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Friday, 29 August 2014

Procedure for Increase in Authorise Capital under Companies Act, 2013

Procedure for Increase in Authorise Capital under Companies Act, 2013

Intimation to ROC for Auditor appointment in Form ADT

Intimation to ROC for Auditor appointment in Form ADT

How to Choose an Accountant for your New or Existing Business


If your hobby is doing Tax and accounting then no need for you to read this article. For the rest of us, if you need help with your yearly tax return or run a business that requires hiring an accountant, then it can be quite a task to find a skilled accounting firm offering professional help and expertise. Whatever type of accountant is required, (chartered accountant, tax accountant, etc.); most people don’t really know what they should be looking out for in their search. Generally decisions are based on the locality, an advertisement found in the phone book or recommendations from friends and colleagues.

Taking the time to find out something about the company you select will make all the difference between an accountant who is just doing their job and one who will be loyal and enterprising. If you are running your own company or if you are self-employed, hiring an accountant can be priceless. A few of the services they offer include completing tax returns, keeping company accounts, financial planning, auditing and book-keeping. Most of the professionals also advice on anything from buying new company to selling shares. If you already have your own business or are in the process of setting one up then you will know how important the accountant can be. They should know the rules and regulations concerning any financial activities and be aware of any changes in the law that might affect your business. With the right accountant you can be sure your business is in capable hands. Accountants can save you from spending your valuable time by maintaining all the essential paperwork for you and they even advice you on ways to cut costs. For example, because a dependable accountant will be up to date on tax laws and legislation, they will save your business quit a lot of money. It’s crucial to select an accountant fitted to your company as they will not only keep the records and finances updated and in order but can also smooth the progress of expansion. To find the right accountant is the difficult part.

The first place to start is on the internet. Preferably you want an accountant in your local area that has been established for a number of years, this will enable you to meet them face to face to discuss your needs and requirements and check out their reputation and qualifications. Ask around colleagues and business owners in similar industries for their recommendations and opinion. You could also ask your financial planner, bank and insurance agent for their advice. If you worry about the costs of an accountant then keep the following in mind. Large accountancy firms might have the advantage of offering their services at more competitive rates, whereas a smaller company could provide a more personable service and commit more time to your account. Thus the question is; do you want quality or quantity? Don’t hold back on contacting a firm to ask questions and advice before making that decision. Chew over the area you need advice or help in as companies often specialize in particular fields, for example if you are setting up a small clothing company, the accountancy firm you select should be clued-up and have some clients and thus experience in this sector. Always check for accreditation from an officially recognized body, especially if you are thinking of selecting an individual accountant. Only registered agents are allowed to charge for preparing or lodging a tax return.

There are only a few companies in India like Just Dial and Sulekha, which offer an accounting firm listing service. These firms can find you professional help in your local area for free. Make sure that the members of their network are fully qualified Chartered Accountants. If you are searching for a general chartered accountant or require a specialist, they should be able to help you locate one in a location of your choice. They can provide a range of accountancy services, from financial planning to trust accounting, from setting up a company and auditing. Handing your financial records over to someone you don’t know involves a lot of trust and co-operation. Choose an accountant firm that responds quickly to your questions and has an understanding of your business. Also ask for their pricing policies and see if it is within your budget. An accountant is not only there to complete your tax returns but to offer advice and guidance that can lead your business in the right direction and into the future.


Thursday, 28 August 2014

Practicle problems relating to partition of HUF

Originally posted on drsaca:

(a) Relating to witness

While getting the document attested by witness care should be taken in the selection of witness and in recording their full names and address on the instrument itself. In order to prove a document in the court of law, it is necessary that at least one of the attesting witness is called to prove the deed.

Whenever full name and address or not noted or strangers or less known persons are taken as attesting witnesses it become a problem to recall as to who signed after a lapse of time when the need to prove the document arises, besides when they are to be summoned in a court of law to prove the document by means of their deposition. Such strangers and unknown persons are neither co-operative nor willing witness so as to readily come forward and take the botheration of deposing and proving the document.

View original 992 more words

Happy Ganesh Chathurthi

Monday, 18 August 2014


After creating on HUF file the assessee wants to increase the capital of HUF, known as capital formation. That too needs to be done within the parameters of law and in the light of the principals enunciated by the Supreme Court.

Some of the modes for creating capital in HUF file are:

(1). Ancestral funds through partial partition.
(2). gift of ancestral funds.
(3). Gift from third parties.
(4). Property received under “will” of any party.
(5). Self- generation, i.e., earning of income in HUF.
(6). Throwing in by a member of an HUF.

(i) Ancestral funds through partial partition

            Receipt of ancestral funds through partial partition has been very effectively used in past. Usually the properties of an HUF where partially partitioned so that the coparcener in whose HUF the funds are to be required is given the largest share whereas other coparceners/members are given meager amount since unequal partition is permissible under the Hindu law. This kind of partitions were held to be valid. In this way the funds belonging to a greater HUF were carved out and stamped as capital of smaller HUF, meaning there by that the funds belonging to the father’s HUF were brought in to the son’s HUF.

However, in 1978 this planning was plugged and it was provided under s. 171, that such partial partitions, in case of  “hitherto assessed HUF” , shall not be recognised under the Income – tax Act. Hence this route has now become practically useless in cases where the HUF has been once assessed to income-tax. However, it may still may be a worthwhile avenue for those HUFs, which have never been assessed (not hitherto assessed) to income-tax.

A question may arise whether unequal partition would result in “gift” or not? The supreme Court in CGT vs. N.S. Getti chettiar (1972) 82 TTR 599 (SC); TC 35r. 730 has held that unequal partition of the properties of on HUF would not fall within the definition of “Gift” under the Gift-tax Act. Incidently the gift-Tax Act has also been abolished from 1st October, 1998.

(vi)          Receiving gift of ancestral funds

It has been held in Narendrenath’s case [(1969)] 74 ITR 190 9 (SC): TC 65R. 557]
Those funds which were ancestral and which are received on partition by the coparcener would become the property of such a coparcener’s HUF. Applying this principle if an HUF gifts reasonable amounts to the HUF of one its coparceners then the donee coparcener would receive the amount for and on behalf of his HUF. In other words the funds so received in gift, bearing the stamp of ancestral funds would continue to remain so in the hands of the coparcener also, i.e., it would be treated as ancestral funds in the coparceners HUF. Once it is ‘ancestral funds’ in the coparceners HUF, relaying on principles laid down in surjital’s case [1976 CTR (SC) 1470 : (1975) 101 ITR 776 (SC): TC 37R. 132] The incoming generated from such uncestral funds would be taxed in the hands of coparcener’s HUF and not in his individual status. Since the above –referred gift by a bigger HUF to smaller HUF is not covered by term “partition” as defined in Explanation under section 171, it would not be effected by the rigours of section 171(9). Further now since the gift-tax in case of above- mentioned gifts.
However it may be noted that the karta of an HUF has got power only to make gifts or reasonable amounts. This aspect of powers of Karta vis-à-vis making a gift should be considered.

(vi)          Gifts from outsiders

While considering the issue of gift from outsider it may be noted that gift from outsiders to an HUF is held to be a valid gift in the hands of HUF has held by the supreme court in Pushpa Devi vs. CIT 1977 CTR (SC) 348: (1977) 109 ITR 730 (SC): TC 37R. 168. However it is important to note that the donor should in clear term state that the gifts has been given to an HUF. There should be no ambiguity left in this matter.

Now let as consider a situation where on one hand we have a family, which comprises of husband wife son and minor daughter. On the other hand we have a family, which comprises of husband, wife and two unmarried daughter i.e., there is only one coparcener.

In the first mentioned family composition, where there are two coparceners the income generated from the gifted funds will be assessed in the hands of HUF.

But if the family has a composition of the second type viz. only one coparcener, then has held in surjital chabda’s case (supra) through the gifted funds belongs to the HUF, since there is only one coparcener, the income of such gifted funds would be taxable in the hands of the solo coparcener. However there can be a contrary view also as stated above. Does this mean that for such families the doors or shut for formation of capital in HUF?
Let us consider an example where the family consist of husband, wife and unmarried daughter, which we shall refer as smaller HUF however the husband has a brother and a father who are still surviving meaning there by the father’s family to which we shall refer as bigger family is in existence, in the father family there is a father, two sons and let us say the mother. Let us presume that this bigger family has no JUF corpus if the genuine third party gift is received in the bigger HUF i.e. fathers HUF. After the receipt of gift if an unequal partial partition is made of the bigger HUF and substantial amount is received by the smaller HUF and substantial amount is received by the smaller HUF then such amount received on partial partition shall become the corpus of smaller HUF. Now applying the principles laid down in the case of narendranath vs. CIT (supra), since the corpus of the smaller HUF bears the stamp of ancestral property i.e., property owned by the bigger HUF where the husband i.e., sole coparcener of smaller HUF will also be considered as ancestral property. This in turn would mean that it shall not be hit by the ratio laid down in sujital’s case the ratio laid down considering the fact that the property received in the hands of the family did not bear the stamp of ancestral property.

However, before resorting to this kind of unequal partition, one will have to examine whether the bigger HUF has been hitherto assessed or not. This is because section 171(9) of the income – tax Act 1961 provides that if an HUF is already assessed to tax as on HUF, then if any partial partition is made after 31st December, 1978, then such partially partition shall not be recognised by the assessing officer and the assessment of income arising out of the partially partitioned property shall be made in the hands of the HUF. Incidently it should be noted that if on HUF is assessed as HUF, then unless the clime of partial partition is recognised by the assessing officer, the income will continue to be assessed in the hands of the HUF.the various sub-section of section 171 provide for the machinery to assess the income and recover the tax, interest, penalty, etc., section 171 provides a fiction where by , through income belongs to the smaller HUF, it is deemed to bethe income of bigger HUF, it is deemed to be the income of bigger HUF is liable to pay the Tax.

(iv)Gift to HUF under a will

Another mode for creating corpus in the HUF is through a will. A parson can bequeath his or her property through his or her will. In a valid will if it has been clearly mentioned that the property shall bestow, let us say, upon the son’s HUF then the property so received by that person, shall belong to his HUF.

(v).Earning of income in HUF

The Supreme Court has also set the principle that if the income is generated out of the investment of funds of HUF, it is HUF income is attributable to be the skills and exertion and the coparcener it is to be taxed in the hands of such coparcener.
For example ordinary commission is paid for rendering of services. There fore, commission is earned on account of exertion of skill labour by on individual. Thus commission income in normal circumstance could not be said to have been earned by HUF, where it can be established on facts, that the assets or funds of the HUF were utilised or at stake in earning the commission income. If the commission is earned as a DEL CREDRE agent, where the agent guarantees the realization of sale, the funds of the agent are at stake, in such a case if the commission agent is on HUF and HUF as sufficient funds, then the commission so earned would have to be taxed in the hands of the HUF.

(vi)          Throwing in by a member of an HUF.

The last mentioned mode viz. capital formation by throwing in or blending of personal property is no more attractive (expect in few exceptional cases) because of the clubbing provisions embedded in section 64(2) and hence it is not discussed in this article however, in given set of facts this route may still be beneficial.  



The term ‘person’ has been defined in section 2(31) in an inclusive manner to include, inter alia, a Hindu undivided family. However, there is no definition of the purchase “Hindu undivided family in the income tax act.

    The supreme court in I.T.O.v. Bachula Kapoor [1966]60 ITR 74 (SC) held that “so long as the HUF exists, the individuals thereof cannot separately be assessed in respect of its income . . . . . thus HUF is a separate and a distinct tax entity and income arising to HUF can be assessed only in it’s own hands and cannot be assessed in the hands of any member or copercener’’

3.Basic condition for assessment as HUF

Income of a joint Hindu family may be assessed as income of a Hindu undivided family if the following two conditions are satisfied:
·       There should be a coparcenership. In this connection, it is worth while to mention that once a joint family income is assessed as that of Hindu undivided family, it continues to be assessed as such in subsequent assessment years till partition is claimed by it’s coperceners.
·       There should be a joint family property which consist of ancestral property, and  property transferred by its members.

ANCESTRAL PROPERTY:- Ancestral property may be defined as the property which the man inherits from any of his three immediate male ancestor, i.e., his father, Grand father and grate grandfather. Therefore, property inherited from any other relation is not treated as ancestral property. In the fallowing cases, income of ancestral property. In the fallowing cases, income of ancestral property is taxable as income of ancestral property is taxable as income of Hindu undivided family:

  1. Family of window mother and sons (may be minor or major);
  2. Family of husband and wife, having no child;
  3. Family of two windows of deceased brother;
  4. Family of uncle and nephew;
  5. Family of two or more brothers ;
  6. Family of mother, son and son’s wife;
  7. Family of male and his late brother’s wife.

In order to compute the income of a Hindu undivided family, one has to first ascertain its income under the different heads of income exempted under section 10, 10A and 10B.

While computing income one should keep in mind the fallowing additional points;
§       If funds of a Hindu undivided family, one has to first ascertain its income under the different heads of income of the family in case the fees or remuneration is earned essentially as a result of investment of funds. Conversely, however, if the fees or remuneration is earned essentially for services rendered by the member in his personal capacity, it will be treated as the personal income of the member.

§       If any remuneration is paid by the Hindu undivided family to the karta or any other member for services rendered by him in conducting family’s business, the remuneration is deductible if remuneration is (a) paid under a valid and bonafied agreement; (b) in the interest of, and expedient for, the business of family; and (c) genuine and not excessive – jugal kishore Baladeo sahai v. CIT[1967] 63 ITR 238(SC). Similarly, if salary is paid by the Hindu undivided family to its karta for looking after its interest in firm in which it is paid by the Hindu undivided family to its karta for looking after its interest in firms in which it is partner through said karta for looking after its interest in firms in which it is partner through said karta, such salary is allowable as deduction __ CIT v. Prakash chand agarwal [1982] 11 taxman 55(MP).
·       The fallowing income are not taxed as income of Hindu undivided family:
o       If a member has converted (or transferred without adequate consideration) after December 31, 1969 his self acquired property in to joint family property, income from such property is not taxable in the hands of the family.
Income from impartial estate is taxable in the hands of the holder of the estate and not in the hands of the Hindu undivided family. Through the impartiable estate belongs to the family, income arising there from belongs to the holder of the estate who is the senior most male member of the family. Income from impartiable estate is taxable in hands of the holder of the estate.
o      Personal income of the members cannot be treated as income of Hindu undivided family.
o      As stridhan is absolute property of a woman, income arising there from is not taxable as income of Hindu undivided family.
o      Under the Dayabhaga school of law, no son has any right in the ancestral property during the life time of his father, If therefore, the father does not have any brother as a coparcener, income arising from ancestral property is taxable as his individual income.
Clubbing and adjustment of losses- In this regard fallowing points should be noted-
1.     Under section 60 to 63, income belonging some other person, may be taxable as income of Hindu undivided family transfer income without transferring the asset, such income is taxable Under section 60 in the hands of the family.
Losses of the court year as well as proceeding years will be set off under section 70 to 80.
After the aforesaid adjustment, the total of the five heads of income is gross total income.
DUDUCTION FROM GROSS TOTAL INCOME – After computing gross total income in the aforesaid manner, the fallowing deduction are made under section 80CCC to 80U for the assessment year 2003-04 in order to arrive at net income:

Section                                                     Nature of deduction    

80D                                      Payment on account of medical insurance premium
80DD                                   Maintenance including medical treatment Of  
                                             handicapped dependents
82DDB                                 Expenditure on medical treatment
80G                                      Donation to charitable institution and funds
80GGA                                Donation to scientific research or rural development
80HHB                                Profit and gains from project outside India
80HHBA                             Profit and gains from Housing projects
80HHC                                Export turnover
80HHD                                Earning in convertible foreign exchange
80HHE                                Profit from export of computer software
80HHF                                Profit from export of films software
80-I                                      Profit and gains from industrial undertaking after a certain    
80IB                                    Profit and industrial undertaking other than infrastructure
                                                            Development undertakings
80JJA                                  Profit from the business of collecting and processing of
                                                            Bio degradable wast
80L                                      Interest on certain securities, dividend etc.
80D                                     Royalties from foreign enterprises

TAX Liability calculation

The procedure and the rates of tax is the same as of on individual.


1. Family consisting of female Members

(i) Whether a joint Hindu family can comprise of females only

A joint Hindu family continues to exist even through at a particular time there may be no male coparcener provided of course there is a “potential mother” in the family, that is to say, the window of a deceased coparcener, who is capable of bringing in a male member by way of adoption.

It was held by Allahabad High court in CIT v. Sarwan kumar [1945] 13 ITR 361 (ALL.) that there can be HUF consisting of female members only. They held that females are and can be component parts of an undivided Hindu family. The court Observed “that being so, there can be in our judgement, an undivided Hindu family consisting of females only.

The coparcenary, no doubt comes to an end with the disappearance of the last male member, but as already pointed out, the existence of coparcenery is not essential for the existence of a joint Hindu family”

Similarly, in the case of Savitri Devi v.CIT [1976] 104 ITR 385 (Pat.) it was held that the window and her unmarried daughter constituted a HUF even when the window had not adopted a son.

(whether two females of a family can, by agreement constitute a joint Hindu family in regard to their individual properties

Where the members HUF, being females, inherit something individually, they cannot constitute a HUF by agreement by pooling up their inherited property. In this context, a reference could also be made to the decision of the Supreme court in the case of Puspa Devi vs. CIT 1977 CTR (SC) 348 (1977) 109 ITR 730 (SC): TC 37R. 168,

Where the supreme court has held that it was a fundamental notion governing a joint Hindu family that a female member of the joint family cannot blend her separate property, even if she is the absolute owner there of, with the joint family property. This judgement covered a case where there was already a joint family in existence and held that, even so, a female cannot blend her absolute property there with other females a HUF and blends the property of her absolute ownership therewith.
However, where there is already an HUF and its members get reduced only to females, say by death of male members, it would continue to be assessed as a joint Hindu family as long as there are two females, as decided in the cases referred to earlier.

2. Smaller HUF

Where the assessee, having wife but no child, got certain property on partition of his bigger HUF, it was held that the assessee’s claim for HUF status was valid and had to be accepted despite the fact that the assessee did not have a son-CIT v. Krishna Kumar [1982] 10 Taxman 292(MP).

Wednesday, 13 August 2014

Company Law Settlement Scheme CLSS-2014 Extended till 15th November 2014

The Ministry of Corporate Affairs, in order to give an opportunity to companies who have failed to file annual statutory documents (Annual Return and Financial Statements), has launched  Company Law Settlement Scheme, 2014 (CLSS-2014), vide General Circular no. 34/2014 dated 12.08.2014.
The scheme gives an opportunity to the defaulting companies to enable them to make their default good by filing belated documents.
Corporates can avail the following benefits:
  1. Immunity from prosecution for delayed filing
  2. A reduced additional fee of 25% of the actual additional fees payable
  3. Escape for directors disqualified under section 164(2) of Companies Act, 2013
CLSS shall not apply to the filing of belated documents other than the following:
  1. Form 20B- Form for filing annual return by a company having share capital.
  2. Form 21A-Particulars of Annual Return for the company not having share capital.
  3. Form 23AC, 23ACA, 23AC-XBRL and 23ACA-XBRL- Forms for filing Balance Sheet and Profit & Loss account.
  4. Form 66- Form for submission of Compliance Certificate with the Registrar.
  5. Form 23B- Form for intimation for Appointment of Auditors.
Further, CLSS shall not apply in the following cases:
  1. Companies against which action for striking off the name under sub-section(5) of section 560 of Companies Act, 1956 has already been initiated by the Registrar of Companies or
  2. Where any application has already been filed by the companies for action of striking off name from the Register of Companies or
  3. Where applications have been filed for obtaining Dormant status under section 455 of the Companies Act, 2013
  4. Vanishing companies
Originally The scheme shall remain in force for a period of two months, i.e., from 15th August, 2014 to 15thOctober, 2014, how ever today Ministry of Company Affairs Company Law Settlement Scheme, 2014 has now been extended till 15th November 2014, as per the important Notices & Circulars of, which means we have one more moths time to utilize this benevolent Scheme.
You are kindly requested to disseminate the information to the corporates who have failed to file annual statutory documents, through your wide network and contacts, to utilize the benefits of the CLSS-2014, issued by the Ministry .
The CLSS-2014 is attached for your ready reference.