Shell Companies Current Affairs - 2019
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The government has relaxed the norms under the definition of Start-Ups. The changes brought in are:
- The investment limit of angel investors to seek exemption under the Income Tax Act, 1961 has been increased to Rs 25 crore from 10 Crore.
- An entity shall be considered a start-up up to 10 years from its date of incorporation/registration instead of the previous period of 7 years.
- An entity would be considered as a startup up to a turnover of Rs 100 crore as against the earlier limit of Rs 25 crore.
- A start-up cannot invest in a building or land unless it is for its business or used by it for purposes of renting or held by it as stock-in-trade.
- A start-up cannot offer loans or advances, other than those where lending money is part of its business.
- A start-up cannot make any capital contribution to any other entity or invest in shares, car, any vehicle or mode of transport that costs more than Rs 10 lakh.
These exemptions were brought in to allay the fears of CBDT that start-ups could be used for money laundering or receive investment from shell companies for tax evasion.
The relaxations are in line with the government’s vision to promote the culture of entrepreneurship and ease of doing business in India.
The Ministry of Corporate Affairs (MCA) and Central Board of Direct Taxes (CBDT) have signed Memorandum of Understanding (MoU) for automatic and regular exchange of tax information.
The purpose of the MoU is to curb the menace of shell companies, money laundering and black money in the country and prevent misuse of corporate structure by shell companies for various illegal purposes,
The MoU will facilitate sharing of data and information between MCA and CBDT on automatic and regular basis. It will enable sharing of specific information such as Permanent Account Number (PAN) data of corporates, financial statements filed with Registrar by corporates, Income Tax returns (ITRs) of corporates, returns of share allotments, audit reports and statements of financial transactions (SFT) received from banks relating to corporates.
The MoU will ensure that both MCA and CBDT have seamless PAN-DIN (Director Identity Number) and PAN-CIN (Corporate Identity Number) linkage for regulatory purposes. The information shared will pertain to both Indian corporates as well as foreign corporates operating in India.
In addition to regular exchange of data, CBDT and MCA will also exchange with any information available in their respective databases with each other, on request, for purpose of carrying out scrutiny, inspection, investigation and prosecution.
Under the MoU, Data Exchange Steering Group also has been constituted for initiative, which will meet periodically to review data exchange status and take steps to further improve effectiveness of CBDT and MCA.