16th-31st July 2016
Here are the highlights of our newsletter from preceding fortnight.
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Start-ups seeks easier access to tax benefits

At a meeting with Commerce Minister Nirmala Sitharaman on Thursday, a number of start-up enterprises asked for easier access to tax benefits and more incubation facilities, among others. The minister later told journalists that issues such as government funding and online selling of prescription drugs were also discussed. The Startup India plan, launched by Prime Minister Narendra Modi earlier this year, offers incentives such as no income tax on profit for three years and exemption from compliance with labour laws for this period, too, for eligible start-ups (there are conditions). Last week, the minister had announced that start-ups are now eligible for most such benefits after receiving a certificate from the department of industrial policy and promotion (DIPP), as opposed to the earlier process of vetting by an inter-ministerial board. However, the relaxed norms will not be valid for availing of tax benefits, which a lot of start-ups covet. DIPP has 782 applications from start-ups wanting these. Only 180 had the required documents, one of these being the incubators certificate qualifying them as an innovative business. While 88 have been listed by DIPP as possible contenders to receive most benefits, so far only one has managed to get approval of the inter-ministerial board for tax benefits, among a potential list of three.
Startups May Find it Easier to Get Listed
The Securities and Exchange Board of India (Sebi) has proposed a slew of changes for the start-up listing platform to make it attractive for new age companies to consider going public in local markets. The regulator said, based on the feedback received from market participants, that it has decided to not just relax rules further but also rename the institutional trading platform as 'High-tech Start-up & Other New Business Platform'. It has proposed to do away with the rule which says no single shareholder shall own more than 25% after listing, which a lot of promoters were not comfortable with, and has increased the allocation of shares more for high net worth individuals (HNIs) and corporates. Earlier, only 25% was reserved for HNIs and corporates. it has also hiked the limit on share allotment to individual institutional investors to 25% from 10%. The regulator has also proposed to allow market making compulsory for a minimum period of three years for initial public offerings of less than Rs. 100 crore. At present, there is no provision mandating market making.
Positive GST Cues may Bring More Foreign Debt Investors to Bond Street
Foreign debt investors who were headed to the exit gate this year may be returning and may even end up being net buyers of bonds as the biggest economic reform in more than a decade, the Goods and Services Tax, appears to be closer to reality than ever.
The passage of the GST Bill will set the stage for improved business conditions and progressively higher tax revenues. The fiscal deficit commitment also gives scope for easing of borrowing pressure in future, say investors. That central banks in developed world are likely to remain committed to easy monetary policy would make the 7% yields along with a stable currency an attractive investment proposition.
The transaction couldn't be deemed as international transaction due to its inadvertently disclosure in Form 3CEB
Where assessee-company gave certain advance to its AE for expansion of its business abroad which was converted into equity within three months, it could not be regarded as international transaction of interest free loan merely on ground that same was reflected in that way by assessee inadvertently in Form 3CEB.
Ind AS Adoption: Ind AS mandatory for associate if its holding company adopts Ind AS voluntarily

A company, C Limited is an associate company of B Limited, being a subsidiary of A Limited. A Limited has decided to comply with Ind AS voluntarily from FY 2016-17.
Whether B Limited and C Limited are also required to comply with Ind AS from FY 2016-17?
Para 3 of Ind AS 28, Investments in Associates and Joint Ventures provides that an associate is an entity over which the investor has significant influence.
Further, as per para 5 of Ind AS 28, if an entity holds, directly or indirectly (e.g. through subsidiaries), 20 per cent or more of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case. Conversely, if the entity holds, directly or indirectly (e.g. through subsidiaries), less than 20 per cent of the voting power of the investee, it is presumed that the entity does not have significant influence, unless such influence can be clearly demonstrated. A substantial or majority ownership by another investor does not necessarily preclude an entity from having significant influence.
So, in the instant case C Limited is an associate of A Limited because, A Limited has significant influence over C Limited through its subsidiary, i.e., B Limited
With reference to the Companies (Indian Accounting Standards) Rules, 2015 as amended on 30th March, 2016, if A Limited has decided to adopt Ind AS voluntarily from FY 2016-17, then B Limited and C Limited have to adopt Ind AS from FY 2016-17.

Tax department signs 7 advance pricing pacts with MNCs
The tax department on Monday signed seven more unilateral advance pricing agreements with taxpayers, as it aims to reduce litigation by providing certainty in the domain of transfer pricing. The international transactions covered in these agreements include software development services, IT-enabled services, engineering design services and administrative and business support services.
IFRS 15 Update: 2016 Financials – Disclosure Considerations

Financial accounting and reporting of revenue is set for a massive change during 2018 under both, United States Generally Accepted Accounting Principles (USGAAP) and International Financial Reporting Standards (IFRS). Corporate India too would be required to switch over to a new IND-AS on revenue from April 1, 2018.
There is a recent update on IFRS 15 disclosures in 2016 financials emanating from a recent Public Document issued by the European Securities and Market Authority (ESMA). It is expected to set the regulatory expectation in the European Union (EU) with respect to implementation of the new revenue standard by entities by 2018.
This update provides relevant inputs and best practices for adoption by Indian companies that prepare financial statements under core IFRS as issued by the IASB for dissemination in United States/EU. Further, Indian companies, both in Phase 1 and Phase 2 would be well advised to analyze this update since the same has implementation implications.

Neeraj Bhagat & Company is a team of distinguished chartered accountant, corporate financial advisors and tax consultants in India. Our firm of chartered accountants represents a coalition of specialized skills that is geared to offer sound financial solutions and advices. The organization is a congregation of professionally qualified and experienced persons who are committed to add value and optimize the benefits accruing to clients.

Neeraj Bhagat & Co.
New Delhi, Gurgaon, Mumbai 

Neeraj Bhagat & Co., S-13, St. Soldier Tower, Vikas Puri, New Delhi, 110018 India

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Neeraj Bhagat & Co · S-13, St. Soldier Tower · G-Block Commercial Centre, Vikas Puri · New Delhi 110018 · India