The Ministry of Corporate Affairs (MCA), vide notification dated January 22, 2016, issued the Companies (Incorporation) Amendment Rules, 2016, wherein rule 8, rule 9 and rule 36 of Companies (Incorporation) Rules, 2014 (hereinafter referred to as the principal rules), have been amended.
The changes in the principal rules have been briefed out as follows:
- Rule 8 of the principal rules provides for the names which are
to be considered undesirable for incorporating a company. Vide this
amendment notification, the government has omitted the following
conditions from the list of undesirability:
- The name which is not in consonance with the principal objects of the company as set out in the memorandum of association;
- The proposed name is vague or an abbreviated name such as 'ABC limited' or '23K limited' or abbreviated name based on the name of the promoters;
- The name which is intended or likely to produce a misleading
impression regarding the scope or scale of its activities which
would be beyond the resources at its disposal.
Accordingly, now application for name can be made in case the proposed name is in the manner mentioned above.
- Also, apart from the above, the government has further amended
the principal rules wherein:
- If any company has changed its activities, which are not
reflected in its name, shall not be required to change its name in
line with its activities.
Prior to this amendment, on change of its activities, the company was required to change its name within a period of six months from the change of activities and comply with all the provisions as applicable to change of name;
- Prior to amendment, if the key word used in the name proposed
was the name of a person other than the name(s) of the promoters or
their close blood relatives, No objection from such other person(s)
was required with the application for name. Also, in case the
proposed name included the name of relatives, proof of relation was
required to be furnished, along with the significance and proof
thereof for use of coined words made out of the name of the
promoters or their relatives.
Post this notification, the above clause has been omitted, thereby removing the obstructions of using the name of persons other than promoters or their close blood relatives. Neither there is any requirement of furnishing proof of relationship or the significance of proposing such words as the name of the company.
- If any company has changed its activities, which are not reflected in its name, shall not be required to change its name in line with its activities.
As per the amended rule 9, an application for the reservation of a name shall be made in Form No. INC-1, which may be approved or rejected by the Registrar of Central Registration Centre (CRC). The CRC, having territorial jurisdiction all over India, has been established by the Central Government, to discharge and carry out the function of processing and disposal of application for reservation of names.
Prior to this amendment, the processing of application was done by the respective offices of Registrar of Companies (ROCs) according to the jurisdiction they have. It shall be noted that the processing and approval of name or names proposed in e-form no. INC-29, shall continue to be done by the respective ROCs having jurisdiction over incorporation of companies under the Companies Act, 2013.
Rule 36 was introduced vide Companies (Incorporation) Amendment Rules, 2015, for the purpose of simplifying the filing of forms for incorporation of a company in integrated process, via e-form INC-29, with effect from 01.05.2015.
According to sub-rule 12 of rule 36, the Registrar, on examining e-form INC-29, shall give intimation to the applicant to remove the defects and resubmit the e-form within fifteen days from the date of such intimation given by the Registrar. After the resubmission of the document, if the registrar still finds that the document is defective or incomplete in any respect, he shall give one more opportunity of fifteen days to remove such defects or deficiencies.
Based on the above sub-rule, this amended notification has inserted a new sub-clause wherein, after resubmission on second opportunity, if the registrar still finds that the document is defective or incomplete, he shall give third opportunity to remove such defects or deficiencies.
Therefore, only after giving three opportunities, if the Registrar is of the opinion that the document is defective or incomplete in any respect, he shall reject the e-form INC-29.
Brief facts of the case :
The fact leading to filing of the appeal by the revenue was that the Respondent was a wholly owned Indian subsidiary of Air Liquid France (ALF), a French multinational company. The Indian company has both Indian as well as expatriate employees on its pay rolls. A survey was conducted in the premises of the Respondent by the Department u/s 133A on a suspicion that multinational corporations were evading taxes on salary and allowances paid by them to the expatriate staff outside India. During the survey it was found that 2 employees were deputed by ALF to look after the Indian operations who were paid remuneration both by Indian company as well as ALF. TDS was deducted by the Respondents on the salaries paid by them to the said two persons, however no tax was deducted at source on the salaries paid to them by the parent company i/e ALF in terms of Section 192 read with S. 9 (1)(ii) of the Act. Accordingly, penalty proceedings u/s 271C were initiated against the Respondent.
The Additional Commissioner of Income Tax (TDS) and CIT (Appeals) dismissed the appeals filed by the respondent while rejecting the explanation offered by the respondent that it was unaware of the payment of salary by ALF to the expatriate employee and therefore, did not deduct tax.
However, the Hon'ble ITAT made a fact finding that there was no material on record to show that the respondent had been intimated by the expatriate employees about the remuneration being received by them from ALF. It noted that:
"Neither in the course of search under Section 133A nor subsequent thereto in evidence was found by the Department to this effect".
It was further noticed by the ITAT that after the search operation under Section 133A and discussion with the income tax authorities, the Respondent having become aware of the taxability of the remuneration received by the expatriate employees from ALF obtained the details and concurrence of ALF for the payment of tax dues. After completing necessary formalities and by arrangement with ALF, the Respondent commenced depositing not only the TDS but also the interest for the delay. Thus, both Sections 192(1) and 192(2) stood complied with by the Respondent even before penalty was levied under Section 271C of the Act by the order dated 17th November, 2000.
The Hon'ble ITAT observed that a duty to deduct tax at source from salary received by an expatriate employee from the 'other employer' could arise only when the employee himself furnishes the details in that regard to the company in India with which he was employed.
On appeal before the Hon'ble High Court, the Court in the light of the factual findings of the ITAT and relying on a similar case of CIT v Marubeni India (P) Ltd. reported in  294 ITR 157 (Del), accordingly dismissed the appeals filed by the revenue.
The Duty to deduct TDS with regards an expatriate arises, only when he himself furnishes the details regards the other employer.
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