Conversion of One Person Company into Private Limited Company & Vice - Versa

As per Companies Act 2013, a One Person Company (OPC) can be converted into a Private Limited Company by voluntary conversion or mandatory conversion as the case maybe.

After the incorporation of One Person Company, it cannot be converted into a private limited company unless it has completed two years from date of incorporation of such OPC. However, it can be voluntarily converted into private limited if the said time period of two years has lapsed from the date of incorporation. The procedure for such conversion shall be in accordance with the rules and regulations laid down under section 18 of the Companies Act, 2013 and Rule 7(4) of the Companies (Incorporation) Rules, 2014.

As per section 18 of the Companies Act 2013, conversion can be done by the alteration of memorandum and articles of the company. On an application made by the company, Registrar shall, on the satisfaction of compliance of provisions of this chapter, close the former registration and issue a new certificate of incorporation, after registering the documents referred to in sub-section (1), as its first registration provided that such registration shall not affect any liabilities, debts, contracts incurred or entered into, obligations.

In case, a One Person Company has a paid-up capital more than or equal to Rs. 50 lakhs or the annual turnover for the relevant financial year exceeds Rs.2 crores, then it shall mandatorily be converted into private limited or public limited company as per Rule 7(4) of the Companies (Incorporation) Rules 2014.

As per Rule 7(4) of the Companies (Incorporation) Rules 2014, if a private company other than a section 8 company having paid up share capital of Rs. 50 lakhs or less or average annual turnover during the relevant period is Rs. 2 crores or less may convert itself into OPC by passing a special resolution in the general meeting.

No objection Certificate shall be obtained from the members and creditors of the company before passing such resolution. Copy of resolution shall be filed by the company within thirty days from the date of passing such resolution in form MGT-14. Company shall file an application for its conversion into OPC along with fees in Form INC-6.

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Some recent updates that you would not like to miss – 17.05.2017

1.   Transfer pricing & advance tax requirements won't apply to Indian Cos with overseas subsidiaries are likely to get some leeway around transfer pricing, withholding tax and advance tax requirements under the place of  effective management (POEM) rules.

2.   Under GST Records can be kept in electronic form & authenticated by Digital Signature. Backups should be taken which can be restored in reasonable time.

3.   SEBI has taken the first major step towards development of the commodity derivatives market by approving introduction of options contracts since taking over the market's regulation in September 2015.

4.   Where revenue urged that assesses company received share application money from bogus shareholders, it was for revenue to proceed by reopening assessment of such shareholders and assessing them to tax and not to add same to assessee's income as unexplained cash credit. Proviso to Sec 68  [2017] 80 taxmann.com 272 (Bombay HC).

5.   Under GST every registered person to keep in physical /electronic form, books of account at Principal & EVERY related place of business mentioned in his RC.

6.   MCA has issued a Circular clarifying the issues relating to the Transfer of shares to IEPF Authority. The due date for transfer of shares by Companies to IEPF is May 31, 2017 .

7.   Meeting of creditors could be dispensed with if maximum no. of creditors gave their consent to amalgamation scheme. [2017] 80 taxmann.com 307 (NCLT - Bang.).

8.   Govt. has notified section 234 of the Companies Act, 2013 which provides for mergers and amalgamations between an Indian Company and a foreign company and vice versa. RBI has also inserted Rule 25A[2] to amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

9.   Under GST Law IGST, CGST, SGST deposited cannot be adjusted against each other. Only IGST, CGST & SGST input tax credit can be adjusted in specified order.

 10. Real Estate (Regulation and Development) Act, 2016 which seeks to protect home-buyers as well as to boost investments in the real estate industry, will come into force across the country from 1st May, 2017. Under the Act, all the States will constitute a Real Estate Regulatory Authority (RERA).

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Some recent updates that you would not like to miss – 16.05.2017

1.  ICAI issues Frequently Asked Questions on The Insolvency and Bankruptcy Code 2016 and Companies Act 2013.

2.  CBDT has decided that if due tax under PMGKY, has been received by 31st March, 2017, and deposit in the Bond Deposit has been received by 30th April, 2017, the declaration in Form No.1 can be filed by 10th May, 2017. Circular No.14 of 2017, dated: 21st April, 2017.

3.  Under GST Supplier MUST maintain Stock records of raw materials, finished goods, scrap etc (including gifts, goods lost). Composition supplier exempt.

4.  Under GST Specified account or records to be maintained separately for each activity including manufacturing, trading & provision of services etc.

5.  About 40 million subscribers of the Employees´ Provident Fund Organization (EPFO) will be able to withdraw up to 90 per cent of their accumulations in their PF account to purchase homes.

6.  The government has extended the startups intellectual property protection (SIPP) scheme for a period of three years till March 2020 to help budding entrepreneurs protect their patents, trademark and designs.

7.  When the assesses has satisfactorily explained the delay in filing the return, he cannot be denied the claim for carry forward of loss without giving an opportunity of being heard. Region Infra & Services Pvt. Ltd. V. CBDT. High Court -MADRAS.

8.  Under GST Every Registered person including a Composition Supplier, to keep & maintain separate account of Advances Received, Paid & adjustments made.

9.  CBDT has made it clear that income from letting out buildings /developed space along with other amenities in an industrial park/special economic zones (SEZs) would only be treated as “business income” and not as “income from house property”.

10.  CBDT issued Circular No.17 of 2017 on the Clarification regarding Liability to income – tax in India for a non – resident seafarer receiving salary in NER (Non Resident External) account maintained with an Indian Bank.

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Some recent updates that you would not like to miss – 15.05.2017

1.  In GSTR-1 give Summary of supplies to unregistered persons, Rate wise for Local supplies & Rate & State wise for Inter-state ones up to 2.50 Lacs.

2.  Negotiable Instruments Act:  Notice deemed to be served when it was returned back with even in absence of drawer at correct address, or on his refusal, due services had to be presumed. Supreme Court of India.

3.  Cess applicable on CGST & IGST on vehicles, cold drinks, pan masala, tobacco, solid fuels made from coal, lignite etc& other specified supplies.

4.  From July 1, 2017, all tax returns will have to mention the Aadhaar No. , as per Sec 139AA of Income Tax Act. If you have both PAN and Aadhaar, you need to link the two. If you fail to do so, your PAN no could become invalid.

5.  The Govt. is considering scrapping Foreign Investment Promotion Board and considering doing away with prior government approval for investments in most sectors including single-brand retail.

6.  RBI permits banks to invest up to 10% in REITs,

7.  From July 1, 2017, all tax returns will have to mention the Aadhaar NO. , as per Sec 139AA of Income Tax Act. If you have both PAN and Aadhaar, you need to link the two. If you fail to do so, your PAN no could become invalid.

8.  Members who have not shared their PAN with ICAI, It has been informed by the Income Tax Dept that the e-Filing account of the members will be blocked by the Income Tax Authorities.

9.  Every entity registered under the proposed GST might have to maintain separate accounts relating to each activity. This is a part of the draft GST rules on accounts and records released by the Centre.

 10. Central Govt. has issued Draft GST Rules on Accounts & Records, Appeals & Revision and Advance Ruling on April 19, 2017, making a total of 14 Draft Rules as on date.

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Some recent updates that you would not like to miss – 12.05.2017

1.  In GSTR-2, Purchaser to specify inward supplies for which he is not eligible for ITC fully or partly whether at invoice level or otherwise.

2.  Union ministry of finance has granted income tax exemption to Indian seafarers sailing aboard foreign ships outside India for more than 182 days a year. (CBDT) circular no. 13/2017.

3.  GSTR-1 of a month can be filed within 10 days from end of month. It cant be filed from  11th to 15th as GSTR-2 to be filed in this period.

4.  Service tax may move up from 15% to 18% under GST: Revenue Secretary Hasmukh Adhia. At present, the services sector is taxed at 14% with two additional cesses -- Swachh Bharat Cess and Krishi Kalyan Cess attracting half percent.

5.  CBDT has issued Revised Form 3CD applicable for Tax Audit cases for AY 2017-18.

6.  E-Way Bills as Per New GST Rules :

   i. Entire process requires participation by Supplier, Transporter and receipt.

  ii. IE-Way Bill will be required for movement of all goods, whether within the state or across states.

  iii. n Case of an Accident if goods would be transferred from one vehicle to another than transporter has to create a new e-way bill on the GSTN portal, before further transit.

 iv.  Multiple consignments are to be transported in one vehicle the transporter is required to indicate the serial number of the e-way bills generated in respect of each such consignment on the GSTN portal.

 v.  Validity period of the e-way bill, which is dependent upon the distance involved for transport of goods.

7.  ROC has issued notices to more than 2 Lakh Companies all over India who have not commenced business within one year of their incorporation or who have not been carrying on any business or operation for a period of two immediately preceding financial years and have not made any application within such period for obtaining the status of dormant company under section 455 to to remove/strike off.

8.  A unique PIN CODE 560500 has been allotted to Centralized Processing Center (CPC), Income Tax Department located in Bangalore by the Department of Post.

9.  Information to be furnished electronically in GST INS-01 prior to movement of goods if value exceeds Rs. 50,000, whether within or outside state.

 10. From July 1, 2017, all tax returns will have to mention the Aadhaar no, as per Sec 139AA of Income Tax Act. If you have both PAN and Aadhaar, you need to link the two. If you fail to do so, your PAN no could become invalid.


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Defective or Incomplete Return [Section 139(9)]

A return of income filed by a taxpayer / assessee for the relevant financial year is said to be defective if –

1.  Such return has not been duly filed: All items in Income Tax return form must be filled in the manner indicated in the return form. If any schedule of the relevant form is not applicable in the case of an assessee, it should be scored across as “----NA----“. If any item is inapplicable, one should write “NA” against it. One should write “NIL” to denote nil figure. No column or row should be left blank. Otherwise the return may be liable to be held defective or even invalid.

2.   Annexures, statements, accounts, etc.: A few statements, reports, proof of pre-paid taxes, accounts, etc.., should accompany the return of income, otherwise the return will become defective. However, it is not possible to attach any certificate or report or computation or final accounts with new income tax returns forms. Likewise, it is not possible to attach proof of pre-paid taxes (like tax deducted / collected at source, advance payment of tax, self – assessment tax). The assessee should, therefore, retain these certificates, report, computation, final accounts, and proof of prepaid taxes with him. These may be furnished whenever the Assessing Officer wants to examine them in assessment proceedings or otherwise. Return of income will not become defective of non – fulfilment of this requirement.

The assessing officer may give the assessee an opportunity to rectify the defect within a period of 15 days from the date of such intimation. This time – limit may be extended by the Assessing Officer on an application by the assessee.

If, however, an application filed by an assessee for extension time is not disposed of (i.e. no action is taken and the Assessing Officer remains silent), then only conclusion is that time asked for by the assessee has been granted by the Assessing Officer.

If the defect is not rectified by the assessee within the period of 15 days or such further extended period, then the Assessing Officer shall treat the return as an invalid return and other provisions of the Income-Tax Act would apply as if the assessee had failed to furnish the return.

Where the assessee rectifies defect after the expiry of the period of 15 days (or the further extended period), but before assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.

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Some recent updates that you would not like to miss – 10.05.2017

1.  From 1st july onwords Aadhar No. is compulsory document for pan card and income tax return filling.

2.  Lok Sabha passed a Bill that would ensure continuance of levy of excise on petroleum products and abolition of cess on some other items following GST rollout from July 1

3.  Share premium received by the company on is subscribed share capital would not constitute part of the capital employed in the business of the company within the meaning of Sec 35D of the Income Tax Act, 1961 for calculating eligible amount of deduction therein. Berger Paints India Ltd. Vs. CIT, Supreme Court of India.

4.  MCA on 5th April 2016 announced E-form STK-2 for Removal of Companies name form ROC pursuant to sub section (2) of Section 248 of the Companies Act, 2013, which talk about ‘voluntary removal of name of Companies form Registrar of Companies.

5.  Bogus Share Capital cannot be assessed as Company’s Share Capital as Amendment to Sec 68 has no Retrospective Effect: Bombay High Court. In CIT v. M/s. Gagandeep Infrastructure Pvt Ltd.

6.  Capital Gain Tax would not attract if the Previous Transaction which the assesses acquired the Property was not taxable: Bombay High Court in case of Mr. Nusli Wadia.

7.   Capital gains: An amount received from a wholly-owned subsidiary in consideration of transfer of shares of the WOS to a group of shareholders is not taxable as capital gains. The Department cannot subject a transaction under the Gift-tax Act and also levy tax under the Income-tax Act.  CIT Vs  M/s Annamalaiar Mills (P) Ltd Vs CIT (Supreme Court)

8.  CBDT clarifies on cash curb, Aadhaar to the small taxpayers under the presumptive taxation scheme are exempt from maintenance of Books of A/c.

9.  Humble President has given his assent to the four key Goods and Services Tax (“GST”) Bills, after they were passed by the Parliament. The four GST Bills which are now enacted can be accessed as under:

· The Central Goods and Services Tax Act, 2017

· The Integrated Goods and Services Tax Act, 2017

· The Goods and Services Tax (Compensation to States) Act, 2017

· The Union Territory Goods and Services Tax Act, 2017

10.  In GSTR-1 give Summary of supplies to Unregistered persons, Rate wise for Local supplies & Rate & State wise for Inter-state ones up to 2.50 Lacs.

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