WHAT YOU HAVE TO LOOK INTO RELATED PARTY NOTE OF A COMPANY WHICH HAS CROSS BORDER TRANSACTIONS WITH ITS RELATED PARTY

 WHAT YOU HAVE TO LOOK INTO RELATED PARTY NOTE OF A COMPANY WHICH HAS CROSS BORDER TRANSACTIONS WITH ITS RELATED PARTY

FORM 48 UNDER THE NEW INCOME TAX ACT

Every company having international transactions with a related party must report them in its Transfer Pricing Documentation (TPD) and file Form 3CEB (which has now been renamed to Form 48 under the new Income-tax Act).

Clause 13 in the above form deals with the availment or provision of services.

HIDDEN FREEBIES

In Transfer Pricing, we scan the RPT note to spot "hidden freebies" like a parent company can give its Indian subsidiary an interest-free loan or a free corporate guarantee so we can calculate what the Arm’s Length Price (fair market value) should have been these freebies.

RPT FILTER

If a company has more than 25% transactions with its Associated Enterprises (AEs), it fails the filter.

One single note buried at the back of the financials drives our entire compliance, benchmarking, and litigation.

WHAT SHOULD A COMPANY SECRETARY OR COMPLIANCE PROFESSIONAL CHECK?

For a company with cross-border related-party transactions, review:

1. The related-party disclosures in the financial statements.

2. The list of associated enterprises and the nature of their relationships.

3. Transactions involving services, royalties, loans, guarantees, imports and exports.

4. Agreements, invoices, supporting evidence and actual receipt of services.

5. The transfer pricing study and the basis for determining the arm’s length price.

6. Consistency between the books of account, transfer pricing documentation and Form 48.

#R V SEKAR FCS, LLB 79047 19295,

SEBI SETTLEMENT REGULATIONS, 2026 — WHAT IS NEW?

 SEBI SETTLEMENT REGULATIONS, 2026 — WHAT IS NEW?

 SEBI has notified the SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026, introducing a revised framework for resolving eligible administrative and civil proceedings through settlement.

The regulations replace the 2018 settlement framework, subject to transitional provision with effect from 6 November 2026.

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SALE CERTIFICATE ISSUED BY DRT IN AUCTION SALE THE REGISTRATION WITH THE REGISTRAR IS NOT COMPULSORY SAYS MADYAPRADESH HIGH COURT IN SUKH SAGAR AGRO INDUSTRIES Vs PUNJAB NATIONAL BANK & OTHERS

 SALE CERTIFICATE ISSUED BY DRT IN AUCTION SALE THE REGISTRATION WITH THE REGISTRAR IS NOT COMPULSORY SAYS MADYAPRADESH HIGH COURT IN SUKH SAGAR AGRO INDUSTRIES Vs PUNJAB NATIONAL BANK & OTHERS

On 8 February 2025, the DRT gives the buyer a sale document.”

The buyer goes to the Registrar's office to record the document, but the Registrar refuses.

5. The buyer goes to the High Court.

6. The State disagrees. The State refers to an older Supreme Court decision to support its position.

The buyer shows other Supreme Court decisions. A sale certificate issued by the proper authority after an auction does not always need compulsory registration.

The High Court considers the law. The Judge decides that the same principle applies to this DRT auction sale certificate.

 The buyer wins the case.

The High Court allows the petition and directs the authorities to record the sale certificate and make the necessary entry in Book No. 1 under Section 89(4)

                      KEY TAKE AWAY

The buyer won the property in a DRT auction, the Registrar refused to record the sale certificate, and the High Court ordered the authorities to make the required official entry.

                      IMPORTANT LESSON:

A sale certificate issued by the proper authority after a DRT auction does not necessarily need compulsory registration.

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WHETHER RESIGNATION OF INDEPENDENT DIRECTOR GAUTAM DOSHI FROM SUN PHARMACEUTICAL INDUSTRIES LTD WITHOUT SIGNING HIS RESIGNATION LETTER AND NOT AFFIXING HIS DSC AND INTIMATION TO THE COMPANY THROUGH HIS LAWYER IS VALID UNDER THE COMPANIES ACT 2013?

 WHETHER RESIGNATION OF INDEPENDENT DIRECTOR GAUTAM DOSHI FROM SUN PHARMACEUTICAL INDUSTRIES LTD WITHOUT SIGNING HIS RESIGNATION LETTER AND NOT AFFIXING HIS DSC AND INTIMATION TO THE COMPANY THROUGH HIS LAWYER IS VALID UNDER THE COMPANIES ACT 2013?

·       Unsigned resignation letter + no DSC + sent only by lawyer → Not valid compliance under Section 168.

·       The director must personally sign (physical or digital) the resignation notice.

·       Intimation through a lawyer without authorization is insufficient.

·       Until a proper resignation is filed, Gautam Doshi would continue to be shown as director in MCA records.

LEGAL FRAMEWORK

Section 168(1), Companies Act, 2013

·       A director may resign by giving a notice in writing to the company.

·       The resignation takes effect from the date the notice is received by the company or the date specified in the notice, whichever is later.

Rule 15 of Companies (Appointment and Qualification of Directors) Rules, 2014 says

·       The company must file Form DIR‑12 with the Registrar within 30 days of receiving the resignation.

·       The resigning director may also forward a copy of the resignation to the Registrar in Form DIR‑11 (though after 2017 amendment, filing DIR‑11 is optional for the director).

·       Key Compliance Questions 

·       Form of Resignation: 

·       The law requires a written notice. It does not mandate that the director must sign with a Digital Signature Certificate (DSC). A physical signature or even an authenticated communication can suffice.

·       However, if the resignation is sent through a lawyer without the director’s own signature, the company may question its validity unless the lawyer is expressly authorized (via power of attorney or mandate).

MODE OF INTIMATION:

·       Resignation must be personally communicated by the director. Courts have generally held that a resignation is a unilateral act — once communicated, it is effective. But communication through a lawyer without the director’s signature raises doubts about authenticity.

JUDICIAL VIEW

Courts (e.g., Moti Ram v. Param Dev, SC) have emphasized that resignation is effective once communicated, even without acceptance.

Resignation of an Independent Director must be personally signed and communicated. A lawyer’s intimation without signature/DSC is not valid under the Companies Act, 2013.

JUDICIAL PRECEDENTS

CASE	COURT	PRINCIPLE ESTABLISHED
Moti Ram v. Param Dev (SC)	Supreme Court	Resignation is a unilateral act effective upon communication to competent authority.
Dr. J.S. Gambhir v. Millennium Health Institute & Diagnostics (P.) Ltd.	Delhi HC	Resignation effective once communicated; acceptance not required.
S.S. Lakshmana Pillai v. ROC	Madras HC	Resignation is unilateral unless Articles specify otherwise.
Latchford Premier Cinema Ltd. v. Ennion and Paterson [1932] 2 Comp. Case 106 (CD)	UK precedent often cited	Even verbal resignation accepted if Articles permitted; Indian law now requires written resignation.
T. Murari v. State of Tamil Nadu	Madras HC	Communication of intention is sufficient; board cannot refuse.

KEY TAKEAWAY

However, in corporate practice, unsigned or unauthenticated letters are treated as irregular. The ROC may also raise objections if DIR‑12 is filed based on such a document.

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LOAN RECEIVED FROM A LENDER HELD REPAYABLE AS DEPOSIT UNDER COMPANIES ACT HELD BY NCLT, ALLAHABAD.

 LOAN RECEIVED FROM A LENDER HELD REPAYABLE AS DEPOSIT UNDER COMPANIES ACT  HELD BY NCLT, ALLAHABAD.

Company’s own balance sheets continued to disclose the amount as Long-Term Borrowings and it cannot refuse to repay the loan.

A company cannot retain funds admittedly received as loan and then refuse repayment by contending that the lender was not its member.

Companies cannot avoid loan repayment obligations merely by raising technical objections regarding the status of the lender.

NCLT ALLAHABAD VS. DHANRAJ BUILDWELL PRIVATE LIMITED

 Companies cannot avoid loan repayment obligations merely by raising technical objections regarding the status of the lender.

M/s Dhanraj Builders advanced around ₹2.33 crore to Dhanraj Buildwell Private Limited in 2014 as financial assistance for its business operations. Except for a partial repayment of ₹5 lakh, the balance amount remained unpaid.

The lender approached NCLT seeking repayment under Sections 73 and 74 of the Companies Act, 2013.

The borrower opposed on the following grounds

The amount was not a deposit under the Companies Act.

The lender was not a member of the company and therefore could not invoke Section 73(4).

The NCLT held that:

·       Money received by the company as a loan fell within the definition of deposit under Section 2(31), as it did not fall under any prescribed exclusion.

·       The alleged repayment was not proved, particularly when the company’s own balance sheets continued to disclose the amount as Long-Term Borrowings.

·       A company cannot escape repayment merely because the amount was received from a non-member.

The NCLT directed the company to repay the outstanding amount along with applicable interest within 30 days.

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GST RETURN REFORMS FROM APRIL 2027 WHAT ARE THE KEY PROPOSED CHANGES?

 GST RETURN REFORMS FROM APRIL 2027

WHAT ARE THE KEY PROPOSED

 CHANGES?

·       New Electronic Statement for Reverse Charge Mechanism (RCM)

·       A Mechanism to Correct Tax Liability

·       Invoice-Level Details in Form GST DRC-03

·       Improvements to the Invoice Management System (IMS)

·       Electronic Credit Reversal and Reclaim Statement

·       Correction Mechanism for ITC Reporting

IF IMPLEMENTED EFFECTIVELY, THE CHANGES COULD HELP:

·       Reduce mismatches between reported tax liabilities and ITC.

·       Minimise avoidable demand notices and system-generated intimations.

·       Improve the accuracy of ITC reversal and reclaim reporting.

·       Strengthen reconciliation between supplier-reported invoices and recipient ITC claims.

·       Make GST return filing more consistent and transparent.

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CAN DEPRECIATION BE CLAIMED ON GOODWILL, BRANDS AND DISTRIBUTION NETWORKS RECOGNIZED FOR THE FIRST TIME DURING A DEMERGER?

 CAN DEPRECIATION BE CLAIMED ON GOODWILL, BRANDS AND DISTRIBUTION NETWORKS RECOGNIZED FOR THE FIRST TIME DURING A DEMERGER?

The Kolkata ITAT examined this important question in Tata Consumer Products Ltd. vs. ACIT

Yes, Depreciation was allowed on goodwill, brands and distribution networks recognized upon demerger, although these assets were not recorded in the demerged company’s books.

The Finance Act, 2021 amended the Income-tax Act to exclude goodwill from depreciable intangible assets with effect from AY 2021–22.

The Tribunal allowed depreciation for AY 2020–21 under the law applicable to that year.

The ruling distinguishes between assets already included in the demerged company's depreciable block and intangible assets identified and valued for the first time when the resulting company acquires the business for consideration.

R V SEKAR FCS,LLB 79047 19295