CA and CS HUB

Sebi probes use of SME platform to launder money, evade tax

Capital market regulator Sebi is investigating a string of trades in stocks of small and medium enterprises (SME) and derivatives like currency options carried out to launder money and escape tax.
Persons with unaccounted cash are suspected to have misused the SME trading platform of exchanges to show the money as legitimate trading income. Another set of people, on the other side of the deals, did the reverse — converting a slice of their official income into unreported cash or "black money" to book fake expense or loss that would lower earnings and tax. The trades typically happened in the run-up to the quarterly closing and a few months preceding the end of a financial year. Two people aware of the probe told ET that the investigation was at an advanced stage.

The regulator and bourses offered the SME platform as an avenue to enable small companies to raise funds with fewer formalities and disclosures. But it appears that some may have taken advantage of easier rules to list companies that serve as money laundering machines.

According to a trader, here's how it happens: "It begins with the registration of a company or preparing an existing firm for listing. Say, the stock is placed at a valuation of Rs 25 a share to a person who is looking for a way to convert black money into white. He actually pays Rs 500 a share - Rs 25 officially in cheque and Rs 475 as cash. The stock is then valued at Rs 25. All this happens at the prelisting stage. Then the company is listed at a price of Rs 25 and the stock is driven up through circular trading among promoters or within a closed group to Rs 500 or even higher. The man who bought the shares at Rs 25 when the firm was unlisted now sells the shares at Rs 500 knowing fully well that the stock is not even worth a fraction. He receives Rs 500 as official trading income — which net of 'service charge' is the amount he had given as cash to the company's promoter prior to listing. Thus, the black money returns as white."

But, who buys the shares on the exchange? That's the other side of the story. The buyer, fully aware of the underlying deal, steps in with a different plan and purpose. He does exactly the opposite (to what the seller of the stock does) - buys the stock on the exchange at Rs 500 and collects cash of Rs 475 (per share) from the original promoter. The share purchase on the exchange lowers his taxable income. The promoter acts as the cash conduit: he collects cash from the first person (who converts black money into white) and transfers the cash to the second person (who converts white money into black to lower tax).

After the deal is cut, trading interest in the counter wanes and the stock slips back closer to its listing price or below. Occasionally, the company informs the exchange about the change of promoter.

The game in currency options, said a former exchange official, is simpler, even smarter. "There is no need to incorporate a company, apply for listing and open demat accounts. Also, transaction cost is lower. Multiple trades in out-ofmoney options help an option buyer to convert black (money) into white. The conversion does not happen in one or two deals. The call option buyer goes on buying and selling, booking small profits every time. The deal is spread over a series of transactions so as not to attract attention," said the trader.

Since out-of-money options are illiquid contracts that do not typically attract genuine market participants, the buyer and seller can go on repeating such deals in the far end of the market. The buyer of the call option — who books profit — converts black money or cash into white, while the option seller (who receives the premium) does the opposite.

Outside the exchange and with the help of a broker (who puts through the option trades), cash moves from the buyer to the seller who shows losses, lowers tax and gets back large part of the amount in cash.

Don’t Quit CA – You are Fit for CA

“Winners never quit and quitters never win”.If you strongly determined to
complete a task then you shouldn’t quit the task in the middle .Chartered
accountancy being considered as one of the toughest courses in India.But
there are many instances that stood as an evidence to prove that “you don’t
need to be excellent performer in studies”. Only thing required is strong
determination and commitment ,dedication.
If you have chosen Chartered accountancy as your career and wish to lead
your professional life as CA then you shouldn’t quit in the middle after
encountering some failures. Remember ” Failure means how one shouldn’t do
that task “. Failure make you to learn that you have an another way of
completing the task. So you need to search for that way by changing your
efforts ,planning ,timing ,presenting.
“The illiterate of 21st century will not be those who can’t read & write ,but
those who can’t learn ,unlearn ,relearn”. – Alvin Toffler.
So ,be cautious while choosing your ambition and put your 100% efforts to
achieve it. Being a student of India’s one of the toughest courses you need to
work smart rather than hard. Follow the suggestions of your lecturers ,friends
,seniors ,superiors as much as possible.
“Success doesn’t mean the absence of failures ,it means the attainment of
ultimate objects & winning the war ,not every battle”
– Edward Bliss
Even though you have a habit of studying for very little amount of time ,you
have to pay 100% attention on what you do. Follow the tips of motivational
speakers to improve your concentration.Regularly be in touch with some
sources of motivation. Sometimes you may not present better in exams even
though you had better preparation ,due to some reason like stress ,fear of
exams , lack of confidence. Start doing meditation for a while regularly to
overcome all those problems gradually. Try to know the experience of your
seniors who have achieved their goals successfully.
Hope these lines may help you to some extent at least .

CA Nov. 2015 Exams Ammendments in Syllabus:

As you know new legislations have been passed recently. Some of these are also included and are important for CA November 2015 Exams. The most important ones among them are :
1. CARO 2015 – We have shared CARO 2015 Notes for both IPCC and CA Final Students applicable in November 2015 Exams.
IPCC CARO 2015 Notes :
CA Final CARO 2015 Notes :

2. GST Bill : Not effective yet, only got passed in Lok Sabha. So not applicable for November 20015 Exams. Though you can expect it soon and there will be no Indirect Tax  (which you currently study).

3. Companies (Amendments) Act 2015 : Amendments in New Companies Act 2013, got the assent from President on 25th May 2015. Not applicable for November 2015 exams but will most probably be applicable in May 2016 Exams.

Click Here to Download Guidance Note on Accounting for Expenditure on CSR Activities

Relaxation to complete Advanced ITT

Course after the Final Examination
ICAI on 26th June 2015 Through an officail notification announced Relaxation
to complete Advanced ITT Course after the Final Examination but before
enrolling as a member of the ICAI.
As per Regulation 29C(1)(iv) of the Chartered Accountants’ Regulations 1988,
A students who have registered for Practical Training on or after February 1,
2013 are Supposed to complete the Advanced IT Training before admission to
the Final Examination. The Council in 343rd Meeting held on June 24-26, 2015
has passed a resolution under Regulation 205 of the Chartered Accountants
Regulations, 1988 on powers to remove difficulties:
To remove difficulties faced by students registered for articled training on or
after February 1, 2013, such students are permitted to complete Advanced ITT
course even after appearing the Final Examination and, thus, may complete
the same before enrolling as a member of the Institute.
Considering the above notification now , students who have registered for
Practical Training on or after February 1, 2013 and are eligible to appear in
Final Examinations from November, 2015, are allowed to complete the
Advanced ITT course after the Final Examination but before enrolling as a
member of the Institute.

What is Professional Tax?

Professional tax is levied by state government on the income earned by the
way of profession, trade, calling or employment
The power to levy professional tax has been given to the states by way of
clause (2) of Article 276 of the constitution of India.
Article 276 in Constitution of India,1949
Notwithstanding anything in Article 246, no law of the Legislature of a State
relating to taxes for the benefit of the State or of a municipality, district
board, local board or other local authority therein in respect of professions,
trades, callings or employments shall be invalid on the ground that it relates
to a tax on income
The total amount payable in respect of any one person to the State or to
any one municipality, district board, local board or other local authority in
the State byway of taxes on professions, trades, callings and employments
shall not exceed two hundred and fifty rupees per annum: Provided that if
in the financial year immediately preceding the commencement of this
Constitution there was in force in the case of any State or any such
municipality, board or authority a tax on professions, trades, callings or
employments the rate, or the maximum rate, of which exceed two hundred
and fifty rupees per annum, such tax may continue to be levied until
provisions to the contrary is made by Parliament by law, and any law so
made by Parliament may be made either generally or in relation to any
specified States, municipalities, boards or authorities
The power of the Legislature of a State to make laws as aforesaid with
respect to taxes on professions, trades, callings and employments shall not
be construed as limiting in any way the power of Parliament to make laws
with respect to taxes on income accruing from or arising out of professions,
trades, callings and employments
Deduction U/s 16 of Income Tax Act
Any amount paid to state government as professional tax is allowed as
deduction under section 16(iii) of Income tax Act.
Section 16(iii):-
Deduction is available only in the year in which professional tax is paid.
If professional tax is paid by employer on behalf of employee, then first it
is included in the salary of the employee as a “Perquisite” and then the
same is allowed as deduction on account of “Professional Tax” from
gross salary.
There is no monetary ceiling under Income tax Act(under the Article 276,
State government cannot impose more than Rs 2500 Per annum as
professional tax).Whatever professional tax is paid during the year is
deductible.
Deducted and Paid By?
In case of salaried and wage earners, the professional tax is liable to be
deducted by the employer from the salary/wages and the same is to be
deposited to the state government.
In case of other class of individuals, this tax is liable to be paid by the
employee himself.
Professional tax Rates
If you are salaried employee earning above Rs.12000 per month then you
are liable to pay Rs.200 per month. The Annual Professional Tax is Max
Rs.2500.
Please Note these Professional Tax Rates is Only as per Gujarat State (We
Provide Professional Tax Slab Rates for All States in Next Article)
Monthly Salary or Wages Tax Rates
Up to Rs 5999 Nil
Rs 6000 to 8999 Rs 80 Per Month
Rs 9000 to 11999 Rs 150 Per Month
Rs 12000 and Above RS 200 Per Month
REGISTRATION
The Employer has to get registered even if he is responsible to deduct tax
from the salary of one employee.
Form No 1 is the Application form for Registration.
The time limit for registration is 60 days from the date of accruing liability
under the Act.
The Employer has to get separate registration for each of his Branch
Deposit of Amount Deducted
Employers covered under the jurisdiction of “State Government” as
Designated authority shall pay in the treasury by Challan through the bank.
Other employers shall pay at the place of payment declared by the
Designated Authorities concerned.
If an employer has employed more than 20 employees, he is required to
make payment within 15 days from the end of the month. However, if an
employer has less than 20 employees, he is required to pay quarterly(i.e. by
the 15th of next month from the end of the quarter).
Interest
Fails to get Registration – He will be liable to a penalty of Rs.20/- per day
under Section 5(5) for the period during which he remains unregistered.
Fails to Deposit to the Government/ Late Deposition – He is liable to pay
interest at the rate of 18 % per annum for such delayed period along with
penalties prescribed
Non Deposition of Amount. – The officials have power to recover such
amount along with applicable penalty and interest from the assets of such
defaulter. Moreover they can attach his bank account also. In serious
cases, prosecution case (police case) also can be filed.
Return Filing
As Per Gujarat State
A monthly return in Form No.5 is to be filed by 15th of next month, if the
number of employees is more than twenty. Where number of employee is
less than 20, only an annual return in Form No.5AA is required to be filed.
If Any Registration holder wants to file Annual return then he can file if he
has obtain special permission from the authority by applying in the FORM
5B for this purpose.

“Do NRIs need to file Return of income in India?”

As an NRI one may be getting some income in India and may be ignoring
about income tax part. Here I’m discussing some important points to be
considered by an NRI about his taxation matters.
Generally in case of salaried employees working in abroad, one opens a bank
account abroad in which the salary is first deposited before being remitted to
India.
(1) First of all one should determine his residential status as per the
provisions stated in income tax act 1961.
(2) As an NRI one should file income tax return in India if any one of the
following conditions is satisfied.
(a) Total taxable income > Basic exemption limit (2.5L) :
If an NRI, has earned income in India and total taxable income exceeds Rs
2.5 Lakhs, then he/she needs to file ITR in India.
(b) Capital Gains in India :
One has earned short-term or long-term capital gains from sale of any
investments or assets, even if the gains are less than the basic exemption
limit. In such case he needs to file the return of income.
(3) If one wants to claim Income tax refund
If the NRI wants to claim IT refund, then they need to file income tax returns
in India.
(4) If the NRI has losses that he needs to carry forward then he should file his
return of income.
1) The benefit of differential basic exemption limit is not applicable to NRIs.,
NRIs do not have special exemption limits available for Senior Citizens or
Women for resident Indians. All NRI’s would be treated as common and same
exemption limit applies.
2) Even though the income of the NRI during the year does not exceed basis
exemption limit and has some capital gain income then he/she has to file
income tax return.
3) If TAX is already deducted by the payer in the form of TDS in respect of
any income on investment like interest or any capital gain then it’s not
required to file ITR.
4) Which ITR is applicable to NRI :
(1) ITR 1 : If an NRI has Interest Income only .
(2) ITR 2 : If NRI has Income from Capital Gains.

Use online tax calculator to file ITR for assessment year 2015-16

With the new Income Tax Return (ITR) forms being recently notified for assessment year 2015-16, filers can do an easy check of their annual tax liability on a new computer-based 'calculator' launched by the CBDT.
The 'tax calculator' is an online computer-based programme hosted on the official website of the I-T department and is meant to help the taxpayer assess their due tax, in a general fashion, as notified for an assessment year by the government.

The CBDT had notified the new forms early this week ushering in the ITR filing season which ends on August 31.

Officials said the 'calculator' has been updated and calibrated by the Central Board of Direct Taxes, the apex policy making body of the department, according to the new announcements made by the Finance Minister in respect to tax rates in his last Budget speech.

The facility can be used by any taxpayer whether individual, corporate or any other entity, to compute the liability. However, it comes with a word of caution from the tax department that filers should not solely rely on it as complicated cases of ITR have different requirements which may not be addressed by the 'calculator'.

"The calculator is only to enable public to have a quick and an easy access to basic tax calculation and does not purport to give correct tax calculation in all circumstances. It is advised that for filing of returns the exact calculation may be made as per the provisions contained in the relevant Acts, Rules etc," a disclaimer by the department says.

A senior official said the facility has been hosted on the website of the department-- www.incometaxindia.gov.in--, for the ease of all taxpayers who either do an e-filing or manual filing of ITR.

The 'calculator' has been calibrated to compute the total tax liability of an individual or any other category of taxpayer under various heads like income from house property, capital gains, profits and gains of business or profession and agricultural income among others.

After it faced criticism, the Finance Ministry simplified the ITR forms excluding columns seeking additional details like the filers' foreign travel history and dormant bank accounts.

How much money to ask for in a salary negotiation

When you're finally down to the wire on your impending job offer, there will come a time to talk numbers, Lynn Taylor says. "That one last conversation - where you negotiate salary - can unnerve even the most savvy job seeker."
Lynn Taylor, a national workplace expert and the author of "Tame Your Terrible Office Tyrant: How to Manage Childish Boss Behavior and Thrive in Your Job" says, While most employers expect you to come back with a counteroffer, many job candidates avoid the practice and leave money on the table. "You don't have to be one of them. You'd be well served in your career to become comfortable with the process. You get one chance to accept a final compensation package at your company, so be prepared to make a persuasive argument."

So how do you stay true to your target without alienating the hiring manager or hurting your prospects?

First, to prepare for that discussion, you'll want to do your research ahead of time and figure out what someone with your experience and skills typically makes in this particular role.

Once you hear their offer and it's time to negotiate, you should keep those numbers in mind, "but also consider the nature of the first offer and how much bargaining power you think you have," Taylor says. And think about whether you're currently under- or overpaid.

As a general rule of thumb, however, it's usually appropriate to ask for 10 per cent to 20 per cent more than what you're currently making.

That means if you're making $50,000 a year now, you can easily ask for $55,000 to $60,000 without seeming greedy or getting laughed at.

"If the original offer is on the low side of the scale, you have more leverage," Taylor explains. "If you get an offer for 20% over your current salary, you can still negotiate for more - ask for an additional 5 per cent - but know that you're already in good stead."

The bottom line: Do the math (and your research!) beforehand - know what a 10 per cent to 20 per cent pay increase would total, and what the going rate for someone with your skills is - and ask for that amount. Worst case scenario, the employer says "no."

GST – Goods and Service Tax

CA Soniya Agarwal

Presently Indian Economy has various taxes on Goods and services such as VAT, Service Tax, Excise, Entertainment Tax; Luxury Tax Etc so with coming of GST there shall be single Taxation System. GST is an integrated scheme of taxation that does not discriminate between goods and services. GST chains commence from manufacture of Goods & ends at final consumer of goods who bears the tax burden.
FEATURES OF GST

A. Destination Based Taxation

B. Apply to all stages of the value chain

C. GST has two component
i. CGST – The GST to be levied by the Centre would be called Central GST (CGST)

ii. SGST – The GST to be levied by the Centre would be called Central GST (CGST)

D. CGST/SGST will get applicable on all taxable supplies of goods and services made for a consideration including import of goods and services into the country except:

I. Exempted goods or services – common list of CGST & SGST

II. Goods or Services outside the purview of GST

III. Transactions below threshold limits

E. Concept of different rate structure under GST like :-

I. Lower rate for necessary items and goods of basic importance

II. Standard rate for goods in general.

III. Special rate for precious metals

IV. Nil Rate

F. The administration of the Central GST to the Centre and for State GST to the States would be given to ensure harmonious functioning between them which shall reduce unhealthy competition among the centre and the states over tax revenue.

G. CGST & SGST on intra – State supplies of goods or services in India.

H. IGST (Integrated GST) on inter- state supplies of goods or services in India – Levied & Collected by the Centre.

I.  GST applicable to

i. Import of goods & services

ii. Inter – state stock transfers of goods & services

J. Export of goods & services – Zero rated.

K. All goods or services likely to be covered under GSt except :-

i. Alcohol for human consumption – state excise + vat

ii. Electricity – Electricity duty

iii. Real State – Stamp duty + property taxes

iv. Petroleum Products

L. Tobacco Products under GST with Central Excise Duty

M. Optional Threshold exemption in both components of GST

N. Optional Compounding scheme for tax payers having taxable turnover up to a certain threshold above the exemption

O. HSN Code like to be used for classification of goods

P. Present Accounting codes likely to be used for services

BENEFITS OF GST

GST will reduce the tax burden for consumers since it will evade cascading effect in Indirect tax regime like presently when on a good excise duty gets levied as they leave the factory however at retail level VAT is charged, without giving credit of the excise duty levied earlier. But in GST system, both Central and state taxes will be collected at the point of sale. Both components (the Central and state GST) will be charged on the manufacturing cost.
It will result in a simple, transparent and easy tax structure; merging all levies on goods and services into one GST
It will result in a good administration of tax structure as it will distribute burden of taxation equally between manufacturing & Services
It will increase tax collections due to wide coverage of goods and services
It will result in cost competitiveness of goods and services in Global market
It will reduce transaction costs for taxpayers through simplified tax compliance
HIGHLIGHTS OF NEW PROPOSED GOODS & SERVICE TAX (GST)

1. We will be having only two taxes in the new proposal for GST which are:

State Level GST (SGST)
Central Level GST (CGST)
2. CGST will take over following taxes presently being levied on goods and services by Central government

Central Excise Duty
Additional Excise Duty
The Excise Duty levied under Medicinal and toiletries preparation Act
Service Tax
Additional Custom Duty (CVD)
Special Additional Duty of customs ( SAD)
Surcharge
Education Cess and Secondary and Higher Secondary education Cess
3. Whereas under SCGST given below taxes will get merged:-

State VAT/ Central Sales Tax
Entertainment Tax (not levied by local bodies)
Purchase Tax
Entry Tax ( All forms)
Luxury Tax
Tax on lottery, betting & gambling
State Cess and Surcharge to the extend related to supply of goods and services
4. The basic principal for subsuming of taxes in GST is provided as follows:

Those taxes which commences with import / manufacture /production of goods or provision of services at one end and the consumption of goods and services on other end.
The taxes, levies and fees which are not related to supply of goods & services should not be subsumed under GST.
5. Taxes on items containing alcohol and petroleum product are kept out of GST. They will continue to be taxed as per existing practices.

6. Tax on Tobacco products will be subject to GST. But government can levy the extra Excise duty over and above GST.

7. The Small Taxpayer: The small taxpayers whose gross annual turnover is less than 1.5 Crore are exempted from CGST and SGST.

8. Input Tax Credit (ITC): Taxes Paid against CGST allowed as ITC against CGST. Taxes paid against SGST allowed as ITC against SGST.

9. Cross utilization of ITC between the Central GST and State GST would not be allowed. Exception: Inter State Supply of goods and services.

ITC of CGST allowed for payment of CGST
ITC of SGST allowed for payment of SGST
ITC of CGST allowed for payment of CGST & IGST in that order
ITC of SGST allowed for payment of SGST & IGST in that order
ITC of IGST allowed for payment of IGST, CGST & SGST in that order
10. PAN based identification number will be allowed to each taxpayer to have integration of GST with Direct Tax.

11. IGST Model and ITC:

Centre would levy IGST levy (CGST + SGST)
The ITC will be allowed in this transaction will be SGST, IGST, CGST as applicable.
Appropriate provision will be provided for consignment or Stock transfer.
12. Exports are fully exempted with Zero rates

ILLUSTRATIONS

At present:

Even today, a manufacturer’s commercial invoice reflects both central excise duty and state VAT on the same goods. This is because both are indirect taxes and are collected from the customer. Conceptually, however, at present the centre taxes ‘manufacture’, and thereafter the state taxes ‘sale’ of the goods. The result is that the central excise duty is imposed first on the goods, and the state tax comes after that, on a value that is price plus central excise duty. If the goods are priced at Rs 100, and excise duty is 10% and VAT is 14%, the present scenario is that the invoice will read as follows:

Goods Rs. 100.00

Excise duty @ 10% Rs. 10.00

Sub-total Rs. 110.00

VAT @ 14% Rs. 15.40

Price of the good = 125.40

In future (during GST regime):

When the same transaction of ‘supply’ is being taxed by both centre and states, the taxes are levied simultaneously on the same value. The rate of GST in the above transaction will be 24%, split as 10% central GST and 14% state GST. The transaction will then be taxed as follows:

Goods Rs. 100.00

GST @ 10% Rs. 10.00

S.GST @ 14% Rs. 14.00

Price of the good – 124.00

Reduction in price of good under GST regime = 1.4

Levy of Tax under GST considering rate @ 10%

Suppose a manufacturer purchases X commodity for Rs. 200 and adds a value of Rs. 80 into it thus price of commodity X becomes Rs. 280.

GST paid by manufacturer will be- Rs. 8 i.e.

(Tax on output- Rs. 28 minus Tax paid on input –Rs. 20)

Now the second party in the chain, the wholesaler will get this X for Rs. 280 and supposing the value addition by him is Rs. 60.

GST paid by wholesaler will be- Rs. 6 i.e.

(Tax on output- Rs. 34 minus Tax paid on input –Rs. 28)

The retailer buys the X for Rs. 340 and added a value of Rs. 100 to it.

GST paid by retailer will be- Rs. 10 i.e.

(Tax on output- Rs. 44 minus Tax paid on input –Rs. 34)

Mr. A (based in Maharashtra) supplied Goods to Mr. B (based in Gujarat) and paid 17% IGST. Mr. A has Input credit of CGST 8% and SGST 8% from local Purchases. So he paid only 1% to Central Government Account i.e. in IGST code of that product. Maharashtra will transfer to Centre 8% SGST used for payment of IGST.

Mr. B (based in Gujarat) who had purchased those goods supplied the same locally to Mr. C (based in Gujarat) and liable to SGST 10% and CGST 8%. He will utilize Credit of IGST of 17% first for CGST (8%) and balance for SGST (9%) and will pay 1% in cash. Gujarat Government where goods are consumed is entitled to get destination based tax i.e. SGST. Centre will transfer 9% IGST Credit used for payment of SGST to Gujarat. In this example, few important points may be noted:

Maharashtra Government in this transaction will not get any tax since it is interstate supply from Maharashtra to Gujarat
Central Government will get 9% IGST on inter-state supply of goods to Gujarat (8% from Maharashtra Government and 1% paid as Cash by Mr. A)
Gujarat Government will get 10% SGST for intra-state supply of Goods (9% from central Government and 1%paid as cash by Mr. B)
Important to note is that Mr. B (based in Gujarat) has been allowed full credit of IGST paid by Mr. A (based in Maharashtra) of 17%

Are Chartered Accountants Really Independent?

CA Amresh Vashisht

Our profession did not anticipate much of what has happened after Satyam, which has sufficiently concerned about the growing loss of credibility of the profession. Everyone is talking about the role and responsibility of Auditors. Company law and income tax are the two main resource legislation, which decide the fate of the profession, but now both the legislation are looking towards the profession with red eyes. The latest income tax amendments in section 288 regulate the appearance by “authorized representatives” before any income-tax authority or the Appellate Tribunal. Sub-clause (viii) of the Explanation of section 288(2), as amended by the Finance Act 2015, provides that a chartered accountant is eligible to be an “authorized representative” subject to many terms and conditions. No opportunity is being lost by the legislation to cover the profession of Chartered Accountancy.

Auditors Independence is the talk of the town. More and more statements, quotes, books, guidelines shall thrust upon the definition of the independent auditor. Every stakeholder knows that selecting an independent auditor that meets a company’s expectations and needs are paramount to effective corporate governance, effective Tax management and effective political governance. Many talk about the independent auditor and look towards independent auditor with a great hope that such auditors would act with due diligence and care without compromising independence. The latest amendments clearly show a way to the profession that an auditor who is not independent cannot meaningfully discharge his functions of protecting the interest of revenue by remaining fair. There is no problem of concept of Independent auditor with the auditor fraternity. They are very much ready to deliver and fulfill the expectations of the stakeholders.

Is it justified that new 51 a rule states that if an auditor has contributed more than Rs 50000/- to a charitable institution, he can’t represent the charitable institution before the Income Tax Authorities. Now in the eyes of law, he shall lose his independence as he is a substantial contributor to that charitable institution. Though the reality is just an opposite of it, If a Chartered accountant gives a donation of Rs. 50000/- and thereafter if he represents the case, HE will be more vigilant and will see towards the accounts, taxation, the conduct of the institution with more open eyes. One more coincidence which may take place is that that if an auditor cum tax consultant find the working of any charitable institution impressive but he can’t be a contributor of Rs. 50000/- towards the charity because it will lose his tax consultancy.

Now it has been taken as granted that if the auditor is a related person, the independence, authenticity and bona fide of such Audit Report shall be compromised. An auditor is expected to discharge his duties with full independence and without compromising the interest of revenue. In the absence of reliability of an audit report signed by interested /related person, not only the reliability of the report suffers but may also aid in tax evasion.

All the Chartered Accountants, if true to their calling, have the independent outlook and the high standards of performance attributed to them as professionals. Many courts have given due respect to the audit report and have held that without having any positive material on record, audit report submitted by the Accountant cannot be disregarded. The authenticity of books of accounts is accepted on the basis of audit reports. Reference may be made to the decisions in CIT v. Regional Kisan Gramin Bank (2014) 42 taxmann.com 578 (Allahabad); CIT v. U.P. State Food & Essential Commodities (2013) 39 taxmann.com 106 (Allahabad); Madanani Construction Corporation Pvt. Ltd. v. CIT (2008) 296 ITR 45 (Gau).

Are Chartered Accountants really independent? All stakeholders recognize chartered accountants as independent who are not in fact independent. Our profession is under intense congressional scrutiny by the latest amendments. The amendments in Company law 2013 and Finance Act 2015 are heading towards a single object to achieve independence and integrity of the auditor. The process of appointing, assessing, and compensating the independent auditor is an important activity. It is the independent auditor’s responsibility to perform a high-quality audit.

But the foremost point is the appointing procedure. No one talks about this. No literature is available where the appointment procedure has been considered as a vital element to achieve auditors independent. In present circumstances there is 100% failure in the appointing procedure of the professional opportunities. The profession is directly in line of fire because the appointing procedure of the auditor is not leading the profession into right direction nor the profession will ever achieve the independent auditor.

The appointment procedure is the mother of the independent auditor. How can an independent auditor be born without a mother? It’s not possible so when we shout about achieving Auditors Independence, are we making fools of everyone? Yes, as long as we shall not deal with the appointing mechanism in all kinds of auditors, it’s wrong to admit being complied with auditor independence.
Independence refers to the mental attitude of a Chartered Accountant in approaching a task. It deals with the actual and the perceived ability to act with integrity and objectivity. The appearance of an independent mental attitude is as important to an auditor as the attitude itself. To us, mental attitude is primary and our appearance secondary. So a mental attitude constitutes the whole of independence. An auditor which is being appointed to the task is by a feeding hand and if he decides to bite a feeding hand, then only he is honest, objective and of independent behavior. Everyone thinks the concept of independent is vital to successful audit practice, then why the allotment or appointment procedures are being taken up in a casual approach.

There are approx 50000 Chartered Accountant firms out of which 40000 are in real time practice. Is it difficult to regulate the 40000 firms with the centralized allotment procedure? In a country , where we are heading towards 1.25 billion aadhar cards digitally attached to their banking accounts and operating it to reimburse the few hundred rupees of subsidy in their account by auto route. Can’t this country regulate and allot the audits to these 40000 firms through a transparent way. Each and every audit allotment is defective and unfair.

The attacks are many. The government is ready with the weapons of mass destruction. Here mass destruction is for the poor accounting professionals. They are ready to hit the auditors. The protection, management which is in the hands of our regulator ICAI has totally failed to raise its voice against the deliberate attempts on the Chartered accountants. Likewise, our government is fully ready to take on its enemy with the strength of their weapons; we see the following threats to our professional practice.

APPOINTMENT OF AUDITOR THROUGH TENDERING.

1. SURYA is Intercontinental-range Multiple independently targetable reentry vehicle (MIRV) with a range of 8000-12000 KM is under development stage. In our profession, we have a tendering process to kill our independence. The tenders are being floated with their own wish list of terms and conditions. The accounting professionals are not able to cope with the tender invitation and are seeking it as low as Re 1 per audit. This tendering process shall have the same effect as Surya shall have in the enemy camp.

APPOINTMENT OF STATUTORY CENTRAL AUDITOR BY CHOICE.

2. AGNI- VI is a Submarine-launched with an intercontinental – range (probable MIRV) having a range of 6000 to 8000 KM is under development stage. In our profession, now we are having a system of autonomy for Central auditor’s appointment in the case of PSU banks. The chairman/ Boards/ Audit Committee is free to choose any of the eligible audit firms as Central auditors of the bank, It’s in the hands of those you are at the helm of affairs that they can choose anyone of their choice. This procedure shall have the same deadly effect on the enemy as of Agni VI.

APPOINTMENT OF CORPORATE AUDITOR BY CHOICE

3. AGNI-V, Intermediate to Intercontinental-range Tested successfully for 5000 to 8000 KM.In our profession, the corporate auditors are being appointed by the shareholders of the company. Technically, this is the big lie. The management decides the auditor take its auditor’s eligibility letter to act as an auditor and then take the name to the meeting of the shareholders and get them approved. This appointment is also an accommodating appointment because there is nothing which suggests that the appointment is an independent one. It’s in the hands of those you are at the helm of affairs in the capacity of the board of Directors as they can choose anyone of their choice. This procedure shall have the same deadly effect on the enemy as of Agni V.

APPOINTMENT OF STATUTORY BRANCH AUDITOR BY BANK STAFF.

4. AGNI-IV, Intermediate-range Tested successfully for 4000 KM. In our profession, the branch auditors are being appointed by the staff of the concerned bank. The staff gets a voluminous list of auditors from RBI and selects the auditor at their choice. Members at large approach them to get the allotment of audits. This appointment is also an accommodating appointment as being begged by auditors and there is nothing which suggests that the appointment is an independent one. It’s in the hands of those you are at the helm of affairs at the lower capacity as they can choose anyone of their choice. This procedure shall have the same deadly effect on the enemy as of Agni IV.

APPOINTMENT OF CONCURRENT AUDITOR BY BANK STAFF.

5. AGNI –III Intermediate range 3500 to 5000 KM deployed to safeguard the territories of the country. In our profession, the concurrent auditors are being appointed by the staff of the concerned bank for favour, for money and for other interests. This is going on uninterrupted for the last 60 years. No challenge from the regulator which is a mute spectator to this on going wrong practice. This appointment is also an accommodating appointment as being unethically obtained by auditors and there is nothing which suggests that the appointment is an independent one. It’s in the hands of those you are at the helm of affairs at the lower capacity as they can choose anyone at their sweet will. This procedure shall have the same deadly effect on the enemy as of Agni III.
APPOINTMENT OF AUDITOR BY RRB.

6. AGNI –II, Medium Range 2000 to 3000 KM, deployed. In our profession, the concurrent auditors are being appointed by the management of the concerned bank. They allot the 15 branches to one auditor from a list received from NABARD. They give the ¾ days to complete the assignment. If anyone raises some reservation of questioned the procedure they qualify them for termination. They appoint the new one and get it signed at a prescribed time by hook or crook. This appointment is also an accommodating appointment as being unethically obtained by auditors and there is nothing which suggests that the appointment is an independent one. It’s in the hands of those you are at the helm of affairs at the lower capacity as they can choose anyone at their sweet will. This procedure shall have the same deadly effect on the enemy as of Agni II.

APPOINTMENT OF AUDITORS BY A PARTNERSHIP OR SOLE PROPRIETOR FIRM.

7. Agni –I short to medium range 700-1250 KM, deployed and ever ready to protect the country. In our profession, the auditor is having formal and informal contacts which give the referrals, he is associated with the various social networks, the old clients introduce there known people to the auditors and above all the relative place an important role in establishing a practice and appointments to the small enterprises. This appointment is also an accommodating appointment as being appointed by referrals and there is nothing which suggests that the appointment is an independent one. This procedure shall have the same deadly effect on the enemy as of Agni I.

APPOINTMENT OF AUDIORS BY C & AG.

8. This is the only audit, which gives independence to auditors. The appointment comes through auto route based on the well established open calculation of weight age of seniority, the term of term establishment, association with the firm, the test of genuinely with the compensatory figures from the firm and were appointed by an independent authority i.e C&AG. Yes, here the auditor appointment is an independent one.

It is not uncommon these days to hear expressions of grave concern within our profession about loosing its shine, compromises with unethical acts and a general decline in intra profession courtesy. At the same time, We Chartered accountants are being surfaced in every stringent amendment. We are being addressed as irresponsible in dealing with the economic affairs of the country. These concerns have led some to worry that our professionalism is either dead or teetering on the brink of extinction. At least this phenomenon is true for the sole proprietors or small firms operating across the country because of being shunted out from the professional opportunities. Weapon details @ Wikipedia.

Signing of Annual return under Companies Act, 2013

CS Zalak Talreja

ANNUAL RETURN:

SCHEDULE V OF COMPANIES ACT, 1956 V/S FORM MGT-7 (along with Form 7.8) OF COMPANIES ACT, 2013

Section 1956 V/S Section 2013:

Earlier the provisions of Annual Return were governed under Section 159,160,161, 162 & Schedule V of the Act, 1956 where as now the all the sections are merged into one hut under Section 92 of the Act, 2013 excluding format for the same which is provided in Form No. MGT-7 prescribed in Rule 11 of the Companies (Management & Administration) Rules, 2014.

Scope 1956 V/S Scope 2013:

The Scope of the provisions under Act, 2013 are more exhaustive and widening as compared to Act, 1956. The certification of Annual Return under Act, 2013 not only limited to the certification of Annual Return itself but also compliances with all the provisions of the Act, 2013 along with SEBI regulations for listed Companies. The format also includes the certificate to be given to under Form MGT-8 which stands similar to Compliances Certificate as issued under Act, 1956 for prescribed companies.

Effective Date 1956 V/S Effective Date 2013:

The Annual Return is suppose to be filed within sixty days of Annual General Meeting. Hence, the details provided in Annual Return were as on the date of Annual General Meeting or the last date on which Annual General Meeting was to be held.

The Act, 2013 provides for details to be provided in conformity of the Financial Statement and not as on the date of Annual General Meeting. Moreover, the extracts of the Annual Return are to be included in the Board’s report which forms the part of Annual Report to be distributed to shareholders. Hence, the shareholders being the king of the Company will now be in access of much more informative documents as compared to earlier. The format of extracts of Annual Return is provided in Form 7.9 of the Act, 2013.

Formats 1956 V/S Format 2013:

Under the earlier Act, 1956 different formats were provided for companies having share capital and Companies not having share capital. Under Act, 2013 the entire format is applicable to all the companies where as different companies have to select there sub-category.

Particulars 1956 V/S Particulars 2013:

Under earlier Act, 1956 the disclosures as per the format of Schedule V included following details:

Company’s Name, CIN, Registered Office, particulars of authorised, issue of Shares and debentures.
Particulars of past and present directors, details of shareholders including transfer of shares in between previous Annual General Meeting and present Annual General Meeting.
Indebtedness figures of the Company.
Break-up of shareholding under specific heads.
Under Act, 2013 along with the above mentioned details the disclosures as per Form MGT-7 includes:

Principal business activities of the Company.
Particulars of holding, Subsidiary and associate Company.
Details of other securities in addition to share capital, debentures and Figures of Securities Premium Account.
Turnover and net worth of the Company.
Names of promoters, Key Managerial Personnel and changes made therein since last Annual Return.
Dates of meetings of members, directors and various committees of directors along with attendance details.
Remuneration of Directors and Key Managerial Personnel.
Penalties and Punishment imposed on the company, its directors and Key Managerial Personnel.
Particulars of compounding of offences, appeals made against any penalty or prosecution.
Disclosures further go in providing particulars of declaration of dividend, inter corporate loans & investments and related party transactions, etc.
Details of shares held by Foreign Institutional Investors with full particulars of such institutions.
Separate disclosure on corporate social responsibility.
Disclosure of directors.
Confirmation about appointment of auditor.
Details of Registrar and Transfer Agent (RTA)
Details of Split and Consolidation of Shares in case of changes during Financial Year.
Disclosures regarding closure of register of members / debenture holders/ other security.
Indebtedness now includes bifurcation into Secured loans, Unsecured loans and Deposits.
Certificate 1956 V/S Certificate 2013

Under Act, 1956 there was no provision for different certificate to be obtained by Practicing Company Secretary, however, the certificate itself formed the part of Annual return which was limited to the following:

the return states the facts as they stood on the date of the annual general meeting aforesaid, correctly and completely;
since the date of the last annual return the transfer of all shares, debentures, the issue of all further certificates of shares and debentures have been appropriately recorded in the books maintained for the purpose;
the whole of the amount of dividend remaining unpaid or unclaimed for a period of three years from the date of transfer to the special account has been transferred to the General Revenue Account of the Central Government as required under sub-section (5) of Section 205 A:
the company has not, since the date of the annual general meeting with reference to which the last return was submitted, or in the case of a first return, since the date of the incorporation of the company, issued any invitation to the public to subscribe for any shares or debentures of the company;
where the annual return discloses the fact that the number of members of the company exceed fifty, the excess consists wholly of persons who under sub-clause (1) section 3 are not to be included in the reckoning the number of fifty.
since the date of annual general meeting with reference to which the last return was submitted or in the case of a first return since the date of the incorporation of the private company, no public company or deemed public company has or have held twenty five percent, or more of its paid up share capital;
the company did not have an average turnover of Rs. Ten Crores or more during the relevant period;
since the date of annual general meeting with reference to which the last annual return was submitted or since the date of incorporation of the company, if it is first return, the company did not hold twenty five percent or more of the paid up share capital of one or more public companies;and
the private company did not accept or renew or invite deposits from the public.
Under Act 2013, the certification is in the below mentioned format:

(a) The return states the facts, as they stood on the date of the closure of the financial year aforesaid correctly and adequately.

(b) The whole of the amount of unpaid/ unclaimed dividend/other amounts as applicable have been transferred to the Investor Education and Protection Fund in accordance with section 125 of the Act.

(c) The Company has maintained all the registers as per the provisions of the Act and the rules made there under and

(d) Unless otherwise anything in contrary is stated expressly elsewhere in this Return, the Company has complied with the applicable provisions of the Act during the financial year.

(Certificates to be given by Private Companies)

(e) The company has not, since the date of the closure of the last financial year with reference to which the last return was submitted or in the case of a first return since the date of the incorporation of the company, issued any invitation to the public to subscribe for any securities of the company.

(f) Where the annual return discloses the fact that the number of members, except in case of a one person company, of the company exceeds two hundred, the excess consists wholly of persons who under second proviso to clause (ii) of sub-section (68) of section 2 of the Act are not to included in the reckoning the number of two hundred.

(g) The Company continues to be a Private Company during the financial year.

Certificate to be given only by One Person Company / Small Company)

(h) The Company continues to be one Person Company / small company.

In case of a listed companies or companies having paid up share capital of ten crore rupees or more or turnover of fifty crore rupees or more, the Annual Return has to be certified by Practicing Company Secretary. The certificate shall be as prescribed in Form MGT-8.

The Companies (Management & Administration) Rules, 2014 prescribes that certification by Practicing Company Secretary should be in Form 7.8 (MGT-8). The Practicing Company Secretary has to consider following points before certification of Form 7.8:

The status of the Company under the Act.
Maintenance of registers and records and entries therein.
Filing of forms and returns.
Meeting of directors and members.
Closure of register of members.
Advances of loans to its directors and other persons.
Contracts and arrangements.
Issue of allotments of shares and transfers.
Matters relating to rights to dividend, rights to bonus shares.
Declaration and payment of dividend
Signing of audited financial results.
Constitution of Board of directors, Key Managerial Personnel and their remuneration.
Appointment of auditors.
Approvals.
Deposits.
Borrowings.
Loan and investments.
Alteration to Memorandum of Association and Articles of Association.
While certifying he is authorized to mentioned any   qualification, reservation or adverse remark, if any.

Looking to the above mentioned points make us remember of Compliance Certificate which was applicable to Companies having paid up capital of ten lacs or more but less than 5 crore rupees. However, under Act, 2013 the requirement of Compliance Certificate is done away with but the above prescribed companies are required to get certificate by Practicing Company secretary under Form MGT-8 which seems to be similar to Compliance Certificate and forms the part of Annual return.

Form 1956 V/S Forms 2013:

Under Act, 1956 there was only one specified form which was mentioned in Part II of Schedule V of the Act, 1956.

Under Act, 2013 the Annual Return is itself divided in three forms via MGT 7 the main part of Annual Return, MGT 8 which is applicable to listed and prescribed companies and MGT 9 which forms the part of the Board’s Report.

Certification 1956 V/S Certification 2013:

Under Act, 1956 the annual Return was to be signed by two directors (if there is no secretary), Company Secretary and a director (Managing Director/Whole-time Director if any) but for the purpose of any listed companies, it was needed to get verified and signed by a Company Secretary in whole time practice in addition to certification by directors. There was no requirement of Company Secretary in Practice to certify the Annual Return (as the word ‘signing’ was used in proviso to sub-section (1) of Section 161) and hence the liability of Company Secretary in Practice was minimal.

Under Act, 2013 the Annual Return shall be signed by a director and a Company Secretary or where there is no Company Secretary by a Company Secretary in whole time practice. In case of OPC and small company Annual Return shall be signed by company secretary and director of a company or where there is no company secretary by director of a company. Annual return filed by listed company and such companies as prescribed shall be signed by director and a Company Secretary and it shall be certified by a Company Secretary in Whole time practice.

The word ‘Certified’ means in relation to a copy, certified as provided in section 76 of the Indian Evidence Act, 1872 and evidence act interpreted certifies as a certificate issued by an authorized officer by law certifying the validity and correctness of the information under his hand and seal. A process, often voluntary, by which individuals who have demonstrated the level of knowledge and skill required in the profession, occupation, role or the competent use or support of a product, are identified to the public and other stakeholders…..

Difference between Certification and Signing

One of the major differences that exist between signing and certification is that mere signing does not imposes or bestow liability on the person signing it. In one of the landmark case of Kashinath vs New Akoy Ginning and pressing Co. Ltd. (1950) 20 Comp. Cas 225(Nag.) it was held that mere signing of a balance sheet does not operate to save limitation because the person in drawing up the document does not do so with the intention of acknowledging liability but under a duty where he is bound to set out among other things, the claim made on the company.

Therefore we could say that signing does not impose liability but rather certification shows that the person has authenticated the document, verified and is therefore taking the responsibility and liability upon itself.

Purpose for Certifying of Annual Return only for Listed Companies and such other Prescribed Companies

The annual return of the company is a public document. In Rashmi Sethi V. chemon India Pvt. Limited {(1995) 82 Comp Cas 563(CLB)} it has been held that it is a prima facie evidence that the specific number of shares was held by a member as on particular date to claim his rights. The annual return of a listed company is further more important to settle number of issues and therefore, it has been made compulsory that the content of the annual return of such companies will have to be verified by a Secretary in Wholetime Practice by inspecting the relevant records of the company.

The act requires every company to comply with certain provisions and any non-compliance, whether deliberate or unintended, of the provisions attracts penalties and prosecutions of the company. Certification would caution the company secretary of unintended non-compliance so that the compliance could be established and the consequences that would follow because of that are avoided. Further, it acts as an effective tool to ensure that the legal and procedural formalities are complied with. When a certificate is issued, the confidence level of compliance of the provisions is built up and ensures a professional discipline.

The statistics generated by the Government of India from the office of the Registrar of Companies reveals that, several documents are returned for rectification of defects and also some remain pending for being taken on record. The Ministry of Company Affairs also institutes a large number of prosecutions against the companies and their officers who are in default for contravention of various provisions of the act, including non-filling of the documents. Further, the reasons for such errors or omissions arise on account of wrong interpretation or ignorance of the provisions of the law. The object behind the provisions relating to obtaining of Certificate by certain companies of certain size is to create awareness among companies to comply with the provisions of the act and also to provide for a mechanism of self regulation.

Penalty 1956 V/S Penalty 2013:

Under Act, 1956 the Company was liable to pay additional fees in case of non-filing of Annual Return with the Registrar of Companies. Moreover, if company fails to file Annual Return the Company and every officer in default was punishable to a fine which may extend to Rs. 500 for every day during which default continues. There was no specified provision relating to penalty of Practising Company Secretary with regards to wrong verification and signing Annual Return.

Under Act, 2013 the Company shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees. Every officer in default shall be punishable with imprisonment for a term which may extend to six months or fine which shall not be less than fifty thousand rupees bit which may extend to five lakh rupees, or with both. Moreover, if a Company Secretary in Practice wrongly certifies the correctness of Annual Return, he shall be punishable with a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

The penalty has been increased and Practicing Company Secretary has to certify that Company has complied with all the provisions of Act, 2013. The scope of      Practicing Company Secretary has been widened and huge responsibility rests with the professionals certifying the Annual Return.

(Author can be reached at  +91 812 88 68 370 or on mail- kjshahcszalak@gmail.com)

Recent Exemptions to Private Limited Company under Companies Act, 2013

Section 43- Kinds of Share Capital
The share capital of a company limited by shares shall be of two kinds, namely:—

(a) equity share capital—

(i) with voting rights; or

(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and

(b) preference share capital:

Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.

Explanation.—

For the purposes of this section,—

(i) ‘‘equity share capital’’, with reference to any company limited by shares,means all share capital which is not preference share capital;

(ii) ‘‘preference share capital’’, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to—

(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and

(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;

(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely:—

(a) that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential

right aforesaid;

(b) that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.

Section – 47 Voting Rights

(1) Subject to the provisions of section 43 and sub-section (2) of section 50,—

(a) every member of a company limited by shares and holding equity share capital therein, shall have a right to vote on every resolution placed before the company;

and

(b) his voting right on a poll shall be in proportion to his share in the paid-up equity share capital of the company.

(2) Every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on

resolutions placed before the company which directly affect the rights attached to his preference shares and, any resolution for the winding up of the company or for the repayment or reduction of its equity or preference share capital and his voting right on a poll shall be in proportion to his share in the paid-up preference share capital of the company:

Provided that the proportion of the voting rights of equity shareholders to the voting rights of the preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of

the preference shares:

Provided further that where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

Service Tax on Construction Service

Shruti Agrawal

1. BACKGROUND: Services provided by the Builders/ Developers is not taxable prior 01st July 2010. It is taxable from 1st July 2010 onwards as per CBEC circular No. 108/02/2009-ST.
2. APPLICABILITY: Service tax is applicable on under construction property at the time of bookings/agreements made before the construction completes. Is the Flats/Apartments / Villas is given to land owners by a real estate company then service tax is also applicable on such unit.

3. PLACE OF PROVISION OF SERVICES:

a. As per Rule no. 05 of Place Of Provision Of Services Rules 2012, if any services provided directly in relation to immovable property including some of the specified services would be deemed to be rendered at a place where immovable property is located or intended to be located

b. In case the services are partially in taxable territory and partially in non-taxable territory, then the place of provision shall be the location in the taxable territory where the greatest proportion of service is provided as per Rule no 07. For e.g. if a service provider provides services in J& K(50%), Himachal (30%) and Punjab (20%) then its services is taxable in the Himachal Pradesh.

c. In case where the service provider and service receiver is located in the taxable territory and the immovable property is located or tend to be located in non-taxable territory then As per Rule No. 08, place of provision shall be location of the recipient of service.

4. ONE PERSON TO ANOTHER: Service provider and service receiver should be different persons. For e.g. if ABC Construction Co. construct own office then it is a self -service and not applicable to service tax.

5. 100% EXEMPTED SERVICES COVERED UNDER NOTIFICATION NO 25/2012:

a. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a)  A civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b)  a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

(c)    A structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;

(d)  Canal, dam or other irrigation works;

(e)  Pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

(f)    A residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65 B of the said Act;

b. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) A road, bridge, tunnel, or terminal for road transportation for use by general public;

(b) A civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana;

(c A building owned by an entity registered under section 12 AA of the Income tax Act, 1961(43 of 1961) and meant predominantly for religious use by general public;

(d) A pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased;

c. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-

(a)  An airport, port or railways, including monorail or metro;

(b)  A single residential unit otherwise than as a part of a residential complex;

(c)   low- cost houses up to a carpet area of 60 square metres per house in a housing project approved by competent authority empowered under the ‘Scheme of Affordable Housing in Partnership’ framed by the Ministry of Housing and Urban Poverty Alleviation, Government of India;

(d)  Post- harvest storage infrastructure for agricultural produce including  a cold storages for such purposes; or

(e)  Mechanized food grain handling system, machinery or equipment for units processing agricultural produce as food stuff excluding alcoholic beverages;

6. ABATEMENT AS PROVIDED VIDE NOTIFICATION NO.26/2012:

Description of taxable services Taxable percentage Abatement Percentage Conditions
Construction of a complex, building, civil structure or a part thereof, intended for a sale to a buyer, wholly or partly, except where entire consideration is received after issuance of completion certificate by the competent authority,

(i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004

(i)  The value of land is included in the amount charged from the service receiver

(a) for a residential unit satisfying both the following conditions, namely:–(i) the carpet area of the unit is less than 2000 square feet; and (ii) the amount charged for the unit is less than rupees one crore

(b) for other than the (a) above. 30 70
NOTE: for the purposes of exemption– The amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting-

(i) the amount charged for such goods or services supplied to the service provider, if any; and

(ii) the value added tax or sales tax, if any, levied thereon: Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles.

(Author can be reached at  shrutiagrawalindia@gmail.com)

‘Sale in Transit’ an Apparatus of Harassment

Salim Akhtar, MA. L.L.B.

‘Sale in transit’ (subsequent sale) under Section 6(2) of Central Sales Tax (CST) Act 1956 has become ‘an apparatus of harassment’ for the suppliers of the goods (manufactures or dealers). The State Revenue Assessing Officers are enjoying this tool by imposing taxes and penalties by treating it as ‘pre-determined’ sale under Section 3(a) instead of 3(b) of Central Sale Tax Act, 1956; even the suppliers (manufactures or dealers) produce relevant documents and declarations, prescribed in this Act for such transactions.
As per Central Sales Tax Act 6(2), if any sale takes place during transit of goods from one state to other through transfer of title by endorsing ‘transport document’ in favour of the consignee (manufacturer or dealer) by its original buyer. Such Sale is treated as subsequent sale and exempted from further levy of tax under CST Act, but mandatorily requires declaration forms ‘EI or EII’ as per the nature of its transactions. Under this transition, it is irrelevant to endorse the ‘name of the consignee’ (recipient or end user of goods) in ‘nucleus document like Invoice or Bill’, since no such provision is available in the CST Act, 1956.

But as per Rule, 11 (2) of Central Excise Rules, 2002, the ‘invoice’ shall be serially numbered and shall contain the registration number, address of the concerned Central Excise Division, name of the consignee, description, classification, time and date of removal, mode of transport and vehicle registration number, rate of duty, quantity and value, of goods and the duty payable thereon. Further refer Sub Rule (2) of Rule, 9 of Cenvat Credit Rules, 2004, ‘No CENVAT credit under sub rule (1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document’.       

Further provided that if ‘the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service tax Registration number of the person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service’ then the Assistant or Deputy Commissioner of Central Excise may allow the CENVAT credit to the receiver of the goods if he is satisfied with the books of accounts of the receiver.

Now, it has established from the above that the ‘name of the consignee’ (recipient) is mandatorily required in the core document i.e. ‘Invoice’ issued under Rule, 11 of CEX, 2002 and unless the receiver of the goods does not have its name in the invoice, the Cenvat Credit may not be claimed until it is allowed by the Assistant or Deputy Commissioner of Central Excise as per his satisfaction.

On the other hand, if the original buyer endorses the ‘Lorry Receipt’ during transit of goods in favour of consignee (manufacturer or dealer) irrespective of endorsement of the core document i.e. ‘invoice’, then it meets the requirement of subsequent sale under Section 6(2) of Central Sales Tax Act, 1956 and exempted from further levy of tax on production of declaration forms EI or EII as the case may be and the excise rules are irrelevant here.

It is peculiar to see such controversial provisions between two Central Government Statutes and for these controversial provisions the Assessing Officers take advantages and put in trouble to the business entities though they are innocent and have no concern about it and un-necessary bear the financial burdens due to such types of provisions of law. So when they follow excise rules then it is treated as ‘pre-determined’ sale or if they follow the CST Act then ‘Cenvat Credit’ may not be available due to absence the name of the consignee in the Invoice, then what they should do!

Now the questions arise

1)  Whether 6(2) provision of CST Act, 1956, is suitable in the present scenario which was created 59 years ago, since it is just opposite of Central Excise Rules as explained above?

2) Whether it is possible for a supplier to sell the goods in transit without obtaining prior orders from its customers to full fill the requirement of 6(2) sale in the present situation, wherein the economy is badly damaged?

3) Whether the supplier would be in a position to bear the financial loss, if he does not receive any order for the said goods during transit or even after receipt of the goods?

And the answers of these questions would be in ‘negative’ in my opinion!

Because, it is universal truth that no one wants to take financial risk in the business due to unstable situations in the present time, hence, most of the suppliers obtain the orders or contracts from the customers in advance then they place the orders to manufacturers or dealers to send the goods directly to their customers as consignee under excise invoices to avail the Cenvat Credit to follow the excise laws.

Simultaneously they also issue commercial invoices on the basis of the excise invoices and endorse the ‘Lorry Receipts’ in favour of the customers to fulfil the requirement of 6(2) sale as per CST Act, 1956 and subsequently issue EI or EII forms as the case may be to bridge these transactions. It is fact that they are not doing such things by their own sprit but having done by compulsion due to such types of confused or controversial laws.

Thus it is FUNNY that if the suppliers follow Excise Rules then it is incorrect as per Central Sales Tax Act and if they follow the Central Sales Tax Act then it is wrong as per Central Excise Rules. Hence, it is not practical possible for the supplier to follow both the rules at a time which are having so much disparities. So, the Assessing Officers take advantage of these lacunas and put in trouble to the suppliers even they are well aware about the practical difficulties.

On this issue a Bench of two Judges, Hon’ble Justice Mr. S. Kapadia and Mr. Aftab Alam has set aside the order passed by the Karnataka High Court on 14th August 2007 vide its order dated 11 December, 2008 against Civil Appeal No. 7233 of 2008 (arising out of S.L.P. (C) No. 1065/08) filed by A And G Projects And Technologies Versus State of Karnataka. In their judgement they quoted Para 18 which was delivered in the case of Bharat Heavy Electrical Ltd. and Others Vs. Union of India and Others – (1996) 4 SCC 230, which read as under:

“18. We may, at this stage refer to the decision of the Bombay High Court in CST v. Barium Chemicals Ltd. – (1981) 48 STC 121.

Besides the above, the Hon’ble Supreme Court of India had already settled down the principles of 6(2) sale in the case of Tata Iron & Steel Co. Ltd. Versus S.R. Sarkar (1960) 11 STC 655 (SC), which read as under:

1) Mere contract of sale is not a sale within the definition u/s. 2(g) of CST Act, ’56.

2) An inter-state sale can either be governed U/s. 3(a) if it occasions movement of goods from one state to another or U/s. 3(b) if it is effected by transfer of documents of title after the commencement of movement. They are mutually exclusive.

3) A sale (transfer of property) becomes an inter-state sale U/s 3(a) if movement of goods from one state to another is under contract of sale. It implies that not a contract of sale but the sale itself occasions the movement of goods and, therefore, any contemplation of endorsement of consignment note i.e. RR is not permissible under 3(a) sale.

4) Transfer of document of title to the goods will arise only in case of sale U/s 3(b) and that too during its movement irrespective of when the contract of this second or subsequent sale has been made between second seller and the next or the final purchaser.

Please refer a Judgement of Hon’ble Orissa High Court in case of M/S. Bateman Engineering (India) Versus State of Orissa And Others … Opp. … on 6 September, 2011 Against W.P. (C) No.23389 of 2011 In the matter of an application under Articles 226 and 227 of the Constitution of India.

In this judgment the Court has allowed 6(2) sale and directed to the assessing officer to give the exemption of tax by considering the declaration forms irrespective the other facts.

Please also refer a recent judgement delivered by the Hon’ble High Court of Kerala at Ernakulum in WP (C). No. 17170 of 2014 (U) filed by M/s East Coast Constructions and Industries Ltd. Versus Kerala State Electricity Board Additional R3 Impleaded 2) Deputy Chief Engineer 3 ) Commercial Tax Officer. The Court delivered the following CST Act, 1956:

“In transit sale Exemption under Section 6(2) of the CST Act 1956 Contract executed for Kerala State Electricity Board Petitioner made sale in transit to Board and sought for C Form from Board. Whether Board can seek proof of payment of tax under the CST Act? Held No. Board directed to issue Form C upon petitioner producing E2 certificate.

Petitioner executed contract for Kerala State Electricity Board. Petitioner purchased goods from outside the State and transferred the same to the Board by way of sale in transit. Petitioner furnished ‘C’ Form to the seller who in turn issued Form E1 to enable the petitioner avail the benefit under Section 6(2) of the CST Act 1956. Petitioner sought for C Form from the Board to avail the benefit under Section 6(2) of the CST Act. Board denied ‘C’ Form on the ground that petitioner did not produce proof of payment of tax under the CST Act. On refusal by Board to issue Form C, Petitioner filed writ of mandamus directing the Board to issue ‘C’ Form for the value of materials supplied.

Held: first sale alone will be taxable and the tax on subsequent sale will be exempted if dealers are registered. Board cannot insist on proof of tax paid by the first seller but can only demand Form E2 from the petitioner. Since Board has already admitted supply of materials by the petitioner, they are bound to issue ‘C’ Forms. Board directed to issue ‘C’ Forms to the petitioner as and when petitioner produces E2 certificate. Petition allowed in favour of assessee”

Now, I thank and congratulate to the Commissioner of Commercial Taxes, Government of West Bengal, Kolkata who understood the difficulties of the dealers and issued a clarificatory Trade Circular No. 11/2010 dated 04.10.2010. In this Circular he narrated the facts nicely by quoting Judgments of High Courts and Supreme Court of India and some contents of this Circular are given below:

“Reports are coming in from different corners highlighting the fact that dealers, registered in West Bengal, who have since been effecting inter-state sales u/s. 3(b) of the CST Act, ’56 and have since been claiming those subsequent sales as exempted u/s. 6(2) of that Act, are now denied their claims by the assessing authorities of Directorate. Further, the dealers, registered in West Bengal, who have effected inter state sales falling u/s. 3(a) of the Act are, in some cases, denied issue of certificates in form E-1 by the assessing authorities. The reason, as presumed by assessing authorities, is that in all such cases the concerned dealers have effected the purported inter-state sales u/s. 3(b), not during the movement of goods from one state to another, pursuant to sales u/s. 3(a) but prior to the commencement of movement of goods from one state to another.

The fact cannot be denied that in the commercial world, substantial number of transactions of subsequent sales take place particularly for specially made goods where a dealer first collects order from his outside state customer and thereafter places his corresponding purchase order either to inside state supplier or to outside state supplier. Therefore, there exists one pre-existing order or pre-determined party at the hands of a subsequent seller when he is making agreement of purchase/sale with the inside state or outside state supplier.

..xxx.. Emphasing on the part underlined above i.e. the contract comes into existence only after commencement, in the latter case, the assessing authorities are denying the dealer’s claim of subsequent sales u/s. 6(2) where they find pre-existing order or pre-determined party at the hands of the subsequent seller. This has resulted in denial of sale falling u/s. 3(b) and consequential denial of issue of certificate in form E-1 etc. to the original supplying dealer who has effected sale u/s. 3(a) and also denial of claim of sale u/s. 6(2) to the subsequent seller…xxx.

Circumstances being as such, we may have a relook on the position of law. From the definition prescribed under the Act, we see that section 3(a) requires that not the contract of sale but the sale itself would occasion the movement of goods from one state to another. Section 3(b) requires that sale is to be effected i.e. contract of sale should come into existence by transfer of documents of title to the goods after the commencement of movement and before termination thereof.   

..xxx.. When principles of law laid down above are holding the field, Hon’ble Supreme Court has pronounced the judgment in case of A & G. Projects & Technologies Ltd. (supra). As mentioned earlier, in this case Hon’ble Supreme Court again laid down almost the same principles of law in same languages excepting that in earlier judgment (Tata Iron & Steel Co. Ltd. etc.) the sale contemplated u/s. 3(b) is held to be one which is effected by transfer of documents of title to the goods during their movement from one state to another and in the latest case (A & G. Projects & Technologies Ltd.) it is held to be one where contract comes into existence only after the commencement and before the termination of the inter-state movement of goods. In both the cases, Hon’ble Court has emphasized on the materialization of the contract by using the terms “sale is effected” in earlier case and “contract comes into existence” in latter one and not on its written or verbal understanding. ‘Sale is effected’ means contract of sale has come into existence and nothing more than that. Nothing new is, therefore, observed by Hon’ble Apex Court in the latter case.

It is, therefore, clarified for all concerned that –

i) in case of sale falling u/s. 3(a), any kind of endorsement of consignment note/LR etc. cannot be invited;

ii) as contract of sale and sale itself are altogether different in case of inter-state sale, pre-existing order or pre-determined parties will not negate any 3(b) sale if other requirements are found fulfilled i.e. physical or constructive transfer of documents of title to the goods is made;

iii) purchase of goods from local dealer and sale of it to outside state purchaser by transfer of documents of title to the goods will also qualify as sale falling u/s. 3(b);

iv) once a sale is established as 3(b) sale, the same will automatically qualify itself to come under the ambit of section 6(2) of the Act;

v) section 6(2) is simply concerned with a valid 3(b) sale, a certificate in form E-I/E-II issued by supplier and a declaration in form ‘C’ collected from customer and nothing more than that.

All concerned are, therefore, requested to follow the clarifications given above. Issue of certificate in form E-I/E-II and of declaration form in Form ‘C’ in connection with subsequent sale is to be streamlined accordingly. It is hereby informed, in this connection, that authority will take a tough stand if it is found that a   dealer registered in West Bengal is claiming input tax credit under WBVAT Act on purchase of an item from a local dealer while at the same time he is claiming inter-state sale of the said purchased item u/s. 3(b) of the CST Act, ’56, in this way or that, and thereby as exempted u/s. 6(2) of the same Act.”

Even though the issue has already settled down by the Hon’ble Supreme Court of India in its earlier judgments, yet the Assessing Officers do not understand or do not want to understand the facts and difficulties of the dealers and keep on raising the same issue repeatedly by demanding tax and penalties during assessments of books of accounts of the dealers, though the dealers are not doing anything beyond the rules. Should it not be treated a contempt of Court!

However, I would like to expect to all the Commissioners of Commercial Taxes of State Governments, if they take appropriate steps same as taken by the Commissioner of Commercial Taxes, West Bengal by issuing a clarificatory Trade Circular in the matter in light of judgments of Apex Court. I also expect from the Central Government to give the guidelines regarding 59 years old provision of CST Act 1956 in line with the Central Excise Rules to avoid such un-necessary litigations to save the time of judiciary and financial burden which is borne by the business entities in the shape of extra taxes and penalties.

(These are my personal views and are expected from the concerned to clarify the issue)

(Author is Manager (Taxation) With Jindal Steel & Power Limited, Angul ( Odisha))

Interview: – A Big Hurdle to Your Job

Aman Rawel

Success of an interview is totally dependent on you. In most of the part of your professional lives you will face many interviews. Facing and to succeed the interview requires both the knowledge and skills. With proper preparation and by following some basic guidelines you can crack most of the interviews.
This article is about some important tips for candidates who face difficulties while attending an interview and do commit common mistakes due to which they fail to get the job. There may be many reasons for this failure. For example

Lack of preparation before interview,
Lack of knowledge about the industry,
Poor Body Language,
Not giving proper answers to the questions of the interviewers, etc
By this article I would like to provide some basic solutions for the above problems to some extent.

HOW TO PREPARE FOR AN INTERVIEW?

Resume

It is very important that your resume is accurate and precise.
Prepare a list of questions that may be asked from every section of your resume, for example from work experience section – learning from specific job, reason for leaving the job, challenges faced, what were the key responsibilities, etc.
Industry knowledge

Find about the size of the industry, how long has it been in existence, etc.
Do a PEST analysis that talks about the business environment that surrounds the industry.
P – Political Environment, e.g. Government policies, regulations, structure, taxes, etc.
E – Economical Environment, e.g. Global Economy, Fiscal Policy, Inflation, Exchange Rates, etc.
S – Social Environment, e.g. Demographics, lifestyles, education trend, earning capacity, etc.
T – Technological Environment, e.g. Inventions, IT, Manufacturing Advances, Internet, etc
After PEST analysis, do a SWOT analysis:
Strengths of the Industry
Weaknesses of the Industry
Opportunities for the Industry
Threats of the Industry
Company Knowledge

One should research on the size and reach of the company.
Be well aware of number of employees, worth of the company, etc.
What are the strengths, challenges of the company, its competitors, etc.
Conduct at the Interview

Be before time: It is very important to be on time for the interview. Set a target to reach before time so that at least you can reach on time.

Communication Skills: Good communication includes both content and delivery. Delivery refers to your tone voice and choice of words and phrases-in short, the art of speaking.

Enthusiasm: You should never be as casual or frivolous, but maintain all along a cheerful disposition and be pleasant.

Listen Carefully: Listen carefully to the interviewers to so that you can understand the questions properly and give appropriate answers. Do not speak before the question is completed.

Be Honest: Never make any attempt to bluff the interviewers. If you don’t know the answer, acknowledge it. You can tactfully make the interviewers ask you about areas known to you.

Sell Yourself: You must find out what interests the interviewer and talk about it.

First Impression: When you enter in the interview room; the first thing that an interviewer sees about you is your grooming. It is important to dress up in formals. Remember 87% of hiring decisions are taken in first five minutes of the interview.

Body Language

Body language of the Interviewers: The body gesture of your interviewers can give you an indication of how well you are coming across to them. This can serve a signal to change your approach at an early stage before they give you the thumbs down.
It’s okay to be nervous: This is something you should not worry about too much. Knowing how to act confidently using body language can increase your chances of passing the interview.
Sitting Posture:
Sit straight, back against the back of the chair.
Lean forward a little while answering.
Ladies can cross their legs with the foot pointing downwards (Try to avoid).
Men should avoid sitting with their legs too wide apart or crossed with ankle on top of the knee.
Don’t keep shifting positions,
Don’t shuffle with your feet, kick against the leg of table, drum your fingers or click with pen (shows impatience, nervousness).
Handshake
Never be the first to initiate a handshake.
If and when the interviewer does initiate a handshake give a firm handshake.
Eye Contact
Maintain eye contact with interviewer, but don’t stare.
In one to one interview, look at the interviewer straight into the eye.
In panel interview, look at the person asking question first and then look at the others turn by turn while giving answer, finally again ending on the first person.
Practice looking above the eyes, near the forehead (above the nose) of other person while speaking.
Don’t blink or flicker your eyelid too much (nervousness).
Don’t look down at the floor-insecure
Don’t let your eyes wander around the room too much-insuecure.
Facial Expression
Always look cheerful and happy.
Don’t let you nervousness show on your face.
Hands position
Let hands lie on your lap or place them on the armrests of your chair.
Don’t stick hands in pocket.
Don’t cross arms.
Don’t wav your hands too much.
Remember

Always knock before entering the room, walk in smartly and cheerfully from the entrance to the interview table.
Wish each and everyone present in the room. “Wish you all a very good morning”, or “Good Morning Sir”.
Only take a seat once asked to.
Make sure that your answers are not too long or short.
Don’t use too many foghorns or fillers during interview.
Avoid using abbreviations.
Resume should always be taken out of the folder, turned so that contents face the interviewer and present with both hands.
If offered any snacks or food, politely refuse. How would you answer with your mouth full?
Closing the Interview

Closing remarks
Reiterate why you are the best candidate,
Re-assert interest,
Recovery
Thank each interviewer by name.
Request business card or contact information of all interviewers or find out how to contact the interviewer.
I hope this article will help to some extent to most of the persons who are not able to clear their interview. It is my very first article, so suggestions, improvements, queries are invited. In my next article I will provide some tips for effective resume writing.

(Author is a CA Final Student from delhi and can be reached at a.man.rawal005@gmail.com)