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(Demonetisation) Govt withdraws exemptions for use of Rs. 500 old notes from 10th Dec on certain payments

Government withdraws exemptions given for the use of Rs.500/- old notes, from the mid night of December 9, 2016, for making payments at railway ticketing counters, ticket counters of Government or Public Sector Undertakings buses for purchase of tickets; For making payments to catering services on board, during travel by rail; and For making payments for purchasing tickets for travel by suburban and metro rail services.

Government has been reviewing the different operational aspects of the matters related to the cancellation of the legal tender character of old high denomination notes of Rs.500/- and Rs.1,000/-. There has been a declining trend in the receipt of these old currency notes of Rs.500/- and Rs.1000/-. Further, a number of steps have been taken for promoting digital transactions.

(Demonetisation) Old 500 & 1000 Rupee Notes Still Accepted For Certain Payments

Whereas, by the notification of the Government of India in the Ministry of Finance, vide F. No. 10/3/2016-Cy.I dated 8th November, 2016 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), dated the 8th November, 2016, the Central Government declared that the bank notes of existing series of denomination of the value of five hundred rupees and one thousand rupees (hereinafter referred to as the specified bank notes), shall cease to be legal tender on and from the 9th November, 2016;

And whereas, it has become necessary to notify certain exemptions for the convenience of the members of public in carrying out certain emergent and urgent transactions using the specified bank notes;

1. Now, therefore, in exercise of the powers conferred by sub-section (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government hereby declares that the specified bank notes shall not be ceased to be legal tender, with effect from the 9th November, 2016 until the 15th December, 2016, to the extent of transactions specified below, namely:—

(a) for making payments in Government hospitals for medical treatment and pharmacies in Government hospitals for buying medicines with doctor's prescription;

The Companies (Removal of Difficulties) Fourth Order, 2016 - Provisos Added to Section 434(1)(c)

Ministry of Corporate Affairs (MCA) Order dated 7th December, 2016

S.O. 3676(E).—Whereas clause (c) of sub-section (1) of section 434 of the Companies Act, 2013 (hereinafter referred to as the 2013 Act) provides that on a date which may be notified by the Central Government for the purpose of transfer of pending proceedings, all proceedings under the Companies Act, 1956 (hereinafter referred to as the 1956 Act) including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer;

And, whereas, the proviso thereof further provides that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government;

And, whereas, clause (c) of sub-section (1) of section 434 of the 2013 Act shall come into force from the 15th December, 2016;

(Tax) Direct Tax Collections for November, 2016 show Growth of 15.12 %

The figures for Direct Tax collections up to November, 2016 show that net collections are at Rs. 4.12 lakh crore which is 15.12% more than the net collections for the corresponding period last year. This collection is 48.67% of the total Budget Estimates of Direct Taxes for F.Y. 2016-17.

As regards the growth rates for Corporate Income Tax (CIT) and Personal Income Tax (PIT), in terms of gross revenue collections, the growth rate under CIT is 11.22% while that under PIT (including STT) is 22.41%. However, after adjusting for refunds, the net growth in CIT collections is 8.75% while that in PIT collections is 23.89%. Refunds amounting to Rs. 1,05,561 crore have been issued during April-November, 2016, which is 17.35% higher than the refunds issued during the corresponding period last year.

Related Post: Direct Tax Collections up to October, 2016 show an increase of 10.6% - link

(Tax) Indirect Tax Collections up to November 2016 show an increase of 26.2%

1. The figures for indirect tax collections (Central Excise, Service Tax and Customs) up to November 2016 show that net revenue collections are at Rs. 5.52 lakh crore, which is 26.2% more than the net collections for the corresponding period last year. Till November 2016, 71.1% of the Budget Estimates of indirect taxes for Financial Year 2016-17 has been achieved.

2. As regards Central Excise, net tax collections stood at Rs. 2.43 lakh crore during April-November, 2016 as compared to Rs. 1.69 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 43.5%.

3. Net Tax collections on account of Service Tax during April-November, 2016 stood at Rs. 1.60 lakh crore as compared to Rs. 1.27 lakh crore during the corresponding period in the previous Financial Year, thereby registering a growth of 25.7%.

4. Net Tax collections on account of Customs during April-November 2016 stood at Rs. 1.48 lakh crore as compared to Rs. 1.40 lakh crore during the same period in the previous Financial Year, thereby registering a growth of 5.6%.

(Demonetisation) Seizure of Rs. 106.52 crore Cash and 127 kg Gold in the case of Sand mining Contractors at Chennai by the Income Tax Department

The Investigation Directorate of Income Tax Department at Chennai conducted searches on 08.12.2016 in the case of a group engaged in sand mining. The group has sand mining licence for the entire state of Tamil Nadu. Eight premises (six residential & two offices) were covered in the search.

During the search, Rs. 96.89 crore cash in Old High Denomination Notes and Rs. 9.63 crore in new Rs. 2000 currency notes along with gold weighing 127 kgs worth approximately Rs. 36.29 crore were found and seized, as unaccounted assets.

The search is still in progress at 4 out of total 8 premises. More specific details including modus-operandi would emerge after examination of the documents and other evidence detected during the search.

(RBI) Security and Risk Mitigation measure - Technical Audit of Prepaid Payment Instrument issuers

RBI Circular to All Prepaid Payment Instrument Issuers, System Providers, System Participants and all other Prospective Prepaid Payment Instrument Issuers (Circular No. DPSS.CO.OSD.No.1485/06.08.005/2016-17 Dt. December 09, 2016)

1. With the withdrawal of legal tender characteristics of existing Rs. 500/- and Rs. 1000/- Bank Notes (Specified Bank Notes – SBN), the use of alternate modes of payment, specifically e-wallets has gained momentum. The Reserve Bank has also notified special measures for Prepaid Payment Instruments (PPIs) to facilitate adoption of digital payments in a big way.

While all efforts should continue to be made by entities for on-boarding new customers and merchants, it needs to be borne in mind that any kind of cyber security incident affecting the digital channels/products, particularly at this juncture, may have significant system-wide ramifications and act as a dampener for the adoption of digital products by public at large.

RBI releases Report on “Measuring Productivity at the Industry Level – The India KLEMS Database"

The Reserve Bank of India today placed on its website the Report on “Measuring Productivity at the Industry Level – The India KLEMS Database” (Data Manual) along with time series data on productivity for 27 industries covering the period 1980-81 to 2011-12, prepared under the India KLEMS [capital (K), labour (L), energy (E), material (M) and services (S)] research project.

The Companies (Transfer of Pending Proceedings) Rules, 2016 (w.e.f. 15.12.2016)


G.S.R. 1119(E).— In exercise of the powers conferred under sub-sections (1) and (2) of section 434 of the Companies Act, 2013 (18 of 2013) read with sub-section (1) of section 239 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016) (hereinafter referred to as the Code), the Central Government hereby makes the following rules, namely:—

1. Short title and Commencement.

(1) These rules may be called the Companies (Transfer of Pending Proceedings) Rules, 2016.
(2) They shall come into force with effect from the 15th December, 2016, except rule 4, which shall come into force from 1st April, 2017.

(Tax) Directions under section 119 of the Income-tax Act, 1961

1. Recent initiatives of the Government to curb the black economy in the country has encouraged people to shift towards digital mode of payment while making financial transactions. By adopting digital mode of payment, no financial transactions would remain undisclosed and consequently an enhanced turnover of business might get reflected in the books of accounts.

Under the circumstances, an apprehension has been raised that increased turnover in the current year may lead to reopening of earlier years' cases involving lower turnover u/s 147 of the Income-tax Act, 1961 ('Act') by the Assessing Officer causing undue harassment to tax payers.

2. It is hereby clarified that reopening of cases u/s 147 of the Act is feasible only when the Assessing Officer "has reason to believe that any income chargeable to tax has escaped assessment for any assessment year" and not merely on the basis of any reason to suspect.

Streamlining the Process for Acquisition of Shares pursuant to Tender-Offers made for Takeovers, Buy Back and Delisting of Securities

1. SEBI had issued circular No. CIR/CFD/POLICY CELL/1/2015 dated April 13, 2015 on Mechanism for acquisition of shares through stock exchange mechanism pursuant to tender-offers for the purpose of takeovers, buy back and delisting of securities.

2. In the current mechanism, the shareholders submit their bids through stock brokers and subsequently, the brokers transfer the shares to the special account of the clearing corporation. Likewise, the consideration payable to shareholders for the shares accepted in the offer are routed through stock brokers. Also, the shares not accepted in the offer are returned to shareholders through the stock brokers.

3. It has now been decided in consultation with the stock exchanges and depositories that transfer of shares of shareholders under the tender offers would be made directly to the account maintained by the clearing corporation. After such transfer of securities, the clearing corporation will be allowed to utilize the securities towards the settlement obligations under such offers. Further, consideration for the accepted shares in the tender offer and shares tendered but not accepted under such offer would be credited directly to shareholders' bank and demat accounts respectively.

(Companies Act) Commencement Notification Dated 07.12.2016

Ministry of Corporate Affairs(MCA), Notification dated 7th December, 2016 S.O. 3677(E).—

In exercise of the powers conferred by sub-section (3) of section 1 of the Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 15th day of December, 2016 as the date on which the following provisions of the said Act shall come into force, namely :-

Sl. No.



Clause (23) of section 2


Clause (c) and (d) of sub-section (7) of section 7


Sub-section (9) of section 8


Section 48


Section 66


Sub-section (2) of section 224


Section 226


Section 230 [except sub-section (11) and (12)], and Sections 231 to 233


Sections 235 to 240


Sections 270 to 288


Sections 290 to 303


Section 324


Sections 326 to 365


Proviso to section 370


Sections 372 to 373


Sections 375 to 378


Sub-section (2) of section 391


Clause (c) of sub-section (1) of section 434

(Tax) ​Procedure for the purposes of furnishing and verification of Form 27BA for removing of default of Short Collection and / or Non Collection of Tax at Source

1. As per first proviso to sub-section (6A) of section 206C of Income-tax Act, 1961, any person, other than a person referred to in sub-section (1D), responsible for collecting tax in accordance with the provisions of this section, who fails to collect the whole or any part of the tax on the amount received from a buyer or licensee or lessee or on the amount debited to the account of the buyer or licensee or lessee shall not be deemed to be an assessee in default in respect of such tax if such buyer or licensee or lessee-

(i) has furnished his return of income under section 139;
(ii) has taken into account such amount for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income,
and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed.

(Service Tax) Govt waives service tax charged while making payments through credit card, debit card, charge card or any other payment card (for payments up to Rs. 2,000 in a single transaction)

When a customer uses a credit card, debit card, charge card or any other payment card for payment of his purchase of goods or services, the merchant/service establishment is charged certain merchant discount rate (MDR) by credit card or debit card issuing banks. 

With a view to promote digital transactions and encourage merchant establishments to accept such card payments, Government has waived service tax on such amount charged while making payments though credit card, debit card, charge card or any other payment card. However, this waiver is limited to payments upto two thousand rupees only (Rs. 2000) in a single transaction.

Ministry of Finance, Department of Revenue, Notification No. 52/2016-Service Tax dt. 08-12-2016

(Demonetisation) Income Tax Sleuths Unearth Innovative Methods of Laundering and Transportation of Cash at Mumbai, Nagpur and Ahmedabad

Income tax investigations at Mumbai led to the revelation of a syndicate of ground level operators active in converting banned currency notes into legal tenders for a commission. As part of the operation to nab the culprits, Income Tax Investigation Directorate sent out a few decoy customers seeking to exchange banned currency notes into new notes. The syndicate, acting through its mediator, agreed to the exchange for a 35% commission. The exchange was to take place at the mediator’s residence. The mediator was caught red handed and new currency notes aggregating to Rs. 29.5 lakh was seized.

It has now emerged that the syndicate comprised of many ground level operators (GLOs) - mainly local youths led by a master aggregator and a mediator. The mediator would seek customers. The GLOs would withdraw new currency in their own names or names of friends and family within the prescribed weekly limits, pass it on to the aggregator for a commission and deposit the old notes in their own accounts or accounts of family or friends in small sums.

(E-Transactions) Package for Promotion of Digital and Cashless Economy

In the aftermath of the cancellation of the legal tender character of old Rs.500 and Rs.1,000 notes, there has been a surge in the digital transactions through use of credit/debit cards and mobile phone applications/e-wallets etc.

To further accelerate this process, the Central Government has decided on a package of incentives and measures for promotion of digital and cashless economy in the country.

1. The Central Government Petroleum PSUs shall give incentive by offering a discount at the rate of 0.75% of the sale price to consumers on purchase of petrol/diesel if payment is made through digital means.

Nearly 4.5 crore customers buy petrol or diesel at such petrol pumps per day who can take benefit of this incentive scheme.  It is estimated that petrol/diesel worth Rs.1800 crore is sold per day to the customers out of which nearly 20% was being paid through digital means.

(MCA) issues Clarification Regarding Due Date of Transfer of Shares to IEPF Authority

Various representations have been received from the Companies for simplification of transfer process of shares under Investor Education & Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016, notified on 05.09.2016. It has also been requested for extending the due date prescribed for transferring the shares to IEPF Authority.

The matters, including simplification of transfer process and extension of date for such transfer, are under consideration and the rules are likely to be revised. The revised rules shall be notified in due course.

Inflow of Funds into Jan Dhan Accounts

Since the time the Government has alerted people not to allow their accounts, particularly Jan Dhan accounts, to be used by others for the purpose of converting their black money, there has been a considerable decrease in the inflow of funds in Jan Dhan accounts. In the first week after the decision on currency notes was announced, i.e. 8th to 15th November, the total deposits received in Jan Dhan accounts was Rs. 20,206 crores. In the second week, between 16th to 22nd November, the flow was Rs. 11,347 crores. And in the third week between 23rd to 30th November, it was reduced to Rs. 4867 crores.

On 1st and 2nd December, the inflow into Jan Dhan account has now been reduced to Rs. 410 crores and Rs. 389 crores respectively. The average per account deposit in Jan Dhan accounts is Rs. 13,113/- for this entire period from 8th November to 2nd December, which is not alarming, given the need to bring all cash to banks.

(Tax) Transport, Power & Interest subsidies received by an Industrial Undertaking-Eligibility for deduction under sections 80-IB, 80-IC etc., of the Income-tax Act, 1961

CBDT Circular No. 39/2016 dated 29th November, 2016

1. The issue whether revenue receipts such as transport, power and interest subsidies received by an Industrial Undertaking/ eligible business are part of profits and gains of business derived from its business activities within the meaning of sections 80-IB/80-IC of the Income-tax Act, 1961 (hereinafter referred to as "the Act") and thus eligible for claim of corresponding deduction under Chapter VI-A of the Act has been a contentious one. Such receipts are often treated as 'Income from other sources' by the Assessing Officers.

2. The Hon'ble Supreme Court in its judgment dated 9.3.2016 in the case of Meghalaya Steels Ltd in CA No. 7622 of 2014 [NJRS citation 2016-LL-0309-15] and other cases has held that the subsidies of transport, power and interest given by the Government to the Industrial Undertaking are receipts which have been reimbursed for elements of cost relating to manufacture/ sale of the products. Thus, there is a direct nexus between profit and gains of the industrial undertaking/ business and reimbursement of such business subsidies. Accordingly, such subsidies are part of profits and gains of business derived from the Industrial Undertaking and are not to be included under the head 'Income from other sources'. Therefore, deduction is admissible under section 80-IB/80-IC of the Act on such revenue receipts derived from the Industrial Undertaking.

(RBI) Withdraws Requirement of Incremental CRR to be Maintained by Banks

Reference to RBI circular DBR.No.Ret.BC.41/12.01.001/2016-17 dated November 26, 2016 whereby all scheduled banks were required to maintain, under Section 42(1A), incremental cash reserve ratio (CRR) of 100 per cent of the increase in NDTL between September 16, 2016 and November 11, 2016, effective the fortnight beginning November 26, 2016.

It was intended to absorb a part of the large increase in liquidity in the system following the withdrawal of the legal tender status of Rs. 500 and Rs. 1,000 denomination bank notes. It was also indicated that the incremental CRR was purely a temporary measure and that it would be reviewed on December 9, 2016 or even earlier.

With the enhancement in the ceiling for issue of securities under the Market Stabilisation Scheme (MSS) to Rs. 6,000 billion, it has been decided to withdraw the incremental CRR effective the fortnight beginning December 10, 2016. The liquidity released by the discontinuation of the incremental CRR would be absorbed by a mix of MSS issuances and liquidity adjustment facility (LAF) operations.

Prevention of Money-laundering (Appeal) Amendment Rules, 2016

Ministry of Finance, Department of Revenue, Notification dated 6th December, 2016

G.S.R. 1116(E).—In exercise of the powers conferred by sub-section (1) and clause (r) and clause (x) of subsection (2) of section 73, read with section 35 of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes the following rules to amend the Prevention of Money-laundering (Appeal) Rules, 2005, namely:-

1. (1) These rules may be called the Prevention of Money-laundering (Appeal) Amendment Rules, 2016.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Prevention of Money-laundering (Appeal) Rules, 2005, in rule 3, in sub-rule (2), in the Table, against serial number 3, in the second column, the words, letters and figure “and upto Rs.1 lakh” shall be omitted.

(MCA) Clarification Regarding Filing of Offline Challans with IEPF Authority under Companies Act

In accordance with Investor Education & Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016, notified on 05.09.2016, it is mandatory for the companies depositing amounts to IEPF under section 125 of Companies Act, 2013 to:-

(i) generate challan online only;

(ii) file form IEPF-1 mentioning the SRN No. of challan (online mode only).

All companies transferring the amount to IEPF are, therefore, requested to ensure that the above procedure is followed. The challans not generated on MCA 21 portal will not be accepted after 15.12.2016.

(Banking) Non-Banking Financial Company - Account Aggregator (NBFC-AA)

The Reserve Bank of India had issued the Non-Banking Financial Company - Account Aggregator (Reserve Bank) Directions, 2016 (the directions) on September 2, 2016. The directions were to come into effect from the date of notification of a non-banking institution that carries on 'the business of account aggregator' as a non-banking financial company, by the Bank in the Official Gazette. The notification issued by the Bank has been published in the Gazette of India (Part III—Sec 4) on November 26, 2016.

No entity other than a company shall undertake the business of an Account Aggregator. Further, no company shall commence or carry on the business of an Account Aggregator without obtaining a certificate of registration from the Bank.

(Demonetisation) Income Tax (IT) Department carries-out swift investigations in more than 400 cases since the de-monetization

Income Tax (IT) Department carries-out swift investigations in more than 400 cases since the de-monetization of old High Denomination (OHD) currency on 8th November, 2016; More than Rs. 130 crore in cash and jewellery seized and approximately Rs. 2,000 crore of Undisclosed Income admitted by the taxpayers; IT Department refers large number of cases with serious irregularities detected Post De-monetization to Enforcement Directorate (ED) & CBI. 

The Income Tax Department has carried-out swift investigations in more than 400 cases since the de-monetization of Old High Denomination (OHD) currency announced by the Government on 8th November, 2016. More than Rs. 130 Crore in cash and jewellery has been seized and approximately Rs. 2000 Crore of undisclosed income has been admitted by the taxpayers.

Detecting serious irregularities beyond the Income-tax Act, the CBDT decided to refer such cases to the ED and the CBI, enabling them to examine the criminal conduct for immediate necessary action. More than 30 such references have already been made to the ED, and are being sent to the CBI.

(Tax) Meeting of the BRICS Heads of Revenue & Experts on Tax Matters at Mumbai

The Heads of Revenue of the BRICS countries, namely the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa held a meeting on 5th & 6th December, 2016 in Mumbai to discuss the potential areas of cooperation and exchange opinions and views based on their existing commitment to openness, solidarity, equality, mutual understanding, inclusiveness and mutually beneficial cooperation.

The meeting saw discussions amongst BRICS Experts on Tax matters on contemporary and relevant topics such as sharing of best practices in BRICS countries on improving compliance through non intrusive means, progress and issues arising out of implementation of BEPS action point 13 relating to Country by Country reporting and also the role of United Nations in becoming the voice of developing and emerging economies in setting international tax rules.