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Can we carry forward the loss on sale of securities and share?
Under the Income Tax Act of India, losses incurred from the sale of securities and shares can indeed be carried forward to offset future capital gains, subject to specific conditions: 1. Classification of Capital Losses: Short-Term Capital Loss (STCL): Occurs when securities are sold within 12 monthRead more
Under the Income Tax Act of India, losses incurred from the sale of securities and shares can indeed be carried forward to offset future capital gains, subject to specific conditions:
1. Classification of Capital Losses:
Short-Term Capital Loss (STCL): Occurs when securities are sold within 12 months of acquisition. Such losses can be set off against both short-term and long-term capital gains. If not fully adjusted in the same financial year, they can be carried forward for up to 8 assessment years.
Long-Term Capital Loss (LTCL): Arises when securities are sold after 12 months of holding. These losses can only be set off against long-term capital gains. Unadjusted LTCL can also be carried forward for up to 8 assessment years.
2. Conditions for Carry Forward:
3. Set-Off Provisions:
Short-Term Capital Loss: Can be set off against both short-term and long-term capital gains.
Long-Term Capital Loss: Can only be set off against long-term capital gains.
4. Carry Forward Duration:
- Both STCL and LTCL can be carried forward for a maximum of 8 assessment years immediately succeeding the year in which the loss was incurred.
See lessWhether business losses and depreciation can be carry forward in case of amalgamation and merger under income tax act?
When a company undergoes an amalgamation or merger, the ability to carry forward its business losses and unabsorbed depreciation is not automatic. Instead, these benefits can be preserved only if certain conditions—designed to ensure continuity—are met. Here’s a simple breakdown: Key Points: ContinuRead more
When a company undergoes an amalgamation or merger, the ability to carry forward its business losses and unabsorbed depreciation is not automatic. Instead, these benefits can be preserved only if certain conditions—designed to ensure continuity—are met. Here’s a simple breakdown:
Key Points:
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- Mandatory Conditions:
- Shareholding Criterion:
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- The general rules for carrying forward business losses and unabsorbed depreciation are set out in Section 72 of the Income Tax Act, 1961.
- Specific restrictions in the context of amalgamations/mergers have been clarified through judicial decisions and CBDT notifications. These emphasize that without the requisite continuity conditions, the losses and depreciation cannot be transferred to the amalgamated or merged entity.
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- If Conditions Are Met:
- If Conditions Are Not Met:
See lessContinuity of Business and Shareholding:
For the losses and depreciation of the amalgamating or merging company to be carried forward by the resulting entity, there must be a continuity of business. This typically means that the merged entity continues the same business as that of the transferor.
A significant condition is that there must be a continuity in shareholding. In many cases, at least 50% of the loss-making company’s share capital (or voting power) should be preserved in the merged entity. If this “continuity of shareholding” condition is not met, the benefits of carry forward are disallowed.
Applicable Provisions:
Practical Implications:
The merged entity can set off these losses and unabsorbed depreciation against its future business income, thus reducing its taxable income.
The losses and depreciation of the transferor company will be lost, and the amalgamated entity cannot claim them.
Does aggregate turnover include value of inward supplies on which RCM is payable?
No, when calculating aggregate turnover under GST, you do not include the value of inward supplies on which the Reverse Charge Mechanism (RCM) is payable. Reference to the Law: Section 2(6) of the CGST Act, 2017 defines “aggregate turnover” as the aggregate value of all taxable supplies, exempt suppRead more
No, when calculating aggregate turnover under GST, you do not include the value of inward supplies on which the Reverse Charge Mechanism (RCM) is payable.
Reference to the Law:
Why This Matters:
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See lessAccurate Calculation:
The purpose of calculating aggregate turnover is to determine GST registration thresholds and compliance requirements based on your own business supplies. Including inward supplies would inflate your turnover incorrectly.
Statutory Clarity:
The definition in Section 2(6) clearly focuses on supplies made by the taxpayer, ensuring that reverse charge transactions—where tax is paid on inward supplies—are excluded.
What is Internal Financial Controls, is it a mandatory requirement for companies?
Internal Financial Controls (IFCs) are the systems, policies, and procedures implemented by a company to ensure that its financial reporting is accurate and reliable, assets are protected, and the risks of fraud and error are minimized. Key Features of Internal Financial Controls: Accuracy of FinancRead more
Internal Financial Controls (IFCs) are the systems, policies, and procedures implemented by a company to ensure that its financial reporting is accurate and reliable, assets are protected, and the risks of fraud and error are minimized.
Key Features of Internal Financial Controls:
IFCs help ensure that accounting records and financial statements are prepared correctly.
They safeguard company assets from misuse or theft.
Robust controls help prevent fraudulent activities.
These systems streamline processes, reducing errors and inefficiencies.
Are They Mandatory?
Yes, all listed companies are required to have strong internal financial controls. Their effectiveness must be reported in the Director’s Report under Section 134 of the Companies Act, 2013.
While the requirement is more stringent for listed companies, other companies—especially those meeting certain thresholds for paid-up capital, turnover, or net worth—are also expected to establish adequate internal financial controls. Even if not strictly mandatory for every company, implementing IFCs is considered a best practice for good corporate governance.
Conclusion
Internal Financial Controls are essential tools for ensuring the integrity of financial operations. They are a mandatory requirement for listed companies and are strongly recommended for all companies to promote transparency, safeguard assets, and manage risks effectively.
See lessWhether it is not mandatory for a company to charge any fees for inspection/ providing copies / extracts of records / registers to members etc?
Under the Companies Act, 2013 and the respective rules regarding the inspection of records and registers, companies must allow their members to access and inspect certain documents (such as registers, minutes, and other statutory records). However, when the Articles of Association (AoA) are silent oRead more
Under the Companies Act, 2013 and the respective rules regarding the inspection of records and registers, companies must allow their members to access and inspect certain documents (such as registers, minutes, and other statutory records). However, when the Articles of Association (AoA) are silent on charging fees for such services, the company is generally not obligated to levy any fees for providing inspection, copies, or extracts.
Key Points to Understand:
Statutory Rights of Members:
Members have a legal right to inspect the company’s records and registers. This right is protected under the Companies Act, and any fees imposed should not hinder that right.
Role of the Articles of Association:
If the AoA specifically mention fees for providing copies or allowing inspections, then those terms must be followed. However, if the AoA are silent on this matter, there is no statutory mandate requiring the company to charge any fee for these services.
Administrative Considerations:
While the company might incur minor administrative costs in processing requests, there is no requirement to pass on significant fees to members unless the AoA provide otherwise.
Best Practices:
Many companies choose to provide access to these records without charge as a part of good governance and transparency. Even if minimal fees are charged, they should be reasonable and not deter members from exercising their statutory rights.
Conclusion:
If your company’s Articles of Association do not specify any fees for the inspection or copying of records and registers, you are not required to charge fees for these services. This approach aligns with the statutory intent to ensure that members can easily access important company documents.
See lessWhat are the rules with regard to the time, day, place of holding the AGM?
The Companies Act, 2013 lays out clear guidelines on when and where an Annual General Meeting (AGM) should be held. Here’s a quick overview: Timing: Public Companies: Must hold their AGM within 6 months from the end of the financial year. Private Companies: Should conduct the AGM within 15 months frRead more
The Companies Act, 2013 lays out clear guidelines on when and where an Annual General Meeting (AGM) should be held. Here’s a quick overview:
Timing:
Day:
Place:
Notice Requirements:
In essence, the AGM must be held within the prescribed timeframe, on a working day, and at a venue communicated well in advance to all shareholders. This ensures that the meeting is conducted efficiently and that shareholders can participate without any hindrances.
See lessWhat is ‘National Holiday’ wrt holding of AGM under companies act?
A National Holiday refers to any day that is officially declared by the Government of India as a public holiday (for example, Republic Day, Independence Day, or Gandhi Jayanti). When it comes to holding an Annual General Meeting (AGM), the concept of a national holiday is significant for several reaRead more
A National Holiday refers to any day that is officially declared by the Government of India as a public holiday (for example, Republic Day, Independence Day, or Gandhi Jayanti). When it comes to holding an Annual General Meeting (AGM), the concept of a national holiday is significant for several reasons:
Scheduling Considerations:
National holidays typically mean that government offices (like the Registrar of Companies) and other essential services are closed. This can affect the practical aspects of conducting the meeting, such as filing related documents or ensuring proper participation.
Quorum and Participation:
Since many directors and shareholders may be unavailable on a national holiday, holding an AGM on such a day could lead to issues with meeting the quorum requirements necessary for a valid meeting.
Best Practices:
Companies are generally advised to avoid scheduling AGMs on national holidays. If an AGM is scheduled on a national holiday, it is often postponed or adjourned to the next working day to ensure full participation and compliance with statutory requirements.
Conclusion:
See lessIn summary, a “National Holiday” under the Companies Act refers to days when official operations are suspended by government decree. For AGMs, this means companies should plan to avoid these dates to ensure that quorum is met and the meeting can proceed smoothly.