Taxpoint: Taxation and Other Laws Ordinance 2020 Analysis

Taxation and Other Laws Ordinance 2020 Analysis

1. Government of India, Ministry of Home Affairs, vide its order No. 40-3/2020/-DM- I(A) dated 24.3.2020 r.w. order No. 1-29/2020/PP (Pt. II) dated 24.3.2020 issued by the National Disaster Management Authority (NDMA) under Disaster Management Act, 2005 pronounced countrywide lockdown in the wake of worldwide Noval Covid-19 outbreak for 21 days starting from 25.3.2020 along with detailed guidelines of the even date. This order was followed by addendums dated 25.3.2020, 27.3.2020 and 29.3.2020.

2. Consequently, the Hon’ble Union Finance Minister and Corporate Affairs Minister, Government of India Smt. Nirmala Sitharaman announced several relief measures relating to Statutory and Regulatory compliance matters across Sectors on 24.3.2020. The preamble of the announcement is as follows:

“The Union Finance & Corporate Affairs Minister Smt. Niramla Sitharaman today announced several important relief measures taken by the Government of India in view of COVID-19 outbreak, especially on statutory and regulatory compliance matters related to several sectors. While addressing the press conference through videoconferencing here today, Smt. Sitharaman announced much-needed relief measures in areas of Income Tax, GST, Customs & Central Excise, Corporate Affairs, Insolvency &Bankruptcy Code (IBC) Fisheries, Banking Sector and Commerce.”

Taxation and Other Laws Ordinance 2020 Analysis

3. Immediately after the above announcement a Press Note was released, which inter alia provided that necessary legal circulars and legislative amendments for giving effect to the aforesaid relief shall be issued in due course. In relation to GST it inter alia further provided that necessary legal circulars and legislative amendments to give effect to the aforesaid GST relief shall follow with the approval of GST Council. In relation to Company matters it inter alia further provide that detailed notifications/circulars in this regard shall be issued by the Ministry of Corporate Affairs separately.

4. In relation to company / LLP matters the Ministry of Corporate Affairs, Government of India has already issued a General Circular No. 11/2020 dated 24.3.2020 providing following relief in accordance with the Press Note:

“In order to support and enable Companies and Limited Liability Partnerships (LLPs) in India to focus on taking necessary measures to address the COVID-19 threat, including the economic disruptions caused by it, the following measures have been implemented by the Ministry of Corporate Affairs to reduce their compliance burden and other risks: –

I. No additional fees shall be charged for late filing during a moratorium period from 1st April to 30th September 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non compliant companies/ LLPs to make a ‘fresh start’. The Circulars specifying detailed requirements in this regard are being issued separately.

II. The mandatory requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (CA- 13) (120 days) stands extended by a period of 60 days till next two quarters i.e., till 30th September. Accordingly, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters, instead of 120 days as required in the CA-13.

III. The Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of being applicable from the financial year 2019-2020 notified earlier. This will significantly ease the burden on companies & their auditors for the financial vear 2019-20. A separate notification has been issued for this purpose.

IV. As per Para Vll (1) of Schedule lV to the CA-13, independent Directors (lDs) are required to hold at least one meeting without the attendance of Non- independent directors and members of management. For the financial year 2019-20, if the lDs of a company have not been able to hold such a meeting, the same shall not be viewed as a violation. The lDs, however, may share their views amongst themselves through telephone or e-mail or any other mode of communication, if they deem it to be necessary.

V. Requirement under section 73(2)(c) of CA-13 to create the deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before 30th April 2020 shall be allowed to be complied with till 30th June 2020.

VI. Requirement under rule 18 of the Companies (Share Capital & Debentures) Rules, 2014 to invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020, may be complied with till 30th June 2020.

VII. Newly incorporated companies are required to file a declaration for Commencement of Business within ‘180 days of incorporation under section 10A of the CA-13. An additional period of 180 more days is allowed for this compliance.

Vlll. Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the
CA-13.”

5. For matters other than company / LLP matters the Ministry of Law and Justice, Government of India, has released an Ordinance promulgated by the Hon’ble President of India on 31.3.2020 to provide relaxation in the provisions of certain Acts and for matters connected therewith or incidental thereto.

6. The Ordinance is as follows:

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Here is the link of video on Webinar on Interpretation of Relief Ordinance, 2020 dated 31 03 2020: