Hi Folks
“Temporary suspension of issuance of allotment of new DINs for Designated Partners/Partners of LLPs is being extended till further notice. A suitable message would be posted on the portal after revised DIR-3 is made available for filing purposes for issuance of new DPIN/DINs for Partners of proposed LLPs. Stakeholders may kindly take note and plan accordingly. “
This is the message on the MCA portal that stares at entrepreneurs who are planning to register a LLP in India. The previous message at least indicated that suspension is until 31st March, 2018 but look at the above. It is indefinite and MCA expects us to plan accordingly. What plans, eh ? All that one can do is to wait and pray that one fine day God MCA will be merciful enough to lift the suspension and allow life to LLPs !! I had to turn down several requests for LLP incorporations and changes in the Designated Partners. Reason – DIN allotment suspended until further notice by MCA. Without a DIN number, a person cannot be appointed as a Designated Partner. A roadblock from the Government even before the journey begins !!
In India we are used to challenges and blocks in every journey but at least should we not be informed what is the reason behind this block (read suspension) and when it will be cleared ? Does the above message suffice ? Is the entrepreneur to wait endlessly without starting his planned business ? Should he be forced to start a private limited company when a LLP suffices ? Why should he be stopped for months (this is on from Jan, 2018 onwards) to induct new Designated Partners ? Should only entrepreneurs who already have DIN be allowed to form LLP during this period ? What about fresh startups who prefer LLP ?
No one seems to know the answer and it is rather embarrassing to respond to clients that a simple form and a number is the reason that he cannot startup as a LLP. Infact one of my clients shot off an email to the PMO’s office. Promptly he got a call from a senior official in MCA assuring that the forms will be ‘out’ soon. This was about 15 days ago ! what is the meaning of soon ?? Another client wants to effect some changes in his LLP Board and get in new people but he is unable to move forward. This may mean loss of business opportunities.
Some of the ingenuous professionals have beaten the ‘suspension’ by applying for a DIN indicating a person will be appointed on a company Board first, appointing him as a Director (please note DIN allotment for directors of companies is not suspended) and then using the DIN number to enter an LLP as Designated Partner. With the changed rules for appointment of Director in companies in India, this is not easy either. This is a convoluted and wrong route that law-abiding corporate citizens would do well to avoid. As the great musician-saint Thyagaraja had composed “Chakkani rajamargamulundaga, sandulu endukkura ?” (meaning when there is a royal highway, why the bylanes). Hope the highway for LLP journey opens soon !!
I am relieved now, having let out steam on the LLP-DIN issue Please do spare time to understand some similar challenges in the Angel Tax exemption article we are carrying in this 189th issue of Samhita. Again, some ‘steam’ let out there. In addition to this a few other regulatory updates in this issue for your reading.
For our older issues of Samhita, tune in to

Happy Reading

CBDT has issued 2 notifications impacting the Angel Tax exemption provided for by DIPP vide its Notification No. G.S.R. 364(E) 11th April, 2018.
  • By quietly dropping the word “accountant” from Rule 11U and 11UA of the IT Rules, 1962, the valuation report issued by a Chartered Accountant is no longer valid for the purpose of tax exemption referred to in S.56 (2)(viib) of the IT Act in respect of startups raising investment.
  • Fair Market Value under the above Rules can be determined only by a SEBI registered Category-1 Merchant Banker.
  • Startup receiving consideration which is higher than the fair market value towards issue of shares to a resident investor, after obtaining necessary approval from the Inter-Ministerial Board, constituted under the DIPP notification need not pay Income Tax on such amount under the head “Income from Other Sources” (Exemption from Angel Tax). Many conditions to be fulfilled both by the Investor as well as Startup.
2 small notifications but with a big impact for startups. We have analysed in detail the provisions of S.80-IAC , S.56 (2)(viib) read with rules 11U and 11UA of IT Rules, 1962 as well as all the clauses in the critical DIPP notification dated 11th April, 2018 to understand the tax benefits available to a startup. Though the DIPP notification was carried in our 186th Issue, for ease of reference it is attached here once again.
Do read the separate article on the above and reflect on the nitty gritties involved in the seemingly simple DIPP and CBDT notifications.

MCA has clarified as below in respect of CODS, 2018:
  • Is your company name struck off from the Register of Companies ?
  • Have you filed a revival application with the NCLT ?
  • Have you received a revival order from the NCLT including DIN re-activation ?
  • Have you filed all the overdue documents, i.e., financial statements and annual returns after receiving NCLT order ?
  • Do you want to avail the CODS, 2018 even after 01.05.2018 ?
If it is a YES to all of the above, you can approach RoC to raise a ticket through Change Requirement Form to reactivate the Directors’ DIN. RoC will do the needful after scrutinizing the NCLT order and ensuring that the overdue documents are filed and the said Directors are not Directors on any other defaulting company which has been struck off.
Appendix 3A is a list of items not allowed for import under Export From India Scheme under Chapter 3 of the Foreign Trade Policy 2015-2020. DGFT has clarified that the word “duty” appearing in Sl No. 3 of the list, i.e, “All Spices with a Duty of more than 30% under Chapter 9 of ITC (HS) Classification of Export and Import items (except Cloves) “ means only Basic Customs Duty and does not include other kinds of duties.
MCA has clarified that a company shall give preference to the local area and areas around it, where it operates, for spending the amount mandated for Corporate Social Responsibility activities. This reiterates the original requirement which must be followed in letter and spirit.

Note: The contents of this Newsletter are only a summary and has not dealt with any issue in detail. Any action taken or proposed to be taken must be in consultation with professionals and not merely based on the articles / news updates. S. C. Sharada & Associates disclaims all liability on action taken without professional advice.

S. C. Sharada & Associates, Company Secretaries. #405, 7th Cross, IV Block, Koramangala, Bangalore – 560 034 Phone : +91 80 25534374 , +91 80 25536618 Email: [email protected]

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