A ‘startup’ company receives consideration exceed the fair market value of the shares is not chargeable to tax

A ‘startup’ company receives  consideration  exceed the fair market value of the shares  is not chargeable to tax 


A ‘startup’ company receives from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares  is not chargeable to tax under Income from other sources(Refer notification no. Notification No. 45/2016, Dated: June 14, 2016)

F.No.173/103/2016-ITA-I
Government Of India
Ministry Of Finance
Department Of Revenue
Central Board Of Direct Taxes
New Delhi

Notification No. 45/2016, Dated: June 14, 2016

In exercise of the powers conferred by the clause (ii) of the proviso to clause (viib) of sub-section (2) of section 56 of the Income-tax Act, 1961 (43 of 1961), the Central Government, hereby notifies the ‘classes of persons’ for the purposes of the said clause as being the ‘person’ defined under sub-section (31) of section 2 of the said Act, being resident, who make any consideration exceeding the face value for issues of shares of a ‘startup’ company.

Explanation. – For the purposes of this notification, “startup” shall mean a company in which the public are not substantially interested and which fulfills the conditions specified in the notification of the Government of India, Ministry of Commerce and Industry. Department of Industrial Policy and Promotion, number G.S.R. 180(E), dated the 17th February, 2016, published in the Gazette of India, Extraordinary, part II, section 3, sub-section (i), dated the 18th February, 2016.

(Rohit Garg)
Deputy Secretary to the Govt. of India

Extract of Section 56(1)(viib)(ii) of the Income Tax Act, 1961:

Income from other sources.

56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.( Heads of income, A.—Salaries.,B,C.—Income from house property.,D.—Profits and gains of business or profession, E.—Capital gains).

(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :—

(viib)		where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
		Provided that this clause shall not apply where the consideration for issue of shares is received—

(i)		by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii)		by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Notification No. 45/2016, Dated: June 14, 2016: classes of persons’ for the purposes of the said clause as being the ‘person’ defined under sub-section (31) of section 2 of the said Act, being resident, who make any consideration exceeding the face value for issues of shares of a ‘startup’ company. For the purposes of this notification, “startup” shall mean a company in which the public are not substantially interested and which fulfills the conditions specified in the notification of the Government of India, Ministry of Commerce and Industry. Department of Industrial Policy and Promotion, number G.S.R. 180(E), dated the 17th February, 2016, published in the Gazette of India, Extraordinary, part II, section 3, sub-section (i), dated the 18th February, 2016.

		Explanation.—For the purposes of this clause,—
(a)		the fair market value of the shares shall be the value—

(i)		as may be determined in accordance with such method as may be prescribed; or
(ii)		as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,
		whichever is higher;
(b)		"venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of[Explanation] to clause (23FB) of section 10;]

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Guidelines for Facilitators and Start-ups for filing and processing applications for Patent, Designs and Trade Marks

Government of India
Office of The Controller General
Patents, Designs & Trade Marks
Boudhik Sampada Bhavan
S.M. Rood, Antop Hill
Mumbai-400037 (India)

CG/F/Start-up/Guidelines/2016/79 Dated 8-6-2016

Public Notice

Guidelines for Facilitators and Start-ups for filing and processing applications for Patent, Designs and Trade Marks

In respect to the Scheme for Facilitating Startups Intellectual Property (SIPP) announced by the Government of India and the list of facilitators published for the purpose, references have been received regarding the procedure to be adopted for filing/ processing of startups’ applications for Patents , Designs and Trademarks and fees to be paid to the facilitators in respect thereof.

Accordingly„ it is clarified as follows:

1. Patents:

i. A start- up willing to file a patent application for his invention shall select a facilitator from the list of facilitators published on the official website of CGPDTM i.e. www.ipindia.nic.in and contact him directly for preparation of application. If the startup is unable to select a facilitator, it should contact the Head of Office of the respective Patent office as per jurisdiction, who shall provide 3 names of facilitator and the startup shall finalise the name of Facilitator.

ii. The facilitator after assessing the patentability of the invention and other aspects as per Patents Act and Rules and being satisfied that the application for patent can be filed, shall draft the patent specification in consultation with the start up.

iii. Thereafter, the Facilitator shall file a complete Patent specification at the appropriate Patent Office on behalf of the start- up as per jurisdiction by following the prescribed procedure under the Patent Act and Rules.

iv. Fee for filing patent application and other statutory fees, as per First Schedule, shall be borne by the start up.

v. After a patent application is received by the Patent Office the facilitator shall submit the claim for fees as per the fee schedule given in SIPP Scheme. A letter addressed to the Head of Office of the respective Patent Office, giving details of claimed fee for drafting of application and his ID proof as a Registered Patent Agent, shall be submitted along with the invoice .

vi. The Head of Office shall verify the ID of the facilitator and ascertain the suitability of payment and arrange for the payment of fee to the facilitator after receiving such claim from the facilitator.

vii. Simultaneously with making the payment to the facilitator, the Head of Office shall forward to the Office of the CGPDTM the details of the application and payment made to the facilitator.

viii. The facilitator shall monitor and perform further steps of proceedings of startup’s patent application, prepare the reply to any query from Patent Office, attend the hearings, etc. and shall file the relevant documents in the Patent Office by following the time line , as and when required, on behalf of the startup and may submit the claim for payment of the fee as per the fee schedule of SIPP Scheme as per the procedure elaborated above.

ix. Designs :

For filing and processing applications for designs, the list of Facilitators for Patents will be applicable and the procedure for claiming the fees by the Facilitator, after he files the design application for a startup as per the designs Act and Rules, shall be as elaborated above.

x. Trade Marks:

For filing and processing applications for trademarks, the list of Facilitators for Trademarks will be applicable and, after filing a trademark application for a startup as per the Trade Marks Act and Rules, the Facilitator shall submit the claim for payment of fees to the respective Head of Office of the Trade Marks Registry who shall follow the procedure as elaborated under para vi and vii.

For any query regarding filing of applications, payment of fees and procedural issues, a facilitator/startup may contact Dr.W.M.Dhumane, Office of Controller General of Patents, Designs and Trademarks on e-mail: wm.dhumane @nic.in or phone (+91 22 24112244).

(O. P. Gupta)
CGPDTM

India’s rank 130 in the Doing Business Report 2016(142 in the Doing Business Report, 2015)

Ease of Doing Business

India’s rank in the Doing Business Report 2015 was 142 among 189 countries, which improved to 130 in the Doing Business Report, 2016. Government of India has emphasized on the importance of ‘Ease of Doing Business’ and it is a major pillar of ‘Make in India’ initiative. It is working extensively on improving India’s rank in the World Bank Group's Doing Business Study.

ACHIEVEMENTS IN DELHI AND MUMBAI

Delhi

·         Unified building Bye-laws has been notified.

·       Online registration of Value Added Tax (VAT) with real-time Tax Identification Number (TIN) allotment has been introduced.

·        Delhi VAT Sewa App has been developed whereby permanent business registration is done without need for field verification by VAT inspector. This step has eliminated instances of corruption and irregularities during field verification.

·         Commercial divisions and appellate divisions in Delhi High Court have been established.

·         Municipal Corporations have introduced fast track approval system for building permits with features such as:

I.   Common application form

II. Use of digital signature for filing application and issue of permits III. Online transfer of application and receipt of NOC

IV.      Online system has been integrated with Airport Authority of India (AAI), Delhi Urban Arts Commission (DUAC), Delhi Metro Rail Corporation (DMRC) & National Monument Authority (NMA).

Mumbai

·     Requirement of inspection has been removed to make registration of Shops and Establishments real-time.

·         Commercial divisions and appellate divisions have been established in Bombay High Court.

·         VAT and Profession tax registration has been integrated into a single process.

     ·      Municipal Corporation of Greater Mumbai (MCGM) has introduced fast track approval system for building permits with features such as:

I.            Common application form

II. Online transfer of application and receipt of NOC III. Online system has been integrated with AAI & NMA.

·         Brihanmumbai Electricity Supply and Transport (BEST) has improved its System Average Interruption Duration Index (SAIDI) by 3% and its System Average Interruption Frequency Index (SAIFI) by 11% in the period June, 2015-March, 2106.

·         Permission for removal of Trees has been integrated with the Municipal Corporation of Greater Mumbai (MCGM) single window application system.

·         Site inspection for construction permits has been minimized by way of self-certification and introducing third party certification. During construction, submission of video clips by architects has been introduced in online Auto DCR system.

·         VAT Registration Certificate is issued within 1 working day (24 hours).

·         AutoCAD based software to scrutinize building plans has been implemented.

·         MCGM has implemented a risk based assessment framework with risk parameters in order to enable fast track approval for buildings.

·         Cost and time for obtaining construction permit has been reduced by 79.6% and 132 days respectively.

·         Property Tax can be paid through mobile app, which can be downloaded from apps.mgov.gov.in.

The Doing Business Report Ranks a Country on 10 Parameters Reforms Under Each of These Are as Follows:

STARTING A BUSINESS

·         Registration with ESIC and EPFO has been made real-time by eliminating all physical touch-points.

·         The requirement of opening a bank account has been removed as a mandatory condition for registration with ESIC and EPFO.

·         The system of issuing PAN and TAN has been put in place together within T+1 days on an application using digital signature on the ebiz platform. PAN and TAN numbers are issued on CBDT’s portal within T+3 days.

·         Maharashtra state has combined the process of registration with VAT and Profession Tax. The registration will now be granted in 24 hours and the same has been adopted by Delhi VAT.

·         Form INC 29 has been launched by Ministry of Corporate Affairs to avail 3 pre-registration services viz. ‘Name Availability’, ‘Director Identification Number’ and ‘incorporation of company’ with one form and one payment.

·         No Environment clearance is required for 36 white industries.

·         Mine prospecting projects have been exempted from the requirement of compensatory afforestation and Forest Rights Act (FRA) certificate for grant of forest clearance.

·         No site inspection is required for mine prospecting projects on forestland for less than 100 ha. for construction of new roads/drilling of bore hole/ sample collection pits.

·         Industrial sheds and educational institutions have been exempted from Environmental Clearance (EC).

·         Validity of Environment Clearance has been increased from 5 years to 7 years.

·         Online submission of applications for environment/forest/wildlife clearances has been put in place for transparent and expeditious decision-making.

·         District Environment Impact Assessment authority has been constituted to grant EC for mining of minor minerals for 5 ha. of individual lease and 25 ha. in a cluster.

·         Regional empowered committees at sub national level have been delegated higher powers to dispose of proposals for Forest Clearance

a)      Involving diversion of 5 to 40 hectares of forest land and

b)      All proposals involving diversion of forestland for linear projects irrespective of area of forest land involved.

·         The competent authorities in the state government have been delegated powers to issue permission for tree felling and commencement of work for a period of one year of linear projects without waiting for final approval under the Forest Conservation Act.

·         EIA notification, 2006 has been amended delegating higher powers to State Environment Impact Assessment Authority (SEIAA) in respect of projects (category B) which require clearance from SEIAA.

CONSTRUCTION PERMITS

·         Municipal Corporation of Greater Mumbai (MCGM) has completed the process of single window approval by integrating with internal departments as well as, AAI and NMA through a common application form.

·         NoCs from Maharashtra Industrial Development Corporation (MIDC), Director of Industries, Collector and Maharashtra Housing and Area Development Authority (MHADA) have been eliminated.

·         MCGM has introduced digital signing of building permit application, as well as maps, thereby eliminating need of physical submission of documents. The manual application for grant of construction permits has been discontinued.

·         Municipal Corporations of Delhi has completed the process of single window approval by integrating with internal departments as well as DMRC, Delhi Fire Services, DUAC, AAI and NMA through a common application form.

·         NOC from Labour Department of Delhi Government is not required if no manufacturing activity is undertaken in the building.

·         MCD has introduced digital signing of building permit application, as well as maps, thereby eliminating the need of physical submission of documents. Manual submission of application for grant of construction permits has been done away with.

·         Ministry of Urban Development and Delhi Development Authority (DDA) have notified the Unified Building Bye-laws.

·         Colour coded maps have been developed by AAI, NMA, DUAC and DMRC to enable applicants to determine whether NOC is required for the land for which permission is applied for.

·         AAI, NMA, DUAC, DMRC, Delhi Fire service, Mumbai Metropolitan Region Development Authority (MMRDA) and Mumbai Metro Rail Corporation (MMRC) have created their own online application systems for receiving and issuing NOC/approval. Their requirements have also been integrated in the common application form developed by South Delhi Municipal Corporation/MCGM.

GETTING ELECTRICITY

·         Maharashtra and Delhi have implemented lump-sum charges for electric connection thereby removing the need of an estimate and.

·         Online application for connections above 100KVA mandatory in Maharashtra and Delhi.

·         Delhi Electricity Regulatory Commission (DERC) has rationalized LT and HT tariff thereby allowing LT connections upto 150KVA.

·         DERC has revised the application format of Delhi Electric Supply Code and Performance Standards Regulations, 2007 for faster release of electricity connection. The distribution licensees have been directed to process applications in the revised format along with the declaration form.

Following are the two documents required for getting electricity connection:

1.      Identity proof

2.      Proof of ownership/ occupancy of premises.

·         NOC/Consent to Establish is not required for getting industrial electricity connection for setting up new industries and projects.

TRADING ACROSS BORDERS

·         Central Board of Excise and Customs (CBEC) has implemented Single Window Interface for Facilitating Trade (SWIFT) (online single window for clearance of goods) on the ICEGATE portal by integrating FSSAI, Animal Quarantine, Plant Quarantine, Drug Controller and Wildlife Control Bureau for imports.

·         Online message exchange system under single window between Customs’ ICEGATE and Plant Quarantine Information System (PQIS) has been implemented for import clearances of agricultural commodities.

·         Customs’ risk management system has been extended to other regulatory agencies to ensure risk- based inspection.

·         168 low phytosanitary risk agricultural commodities listed under schedule VII of the PQ order, 2003 have been identified for 5% random inspection.

·         Mandatory testing of imports from countries where azo dye has not been banned has been reduced to 25%.

·         The limit on the number of consignments released under direct delivery has been removed facilitating prompt delivery of goods.

·         Terminal handling receipts have been eliminated from Jawaharlal Nehru Port Container Terminal, Gateway Terminals India and Nhava Sheva International Container Terminal by web based e-form 13.

·         Filing of import and export declarations and manifests has been made online with digital signature.

·         An electronic messaging system between Shipping lines and Custodians for electronic delivery order has been introduced.

·         Customs’ Clearance Facilitation Committee has been set up at every major customs seaport and airport at Central level.

·         The system of physical control and locking of public and private warehouses by Customs has been dispensed with and replaced by record based controls.

·         24x7 customs clearance facilities have been extended to 19 seaports and 17 air cargo complexes.

·         Documents required for export and import has been reduced to three.

ENFORCING CONTRACTS

·         The Arbitration and Conciliation Act has been amended to reduce the time taken in arbitration proceedings and grounds on which an award may be challenged.

·         Commercial Appellate Division Bench and Commercial Division Benches are functioning in Bombay High Court and Delhi High Court.

DIGITIZATION PROCESS FOR REGISTERING PROPERTY

·         In Delhi, all sub-registrar offices have been digitized and Sub-registrar’s records have been integrated with the Land Records Department.

·         In Maharashtra, all property tax records have been digitized.

GETTING CREDIT

SARFAESI (Central Registry) Rules, 2011 has been amended to record security interest created on all types of property viz. movable, immovable as well as intangible.

RESOLVING INSOLVENCY

Insolvency and Bankruptcy Code Bill has been passed in the Parliament.

eBIZ PLATFORM (ONLINE SINGLE WINDOW)

·         One-stop access for Investors to know more about Investment opportunities and information on number of licenses/approvals required from Government agencies.

·         User-friendly features such as Payments through netbanking, credit & debit cards, status tracking, SMS alerts and Help-desk support enabled.

·         Single face of Government - Composite Application Form and one-time payment designed for obtaining approvals from multiple Ministries/Departments viz., Ministry of Corporate Affairs, Central Board of

Direct Taxes, Ministry of Labour & Employment including Employees’ State

Insurance Corporation & Employees Provident Fund Organization.

·         Elimination of multiple visits to different agencies. Investor can apply for 20 Central Government services; 14 Andhra Pradesh, 14 Odisha and 2 Delhi state Government services have been integrated with eBiz IT platform as detailed below.

CENTRAL GOVERNMENT SERVICES INTEGRATED ON e-biz PLATFORM

S.	Ministry/ Dept. Name			Service Name
No.
1.	Employee’s State Insurance Corporation		Employer Registration
2.	Department of Industrial Policy and Promotion		Industrial License
3.	Department of Industrial Policy and Promotion		Industrial		Entrepreneur
			Memorandum
4.	Ministry of Corporate Affairs		Name Availability
5.	Ministry of Corporate Affairs		Director Identification Number
6.	Ministry of Corporate Affairs		Certificate of Incorporation
7.	Ministry of Corporate Affairs		Commencement of Business1
8.	Central Board of Direct Taxes		Issue  of	Permanent		Account
			Number (PAN)
9.	Central Board of Direct Taxes		Issue of Tax Deduction Account
			Number (TAN)
10.	Reserve Bank of India		Advanced Foreign Remittance
			(AFR)
11.	Reserve Bank of India		Foreign	Collaboration-General
			Permission Route (FC-GPR)
12.	Employees’ Provident Fund Organization		Employer Registration
13.	Petroleum and Explosives Safety Organization		Issue of Explosive License
14.	Directorate General of Foreign Trade		Importer Exporter Code License
15.	Reserve Bank of India		Foreign Currency- Transfer of
			Shares2
			Issue	of	custom		duty
16.	Department of Heavy Industry (DHI)		concession		certificate		to
			entrepreneurs		under	project
			import scheme

¹ Withdrawn from eBiz Portal w.e.f 15.07.2015 pursuant to the Companies (Amendment) Act 2015.

²         FC-TRS an additional service integrated and launched with eBiz portal w.e.f 24.08.2015.

S.	Ministry/ Dept. Name	Service Name
No.
17.	Central Board of Direct Taxes (CBDT)	Changes or correction in	PAN
		data
18.	Ministry of Labour and Employment (MoL&E)	Registration under the Contract
		Labour Act, 1970
19.		Registration under the Building
	Ministry of Labour and Employment (MoL&E)	and other construction workers
		Act, 1996
20.		Registration  under  the  Inter-
	Ministry of Labour and Employment (MoL&E)	State  Migrant  Workmen	Act,
		1979

STATE GOVERNMENT SERVICES INTEGRATED ON e-BIZ PLATFORM

Andhra Pradesh (14 Services)

S.No	Department Name	Service Name
1.	AP-Ground Water Department	Permission to draw Ground Water
2.	AP-Department of Factories	Approvals of plans from Factories
		Department
3.	AP-Department of Factories	Factories License
4.	AP-Department of Factories	Annual Filing under Factories Act
5.	AP-Fire Department	NOC from Fire Services Department
6.	AP-Department of Industries	Industrial Incentives (Power)
7.	AP-Department of Industries	Industrial Incentives (VAT)
8.	AP-Department of Industries	Allotment of Scarce raw materials
9.	AP-Department of Industries	MSME Registration
10.	AP-Department of Industries	NOC Acknowledgement from GM, DIC
		for MSME
11.	AP-Department of Drug Controller	License for manufacturing Bulk Drugs
		and Formulations
12.	AP - Department of Town & Country	Permission from TCP for Site and
	Planning	Building
13.	AP-Commercial Taxes Department	VAT Registration
14.	AP-Commercial Taxes Department	Central Sales Tax (CST) Registration
Odisha (14 Services)

S.No	Department Name	Service Name
1.	Industries Department, Odisha	Project Evaluation cum Allotment of
		Land
2.	Directorate of Factories & Boilers,	Registration under Boilers Act
	Odisha
3.	Labour Directorate, Odisha	Registration under Shops and
		Establishment Act
4.	Labour Directorate, Odisha	Registration of Establishment
		Employing Contract Labour
5.	Water Resources Department,	Permission to draw Water for
	Odisha	Industries-Ground Water & Surface
		Water
6.	Directorate of Factories & Boilers,	Approvals of Plan under Factories
	Odisha	Act,1948
7.	Department of Energy, Odisha	New Power Connection
8.	Housing and Urban Development	Permission for Site and Building
	Department, Odisha

9.	Directorate of Factories & Boilers,				Factories License under Factories
		Odisha			Act,1948
10	Housing and Urban Development				Completion cum Occupancy Certificate
		Department, Odisha
11	Commercial Taxes Organisation,				VAT Registration
		Odisha
12		Commercial Taxes Organisation,			CST Registration
		Odisha
13		Odisha State Pollution Control Board			Consent to Establish
14	Odisha State Pollution Control Board				Consent to Operate
Delhi (2 Services)
S.No		Department Name				Service Name
.
1.		Factories Department				Factory Filling
2.		BYPL (BSES Yamuna Power Limited)				New Power Connection
			COMPOSITE APPLICATION FORMS INTEGRATED
List of joined-up (L3) services
S.No.			Service Name		Department /Ministry
			INC-29 with 7 services viz., Name
			Availability (MCA), Director
			Identification Number (MCA),		Ministry of Corporate Affairs, CBDT,
1.			Certificate of Incorporation
					EPFO & ESIC
			(MCA), PAN (CBDT), TAN (CBDT),
			Employer registration of EPFO
			and ESIC
			INC-7 with 5 services viz.,
			Certificate of Incorporation		Ministry of Corporate Affairs, CBDT,
2.			(MCA), PAN (CBDT), TAN (CBDT),
					EPFO & ESIC
			Employer registration of EPFO
			and ESIC,
			5 registration services under
			Employer registration under
3.			EPFO and ESIC Act, Contract		Ministry of Labour & Employment
			Labour Act, Building and other
			Construction Workers Act, and
			Inter-state Migrant Workmen Act