sharniana contractor has not availed the benefit under the notification of the Government of India

Indian Service Tax

Notifications

Exemption

[Notification No. 18/2004-ST, dt. 10/9/2004]

For full text see under "Airport Services".

[Notification No. 22/2004-ST, dt. 10/9/2004]

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided by a pandal or shamiana contractor to a client, from so much of the service tax leviable thereon under section 66 of the said Act, as is in excess of the amount of service tax calculated on a value which is equivalent to seventy per cent. of the gross amount charged from a client by such contractor, for the services provided in relation to a pandal or shamiana in any manner, including services rendered as a caterer:

Provided that the said exemption shall apply only in such cases where -

• Such pandal or shamiana contractor also provides catering services, that is, supply of food and the invoice, bill or challan issued for this purpose indicates that it is inclusive of charges for catering service; and

• No credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; and

• Such pandal or sharniana contractor has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003]

Exp!apation: For the purposes of this notification, the _expression "food" means a substantial and satisfying meal.

telegraph authorities normally charge the subscriber in advance on a quarterly basis

Indian Service Tax

Pagers

Effective Date: 01/11/1996.

Authority: Notification No.06/96-ST,dt. 31/10/1996(forfull text of Notification see under'Advertising Agency').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2%of10% =0.2.Total ST = 10.2%.

Definition: ''pager'' means an instrument, apparatus or appliance which is a non-speech, one way personal calling system with alert and has the capabilityofreceiving, storing and displaying numeric or alpha-numeric messages, [Section 65 (77)]

Taxable service: Pager services provided by the Telegraph authority to a subscriber in relation to a pager.

Value of taxable service: Gross total amount (including deposit adjustment) received by the Telegraph authority.

Person liable to pay: Pager Agency.

Head of Account

Sl. Code SCCD Minor-head 004400106 Radio Paging Services Sub-head 00440010601 Tax Collection 00440015 110 Sub-head 00440010602 Other Receipts 00440020 110 Sub-head 00440010603 Deduct Refunds 00440021 111

Main text of Departmental Circular/TN

[TN No. 90/96, dated 31-10-1996ofHyderabad Commissionerate]

In the caseofpaging services, the telegraph authorities normally charge the subscriber in advance on a quarterly basis for the paging service provided. The Service charge on paging service will be chargeable on the gross amount charged from the subscriber.

Notification

N.B.: For full text of Noti. No. 13/97-ST, dt. 14/02/1997 see under 'Telephone Service'.

"Outdoor Caterer" means a caterer engaged in providing services in connection with catering at a place other than his own, [Section 65 (76a)]

Indian Service Tax

Outdoor Catering Services

Effective Date: 10/09/2004. Authority: Finance (No.2) Act, 2004.

Rate of Service Tax: 10% - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "caterer"means any person who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non-alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion; [Section 65 (24)].

"Outdoor Caterer" means a caterer engaged in providing services in connection with catering at a place other than his own, [Section 65 (76a)]

Taxable service: Taxable service means any service provided to a client, by an outdoor caterer, [Section 65 (105) (zzt)]

Value of taxable service: Gross amount

Exemptions: See Notification No. 18/2004-ST, dt. 10/9/2004 at the end of the Chapter of "Airport Services".

Catering in hotels, restaurants, trains, inhouse services.

Person liable to pay: Outdoor Catering Service provider

Head of Account: To be issued.

Notifications

Exemption

[Notification No. 18/2004-ST,. dt. 10/9/2004]

For full text see under "Airport Services".

Exemption to catering service provided on a railway train

[Notification No. 19/2004-ST, dt. 10/9/2004]

In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided by an outdoor caterer to a client in relation to catering service provided on a railway train by such caterer, from the whole of service tax leviable thereon under Section 66 of the said Act.

[NotificationNo.20/2004-ST,dt.10/9/2004]

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided by an outdoor caterer from so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the amount of service tax calculated on a value which is equivalent to fifty per cent. of the gross amount charged from the client by such caterer for the services provided in relation to catering

Provided that the said exemption shall apply in such cases where -

• Such outdoor caterer also provides food and the invoice, bill or challan issued for this purpose indicates that it is inclusive of charges for supply of food; and

• No credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004; and

• Such outdoor caterer has not availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503(E),dated the 20th June, 2003]

Explanation: For the purposes of this notification, the _expression "food". means a substantial and satisfying meal.

[Notification No. 21/2004-ST, dt. 10/9/2004]

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by an outdoor caterer to a client for services in relation to catering by such caterer if such caterer is located within the premises of any academic institution or medical establishment and is providing such services only within such premises, from the whole of service tax leviable thereon under section 66 of the said Act.

The company’s investment in the shares of other bodies corporate and the loans made

The company’s investment in the shares of other bodies corporate and the loans made

to other bodies corporate exceed 60 per cent of its paid-up share capital and free reserves and also 100 per cent of its free reserves. The company has obtained a term loan from the Industrial Credit and Investment Corporation of India Limited. The company proposes to increase its investment in the equity shares of ACE Forgings Limited from 60 per cent to 70 per cent of the equity share capital of ACE Forgings Limited by purchase of shares from the Forging Collaborator.

State the legal requirements to be complied with by ACE Automobiles Limited under the Companies Act to give effect to the above proposal. Will your answer be different if the company has defaulted in repayment of matured deposits accepted from

the public. [CA. (Final) November, 1999]

.9Lns. ACE Engineering Ltd. is not a whoily owned subsidiary of ACE Automobiles Ltd. and hence investment in such a subsidiary company is not covered by exemption under Section 372-A(8)(e) of the Companies Act, 1956. As the aggregate of the loans and investments so far made by ACE Automobiles Ltd. exceeds 60% of the paid-up share capital and free reserves it is necessary for the company to follow the following procedure:

(i) Pass a resolution of the Board of directors at a meeting of the Board approved by all the directors present at the meeting [Section 372A(2)]. The notice of special resolution must indicate clearly the specific limits, the particulars of the body corporate in which the investment is proposed to be made, the purpose of the investment, specific sources of funding and such other details [Proviso 3 to Section 372-A(1»).

(ii) Pass a special resolution in. the General Body Meeting [Proviso to Section 372-A(1»).

(iii) Obtain prior approval of ICICI Ltd. since ACE Automobiles Ltd. has obtained the term loan from lCICI Ltd. which is a public financial institution as per Section 4A of the Companies Act and, therefore, the provisions of the Proviso to Section 372-A(2) are also attracted.

(iv) Enter the prescribed particulars of the investment in a register within seven days of making the investment [Section 372-A(5»).

(v) Comply with the guidelines, if any, prescribed by the Central Government under Section 372-A(7).

The company’s investment in the shares of other bodies corporate and the loans made

The company’s investment in the shares of other bodies corporate and the loans made

to other bodies corporate exceed 60 per cent of its paid-up share capital and free reserves and also 100 per cent of its free reserves. The company has obtained a term loan from the Industrial Credit and Investment Corporation of India Limited. The company proposes to increase its investment in the equity shares of ACE Forgings Limited from 60 per cent to 70 per cent of the equity share capital of ACE Forgings Limited by purchase of shares from the Forging Collaborator.

State the legal requirements to be complied with by ACE Automobiles Limited under the Companies Act to give effect to the above proposal. Will your answer be different if the company has defaulted in repayment of matured deposits accepted from

the public. [CA. (Final) November, 1999]

.9Lns. ACE Engineering Ltd. is not a whoily owned subsidiary of ACE Automobiles Ltd. and hence investment in such a subsidiary company is not covered by exemption under Section 372-A(8)(e) of the Companies Act, 1956. As the aggregate of the loans and investments so far made by ACE Automobiles Ltd. exceeds 60% of the paid-up share capital and free reserves it is necessary for the company to follow the following procedure:

(i) Pass a resolution of the Board of directors at a meeting of the Board approved by all the directors present at the meeting [Section 372A(2)]. The notice of special resolution must indicate clearly the specific limits, the particulars of the body corporate in which the investment is proposed to be made, the purpose of the investment, specific sources of funding and such other details [Proviso 3 to Section 372-A(1»).

(ii) Pass a special resolution in. the General Body Meeting [Proviso to Section 372-A(1»).

(iii) Obtain prior approval of ICICI Ltd. since ACE Automobiles Ltd. has obtained the term loan from lCICI Ltd. which is a public financial institution as per Section 4A of the Companies Act and, therefore, the provisions of the Proviso to Section 372-A(2) are also attracted.

(iv) Enter the prescribed particulars of the investment in a register within seven days of making the investment [Section 372-A(5»).

(v) Comply with the guidelines, if any, prescribed by the Central Government under Section 372-A(7).

What is winding-up? Discuss the circumstances in which a company may be wound up by the Court

Winding-up of a company is the process whereby its life is ended and its property administered for the benefit of its creditors and members. An administrator, called a ‘liquidator’, is appointed and he takes control of the company, collects its assets, pays its debts and finally distributes any surplus among the members in accordance with their rights. In the words of Perrins and Jeffreys’ “Winding-up means applying the assets of a company in the discharge of its liabilities and returning any surplus to those entitled to it, subject to the costs of doing so. The statutory process by which this is achieved is called ‘liquidation’.”

Winding-up of a company differs from insolvency of an individual inasmuch as a company cannot be made insolvent under the insolvency law. Besides, even a solvent company may be wound up.

Winding-up by the Court

Winding-up by the court, also called ‘Compulsory Winding up’, may be ordered in cases mentioned in Section 433 of the Companies Act, 1956. These circumstances are:

1. Special Resolution. The company may, by special resolution: resolve that it be wound up by the court. The resolution may be passed for any cause whatsoever. However, the court may not order for winding-up if it finds it to be opposed to public interest or the terest of the company as a whole.

2. Default in Holding Statutory Meeting. If default is made in delivering the statutory report to the Registrar or in holding the statutory meeting, it may be ordered to be wound up. Petition on this ground can be presented either by the Registrar or by a contributory. If it has to be filed by any other person it should be filed before the expiration of 14 days after the last day on which the statutory meeting ought to have been held [Sec. 439(7)]. The court is empowered, instead of making a winding-up order on this ground, to direct the filing of the report or the holding of the meeting with costs against the persons responsible for the default [Sec. 443(3)].

3. Failure to Commence Business. If a company does not commence business within a year from incorporation or suspends business for a whole year, it may be ordered to be wound up. Failure to commence or to carryon business is not treated as a ground for compulsory winding-up unless the company has no intention of carrying on business or it has become impossible to do so. A company will not be wound up simply because of some temporary interruption, such as a trade depression or because it is waiting for further capital to be subscribed. In Murlidhar Vs. Bengal Steamship Co., a company employed a steamer and two flats. During the First World War, the Government acquired the flats which resulted in suspension of the business of the company for more than a year. The High Court of Calcutta held that “the suspension of business of the company for more than a year, is sufficiently accounted for and does not furnish an indication that there is no intention to carryon the business.”

But where, however, the chances of resuming business are gloomy, the Court may order for the winding-up of the company (Rupa Bharti Ltd. Vs. Registrar of Companies).

4. Reduction in Membership. If the number of members is reduced below the statutory minimum of 7 in a public company or 2 in a private company, the company may be ordered to be wound up.

5. Inability to Pay Debts. The Court may order a company to be wound-up if it is unable to pay its debts. According to Sec. 434, a company shall be deemed to be unable to pay its debts if:

(a) ..A creditor for more. than Rs. 500 has served on the company at its registered ‘Office a demand under his hand requiring payment and the company has for three weeks thereafter neglected to payor secure or compound the sum to the reasonable satisfaction of the creditor; or

(b) execution or other process issued on a judgment or order in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) it is unable to pay its debts, taking into account its contingent and prospective liabilities.

. Miss N.J., a minor, applied for registration in her naml’

Problem 1. Miss N.J., a minor, applied for registration in her naml’ of 10,000 fully paid-up equity shares in the company through her rathel’ and natural

guardian Sh. A.KJ., The appellant had bought these shares from one

Shri “M.KJ. The transfel”Or Shl’i. M.KJ. and the trnnsferee, the minor Miss”

N.J. through her father and natural guardian Sh. A.KJ. executed the necessary tmnsfer deed which was presented to the company for regish’ation of the

transfer of shares. Can the Board of Dh-ectors refuse to register the transfer of shares on the plea that the transferee is a minor?

Solution. No. The Company Law Board in its decision in Nandita Jaill Vs. Benllet Coleman alld Co. Ltd. has observed that registration of a transfer of

shares in the name of a minor, acting through hisher guardian especially where the shares are fully paid-up cannot be refused on the ground of the

transferee being a minor.