Financial year under Companies Act, 2013

4 February 2016 • Sonal Verma

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Financial year under Companies Act, 2013

4 February 2016 • Sonal Verma

As per section 2(41) of companies Act, 2013 every Company is required to follow uniform Financial Year ending on 31st March. Companies following a different FY were given a transition period of 2 years to comply with the requirement. It means Company has to comply with this provision by 31st March, 2016.

The new law has not provided any specific procedure for such alignment during the transitional period. Further, with respect to this provision there is no separate format or forms to intimate ROC and different ROC have different views on this matter.

It came to our notice in one case that ROC had given the extension under the old Act (Section 210(4) of Companies Act, 1956). Section 210 of the Companies Act, 1956 has been repealed w.e.f 01-04-2014 itself and neither the corresponding provision i.e. section 129 (Annual Financial Statements) nor section 2(41) of the Companies Act, 2013 prescribes any procedure for such extension. ROC probably had given extension during initial months of implementation of the new Act but has started rejecting the application by saying that the ROC does not have the power to grant  extension under Section 129 of the Companies Act, 2013.

We are of the view that a company can align its financial year by passing a board resolution without any requirement of seeking permission of any authority under law and while doing Annual filing you need to attach the Board resolution.

For future convenience you need to inform this change to other authorities if any, like Income tax, SEBI (for listed Co.). etc.

If any Company which is holding or subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India,  suitable application is to be filed with the Tribunal.


11 comments

  1. What if a company incorporated after jan 2020 and it files financial statement for 3 months from jan to march 2020. Is there any violation as per sec 2(41) which says to file financial statements on 31st march of following year(i.e. 31 march 2021)??

    1. Pursuant to the provision of Section 2(41) of the Companies Act, 2013 “Financial Year” means the period ending on the 31st day of March every year, and where any company or body corporate has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up.

      Since the company was incorporated after January 2020, its first financial year will be closed on 31st March 2021. However, in your case since the Company has closed its financial year on 31st March, 2020 and the Board in their first meeting has resolved to close the financial year on 31st March, 2020 itself, it will not be treated as a non-compliance of the provision of the Act. Further, regarding the filing of financial statement, it will be regulated on the basis of the date on which the shareholders has adopted the same in the Annual General Meeting of the Company.

  2. Dear Sir,
    Our company is subsidiary of a foreign company. In 2016, after application we got the NCLT order to change FY to Oct-Sept. Now we want to align FY and change again to Apr-Mar. Do we have to make request to RD u/s 2(41) or board resolution will suffice. Also do we have to approach ROC for extension of FY for 18 months i.e. 1st Oct 19 to 31st Mar 21

    1. As per Section 2(41) read with Rule 40 of Companies (Incorporation) Rules, 2014, you have to make an application to RD (Regional Director) in e-Form RD-1 as only RD has the power to change the Company’s Financial Year and not the Board of the Company.

      Further, ROC has no power to extend the Financial Year of a company. Only RD has the power to allow any period as a company’s financial year, whether or not that period is a year.

  3. Suppose i am allowed to change my financial year wit regards to Companies Act to Jan to Dec, then what would be considered as a Financial year from the Income tax Perspective?

    1. Income Tax Act has defined, “assessment year” means the period of twelve months commencing on the 1st day of April every year and “previous year” means the financial year immediately preceding the assessment year.

      In view of the above, we can safely say that the Financial year as per the Income Tax Act will be the period from 1st April to 31st March. However, you are requested to seek advice from a Tax Consultant in this matter.

  4. If a company is incorporated in India and has a foreign parent, its allowed to change its accounting year to 30 June under companies act ?Do you know if that’s allowable under income tax act as well ?

    1. Yes, according to Section 2(41) of the Companies Act, 2013 if an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year.
      No, there is no such concept under Income Tax Act.

  5. i wanted to know According to Section2(41) companies act,2013 it is mandatory for Every subsidiary company who follow the calender year for consolidation of their financial statement need to report ROC required to follow uniform Financial Year ending on 31st March??? and what will be the process to report as per financial year previously we have report as per calender year, please to advise on above.

    Regards
    kalpesh

    1. If holding and subsidiary both are Indian company. Then they have to follow the F/Y ending on 31st march.
      If either holding or subsidiary is incorporated outside India and is required to follow a different F/Y for the consolidation of its accounts outside India, then they can apply to tribunal for different F/Y.

  6. Wehther section 2(41) is applicable on project office of foreign company who are making their account for Indian operation as per section 381.

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