Economic \ Education

Legal Update Circiriars/Notifications

Given below are the important Circulars and Notifications issued by the CBDT, CBEC, MCA., RBI, SEBI and IRDA during the last month for information and use of members.] Readers are requested to use the citation/website or weblink to access thefull text of desired circular/notification. You are requested to please submit your feedback and suggestionsi on the column at eboard@icai.in

  1. Rule 12CA on “Statement under section 115UA(4)” requires:NOTIFICATIONS
  2. Statement under Section 115UA(4)-lnsertion of Rule 12CA and introduction of new Form Nos. 64A and 64B The Finance (No. 2) Act, 2014 inserted new chapter XII-FA containing the special provisions relating to business trusts. Section 115UA provides for tax on income of unit holder and business trust. Section 115UA(4) provides that any person responsible for making payment of the income distributed on behalf of a business trust to a unit holder shall furnish a statement to the unit holder and the prescribed authority, within such time and in such form and manner as may be prescribed, giving the details of the nature of the income paid during the previous year and such other details as may be prescribed. In exercise of the powers conferred by Section 295 read with section 115UA(4), the Central Board of Direct Taxes, has inserted Rule 12CA (along with Form No. 64A and Form No. 64B), which shall come into force from the day of their publication in the Official Gazette.
  • the statement of income distributed by a business trust to its unit holder to be furnished electronically under digital signature to the Principal Commissioner or the Commissioner of Income-tax within whose jurisdiction the principal office of the business is situated in Form No. 64A, duly verified by an accountant, by the 30th November of the financial year following the previous year during which such income is distributed.
  • the statement of income distributed by a business trust to its unit holder to be furnished to the unit holder in Form No. 64B, duly verified by the person distributing the income on behalf of the business trust in the manner indicated therein, by 30th June of the financial
    year following the previous year during which the income is distributed.
  • the Director General of Income-tax (Systems)! to specify the procedure for filing of Form Nod 64A and shall also be responsible for evolving^ and implementing appropriate security^ archival and retrieval policies in relation to the statements so furnished.

[Notification No. 3/201S, dated 19-01-2015]

  1. Section 80C of the Income-tax Act, 1961 – Notified plan under Section 80C(2)(viii) for deductions from total income

Section 80C provides for deduction from gross total income in respect of sums paid and investments] made through specified modes like life insurance] premia, deferred annuity etc. Under clause (viii) of Section 80C(2), deduction is available in respect of sums paid or deposited in the previous year by the assessee as subscription to any such deposit scheme that the government may specify by notification in the official gazette. Accordingly, in exercise of the powers conferred by Section 80C(2)(viii) of the Income-tax Act, 1961, the Central Government has specified the scheme for Girl child named ‘Sukanya Samridhhi Account’ for the purpose of said section which shall come into force with effect from the date of its publication in the Official Gazette.

Further, the Finance Minister has, vide Office Memorandum, dated 20.1.2015, decided to allow 9.1% rate of interest on investments in the said scheme during the Financial Year 2014-15.

[Notification No. 9/2015, dated 21-1-2015]

  1. Agreement for avoidance of double taxation and prevention of fiscal evasion with South Africa – Amendment in Notification No. GSR 198(E), dated 21-4-1998

In exercise of the powers conferred by Section 90 of the Income-tax Act, 1961, the Central Government had notified that all the provisions of the protocol amending the agreement between the Government of the Republic of India and the Government of the Republic of South Africa for the avoidance

 

Legal Update


 

 

of double taxation and the prevention of fiscal evasion with respect to taxes on income, which was signed in Pretoria on the 26.07.2013, shall be given effect to in the Union of India with effect from the 26.11.2014.

[Notification No. 10/2015, dated 2-2-2015]

  1. Income-tax (Second Amendment) Rules, 2015 -Safe Harbour Rules for Specified Domestic Transactions- Government company engaged in business of generation, transmission and distribution of electricity In exercise of the powers conferred by Section 92CB and 92D read with Section 295 of the Income-tax Act, 1961, the Central Board of Direct taxes has, through this notification, amended Rules 10D, IOTA and inserted Rules 10TH, 10THA, 10THB, 10THC, 10THD and Form No. 3CEFB to provide the following:
  • Sub-Rule (2A) has been inserted in Rule 10D to provide that an eligible assessee, a person who has exercised a valid option for application of safe harbour rules and is a Government Company engaged in the business of generation, transmission or distribution of electricity, shall keep and maintain the information and documents specified therein.
  • The heading “Safe Harbour Rules for International Transactions” shall be substituted under Rule 10T for the heading “Safe Harbour Rules”.
  • Further, “Safe Harbour Rules for Specified Domestic Transactions” has been notified through the following rules:
  • The word “Appropriate Commission” and “Government Company” has been defined under rule 10TH.
  • ‘Eligible assessee’ has been defined under rule 10THA to mean a Government Company engaged in the business of generation, transmission or distribution of electricity and has exercised a valid option of safe harbor rules.
  • Rule 10THB defines an ‘eligible specified domestic transaction’ to mean a specified domestic transaction, which comprises of supply of electricity by generating company or transmission or wheeling of electricity.
  • Rule 10THC provides that the transfer price declared by the assessee, in respect of eligible specified domestic transaction entered by him, shall be accepted by the

income-tax authorities, if it is in accordant with the rules specified therein.

  • Rule 10THD provides the procedure I be followed for the purpose of exercisii the option for safe harbour for which tl application shall be furnished in Form Ni 3CEFB.

[Notification No. 11/2015, dated 4-2-20U

The complete text of the above Notification can be downloaded from the link: http://wwi incometaxindia.gov.in/Pages/communicatiom notifications.aspx

  1. CIRCULARS
  2. Explanatory Notes to the provisions of the Finance] (No. 2) Act, 2014

This circular contains the Explanatory notes t the provisions of the Finance (No. 2) Act, 201 as assented by President on 6th August, 2014 This circular, thus, explains direct tax provisions contained in the Finance (No. 2) Act, 2014.

[Circular No. 1/2015, dated 21-01-20151

  1. Chargeability of Interest under Section 234A of the Income-tax Act, 1961 on self assessment tax paid before the due date of filing of return of income Interest under Section 234A is charged in case of default in furnishing return of income by an assessee. The interest is charged at the specified rate on the self] assessment tax which is the amount of tax payable on total income as reduced by the amount of advance tax, TDS/TCS, any relief of tax, deductions, and tax credit allowed under the Act Since self-assessment tax is not mentioned as a component of tax to be reduced from the amount on which interest under Section 234A of the Act is chargeable, interest is being charged on the amount of self-assessment tax paid by the assessee even before the due date of filing of return.

However, it has been held by the Hon’ble Supreme Court in the case of CIT vs. Prannoy Roy, 309 ITR 231 (2009) that the interest under section 234A shall be payable only on the amount of tax that has not been deposited before the due date of filing of the Income-tax return for the relevant assessment year.

Accordingly, the CBDT reviewed the present practice of charging interest and decided that no! interest under Section 234A shall be charged on self I assessment tax paid before the due date of filing of I return.

[CircularNo. 2/2015, dated 10-2-2015]\


Legal Update


 

 

  1. \Clarification regarding ‘Amounts not deductible’ under Section 40(a)(i) of the Income-tax Act, 1961 If there has been a failure in deduction or in payment of tax deducted in respect of any interest, royalty, fees for technical services or other sum chargeable under the Act either payable in India to a non-resident (not being a company)/a foreign company or payable outside India, then disallowance of the related expenditure/payment is attracted under Section 40(a) (i) while computing income chargeable under the head “profit and gains of business or profession”. This circular clarifies the doubts which have been raised about the interpretation of the term ‘other sum chargeable’ e. whether this term refers to the whole sum being remitted or only the portion representing the sum chargeable to income-tax under the Act.

In its Instruction No. 2/2014, dated 26.02.2014 the Central Board of Direct Taxes has clarified that the Assessing Officer shall determine the appropriate portion of the sum chargeable to tax as mentioned in Section 195(1), to ascertain the tax
liability on which the deductor shall be deemed to be an assessee in default under Section 201, in cases where no application is filed by the deductor for determining the sum so chargeable under Section 195(2).

In this circular, the CBDT has, in exercise of its powers under Section 119, clarified that for the purpose of disallowance of ‘other sum chargeable’ under Section 40(a)(i), the appropriate portion of the sum which is chargeable to tax shall form the basis of disallowance. Further, the appropriate portion shall be determined by the Assessing Officer having jurisdiction for the purpose of Section 195(1). Also, where the determination of ‘other sum chargeable’ has been made under sub-Section (2), (3) or (7) of Section 195 of the Act, such determination will form the basis for disallowance, if any, under Section 40(a) (0-

[Circular No. 3/2015, dated 12-02-2015]

The detailed circulars can be downloaded from the link: http://www.incometaxindia.gov.in/Pages/ communications/circulars.aspx

Legal Update


SCNs Adjudicating Authority
All cases where the duty involved is more than ? 5 crore ADG (Adjudication) of DGCEI
Pertaining to jurisdiction of one executive Commissioner of Central Excise The Jurisdictional Executive Commissioner
Pertaining to jurisdiction of multiple Commissionerates Commissioner in whose jurisdiction the noticee from whom the highest demand of duty has been made falls.

 

  • INSTRUCTIONS
  1. Acceptance of Order of High Court of Bombay in case of Vodafone India Services Pvt Ltd.

The High Court of Bombay, in Vodafone India Services Pvt. Ltd. for A.Y. 2009-10 (WP No. 871/2014), held that the premium on share issue was on account of a capital account transaction and does not give rise to income and, hence not liable to transfer pricing adjustment. The CBDT has, through, this instruction informed all Principal CCITs/ DsGITs and CCsIT/DsGIT that it has accepted the decision of the Bombay High Court in said Writ petition and directed that the ratio decidendi of the judgement must be adhered to by the field officers in all cases where this issue is involved. The Board has also instructed that this may also be brought to the notice of the ITAT, DRP’s and CsIT (Appeals).

[Instruction No. 2/2015, dated 29-1-2015] The complete text of the above Instruction can be downloaded from the link: http://www. incometaxindia.gov.in/Pages/communications/ circulars.aspx

(Matter on Indirect Taxes has been contributed by the Indirect Taxes Committee of the ICAI)

  1. EXCISE
  2. Issue of summons in Central Excise and Service Tax matters CBEC vide Instruction F. No 207/07/2014- CX-6 dated 20.01.2015 has further streamlined the process of issuance of summons:
  3. Summons need not always be issued when a simple letter, politely worded, can also serve the purpose of securing documents relevant to the investigation. Further, it is emphasised that the use of summons be made only as a last resort when it is absolutely required.
  4. Summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing.

Due to operational reasons it is not possible to obtain written permission; oral/telephonic permission must be obtained and the same should be reduced to writing and intimated to
the officer according such permission at the earliest opportunity.

  • In all cases, where summons are issued, the officer issuing summons should submit a report and submit the same to the officer who has authorised the issue of summons.
  1. CEO, CFO, General Managers of a large company or a PSU should not be issued summons at the first instance and should be summoned only when there are indications of involvement in the decision making process which lead to loss of revenue.

It may be noted that the aforesaid Instruction has been issued to remove the hardship faced by the assesse in pursuance of circular no. F. No 208/122/89-CX.6 dated 13.10.1989 in respect of central excise and F. No. 137/39/2007-CX.4 dated 26.2.2007 in Service tax.

[Instruction F. No 207/07/2014-CX-6 dated 20th January, 2015]

  1. Adjudication of Central Excise and Service Tax Cases booked by DGCEI

CBEC vide Circular No. 994/01/2015-CX dated February 10, 2015 has specified the cases to be adjudicated by the ADG (Adjudication) of . The Directorate General, Central Excise Intelligence (DGCEI) and jurisdictional Central Excise officers in the following manner:

Cases to be adjudicated by the officers below the rank of Commissioner shall be adjudicated only by the field officers in the executive Commissionerates. The guidelines shall apply mutatis mutandis to the Service Tax cases booked by DGCEI.

[Circular No. 994/01/2015-CX, Dated: February 10,2015]


Legal Update

 

 

 

  1. Introduction of Taxpayers Day – an initiative towards better governance

Central Government, in order to ensure good governance, to further simplify and modernise the tax system, expand the tax base and improve compliance, has decided that one day of the week, viz., Wednesday (9 AM to 1 PM) will be designated as Taxpayers’ day wherein Heads of all offices in the field will meet the taxpayers without any prior appointment in order to address their grievances expeditiously.

[Instruction F. No. 296/267/2014-CX-9 dated 7th January 2015]

  1. CUSTOMS
  2. Enhancement of limit to carry Indian Currency from/to India

CBEC vide Circular No. 03/2015-Customs, Dated: January 16, 2015 has directed its officers to adhere with RBI A. P. (DIR series) Circular No. 146 which enhanced the limit, to take/bring Indian currency from/into India, to ?25000/- per person from earlier
limit of ? 10,000/- per person. This limit does not apply in case of Nepal and Bhutan.

[Circular No.03/2015-Customs, Dated: January 16,

2015]

  1. Power of officer has been modified in case of re­export of goods imported under bona-fide mistake With a view to expedite decision-making in respect of re-export of imported goods destined for elsewhere but which are inadvertently imported at a particular Customs station, CBEC vide Circular No. 04/2015-Customs, Dated: January 20, 2015 has modified the earlier Circular to provide that the permission for re-export may be granted on merit by the Customs Officers concerned in accordance with their powers of adjudication.

Earlier the permission for re-export of goods that are shipped contrary to instruction of the importer was granted only by Commissioner of Customs.

[Circular No. 04/2015-Customs, Dated: January

20,2015]


 

 

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S. No. Country Earlier Notification No.
1. Singapore Notification No. 10/2008-Customs, dated the 15th January, 2008
2. Korea Notification No. 152/2009-Customs, dated the 31st December, 2009
3. Malaysia Notification No. 53/2011-Customs, dated the 1st July, 2011
4. ASEAN Notification No.

46/2011-Customs, dated the 1st June, 2011

 

S. No. Country Earlier Notification No.
5. Japan Notification No.

69/2011-Customs dated the 29* July, 2011

 

[Notification No. 01/2015-Cus., Dated: January 05, 2015; Notification No. 36/2014-Customs,
Dated: December 29,2014; Notification No. 37/2014-Customs, Dated: December 29, 2014; Notification No. 38/2014-Customs, Dated: December 29, 2014; Notification No. 39/2014-Customs, Dated: December 29, 2014]
  1. Duty Drawback – Revised All Industry Rate

The Central Board of Excise and Customs has revised All Industry Rates of Duty Drawback with effect from 13th February 2015 vide Notification Nos. 20/2015-Customs (N.T.) & 21/2015-Cus., (N.T.), both dated: February 10, 2015. The revised schedule, notes & conditions and the other details can be viewed in the Notification.

[Circular No. 6/2015-Customs dated February 11, 2015; Notification Nos. 20/2015-Customs (N. T.) and 21/2015-Cus., (N.T.), Dated: February 10, 2015]

  1. Customs Ports/lnland Container Depot (ICD)

Notified by CBEC

CBEC has notified the following two ports for the purpose specified against them:

S. No. Port Purpose
T. Panaji (3)-Port Unloading of imported goods and loading of export goods or any class of such goods
2. Hindaun City, District Karauli, Rajasthan, ICD Unloading of imported goods and loading of export goods
[Notification No. 14/2015-Customs (NT), Dated: January 28, 2015 and Notification No. 19/2015-
Cus., (N.T.), Dated: February 9, 2015]

 

  1. Amendments made in Preferential Trade Agreements/Comprehensive Economic Cooperation Agreement with various Countries.

CBEC has made amendments in the Notifications describing the Preferential Trade Agreements entered with the following countries effective January 2015:

  1. VALUE ADDED TAX Rajasthan VAT
  2. Submission and Correction of PAN data on rajtax web portal.

Circular No. 19 F.16 (9S)Tax/CCT/14-15/1072 Dated 6th February, 2015 provides that dealers are required to submit or correct their PAN details at http://rajtax.gov.in. Further, Dealers whose PAN is not available or is not validated by Income Tax data base, shall be requested to submit Form VAT-05 for amendment with regard to PAN. Dealers may refer a hand book on Process for Application of PAN submission/correction provided in user guide under e-services guidelines on rajtax web portal.

[Circular No. 19 F.16 (9S)Tax/CCT/14-15/1072 Dated 6°’ February, 2015]

  1. E-facility to apply online for closure of business by Dealer

A facility to apply online for closure of business in Form VAT-06A has been provided at: http://rajtax. gov.in.The dealer shall have to enter mandatory details in the form after mentioning date and reason for closure of business and details of closing stock etc.

[Circular No. 20 F.16 (9S)Tax/CCT/14-15/1081 Dated 6th February, 2015]

  1. Introduction of Amnesty Scheme

Notification No. F. 12 (16) FD/TAX/2009-188- Dated 9th February, 2015 has notified Amnesty scheme-2015 for waiver of interest and penalty to some extent. The salient features of the scheme are as follows:

♦ The Scheme shall remain up to 31st March, 2015.

 

Legal Update

 

 

 

Now every registered dealer shall furnish self- assessed return in Form VAT-XV in the following manner:-

Sr.

No.

Gross Turnover Time for filing return
1 Up to ? 1 Crore Within 40 days from the end of each quarter
2 Exceeding ? lCrore but not exceeding X 5 Crore Within 45 days from the end of each quarter
3 Exceeding ? 5 crore shall furnish return monthly within forty five days from the expiry of each month of a financial year;

 

  • It applies to dealer or person against whom total outstanding demand of sales tax/vat is up to rupees five Crore.
  • The demand must be created on or before 31st March, 2011 or is under dispute on or before 31st December, 2013.
  • The scheme benefits in regards to waiver/ reduction of interest and penalty have been divided into 3 categories such as demand related to evasion of tax, interest and others.

For more information about terms & conditions and procedures in Form AS-1 and Form AS-2 in regards to amnesty scheme the notification can be viewed.

[Notification No. F. 12 (16) FD/TAX/2009-188- Dated 9th February, 2015]

Himachal Pradesh

  1. Time limit for filing of VAT return amended Notification No. EXN-F(10)-7/2011-Vol.I Dated 30th January, 2015 has amended Rule 40(1) of Himachal Pradesh Value Added Rule, 2005.

Further, in case of dealer for whom the return period has been fixed by the assessing authority under Rule 40(3), are required to submit the return within 45 days from the closure of each month.

[Notification No. EXN-F(10)-7/2011 -Vol.I Dated

30th January, 2015]


 

 

 

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Legal Update

 

 

 

Delhi VAT

  1. Date of Filing of reconciliation return in form 9 extended to 31st March, 2015

Circular No. 26 of 2014-15 No.F.7(420)/VAT/ Policy72011/PF/761-767 Dated 16th February, 2015 extends the date of filing of online return in form 9, containing details of interstate sale at concessional rates against statutory forms C/F/H, to 31/03/2015.

[CircularNo. 26 of 2014-15No.F.7(420)/VAT/ Policy/2011/PF/761-767Dated 16th February, 2015]

Assam VAT

  1. E- filing of details in transportation of goods Notification No. LGL.6/2003/108-Dated 6th February, 2015 has inserted a new sub-Section (3A) in Section 75 which provides that the owner of any goods or the transporter of such goods or the person in-charge of the goods vehicle carrying such goods shall also furnish relevant information in the electronic format online as may be prescribed.

Further a new clause (aa) has inserted in Section 77 (2) which provides that where any taxable goods are consigned by railway, river, air or post from a place outside the state for delivery to a dealer inside the state, the importer shall not obtain or cause to be obtained delivery thereof unless he files details of vehicle, consignment and statutory form online in advance before the goods carrying vehicle reaches delivery point.

[Notification No. LGL.6/2003/108 – Dated 6th February, 2015]

Andhra Pradesh VAT

  1. Guidelines issued regarding conducting of Audit and Assessments in Rule 59 of APVAT Rules, 2005.

Circular CCT’s Ref. No.                                 Enft/E3/716/2014

Dated: 11th February, 2015 provides guidelines in respect of VAT Audits and Assessments for allocation/selection of the cases for audit by the officer in charge.

[Circular CCT’s Ref. No. Enft/E3/7 16/2014 Dated:

11th February, 2015]

  1. Purchase/sale details are required to be provided along with Return.

Notification No. GOMS. No. 26 Dated: 05th February, 2015 Provides that details of purchases from registered VAT dealers in Annexure-I and sales to
registered VAT dealers in Annexure-11 has to beH submitted along with the Tax return. The detailsH procedure in this regard can be viewed in theH Notification.

[Notification No. GOMS. No. 26 Dated: 05£/iB February, 2015]I

(Matter on FEMA has been I contributed by CA. Manoj Shah I and CA. Hinesh Doshi)

  1. Overseas Direct Investments by! proprietorship concern/unregistered I partnership firm in India Notification No. FEMA.325/RB-2014 dated November 12, 2014 and A. P. (DIR Series) Circular No.59 dated January22,2015

Keeping in view the changes in the definition/11 classification of the exporters as per the Foreign I Trade Policy of the Ministry of Commerce and! I Industry it is decided to review the policy framework I for Overseas Direct Investments (ODI) by a I proprietorship concern/unregistered partnership I I firm in India. Accordingly following revised terms I and conditions are required to be complied with for I considering the proposal of ODI, by a proprietorship I concern/unregistered partnership firm in India, by I the Reserve bank under approval route:

  1. The proprietorship       concern/unregistered I

partnership firm in India is classified as ‘Status Holder’ as per the Foreign Trade Policy issued I by the Ministry of Commerce and Industry, Government of India from time to time.

  1. The proprietorship       concern/unregistered

partnership firm in India has a proven track record i.e. export outstanding does not exceed 10% of the average export realisation of the I preceding three years and a consistent high I I export performance.

  1. The Authorised Dealer is satisfied that ■ proprietorship concern/unregistered firm ■ is a KYC (Know Your Customer) compliant, ■ engaged in the business and has turnover as I indicated.
  2. The entity has not come under adverse notice I of any government agency and does not appear ■ in exporter’s caution list of the Reserve Bank or ■ in defaulters list of the banking system in India, I and
  3. The amount of proposed investment outside 11 India does not exceed 10 percent of the average 11

 

Legal Update

 

 

 

Delhi VAT

  1. Date of Filing of reconciliation return in form 9 extended to 31st March, 2015

Circular No. 26 of 2014-15 No.F.7(420)/VAT/ Policy/2011/PF/761-767 Dated 16th February, 2015 extends the date of filing of online return in form 9, containing details of interstate sale at concessional rates against statutory forms C/F/H, to 31/03/2015.

[CircularNo. 26 of 2014-15No.F.7(420)/VAT/ Policy/2011/PF/761-767Dated 16th February, 2015]

Assam VAT

  1. E- filing of details in transportation of goods Notification No. LGL.6/2003/108-Dated 6th February, 2015 has inserted a new sub-Section (3A) in Section 75 which provides that the owner of any goods or the transporter of such goods or the person in-charge of the goods vehicle carrying such goods shall also furnish relevant information in the electronic format online as may be prescribed.

Further a new clause (aa) has inserted in Section 77 (2) which provides that where any taxable goods are consigned by railway, river, air or post from a place outside the state for delivery to a dealer inside the state, the importer shall not obtain or cause to be obtained delivery thereof unless he files details of vehicle, consignment and statutory form online in advance before the goods carrying vehicle reaches delivery point.

[Notification No. LGL.6/2003/108 – Dated 6th February, 2015]

Andhra Pradesh VAT

  1. Guidelines issued regarding conducting of Audit and Assessments in Rule 59 of APVAT Rules, 2005.

Circular CCT’s Ref. No.                                Enft/E3/7 16/2014

Dated: 11th February, 2015 provides guidelines in respect of VAT Audits and Assessments for allocation/selection of the cases for audit by the officer in charge.

[Circular CCT’s Ref No. Enft/E3/7 16/2014 Dated:

11th February, 2015]

  1. Purchase/sale details are required to be provided along with Return.

Notification No. GOMS. No. 26 Dated: 05th February, 2015 Provides that details of purchases from registered VAT dealers in Annexure-I and sales to

registered VAT dealers in Annexure-II has to be submitted along with the Tax return. The details procedure in this regard can be viewed in the Notification.

[Notification No. GOMS. No. 26 Dated: 05th February, 2015]

(Matter on FEMA has been contributed by CA. Manoj Shah and CA. Hinesh Doshi)

  1. Overseas Direct Investments by ; proprietorship concern/unregistered partnership firm in India Notification No. FEMA.325/RB-2014 dated November 12, 2014 and A. P. (DIR Series) Circular No.59 dated January22,2015

Keeping in view the changes in the definition/ I classification of the exporters as per the Foreign I Trade Policy of the Ministry of Commerce and I Industry it is decided to review the policy framework I for Overseas Direct Investments (ODI) by a I proprietorship concern/unregistered partnership I firm in India. Accordingly following revised terms and conditions are required to be complied with for considering the proposal of ODI, by a proprietorship concern/unregistered partnership firm in India, by the Reserve bank under approval route:

  1. The                 proprietorship         concern/unregistered

partnership firm in India is classified as ‘Status Holder’ as per the Foreign Trade Policy issued by the Ministry of Commerce and Industry, Government of India from time to time.

  1. The                 proprietorship         concern/unregistered

partnership firm in India has a proven track record i.e. export outstanding does not exceed 10% of the average export realisation of the preceding three years and a consistent high export performance.

  1. The Authorised Dealer is satisfied that proprietorship concern/unregistered firm is a KYC (Know Your Customer) compliant, engaged in the business and has turnover as indicated.
  2. The entity has not come under adverse notice of any government agency and does not appear in exporter’s caution list of the Reserve Bank or in defaulters list of the banking system in India, and
  3. The amount of proposed investment outside j India does not exceed 10 percent of the average I

 

Legal Update

 

 

 

of last three years export realisation or 200 percent of the net owned funds of the entity, whichever is lower.

Necessary amendments to the Notification No. 120 have been issued vide Notification No. 325/RB- 2014 dated November 12,2014.

  1. Foreign Direct Investment-Review of FDI Policy (Sector Specific-Construction Development) Notification No. FEMA.329/RB-2014 dated December 8, 2014 and A.P. (DIR Series) Circular No. 60 dated January 22,2015

The extant FDI Policy for Construction Development sector has been reviewed and accordingly, effective from 3rd December 2014 100% FDI under automatic route shall be permitted in Construction Development sector subject to conditions specified in Press note No 10 (Series 2014) dated December 3,2014 issued by DIPP.

Reserve Bank has since amended the Principal Regulations through Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
outside India) (Sixteenth Amendment) Regulations, 2014 notified vide Notification No. FEMA.329/2014- RB dated December 8,2014.

For detailed amendments, please refer the said notifications on RBI website available at: http://rbidocs.rbi.org.in/rdocs/notification/PDFs/ NT329FEM140115FN.pdf

  1. Depository Receipts Scheme Notification No. FEMA.330/RB-2014 dated December 15, 2014 and A.P. (DIR Series) Circular No. 61 dated January22,2014

A new scheme called ‘Depository Receipts Scheme, 2014’ (DR Scheme, 2014) for investments under ADR/GDR have been notified by the Central Government effective from December 15, 2014 which provides for repeal of extant guidelines for Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 except to the extent relating to foreign currency convertible bonds.

 

 

Economic

Know Your Ethics

  1. Whether a member of the Institute in practice is liable for professional misconduct, if he does not follow the direction given, by the Council or an appropriate Committee or on behalf of any of them, to the incoming auditors not to accept the appointment as auditors, in the case of unjustified removal of the earlier auditors?
  2. Yes, in exercise of the powers conferred by Clause (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949, the Council of the Institute has issued Council General Guidelines, 2008 which specify that a member of the Institute in practice shall be deemed to be guilty of professional misconduct, if he does not follow the direction given, by the Council or an appropriate Committee or on behalf of any of them, to the incoming auditors not to accept the appointment as auditors, in the case of unjustified removal of the earlier auditors.
  3. Whether a member of the Institute shall be deemed to be guilty of professional misconduct, if he includes in any statement, return or form to be submitted to the Council or any of its committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority any particulars knowing to be false?
  4. Yes, as per Clause (3) of Part-II of the Second Schedule to the Chartered Accountants Act, 1949 a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct if he includes in any statement, return or form to be submitted to the above authorities any particulars knowing them to be false.
  5. Is there any ceiling on the number of tax audit assignments that can be taken up by a member in practice?
  6. Yes, in exercise of the powers conferred by Clause (1) of Part II of the Second Schedule to the Chartered Accountants Act, 1949, the Council of the Institute has issued Council General Guidelines, 2008 which specify that a member of the Institute in practice shall be deemed to be guilty of professional misconduct, if he accepts, in a financial year, more than the specified number of tax audit assignments under Section 44AB of the Income Tax Act, 1961 (The limit has been raised from 45 to 60 w.e.f. 2014-15)
  7. Whether a member in practice will be liable if he is grossly negligent in the conduct of his professional duties?
  8. Yes, as per Clause (7) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, a member in practice shall be deemed to be guilty of professional misconduct, if he is grossly negligent in the conduct of his professional duties.
  9. Can a Chartered Accountant receive his professional fees in advance partly or in full?
  10. Yes, as such there is no bar in the Chartered Accountants Act, 1949 or in the Chartered Accountants Regulations, 1988 as well as Code of Ethics, 2009 for taking the Professional fees in advance.
  11. Whether a member in practice will be liable if he fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are sufficiently material to negate the expression of an opinion?
  12. Yes, as per Clause (8) of Part I of Second Schedule to the Chartered Accountants Act, 1949, a member in practice shall be deemed to be guilty of professional misconduct, if he fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are sufficiently material to negate the expression of an opinion.
  13. Can a member act as an Insurance Surveyor?
  14. As per Appendix (9) of the Chartered Accountants Regulations, 1988, a member of the Institute in practice is generally permitted to act as a Surveyor and Loss Assessor under the Insurance Act, 1938 provided they are otherwise eligible and can perform attest functions.

 

 

 

* Contributed by the Ethical Standards Board of the ICA1

Know Your Ethics


 

 

  1. Can a member in practice be Promoter/ Promoter Director of the Company?
  2. Yes, there is no bar for a member to be a promoter/signatory to the Memorandum and Articles of Association of any company. There is also no bar for such a promoter/ signatory to be a Director Simplicitor of that company irrespective of whether the objects of the company include areas, which fall within the scope of the profession of chartered accountants. Therefore members are not required to obtain specific permission of the Council in such cases. There is also no bar on holding any number/percentage of shares in the company
  3. What should be the size of signboard for the office?
  4. With regard to the size of the signboard for his office that a member can put up, it is a matter in which the members should exercise their own discretion and good taste. The size of the signboard should be reasonable. Use of glow signs or lights on large-sized boards as is used by traders or shopkeepers would not be proper. A member can have a name board at the place of his residence with the designation of a Chartered Accountant, provided it is a name plate or name board of an individual member and not of the firm.
  5. Can there be any sharing of fees between the widow or the legal representative of the proprietor of a single member firm and the purchaser of the goodwill of the firm on the death of the sole proprietor of the firm?
  6. No, there could not be any sharing of fees between the widow or the legal representative of the proprietor of a single member firm and the purchaser of the goodwill of the firm on the death of the Sole proprietor of the firm. Payment of goodwill to the widow is permissible in such cases only for the goodwill of the firm and to enable such payments to be made in installments provided the agreement of the sale of goodwill contains such a provision. These payments even if they are spread over the specified period should not be linked up with participation in the earnings of the firm.
  7. What is the status of a Chartered Accountant who is a salaried employee of a Chartered Accountant in practice or a firm of such Chartered Accountants?
  8. An associate or a fellow of the Institute who is a salaried employee of a Chartered Accountant in practice or a firm of such Chartered Accountants shall, notwithstanding such employment, be deemed to be in practice for the limited purpose of the training of articled assistants. He may hold Certificate of Practice but he is not entitled to do attest functions w.e.f. 1.4.2005.
  9. Can a member in practice be a sleeping partner in family business concern?
  10. Yes, a member in practice can be a sleeping partner in a family business concern provided he takes specific and prior permission from the Council in terms of Regulation 190A of Chartered Accountants Regulations, 1988.
  11. Can a member publish a change in partnership or change in the address of practice and telephone numbers?
  12. Yes, a member can publish a change in partnership or change in the address of practice and telephone numbers. Such announcements should be limited to a bare statement of facts and consideration given to the appropriateness of the area of distribution of the newspaper or magazine and number of insertions.
  13. Can a Concurrent Auditor of a Bank also undertake the assignment of quarterly review of the same bank?
  14. No, the Concurrent audit and the Assignment of quarterly review of the same entity cannot be taken simultaneously as the concurrent audit is a kind of internal audit and the quarterly review is a kind of statutory audit. It is prohibited in terms of the ‘Guidance Note of Independence of Auditors’.
  15. Can a member holding Certificate o Practice is entitled to own Agricultural land and continue agricultural activity?

A. Yes, member holding Certificate of Practice can own and hold agricultural land and continue agricultural activity. ■

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Rahman Khan extended

profession in the world. He continued: Then: Being a 66 year-old institution, the ICAI with more than 235,000 members and 832,000 students, has played a crucial role in the economic development of our country…it has to play a bigger role in reforming the government accounting managing the losses of PSUs and investing in financial research.

Chief Guest Union Minister for Railways Shri (CA.) Suresh Prabhu made hard and important statements, and congratulated the ICAI President for his commendable job. He expressed:     The Institute

must align immensely with the national priority schemes such as Make in India, Swachh Bharat Mission and Jan Dhan Yojana. He made an appeal to the ICAI to adopt Indian railway stations and help them in keeping them neat and clean. According to him, the mantra to accelerate growth is: search for domestic and global market and develop competition in overseas market. He

advised the ICAI to launch portals where ICAI and Railways can work together.

ICAI Vice-President CA. Manoj Fadnis proposed the vote of thanks. He thanked both the Chief Guest and the Guest of Honour for their august presence, and expected that participants would be immensely benefited by the sessions and panel discussions of all the three days of the Conference.

Special Address—

Accountancy Profession-Meeting Governance Mandate ICAI Central Council member CA. Charanjot Singh Nanda hailed the role being played by various regulatory bodies

of SAARC countries under the supervision of SAFA. ICA Nepal President CA. Narendra Bhattarai drew the delegates’ attention to the situation of poor governance in most developing countries. He categorically appreciated the Indian Prime Minister for putting governance on high pedestal, i.e. Minimum Government, Maximum Governance. Chartered accountants with their character, capacity and commitment could play a decisive role in governance, he expected.

SAFA President Mr.

Arjuna Herath provided a brief account of SAFA, its activities and reminded the accountancy professionals that there could be many who talked about corporate governance but no single entity was custodian of corporate governance; chartered accountants could contribute here and professional rise across the entire South Asian region.

In the Session on India Emerging as Global

Accountants’ course today is highly cost-effective in nature when compared to other professional courses, and this fact has helped the students from even very humble background in joining the journey of accountancy profession. He reminded the delegates that the ICAI today is the second largest accounting body and accountancy is the most popular profession in the world. ICAI President assured all the participants present that ICAI had been pursuing the agenda of accountancy through its 5 Regional Councils, 147 Branches and 26 Foreign Chapters in the world. ICAI has actively contributed to the all three special initiatives of the Indian Prime Minister, i.e. Swachh Bharat Abhiyaan, Make in India campaign and Jan Dhan Yojana, while extending unceasing support to all government departments and offices.

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a Mohandas Pai, Padma Shri awardee, advised the Indian professionals to increase their global competitiveness and that India must adopt the best global practices in accountancy, bring its regulations at par with the global standards, and provide chartered accountants an environment 3. where they could provide services globally with 4. ease.
The | session was moderated by ICAI Central Council member CA. Abhijit Bandyopadhyay
and the vote of thanks was proposed by ICAI Central Council member CA. Praful Chajjed.

ONGC Executive Director Shri Alok Mishra addressed the delegates on Corporate Social Responsibility- Responsible Growth; Inclusive Development while   justifying

how   corporate

social responsibility could actually lead organisations to attain a sustainable, inclusive and responsible development.

Releases/Launches

The first day also witnessed releases and launches of books and service portals at the hands of the Chief Guest Union Railways Minister Shri (CA.) Suresh Prabhu during the inaugural session.

Portals

  1. Portal for Senior Members
  2. BNA Bloomberg
  3. ICAI National Helpline Books
  4. FAQs on Management Accounting
  5. Technical Guides on Service Tax-Works Contract, CENVAT Credit, Mizoram VAT, Assam VAT, Uttarakhand VAT and Delhi VAT

Goods & Service Tax Kit Compendium of Generic Internal Audit Guide (Vol. I & II)

Day 2: Ind AS Implementation Deliberated from Perspectives of Regulators, Corporates and Government

International Conference on Accountancy Profession—Building Global Competitiveness; Accelerating Growth proceeded to DAY 2 successfully with enthusiastic participation of delegates and positive and constructive deliveries of national and international high-profile and prolific technical experts/ speakers. The day started on a strong note with its first session on financial reporting with a focus on governance and sustainability.

Session I: Essence of Reporting- Governance and Sustainability

ICAI Central Council member CA. Shiwaji Bhikaji        Zaware

welcomed the audience while informing the audience about three levels of reporting,

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Special Address—Essence of Leadership and Contours of Holistic Living

The Art of Living spiritual leader Sri Sri Ravi Shankar brought a thematic shift in the ongoing discussion of the International Conference and spoke on leadership and its connection with the

i.e. environmental, economic and social, as ingredients of integrated reporting.

The first session started on a positive note with a powerful delivery from the Chief Strategy Office of the IIRC (International Integrated Reporting Council), Mr. Jonathan Labrey, on the topic, Moving towards Integrated Reporting. He advised the delegates that in order to deal with financial instability and capital core solution, intellectual, human and natural capitals including strategy and business management could be introduced. Integrated reporting environment that can bring consistency in reporting norms globally can be achieved by encouraging innovation, gaining trust from long-term investors, etc., among others.

ICAI Central Council member CA. Shiwaji Bhikaji Zaware offered the vote of thanks and appreciated the speaker for his message of live and let live and his practice by that.

IFRS Implementation: Key Learnings The second part of Session I, i.e. Essence of Reporting—Governance and Sustainability, started with an assortment of perspectives (e.g. regulators, corporate and government) on the issue of IFRS implementation. ICAI Central Council member CA. Sanjay Agarwal introduced the speakers and moderated the session.

To provide the Indian Government’s perspective on IFRS implementation, Ministry of Corporate Affairs Joint Secretary Shri Ajai Das Mehrotra presented the views and opinions of the Government on the matter.

He accepted that the Government had recognised the role of chartered accountants, and the Section 211 of the Companies Act, 1956 and Section 133 of Companies Act, 2013 could be referred to corroborate the same.

While recognising the importance of universal financial reporting for a robust economy, he informed that the implementation of Indian accounting standards had been proposed in three phases.

ICAI President CA. K. Raghu then invited the next speaker to address the corporate perspectives of the IFRS implementation. A series
of perspectives in implementation was reported by Executive Director and Chief Finance Officer of WIPRO Ltd., CA. Suresh Senapathy, who said that raising funds across borders was going to be an increasing trend, while highlighting the Indian PM’s vision of upgrading India’s economy from a $2 trillion to $20 trillion. He discussed the preparedness of India to implement IFRS by redesigning the IT and MIS systems, assessing impact on debt covenants and ratios, calibration of compensation measurement systems, etc., among others. India must embrace IFRS and lead with advocacy in the international community collaboratively.

NACAS (National Accreditation of Accounting Standards) Chairman (and ICAI past-President) CA. Amarjit Chopra provided an insider’s perspective on behalf of the nations’ regulators. He appreciated the robust process followed by ICAI in formulating the Indian accounting standards converged with the IFRSs and their commendable job in this regard. He said: ICAI took IFRS as the starting point and made required changes in sync with the accounting principles and practices and economic conditions prevailing in India. He said: For me, IFRS means Indian Formulated Reporting Standards.

ICAI Vice-President CA. Manoj Fadnis and Central Council member CA. Sanjeev Chaudhary were also present on the dais during the session.

 

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holistic approach to living. He informed that life might be viewed through three Cs—context to life, commitment to life and compassion. He indicated the fact that we were more committed to accessories and infringements rather than to the life’s core. He conducted yogic and meditation exercises with the delegates and said that such exercises that are easily doable in office could help us in having a stress-free life.

ICAI Central Council member CA. Anuj Goyal offered the vote of thanks to the spiritual leader. ICAI Vice-President CA. Manoj Fadnis was also present on the dais.

Session II: Managing Change – Regulation and Developmental Context

ICAI Central Council member CA. Naveen N. D. Gupta moderated this post-lunch session. He said that change was the only constant thing in the world.

Accountancy and assurance expert CA. P. R. Ramesh took the opportunity to address the delegates on Assurance Services: Moving beyond Regulatory Requirements Global Perspective and informed that assurance function had moved towards risk-based function and that the role of auditors was dynamic in scope. He said that auditor independence is one of the fundamental professional challenges. There are three essential phases of a transformation—orient (explore and envision), embark (design and act) and evolve (learn and adapt). In order to survive, human beings would have to justify and create value in what they do, he opined.

The vote of thanks for the session was jointly proposed by the ICAI Central Council members CA. Mukesh Singh Kushwah and CA. Atul Kumar Gupta.


Special address: International Taxation- Building Industry Competitiveness in the Borderless Economy

While speaking on international taxation, industry competitiveness and borderless economy,

  1. T. P. Ostwal stressed on a strong relationship between global trade and IT practices, and informed that technology evolves faster than taxation; therefore, taxation had to be updated. International mergers and acquisition, inbound structuring, taxation of immigrants and emigrants, and advance pricing arrangements are among the emerging areas in global practice in taxation. E-commerce is another challenging sector for taxation.

This session was moderated by ICAI Central Council member CA. Dhinal Ashwinbhai Shah and the vote of Thanks was offered by the ICAI Central Council member CA. M. Devaraja Reddy.

Session III: Management and Leadership: Frontiers of Growth

In the third session, Le. Management and Leadership—Frontiers of Growth, ICAI Central Council member CA. Charanjot Singh Nanda introduced the speaker, Shri Ashish Kumar Chauhan and welcomed him.

BSE (Bombay Stock Exchange) Managing Director and Chief Executive Officer Mr. Ashish Kumar Chauhan informed that he clearly dreamt of a situation when inflation, fiscal deficit and current account deficit would come down. Other than them, goods and services tax, labour laws and revenue deficit are other problematic issues. He praised technological developments (e.g. nanotechnology, cloud campus, robotics, etc.) for effecting a positive change in industry. Role of a stock exchange is to mobilise household savings, channelise savings for capital market use, fund entrepreneurs who create jobs, etc., among others.

ICAI Central Council member CA. Jay Chhaira offered the vote of thanks