finance bill 2012 – major issues and challenges

EDITORIAL

Volume XXIII, No. 4, April, 2012

CA Vinod Jain*

* Mr. Vinod Jain, FCA, FCS, FICWA, LL.B., DISA (ICA), Chairman, INMACS and Vinod Kumar & Associates, Member, Central Council, ICAI. [email protected], [email protected], +91 9811040004

FINANCE BILL 2012 – MAJOR ISSUES AND CHALLENGES

The Finance Bill 2012 was presentedin the Lok Sabha recently and is underconsideration of the Parliament. Avery heated debate is happening onseveral new provisions and issuesarising there from.

Vodafone ControversyThe Govt. wanted to tax the capitalGain on sale of telecom business of

HUTCH in India to Vodafone by transfer of share holdingin a holding company outside India. The Vodafone case,based on the current law has already been upheld in favourof Vodafone by the Hon'ble Supreme Court and even thereview petition has been rejected.

There are proposals to make clarificatory amendmentswith retrospective effective from 1.4.1962 in varioussections of the Income Tax Act to establish that sourcecountry has taxation right on the gains derived of offshoretransactions where the value is attributable to the underlyingassets situated in that country. Validation clause is alsobeing introduced to ensure pursuing the Vodafone caseonce the Bill is passed.

The retrospective amendment is being questioned bynumber of tax analysts and foreign investors. They arealleging that rules of the game should not be amendedretrospectively. In our view, the Government of Indiais fully justified in ensuring that the income earnedin India or valuation increase of business or assets inIndia is taxed in India as income and / or capital gainand any device or methodology or structure designedto defeat or circumvent the basic intent of law cannotbe supported at macro level. It is clear that Hutch madea substantial gain from sale of its telecom business toVodafone. In such a situation the government is seekingpayment of tax on actual capital gain as the real purposeof the transaction was transfer of telecom business in India.

In case the laws are being interpreted or misinterpreted ina manner so as to defeat the very objective or intent of the

tax legislation, the government is fully justified in bringingout a retrospective amendment.Anti avoidance lawsThe General Anti Avoidance rule (GAAR), domestic transferpricing, amendment in section 68 seeking source of thesource and taxation of the share premium, where it is notsupported by fair value are amendments in the rightdirection, to plug the various loop holes in the tax laws.

In a large number of developed countries, the interpretationof tax statue is being done on the basis of the intent andobject of the legislator.India can consider the laws relatingto interpretation of tax statutes to be modified appropriatelyto address this basic concern of the government.Corruption a Serious ConcernThe honest tax payers are seriously concerned about thegenuenity of interpretation and harassment at theassessment level due to wide spread corruption.

It is suggested that the personal interaction between theassessee and the tax officials can be reduced to the largeextent and for reviews, scrutiny and assessment greateruse of electronic mode may be resoted to. The personsinitiating such communication from the department shouldbe unknown to the assessee and should be at substantialdistance. In case of dissatisfaction at the end of theassessee, the draft assessment order itself should be subjectto judicial scrutiny and right of being heard by a panel.The proceeding of this panel can be fully recorded andonly reasoned order can be given, which are transparentand subject to public / media scrutiny.It is very important to nail down the corruption in the taxdepartment, in case we want fair treatment from theassessee and with the assessee. It is also important toensure that the tax rate is further cut, at the higher bracket,so as to ensure almost full compliance by India Inc. Wemust also appreciate a positive amendment to reducepenalty in case of disclosure of undisclosed income at thetime of search. This will pave the way for reducingcorruption. In fact we need to achieve, at the earliest theposition that personal privacy of assessee is not disturbedby survey, search and raids. Contd ... on page 8

2 THE CHARTERED ACCOUNTANT WORLD – April 2012

LATEST IN FINANCE

LATEST IN FINANCE1.0 BRICS COUNTRIES INK PACT TO TRADE

IN LOCAL CURRENCIESA major outcome of the fourth BRICS summitwas the signing of an agreement on providingcredit facility in local currencies. This would seekto reduce the demand for fully convertiblecurrencies for trade transactions among BRICScountries - Brazil, Russia, India, China and SouthAfrica.Prime Minister Manmohan Singh has said that allthe nations have agreed to examine in greater detaila proposal to set up a BRICS-led South-SouthDevelopment Bank, funded and managed by theBRICS and other developing countries. He alsosaid that the five BRICS countries had directedtheir respective finance ministers to set up a jointworking group for an in-depth analysis of theproposal. The issues such as easier business visasmust be prioritised. As large trading countries,BRICS have a strong interest in removing barriersto trade and investment flows and avoidingprotectionist measures.

2.0 DEBIT CARDS BASED ON RUPAYPLATFORM LAUNCHEDState Bank of India (SBI), Bank of Baroda, Bankof India, and Union Bank of India formallylaunched debit cards based on the indigenouslydeveloped RuPay payment platform.

The RuPay branded debit cards will be acceptedat all 91,000 ATMs and over six lakh point of sale(POS) terminals in the country. In due course,these cards would be accepted on Internet andalso at ATMs/ point of sale (POS) terminalsabroad.

3.0 RBI CLAMPS DOWN ON GOLD LOANS BYNBFCsThe Reserve Bank of India (RBI) has directedNBFCs (Non-Banking Financial Companies) notto give loans exceeding 60 per cent of the valueof the gold jewellery pledged with them.

NBFCs (Non-Banking Financial Companies)primarily engaged in lending against gold jewelleryhave been asked not to grant any advance againstbullion/primary gold and gold coins.

RBI (Reserve Bank of India) said NBFCs (Non-Banking Financial Companies) primarily engagedin lending against gold jewellery (such loanscomprising 50 per cent or more of their financialassets) will be required to maintain a minimumTier-l capital of 12 per cent by April 1, 2014.

4.0 INTEREST RATES ON SMALL SAVINGSSCHEMES HIKED BY UP TO 0.5%

Small Savings Interest Rates

Current RatesRate w.e.f. 1.4.2012

Savings Deposit 4.0 4.0

1-yr Time deposit 7.7 8.2




5-yr Recurring deposit 8.0 8.4

5-yr Sr citizen scheme 9.0 9.3

5-yr Monthly income 8.2 8.5Scheme

5-yr NSC 8.4 8.6

10-yr NSC 8.7 8.9

PPF 8.6 8.8

5.0 RBI REVISES INTEREST RATES ON PUBLICPROVIDENT FUND SCHEME AND SENIORCITIZENS SAVINGS SCHEME

Rate of interest Rate of interestw.e.f. 1.12.2011 w.e.f. 1.4.2012

5 year SCSS, 2004 9.0% p.a 9.3% p.a

PPF, 1968 8.6% p.a 8.8% p.a

6.0 RBI CUTS CRR BY 75 BPSThe Reserve Bank of India (RBI) reduced thecash reserve ratio (CRR) by 75 basis points. Thiswill infuse `48,000-crore liquidity into thesystem.

Changes in CRR since 2010

February 15, 2010 5.50%March 2, 2010 5.75%April 26, 2010 6.00%January 30, 2012 5.50%March 30, 2012 4.75%

PARTICULARS

SCHEME

3A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

LATEST IN FINANCE/ DIRECT TAXATION

7.0 NATCO PHARMA BAGS COMPULSORYLICENSE TO SELL BAYER'S CANCERDRUG "NEXAVAR"The government has allowed a local drug makerto make and sell a patented cancer drug at afraction of the price charged by Germany's BayerAG, setting a precedent for more such efforts byIndian firms and heightening the globalpharmaceutical industry's anxiety over the useof the controversial compulsory licensingprovision.Ruled compulsory licensing which is allowing ageneric drug maker to make and sell a low costversion of a patented drug in India under certainconditions, without the consent of the patentholder, by paying royalty.

8.0 AUSTRALIA IMPOSES MINING TAXAustralia's parliament passed laws for a new 30percent tax on iron ore and coal mine profits aftera bruising two-year battle with mining companies.

9.0 CHEQUES & DRAFTS TO BE VALID ONLYFOR 3 MONTHSWith effect from April 1 2012, all cheques andbank drafts will be valid only for three months.

10.0 NHAI LAND ACQUISITION COSTINCREASES

The National Highway Authority of India (NHAI)has said that the land acquisition cost to buildone km of road has increased from ` 85 lakh to` 1.25 crore in the current year. Land rates acrossthe country have increased.

FINANCIAL INDICATORSCurrent Rate* Month Ago 3 Month 6 Month

(in %) (in %) Ago (in %) Ago (in %)

3 Month LIBOR 0.47 0.48 0.58 0.403 Month MIBOR 10.57 10.52 9.79 9.37SENSEX 17243.84 17503.24 16067.44 16958NIFTY 5243.60 5333.55 4820.65 5099CRR 4.75 5.5 6 6REPO 8.5 8.5 8.5 8.25REVERSE REPO 7.5 7.5 7.5 7.25Gold (per 10 gm) 28140 27982 27555 26988Silver (per kg) 55554 59052 51968 54417Crude (USD/bbl) 119.88 125.98 113.09 111.73Rs. vs USD 51.20 49.75 52.22 49.24Rs. vs Euro 67.16 65.25 66.79 67.17Rs. vs Yen 63.00 60.35 67.99 63.95Rs. vs RMB 8.14 7.88 8.27 7.73Rs. vs Pound 81.50 78.06 80.84 76.57MCX Aluminium 105.00 108.50 108.80 107.25MCX Copper 420.55 425.45 397.15 395.40*As on 10th April 2012 (Sources: Bloomberg, NSE, BSE, RBI)

DIRECT TAXATION 1.0 SOME IMPORTANT JUDGMENTS

SECTION 9� The Delhi ITAT bench held that payment

received by assessee, an insurance broking firmof UK, from Indian Insurance Companies foradvising them about selection of reinsurer ininternational market cannot be treated as feesfor technical services.Decided Case: Guy Carpenter & Co. Ltd. v/s Assistant

Director of Income-tax, International Taxation, Circle

1(2), New Delhi, dated February 24, 2012

� The Karnataka High Court held thatconsideration paid for transfer of right to use

software/computer programme is royalty undersection 9Decided Case: Commissioner of Income-tax, International

Taxation v/s Rational Software Corpn. India Ltd., dated

February 21, 2012

SECTION 10(23C)

� The Kerala High Court held that religiousteaching in a seminary is education and seminaryis therefore an 'educational institution' entitledfor exemption under section 10(23C)(iiiad).Decided Case: Commissioner of Income-tax,

Thiruvananthapuram v/s St. Mary's Malankara

Seminary, dated February 16, 2012

� The Punjab & Haryana High Court held thatwhere assessee-society devoted solely foreducation purposes for last 18 years, it couldnot be denied exemption under section10(23C)(vi) on ground that it was making profits.Decided Case: Sanatan Dharam Shiksha Samiti v/s Chief

Commissioner of Income-tax, Panchkula, dated Oct. 3, 2011

SECTION 80-O

The Madras High Court held that where assesseesupplies technical know-how developed by anotherIndian concern to a foreign company, to be used inforeign country and earns foreign exchange, it wouldbe eligible for deduction under section 80-O.Decided Case: TVS Berg Ltd.v/s Commissioner of Income-tax,

dated December 13, 2011


DIRECT TAXATION/INDIRECT TAXATION/CORPORATE ANDECONOMIC LAWS/CAPITAL MARKET AND COMMODITIES

2.0 SUPREME COURT REJECTS PETITIONSEEKING REVIEW OF ORDER ONVODAFONE CASE

The Supreme Court has declined to reconsiderits ruling that the tax authorities had no jurisdictionto tax Vodafone's offshore acquisition of itsIndian mobile unit.

1.0 RAILWAY FREIGHT GETS THREE-MONTHRELIEF FROM SERVICE TAX

Freight users of Railways have been spared aneffective service tax hit of 3.6 per cent for threemore months, though there is no such relief forair-conditioned passengers as yet.

INDIRECT TAXATION

1.0 PF RATES REDUCED TO 8.25%

The Government has slashed interest rates onprovident fund deposits by 1.25 percentage pointsto 8.25 per cent for 2011-12.

2.0 CCI IMPOSES PENALTY ON 50 LPGCYLINDER MAKERS

The Competition Commission of India (CCI) hasimposed penalty on 50 private LPG cylindermanufacturers for collusive bidding against IndianOil Corporation tender.

3.0 HIGH COURT UPHOLD BENCKISER'SSHARE CAPITAL SELECTIVE REDUCTION

The Delhi High Court has dismissed a plea byReckitt Benckiser (India) Ltd's shareholderchallenging the firm's decision to reduce its sharecapital on grounds of want of any infirmity inthe decision of the firm, noted for products likeDettol and Strepsils.Petitioner had contended in his pleas thatreduction of share capital of the firm was nothingbut "forcible acquisition" of shares by public asthe stake of the promoter group was not touchedfor the propose reduction.The high court had rejected his contentions sayingthat section 100 of the Companies Act 1956;expressly permit a firm, if authorized by its articleof association, to reduce its share capital.Case: Chandra bhan Gandhi Vs Reckitt Benckiser (India) Ltd.

CORPORATE AND ECONOMIC LAWS

CAPITAL MARKET AND COMMODITIES1.0 SEBI UNVEILS NORMS FOR AIFs

The Securities and Exchange Board of India(SEBI) has come out with the rules for AlternativeInvestment Funds (AIFs). The said rules will beapplicable for all pooled investment vehicles otherthan family trusts and holding companies amongothers.

The regulator has also said these funds shouldnot have more than 1,000 investors and theminimum investment amount should not be lessthan ` 1 crore. The Securities and ExchangeBoard of India (SEBI) has also mandated thatsponsors should contribute at least 2.5% of theinitial corpus. Moreover, Alternative investmentfunds (AIFs) cannot invest more than 25% ofthe investible funds in one company.

2.0 REGISTRATION MANDATORY FORREALTY AND HEDGE FUNDS: SEBI

The Securities and Exchange Board of India(SEBI) has unveiled rules for regulating privatepool of capital to increase systemic stability, whilemaking it mandatory for real estate funds andhedge funds to register with the regulator. Theregulator has classified all types of funds intothree categories: venture capital, private equityand hedge funds.

While the first two categories of funds have tobe close-ended with a minimum tenure of threeyears and are barred from engaging in leverage,hedge funds are allowed to be open-ended orclose-ended and can engage in leverage.

3.0 SEBI ISSUES NORMS FOR EXIT OF NON-OPERATIONAL STOCK EXCHANGES

The Securities and Exchange Board of India(SEBI) has said that a stock exchange withoutany trading at its own platform or where theannual trading is less than ` 1000 crores, mayapply for voluntary de-recognition and exit. Ifthe stock exchange eligible for voluntary de-recognition is not able to achieve a turnover of `1000 crores on continuous basis or does not applyfor voluntary de-recognition and exit within a


CERTIFICATE COURSECAPITAL MARKET AND COMMODITIES/TELECOM/NBFC/FEMA

period of two years from the date of notification,The Securities and Exchange Board of India(SEBI) shall proceed with the compulsory de-recognition and exit of such stock exchange. TheBoard also decided that the stock exchanges maybe permitted to exit subject to certain conditionssuch as payment of statutory dues to theSecurities and Exchange Board of India (SEBI) /Government contribution of certain percentageof assets of the exchange towards InvestorProtection and Education Fund etc.Reference: PR No. 40/2012, dated 2-4-2012

4.0 BSE'S SME EXCHANGE GOES LIVE

The Bombay stock exchange's platform for Smalland Medium Enterprises (SMEs) becameoperational.

5.0 NCDEX BANS FRESH POSITIONS IN GUARSEED, GUM CONTRACTS

Alarmed by the 120% rise in the prices of guargum futures in the last one month, despite fallingtrading volumes, the National Commodity andDerivatives Exchange (NCDEX) has barredtraders from taking fresh positions in all existingcontracts of guar gum and guar seeds for thisseason.

TELECOM1.0 TRAI CONSULTAION PAPER ON ISSUES

RELATED TO ADVERTISEMENTS IN TVCHANNELSThe Telecom Regulatory Authority of India(TRAI) has released a consultation paper on"Issues Related to Advertisements in TV channels"vide press release number 64/2012 dated 16March 2012. The salient features of the proposalinclude:1. Prescribing upper limit for duration of

advertisements on clock hour basis.2. Different maximum limits for duration of

advertisements.3. Scheduling advertisement breaks.4. Defining time gaps between constructive

advertisement breaks, etc.

The full text of the consultation paper is availableon TRAI`s website: www.trai.gov.in.

NBFC1.0 RBI ISSUES NORMS FOR NON-

RECKONING FIXED DEPOSITS WITHBANKS AS FINANCIAL ASSETSThe Reserve Bank of India (RBI) has issued thefollowing norms for Non-Reckoning FixedDeposits with Banks as Financial Assets:

� It is clarified, that the Reserve Bank of India(RBI) issues a Certificate of Registration forthe specific purpose of conducting NonBanking Financial Institutions (NBFI)activities. Investments in fixed depositscannot be treated as financial assets andreceipt of interest income on fixed depositswith banks cannot be treated as income fromfinancial assets as these are not covered underthe activities mentioned in the definition of"financial Institution" in Section 45I(c) of theRBI Act 1934. Besides, bank depositsconstitute near money and can be used onlyfor temporary parking of idle funds, and/orin the above cases, till commencement ofNon Banking Financial Institutions (NBFI)business.

� In addition, the Non Banking FinancialCorporation (NBFC) which is in receipt of aCertificate of Registration from the Bankmust necessarily commence Non BankingFinancial Corporation (NBFC) businesswithin six months of obtaining Certificate ofRegistration failing which the Certificate ofRegistration will stand withdrawnautomatically.

1.0 RBI RATIONALISES OVERSEAS DIRECTINVESTMENTS BY INDIAN PARTY� Creation of charge on immovable /

movable property and other financialassetsIt has been decided that proposals from theIndian party for creation of charge in the formof pledge / mortgage / hypothecation on theimmovable / movable property and otherfinancial assets of the Indian Party and theirgroup companies may be considered by theReserve Bank of India (RBI) under the

FEMA


FEMA

approval route within the overall limit fixed(presently 400%) for financial commitmentsubject to submission of a 'No Objection' bythe Indian Party and their Group companiesfrom their Indian lenders.

� Reckoning bank guarantee issued onbehalf of JV / WOS for computation ofFinancial CommitmentIt has been decided that the bank guaranteeissued by a resident bank on behalf of anoverseas JV / WOS of the Indian party, whichis backed by a counter guarantee / collateralby the Indian party, shall be reckoned forcomputation of the financial commitment ofthe Indian Party and reported accordingly.

� Issuance of personal guarantee by thedirect / indirect individual promoters ofthe Indian PartyIt has been decided that issuance of personalguarantee by the promoters of the IndianParty as presently allowed under the GeneralPermission shall also be extended to theindirect resident individual promoters of theIndian party with same stipulations as in thecase of personal guarantee by the directpromoters.

� Financial Commitment without equitycontribution to JV / WOSIt has now been decided that the proposalsfrom the Indian party for undertakingfinancial commitment without equitycontribution in JV / WOS may be consideredby the Reserve Bank of India (RBI) underthe approval route. AD banks may forwardthe proposals from their constituents afterensuring that the laws of the host countrypermit incorporation of a company withoutequity participation by the Indian party.

� Submission of Annual PerformanceReportWhere the law of the host country does notmandatorily require auditing of the books ofaccounts of JV / WOS, the AnnualPerformance Report (APR) may be submittedby the Indian party based on the un-auditedannual accounts of the JV / WOS provided:

a. The Statutory Auditors of the Indian party

certifies that 'The un-audited annualaccounts of the JV / WOS reflect the trueand fair picture of the affairs of the JV /WOS' and

b. That the un-audited annual accounts ofthe JV / WOS has been adopted andratified by the Board of the Indian party.

� Compulsorily Convertible PreferenceShares (CCPS)It has been decided that CompulsorilyConvertible Preference Shares shall be treatedat par with equity shares and the Indian partyis allowed to undertake financial commitmentbased on the exposure to JV by way of CCPS.

Reference: A.P. (DIR Series) / 96 dated March 28 2012,

2.0 FOREIGN VCs CAN INVEST IN MARKETVIA THIRD PARTIESThe Reserve Bank (RBI) has allowed foreignventure capital investors to invest in securitiesthrough private arrangements or purchase from athird party.RBI (Reserve Bank of India) in a circular releasedthat it has now been decided to allow foreignventure capital investors to invest in eligiblesecurities (equity, equity-linked instruments, debtand debt instruments, debentures of a domesticventure capital undertaking or VC (Venture Capital)funds, units of schemes/funds set up by a VCfund) by way of private arrangements or purchasefrom a third party also.

3.0 RBI LIBERALISES OVERSEAS INVEST-MENTS BY RESIDENT INDIVIDUALSHenceforth, remittance shall be allowed fromresident individuals for acquiring the qualificationshares for holding the post of a Director in theoverseas company to the extent prescribed as perthe law of the host country where the company islocated. The limit of remittance for acquiring suchqualification shares shall be within the overallceiling prescribed for the resident individuals underthe Liberalized Remittance Scheme (LRS) in forceat the time of acquisition.� Acquiring shares of a foreign company

towards professional services rendered orin lieu of Director's remunerationIt has been decided to grant GeneralPermission to the resident individuals to


CERTIFICATE COURSEFEMA

acquire shares of a foreign entity in part /full consideration of professional servicesrendered to the foreign company or in lieu ofDirector's remuneration. The limit ofacquiring such shares in terms of value shallbe within the overall ceiling prescribed forthe resident individuals under the LiberalizedRemittance Scheme (LRS) in force at the timeof acquisition.

� Acquiring shares in a foreign companythrough ESOP SchemeIt has now been decided that residentemployees or Directors may be permitted toaccept shares offered under an EmployeeStock Option Plan (ESOP) Scheme globally,on uniform basis, in a foreign companyirrespective of the percentage of the director indirect equity stake in the Indian companysubject to:i. The shares under the Employee Stock

Option Plan (ESOP) Scheme are offeredby the issuing company globally on auniform basis, and

ii. An Annual Return is submitted by theIndian company to the Reserve Bank ofIndia (RBI) through the AD Category - Ibank giving details of remittances /beneficiaries, etc.

Reference: A.P. (DIR Series) / 97 dated March 28 2012.

4.0 RBI ISSUES NORMS FOR RAISINGAGGREGATE FIIs / NRI LIMITS FORINVESTMENTS UNDER PIS

The Reserve Bank of India (RBI) has clarifiedthat the Indian company raising the aggregate FIIinvestment limit of 24 per cent to the sectoralcap/ statutory limit, as applicable to the respectiveIndian company or raising the aggregate NRIinvestment limit of 10 per cent to 24 per cent,should necessarily intimate the same to theReserve Bank of India (RBI), immediately, ashitherto, along with a Certificate from theCompany Secretary stating that all the relevantprovisions of the extant Foreign ExchangeManagement Act, 1999 regulations and theForeign Direct Policy, as amended from time totime, have been complied with.Reference: A.P. (DIR Series) / 94 dated 19 March 2012,

5.0 RBI ISSUES NORMS FOR REVIEW OF ALL-IN-COST CEILING IN ECBs AND TRADECREDITS� The Reserve Bank of India (RBI) has issuedthe following norms for External CommercialBorrowings (ECBs) and trade credits for all-in-cost ceiling.

Average Maturity Period All-in-cost over6 month LIBOR

Three years and up tofive years 350 bps

More than five years 500 bps

Reference: A.P. (DIR series) / 99 dated 30 March 2012

Maturity Period All-in-cost over6 month LIBOR

Upto one year 350 bps

More than one year and 350 bpsUpto three years


� The all-in-cost ceiling is applicable up toSeptember 30, 2012

6.0 RBI NORMS FOR CREDIT TO RESIDENT(EXTERNAL) RUPEE / FOREIGN -CURRENCY NON- RESIDENT (BANK)ACCOUNT� An individual resident in India may borrow a

sum not exceeding USD 250,000/- or itsequivalent from her / his close relatives outsideIndia, subject to the conditions mentionedtherein.

� The Reserve Bank of India (RBI) may allowrepayment of such loans to NRE / ForeignCurrency Non-Resident (Bank) [FCNR(B)]account of the lender concerned subject tothe condition that the loan to the residentindividual was extended by way of inwardremittance in foreign exchange through normalbanking channels or by debit to the NRE /FCNR(B) account of the lender and the lenderis eligible to open NRE / FCNR(B) accountwithin meaning of the Foreign ExchangeManagement (Deposit) Regulations, 2000notified vide Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from timeto time.



� Contact details : Dharampal (9013363257) All India Chartered Accountants’ Society - CFO World 909, Chiranjiv Tower, 43, Nehru Place,New Delhi-110019. Ph: 26223712, 26228410, 26226933 E-mail:[email protected] / [email protected] �EDITOR: Pankaj Gupta, LLB, FCSE-mail: [email protected] � PUBLISHED & PRINTED: At New Delhi by Satish Chandra, Administrative Officer, on behalf of All India CharteredAccountants’ Society, 4696, Brij Bhawan, 21A, Ansari Road, Darya Ganj, New Delhi-110 002 Phone 23265320, 23288101 E-mail : [email protected] at: EIH Ltd., Unit : Printing Press, No. 7, Sham Nath Marg, Delhi-110054. Views expressed by contributors are their own and the Society does not acceptany responsibility.

If undelivered, please return to :All India Chartered Accountants’ Society4696, Brij Bhawan 21A, Ansari Road,Darya Ganj, New Delhi-110 002

Date of Publishing : 12th APRIL, 2012R.N.I. No. 50796/90Posting Date: 14/15 April, 2012

Registration No. DL(c)-01/1268/2012-14Licenced to post without prepayment No. U-(C)-82/2012-14

� Income Tax, International Tax

� Service Tax, Excise, VAT

� Risk Management, Internal Audit

� Valuation, FEMA, Complex Regulatory issues and Corporate Tax Advisory

� Due Diligence Fund Raising - Private Equity, Debts and International Funding

� Accounting, MIS, System Design

� Joint Venture, Collaboration, Shareholders Agreements and Business Agreements

� Project Funding � Education and Training � Investment Banking � BIFR, CLB Cases

CA Monika Dua +91 9999483999 [email protected] CA Vaibhav Jain +91 9711310004

Introduction of Excise and TCS on goldThere is a substantial risk to all investors at these price levels.A major contributor in increase in prices is special demandof gold arising out of Euro Zone crisis, very heavy import ofgold by India (in excess of US$ 40 million per annum). Thespeculative activities in gold and silver derivatives have addedfuel to the fire. Gold and silver have been traditionallyconsidered as one of the best and safe investment and ahedge against inflation. However the recent surge in pricesis beyond reasonable expectations and calculations.

The recent attempt of the Government to control the activitiesof gold loan, imposing excise on gold, introduction of tax atsource for gold purchases are certain initiatives which arerequired to be further matured and modified in a manner sothat we are able to efficiently and effectively check the riskto Indian economy and Indians arising out of a possiblebubble burst. The Indian Government needs to check thegold hoarding and speculative activities in gold and silver toensure sanctity of the precious metals.

EDITORIAL

AUDIT1.0 AUDIT GUIDELINES FOR CREDIT RATING

AGENCIESThe Securities and Exchange Board of India(SEBI), in consultation with the Credit RatingAgencies (CRAs) and also with the otherregulators, has decided that CRAs shall followthe applicable requirements pertaining to ratingprocess and methodology and its records,transparency and disclosures, avoidance ofconflict of interest, code of conduct, etc, asprescribed in the regulations and circulars issuedby SEBI from time to time.

Contd ... from page 1 Negative list of services

The Government has imposed service tax on all servicessubject to a small negative list, which require completereconsideration and should be deferred pending a debate.Accrual system of imposition of service tax on charteredaccountant is completely misplaced.