INR 11.50 lakh crores in current financial year from direct taxes, which include corporate tax and personal income tax.

As per the 2019-20 budget estimates, out of the INR 13.80 lakh crores of direct taxes, the government aims to raise INR 7.60 lakh crores from corporate tax as well as INR 6.20 lakh crores from income tax. This is higher than INR 6.71 lakh crores estimated to be collected from corporate tax and INR 5.29 lakh crores from income tax in the current fiscal ending March 2019.

Undertaking online assessments saves taxpayers a lot of time as well as money. Frequently the assessments can be executed in less time; multiple personnel can complete the assessment online within the same stipulated time. No need for specialized human resources, thereby cutting expenses of the taxpayers.

Nobody can judge the idea about whose time has come. In our opinion, the era for e-assessments is here and will stay. While the metamorphosis from age-old archaic practices is inevitable, this change cannot be at the periphery and needs to impact the entire process and make assessments more taxpayer-friendly and transparent. As long as this determination and commitment stays with both the government and taxpayers, the Indian tax ecosystem will be cruising ahead in its journey to autonomous success.

In case of any assistance regarding e-assessment or other compliance related issues, kindly click here

Tax saving investments routes

Tax saving is the strategy by which one saves taxes by using the provisions specified under law. At the time of filing your return, you can seamlessly claim these exemptions and deductions from the income tax department. Such provisions are provided by the government to incentivize savings and investments in the economy. The process of tax saving is completely legal and encouraged by the government. It is a compulsory contribution to state revenue levied by the government on workers income and business profits or added to the cost of some goods, services and transaction. Taxes paid by public are used by the government for carrying out various welfare schemes including employment programs. Under section 80 of Income Tax Act, 1961 (“Act”) there are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo.

Every year most of us struggle to save our tax and it might be challenging for the new earners or newly recruited employees as well. Most commonly used option to save income tax is section 80C. According to this section, if an individual or hindu undivided family (HUF) invests in or spends on specified sources, then up to INR 1.5 lakhs of such investment can be claimed as a deduction from gross total income before calculating tax payable on it in financial year. Such deduction made can be claimed only from the income in the financial year in which such investment was made.
Tax saving investment is an essential part of tax planning we do to save our tax and also an activity which every tax payer should undergo. So, here is all the information and analysis we need in order to choose the tax saving investment scheme under section 80C:

1. Public provident fund (PPF): Investment in PPF is the best option under section 80C of Income Tax Act. It is worthiest for the ones who need to keep aside funds for their retirement. It declares to allow the return on par with the inflation generally. Contribution amounting INR 150,000 is allowed under PPF. Rate of interest is determined by Ministry of Finance from time to time. Interest earned is tax-free. The lock-in period for PPF is 15 years. After five years amount can be withdrawn subject to certain conditions. It is amongst the best strategies for tax saving.
2. 5 year bank fixed deposits (FDs): Any term deposit with the tenure of at least 5 years with the scheduled bank also qualifies for the deductions under section 80C and the interest earned on it is taxable. The investment made in FDI cannot be withdrawn in between.
3. Equity Linked Saving Schemes (ELSS): ELSS funds have the shortest mandatory lock-in period of three years among the tax-saving investment options available under section 80C. The investment is made in equity, directing more prominent returns and gives about 15% in the long term. The deduction can be claimed u / s 80C easily. ELSS is an overall financial plan and is perfect to assemble one’s long-term fiscal goals.
4. National Savings Certificate (NSC): The best thing about this instrument is that unlike an insurance policy or a pension plan NSC does not require a multi-year commitment. So, it is a good option for those who don’t have time to study the features of the plan or look up to the promising ELSS funds. It is issued in the post offices. The income tax deduction for this investment can be claimed under section 80C of the Act.
5. Unit Linked Investment Plan (ULIP): ULIP came into focus from last year after the budget introduced tax on long-term capital gains from stocks and equity funds. It is the combination of investment and insurance which is eligible for tax exemption. It covers the return but there are no guaranteed returns.
6. Premium of life insurance: The scheme is covered under section 80 of the Act. The schemes of life insurance help a person to protect itself and its dependents from any risk occurring in future.
7. Senior Citizens Savings Scheme (SCSS): SCSS was already the best tax-saving option for those above 60 years of age, but last year’s budget made it more attractive by offering senior citizens an additional INR 50,000 exemption on interest income. This means that the overall tax exemption for senior citizens above 60 is now INR 3.5 lakhs and for very senior citizens above 80 is INR 5.5 lakhs. Maximum limit for the above mentioned investment is INR 15 Lakhs. The lock-in period of 5 years. The deduction is allowed under section 80C.

Above stated are the investments which provide deductions that can be claimed under section 80C for saving the tax, considering various provisions. The last quarter of every financial year that is January to March is the time when most of us rush to settle our tax saving exercise by submitting the documents to our employers and also making various investments. Doing this we should keep in mind some important points or measures which we should take for exercising the tax saving benefit. The same will be discussed in our next segment.

We have a team of skilled professionals who can help you with making appropriate investment decisions, tax planning, computation and payment of advance taxes, etc. Still confused and have questions regarding Income tax saving or planning, get assistance from our team of experts click here.

Tax saving investments routes

Tax saving is the strategy by which one saves taxes by using the provisions specified under law. At the time of filing your return, you can seamlessly claim these exemptions and deductions from the income tax department. Such provisions are provided by the government to incentivize savings and investments in the economy. The process of tax saving is completely legal and encouraged by the government. It is a compulsory contribution to state revenue levied by the government on workers income and business profits or added to the cost of some goods, services and transaction. Taxes paid by public are used by the government for carrying out various welfare schemes including employment programs. Under section 80 of Income Tax Act, 1961 (“Act”) there are various deductions a taxpayer can claim from his total income which would bring down his taxable income and thereby reduce his tax outgo.

Every year most of us struggle to save our tax and it might be challenging for the new earners or newly recruited employees as well. Most commonly used option to save income tax is section 80C. According to this section, if an individual or hindu undivided family (HUF) invests in or spends on specified sources, then up to INR 1.5 lakhs of such investment can be claimed as a deduction from gross total income before calculating tax payable on it in financial year. Such deduction made can be claimed only from the income in the financial year in which such investment was made.

Tax saving investment is an essential part of tax planning we do to save our tax and also an activity which every tax payer should undergo. So, here is all the information and analysis we need in order to choose the tax saving investment scheme under section 80C:

1. Public provident fund (PPF): Investment in PPF is the best option under section 80C of Income Tax Act.  It is worthiest for the ones who need to keep aside funds for their retirement. It declares to allow the return on par with the inflation generally. Contribution amounting INR 150,000 is allowed under PPF. Rate of interest is determined by Ministry of Finance from time to time. Interest earned is tax-free. The lock-in period for PPF is 15 years. After five years amount can be withdrawn subject to certain conditions. It is amongst the best strategies for tax saving.
2. 5 year bank fixed deposits (FDs): Any term deposit with the tenure of at least 5 years with the scheduled bank also qualifies for the deductions under section 80C and the interest earned on it is taxable. The investment made in FDI cannot be withdrawn in between.
3. Equity Linked Saving Schemes (ELSS): ELSS funds have the shortest mandatory lock-in period of three years among the tax-saving investment options available under section 80C. The investment is made in equity, directing more prominent returns and gives about 15% in the long term. The deduction can be claimed u / s 80C easily. ELSS is an overall financial plan and is perfect to assemble one’s long-term fiscal goals.
4. National Savings Certificate (NSC): The best thing about this instrument is that unlike an insurance policy or a pension plan NSC does not require a multi-year commitment. So, it is a good option for those who don’t have time to study the features of the plan or look up to the promising ELSS funds. It is issued in the post offices. The income tax deduction for this investment can be claimed under section 80C of the Act.
5. Unit Linked Investment Plan (ULIP): ULIP came into focus from last year after the budget introduced tax on long-term capital gains from stocks and equity funds. It is the combination of investment and insurance which is eligible for tax exemption. It covers the return but there are no guaranteed returns.
6. Premium of life insurance: The scheme is covered under section 80 of the Act. The schemes of life insurance help a person to protect itself and its dependents from any risk occurring in future.
7. Senior Citizens Savings Scheme (SCSS): SCSS was already the best tax-saving option for those above 60 years of age, but last year’s budget made it more attractive by offering senior citizens an additional INR 50,000 exemption on interest income. This means that the overall tax exemption for senior citizens above 60 is now INR 3.5 lakhs and for very senior citizens above 80 is INR 5.5 lakhs. Maximum limit for the above mentioned investment is INR 15 Lakhs. The lock-in period of 5 years. The deduction is allowed under section 80C.

Above stated are the investments which provide deductions that can be claimed under section 80C for saving the tax, considering various provisions. The last quarter of every financial year that is January to March is the time when most of us rush to settle our tax saving exercise by submitting the documents to our employers and also making various investments. Doing this we should keep in mind some important points or measures which we should take for exercising the tax saving benefit. The same will be discussed in our next segment.

We have a team of skilled professionals who can help you with making appropriate investment decisions, tax planning, computation and payment of advance taxes, etc. Still confused and have questions regarding Income tax saving or planning, get assistance from our team of experts click here.

Perceiving tax scrutiny

Thousands of income tax returns (“return”) filed are reviewed and filing patterns are monitored by Income Tax department (“Department”) annually. Some scrutiny cases are selected randomly whereas some are chosen deliberately as a result of meeting the pre-set watch criteria, laid down by the Department. Income tax scrutiny notice is sent to a large number of individuals as well as businessmen filing returns by the Department as a part of their routine check and annual supervision. The idea behind this process is to assess that all the filings made by any person are in compliance with all the protocols, norms and regulations laid down by the Department.

Scrutiny assessment
Critical examination of returns by giving reasonable opportunity to the assessee to substantiate the income, losses and expenses furnished as well as deductions and exemptions claimed, in the return in relation to information provided in the evidence. Income tax officer conducts enquiry from assessee and third party as a part of its assessment. Scrutiny assessment is undertaken to ascertain the factual and legal correctness of the claims for deductions, exemptions, etc.

Purpose of scrutiny assessment
Enquiries are conducted by the assessing officer to ensure that following activities are not performed by the assessee:

• Understatement of income as compared to actual
• Computation of excess loss than actual
• Underpayment of tax
• Concealing any material facts, incomes, etc.

Penalties
In case information supplied in the return is incorrect under any circumstances, whether in the form of omissions, inaccuracies, discrepencies, etc. as a result of this examination. Assessing officer is authorized to assess the income in accordance with his best knowledge (termed as best judgement) as well as evidence or facts so derived and as per the provisions under section 143(3) of the Income Tax Act (“Act”). Assessing officer further has the following authorities:

• Charging of requisite additional interest
• Levying penalties as per the set provisions of the Act
• Initiating prosecution proceedings

Types of scrutiny assessments
Following are the types of scrutiny assessments:

1. Manual scrutiny cases
2. Compulsory scrutiny cases

We have a team of professionals possessing desired experience in annual filings of returns or e-TDS returns as well as other compliances, representation, opinion, litigation, conducting independent audit, furnishing reports, assessments and tax planning services.
Our team is also proficient in the areas of accounting and bookkeeping, auditing & assurance, internal audit, tax audit, management audit, statutory audit, income tax, tax planning, direct taxes, service tax, delhi value added tax, sales tax, company formation, business consultation, company registration / incorporation India, corporate compliance, foreign branch / liaison office registration. Get in touch with us for any assistance by clicking here

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