Single transferable system of voting – An appraisal

The next elections to the Council and Regional Councils of the Institute will be held on 4th and 5th December, 2015 at Ahmedabad, Bangalore, Chennai, Delhi/New Delhi, Gurgaon, Hyderabad, Jaipur, Kolkata, Mumbai, Pune, Surat and Thane and on 5th December, 2015 at all other places where polling booths have been set up. The members especially those who are new would, naturally, be interested in knowing how the “single transferable vote” system under which the elections are held operates. The broad details of the system are given below:

1. Each voter has only one vote for election to the Council and one vote for election to the Regional Council. The voter, in order to cast his vote, shall place on his ballot paper the number 1 (in Arabic or Roman numerals, or in words) against the name of the candidate for whom he desires to vote, and may, in addition, place on his ballot paper the number 2, or numbers 2 and 3, or the numbers 2, 3 and 4 and so on opposite the names of other candidates in the order of his preference. A voter has as many preferences as the total number of candidates from that Regional Constituency/ Regional Council. However, for the purpose of facilitating the process of election by avoiding fractions, each valid vote is notionally considered to be of the value of 100 so that if a part of the vote has subsequently to be transferred from one candidate to another (next in the order of preference), it does not become necessary to resort to fractions, which would make the counting cumbersome.

2. At the time of counting of votes, the covers containing the postal ballot papers are opened and the voting papers are separated. To these are added the voting papers taken out from the ballot boxes used at different polling booths. The ballot papers are, in the first place, examined and invalid papers are rejected and excluded from the process of counting. The total value of the valid votes is then calculated by multiplying the number of such votes by 100, as mentioned above. This total value is then divided by the number of vacancies increased by one, and the quotient increased by one gives the value that is required for any candidate to get elected. This figure is termed as the “quota”. Thus, if in a constituency, eight members are to be elected and there are 4,500 valid votes, the quota will be:-

4500 x 100
---------------- + 1 = 50,001
8+1

In other words, a candidate should get 50,001 votes to get elected. The addition of one to the quotient is explained by the fact that if it is not done, there is a possibility that more candidates may get elected than the number of vacancies.

The First Count

3. After working out the “quota”, the votes are sorted out and divided into parcels according to the candidates for whom the first preference is marked on the respective votes. The value of the first preference votes received by each candidate is then worked out and the process is known as the first count.

4. All the candidates, the value of whose votes is equal to or greater than the quota, are declared elected. The votes of the candidates who obtain exactly the quota are set aside as there is no question of transfer of any surplus from those votes.

Transfer of Surplus and Subsequent Counts

5. Then starts the process of transfer of the surplus values of the votes of those candidates who have secured more than the quota at the first count. Their cases are taken one by one in the strict order of the value of their votes, the largest surplus being dealt with first. In case no candidate obtains the quota in the first count, exclusion of candidates is resorted to (see para 12).

6. The votes of the candidate whose surplus is to be transferred are scrutinized and all those votes which are capable of being transferred (viz., on which the next preference is marked for a candidate, who has not already been elected, or if the next preference is marked for an elected candidate, the preference marked next to that and so on) are separated. The remaining votes which are not capable of further transfer are set aside and treated as exhausted.

(7.1) Before the votes are transferred to the candidates marked next in preference, a new value of each vote is worked out. This value is arrived at by dividing the total surplus of the candidate by the number of votes to be transferred, the remainder being ignored, subject to the condition that the new value does not exceed the original value at which the vote was received by the candidate whose surplus is being transferred (viz., 100 in the case of first preference votes).

(7.2) Thus, if after the first count, a candidate has a surplus of 2,962 and there are 65 votes in his parcel which are capable of being transferred, each vote will be transferred at the new value of (2,962÷65) 45. The remainder of 37 [2962-(65x45 = 37)] is treated as loss in value.

8. The votes under transfer are then divided into parcels according to the candidates to whom they are to be transferred. The parcels of the transferred votes are also added as sub-parcels to the parcels of original (viz., first preference) votes of the candidates concerned. The total value of the votes going to a particular candidate is obtained by multiplying the new value of each vote by the number of votes going to him and is added to the value of his original votes. The result of the transfer is then struck out and the candidates who obtain at this stage the “quota” are also declared as elected.

9. This process of transfer of the surpluses of the elected candidates continues till the required number of candidates are elected or till all the surpluses have been dealt with.

10. As already stated, the surpluses are transferred in the strict order of their value, but all surpluses arising at an earlier count are disposed of before the surpluses arising at subsequent counts are taken up.

11. In the case of transfer of surplus of a candidate who was not elected at the first count but only as a result of transfer of some votes to him at a subsequent count, since the surplus arises out of the last sub-parcel of his votes, it is only the last sub- parcel that is scrutinized and the unexhausted votes contained therein which are capable of further transfer are revalued, in the manner stated in para 7.1 and 7.2 above, and then transferred to the candidates marked next in order of preference. If there is no vote in the last sub-parcel which is capable of further transfer, the whole of the surplus is treated as loss in value.

Exclusion of Candidates

12. When there is no surplus left for transfer and the number of candidates elected is less than the number of seats, the exclusion of candidates is resorted to. The process of exclusion comprises the transfer of votes (both original and transferred) of the candidate to be excluded to the candidates marked next in order of preference and who have not already been elected or excluded.

13. The candidate, the value of whose votes is lowest at the time of exclusion, is first excluded.

14. The parcels and the sub-parcels of the votes of the candidates to be excluded are taken up one by one in the order in which they were received and the votes contained in each parcel and sub-parcel which are capable of further transfer are transferred to the candidates marked next in order of preference at the same value at which they were received by him. Each parcel and sub-parcel is dealt with separately. It is only after the parcel and all the sub-parcels have been duly transferred that count is completed.

15. If, as a result of transfer of votes of a parcel, or a sub-parcel, any other candidate secures the quota and is elected, the count in progress is completed but no further votes are transferred to the elected candidate from the subsequent sub-parcels. The following example would make it clear. Let us suppose that the votes of candidate “A” who is to be excluded consist of the original parcel and two sub-parcels subsequently transferred to him. Suppose as a result of the transfer of votes contained in the original parcel, another candidate “B” gets elected. Then the remaining two sub-parcels will be dealt with one by one but no vote therefrom will be transferred to candidate “B” and such of the votes as would have normally gone to “B” will now be straightaway transferred to the candidates marked next to “B” in the order of preference on the respective votes.

16. The process of exclusion continues till the requisite number of candidates has been elected or the number of candidates left in the field (i.e., the continuing candidates) is equal to the number of vacancies still unfilled.

17. If, as a result of any exclusion, another candidate gets the quota and is thus elected, no further exclusion is done till the surplus of the elected candidate has been transferred and it becomes necessary thereafter to again resort to exclusion. In other words, a candidate is to be excluded only when there is no surplus to be transferred.

(18.1)If, at any time during the course of counting of votes, the number of candidates remaining in the field is reduced to the number of vacancies not yet filled, all those candidates are declared as elected without resorting to any further calculations.

(18.2)It, therefore, follows that a candidate may be elected even though he does not get the required quota.

19. If at a particular time only one vacancy is left unfilled and the value of votes (both original and transferred) of anyone continuing candidate at that time exceeds the total value of votes of all the other candidates left in the field, including the surplus of any candidate not yet transferred, that candidate is declared as elected.

20. When after counting of votes, a tie is found to exist between candidates, regard is given to the original votes and if the original votes are also equal, then the process of draw of lots is resorted to. In case of tie amongst more than two candidates, the candidate whose slip is picked up is excluded from the poll. If the tie is between two candidates, the candidate whose slip is picked remains in the poll or declared as successful, as the case may be.

- CA Kasliwal Ambar

ICAI proposal to least developed countries for developing their accounting profession.

Aiding transition and emerging economies, ICAI has been advocating the need for creating a sustainable framework of accounting in countries lacking accounting Infrastructure/where accountancy profession is evolving for creating a cadre of accounting professional who are able to support the evolution of Industry by propagating and putting in place a compliance regime and sound framework for reporting practices.

A very strong role is played by accountancy institutes in economic growth of countries and in capacity building. It is important to have a well-developed accounting institute which would help in developing competent accounting professionals and in promoting strong professional and ethical standards.

ICAI’s endeavor is to help Least Developing Countries (LDC’s) to establish Accounting Institute in those economies where the same does not exist and in further strengthening the accounting infrastructures in those countries where the same exists. ICAI proposes to undertake off- site and if required on-site study of the accounting profession in the relevant LDC in order to design its methodology and approach to forward the overall project.

- CA Kasliwal Ambar

Government to Issue Sovereign Gold Bonds

Government of India, in consultation with Reserve Bank of India (RBI), has decided to issue Sovereign Gold Bonds. The Bonds will be issued on November 26, 2015. Applications for the bond will be accepted from November 05, 2015 to November 20, 2015. The Bonds will be sold through banks and designated post offices as may be notified. The borrowing through issuance of the Bond will form part of market borrowing programme of Government of India.


It may be recalled that the Finance Minister had announced in Union Budget 2015-16 about developing a financial asset, Sovereign Gold Bond, as an alternative to purchasing metal gold.

The major features of the Bond are given below:

• Product name- Sovereign Gold Bond
• Issuance- To be issued by Reserve Bank India on behalf of the Government of India.
• Eligibility- The Bonds will be restricted for sale to resident Indian entities including individuals, HUFs, trusts, Universities, charitable institutions.
• Denomination- The Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.
• Tenor- The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the interest payment dates.
• Minimum size- Minimum permissible investment will be 2 units (i.e. 2 grams of gold).
• Maximum limit- The maximum amount subscribed by an entity will not be more than 500 grams per person per fiscal year (April-March). A self-declaration to this effect will be obtained.
• Joint holder- In case of joint holding, the investment limit of 500 grams will be applied to the first applicant only.
• Frequency- The Bonds will be issued in tranches. Each tranche will be kept open for a period to be notified. The issuance date will also be specified in the notification.
• Issue price- Price of Bond will be fixed in Indian Rupees on the basis of the previous week’s (Monday–Friday) simple average of closing price of gold of 999 purity published by the India Bullion and Jewellers Association Ltd. (IBJA).
• Payment option- Payment for the Bonds will be through electronic funds transfer/cash payment/ cheque/ demand draft.
• Issuance form- Government of India Stock under GS Act, 2006. The investors will be issued a Stock/Holding Certificate. The Bonds are eligible for conversion into demat form.
• Redemption price- The redemption price will be in Indian Rupees based on previous week’s (Monday-Friday) simple average of closing price of gold of 999 purity published by IBJA.
• Sales channel- Bonds will be sold through banks and designated Post Offices, as may be notified, either directly or through agents.
• Interest rate- The investors will be compensated at a fixed rate of 2.75 per cent per annum payable semi-annually on the initial value of investment.
• Collateral- Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank from time to time.
• KYC Documentation- Know-your-customer (KYC) norms will be the same as that for purchase of physical gold. KYC documents such as Voter ID, Aadhaar card/PAN or TAN /Passport will be required.
• Tax treatment- The interest on Gold Bonds shall be taxable as per the provision of Income Tax Act, 1961 (43 of 1961) and the capital gains tax shall also remain same as in the case of physical gold.
• Tradability- Bonds will be tradable on exchanges/NDS-OM from a date to be notified by RBI.
• SLR eligibility- The Bonds will be eligible for Statutory Liquidity Ratio.
• Commission- Commission for distribution shall be paid at the rate of 1% of the subscription amount.

Avoiding complaints from your clients' may affect your firms reputation.

Dear Friends,

Research shows that as many as 66% of disgruntled clients' will most likely choose not to work with you again, for a faulty solution or experienced bad service. (Source : Google)

Here are seven ways to avoid losing clients — and save your reputation.

Tip #1 : Show that you care

Listen to what your client has to say to determine the problem and offer a quick resolution. It's important to stay professional and avoid getting emotional, but it's equally important to show your human side and demonstrate that the client is not just another number for you.

Just in case you need numbers to actually care: A 2014 study suggests that a completely satisfied client contributes 14 times as much revenue as a somewhat dissatisfied one (Source : Google)

Tip #2 : Throw away template answers

You should take a one-on-one approach for every aspect of your communication with your client. Generic copy-paste emails won’t do. Your voice and professional opinions need to be heard and, most importantly, you need to match them to your client's situation and to the solution you are providing.

Show your client a personalized approach and try to put yourself in your clients' shoes before you answer. Research suggests that more than 55% of your clients will be willing to pay more for better client service. And better means more individualized and personalized attention. (Source : Google)

Tip #3 : Avoid lengthy discussions

Try to focus on facts and don't get yourself dragged into disputes over who's right and what's right.

Proving your point will not get you any extra client love. Your clients – even those most upset – expect to be listened to, encouraged that their issue will be taken care of, and offered a resolution.

In a typical business, 42% of client service agents are unable to efficiently resolve customer issues due to disconnected systems, archaic user interfaces and age-old methods. (Source : Google)

Don’t close yourself off in a golden cage of old structures. Take the road less travelled.

Tip #4 : Offer a fast and effective solution
Unhappy clients will keep contacting you until you resolve their problem and make sure that help is coming. It's important for you to offer quick and reliable assistance. At the same time, you need to be realistic and not over-promise.

2012 research indicates that 33% of clients would recommend someone that provides a quick response, even if that response is ineffective. (Source : Google). This speaks about the need of time-efficient response to your client’s needs.

As long as you stick to the facts, you will gain clients' gratitude for responsibly handling their issues. You already have the skill set and experience to make the best possible short-term solution in a short amount of time. Be honest with your client about their options.

Tip #5 : Don't let the issue escalate

Finding a solution may take some consultations and follow-up, but remember that in the world we live in today, clients(especially those disgruntled ones) count on fast resolution. If they don't get it, they'll go on Facebook or Twitter to voice their frustration. Don't ignore any complaint; deliver what you promised and don't let the issue escalate to the point where it causes your firm, a loss of reputation.

Nowadays, your client is twice as likely to post a negative review about your client relationship as opposed to a positive one, and they are four times more likely to switch to the competition if they are dissatisfied with the service.

This is not to say you have to seal any issue that might have presented itself and never speak of it in public. When it comes to issue resolution, think fast and act faster. But don’t be afraid to give a creative apology if your client has been damaged by the issue.

Tip #6 : Train your staff so they can do their job right

This one is well-meant advice for those of you who employ more than just yourself in your client relationships. Your client service personnel are always out there on the battlefield, handling debates with unhappy clients and trying to put-out fires. Make sure they have all the support they need to assist and support others.

Share with them the company's values and guidelines so that they are never surprised by a question from a client; collect feedback from clients and try to improve your services as much as possible; show your staff what is doable and what is not doable when handling complaints; invest in brainstorming and training sessions so that they can provide top quality service. Don't be shy to include new market solutions that will save them time and effort.

Tip #7: Minimize negative reviews

Negative reviews can be very costly for your business. Show your clients you are ready to listen to their complaints before they go and rage about your service.

Resolve their problem fast and effectively by providing client service by phone, mail, skype etc. Your clients will reward you by staying with you — instead of choosing another professional.

-CA Kasliwal Ambar

Property prices will be hit by tax on unsold inventory held by developers and builders

According to tax authorities, real-estate companies should have to pay tax based on Annual Letting Value (ALV) on unsold flats as they are the owners of the flats and it does not matter whether the properties are rented out or not.

In a bid to arrest hoarding of residential flats by developers and increase supply across the country, the income-tax department has decided to tax realtors on estimated annual rentals.


The tax could be anywhere between 15% and 20%. The move is as per the central action plan for 2015-16, under which the I-T department can levy tax on any unsold flat by treating it as 'income from house property' under Section 43-CA of the I-T Act, 1961.
According to tax authorities, real-estate companies should have to pay tax based on Annual Letting Value (ALV) on unsold flats as they are the owners of the flats and it does not matter whether the properties are rented out or not.

This means inventory of builders will be taxed on the basis of notional ALV -- a value on which tax has to be paid on the annual value of house property or the rent actually earned, whichever is higher.

A senior IT official said, "The builders' lobby has been creating artificial scarcity through hoarding of flats, only to sell them at higher prices later".

It has been noticed that this practice has been in vogue for over a decade and such flats or stocks are shown 'unsold' in the books of accounts while the main aim was to rig the prices upwards, said a tax official on condition of anonymity.

Taxing unsold stocks will help in two ways, according to a senior I-T official. One, this brings significant revenue, and second, it will force real-estate players to either sell their unsold flats at market-determined price. "Paying tax will further affect their bottomlines," the official, who did not wish to be named, told dna.

According to a recent report on the real-estate market in India by an international property consultant, unsold flats in six major cities hit the highest at 6.88 lakh units in the January-March quarter.

According to the report, it will take 72 months for builders to clear the inventory in Delhi-NCR and 46 months in Mumbai.

So far, unsold projects of builders were exempted from income-tax under the 'stock-in-trade' category. The I-T department believes builders would release more flats into the market, if they have to pay tax on them.

"Real-estate companies show their finished apartments as stock-in-trade and income from these are shown as business income, as in most other businesses. In a rising market, several developers hold apartments to benefit from the price appreciation that will accrue a few years after the project is complete," said a real-estate consultant.

A few years ago, when there was an attempt to tax such unsold stock, builders had moved court. However, the court gave a judgment in favour of the department in 2012.

The court had validated the I-T department's argument that builders will have to pay tax based on the ALV method, irrespective of the fact that these flats were not rented out. The department has now decided to levy this tax uniformly across the country after the proposal was cleared by the finance ministry.

- CA Kasliwal Ambar

Betting turnover in Bihar elections is expected to cross Rs 10,000 crore

Bookies in the satta bazzar or the illegal betting market, who accurately predicted a single party majority for BJP in May 2014's national polls, are predicting that state's two political parties the RDJ and JDU may not win more than 50 seats and 80 seats respectively in the 243 seat state assembly. It is the best case scenario of both these political parties, bookies. Odds on Nitish Kumar led JDU winning 80 seats are pegged at 6:1 while Lalu Yadav's RJD winning 50 seats is pegged at 6:1.

"Anti-incumbency is strongly against JDU, while people of Bihar have still not forgotten the poor state of law during RJD's tenure," said a bookie. Betting turnover in Bihar elections is expected to cross Rs 10,000 crore.

The BJP appears to be galloping ahead in Bihar polls like the bulls. Bookies say in the worst case the BJP's seat count may not fall below 85 seats whereas there is no cap on seats on the upside. Bookies will offer only 85 paise on every rupee bet for BJP winning 85 seats. 

Lower the odds, higher are the chances of a win.

A couple of months ago most bets were on a close contest. The bookies gave BJP lead NDA and Nitish Kumar around 110 each. But, the punters now favour a clear majority for the NDA, giving it around 135 seats, JDU 40-42, RJD 33-35 and relegating Congress to single digits.

- CA Kasliwal Ambar

AUDITORS SHOULD NOT AFFIX THEIR DIGITAL SIGNATURE IN ROC RETURNS

Forms for annual filing have been released today. The two forms ie Form 23AC and ACA have been replaced by a single Form AOC-4.

Now every company needs to file its balance sheet in Form AOC-4

Form AOC -4 is required to be certified by any CA CS or ICWA in practice by subscribing to the declaration that the respective professional has been duly engaged for certification of the said form.

As per the provisions of section 144 of the Companies Act 2013 certain services can't be rendered as an auditor, which includes “management services”

Management services means services rendered on behalf of Management, which management itself is oblige to do.

E.g.

Preparation and filling of:
· Income Tax Return
· ROC Return
· Service Tax Return
· VAT Return
· TDS Return
· Excise Return

This can be planned to comply with the provision.

- CA Kasliwal Ambar

CASA Daily News Alert

>> TAR/ITR Extension Case:

Writ Petition filed against non extension of Due date of TAR/ITR filing for cases covered under Tax Audit Provisions in various High Courts (Gujarat, Delhi, Jodhpur, Karnataka, Orrisa, Mumbai and in Punjab & Haryana) - Cases adjourned for Hearing / Cases Listed for Final Hearing later. ICAI Meeting with FM: No Concrete Decision on TAR/ITR Date Extension.

>> CBDT has updated the tax audit utility today by updating utilities for form 3CA CD, form 3CB CD and form 10B. So please take care and in case you are using tax filling software ask your vendor to update software.

>> ICAI: Exposure Draft of Changes in Ind ASs as a consequence of deferment of Ind AS 115, Revenue from Contracts with Customers, for Public Comments issued

>> MCA Updates: New forms (AOC-4, MGT-7, ADT-2, SH-9) will be available from 25-09-2015. Versions of CRA-4 & CHG-4 are likely to be modified w.e.f. 25-09-2015.

>> SEBI has issued circular under Regulation 27(2) of the SEBI(Listing obligations and disclosure requirements) Regulations, 2015 read with regulation 101(2) (Clause 49 of the existing listing agreement), which provides for the format for compliance report on corporate governance to be submitted to the Stock exchanges by the listed entities.

>> Case Study: Bombay High Court held In the case of M/s Nagpur Engineering Co. Pvt. Ltd. vs. CIT. that in order to attract ceiling u/s 40(c), the payment must be a periodical payment. A Lumsum payment or one time payment is not covered under section 40(c) of Income Tax Act

- CA Kasliwal Ambar

Delhi High Court rejected writ for extention of due date for TAR

Delhi High Court rejected writ for extension of due date for TAR; said CAs should have completed audit by 7th July( i.e. date till form notified), time thereafter is sufficient to file TAR (7th July to 30th September) 

Facts:

a) The petitioner claims to be entitled to extension of due date of filing income-tax return (‘ITR’) (i.e., September 30, 2015) due to the delay on the part of the respondents in prescribing the ITR forms. b) It was contended that the said forms were prescribed only vide Notification dated 29th July, 2015 and were made available only with effect from August 7, 2015. The argument of the counsel for the petitioner was that since the Assessment Year 2015-2016 commenced on 1st April, 2015 and the due date for filing the return is 30th September, 2015, so 180 days are to be made available to the assessee to file the return. The Delhi High Court held as under:

1) The period claimed by the petitioner as a matter of right of 180 days for filing the ITR is admittedly not prescribed, neither in the Statute nor in the Rules.

2) Filing of ITR for assesses due date whereof is 180 day sis dependent upon the accounts of the assessee being audited and which audit the counsel for the petitioner admits commences only on the beginning of assessment year. The said audit, in the case of some assesses may be completed in a few days and in case of others may take longer. Thus, the time taken in audit, which is variable, will be determinative of the time available thereafter for filing the ITR. Said audit is not dependent upon the prescription of the income-tax return (‘ITR’)forms.

3) Once the audit is complete the time admittedly available from 29th July, 2015 / 7th August, 2015 to 30th September, 2015 cannot be said to be so small.

4) The Government vide Press Release dated 9th September, 2015 have already clarified that the date of 30th September, 2015 will not be extended and have advised the taxpayers to file the returns accordingly. The time available, after 7th August, 2015 and till 30th September, 2015 is not found to be illogical or unreasonable to enable the assessees to file the ITR.

5) The counsel for CBDT is unable to give the reasons for the forms are not available at the beginning of the assessment year on 1st April of every year and the same thereby causing inconvenience to the practitioners of the subject.

6) There is sufficient time available to the Government, after the Finance Act of the financial year, to finalise the forms and if no change is intended therein, to notify of the same immediately.

7) From the next assessment year Government should at least ensure that the forms which are to be prescribed for their Audit Report and for filing the ITR are available as on 1st April of the assessment year unless there is a valid reason therefore and which should be recorded in writing by the respondents themselves, without waiting for any representations to be made.

-CA Kasliwal Ambar

Cash loan of above Rs. 20,000 taken by builder to meet immediate requirement of business won’t attract penalty

Section 269SS, read with sections 273B and 271D, of the Income-tax Act, 1961 - Deposits - Mode of taking/accepting

Penalty under section 271D could not be levied when assessee sufficiently process that loan was taken in excess of Rs. 20,000 to meet urgent and immediate requirement of Business

[2015] 56 taxmann.com 439 -HIGH COURT OF GUJARAT –CIT v. Shreenathji Corpn

Assessee carries on business of construction of building and in course of such business large amount of labour charges and payments for raw material purchased from unorganized trading sectors and bricks etc. are required to be made after banking hours

If their demand for cash payment was not met they would cancel contract work and refused to complete work and would also prevent other contractors from undertaking work till their dues were settled

It was held that since loan/deposits was taken in excess of Rs. 20,000 to meet urgent and immediate requirements of business, no penalty could be imposed

Circulars and Notifications: Circular Nos. 387 dated 6-7-1984 and 572, dated 3-8-1990

- CA Kasliwal Ambar

Chartered Accountant: Latest Updates You Need To Know - 17th September 2015

1. President ICAI suggested Finance Minister to extend due date of filing of ITR & Tax Audit Report be extended from 30.9.2015 to atleast 31.10.2015 for genuine hardship to the assesses and members of the profession.

2. Individuals can now apply for PAN online with digital signature w.e.f 6.9.2015.

3. Salary and Interest to partner to be allowed as deduction while estimating the profits of the firm where books of accounts are rejected- Inter Continental Constructions (High Court of Andhra Pradesh and Telangana).

4. If the notice u/s 148 of I T Act was not served on the assessee in accordance with law, the re-assessment made is liable to be quashed.[ CIT vs. Chetan Gupta, High Court of Delhi]

5. Now a private company can accept unsecured loans also from a relative of director, with a declaration that such loan is not from borrowings. Notification dated 15.09.2015.

6. Union Cabinet has approved to promulgate the Negotiable Instruments (Amendment) Ordinance 2015 which redefined the jurisdiction clause in the Negotiable Instrument Act.

7. DGFT has notified modification in E-IEC’s as well as the IEC’s issued in physical format from 21st of September, 2015. www.dgft.nic.in.

- CA Kasliwal Ambar

‪MCA‬ Update on Deposit From Relative By ‪Private Limited Company‬

Deposits rules are quickly getting aligned with old 58A exempted rules to private limited company.

Without any upper limit of amount, now a private company can accept unsecured loans apart from director even from a relative (as per definition) of a director of the company with simple declaration saying the relative has not borrowed same from others. The relative need not be a shareholder of the company.

http://www.mca.gov.in/Minis…/…/Amendement_Rules_15092015.pdf

- CA Kasliwal Ambar

Learn CARO, 2015 in just a minute.

Lets Begin!!

We have to learn one line to learn each point of CARO , 2015.

Line is:

"FIL ID Code - SAD GUN"

1. F : Fixed assets

2. I : Inventories

3. L : Loans u/s 189

4. I : internal control system

5. D : Deposited

6. Code : Cost records

7. S : Statutory dues

8. A : Accumulated Losses

9. D : Default of repayment

10. G : Guarantee for Loan

11. U : Usage of Term Loan

12. N : Noticed any fraud and its reporting ?

- CA Kasliwal Ambar

Guidance Note on Audit of Internal Financial Controls Over Financial Reporting

ICAI has issued "Guidance Note on Audit of Internal Financial Controls Over Financial Reporting"

Link for Text of Guidance Note: http://220.227.161.86/39249aasb28733.pdf

Link for Contents of accompanying CD: http://220.227.161.86/39250aasb28733cd.zip

- CA Kasliwal Ambar

GST Update

Companies with an annual turnover up to Rs 25 lakh might be exempted from the proposed national goods and services tax (GST). The Centre and states are likely to settle for this threshold as they finalise the GST laws.

According to finance ministry officials, the draft of these laws is expected to be ready by the end of this month. The Centre and states are working on a mechanism to avoid dual scrutiny of companies by them. "The thinking now is that all legal entities with an annual turnover of up to Rs 25 lakh will be completely exempt. This will be applicable to one TIN (Taxpayer Identification Number)," said a ministry official.

The government is looking to reconvene Parliament's monsoon session to get the Constitutional amendment Bill on GST passed in the Rajya Sabha. Three Bills - on the Centre's GST (CGST), states' GST and Integrated GST -would come up after the Constitutional Bill is cleared. Work on the drafts is on.

States wanted a threshold of Rs 10 lakh to protect their revenue, while the Centre has assured them full compensation for five years. Besides, firms with an annual turnover between Rs 25 lakh and Rs 75 lakh will have an option to pay a flat rate of one per cent or GST rate. If they decide to opt for one per cent rate, firms will not get input credits because of which many, particularly dealers, may choose the GST rate.

The exemption limit from value added tax and service tax across states - except the North-East - is close to Rs 10 lakh turnover. "There will be an impact on revenue but it will depend on how many under the Rs 25 lakh to Rs 75 lakh annual turnover bracket opt for the one per cent rate. If 60-70 per cent opt for it, there will be loss of revenue for states but they will also get compensated by the Centre," said Bipin Sapra, tax partner, EY. From the manufacturing point of view, it was important to keep the exemption limit higher, he added.

While these are likely to be part of the GST laws, a final decision on this is to be taken by the yet-unformed GST Council. This is to be constituted within two months of enacting the Constitution amendment. It would comprise the Union and state finance ministers and will be empowered to take key decisions on GST.

The idea is that entities with a turnover of up to Rs 75 lakh will not attract any checks or audits from either the state or the Centre. The Centre will give states a free run on compliance checks for companies with annual turnover above Rs 75 lakh and up to Rs 1.5 crore. "Here, the Centre will only do online scrutiny. And, if states detect non-compliance with respect to CGST, only the Centre will issue a notice. States cannot issue a notice on our behalf," said an official. However, in case of companies with annual turnover of more than Rs 1.5 crore, there will be concurrent audits by both the state government and the Centre.

"The government is still discussing a mechanism of a risk-based selection so that the checks by Centre and states do not overlap," said the official.

The government on Sunday made a renewed appeal to Opposition parties to help pass the Constitutional amendment through an extended monsoon session. It is vital that this be cleared at the earliest for the government to stick to the GST implementation timeline of April 1, 2016. The three draft legislations will lay down the fine print of the uniform indirect tax regime.

- CA Kasliwal Ambar

RBI – New Guidelines on Concurrent Auditing at Branches

The ‪Reserve Bank‬ on Thursday said the concurrent audit at bank branches shouldcover at least half of their advances and deposits.

The concurrent audit system is regarded as part of a bank's early warning system to ensure timely detection of irregularities and lapses.


"Concurrent audit at branches should cover at least 50 per cent of the advances and 50 per cent of deposits of a bank," RBI said in a notification.

It said branches rated as high risk or above in the last risk-based internal audit (RBIA) or serious deficiencies found in internal audit are subject to concurrent audit.

The audit will also be applicable on all specialized branches like large corporate, mid corporate, exceptionally large/very large branches, SMEs and all centralised processing units like loan processing units (LPUs).

Besides, it would include service branches, centralized account opening divisions, wealth and portfolio management services, card products divisions, data centres and treasury/ foreign exchange business, investment banking, among others.

The concurrent audit also helps in preventing fraudulent transactions at branches.

The main role of concurrent audit is to supplement the efforts of the bank in carrying out simultaneous internal check of the transactions and other verifications and compliance with the procedures laid down, the RBI said.

The scope of concurrent audit should be wide enough or focused to cover certain fraud-prone areas such as handling of cash, deposits, advances, foreign exchange business, off-balance sheet items, credit-card business, Internet banking, it added.

The regulator said appointment of an external audit firm for concurrent audit may be initially for one year and extended up to three years, after which an auditor could be shifted to another branch, subject to satisfactory performance.

Abolition of ISA Eligibility Test

The Committee decided to abolish the ISA Eligibility Test from the Post Qualification Course on Information Systems Audit and all the members who have not yet qualified the ISA Eligibility Test and completed the Professional Training classes will be allowed to appear directly in the forthcoming ISA Assessment Test scheduled to be held in December, 2015. All the participants who will complete their professional training classes by 20th November, 2015 will be allowed to appear directly in the ISA Assessment Test scheduled to be held in the month of December, 2015.

- CA Kasliwal Ambar

Regional Council Elections of WIRC of ICAI for 2016-18

Dear CA Friends,

We, as Chartered Accountants belong to an esteemed profession that is at the forefront of a rapidly developing economy. Our skill sets have been honed by one of the best educational systems in the country and we have been entrusted with the responsibility to lead, nurture and protect our great nation. It is, therefore, our responsibility to ensure that our skill sets are world class and we continue to be well equipped to take on the challenge.

Since qualifying as a Chartered Accountant in the year 2002, it has always been my endeavour to contribute to the pride, dignity and growth of our esteemed community. My senior members of ICAI have always been my inspiration, mentor and guide during my professional journey and they have always encouraged me to take on greater responsibility at the Institute. Coupled with the support and guidance of my father and other senior members, I am in a position where I understand and appreciate the concerns of our community which operates under highly regulated environment and work with Institute in developing an inclusive and supportive ecosystem to enable members to discharge their responsibilities objectively and independently. With the advantage of youth on my side, I am well aware of the issues that newly qualified members face with regard to professional opportunities and networking and operate effectively under globalization, liberalization and privatization arena. I am equally aware of the problems faced by members in the industry and the women chartered accountants.

I would like to pledge my experience, skills, resources and efforts to our noble profession to take our community to even greater heights. I hereby declare my candidature for the next term of the Regional Council Elections of WIRC of ICAI for 2016-18 for which elections are scheduled for 4th and 5th December 2015, and humbly seek your support as well as the support of your colleagues and friends in our fraternity.

TO HAVE A VOICE, MAKE A CHOICE.

Thanks & Regards,
CA Ambar Kasliwal
B.Com., F.C.A
________________________

Jain Kasliwal & Associates LLP
Chartered Accountants

F-10, Sej Plaza, 1st Floor,
Near Nutan Vidya Mandir,
Marve Rd, Malad (W)
Mumbai - 400 064

Landline : +91-22-2807 6279/91-22-2807 6877
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www.cajainkasliwal.com

Central Excise Update

Cash Discount deductible from Transaction Value under new Section 4 also – Supreme Court in yesterday's judgement

The Supreme Court, on 25 August, 2015, has held that cash discount isdeductible from transaction value under new Section 4 of Central Excise Act, 1944 also as amended in the year 2000. [PurolatorIndiaLtd.vs.Commissionerof CentralExcise]

· According to the Supreme Court, for excisable goods, determination of price is only “at the time of removal” and this basic feature has not changed despite amendments in 1973 and 2000.

· The Supreme Court held that under Section 4, one needs to arrive at the assessable value based on transaction value as at the time of clearance of goods from the factory or depot. It held that basis for transaction value is the agreed contractual price and the term “whensold” does not indicate time at which goods are sold but goods are subject matter of an agreement of sale.

· The Apex Court held that cash discount is something known at or prior to clearance of goods as the same is contained in sale agreement and therefore, such cash discount must be deducted from sale price to arrive at value“at the time of removal”.

· The Supreme Court relied upon its own judgments in the cases of Union of India v. Bombay Tyre International and Government of India v. Madras Rubber Factory wherein the Supreme Court allowed deduction of trade discounts and year-end discounts & prompt payment discount respectively. The Court noted that ratio of these rulings will remain valid under amended Section 4 also.

· The Tribunal in its order had held if the buyer makes the prompt payment which entitles him to discount, the sale price will stand reduced by the amount of cash discount, whereas if payment is not made within the stipulated time, higher price recovered from the buyer will be considered as the assessable value. On this issue of cash discount, the Supreme Court set aside the order of the Tribunal.

· In this case, the Supreme Court was concerned with the period prior to as well as post 2000 i.e. both the normal price and the transaction value regimes. It distinguished the judgment rendered in the case of Commissioner of Central Excise v. Super Synotex wherein the Apex Court had dealt with amount of sales tax retained by the assessee on account of incentive scheme.

The conclusions emerging from this judgment are:

- Price at the time of removal is relevant under new Section 4 also.

- Cash discount is deductible from transaction value under new Section 4 also.

- Basis for transaction value is price as agreed or contracted as per sale agreement.

- Expression “actually paid or payable for the goods, when sold” in Section 4 means whatever is agreed to as the price whether such price has been paid or part paid or not paid at all.

- Price at the time of removal is not discounted or not determined is not fatal to deduction of cash discount

- CA Kasliwal Ambar

Service Tax on Home Delivery of Food not applicable

As per Govt norms, Service Tax is levied if the Food is served in an Air Conditioned Restaurant.

However, there has been a lot of confusion regarding levy of Service Tax on Home Delivery of Food as such food is not being eaten in a AC Restaurant.

A clarification in this regard was sought from the office of the Deputy Commissioner of Central Excise and Service Tax Division (Chandigarh) in this regard.

It has in a written communication replied that in the case of Transaction involving Pick-up/ Home Delivery of food sold by a Restaurant, the dominant nature of the transaction is that of Sale and not service as the Food is not served at the Restaurant.

Moreover, no element of service is being offered at the Restaurant, be it ambience, live entertainment, air conditioning, personal hospitality etc. The Service Tax can only be levied if there is an element of "Service" involved which would typically be the case where the food is served in a Restaurant.

Therefore, the above transaction is not chargeable to Service Tax, being sale in nature, only if, no amount is charged for such free delivery of food.

- CA Kasliwal Ambar