(setup by an act of parliament) hyderabad branch of sirc e...
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www.hydicai.org [email protected] Volume: 22/ Issue: 12 / April, 2018
The Institute of Chartered Accountants of India (Setup by an Act of Parliament)
HYDERABAD BRANCH OF SIRC
E-NEWSLETTER
April, 2018
The Institute of Chartered Accountants of India 1
Chairman Writes…. Dear Members and Students Quality of work is the key to success. Our profession owes its sustainability to strong regimen of
ethics. It is right time to face the disruptions through introspection by corrective actions,
if so needed. Let us all pledge to stand united in our avowed task of being guardians of
financial probity.
The Indian accountancy profession has to undergo a paradigm shift in terms of
embracing technology. The key to this transition is technology-driven capacity building.
We at branch have been considering these concerns by reaching to you through various
CPE seminars. Most of us will be commencing our bank audits by the first week of April. In view of the
increase in non-performing assets and scams reported our duty as auditors of banks gains paramount
importance. With the overall emphasis on Bank audit during the month of March, we have conducted
three one day seminars on Bank Audit for the members and students which were well received.
We have organized crash coaching classes, several workshops and mock tests for the students from the
point of view of the examinations.
The online payment option for membership is active and members may utilize this option for payment of
fee for up to a period of two years. You may click the following link for payment of fees.
http://memfee.icai.org/memfee.html
Certificate course on GST is planned in the third week of April, 2018. Members are requested to register
for the ten days course which will be held on weekends starting from 21st April. We are also planning
various seminars at the branch on topics of current importance like auditing standards, ICDS and GST.
We are forming study groups on various topics like Auditing & Accounting standards, Indirect taxes,
Direct Taxes, FEMA, Company law, International Taxation, Valuation and IBC which will start from
May 2018. Our intention is to have a groups that will study the various aspects and developments in the
subject and give their suggestions and observations which will be published in the newsletter of the
branch. Members interested may kindly mail to the following mail id [email protected].
Young members are facing several hardships while they set up practice and keeping this in mind we are
organizing a one day workshop for young members on “Practice development strategies” in the month
of May the details of the programme will be hosted on the website shortly.
I wish all the members a very successful bank audit season and the students all the very best for their
exams.
Yours Sincerely,
CA. Mandava Sunil Kumar
Chairman [email protected]
1st April,2018
April, 2018
The Institute of Chartered Accountants of India 2
Programmes for the Month of April, 2018 Day & Date Name of the Programme Speaker Delegate
Fee CPE
Hours
Venue
Saturday 21st April,2018 06PM -08PM
Study Circle Recent Judgements in
Income Tax
CA. A.C. Gangaiah
- 2hrs Branch Premises
Monday 23rd April, 2018
05.30 PM -08.30 PM
Crypto currency and its Taxation
CA. Deepak Nagori
150/- 3Hrs Branch Premises
Tuesday 24th April, 2018
05.30 PM -08.30 PM
Survey Proceedings Under Income Tax
CA. Rama Murthy.T
150/-
3Hrs Branch Premises
Tuesday 24th April, 2018 06 PM -08PM
Study Circle IND AS Accounting Standards Revenue
Recognition
CA. Vijay T - 2hrs Branch Premises
Wednesday 25th April, 2018
05.30 PM -08.30 PM
ICDS CA. P.S.R.V. V Surya Rao
150/- 3Hrs Branch Premises
Thursday 26th April, 2018
05.30 PM -08.30 PM
Recent Developments in GST
CA. Sri Ram K 150/- 3Hrs Branch Premises
Friday 27th April, 2018
05.30 PM -08.30 PM
E- Filing of TDS, TCS & SFT Returns
CA. Ritesh Mittal
150/- 3Hrs Branch Premises
Saturday 28th April, 2018
03.00 PM -07.00 PM
Half Day Seminar on RERA
CA. Vinay Thagaraj
Adv.E Suhail Ahmed
200/- 4Hrs Branch Premises
April, 2018
The Institute of Chartered Accountants of India 3
SCHEDULE – III, D – II COMPANIES ACT – 2013
Complied by: CA. Ravindranath Reddy .P
I) Introduction: The Ministry of Corporate Affairs has made it mandatory certain
companies to comply with IND – AS in presenting the financial statements. Schedule – III, D-II has been introduced in the Companies Act with some modifications in the Balance Sheet and Statement of Profit and Loss. A brief discussion is made on the subject in the Article.
II) APPLICABILITY: IND-As read with Schedule – III, D-II is applicable to all listed Companies and other Companies whose net worth is 250 Crore or more. These Companies have to present their Financial Statements in Compliance with the above mentioned standards and the Schedule of the Act.
III) DEFINATIONS:i) Current Assets: An Entity shall classify an asset as current when a) it expects to realize the asset o intends to sell or consume it, in its normal operating cycle. b) It holds the asset primarily for the purpose of trading, c) it expects to realize the asset within twelve months after the reporting period, d) the asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at-least twelve months after the reporting period. ii)Operating Cycle: The operating cycle of an entity is the time between the acquisition of asset for processing and their realization in cash or cash equivalent. When the entity‟s normal operating cycle is not clearly identifiable, it is assumed as twelve months.
iii) Financial Asset:a) cash b) an equity instrument of another entity, c) a contractual right i) to receive cash or another financial asset, ii) to exchange financial asset or liability with another entity if the conditions are potentially favorable to the entity, d) a contract that will or may be settled in the entity‟s own equity instrument. (IND –AS 32). iv) Trade Receivable: A Receivable shall be classified as “trade receivable” if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business. v) Cash and Cash Equivalent: Cash Comprises cash on hand and demand deposits. Cash equivalents are short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to as insignificant risks of changes in value.
IV) PRESENTATION BALANCE SHEET: The Balance sheet presentation starts with Assets. Assets are mainly divided into Non- Current and Current. Non-current Assets Comprise, a) Property, plant and equipment, b) Capital Work in progress, c) Investment property d) goodwill, e) other intangible assets, f) Intangible assets under development, g) Biological Assets other than bearer plants h) financial assets, i) deferred tax assets (Net) j)other non-current assets. Current Assets include a)Inventories b) Financial Assets, c)Current Tax Assets (NET), d) other current assets.
Articles
April, 2018
The Institute of Chartered Accountants of India 4
i)Non-Current Assets:Property, Plant and Equipment: The assets under this head have to be classified further as, a)land b) buildings, c)plant and equipment, d)furniture and fixtures, e)Vehicles f) office equipment g) bearer plants and h)others. The assets has to be capitalized as per IND-AS 16 and depreciation has to be provided as per schedule – II of the Companies Act. The Company may adopt
cost mode or revaluation mode. In case revaluation mode is adopted necessary adjustments have to be made regularly. A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals acquisitions through business combinations and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately. Capital work in progress: Any asset under construction / installation including appropriate allocable expenditure has to be disclosed as capital work in progress. Any advance for capital work in progress shall not be included in CWIP but to be disclosed as other non-current assets. Investment Property: It is the property held to earn rentals or for capital appreciation rather than for use in production or supply of goods or services or for administrative purposes or sale in the ordinary course of business. Necessary disclosures applicable to PPE are applicable to these Assets also. Goodwill: to be disclosed as a separate line item apart from „other intangible assets‟. The same disclosures are applicable to Goodwill also. Other Intangible Assets: Other Intangible Assets have to be classified as a) Brands or trademarks b) Computer software c)Master heads and publishing titles, d)Mining rights e) Copy right, patents, other intellectual property rights, service and operating rights, f) Recipes, formulae, models, designs and prototypes g) Licensees and Franchises h)Others. Necessary disclosures have to be made in the notes that are applicable to PPE in this group of assets. Biological Assets other than bearer plants: Reconciliation of the carrying amount of each class of assets between the beginning and the end of the period. FinancialAssets: Comprise a) Non-Current Investments b) Trade Receivables c) Loans and d) others. Non-Current Investments: To be classified as, a) Equity Instruments b) Preference Shares c) Government or trust securities d) debentures or bonds e) mutual funds f) Partnership firms g) other investment. Under each classification details of the names of the bodies corporate are to be given as i) Subsidiaries ii) Associates iii) Joint ventures iv) Structured entities. The following further details to be disclosed a) aggregate amount of quoted investments and market value thereof, b) aggregate amount of unquoted investments and c) aggregate amount of impairment in value of investment. Further the investment have been grouped as a) Investments at amortized cost b) at fair value through other comprehensive Income c) at fair value through profit and loss, either in the Balance Sheet or in the Notes (IND – AS 107). Investments in Partnership: Name of the firms, their partners‟ total capital and share of each partner to be disclosed separately. This is not applicable to Limited liability Partnership, since it is a body corporate. Trade Receivables: to be classified as a) Secured and considered good, b) Unsecured considered good c) doubtful. Allowance for bad and doubtful debts
shall be disclosed under the relevant heads separately. Debts due by directors or
April, 2018
The Institute of Chartered Accountants of India 5
other officers of the Company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or director or a member to be stated separately. Loans: To be classified as a) Security deposits b) Loans to related parties (giving details) c) other loans. Further to be classified and disclosed as specified to „Trade Receivable‟.
Others: Bank deposits with more than twelve months maturity shall be disclosed. The following further disclosures are made a) Earmarked balances shall be separately stated (e.g. Unpaid dividends), b) balance with banks held as margin money are security against borrowings, guarantees, other commitments shall be disclosed separately. Repatriation restrictions to be stated separately. Other Non-Current Assets: To be classified as i) Capital advances and ii)other advances to be classified further as a) security deposits b)Advance to related parties and c) other advances to be disclosed as applicable to loans and trade receivables, iii) others. ii) Current Assets: i) Inventories: to be classified as a) Raw materials b) work in progress c) finished goods d) stock in trade (acquired for trading) e) stores and spares f) loose tools g) others. ii) Goods in transit shall be disclosed under the relevant sub-head. iii) Inventories shall be valued as per IND – AS 2 and mode of valuation to be stated. Financial Assets: (Current) Current Investments: To be valued, classified, presented and necessary disclosures are to be made on par with non-current investments. Trade Receivables: To be classified, valued and presented on par with non-current trade receivables. Cash and Bank Balances: Cash and cash equivalent a) Balance with banks b) Cheques, drafts on hand c) Cash on hand d) others. Bank Balances other than cash and cash equivalent shall be disclosed separately. Necessary disclosures to be made on par with non-current bank balances. Current Loans: To be classified on par with non-current loans and disclosed in the Balance Sheet. Current Tax Assets (net): If the amount of tax paid in respect of current or prior periods exceeds the tax dues for those periods (Assessment year wise not cumulative) then such excess tax shall be recognized as an asset. If it is realizable within one year from the date of the Balance Sheet to be disclosed as a Current Asset. Otherwise as a non-current asset.Other Current assets: Any advances other than capital advances shall be grouped under this head, to be classified and presented on par with other advances under non-current assets. Financial assets have to be presented valued and disclosed in compliance with the IND – AS 32, 39, 107 and 109 for better presentation of financial statements.
V) Conclusion: Every company shall take necessary measures to comply with the norms prescribed under IND – AS and the disclosures mentioned in the Schedule – III of the Companies Act, so that adequate and proper disclosures are made in the financial statements. The Statutory auditorhas to consider the importance of the standards and law before submitting the report on the same.
(to be continued…)
April, 2018
The Institute of Chartered Accountants of India 6
GST UPDATE Compiled by CA SATISH SARAF
S. No Notificatio
n No
Issued
under
Effective
from
Brief particulars
01 12/2018 Central Tax 07-03-2018
Notifying the due date, for filing Form TRAN-02 for the months of July, 2017 to December 2017, as 31-03-2018.
Substitution of Rule 138 relating to E-Waybills.
02 13/2018 Central Tax 07-03-2018 Removal of waiver of late filing fee for Form
GSTR-5A
03 10/10/2017 Central Tax
- Circular 18-10-2017
Clarification on movement of goods from one
state to another on the basis of approval.
04 11/11/2017 Central Tax
– Circular 20-10-2017
Clarification on taxability of printing contracts
05 13/13/2017 Central Tax
– Circular 27-10-2017
Clarification on applicable rate of tax on
unstitched Salwar Suits
06 14/14/2017 Central Tax
– Circular 06-11-2017
Procedure regarding procurement of supplies
of goods from DTA by EOU / EHTP / STP /
BTP under deemed export benefits
07 16/16/2017 Central Tax
– Circular 15-11-2017
Clarification regarding applicability of GST &
availability of ITC in respect of certain services
08 17/17/2017 Central Tax
– Circular 15-11-2017
Procedure for processing of refund claims in
respect of Zero Rates Supplies (Exports &
Supplies to SEZ Units, Etc)
09 18/1/2017 Central Tax
– Circular 16-11-2017
Prescribed the procedure for refund of
Unutilized Input Tax Credit paid on Inputs in
case of Exporter of Fabrics
10 19/19/2017 Central Tax
– Circular 20-11-2017
Clarification on taxability of custom milling of
paddy, taxable @ 5%
April, 2018
The Institute of Chartered Accountants of India 7
11 20/20/2017 Central Tax
– Circular 22-11-2017
Clarification regarding taxability of Terracotta
Idols, taxable at Nil Rate
12 21/21/2017 Central Tax
– Circular 22-11-2017
Interstate movement of Rigs, Tools, Spares
and all goods on Wheels like Cranes will not
be liable to CGST/SGST/IGST subject to
conditions prescribed. Any repair or
maintenance done on conveyance will be liable
to GST.
13 22/22/2017 Central Tax
– Circular 21-12-2017
Clarification on issues regarding treatment of
supply by an artist in various states and supply
of goods by artist from galleries.
14 23/23/2017 Central Tax
– Circular 21-12-2017
Clarification on issues in respect of
maintenance of books of accounts relating to
additional place of business by principal or an
auctioneer for the purpose of auction of Tea,
Coffee, Rubber etc.
15 24/24/2017 Central Tax
– Circular 21-12-2017
Manual filing and processing of refund claims
on account of Inverted Duty Structure, Deemed
Exports and excess balance in Electronic Cash
Ledger.
Direct tax and transfer pricing updates
(Contributed by CA Vikram Doshi andCA VaibhavMehta)
1. Referral fees are not in the nature of fees for technical services (‘FTS’) but business income and not taxable
in India.
Recently, the Mumbai Bench of the Income-tax Appellate Tribunal („the Tribunal‟) in the case of Credit Suisse
AG1 („Assessee‟) held that the referral fees paid by the Indian group company of the Assessee to Credit Suisse
AG, Dubai Branch (CSDB) for referring clients in India are not in the nature of FTS. It is in the nature of
business income and since the Assessee‟s Permanent Establishment (PE) in India has no role to play in
performance of such referral activities, the same are not attributable to such PE in India. Therefore, payment for
such services is not taxable in India under India-Switzerland tax treaty („the tax treaty‟).
1 DCIT v. Credit Suisse AG ([2018] 90 taxmann.com 181)-Mumbai Tribunal
April, 2018
The Institute of Chartered Accountants of India 8
- The Assessee is an entity incorporated in Switzerland. The Assessee is a part of the Credit Suisse group, a
global bank providing various financial services in the field of investment and personal banking to its clients
across the globe.
- The Assessee has group company in India namely Credit Suisse Securities (India) Private Limited („Indian
company‟). The Assessee also has a branch in Dubai (i.e. CSDB) as well as in India.
- The Indian company paid referral fee to CSDB for referring an Indian resident client for bringing out the
issue of convertible bonds. The Assessee contended that such a referral fee received by CSDB was a
'business income' and notliable to tax in India because CSDB did not have a PE in India.
- The Assessing Officer („AO‟) did not accept the Assessee‟s stand and instead held that the referral fee was
liable to be taxed in India having regard to section 5(2)(b) of the Income-tax Act, 1961 („Act‟) read with
Section 9(1)(i) of the Act. Since the referral fee was payable to CSDB in relation to the execution of
transaction between Indian company and referred client, such referral fee is deemed to accrue or arise in
India. In other words, by virtue of the source of the „referral fee‟ being located in India, the same was taxable
in India. The AO held that the payment was in the nature of FTS and not 'business income'.
- The Dispute Resolution Panel („DRP‟) upheld the contention of the Assessee of non-taxability of the said
receipts in India and held that the referral fee is not in the nature of FTS. The referral fee was not attributable
to the Assessee‟s PE in India as per Article 7 of the tax treaty. Further, CSDB undertook the referral activity
and it had no PE in India.
- On appeal, the Hon‟ble Tribunal held as follows:
- CSDB referred an India resident client to the investment banking division of the Indian company. The Indian
company worked on the assignment of the issue of convertible bonds for the referred client, and 50 per cent of
the fee earned by the Indian company was paid to CSDB in terms of the global policy of the group.
- The Tribunal held that referral fee which was payable by the Indian company to CSDB after execution of the
work of the referred client is no grounds to determine the nature of the payment.
- The Authority for Advance Rulings („AAR‟) in the case of Cushman & Wakefield(S) Pte. Ltd.2 held that such
„referral fee‟, being in the nature of „commission‟ was to be treated as being in the nature of „business
income‟ both, under the Act as well as under the India-Singapore tax treaty. No contrary decision has been
referred by the tax department. Accordingly, the Tribunal held that the referral fees were not in the nature of
FTS.
2Cushman and Wakefield(S) Pte. Ltd. ([2008] 305 ITR 208) -AAR
April, 2018
The Institute of Chartered Accountants of India 9
- There is no dispute that CSDB has no PE in India. Further considering that the referral activity was
undertaken outside India and Assessee‟s PE had no role to play in the performance of the referral activity, the
referral fee earned by CSDB could not be construed to be attributable to Assessee‟s PE in India and thus, the
DRP rightly held the same to be non-taxable in India.
2. Investment in building, furniture, fixture in case of a hotel will qualify to be treated as investment in plant
and machinery for purpose of section 80IC of the Act.
Recently, the Chandigarh Bench of the Tribunal in the case of Sirmour Hotels (P) Ltd.3(„Assessee‟) held that
the investments in building, furniture and fixtures etc. in case of a hotel will qualify to be treated as investment
in plant & machinery for the purpose of substantial expansion under section 80IC of the Act.
- The Assessee is a private limited company running a hotel in the State of Himachal Pradesh. During the FY
2005-06, the Assessee claimed 100% deduction under section 80IC of the Act on account of substantial
expansion of the unit as defined under section 80IC (8). The Assessee claimed it was running an Eco-
Tourism project as mentioned in XIV schedule, Part C of the Act.
- The AO did not accept the Assessee‟s contention and instead held that the Assessee‟s hotel did not
constitute an Eco-tourism unit and without prejudice to the above the AO also contended that Assessee did
not undertake „substantial expansion‟ as per 80IC (8) of the Act i.e. increase in investment in the plant and
machinery by at least 50% of the book value. The AO observed that the expansion in the hotel building,
furniture and equipment did not constitute expansion in the plant and machinery.
- Aggrieved by the above order of AO, the Assessee preferred an appeal before Commissioner of Income-tax
(Appeals) [„CIT(A)‟]. The CIT(A) allowed the Assessee‟s claim to be an Eco-tourism unit however upheld
the findings of the AO that the substantial expansion had to be looked into only after excluding the building,
furniture and fittings.
- On appeal by the Assessee, the Hon‟ble Tribunal held as follows:
- The deduction under section 80IC of the Act is not only allowable on the commencement / start of operation
of such units as are listed in the XIV schedule but also on the substantial expansion of such units.
- The special provisions of section 80IC of the Act are enacted for promoting investment activity in certain
undertaking or enterprises in the special category of states including state of Himachal Pradesh.
- The Eco-tourism unit including the hotel has been specifically allowed in the list eligible for deduction as per
special provisions which otherwise does not involve installation of plant and machinery. If the original
investment made for setting up of such unit is eligible for deduction under section 80IC of the Act, then
3 Sirmour Hotels (P.) Ltd. v. DCIT ([2018] 91 taxmann.com 450)- Chandigarh Tribunal
April, 2018
The Institute of Chartered Accountants of India 10
certainly the further investment in the same infrastructure for the purpose of expansion cannot be denied,
merely because the investment does not involve setting up / installment of plant and machinery.
- Any other or strict definition of word 'substantial expansion', would defeat purpose for which the special
provisions under the section 80IC of the Act have been made. Therefore, the Tribunal held that the
investment in building, furniture, fixture in the case of a hotel will qualify to be treated as investment in plant
and machinery for the purpose of section 80IC of the Act and, further held that the Assessee will be entitled
to deduction under section 80IC of the Act on account of substantial expansion of the unit.
Disclaimer : The views and opinions expressed or implied in the Hyderabad Branch of
SIRC of ICAI E- Newsletter are those of the authors and do not necessarily reflect those
of Hyderabad Branch of SIRC of ICAI. Material in the Publication may not be reproduced,
whether in part or in whole, without the consent of Hyderabad Branch of SIRC of ICAI
CA. Mandava Sunil Kumar Chairman
09866996662 [email protected]
CA. Bhanu Narayan Rao Y. V Vice- Chairman
09951782950 [email protected]
CA. Chadalawada.Venkatram Secretary
09849069009 cvenkatram@ gmail.com
CA. Pankaj Kumar Trivedi Treasurer
09246509697 [email protected]