India CA The Chartered Accountant Oct 11

CHARTERED
ACCOUNTANT
THE
T H E I N S T I T U T E O F C H A RT E R E D A C C O U N TA N T S O F I N D I A
SET UP BY AN ACT OF PARLIAMENT
Happy
Diwali
An Auditor is often described
as a watchdog. In the
present day of our quick economic
development, both in the public
as well as the private sectors, you
have to play an important role. The
ow of investment in corporate
enterprises, where increasingly
ownership is getting divorced
from management, could hardly be
maintained without condence in
the integrity of management on
the part of the ultimate owners of
a company. The watchfulness of the
accountancy profession, more than
any other safeguard, helps to create
and sustain this condence.
Shri Lal Bahadur Shastri

(At Annual Meeting of the Council of the
ICAI on 13th September, 1958)
JOURNAL
VOLUME 60 NO. 4 OCTOBER 2011 R100
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511
EDITORIAL
Concept of Independence in Independent Auditor
corporate entity is not merely a legal personification

but a quintessence of Trust. Various stakeholders
rely and place their investments on this trustee
with the premise that their investments will be procreated
by expending it on purposes for which funds were sought.
Given the separation of ownership and management in a
corporate model, it is not possible for all to take part in
the day-to-day affairs of the company which are left to
the Board of Directors and key managerial personnel.
Stakeholders largely rely on the published information
emanating in the form of quarterly reports, annual report,
auditors report and so forth. The results that the company
publish annually every year reflect the credence of trust to
all those who partake in their investment process. In this
process, the auditors role is of paramount importance as
he certifies on true and fair view on the state of affairs of
the company.
Given the toughness of situations in which businesses
operate and cyclical situations which it has to undergo, a
corporate growth is a bumpy affair. The global financial
crisis, fall down of financial institutions in the recent past
and the current sovereign debt crisis in select economies
has brought forth cynicism and scepticism in the minds
of investors. As a result trust on corporate integrity is
at low ebb and efforts are on to rebuild it. Regulators
and investors being baffled are still battling against the
corporate misdemeanours and its prevention. The laws
are fraught with different complexities in fixing the role
and responsibility of those at the helm of affairs. How
should be the person at the helm of a corporate body
function? The world at large expects the directors and
the auditors to be independent. What constitutes being
independent? There can be many views and reviews.
Becoming and being independent is an individual frame
of mind set and with each personality it differs. Codes on
Corporate Governance have attempted to define how a
director can be independent but a mere prescription is not
a panacea. In the Indian context, there is a definition of an
independent director in clause 49 to the listing agreement
and also proposed in the Companies Bill, 2009. The
society at large and the law also expects an auditor to
be the repositories of trust, transparency, and, therefore,
auditor should also be independent. Unlike the definition
of independent director, the term independent auditor is
commonly used but has not been significantly defined.
This brings us to explore the concept of independence in
independent auditor. An auditor should not only be seen
as independent but also be seemingly independent.
The legal framework, in which auditors operate,
however, is not sufficiently designed in certain respects to
provide the objectivity which shareholders and the public
expects of an auditor in carrying out his functions. A further
drawback is the lack of knowledge and understanding
amongst the shareholders and public of the nature and

extent of auditors role. What auditors do achieve and
what is thought to be achieved leads to an expectation
gap, which is widening and is of great concern because it
reflects the realistic expectations by various stakeholders
on audits being done in an independent manner. The
auditors role is to report whether the financial statements
give a true and fair view (not full and fair view) on the
affairs of the company. His role is neither to prepare the
financial statements, nor to provide absolute assurance
that figures in the financial statements is correct, nor to
provide a guarantee that the company will be a going
concern. The going concern concept and problems are
to be handled and addressed by the management rather
than by auditors. Therefore, a fine-tuning and balance has
to be brought forth by the auditors in their statement on
the conditions on which business is now continuing and
not to mention that business may be susceptible to be
closed down at any time. Another issue, in the growing
expectation gap on the role of auditors, is that whether
the prime responsibility for the prevention and detection
of fraud is of the auditors or the fiduciary responsibility of
the Board. The solution to the problem lies in the support
systems that the company has created by way of internal
controls, constitution of independent audit committee,
etc. To place a duty on the auditors to deduce fraud(s)
is fraught with difficulties because he will never be in a
position to state whether fraud has taken place or not.
Whenever a fraud is perceived to have taken place and
no material evidence is available, it may not be realistic
for the auditors to bring the same to the attention of the
shareholders or at best he can bring out qualifications in
his report.
It is often believed that an auditors report to the
shareholders but work for the management. This myth
lays the stress and strain for the independence, excellence
and integrity of the auditors. Auditors, in order to preserve
their unblemished reputation for independence, should
not have any commercial or conflict of interest in the
company in which he is the auditor. The role of Audit
Committee is an important area to safeguard auditors
independence and objectivity. An auditor should be seen
from the point of view that his excellence in context
of complying with the requirements of accounting and
auditing standards, independent in submission of report
to the management without fear or favour and integrity
that he is true and fair to those who are concerned with
him including the profession to which he is the torchbearer. In all matters of Trust, you always find us. This
is the glory of the ICAI and its members.
-Editorial Board
ICAI-Partner in Nation Building
THE CHARTERED ACCOUNTANT
october
2011
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514
CONTENTS
VOICE
EDITOR
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516
JOINT EDITOR
MEMBERS
SECRETARY
ICAI EDITORIAL TEAM
CA. G. RAMASWAMY,
President
CA. JAYDEEP N. SHAH,
Vice-President
CA. ATUL C. BHEDA
CA. K. RAGHU
CA. M. DEVARAJA REDDY
CA. MADHUKAR N. HIREGANGE
CA. MANOJ FADNIS
CA. NAVEEN N.D. GUPTA
CA. NILESH S. VIKAMSEY
CA. P. RAJENDRA KUMAR
CA. RAJKUMAR S. ADUKIA
CA. RAVINDRA HOLANI
CA. SUBODH K. AGRAWAL
CA. SUMANTRA GUHA
CA. V. MURALI
CA. ANIL S. DANI
CA. R. GIRI
CA. S. SUNDARRAMAN
CA. NITIN JAIN
NADEEM AHMED
SUSANTA K. SAHU
DR. N. K. RANJAN
NIMISHA SINGH
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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Diwali
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MEMBERS
CHARTERED
ACCOUNTANT
THE
An Auditor is often described

as a watchdog. In the
present day of our quick economic
development, both in the public
as well as the private sectors, you
have to play an important role. The
ow of investment in corporate
enterprises, where increasingly
ownership is getting divorced
from management, could hardly be
maintained without condence in
the integrity of management on
the part of the ultimate owners of
a company. The watchfulness of the
accountancy profession, more than
any other safeguard, helps to create
and sustain this condence.
Shri Lal Bahadur Shastri

(At Annual Meeting of the Council of the
ICAI on 13th September, 1958)
ICAI NEWS
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CA Students
Editorial
From The President
JOURNAL
EDITORIAL BOARD
2011
633
633
634
635
636
636
Invitation to Contribute Articles for E-Newsletter - Prudence

Announcement from Peer Review Board
Statutory Audit of Public Sector and Private/Foreign Banks
simultaneously
ICAI-ROC: A MCA-21 Compliance Software
www.icai.org.in: An Exclusive Website
ICAI-Tax Suite: A Tax Compliance Software
CABF Group Term Insurance Scheme for CAs & spouse
Empanelment of Resource Persons
Announcement regarding IPCC [Paper 7 - Section B] and PCE
[Paper 6 - Section B] - Strategic Management
EVENTS
637
Training Programme on An Insight on the Concepts Applicable to

Autonomous Bodies, Ahmedabad
637
Workshop on Capacity Building Measures of Practitioners & CA

Firms, Surat
638
Training Programme on An Insight on the Concepts Applicable to

Autonomous Bodies, Bangalore
638

Firms, Bharuch
639
NATIONAL RRC on CA Profession towards excellence through

Capacity Building, Salasar Balaji, Churu (Rajasthan)
640
Auto Connect- CMII National Conference on Auto Industry, Pune
640

Firms, Bharatpur
641
Residential Refresher Course on Tax Reforms and SMPs: Issues,

Suggestions & Solutions, Mount Abu
641
Residential Refresher Course on Capacity Building Measures of

Practitioners & CA Firms, Nathdawara (Rajsamand), Rajasthan
642

Firms, Allahabad
643
Residential Refresher Course, Balotra (Rajasthan)
644
National Conference on Excellence in Profession through Capacity

Building, Udaipur
644

Firms, Agra
645
Study Tour on International Taxation to Vienna, Austria
646
Workshop on Capacity Building Measures for Practitioners & CA

Firms, Nagpur
515
CHARTERED
ACCOUNTANT
THE
JOURNAL
IN THIS ISSUE...
ACCOUNTING
565
Accounting for Credit Value Adjustments
CA . R. Venkata Subramani
568
Forensic Accounting - Another Feather in the Hat of
Accounting
Dr. Indrani Ghosh and Dr. Kamal Kishore Banerjee
INTERNATIONAL TAXATION
602
Taxability of Software Payments under the Act The
Controversy Continues
Committee on International Taxation of the ICAI
CORPORATE & ALLIED LAWS

612
Changing Methodologies- Interpreting Exemption
Notilcation
Mr. S. M. Jain
REPORTING
572
Disclosures in Corporate Annual Reports A Case
Study of Some Selected Public Limited Companies in
India
Prof. Pintu Sarkar
579
Global Trends in Reporting to the Stakeholders
CA. Sriraman Parthasarathy
AUDITING
586
Information Risk and Risk Assurance in Auditing
CA. (Dr.) Sanjib Kumar Basu
TAXATION
593
Is Goodwill an Intangible Asset Eligible for Tax
Depreciation?
CA. Namita Kedia
598
Proposed Goods and Services Tax and Latest
Developments towards its Implementation
CA. Rabin Kr. Ray
SPEECH
615
As India Grows, CAs Have to Share a Lot of
Responsibilities
Shri Sachin Pilot, Union Minister of State for
Communication and Information Technology
TECH FOR YOU

626
Mobile Computing: Concepts, Challenges and
Opportunities for Chartered Accountants
CA. A. Rafeq
GENERAL
649
How to Succeed in Life Against All Odds
CA. K. S. Karthikeyan
BACKPAGE
652
Cross Word 064
Smile Please
OCTOBER
2011
516
FROM THE PRESIDENT
of the Council or till further orders, whichever is earlier.

Shri Manoj Kumar, therefore, has been appointed on the
21st Council for the remaining period of 2011-2012. We
had the occasion to meet and welcome him during the
recently-concluded meeting of the Council.
Initiatives for Ministries/Government Offices
Suggestions Submitted to MCA: We have sent our
views on the proposed Forms 23 AC-XBRL and 23 ACAXBRL to be notified by the Ministry of Corporate Affairs,
to the Ministry. We have also sent our views on the draft
Companies (Auditors Report to the Central Government)
Order, 2011 and the proposed Companies (Auditors
Report) Order, 2011 to the Ministry of Corporate Affairs.
CA. G. Ramaswamy, President, ICAI

Dear Friends,
et me first wish all our readers moments of great

inspiration that 2nd October as birthday of the father
of our nation, Mahatma Gandhi, instils in the hearts
of the people of India and the world.
At the same time, I would also like to remember that
another great nationalist leader and freedom fighter was
born on the same day. Born on 2nd October, 1901, Shri Lal
Bahadur Shastri was a man of people and principles. He
understood the common mans language, i.e. their needs
and emotions. Deeply influenced by the political teachings
of Mahatma Gandhi, Shastriji was also of the opinion: Hard
work is equal to prayer. A man of integrity, Shastriji gave
us a slogan of Jai Jawan Jai Kisan to enthuse both our
soldiers and farmers asking them to do their best for the
rise of the country and grow along with it.
Today our nation stands tall and strong despite the fact
that a financial crisis has again struck the world. While
other countries have started to become nervous about
the size of their budget deficits, our fundamentals are still
strong, and, India is ready to face the crisis.
Now, let us get updated with some of the major
developments in the accountancy profession that have
taken place in the past one month:
Shri Manoj Kumar, JS, MCA, Nominated on ICAI Council
Ministry of Corporate Affairs has communicated the
nomination of Shri Manoj Kumar, Joint Secretary, Ministry
of Corporate Affairs, on the 21st Council of the Institute
in place of Dr. T. V. Somanathan, for the remaining term
8
october
2011
Suggestions on CBEC Draft Circular Submitted:

The Central Board of Excise and Customs (CBEC) had
proposed to introduce a simplified scheme for refund of
service tax to exporters on the lines of duty drawback
scheme. Exporters, exporter associations, chambers,
trade, industry and field formations had been requested
to go through the proposed scheme and offer their
comments. We have finalised our suggestions on the
draft circular and submitted the same to the CBEC.
Issues in TDS and e-Filing Submitted to DIT: Issues
being faced in claiming of TDS and e-filing of returns have
been submitted to Shri Harish Kumar, DIT (Systems), on
their request. We have been further requested to forward
the details of specific cases so that remedial action could
be initiated.
Draft Accounting Standards for Local Bodies Sent to
Ministries: It is quite satisfying to inform that the drafts
of ASLB 1 on Presentation of Financial Statements and
ASLB 7 on Inventories have been sent to the Technical
Committee on the Budget and Accounting Standards
constituted by the Ministry of Urban Development,
Government of India, and the Technical Committee on
the Budget and Accounting Standards constituted by
the Ministry of Panchayati Raj, Government of India,
for recommending the same to states for adoption by
the urban local bodies and Panchayati Raj institutions
respectively.
Meetings with Government Offices/Officials
Meeting of Central Direct Taxes Advisory Committee:
My Central Council colleague CA. Sanjay K. Agarwal,
among others, represented the Institute and participated
in the third meeting of Central Direct Taxes Advisory
Committee, which was chaired by Shri. Pranab Mukherjee,
Honble Finance Minister, and was attended by Shri
S. S. Palanimanickam, Honble Minister of State, and
other dignitaries from the Ministry as well as from FICCI,
ASSOCHAM, Federation of Association of Small Industries
of India, etc. We placed our views and offered assistance
for developing and encouraging mutual understanding
and department co-operation between taxpayers and the
517
Income-tax Department. Our views were well received.

Shri Mukherjee assured that the issues raised would be
taken up by the offices concerned.
Meeting with Secretary, Department of Financial
Services: In respect of the appointment of central
statutory auditors of public-sector banks, a meeting
was held with Shri D. K. Mittal, Secretary, Department
of Financial Services, Ministry of Finance, where he was
apprised of various options available to the Ministry
in case the RBI refuses for direct appointment of the
auditors. Shri Mittal has agreed to look into the matter.
CA. Amarjit Chopra, immediate past-President, was also
present in the meeting.
Sub-Group for MCA in Simplifying Procedures under
Companies Act, 1956: A sub-group has been constituted
under the chairmanship of my Central Council colleague
CA. S. Santhanakrishnan with CA. Nilesh Vikamsey, my
other Central Council colleague, as its Vice Chairman, in
response to a letter received from the Additional Secretary,
Ministry of Corporate Affairs, soliciting suggestions for
the simplification of procedures under the Companies
Act, 1956.
Training/Workshops/Other Programmes
Training Programmes for Officials of Autonomous
Bodies: As you are aware that we, in collaboration with
office of Comptroller and Auditor General of India (C&AG),
have been organising a series of training programmes
on An insight on the concepts applicable to Autonomous
Bodies for the officials of autonomous bodies and
members of the Profession with an objective to
familiarise them with the concepts and techniques of the
financial reporting and adherence to the uniform format
of accounts. In this series, recently, such a programme
was successfully held in Noida with over 175 participants
from autonomous bodies of Delhi and NCR, and the
Profession, where dignitaries from the office of C&AG
of India as well as ICAI were present. Another such
programme was conducted with about 120 participants
from the autonomous bodies of Andhra Pradesh and
Orissa, and the profession recently in Hyderabad.
Director General (Autonomous Bodies), office of C&AG
of India, Shri K. P. Sasidharan was present among others
on both the occasions.
Spreading Investor Awareness: As you are aware,
the Ministry of Corporate Affairs had appointed us the
nodal agency for the noble cause of investor awareness
and mandated us to conduct investor awareness
programmes across the country. I am happy to
acknowledge that, in the last month alone, we have
conducted 18 MCA-ICAI investor awareness programmes
in Goa, Surat, Gurgaon, Moradabad, Gorakhpur, Rajkot,
Vasai, Baroda, Vapi, Latur, Calicut, Chirala, Sivakasi,
Secunderabad, Coimbatore, Thrissur, Sriganganagar
and Bhilai.
FROM THE PRESIDENT
Workshop on Municipal Accounting Reforms Held: I

am happy to inform that my Central Council colleagues
CA. J. Venkateswarlu and CA. Jayant Gokhale recently
made presentations on the Role of ICAI in Municipal
Accounting Reforms and Management Accounting
Reforms in Municipalities respectively at a workshop
on Municipal Accounting Reforms - The way forward
organised by the Asian Development Bank (ADB) in New
Delhi, where they also addressed the queries regarding
municipal accounting reforms.
ISA Faculty Meet in October: I am pleased to inform
you that we are going to organise the ISA (Information
Systems Audit) faculty meet at the Centre of Excellence
in Hyderabad on 15th and 16th October, 2011. This meet is
important for charting a strategy for identifying changes
that need to be implemented for further improvement in
the post-qualification course on ISA, practical aspects of
the ISA professional training, background material of the
Course and so on.
Workshop on Accrual Accounting: We have received
a request from office of the GASAB (C&AG of India) to
organise a two-day workshop on Transition to Accrual
Accounting for its officials. The workshop would be held
shortly at International Centre for Information Systems &
Audit in Noida.
International Initiatives
IFAC Board and Edinburgh Group Meetings: I had
the opportunity to attend the IFAC Board and Edinburgh
Group meetings recently along with CA. Ved Jain, ICAI
past-President, in Brisbane, Australia. An oral update
on the activities of the Public Policy and Regulation
department including that about Private Sector Taskforce
of Regulated Provisions and Industries, IFAC submissions
to the G-20 for November 2011 Heads of Governments
meeting, and Policy Position Paper, was provided in the
Board meeting. A presentation on current developments
and IFAC responses to such developments was also
made. In the Edinburgh Group meeting, we discussed
the IFAC Board Papers, issues relating to liaison with
the IFAC committees, and 2011 Forward Planner for
the Group, and took note of the status of actions arising
from the Groups meetings previously held. We also got
an update on the plans for the 2014 World Congress of
Accountants that would be held in Rome.
Invitation for Agreement with Tunisia Accounting
Institute: I feel happy to inform you that Mr. Jaleel,
representing Tunisia at the Edinburgh Group meeting,
has made a personal request and invited me to visit
the accounting institute in Tunisia towards signing a
friendship agreement with them.
CAPA Events/ Conference: I also attended the CAPA
events along with the ICAI Vice-President CA. Jaydeep
N. Shah. Our Board membership of the CAPA has been
october
2011
518
FROM THE PRESIDENT
retained. I also participated in the 18th CAPA Conference

in one of its interactive panel sessions, i.e. session on
Exploring IFRS implementation Practical Insights and
Lessons Learnt, and shared my views on the issues
involved in IFRS implementation in India with the
representatives of other countries.
IASBs National Standard Setters Meeting in Vienna:
I wish to inform you that my Central Council colleagues
CA. Manoj Fadnis and CA. S. Santhanakrishnan
recently attended the National Standard Setters meeting
organised by the International Accounting Standards
Board in Vienna and made a presentation on rate
regulated activities. Later, they also had discussions in
the AOSSG informal meeting held in London, where they
also participated in the meeting of the World Standard
Setters and explained Indias position with respect to
what the carve-outs were.
ICAI Shortlisted for Agreement Services for LICPA:
I am really glad to inform our stakeholders that our
Institute has been shortlisted along with the CPA Ireland
and the CGA-Canada for submission of a request for
proposal (RFP) for twinning arrangement services for
strengthening the Liberia Institute of Certified Public
Accountants under the World Bank proposal. The RFP
has been sent for rendering services for establishment of
accountancy institute and rendering allied services to the
Liberian Institute of Certified Public Accountants.
MCA and MEA Approval to Initiate MoU with AIA, UK:
Ministry of Corporate Affairs and Ministry of External
Affairs have given their approval for signing of an MoU
with the Association of International Accountants (AIA),
UK, which, hopefully, would be signed by October end
this year during the visit of AIA delegation to India.
Next ICAI International Conference in Chennai: I wish
to inform the accounting community in India as well as the
world that the next International Conference of the ICAI
will be held on 6th to 8th January 6-8, 2012, in Chennai and
a large number of foreign participants are expected to
join the occasion. Details about the Conference, including
the schedule, will be communicated shortly through our
website and journal.
Initiatives for the Profession
Approval on Draft Amendments in CA Regulations,
1988: I am happy to inform all our stakeholders that
we have received a communication from the Ministry
of Corporate Affairs stating its approval to the draft
amendments in the Chartered Accountants Regulations,
1988 submitted by us to them in July 2011. Most of
our proposed amendments have been agreed to. After
preparing the draft notification in agreement with the
recommendations of the Ministry, the same will be hosted
on the Institute website for public comments and then
submitted for vetting by the Legislative Department.
10
october
2011
Roadmap for Robust FRRB Mechanism: I feel happy

to share that the Financial Reporting Review Board
(FRRB) of the ICAI has been able to carve a niche among
the regulators and members of the profession while
striving to bring transparency in the financial reporting
system in India. We understand the need to consider
the existing procedures of FRRB and revise them, if
necessary on regular basis. To make the FRRB mechanism
more robust and effective, its existing procedures have
been reconsidered recently and to make it more robust
and effective a concept paper was drafted by the Board.
We considered this concept paper in the recently-held
Council meeting and approved the same so that a more
effective financial reporting review mechanism could be
developed.
Roadmap for the applicability of Ind ASs: As you
may be aware, the International Accounting Standards
Board (IASB) has issued certain new IFRSs and revised
some others recently. The new/revised IFRSs/IASs
would be applicable from January 2013. Further, the date
of applicability of Indian Accounting Standards (Ind ASs)
is yet to be notified by the Ministry of Corporate Affairs.
In view of the above and considering the fact that if
Ind ASs become applicable from 2012, the companies
would apply them for the year 2012-2013 only and
the new Standards would become applicable to them
from the year 2013, we have recently considered and
approved the recommendations on the revised roadmap
for the applicability of the Ind ASs, convergent with the
IFRSs, and sent the same to the Government for its
consideration.
QRB Meeting in Delhi: Quality Review Board (QRB)
conducted its meeting recently in New Delhi, where it
considered the issues for recommending appropriate
amendments to the Chartered Accountants Procedures
of Meetings of Quality Review Board, and Terms and
Conditions of Service and Allowances of the Chairperson
and Members of the Board Rules, 2006. The Board also
took note of the interaction held recently with high-level
delegation of accountancy professionals from the UK,
where issues relating to audit regulation, environment
for such regulation and regulatory practices, principles
for inspection processes, issues emerging from audit
inspections, among others had been discussed. We
must appreciate that the Board had taken note of the
stakeholder consultation workshops that we successfully
organised in New Delhi, Chennai and Kolkata, and
thanked us for the same.
Draft Guidance Note on Revised Schedule VI: We have
prepared and considered the draft Guidance Note/
Statement on Revised Schedule VI recently to identify if any
additional guidance is required to be given to the statutory
auditors in order to bring out a comprehensive document.
The Guidance Note will be released after including the
comments and suggestions given by the Council.
519
Strategy Meeting of ICAI Council: In my last

communication, I had informed you about a meeting
we had with the past-Presidents of ICAI to identify the
strategic directions of the profession and ICAI. On the
same lines, a strategy meeting of the ICAI Council was
held to develop a strategy and prepare a comprehensive
plan. I am happy to share with you that the discussions
were quite fruitful. I would like to thank all my Central
Council colleagues for their whole-hearted cooperation,
insight and meaningful suggestions towards making that
meeting a success.
Initiatives for Members
Conclave of ICAI Members in Entrepreneurship
& Public Services: A Conclave of ICAI Members in
Entrepreneurship & Public Services was successfully
held in New Delhi recently for the ICAI members who
have established themselves as successful entrepreneurs
or are engaged in public services, to solicit their
suggestions for restructuring the Institutes initiative
towards this niche segment of members. It was inaugurated
by the Honble Member of Parliament, Rajya Sabha, Shri
Piyush Goyal. Honble Sitting Judge of Delhi High Court
Justice CA. Rajiv Shakdher delivered a special address on
the occasion. More than 50 members participated in the
Conclave, including CA. Ravi Pandit, Chairman & Group
CEO, KPIT Cumins Infosystems Limited, CA. Anand Rathi,
Founder & Managing Director, Anand Rathi Financial
Services Limited, CA. Anil Peshawari, Founder & Managing
Director, Meenu Creation Pvt. Limited, CA. Suresh Prabhu,
Former Union Minister, Government of India, CA. Tejendra
Luthra, Joint Commissioner of Police (Special Branch),
New Delhi, CA. Jitendra Tiwari, Executive Director, Centre
for Entrepreneurship Development, Madhya Pradesh, CA.
Shivshankar Gupta (IAS), Development Commissioner
(Handicrafts), Ministry of Textiles, Government of India,
CA. Sandeep Kumar Sultania (IAS), Vice Chairman &
Managing Director, Andhra Pradesh Tourism Development
Corporation Limited, and CA. G. E. Veerabhadrappa, VicePresident, ITAT.
Developing CA Firms Websites: As you are aware that
an exclusive website, www.icai.org.in, was launched in
the recent past to enable our members in practice and
CA firms to create their own websites and upload details
of their firms in order to network and get better visibility. It
is quite satisfying to note that so far, 1,699 CA firms have
created their websites.
List of Members Published: List of Members as on
1st April, 2011, has been prepared and hosted on the
Institutes website. Members may view the list on the
Institutes website. CDs of the Members List will also be
released shortly.
Clarification in Number of Tax-Audit Assignments
Hosted: For the removal of doubts pertaining to inclusion
of audits conducted under Sections 44AD, 44AE and
FROM THE PRESIDENT
44AF of the Income-tax Act, 1961 in the specified number

of tax audit assignments, a clarification has been issued
and hosted on the Institutes website for information of
the members that audits conducted under Section 44AD,
44AE and 44AF of the Income-tax Act, 1961 shall not
be taken into account for the purpose of reckoning the
specified number of tax audit assignments.
Certificate Courses: As you are aware, continuous
professional updation is the hallmark of our profession.
Therefore, in the last few years, we started many
Certificate Courses in the areas like arbitration, valuation,
ERM, forex and treasury, international taxation, IFRS,
business finance, IT, indirect taxes and internal audit,
which are not covered comprehensively in our course
curriculum. Members have been participating in those
Courses in large numbers. And we have been taking
all required steps to make improvements like revising
course-content, revision/launching e-learning modules,
updating study materials, etc. I am sure, in the time to
come, more members will join these professional courses
and get benefited by them.
Recently, I along with the ICAI Vice-President CA. Jaydeep
N. Shah inaugurated the new batch of Certificate Course
on Forex and Treasury Management in New Delhi, where my
Central Council colleague CA. Vinod Jain was also present.
I would also like to take this opportunity to inform you that
certificate courses in the areas of mergers & acquisitions,
Competition Laws and Regulatory and accounting aspects
of NPO sectors are also likely to start shortly.
Initiatives for the Students
I am happy that our Institute has taken the required
measures for the benefit of our students including
organising special counselling programmes and
conducting mock tests at Regional Councils and Branches
for the betterment of their preparation and execution
of their forthcoming examinations. I am sure that such
measures will enhance the performance of our students in
examinations. I would like to urge our students to do hard
work and success is bound to follow. Friedrich Nietzsche
had rightly observed: The only place success comes
before work is in the dictionary. And always remember
what Winston Churchill had said: Success is not final,
failure is not fatal; it is the courage to continue that counts.
National Conventions in Kolkata and Lucknow:
National Convention for the CA students on the theme
Chartered Accountancy: Present Glowing, Future
Perfect was successfully held recently in Kolkata,
hosted jointly by the EIRC and Eastern India Chartered
Accountant Students Association (EICASA) and attended
by about 800 students, which was inaugurated by the
noted industrialist Shri Harshavardhan Neotia, Padma
Shri awardee, along with the ICAI Vice-President CA.
Jaydeep N. Shah. Another National Convention for
the CA students on the theme Challenges before the
october
2011
11
520
FROM THE PRESIDENT
Profession: Excellence, Integrity and Independence

was held in Lucknow, hosted by Lucknow Branch of
CIRC, and attended by over 900 students, which was
inaugurated by Honble Justice and Lok Ayukta of Uttar
Pradesh, Shri N. K. Mehrotra along with the ICAI VicePresident CA. Jaydeep N. Shah. Some of my Central
Council colleagues also attended the Conventions.
GMCS to be Held Twice: We have decided to hold
the General Management and Communication Skills
programme twice (in two parts) for our students first
during the first year of articleship training and second
before joining the profession but after passing the
Intermediate examination. These two-part training
programmes will deal with the office management and
personality development (group discussion, mock
interviews, etc.) aspect of profession respectively,
aiming to transform and prepare our students to face the
international professional scenario with grace and skill.
Formation of New Branches of Students Association:
We have received formal requests for setting up the
branches of Central India Chartered Accountants
Students Associations (CICASA) from the CIRC
Branches, i.e. Patna, Ajmer, Dhanbad, Saharanpur,
Allahabad, Kota, Lucknow, Varanasi, Bhilwara, Alwar,
Jamshedpur, Ghaziabad and Jabalpur, of Western
India Chartered Accountants Students Associations
(WICASA) from the WIRC Branches, i.e. Bhavnagar, Vapi
and Akola, and of Eastern India Chartered Accountants
Students Associations (EICASA) from an EIRC Branch,
i.e. Bhubaneswar, along with the recommendations of the
Chairman of the Regional Council concerned. While we
have decided in favour of setting up of the branches of
Association in the aforesaid places, we have, in principle,
also decided that mere submission of intimation about
the formation of a Students Association along with the
recommendation of the Regional Council concerned to
the President in office shall be a valid compliance.
Campus Placement Programmes: Campus Placement
Programmes (August to September 2011) have been
successfully organised at 16 centres across India, viz.
Ahmedabad, Bangalore, Bhubaneswar, Chandigarh,
Chennai, Coimbatore, Ernakulam, Hyderabad, Indore,
Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi
and Pune. More than 1,100 newly-qualified chartered
accountants have been offered jobs out of 10,169,
who registered. Highest salary offered is R13.93 lakh
per annum by ITC. A detailed report on the placement
programmes is published elsewhere in the Journal.
Infrastructural Initiatives
It is time to literally consolidate the foundations of the
accountancy profession in all corners of our nation. And
I feel both blessed and blissful about the strengthening
of the pillars of our profession. This is not just a sign of
growth of our infrastructure but that of strengthening of
12
october
2011
this unique academic tradition of integrity also. These

initiatives are also to extend the best-possible facility
to our students as well as our members in building
and maintaining an ethically strong society. I felt quite
delighted to lay the foundation stone for the buildings
of Alleppey Branch, Madurai Branch, Erode Branch,
Mangalore Branch, Ajmer Branch and Bhilwara Branch,
and to inaugurate the building of Kakinada Branch.
*******
A great exponent of liberty and democracy, Thomas
Jefferson says: Our greatest happiness doesnt depend
on the condition of life in which change has placed us,
but is always the result of a good conscience, good
health, occupation, and freedom in all just pursuits.
Faith in peaceful coexistence is based in the principle
of vasudhaiva kutumbakam (whole world is one family),
and in valuing dignity of all individuals of our society and
loving them instinctively. I would like to quote the great
poet, Kanian Poongundran, who writes in Purananuru:
all towns are one, all men our kin. We have to retain
our faith in human relationships, rather than alienating
ourselves from society and insulating ourselves against
the instincts of love and affection. Environmentalist and
Nobel Laureate Dalai Lama has strong belief in the power
of a good soul: It is very important to generate a good
attitude, a good heart, as much as possible. From this,
happiness in both the short-term and the long-term for
both yourself and others will come.
Let us understand what the great saint Thiruvalluavar
says about human beings and their status: all human
beings are alike at birth; their acts bring about variations
in their worthiness. Almost two thousand years
back, the saint spoke something which was more a
matter of common sense and an instance of his great
understanding of societal reality. Today, our science says
that human beings are 99.9% identical so far as their
genetic material is concerned. People and conveniences
around us and available to us where we grow make us
different individuals. Therefore, we will not take pride in
how different we are from others. Buddhism cautions us
to watch our character, as it becomes our destiny. Let us
simply unite and see the power of joy which this unity
radiates on all of us.
May the festivals of Dussehra and Diwali bring joy and
light in your life!
Best wishes
CA. G. Ramaswamy
President, ICAI
September 25, 2011
New Delhi
Advertisement
522
READERS WRITE
September Issue a
Treasure Trove
The September 2011 issue has
proved to be a treasure for the tech
savvy professionals. The deep insight
into a relatively naive technology
for the Chartered Accountants,
Cloud Computing, by CA. A. Rafeq
is an impeccable effort. Making
the netizens aware of the risk and
threats involved in using IT and also
explaining the security measures to
combat the issue by Dr. Debashis
Kundu has made this issue of journal
accomplish its objective.
-CA. Priyesh Jain, Jaipur
I congratulate and appreciate our
honourable Institute for continuously
improving the content and quality of
our CA Journal, which is undoubtedly
one of the finest publications.
September issue was one of the best
in recent times, highlighting various
important issues and matters. I also
want to thank the team of this journal
for putting up the most important
things in concise and understandable
manner. Also it is very useful for those
who have selected there career
either in auditing or taxation because
it helps the readers in updating
the knowledge in different aspects
which becomes very difficult in
practical life.
-Jatin Prashnani
The September 2011 issue of the
journal was very nicely packed with
informative and knowledge enhancing
content, particularly the Information
Technology aspect. The Editorial
titled Information Technology and
Chartered Accountants made a very
good and informative reading. The
column From the President was
equally informative which updated
us with the latest developments
pertaining to our profession in India
and the ICAI. Among the other
contents, the section on Information
Technology really stood out and

considerably added to our knowledge.
Know Your Ethics and EAC Opinion
are two other regular columns which
were worth preserving by Indian
accounting professionals for all times
to come. I congratulate the related
team for bringing out the September
2011 issue of the journal.
-CA. S Jain
Congratulations to the team

that has worked on this useful
improvement to the user interface of
the ICAI journal. The ease of access
and reading makes it a completely
joyful experience leave alone the cost
it saves in terms of paper and air/sea
mailing.
-CA. Venkat Ramamurthy, Vice
Chairman - ICAI Doha Chapter
Members Identity
Card Should be Widely
Accepted
The identity cards issued by
ICAI should be widely accepted
and recognised. Why it is that CAs
are amongst the most respected
professionals, still their I-cards are of
no use where we need to submit the
documents. Neither it is recognised
in banks for opening a bank account
nor when they ask for a copy of ID
Proof. I appeal to the ICAI to take
steps in this direction, so that we can
use our I-cards as first source of any
identification proof.
-CA. Tapan Jindal
I am a member since 1986 and

consider the Journal Highlights as
best improvement. Hope these links
are permanent.
-Rajan Srinivasan
Journal Highlights through

email a Useful Initiative
We are very happy to get the journal
highlights in email, which is very user
friendly. We look forward that this
practice continues for all times to
come.
-CA. I.V.Surendra Kumar, Ongole
The journal highlights being sent to
us by email is an excellent initiative.
Congratulations!
-Akbar Mohamed Casim Shaikh, Qatar
Its a very appropriate & timely
decision of sending highlights of
the Journal with details accessible
at single click. Reference becoming
easy with high level of comfort.
Congrats for a new service to the CA
community!
-CA.Vivek Mathkari. Pune
Please accept my congratulations

for this initiative of sending the Journal
Highlights through email. Many a time
we used to miss reading the journal
for it was not readily accessible at all
times. But getting this in email, you
certainly cannot miss it.
-CA Rakesh Khanna
Thanks a lot for arranging the
delivery of Journal Highlights through
email. This format is very helpful
particularly for members like me who
are far away from home.
-CA. Sai Akkanapragada Saiprasad,
New York
I highly appreciate the initiative of
sending the PDF file with highlights
of the journal to members.
-CA. Ganesh S Deshpande, Thane
n
Corrigendum
In the executive Summary of the article
titled Assurance on corporate Sustainability
reports published on page nos. 88-93
in August 2011 issue, the IFAc definition
of Assurance was wrongly published as
definition of Sustainability reporting. the
error is regretted.
Editor
For the Attention of Readers
Readers attention is specifically invited to the fact
that the views and opinions expressed or implied in
The Chartered Accountant journal are those of the
respective authors only, and not of the ICAI. The ICAI
bears no responsibility of any sort whatsoever in case
of any action taken by any reader based on any article
published in the Journal.
14
october
2011
Write to Editor
Information is Power and our ever-evolving profession
needs more and more of that today than ever before.
Do you have any relevant points to make, experiences
to share, and views to spread among the CA fraternity?
If yes, e-mail us at eboard@icai.org/nadeem@icai.org
or write to:
The Editor, The Journal Section, ICAI, A-29, Sector 62, Noida
(UP) - 201309
Advertisement
524
Honble Chief Minister, Govt. of Odisha, Shri Naveen Patnaik lighting the
Inaugural Lamp in presence of (From R-L) Past Chairman, Bhubaneswar
Branch, CA. Pranab Das Pattnaik, President, ICAI, CA. G. Ramaswamy, Shri
Prafulla Chandra Ghadai, Honble Minister of Finance & Public Enterprises,
Govt. of Odisha, CA. Saroj Kumar Sahu, Organising Committee Chairman and
CA. B. Manoj Kumar Patro, Chairman, Bhubaneswar Branch.
ICAI President CA. G. Ramaswamy with Shri D. K. Mittal, Secretary, Financial

Services, Ministry of Finance, Govt. of India during a meeting in New Delhi.
Honble Justice CA. Rajiv Shakdhar, Judge Delhi High Court, being presented
a memento by ICAI President CA. G. Ramaswamy during Conclave of ICAI
Members in Entrepreneurship & Public Services held in New Delhi. Central
Council Member CA. Mahesh P. Sarda, ICAI Vice-President CA. Jaydeep N.
Shah and ICAI Secretary Shri T. Karthikeyan are also seen in the photograph.
(22.09.2011)
ICAI President CA. G. Ramaswamy presenting a memento to Shri Piyush

Goyal, Member of Parliament during Conclave of ICAI Members in
Entrepreneurship & Public Services held in New Delhi. ICAI Vice-President CA.
Jaydeep N. Shah is also seen in the photograph. (22.09.2011)
ICAI President CA. G. Ramaswamy along with Vice-President CA. Jaydeep

N. Shah, Central Council member CA. Vinod Jain and Regional Council
Members of NIRC inaugurating the Certilcate Course on Forex and Treasury
Management in New Delhi. (17.09.2011)
ICAI President CA. G. Ramaswamy presenting a bouquet to Union Minister of

State for Communication and Information Technology Shri Sachin Pilot during
CMII Orientation Programme held in New Delhi. Central Council Members CA.
K. Raghu, CA. Pankaj Tyagee and ICAI NIRC Chairman CA. Rajesh Sharma are
also seen in the photograph.
Group photograph taken during recently held meeting of the Council to discuss and identify Strategic Directions for the Profession and ICAI in Manesar,
Gurgaon. (24.09.2011)
16
OCTOBER
2011
(Premier professional body set up by an Act of Parliament)

ICAI Bhawan, Indraprastha Marg, Post Box No. 7100, New Delhi 110 002.
(Premier professional body set up by an Act of Parliament)

ICAI Bhawan, Indraprastha Marg, Post Box No. 7100, New Delhi 110 002.
ICAI invites applications from highly competent

candidates for the position of
THE INSTITUTE OF CHARTERED

ACCOUNTANTS OF INDIA
SECRETARY
(which is a statutory position)
requires
Technical Director
Location: New Delhi Age : 45+ years (relaxable in deserving cases)
Technical Director heads the Technical Directorate which

provides support to the Accounting Standards Board,
Committee for Implementation of Indian Accounting
Standards (IFRS), Committee for Accounting Standards
for Local Bodies, Research Committee, Expert Advisory
Committee and other assignments relating to providing
inputs to the accounting pronouncements issued by the
Institute. The work includes liaising with the relevant
international bodies, such as International Accounting
Standards Board and the Governmental and Regulatory
Authorities, such as Ministry of Corporate Affairs, Reserve
Bank of India, Securities Exchange Board of India, Insurance
Regulatory Development Authority and other such authorities
on accounting matters.
ICAI, the second largest accounting body in the world, set

up by an Act of Parliament, is looking for a high profile and
multi-faceted personality with leadership qualities, excellent
communication, interpersonal and motivational skills for the
position of Secretary
Essential knowledge and skills required for the incumbent

would include expert knowledge of the Accounting Standards
in India and IFRSs apart from the other pronouncements,
such as Guidance Notes, Opinions of Expert Advisory
Committee and other technical literature issued by the
ICAI. The skills required include application of the aforesaid
pronouncements in specific situation with a view to advise
the relevant Committees/Board and to draft the relevant
pronouncements. This would require ability to objectively
analyse issues involved in various accounting alternatives
and perceive their implications in implementation.
ROLE
To act as the Secretary of the Council of ICAI, which is the
governing body managing the affairs of ICAI.
Largely responsible for furthering the Institutes objectives
of promotion and regulation of the Accountancy Profession,
by being in constant touch with other statutory / regulatory
/ professional bodies within and outside India and the
Governments and the Society at large.
As a conceptualist, to sustain and further enhance the image
of the profession externally with various Government Ministries
/ Departments like Ministry of Corporate Affairs, Ministry of
Finance, Ministry of Commerce and Industry, Office of the
C&AG, Ministry of Law and Justice; Regulators such as RBI,
SEBI, IRDA, etc., and Apex Industry Associations.
To be the external face of ICAI with international and regional
/ sub-regional professional accounting bodies, such as, IFAC,
IASB, IAASB, CAPA, SAFA, etc.
Qualification and Experience

Chartered Accountant or equivalent with experience of
application of Accounting Standards in India and or abroad
of 15 years.
PROFILE
Brilliant academic career, outstanding track record and also
flair for taking up multifaceted challenging assignments.
Currently occupying a top management / managerial
position (directly involved in policy making and formulating
strategies) reporting only to the Board of Directors / CEO of
the organisation concerned.
Relevant experience : 20 years or more in any renowned
/ reputed regulatory / professional / educational body /
institution in the Government, Public or Private Sector.
Membership of ICAI with a high first class Degree from
a renowned University would be an added advantage.
[Condition relaxable in exceptional cases].
Salary payable is currently under revision and hence the same
is negotiable, which among others, would seek to protect the
current salary drawn by a deserving candidate.
Contractual arrangement can also be considered in
exceptional cases.
This is an EXCELLENT opportunity for a high calibre professional
to join a world class accounting organisation and make an
impact on the national level.
For structured application and other details, please visit

our website: http://www.icai.org. Interested candidates
may e-mail their structured format application at
tech.director@icai.org or can send through speed post/
courier to the Deputy Secretary, HRD(P) at the above
address, superscribing on the envelope Application for
Technical Director within 15 days
For structured application and other details, please visit

our website: http://www.icai.org. Interested candidates
may e-mail their structured format application at
chatar@icai.in or can send through speed post / courier to Shri
Chatar Singh, Assistant Secretary, Presidents office, at the
above address, superscribing on the envelope Application for
the post of Secretary within 15 days.
Advt. No. ICAI/Rectt./03/2011
Advt. No.ICAI / Rectt./04/2011
He/She would act as team manager of the Technical

Directorate comprising technical and administrative
personnel.
Remuneration
Salary payable is currently under revision and hence the
same is negotiable, which among others, would seek to
protect the current salary drawn by a deserving candidate.
In appropriate cases contractual arrangements can also be
considered.
526
PHOTOGRAPHS
Infrastructure Development
Alleppey
Kakinada
ICAI President CA. G. Ramaswamy laid the foundation stone for the building
of Alleppey branch of SIRC of ICAI in the presence of Central Council member
CA. Rajendra Kumar P., Alleppey branch Chairman CA. Antony M. Malayil,
branch managing committee members and other dignitaries. (21.07.2011)
Ajmer
Bhilwara
Lighting of lamp during foundation stone laying ceremony for the building of
Ajmer branch of CIRC of ICAI. Seen in the photograph ICAI President CA. G.
Ramaswamy, Vice-President CA. Jaydeep N. Shah, Central Council Member
CA. Vijay Garg and Ajmer Branch Chairman CA. Sushil Bansal among other
dignitaries. (15.08.2011)
Madurai
Photograph taken during laying of foundation stone at the Bhilwara branch of

CIRC of ICAI. ICAI President CA. G. Ramaswamy, Vice-President CA. Jaydeep
N. Shah, Central Council Member CA. Vijay Garg and Branch Managing
Committee members are also seen in the photograph. (15.08.2011)
Erode
ICAI President CA. G. Ramaswamy, Vice-President CA. Jaydeep N. Shah, SIRC

of ICAI Chairman CA. K. Shanmukha Sundaram and Madurai branch Chairman
CA. V. Sivakumar performing Poojan during foundation stone laying ceremony
for the building of Madurai branch of SIRC of ICAI. (31.08.2011)
18
Honble Minister of State for Defence, Govt. of India, Dr. M. M. Pallam Raju
along with ICAI President CA. G. Ramaswamy inaugurating the branch building
of Kakinada branch of SIRC of ICAI. (13.08.2011)
OCTOBER
2011
ICAI President CA. G. Ramaswamy unveiling the foundation stone for the
building of Erode branch of SIRC of ICAI. SIRC of ICAI Chairman CA. K.
Shanmukha Sundaram, SIRC Secretary CA. S. Murali, Erode branch Chairman
CA. C. P. Suresh Kumar and other dignitaries are also present in the
photograph. (02.09.2011)
Advertisement
528
KNOW YOUR ETHICS
Know Your Ethics*

Ethical Issues in Question-Answer Form
Q. Whether a Chartered Accountant can accept an
appointment as auditor of a company without first
ascertaining from it whether the requirement of
Section 225 of the Companies Act, 1956 in respect
of such appointment have been duly complied
with?
A. No, as per Clause (9) of Part I of the First Schedule
to the CA Act, a Chartered Accountant in practice
shall be deemed to be guilty of professional
misconduct if he accepts an appointment as auditor
of a company without first ascertaining from it
whether the requirements of Section 225 of the
Companies Act, 1956 in respect of such appointment
have been duly complied with. In this regard, the
Council has laid down detailed guidelines that are
appearing at pages 188 to 196 of Code of Ethics,
2009.
Q. Whether a statutory auditor can be appointed in
the adjourned meeting in place of existing statutory
auditor where no special notice for removal or
replacement of the retiring auditor is received at the
time of the original meeting?
A. No, if any annual general meeting is adjourned
without appointing an auditor, no special notice
for removal or replacement of the retiring auditor
received after the adjournment can be taken note
of and acted upon by the company, since in terms
of Section 190(1) of the Companies Act, 1956,
special notice should be given to the Company
at least fourteen clear days before the meeting
in which the subject matter of the notice is to be
considered, the meeting contemplated in Section
190(1) undoubtedly is the original meeting.
Q. Whether a Chartered Accountant or a firm of
Chartered Accountants can charge or offer to
charge professional fees based on a percentage of
turnover?
A. No, in terms of Clause (10) of Part I of First Schedule
to the CA Act it is not permitted to a Chartered
Accountant or a firm of Chartered Accountants to
*
Contributed by the Ethical Standards Board of the ICAI
20
october
2011
charge fees on a percentage of turnover, except in

the circumstances provided under Regulation 192
of the CA Regulations.
Regulation 192 reads as under:
192. Restriction on fees
No Chartered Accountant in practice shall charge or
offer to charge, accept or offer to accept, in respect
of any professional work, fees which are based on a
percentage of profits, or which are contingent upon
the findings, or results of such work:
Provided that:
(a) in the case of a receiver or a liquidator, the fees
may be based on a percentage of the realisation
or disbursement of the assets;
(b) in the case of an auditor or a co-operative
society, the fees may be based on a percentage
of the paid up capital or the working capital or
the gross or net income or profits; and
(c) in the case of a valuer for the purposes of
direct taxes and duties, the fees may be based
on a percentage of the value of the property
valued.
Q. Whether a Chartered Accountant in practice can
engage in any business or occupation other than
the profession of Chartered Accountancy?
A. No, in terms of Clause (11) of Part I of First Schedule
to the CA Act, in general, a Chartered Accountant in

practice is not permitted to engage in any business
or occupation other than the profession of Chartered
Accountancy.
However, there are following exceptions to it:1. A Chartered Accountant can be a director of
a company (not being a managing director or
a whole time director), unless he or any of his
partners is interested in such company as an
auditor.
2. A Chartered Accountant in practice may
engage in any business or occupation with
the permission granted in accordance with a
resolution of the Council.
Appendix (9) of CA Regulations contains the above
Resolution under two heads (A) Permission granted
Advertisement
530
KNOW YOUR ETHICS
generally (B) Permission to be granted specifically.

(Please refer pages 345 to 349 of the Code of
Ethics, 2009).
Q. Whether a Chartered Accountant in practice is
entitled to accept teaching assignment?
A. Yes, a Chartered Accountant in practice is allowed
to accept teaching assignment in university,
affiliated colleges, educational institution, coaching
organisation, private tutorship under the specific
permission of the Council , provided the direct
teaching hours devoted to such activities taken
together do not exceed 25 hours a week .
Q. Can a practicing Chartered Accountant accept a
position as auditor previously held by some other
Chartered Accountant in such conditions as to
constitute undercutting?
A. Prior to the amendment in the CA Act
in 2006, undercutting was violative of the then
Clause (12) of Part-I of the First Schedule to the CA
Act. After the 2006 amendment, this provision has
been repealed, and hence, it is not violative for a
practicing chartered accountant to accept a position
as auditor at a fee below the fee earlier charged by
previous auditor.
Q. Whether a member of the Institute be guilty of
professional misconduct, if he, not being a fellow,
styles himself as a fellow?
A. Yes, as per Clause (1) of Part III of the First

Schedule to the CA Act, a member of the Institute,
whether in practice or not, shall be deemed to
be guilty of professional misconduct if he, not being
a fellow, styles himself as a fellow.
Q. Whether a member of the Institute shall be
deemed to be guilty of professional misconduct,
if he does not supply the information called for, or
does not comply with the requirements asked for,
by the Institute?
A. Yes, a member of the Institute shall be deemed
to be guilty of professional misconduct if he does
not supply the information called for, or does not
comply with the requirements asked for, by the
Institute (As per Clause (2) of Part III of the First
Schedule to the CA Act).
Q. Can a Chartered Accountant in practice disclose
information acquired in the course of his professional
engagement?
A. No, as per Clause (1) of Part I of Second Schedule
to the CA Act, a Chartered Accountant in
practice shall be deemed to be guilty of professional
misconduct, if he discloses information acquired
in the course of his professional engagement to
any person other than his client so engaging
him, without the consent of his client or otherwise
than as required by any law for the time being
in force. n
Classifieds
4868
Required Chartered Accountants on partnership/

assignment/sub-contract /employment basis,
semi- qualified and articled assistants (for the
state of Jammu & Kashmir)/ Northern States.
Apply Box: 4868, C/o The Institute of Chartered
Accountants of India, ICAI Bhawan, A-29, Sector62, Noida-201301.
4869
Mumbai based Mid-size C.A Firm, seeks to

merge small Firms at Varanasi, Raipur, Patna ,
Ranchi ,Chandigarh, Chennai, Bangalore, and
Hyderabad. Contact: 09821240794 or e-mail:
jsingh@bom5.vsnl.net.in
4870
22
A Delhi based CA firm having branch offices at

Mumbai, Bangalore & Jaipur invites expression of
october
2011
interest (EOI) for partnership from professionals at

Hyderabad to start its local branch office and from
professionals at Delhi & NCR with experience/
expertise in direct and indirect taxation. CAs in
practice of profession for a period up to 7 years
may send their EOI at manoj.sharma@snr.net.in
4871
A Kolkata based old partnership audit firm requires

partner for their Delhi office. email: sksinhaco@
yahoo.com
4872
Required CAs as partners in experienced C.A.firm

in Mumbai with good arrangement /terms and
freedom for personal practice, place and age no
bar. Contact: glen.office@gmail.com / 26254421 /
9920317933.
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532
Legal Decisions
Legal Decisions1
DIRECT
TAXES
Income-tax Act
LD/60/34
LS Cable Ltd., In re
July 26, 2011 (AAR)
Section 9 of the Income-tax Act, 1961
- Income - Deemed to accrue or arise
in India
Where clauses in offshore supply contract agreement
regarding transfer of ownership and payment mechanism
in form of letter of credit, would go to establish that
transaction of sale and title took place outside Indian
Territory and ownership and property in goods passed
outside India, amounts receivable by a foreign company
for offshore supply of equipments and material are not
liable to tax in India, merely on the ground that transit risk
is borne by applicant till goods reach site in India
The applicant-Korean company was the successful
bidder in the bids invited by the Delhi Transco Limited
(DTL). The scope of work of the applicant under the
said contracts for all these projects include: (1) offshore
supply contract involving supply of equipments and
materials including mandatory spares on CIF basis,
(2) onshore supply contract and (3) onshore service
contract. The applicant refers to various clauses in the
contract documents relating to offshore supply contract
viz., transfer of title, insurance, payment mechanism etc.
and submits that in connection with the said contract, the
property in the goods to be supplied from Korea would
pass outside India in favour of DTL and the sale would
be concluded outside India and the payment would be
received outside India in foreign currency. The applicant
contends that no income accrues or arises in India and
further no income will be received or deemed to be
received in India.
The question formulated by the applicant for seeking
advance ruling is whether the amounts receivable by the
applicant from DTL under offshore supply contract for
offshore supply of equipments and materials, spares are
liable to tax in India.
The Authority for Advance Rulings held that the
clauses in the offshore supply contract agreement
regarding the transfer of ownership, the payment
mechanism in the form of letter of credit which ensures the
credit of the amount in foreign currency to the applicant's
foreign bank account on receipt of shipment advice
and insurance clause, would go to establish that the
transaction of sale and the title took place outside Indian
Territory. The ownership and property in goods passed
outside India. The transit risk borne by the applicant
till the goods reach the site in India is not necessarily
inconsistent with the sale of goods taking place outside
1
India. The parties may decide between them as to when

the title of the goods should pass. As the consideration
for the sale portion is separately specified, it can well be
separated from the whole.Nothing in law prevents the
parties to enter into a contract which provides for sale of
material for a specified consideration, although they were
meant to be utilised in the fabrication and installation of a
complete plant. Regarding the revenue's plea that as the
applicant has a PE in India, the income arising should be
taxed in India, the authority stated that the existence of PE
would be for the purpose of carrying out the contract for
onshore supplies and services etc. but such a PE would
have no role to play in offshore supplies. Even if a PE
is involved in carrying on some incidental activities such
as clearance from the port and transportation, it cannot
be said that the PE is in connection with the offshore
supplies. Accordingly, the applicant was not liable to tax
in respect of offshore supplies as per the Act.
LD/60/35
Columbia Sportswear Company, In re
August 8, 2011 (AAR)
Section 9 of the Income-tax Act, 1961 read with
Article 5 of the Indo-US DTAA - Income - Deemed to
accrue or arise in India
Where Indian liaison office of applicant US company
is not used solely for purpose of purchasing goods or
merchandise or for collecting information for enterprise,
rather identifies competent manufacturer/supplier,
negotiates competitive price, helps in choosing material
to be used, ensures compliance with quality of material,
acts as go between, between applicant and seller or
manufacturer-seller of goods and even gets material
tested to ensure quality in addition to ensuring compliance
with its policies and relevant laws of India by suppliers,
and, furthermore, takes identical activities in Egypt and
Bangladesh, liaison office in question would qualify to be
a permanent establishment in terms of Article 5 of DTAA
In the year 1995, the applicant US company
established a liaison office for undertaking liaison
activities in connection with purchase of goods in India,
Bangladesh and Egypt. Besides coordinating purchase of
goods it is engaged in quality monitoring and production
monitoring of goods purchased from these countries.
The goods procured from Egypt and Bangladesh do not
come to India but are directly sold to the applicant in the
United States.
The applicant approached the Authority for Advance
Rulings essentially seeking a ruling on the question
whether in the nature of the activities carried on by the
liaison office it could be understood as a permanent
Readers are invited to send their comments on the selection of cases and their utility at eboard@icai.org.
24
october
2011
533
establishment of the applicant and whether any income

can be said to accrue or arise in India to the applicant,
liable to be taxed in India.
The Authority for Advance Rulings held that what
section 9(1)(i) Explanation 1(b) deems in the case of a nonresident, is that no income arises in India to him through
or from operations which are confined to the purchase
of goods in India for the purpose of export. In this case,
the activities of the Liaison Office of the applicant in India
is not confined to the purchase of goods in India for the
purpose of export. The applicant, in fact, transacts in
India its business of designing, quality controlling, getting
manufactured consistent with its policy and the laws, the
branded products it sells elsewhere. All these activities
cannot be understood as activities confined to purchase
of goods in India for export from India. 'Confined' means,
'limited restricted'. 'Purchase' means 'get by payment, buy'.
It is difficult to accept that all these activities enumerated
are activities confined to purchase. None can accept the
position that these activities are limited to the purchase
of goods.
Income resulting from manufacture, purchase and sale
cannot be compartmentalized and confined to one arising
out of a sale only. The whole process of procurement and
sale has to be completed to generate income. Hence,
getting manufactured and purchasing form integral parts
of the process of generating income. The liaison office
acts as the arm of the applicant regarding that part of the
activity. A function related to purchase is not a function
confined to purchase or mere purchase.
There is another aspect. The activities of the Liaison
Office of the applicant in India, is not confined to India. It
also takes up the identical activities as in India, in Egypt
and Bangladesh. The applicant has only pleaded that
the goods procured from Egypt and Bangladesh are not
imported into India and are sold only to the applicant
in the US. Whether product of the applicant are sold in
Egypt and Bangladesh is not clear. Whatever it be, since
the activities of the applicant in India takes in, its business
in Egypt and Bangladesh, it cannot be stated that the
operations of the applicant in India are confined to the
purchase of goods in India for the purpose of export.
Therefore, inclined to the view that the applicant cannot
take shelter under Explanation 1(b) to section 9(1)(i) of the
Income-tax Act.
According to article 5 of the Indo-US DTAA, the term
'permanent establishment' means a fixed place of business through which the business of an enterprise is
wholly or partly carried on. Then, the article proceeds to
enumerate certain establishments as included in the term
'permanent establishment' in sub-article (2). Sub-article
(3) excludes certain establishments from within the term
'permanent establishment'. Clause (d) therein excludes a
fixed place of business solely for the purpose of purchasing
goods or merchandise or of collecting information for the
enterprise. Clause (e) excludes a fixed place of business
Legal Decisions
LEGAL UPDATE
solely for the purpose of advertising, for the supply of

information, for scientific research or for other activities
which have a preparatory or auxiliary character, for the
enterprise. Article 5.1 defines a permanent establishment
as meaning a fixed place of business through which the
business of an enterprise is wholly or partly carried on. If
an establishment satisfies this definition, there is no need
to go into the question whether the establishment cannot
be brought within the inclusive part of the definition in
sub-article (2). Once the definition in article 5.1 is satisfied,
the only inquiry to be undertaken is to see whether it is
one of those establishments excluded by sub-article (3).
In construing the exclusion in sub-article (3), it appears
to us that the exclusion has to be tested with reference to
one or more of the activities referred to therein.
In the instant case the liaison office has a fixed place
of business. It was originally in Chennai and now it is
being established in Bangalore. It has 35 employees
and it deals with different aspects of the business of the
applicant. The business of the applicant is designing,
getting manufactured, purchasing and selling of garments
based on its research relating to consumer preferences
and market conditions. Other than the actual business
of selling, the rest of the activities of the applicant are
conducted by the liaison office in India at best in part.
In other words, a part of the business of the applicant is
carried on in India by the liaison office. Not only in India,
but also in Egypt and Bangladesh. There cannot be much
doubt in such circumstances that the liaison office would
be a permanent establishment of the applicant within the
meaning of article 5.1 of the DTAA. The applicant has
admitted that it has a fixed place of business in India
through which it carries on its business and has invoked
the exclusionary provisions in Article 5(3) of the Treaty to
get out of the obligations arising therefrom.
The liaison office is not used solely for the purpose
of purchasing goods or merchandise or for collecting
information for the enterprise. The liaison office identifies
a competent manufacturer, negotiates a competitive
price, helps in choosing the material to be used, ensures
compliance with the quality of the material, acts as go
between between the applicant and the seller or the
manufacturer-seller of the goods and even gets the
material tested to ensure quality in addition to ensuring
compliance with its policies and the relevant laws of India,
by the suppliers. What sub-article (3)(d) excludes is a
place of business solely for the purpose of purchasing
goods or of collecting information for the enterprise. The
activities carried on by the liaison office cannot said to
be an activity solely for the purpose of purchasing the
goods or for collecting information for the enterprise. It is
practically an involvement in all the activities connected
with the business of the applicant except the actual sale
of the products outside the country. On these facts, it is
not possible to find that such an establishment would be
excluded by clause (d) of sub-article (3) of article 5. Further,
october
2011
25
LEGAL UPDATE
Legal Decisions
the liaison office, admittedly is collecting information for

the enterprise, though it may not be established solely for
that purpose.
Clause (e) speaks of a fixed place of business
solely for the purpose of advertising, for the supply of
information, for scientific research or for other activities
which have preparatory or auxiliary character for the
enterprise. Auxiliary means providing extra help and
support. Preparatory means done in order to prepare
for something. Here again, the liaison office is not solely
involved in advertising, for the supply of information
for scientific research or other activities which have
preparatory or auxiliary character. The liaison office is
involved in conducting a substantial part of the business
of the applicant which as indicated earlier, takes in a
number of activities culminating in designing of apparel or
goods with material to the taste of the customers and after
adequate research at a competitive price, supervision of
the manufacturing process and then sale by the applicant
in a brand name. The liaison office is also the conduit
for conveying the requirements and the decisions of
the applicant to the various manufacturers identified by
it and approved by the applicant and for processing the
goods and paying for them. A part of the business of the
applicant in Egypt and Bangladesh is also carried on
by or through the liaison office. On the facts of this case
and in the light of the activities undertaken by the liaison
office, clauses (d) and (e) of article 5(3) read separately or
together, would take the liaison office out of the definition
of permanent establishment contained in article 5(1) of
DTAA. On the facts of this case, the liaison office would be
a permanent establishment of the applicant in India.
It is true that in terms of the permission taken from the
Reserve Bank of India, the liaison office can undertake
purely liaison activities, viz., to inspect the quality, to
ensure shipments and to act as a communication channel
between Head office and parties in India and will not take
up any other activity of a trading, commercial or industrial
nature. The liaison office, on the applicant's own showing
26
october
2011
534
is also engaged in identifying suppliers, recommending

them for acceptance, getting competitive quotations from
suppliers, recommending their acceptance and so on.
In addition, it is also doing the work of the applicant in
Egypt and Bangladesh. The question, whether all these
activities will also come within the permission granted by
the Reserve Bank of India, need not be considered here.
Suffice it is to say that one has to test the effect of the
activities admittedly undertaken by the liaison office in the
context of Article 5 of DTAA to adjudge whether it would
be a permanent establishment within that Article. On
the basis of the reasoning as above, the liaison office in
question would qualify to be a permanent establishment
in terms of Article 5 of the DTAA.
LD/60/36
Commissioner of Income Tax
Vs.
K. Raheja Corporation P. Limited
August 8, 2011 (BOM)
[Assessment Year 2000-01]
Section 14A read with Section 10(33) of the Income
Tax Act, 1961 - Total income - Expenditure incurred in
relation to income not includible in
In absence of any material or basis to hold that interest
expenditure directly or indirectly was attributable for
earning dividend income, interest expenditure could not
be disallowed under section 14A
The finding of fact recorded by the Tribunal was that
the investments in equity shares and mutual funds were
made by the assessee year after year and it has been
consistently held by the Tribunal that these investments
had been made out of the assessees own funds and not
out of the borrowed funds. The Revenue could not point
as to how interest on borrowed funds was attributable to
earning dividend income which are exempt under Section
10(33) (as it then stood).
The Bombay High Court held that in the facts of the
present case, in the absence of any material or basis to
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hold that the interest expenditure directly or indirectly was

attributable for earning the dividend income, the decision
of the Tribunal in deleting the disallowance of interest
made under section 14A could not be faulted.
LD/60/37
Siem Offshore Inc., In re
July 25, 2011 (AAR)
Section 44BB read with section 9 of the Income-tax
Act, 1961 read with Article 25 of the Indo-Norwegian
DTAA - Non-residents, business of exploration
mineral oils etc
Where in addition to ensuring marine logistics support
in event of any operational exigency, applicant was
mainly engaged in transportation of cargo, material and
personnel required at rig, responsibilities resting on
applicant in terms of contract did not involve providing of
any technical service; obviously, applicant was engaged
in business of providing service or facilities in connection
with extraction or production of oil, a mining activity and,
thus, income would take it out of section 9(1)(vii) and
bring it within section 44BB
The applicant-foreign company is incorporated in
the Cayman Islands. The applicant formed a consortium
with three other companies which were awarded work
by ONGC. The consortium agreement provides scope
of work of each one and ONGC was to make direct
payments to each company for performance of work.
Under agreement with ONGC, applicant was required to
provide sea logistics services, which included service
to provide marine logistics support for transportation
of essential cargo including operators, operators', subcontractors' and rig contractors' materials and personnel
required at rig in addition to ensuring marine logistics
support in event of any operational exigency.
The Authority for Advance Rulings held that the work
undertaken by the applicant is the providing of Sea
Logistics Services. The applicant was mainly engaged in
transportation of cargo, material and personnel required
at the rig in addition to ensuring marine logistics support
in the event of any operational exigency. Thus, the
responsibilities resting on the applicant in terms of the
contract did not involve the providing of any technical
service. Obviously, the applicant was engaged in the
business of providing service or facilities in connection
with extraction or production of oil, a mining activity. It
could also be said to be supplying plant and machinery for
hire to be used in the prospecting of oil. Thus, the income
derived by the applicant from the activities undertaken
by it under the consortium agreement as recognized by
ONGC, the explorer, takes it out of section 9(1)(vii) and
brings that income within section 44BB. On the terms of
the transaction in question, it is clear that what is paid
to the applicant is not fee for technical services and
consequently the proviso to section 44BB is not attracted.
It is not, therefore, necessary to go into the question as
28
october
2011
536
to what constitutes fee for technical services and whether

section 44DA will be attracted to the case. On facts, the
services being provided by the applicant are not technical
services. Hence, the applicant can claim to be assessed
in terms of section 44BB especially since there is no case
that ONGC is not involved in prospecting, exploration and
extraction of oil and the services being provided by the
applicant are services in connection with that activity.
However, in view of the developments that took place
after 1-1-2010, the income of the applicant should be
assessed only in the context of Article 25 of the IndiaNorwegian Treaty. Thus, the tax liability of the applicant
to be taxed in India is governed by Article 23(4) of DTAA
read with its non obstante clause fixing the limit.
LD/60/38
WesternGeco International Ltd., In re
July 25, 2011 (AAR)
Section 44BB of the Income-tax Act, 1961 - Nonresidents, business of exploration mineral oils etc
Revenues to be earned by the Non-resident-Applicant
under the seismic data acquisition and processing
contract with a company engaged in the exploration
and production of mineral oils in India are taxable in
accordance with section 44BB
The applicant, British Virgin Islands Company, is
engaged in the business of acquisition and processing
of 2D and 3D seismic data for companies engaged in the
exploration and production of mineral oils in India. The
applicant desires to obtain a ruling on the questions as
to whether revenues to be earned by the applicant under
the seismic data acquisition and processing contract
with BHP Billiton in India are taxable in accordance with
section 44BB.
The Authority for Advance Rulings held that in terms
of the contract, the applicant is to provide vessels and
seismic crew at the area of operations to acquire the 2D
geophysical survey in the MB/KK blocks offshore India to
BHP Billiton. The vessels are to be equipped with hardware
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and software to process the seismic data. The survey

work is to be carried out 247 hours a day, seven days
a week and without shut down for holidays. The cost of
maintenance of the vessels, catering and accommodation
services on board the seismic vessels is to be borne by
the applicant. It is therefore obvious that the applicant is
engaged in the business of providing services or facilities
in connection with extraction or production of oil, a mining
activity. It could also be said that the applicant is supplying
plant and machinery for hire to be used in the prospecting
of mineral oil. The activities undertaken are recognised
by BHP Billiton in connection with the extraction or
production of oil. The activities being mining, the services
rendered goes out of the purview of section 9(1)(vii). The
executive understanding of Explanation 2 to section 9(1)
(vii) is also explained in CBDT's Instruction No. 1862 in the
similar manner. As section 44BB is a special, specific and
exclusive provision, even where the profits arising from
business specified therein fall within the ambit of fees for
technical services, the provision should prevail for the
purposes of computation.
Therefore, revenues to be earned by the Applicant
under the seismic data acquisition and processing contract
with BHP Billiton in India are taxable in accordance with
section 44BB.
Section 44BB of the Income-tax Act, 1961 - Nonresidents, business of exploration mineral oils etc
Where applicant company is engaged in business of
acquisition and processing of seismic data for companies
engaged in exploration and production of mineral oils in
India and equipment vessel mobilization/demobilization
activities was attributable to distance travelled by the
vessel outside India, entire mobilization/ demobilization
revenues received by applicant with respect to seismic
data acquisition and/or processing would be taxable in
India at an effective rate of 4.223 per cent
The applicant, British Virgin Islands company, is
engaged in the business of acquisition and processing
of 2D and 3D seismic data for companies engaged in the
exploration and production of mineral oils in India. The
applicant desires to obtain a ruling on the questions as
to whether the revenues arising under the contract with
BHP Billiton on account of mobilization/demobilization
activities attributable to distance travelled by the vessel
outside India will be subject to tax in India.
The Authority for Advance Rulings held that once
an assessee opts to come under section 44BB(1), the
provision itself deems its profits and gains as 10 per cent
of the aggregate of the amounts specified in sub-section
(2). Sub-section (2)(a) specifies that that aggregate
amount is the amount paid or payable whether in or
out of India to the assessee on account of provision of
services in India. In the scenario, there is no scope for
splitting up the amount payable to the assessee. If the
30
october
2011
538
assessee wants to seek such a splitting up it has to go

under section 44BB(3).
Section 44BB does not close its doors to an applicant
who desires to know which part of its income accrues or
arises in India and how much. The applicant can exercise
its rights provided it opts to get the income taxed under
section 44BB(3). The scheme of computation of income
under this section does not provide any leeway to apply
both the sub-sections (1) and (3) of section 44BB to the
income arising from the business activities falling under
the ambit of section 44BB(1). Even if part of the income
falls under 'Royalties' or 'Fees for technical Services', there
is no scope to assess such receipts under these heads,
once it is held that the income is from its oil exploration and
production activities as envisaged under section 44BB.
In view thereof, the entire mobilization/ demobilization
revenues received by the applicant with respect to seismic
data acquisition and/or processing would be taxable in
India at an effective rate of 4.223 per cent.
LD/60/39
Sahney Kirkwood Private Limited, Mumbai
Vs.
Additional Commissioner of Income-tax
July 29, 2011 (BOM)
Section 60 of the Income-tax Act, 1961 - Transfer of
income Where there is no transfer of assets
Where assessee let out a part of its premises to another
company in which one of directors of assessee company
was also a director, but there was nothing on record
to show that transaction between assessee and said
company was a sham transaction, amounts received
by said company on account of letting out premises to
third parties were not liable to be assessed in hands of
assessee
By a Leave and Licence Agreement, the assessee let
out a part of its premises to a company Minicon. Minicon
let out the said premises on leave and licence to various
third parties. The Assessing Officer sought to tax the
amount received by Minicon from various persons in the
hands of the assessee on the ground that the leave and
licence agreement between the appellant assessee and
Minicon was a sham transaction.
The Bombay High Court held that the amounts received by Minicon had been taxed in the hands of Minicon
and the assessment orders passed to that effect had
attained finality. If the amounts received by Minicon
by letting out the premises taken on leave and licence
agreement from the assessee, had been taxed in the
hands of Minicon, then taxing the very same amount
once again in the hands of the assessee would amount to
taxing an income twice which is not permissible in law.
The fact that one of the directors of the assessee
company was also a director in Minicon, but there was
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nothing on record to show that the transaction between

the assessee and Minicon was a sham transaction. In
these circumstances, the amounts received by Minicon
on account of letting out the premises were not liable to
be assessed in the hands of the assessee.
LD/60/40
Deputy Commissioner of Income-tax
Vs.
Deloitte Consulting India (P.) Ltd.
July 22, 2011 (ITAT-HYD)
[Assessment Year 2004-05]
Section 92C of the Income-tax Act, 1961 - Transfer
Pricing - Computation of
It is mandatory to use current year data first and then
datas for period not more than two years
Tolerance band provided in section 92C is not to
be taken as a standard deduction; actual working
is to be taken for determining ALP without giving
deduction of 5%
Companies having related party transaction of more
than percentage limit of turnover fixed, is to be
excluded from list of comparable
No two comparable companies can be replicas of
each other; intangibles or outsourcing manpower
would not materially affect price or profit margin
Giant company having 20 times more turnover than
assessee company, cannot be a comparable
Section 92A(2)(i) clearly deals with manufacturing
of goods and articles and not with provision of
services; rejection of comparable on basis of criteria
of services provided by it, was not just
Where comparable companies did not have any
export business for year under consideration
whereas assessee company had full-fledged
export business, those companies could not be
comparable
Where assessee company was carrying several
risks while undertaking various works/services for
its associate enterprise, adjustment towards risks
was to be made
During transfer pricing assessment, authorities are
not required to demonstrate motive of assessee
company to shift profits outside India by manipulating
prices
The assessee is a company which derives income
from software development and IT enabled services. It has
entered into international transactions with its associated
enterprises. For determining arms lengths price (ALP),
the Tribunal made following observations:
For the purpose of determining the ALP, the transactions entered into the Associate Enterprises are to
be compared with uncontrolled transactions carried on by
an entity during the same period as that of the assessee
company as provided under rule 10B (4) of the Incometax Rules. In view of this matter, consideration of the data
32
540
Legal Decisions
october
2011
of only one year is justified. The expression "shall" used

in the said Rule makes it clear that it is mandatory to use
the current year data first and if any circumstances reveal
an influence on the determination of ALP in relation to the
transaction being compared than other datas for period
not more than two years prior to such financial year may
be used.
The tolerance band provided in section 92C is not to
be taken as a standard deduction. If the arithmetic mean
falls within the tolerance band, then there should not be
any ALP adjustment. If it exceeds the said tolerance band,
then ALP adjustment is not required to be computed after
allowing the deduction at 5 per cent. That means, actual
working is to be taken for determining the ALP without
giving deduction of 5 per cent.
The TPO applied the criteria of excluding the companies having related party transaction of more than
25 per cent of the turnover from the list of comparable
companies. Having done so, the TPO should have
excluded those companies from the list of comparable
companies where it was evident that the percentage of
related party transaction in these cases above said 25 per
cent and this, failed to satisfy the TPO's own criteria.
It is contended that the comparable company VITL
has employee-cost at 1.38 per cent of its revenue when
compared to that of the assessee company which was
at 52.12 per cent. Further, VITL owns valuable intangible
when compared to the assessee company. Hence, the
said company had to be excluded.
Held that it appeared that the VITL had outsourced
the manpower and the cost of outsourcing appeared to
have been included in the other heads of the expenditure
instead of wages-employee cost. Moreover, the intangibles
would not materially affect the price or profit earning. By
outsourcing the manpower, the VITL would have incurred
more cost compared to the assessee company, thus
resulting in lesser operating profit. But, the intangibles or
outsourcing the manpower would not materially affect the
price or profit margin.
No two comparable companies can be replicas of
each other. The application of rule 10B should be carried
out and judged not with technical rigor, but on a broader
prospective. In this view of the matter, selecting the VITL
as comparable company was proper.
Wipro Company's turnover was 20 times more than
the assessee company. Hence, the assessee company
was not comparable with Wipro BPO, the reasoning being
that the latter is a giant company having 20 times more
turnover than the assessee company. Wipro BPO should
be excluded from the list of comparable companies.
Hence, the ground raised by the assessee on this issue
is allowed.
The company ASL was rejected as comparable
company in back office services segment on the basis
that the company sourced it exclusively from Apex
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Data Services Inc., USA and thus, has related party

transactions.
Held that ASL did not render any services to Apex
Data but only sources business from them. Therefore,
ASL rendered services directly to the third parties and not
to the Apex Data. ASL had only transaction with Apex Data
in purchasing of fixed assets. In view of this matter, no
controlled transaction between the ASL and Apex Data.
Thus, no materially significant related party transactions
exist. Section 92A(2)(i) clearly deals with manufacturing
of goods and articles and not with provision of services.
Therefore, the TPO/CIT (A) was not justified in rejecting
the ASL as comparable company from the final list of
comparable companies.
Independent comparable companies were rejected
by TPO/CIT (A) on the basis that they did no have any
foreign exchange revenue. The TPO, in the case of back
office services segment, had rejected five companies on
account of the fact that these companies did not generate
foreign exchange revenue.
Held that the domestic BPO is much smaller business
segment than the export BPO. The productivity and return
in domestic segment is also much less than the export
segment. The TPO clearly demonstrated in his order that
the earnings per seat in domestic segment was 0.45 lakhs
as against 2.37 lakhs in the export segment which worked
out to 5.27 times more than the domestic segment. In
the export segment, the earnings would be more due to
the fact that they had advantage of time zone and higher
productivity etc. It appeared that the assessee company
agreed that one criterion for selection/rejection of the
comparables is FAR analysis. The aforesaid companies
did not have any export business for the year under
consideration whereas the assessee company had fullfledged export business. The functions, risks and assets
are entirely different. Hence, these companies could not
be considered as a comparable company for determining
the ALP.
The reference to resident and non-resident in rule
10A of IT Rules, is related to the residential status and
not related to the domestic or export. Moreover, the Delhi
Bench of the Tribunal in the case of Mentor Graphics
Noida (P.) Ltd. v. Dy. CIT [2007] 109 ITD 101 (Delhi) held
that the ALP should be determined by taking results of
a comparable transaction in comparable circumstances.
Rule 10B(2)(d) also emphasizes that the comparability of
the transaction should be international transaction. There
was no merit in the argument that the companies rejected
by the TPO operate in similar market condition as that
of assessee company due to the fact that the aforesaid
companies did not have any international transaction. In
view of the above, rejecting the aforesaid company as not
comparable was justified.
There are several factors such as market risks,
environmental risk, entrepreneurial risk and functional risk
34
542
Legal Decisions
october
2011
etc., which affect the matter and which ultimately affect

the results of the company. All the aforesaid factors make
it impracticable to any authority to find out exact duplicate
company of the assessee as comparable. Some variation
bound to exist.
The TPO had made efforts to identify the comparables
whose functions are similar to the assessee company by
applying filter quantitatively and qualitatively to eliminate
the differences between the assessee companies with
that of comparable companies to neutralize the aforesaid
risk factors.
The assessee company was an independent
contracting entity and would be solely responsible for
determining the manner, means and methods by which
it performs its obligation under the said contract as per
Article-5, the assessee company has undertaken the
warranty that all its work and documentation to be delivered
to the associate enterprise would be free of error. In a
nutshell, the assessee company was carrying several risks
while undertaking various works/services for its associate
enterprise. It could not be said that the assessee company
was operating in a risk free environment and accordingly
the assessee company was not entitled to any adjustment
towards risks borne by various comparable companies.
Transfer pricing rules shall apply when one of the
parties to the transaction is a non-resident, even if the
transaction takes place within India. There is no need
to find out the legislative intent behind the transfer
pricing provision when the provisions themselves were
unambiguous. Therefore, existence of actual cross
border transactions or motive to shift profits outside India
or to evade taxes is not free conditions for transfer pricing
provisions to apply. In view of this, the lower authorities,
during transfer pricing assessment, are not required to
demonstrate the motive of the assessee company to shift
the profits outside India by manipulating the prices.
LD/60/41
Cairn U.K. Holdings Ltd., In re
August 1, 2011 (AAR)
Section 112, read with section 48, of the Income-tax
Act, 1961 - Capital gains - Tax on long term capital
gains
Where foreign company sold equity shares held by it in
an Indian listed company in off-market mode, Tax payable
on long-term capital gains arising to does not get benefit
of lower rate of 10 per cent as provided by proviso to
section 112
The applicant CUHL, a Scotish company, acquired
the equity shares of Indian company CIL. As per the
share purchase agreement, 135,267,264 equity shares
of CIHL were transferred by the applicant to CIL and as
a consideration, CIL issued 861,764,893 equity shares to
the applicant. Accordingly, these equity shares of CIL were
allotted to the applicant under a swap of share arrange-
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ment. Approval of the Foreign Investment Promotion

Board of India was also obtained. Later on PCIL acquired
2.29 per cent equity shares in CIL from the applicant,
pursuant to which the applicant transferred 4,36,00,000
equity shares to PCIL for a consideration of USD
241,426,379. The transaction took place in off-marketmode and not through the recognised stock exchange.
The question arose for a ruling from the Authority as to
whether the tax payable on long term capital gains arisen
to CUHL on sale of equity shares of CIL will be 10 per cent
of the amount of capital gains as per proviso to section
112(1).
The Authority for Advance Rulings held that the assets
on which tax is payable in respect of any income arising
from the transfer are listed securities or unit or zero
coupon bond. If the asset is not a share or debenture,
the residents and non-resident assessees are allowed
computation of capital gains on the basis of indexation. In
respect of units and zero coupon bonds, which are other
than shares or debentures, all the assessees, whether
residents or non-residents, are eligible to the benefit of
indexation in the computation of capital gains arising on
their transfe. However, the 3rd proviso denies the benefit
of indexation to bonds or debentures. While applying the
proviso to section 112(1) to determine the tax payable,
the computation mechanism includes such assets. There
is thus no dichotomy in the proviso to section 112(1)
and the 3rd proviso to section 48. Section 48 is a section
which governs mode of computation of income whereas
section 112 determines the tax payable on such income.
It may be important to keep in mind that the application
of the proviso is based on the capital asset to which the
provisions of 2nd proviso to section 48 apply. If it is the
case that it applies to the 1st proviso meant for a nonresident assessee then the proviso would have made a
mention of it.
The indexation formula already enters into the
computation in the first limb where it is mentioned that
"tax payable in respect of any income arising from the
transfer of long-term capital asset" is to be determined. In
fact there is no issue on this part of proviso whether the
36
october
2011
544
2nd proviso to section 48 enters into the said computation

or not. The issue that arises lies in the second limb of the
proviso starting with the phrase "ten per cent of the amount
of capital gains before giving effect to the provisions of
the second proviso to section 48". This cannot be read to
mean "deny the concessional rate of tax to the category
of assessees who are not eligible to have the benefit of
indexed cost of acquisition under the second proviso of
section 48". It only conveys how a particular amount is to
be determined. Any other meaning would tantamount to
rewriting this part of the proviso of section 112(1).
As the indexation on the zero coupon bond is available
by virtue of 2nd proviso, it will affect the computation of
capital gains under section 48 on which tax is payable
under the first limb of the proviso and thus would not go
out of the purview of the proviso to section 112(1). The
zero coupon bond on which indexation is available will
get the benefit of the lower rate of tax at 10 per cent under
the proviso. The exclusion from application of 1st and
2nd provisos to section 48 while calculating the amount
of Income-tax on the income by way of long-term capital
gains in the cases of non-residents and allow them the
benefits of lower tax rates of 10 per cent also find mention
in sections 115AC(3) and 115AD(3). The Act has taken
care when, where, and how the 1st and the 2nd provisos
to section 48 are to be excluded. The long-term capital
gains on the sale of shares of the listed companies are
otherwise exempt from tax under section 10(38) if the
sale of the shares takes place through the recognized
stock exchange on which security transaction tax is paid.
However, in this case such exemption is not available as
the shares of the listed company CIL are sold in the offmarket mode.
As the section 48 must be read with section 112 and
if the tax on long-term capital gains provision cannot be
given effect to for any reason, then the provision has
no application under the Act. Resultantly, the applicant
is not eligible to avail the benefit of lower rate of tax of
10 per cent on the capital gains on the sale of shares
to PCIL.
545
Legal Decisions
LEGAL UPDATE
LD/60/42
Hyundai Heavy Industries Ltd.
Vs.
Union of India
July 21, 2011 (Uttarakhand)
[Assessment Years 2002-03, 2004-05 to 2007-08]
Section 144C of the Income-tax Act, 1961 read with
Rule 3 of the Income-tax Rules, 1962 Reference to
Dispute Resolution Panel
Provision of Section 144C and Rule 3 (2) of Rules is not
ultra vires
Where, one of members of Dispute Resolution Panel is
also a jurisdictional Commissioner, said officer should not
sit and adjudicate upon matter brought before DRP
The petitioner, being aggrieved by the draft assessment
orders, approached the Dispute Resolution Panel and filed
its objection. During the pendency of the proceedings
before the Panel it came to know that one of the members
of the collegium was a Commissioner presently holding
the post of Director of Income Tax (International Taxation),
who was ceased of various proceedings against the
petitioner. It was contended that the said DIT had exercised
his power granting approval for the re-assessment for
the same of assessment years in question under section
148. The petitioner consequently orally objected to the
constitution of the collegium and submitted that there
was a conflict of interest if the DIT continued to sit in the
collegium since he was involved in the reassessment
proceedings. Inspite of the oral objection, the DIT did not
recuse himself and participated in the proceedings and
finalised the draft assessment order. The Panel without
considering the objection of the petitioner issued orders
to the Assessing Officer by its order for the assessment
years in question.
The Uttarakhand High Court held that the doctrine
of nemo judex in causa sua is subject to the doctrine of
necessity. Bias cannot be established merely because one
of the members of the Dispute Resolution Panel is also a
jurisdictional Commissioner. Where, there was nothing
to indicate that the jurisdictional Commissioner was
interested in his personal capacity in the outcome of the
assessment order. Further, there was nothing to indicate
that the direction issued by the Panel to the Assessing
Officer was based on extraneous considerations.
The Commissioner is required to discharge certain
functions under the Act. He exercises his power impartially
and with an independant mind. Such exercise of statutory
functions does not get coloured when a member of a
Panel issues directions to the Assessing Officer.
The DIT in question was only discharging its statutory
functions provided under the Act and, therefore, on the
principles of the doctrine of necessity, bias stood excluded.
There was no violation of the principles of natural justice.
The law permits certain things to be carried out as a matter
of necessity. The doctrine of necessity makes it imperative
for the authority to carry out its statutory functions and if
october
2011
37
LEGAL UPDATE
Legal Decisions
the doctrine of necessity is not allowed full play in certain

situations, it would impede the course of justice.
The contention of the petitioner that Section 144C of
the Act and Rule 3 (2) of the Rules should be declared
ultravires was patently erroneous. Mere potential of bias
against one of the members of the panel will not render the
provision unconstitutional. In the facts and circumstances
of the case, there was no conflict of interest. Alleged bias
against one member of the Panel does not make the
provision ultravires. Even though, no specific prayer for
the quashing of Section 144C of the Act and Rule 3 (2) of
the Rules, was made in the petition. The Court has dwelt
on it since long drawn arguments were made. In the light
of the aforesaid, the provision of Section 144C of the Act
and Rule 3(2) of the Rules could not be held to be ultra
vires.
However, the jurisdictional Commissioner was one
of the members of the Panel. He was the officer who
approved the reopening of the assessment orders
and issued directions to the Assessing Officer, which
according to the averments in the counter affidavit, was
supervisory in nature. The respondents admitted that in
the exercise of statutory functions, the Officer could have
an official bias towards the department to which he was
attached and that it was extremely difficult to insulate the
officials discharging adjudicatory functions completely
from policy bias.
The DIT in question was exercising supervisory
functions and had a hand in the reopening of the
assessments under section 147/148 and was also a
member of the Panel considering the draft assessment
which has been made pursuant to the reopening of the
assessment. Therefore, real likelihood of bias could not be
ruled out. Even if the officer was impartial and there was
no personal bias or malice, nonetheless, a right minded
person would think that in the circumstances, there could
be a likelihood of bias on his part. In that event, the officer
should not sit and adjudicate upon the matter. He should
recuse himself. This follows from the principle that justice
must not only be done but seen to be done.
Excise
LD/60/43
Commissioner
of
Central
Excise
INDIRECT
Vs.
TAXES
Doaba Steel Rolling Mills
July 6, 2011 (SC)
Section 3A of the Central Excise Act,
1944, read with Rule 5 of the Hot
Re-rolling Steel Mills Annual Capacity
Determination Rules, 1997 Power of Central
Government to charge excise duty on the basis of
capacity of production in respect of notified goods
Rule 5 of the 1997 Rules will be attracted for determination
of the annual capacity of production of the factory when
38
october
2011
546
any change in the installed machinery or any part thereof

is intimated to the Commissioner of Central Excise in
terms of Rule 4(2) of the 1997 Rules
The short question for consideration is whether
Rule 5 of the 1997 Rules will apply in a case where a
manufacturer proposes to make some change in the
installed machinery or any part thereof and seeks the
approval of the Commissioner of Excise in terms of Rule
4(2) of the 1997 Rules?
The Supreme Court held that Section 3A was
inserted in the Act to enable the Central Government
to levy Excise duty on manufacture or production of
certain notified goods on the basis of annual capacity
of production to be determined by the Commissioner
of Central Excise in terms of the Rules to be framed by
the Central Government. Section 3A is an exception to
Section 3 the charging Section and being in nature
of a non obstante provision, the provisions contained in
the said Section override those of Section 3. Rule 3 of
Hot Re-rolling Steel Mills Annual Capacity Determination
Rules, 1997 framed in terms of Section 3A(2) lays down
the procedure for determining the annual capacity of
production of the factory. Sub-rule (3) of that Rule contains
a specific formula for determination of annual capacity
of production of hot rolled products. This is the only
formula whereunder the annual capacity of production of
the factory, for the purpose of charging duty in terms of
Section 3A, is to be determined. Second proviso to subsection (2) of Section 3A contemplates re-determination
of annual production in a case when there is alteration or
modification in any factor relevant to the production of the
specified goods but such re-determination has again to
be as per the formula prescribed in Rule 3(3) of the 1997
Rules. It is clear that sub-rule (2) of Rule 4, which, in effect,
permits a manufacturer to make a change in the installed
machinery or part thereof which tends to change the
value of either of the parameters, referred to in sub-rule
(3) of Rule 3, on the basis whereof the annual capacity of
production had already been determined, would obviously
require re-determination of annual capacity of production
of the factory/mill, for the purpose of levy of duty. It is plain
547
that in the absence of any other Rule, providing for any

alternative formula or mechanism for re-determination
of production capacity of a factory, on furnishing of
information to the Commissioner as contemplated in
Rule 4(2) of the 1997 Rules, such determination has to
be in terms of subrule (3) of Rule 3. That being so, it must
logically follow that Rule 5 cannot be ignored in relation to
a situation arising on account of an intimation under Rule
4(2) of the 1997 Rules. Moreover, the language of Rule
5 being clear and unambiguous, in the sense that in a
case where annual capacity is determined/redetermined
by applying the formula prescribed in sub-rule (3) of
Rule 3, Rule 5 springs into action and has to be given full
effect to.
The principle that a taxing statute should be strictly
construed is well settled. It is equally trite that the intention
of the Legislature is primarily to be gathered from the words
used in the statute. Once it is shown that an assessee
falls within the letter of the law, he must be taxed however
great the hardship may appear to the judicial mind to be.
There is no reason to depart from these well settled
principles to be applied while interpreting a fiscal statute.
Therefore, bearing in mind these principles and the
intent and effect of the statutory provisions, analysed, the
conclusion becomes inevitable that Rule 5 of the 1997
Rules will be attracted for determination of the annual
capacity of production of the factory when any change in
Legal Decisions
LEGAL UPDATE
the installed machinery or any part thereof is intimated to

the Commissioner of Central Excise in terms of Rule 4(2)
of the 1997 Rules.
LD/60/44
CCE
Vs.
Pals Microsystems Ltd.
July 29, 2011 (SC)
Section 11A of the Central Excise Act, 1944 Recovery of duties not-levied or not-paid or shortlevied or short-paid or erroneously refunded
Where alleged suppression of payment of duty by the
respondent-company was brought to the notice of the
authority on 25th October, 1996, whereas the show cause
notice was issued on 26th June, 2000 and department
could not establish that there was any suppression of facts
or a fraud on the part of assessee, notice could be said to
have been issued after expiry of the period of limitation
The alleged suppression of payment of duty by
the respondent-company was brought to the notice of
the authority on 25th October, 1996, when the
Superintendent of Central Excise had inspected the
premises of the respondent-assessee, whereas the
show cause notice was issued on 26th June, 2000.
The department could not establish that there was
any suppression of facts or a fraud on the part of the
respondent-assessee.
october
2011
39
LEGAL UPDATE
The Supreme Court held that the honest mistake

committed in maintenance of stock register etc. was frankly
admitted by the Managing Director of the respondentassessee. There was no finding to the effect that there
was a fraud or willful mis-statement or suppression of
facts. Thus, it was very clear that the notice was issued
after expiry of the period of limitation and the initiation
of proceedings against the respondent-assessee was
barred by limitation.
Service Tax
LD/60/45
Idea Mobile Communication Ltd.
Vs.
CCE & C
August 4, 2011 (SC)
Section 65 (105) (zzzx) of the Finance Act, 1994
Telecommunication Service
Value of SIM cards sold by mobile telecommunication
operators to subscribers is to be included in taxable
service under Section 65 (105)(zzzx), which provides for
levy of service tax on telecommunication service and it is
not taxable as sale of goods under Sales Tax Act
A SIM Card or Subscriber Identity Module is a portable
memory chip used in cellular telephones. It is a tiny
encoded circuit board which is fitted into cell phones at
the time of signing on as a subscriber. The SIM Card holds
the details of the subscriber, security data and memory to
store personal numbers and it stores information which
helps the network service provider to recognize the caller.
Kerala High Court, in Escotel Mobile Communications
Ltd. vs. Union of India and Others, (2002) 126 STC 475
(Kerala), has held that a transaction of selling of SIM Card
to the subscriber is also a part of the "service" rendered by
the service provider to the subscriber.
The charges paid by the subscribers for procuring a
SIM Card are generally processing charges for activating
the cellular phone and consequently the same would
necessarily be included in the value of the SIM Card.
The position in law is therefore clear that the amount
received by the cellular telephone company from its
subscribers towards SIM Card will form part of the taxable
value for levy of service tax, for the SIM Cards are never
sold as goods independent from services provided. They
are considered part and parcel of the services provided
and the dominant position of the transaction is to provide
40
548
Legal Decisions
october
2011
services and not to sell the material i.e. SIM Cards which
on its own but without the service would hardly have any
value at all. Thus, the value of SIM cards forms part of the
activation charges as no activation is possible without a
valid functioning of SIM card and the value of the taxable
service is calculated on the gross total amount received by
the operator from the subscribers. The Sales Tax authority
understood the aforesaid position that no element of sale
is involved in the present transaction.
Therefore, the value of SIM cards sold by the
appellant to their mobile subscribers is to be included
in taxable service under Section 65 (105) (zzzx), which
provides for levy of service tax on telecommunication
service and it is not taxable as sale of goods under the
Sales Tax Act.
O T H E R
Companies Act
LD/60/46
Legum & Law Awareness Society
Vs.
Union of India
August 11, 2011 (DEL)
Section 33 read with Section 459 of
the Companies Act, 1956 read with
Section 11 of the Limited Liability Partnership Act,
2008 Registration of Memorandum and Articles
Advocates/corporate advocates cannot be included in list
of practicing professionals and they cannot issue various
certificates integrated into various e-forms notified under
Companies Act, 1956 and Limited Liability Partnership
Act, 2008
The petitioner filed writ petition praying for direction to
respondent to include the advocates/corporate advocates
in the list of practicing professionals and enable them
to issue various certificates integrated into various
e-forms notified under the Companies Act, 1956 and the
Limited Liability Partnership Act, 2008 and to eliminate
the obligatory certification of e-forms notified under the
Companies Act, 1956 and the Limited Liability Partnership
Act, 2008.
The respondent, in the counter affidavit, has
clarified that full effect is being given to section 33 of the
Companies Act and section 11 of the Limited Liability
Partnership Act. The said provisions are being fully
complied with.
AC T S
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550
As far as filing of Forms 18 and 32 under the

Companies Act are concerned, these were never filed by
advocates. With the introduction of e-filing, the said forms
have to be now filed electronically. These forms required
declaration and verification to be made in the prescribed
format by the parties. There is similarly a provision for
making declaration and verification in the prescribed
format in respect of limited liability partnerships, which
again are required to be filed electronically. In this regard,
authentication or certification is required to be made by
company secretaries, chartered accountants and cost
accountants.
Keeping in view the explanation given by the
respondent, the prayer made by the petitioner could not
be accepted.
offence the Registrar of Companies had no knowledge,

but by 22nd December, 2008 the Registrar was deemed to
have knowledge of the offence as knowledge by the office
of the Regional director is knowledge of the Registrar of
Companies.
This application was filed on 4th August, 2010. On that
date no criminal complaint was lodged by the Registrar
of Companies, West Bengal. Therefore, if he was fixed
with knowledge of the alleged offence by 22nd December,
2008, cognizance of the offence was barred when this
application was filed. If cognizance of the offence would
be barred the alleged complaint would be liable to be
dismissed and the accused discharged. The above
cognizance of the offence would become barred.
LD/60/47
Sanjay Somani
Vs.
The Registrar of Companies, West Bengal
August 3, 2011 (CAL)
Section 295 read with Section 633 of the Companies
Act, 1956 read with Section 468 of the Criminal
Procedure Code 1973 Loans to Director
Alleged violation of Section 295 in advancing money to
another company in which directors of lender company
had more than 30% of paid-up share capital would fall
under section 468 of the Criminal Procedure Code;
accordingly, time limit for taking cognizance of the offence
is one year from date of its commission or knowledge by
inter alia person aggrieved by it
According to the Central Government the amount
paid by the Company in question to company H.N.G. was
loan and advance. According to them the Directors of the
Company were holding 30% of the paid up share capital of
the other Company and, therefore, for advancing money,
permission of the Central Government was required,
which was not obtained. Therefore, there was violation of
Section 295 (1) (d).
The High Court of Calcutta held that the first ground
taken was on limitation. The alleged violation is of Section
295. The penalty for such violations, if proved is six months
imprisonment or fine or both. Hence, under Section 468
of the CrPC the time limit for taking cognizance of the
offence is one year from the date of its commission or
knowledge by inter alia the person aggrieved by it. The
period for which the violation had allegedly taken place
ended 31st March, 2008.
Now it is the usual case of the Registrar of Companies,
that the date of knowledge is the date of the show cause
notice which is 14th July, 2010. Hence limitation did not set
in when this application was filed. The commencement of
the period of limitation is from the date of the offence or
from the date of knowledge of the offence by the person
aggrieved (See Section 469 (1) (a) and (b) of the CrPC).
Even if it is assumed that on the date of the alleged
Section 633 of the Companies Act, 1956 read with

Section 190 of Code of Criminal Procedure - Power of
Court to Grant Relief in Certain Cases
Papers in section 633(2) applications constitutes
information under Section 190 of Code of Criminal
Procedure, on basis of which High Court can dismiss
complaint and discharge accused
In the case of In Re S.B.I. Home Finance Ltd. Vs.
Regional Director, December 7, 2006 (CAL) it was held
that the High Court in a section 633(2) application
becomes a criminal Court and has the power to acquit or
exonerate an accused. The papers in the Section 633(2)
application constituted the information under Section 190
of the Code of Criminal Procedure, on the basis of which
the High Court can dismiss the complaint and discharge
the accused.
LD/60/48
Smt. Anupam Khosla
Vs.
Official Liquidator
July 20, 2011 (CAL)
Section 543 of the Companies Act, 1956 read
with Section 47 of the Presidency Insolvency Act,
1909 - Power of Court to Assess Damages against
Delinquent Directors, etc.
Section 47 of the Presidency Insolvency Act do not
authorise the Company Court to neither reopen decree
nor give any authority to adjust the amount realised in
execution of decree
An application for misfeasance was filed against the
ex-directors of company-in-liquidation in which an exparte misfeasance decree was passed. The assets of the
judgment debtors who were delinquent directors, were
sold in execution of the decree and decretal dues were
duly paid. The applicant preferred the instant application
for adjustments in decretal dues.
The High Court of Calcutta held that the High Court
has no authority and/or power to reopen the decree.
The decree had become final and binding upon all the
parties. Section 47 of the Presidency Insolvency Act do
42
october
2011
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not authorize this Court to reopen decree nor give any

authority to adjust the aforesaid amount of rent. Section
70 of the Contract Act had no application in the present
case of the petitioner. The applicant did not pray for any
variation before the Court when the order was passed.
The amount collected by the Official Liquidator could
be refunded only after the payments were made to the
secure creditors. The claim of the petitioner, on the basis
of the balance sheet prepared in 1958 was also not
acceptable to the Court in view of the fact that the order
of winding up was passed on 7-9-1965 and, therefore,
there was no scope today to consider the balance sheet
of 1958, which was lost all its relevance. Furthermore,
the claim made by the applicants as regards payment of
decretal dues to some persons were disputed questions
of facts and there was nothing on record before this Court
to come to a conclusion on the same either. Therefore, the
claim of making payments to the said persons was also
to be rejected.
SEBI
LD/60/49
Mansukh Securities and Finance Ltd.
Vs.
The Adjudicating Officer
July 7, 2011 (SAT-MUM)
Regulation 26 of the SEBI (Brokers and Stock
Brokers) Regulations, 1992 - Procedure for Action in
Case of Default - Liability for monetary penalty
Even where number of transactions, which were entered
into by appellant-stock broker in cash to/from clients in
lieu of securities, is small as compared to total number
of transactions but he had failed to give strict proof of
what were exceptional circumstances that led it to accept
or pay to client in cash, irregularity is culpable enough
calling for monetary penalty
The appellant/noticee stock broker was alleged to have
paid and received cash to/from clients in lieu of securities
which was alleged to be in violation of Regulation 26(xv)
of the Stock brokers Regulations, read with Boards
circular dated November 18, 1993 and August 27,
2003. The appellant submitted before the Board that the
transactions were made against trading obligation of
clients in exceptional circumstances and in the interest
of commercial prudence. It was further submitted by it
that the number of such transactions is negligible when
compared to the total transactions during the period
covered by the inspection report.
The Tribunal held that Regulation 26 of the stock
brokers regulations makes a stock broker or a sub broker
liable to monetary penalties in respect of the violations
mentioned there under. Clause (xv) of the said regulation
makes failure to comply with the directions issued by
the Board under the Act or the Regulations framed there
under liable to monetary penalty. The violation in the case
in hand was neither of the Act nor of the Regulations
44
october
2011
552
framed there under but of the two circulars of Board dated

18-11-1993 and 27-8-2003. Perusal of the record showed
that the number of transactions which were entered into
by the appellant-stock broker in cash to/from clients in lieu
of securities was small as compared to the total number
of transactions entered into by the appellant during the
inspection report and all such transactions are of amounts
less than ` 20,000.
The purpose of carrying out inspection is not punitive
and every minor discrepancy/ irregularity found during
the course of inspection is not culpable and the object of
the inspection could well be achieved by pointing out the
irregularities/deficiencies to the intermediary at the time
of inspection and making it compliant. While holding the
appellant guilty of this irregularity, the adjudicating officer
had stated that the noticee failed to give strict proof of
what were the exceptional circumstances that led noticee
to accept or pay to the client in cash. If that was so, the
adjudicating officer could have sought further clarification
from the appellant which was not done. In the facts and
circumstances of this case the irregularity was culpable
enough calling for monetary penalty.

Where some persons who operated proprietary account
trading enabled terminals, were employees of its group
company and those employees were seconded to it by
said group company and were working under direct
control and supervision of appellant, in absence of any
bar in Rules or Regulations on this subject, there was no
illegality or irregularity in procedure adopted by appellant
in this regard
The irregularity for which the appellant/noticee had
been held guilty by the adjudicating officer was that the
appellant allowed unauthorized persons i.e. the employees
of its group company to carry out proprietary account
trading besides client based trading. The appellant had
admitted that some persons who operated the proprietary
account trading enabled terminals were employees of its
group company and those employees were seconded to
it by the said group company and were working under the
direct control and supervision of the appellant. The proof
of secondment of the persons by the group company was
also submitted by the appellant which was not accepted
by the adjudicating officer on the ground that it was not
ascertainable whether the persons who were deputed to
the noticee carried out the proprietary trading besides
client based trading. The other ground for not accepting
the appellants reply was that the memos of secondment
were blanket agreement entered into with a group
company.
The Tribunal held that the logic given by the adjudicating officer of the Board could not be accepted.
553
Legal Decisions
LEGAL UPDATE
In the absence of any bar in the rules or regulations on

this subject, there was no illegality or irregularity in the
procedure adopted by the appellant in this regard.

Where no explanation is forthcoming on records explaining
entries in sample of receipts and payments made through
clients account with regard to salary, interest on FD,
telephone charges, FDR etc. Such withdrawals are not
permissible under Boards circular dated 18-11-1993
The appellant had been found guilty for failure to
segregate the clients fund from its own fund which
resulted in clients accounts being used for purposes
other than that of clients transaction. In its response to
the adjudicating officer, the appellant had submitted that
the amounts alleged to have been withdrawn by it from
the client accounts and used for purposes other than
client transaction never exceeded the brokerage due to it
on the date of such withdrawal.
The Tribunal held that the Boards circular dated
November 18, 1993 which prescribes regulation of
transactions between clients and brokers specifically
mandates that no money shall be drawn from clients
account other than some specified ones.
No explanation was forthcoming on records
explaining the entries in the sample of receipts and
payments made through clients account with regard
to salary, interest on FD, telephone charges, FDR, etc.
Such withdrawals are not permissible under the Boards
circular referred to above. Therefore, there was no infirmity
in the findings arrived at by the adjudicating officer in
this regard.

Where appellant broker failed to mention settlement
number and order time in contract notes and thus, failed
to issue contract notes in form and manner as required
and for such procedural irregularities corrective measures
had been taken by appellant, said irregularities did not
call for any punitive action
The appellant-broker had been found guilty of not
mentioning settlement number and order time in the
contract notes and thus, failed to issue the contract notes
in the form and manner as required under the Regulations
and this amounted to violation of regulation 26(xvi).
The Tribunal held that these procedural irregularities
for which corrective measures had been taken by the
appellant. Thus, the irregularities did not call for any
punitive action.
october
2011
45
LEGAL UPDATE
Circulars / Notifications
554
Circulars/Notifications
Given below are the important Circulars and Notifications issued by the CBDT, CBEC, MCA, RBI and SEBI during the last
month for information and use of members. Readers are requested to use the Citation/website or weblink to access the full
text of desired circular/notification. You are requested to please submit your feedback and suggestions on the column at
eboard@icai.org.
DIRECT
TAXES
(Matter on Direct Taxes has been

contributed by the Direct Taxes
Committee of the ICAI)
I. CIRCULARS
1. Circular No.5/2011 dated August 16,
2011.
The Central Board of Direct Taxes has
through this circular, provided the rates for deduction
of income-tax from the payment of income chargeable
under the head Salaries during the financial year
2011-12 and explained certain related provisions of
the Income-tax Act, 1961.
2. Circular No.6/2011 dated August 24, 2011.
The Central Board of Direct Taxes has through this
circular, modified Circular No.02/2011, dated April
27, 2011, which had prescribed the procedure for
regulating refund of amount paid in excess of tax
deducted and/or deductible in respect of TDS on
residents covered under sections 192 to 194LA of the
Income-tax Act, 1961.
In partial modification of Circular No. 2/2011, dated
April 27, 2011, it has now been provided that:
The refund claims pertaining to the period up to
March 31, 2009 may be submitted to the Assessing
Officer (TDS) up to December 31, 2012.
The complete details of the text of the circulars can be
downloaded from the link http://law.incometaxindia.gov.
in/DIT/Circulars.aspx
II.NOTIFICATIONS
1. Notification No. 47/2011, dated September 1,
2011.
In exercise of the powers conferred by section 90 of
the Income-tax Act, 1961, the Central Government
through this notification notifies that, all the provisions
of the Second Protocol amending the agreement
between the Government of the Republic of India and
the Government of the Republic of Singapore for the
avoidance of double taxation and the prevention of
fiscal evasion with respect to taxes on income, shall
be given effect to in the Union of India for taxable
periods falling after January 1, 2008, that is, Financial
Year 2008-09 and subsequent financial years in
accordance with the provisions specified in Article 3
of the Protocol.
2011.
In exercise of the powers conferred by sub-section
(1) of section 90A of the Income-tax Act, 1961 the
Central Government had adopted the agreement
between India-Taipei Association in Taipei and Taipei
Economic and Cultural Center in New Delhi for the
46
october
2011
avoidance of double taxation and the prevention of

fiscal evasion with respect to taxes on income and
notifies that all the provisions of the said agreement
shall be given effect to in the Union of India with effect
from the 1st day of April, 2012.
2011.
In exercise of the powers conferred by section 10(45)
of the Income-tax Act, 1961, the Central Government
has through this notification, notified certain
allowances and perquisites for serving Chairman
and members of Union Public Service Commission
namely, the value of rent free official residence,
conveyance facilities, sumptuary allowance and leave
travel concession. The said notification also notifies
allowances and perquisites for retired Chairman and
retired members of Union Public Service Commission
which are as follows:
a) A sum of maximum R14000 per month for defraying
the service of an orderly and meeting expenses
incurred towards secretarial assistance on contract
basis.
b) The value of a residential telephone free of cost and
the number of free calls to the extent of R1500 pm
(over and above free calls allowed)
This notification shall come into force from April 1, 2008.
2011.
In exercise of the powers conferred by section
80CCF of the Income-tax Act, 1961, the Central
Government through this notification, specifies the
long term infrastructure bonds to be issued in the
financial year 2011-12 by IFCI, LIC, IDFCL, IIFCL and
a Non-Banking Finance Company classified as an
Infrastructure Finance Company by Reserve Bank
of India, as Long Term Infrastructure Bonds for the
purpose of the deduction under section 80CCF.
The notification further specifies certain conditions
relating to limit on issuance, tenure of the bond, yield
of the bond, end-use of the proceeds and reporting
or monitoring mechanism.
Further, it shall be mandatory for the subscribers to
furnish their PAN to the issuer.
The complete details of the text of the above-mentioned
notifications can be downloaded from link http://law.
incometaxindia.gov.in/DIT/Notifications.aspx
III. PRESS RELEASE
1. Press Release No.402/92/2006-MC (20 of 2011),
dated August 24, 2011.
The Government of India has signed an Agreement
for Avoidance of Double Taxation and the Prevention
of Fiscal Evasion with respect to Taxes on Income
and on Capital (DTAA) with Government of Georgia.
555
The complete details of the text of the abovementioned press release can be downloaded from
the following link http://www.incometaxindia.gov.in/
press_release.asp
IV. LETTERS
1. Letter No. DIT(L&R)-I/SLP/393/2011/4589 dated
September 2, 2011
The revised monetary limit (R4Lakhs) for filing appeals
by the department before Appellant Authorities
became effective for the appeals filed on or after
February 09, 2011 i.e. the date of issue of instruction
no:03/2011. The Honble Delhi High Court, on the
basis of revision in monetary limits, had summarily
dismissed the appeals filed by the department prior
to February 09, 2011 on the ground that the tax effect
involved was less than the revised monetary limit.
On this issue, a Special Leave Petition (SLP) was
filed by the Surya Herbal, in response to which the
Supreme Court has directed that in all such cases
review petition be filed in High Court within two
weeks and that High Courts not to apply the said
instructions ipso facto in respect of appeals filed prior
to February 09, 2011. The Directorate of Income-tax
(Legal & Research)-I has through this letter requested
the Chief CITs and DGITs to take immediate steps
to file review petition in High Court pointing out the
observations of Supreme Court and has also advised
the officers not to send any proposals to file SLP in
such cases.
In furtherance to the said instructions, letter No.
DIT(L&R)-I/NZ/SLP/393/2011/5091 dated September
16, 2011 has been issued by the Office of the Director
of Income-tax (Legal & Research)-I to all Chief CITs
and DGITs. In the said letter, the field officers have
been advised to file a recall/ review petition in High
Court as may be suggested by the Sr. Standing
Counsel in a particular case.
The said letter has also clarified that since appeal to
High Court was filed as per the relevant Instruction
applicable at the time of filing, review/ recall petition in
such cases is also to be filed where tax effect is less than
R4 Lacs, if filing appeal to High Court was permissible
as per Instruction applicable at the time of filing.
The complete text of the above mentioned letters may
be downloaded from http://www.itatonline.org
INDIRECT
TAXES
(Matter on Indirect Taxes has been

contributed by the Indirect Taxes
Committee of the ICAI)
A. SERVICE TAX
I. Notification:
1.
Notification No. 43/2011 ST
dated August 28, 2011: Service Tax Rules, 1994
have been amended to provide that every assessee
will have to submit half-yearly service tax return
electronically, irrespective of the amount of service
2.
3.
LEGAL UPDATE
tax paid by him in the preceding financial year. The

amendment would be effective from October 1,
2011.
At present, electronic filing of service tax returns is
mandatory for the assessees who have paid service
tax of R10 lakh or more including the amount of
service tax paid by utilisation of CENVAT credit in the
preceding financial year.
Notification No. 44/2011 ST dated September
09, 2011: Business Auxiliary Services provided by
Sub Brokers to Stock-Brokers in relation to sale or
purchase of securities listed on a registered stock
exchange are exempt from payment of service tax
vide Notification No. 31/2009 ST dated September
01, 2009. Such exemption has now been extended to
the authorised person also.
Notification No. 45/2011 ST dated September 12,
.2011: Taxable services provided to any business
entity, by an arbitral tribunal, in respect of arbitration
have been exempted from payment of service tax.
II. Circular:
1. Circular No. 145/14/2011 ST dated August 19, 2011:
CBEC has clarified that fees charged for issuance of
country of origin certificate (COOC) by Chambers of
Commerce is liable to service tax under technical
inspection or certification service.
The Board has clarified that though the above service
may also fall under club or association service, but
the technical inspection and certification agency
service, being a specific description when compared
to a general description of club or association
service, would be the correct classification as per the
principles of classification provided in section 65A of
Finance Act, 1994.
It may be noted that service tax paid on technical
inspection & certification of export goods is eligible for
refund under Notification 17/2009 dated July 7, 2009.
B. CENTRAL EXCISE
I. Notifications:
1. Notification No. 21 & 22/2011 CE (NT) dated
September 14, 2011: Central Excise Rules, 2002
have been amended to provide that the returns and
statements prescribed under rule 12 will have to be
filed electronically by all the assessees irrespective
of the duty paid in the preceding year. Monthly
Return for production and removal of goods (ER-1),
Quarterly Return (ER-3), Annual Financial Information
Statement (ER-4) are some of the returns and
statements prescribed under Rule 12.
Assessees availing exemption under Notification No.
49/2003 CE dated June 10, 2003 or Notification No.
50/2003 CE dated June 10, 2003 have been exempted
from the requirement of e-filing of the returns prescribed
under rule 12. Notification No. 49/2003 CE dated the
June 10, 2003 exempts certain goods when cleared
from a unit in the State of Uttaranchal or Himachal
october
2011
47
LEGAL UPDATE
556
Pradesh. Notification No. 50/2003 CE dated June 10,

2003 exempts certain goods when cleared from a unit
located in the Industrial Growth Centre or Industrial
Infrastructure Development Centre or Export Promotion
Industrial Park or Industrial Estate or Industrial Area or
Commercial Estate or Scheme Area.
Hundred per cent Export Oriented Undertakings will
also be required to submit the monthly excise return
(ER-2) electronically irrespective of the duty paid in
the preceding year.
Similar amendment has been made in CENVAT
Credit Rules, 2004 to the effect that the assessees
will now have to file the annual declaration in respect
of principal inputs (ER-5) and the monthly return
of information relating to principal inputs (ER-6)
electronically irrespective of the duty paid in the
preceding year.
The amendments will become effective from October
1, 2011.
2. Notification No. 20/2011 CE (NT) dated September
13, 2011: CBEC had notified new Form ER-1 & Form
ER-3 of Excise Returns vide Notification No. 16/2011
CE (NT) dated July 18, 2011 which were to be effective
from October 01, 2011. The forms have been further
amended by the CBEC. The new Forms along with
the amendments would be effective from January 01,
2012.
Form ER-1 is the form for filing Monthly Return for
Production and removal of Goods and Form ER-3 is
the form for Quarterly Return for Clearance of Goods
& CENVAT credit.
(Matter on FEMA has been

contributed by CA. Manoj Shah and
CA. Hinesh Doshi)
1. Opening and Maintenance of
Vostro Accounts of Non-resident
Exchange Houses
A.P. (DIR Series) Circular No.09 dated
August 29, 2011
In terms of para (A)(1) of Annex-I of
A.P.(DIR Series) No.28 [A.P(FL/RL Series) Circular No.02]
dated February 06, 2008, under the Rupee Drawing
Arrangements (RDAs), inward remittances for permissible
purposes are received in India through Exchange Houses
situated in Gulf countries, Hong Kong and Singapore,
with prior approval of the Reserve Bank. With a view to
extending the scope of the said Arrangement to other
jurisdictions, it has been decided to extend the RDAs only
under the Speed Remittance procedures to Exchange
Houses situated in Malaysia.
C. CUSTOMS
I. Notification:
1. Circular No. 37/2011 Cus. dated August 23, 2011:
CBEC has formulated an Authorised Economic
Operators (AEO) programme to address the growing
concern amongst Customs administrations about the
threat posed through misuse of channels of import
and export. The objective of programme is to ensure
security in global supply chain from the point of origin
i.e., the point of export to import in the receiving
country, keeping in view national requirements of
respective administrations. The programme has been
developed pursuant to guidelines of WCO adopted in
SAFE FoS (Framework of Standard) in 2005.
One of the salient features of the AEO programme
is that any economic operator such as importer,
exporter, logistics provider, Customs House Agent can
apply for authorisation subject to certain conditions.
The authorisation would normally be granted within
90 days of receipt of application if the same is found
to be acceptable and not deficient in any material
particulars.
The AEO Programme envisages various benefits
to different categories of economic operators such
as importers, exporters, Customs House Agents,
etc. The intention is to give AEO certified operators
2. External Commercial Borrowings (ECBs)

Simplification of Procedure
A.P. (DIR Series) Circular No.11 dated September 07,
2011
As per the extant ECB procedures, any request for
change of the lender for an existing ECB is required to
be referred by the Authorised Dealer Bank to the Reserve
Bank (RBI) for necessary approval.
As a measure of simplification of the existing
procedures, RBI has decided to delegate powers to the
designated AD Category-I banks to approve the request
from the ECB borrowers with respect to change in the
recognised lender provided:
1. the original lender is an international bank or a
multilateral financial institution (such as IFC, ADB,
CDC, etc.) or a regional financial institution or a
Government owned development financial institution
or an export credit agency or supplier of equipment;
2. the new lender also belongs to any one of the above
mentioned categories, subject to the Authorised
Dealer ensuring the following conditions:(i) the new lender is a recognised lender as per the
extant ECB norms;
(ii) there is no change in the other terms and
conditions of the ECB; and
48
october
2011
preferential treatment in terms of less Customs

examination, relaxed procedural requirements etc.
The AEO programme would be implemented on
voluntary basis i.e. those who are interested in getting
benefits of the programme may apply for authorisation.
The authorisation would be granted after detailed precertification verification and validation done by AEO
Programme Team.
The complete text of the above-mentioned
notifications and circulars can be downloaded from
www.cbec.gov.in
FEMA
Advertisement
LEGAL UPDATE
(iii) the ECB is in compliance with the extant

guidelines.
However, changes in the recognised lender in case of
foreign equity holder and foreign collaborator will continue
to be examined by the RBI. The changes in the recognised
lender should be promptly reported to the Department of
Statistics and Information Management, RBI in Form 83.
The above modifications to the ECB guidelines will
come into force with immediate effect. All other aspects of
the ECB policy shall remain unchanged.
The full text of the above circulars is available on the
website www.rbi.org.in
(Matter on Corporate Laws has been
contributed by CA. Jayesh Thakur)
LAWS
MCA
1. Revised forms 23AC and 23ACA
notified by MCA
www.mca.gov.in
The MCA has issued Notification
F. No. 5/18/2005 - CLV dated August
11, 2011 revising the form 23AC (Form
relating to filing balance sheet and other documents with
the RoC) and form 23ACA (Form for filing profit and loss
account and other documents with the RoC). These new
forms will be effective from August 12, 2011. One may
refer to the above citation and website for further details
and the forms.
CORPORATE
2. Repeal of online incorporation of companies within

24 hours
www.mca.gov.in
The MCA has issued General Circular No. 61/2011
dated September 05, 2011 referring to its earlier Circular
whereby the procedures to enable promoters to get their
companies incorporated online within 24 hours was
provided. It had stated that in case the e-forms 1, 18, 32
and e-form for Memorandum of Association (MOA) and
Articles of Association (AOA) have been certified by the
practicing professional regarding the correctness of the
information and declarations given by the subscribers,
the application shall be processed electronically and
the digital certificate of incorporation shall be issued
immediately online by the Registrar of Companies. The
MCA has re-examined the matter and decided that since
now companies are being incorporated within 24-48
hours, on-line approval of incorporation forms i.e. STP
mode of approval of e-forms 1, 18 and 32 on the basis
of certification and declarations given by the practicing
professional is not going to be implemented yet. One may
refer to the above citation and website for further details.
3. Applicability of revised schedule VI format to
companies proposing IPO
www.mca.gov.in
dated September 05, 2011 referring to its earlier notifi50
october
2011
558
cation regarding revised schedule VI of the Companies

Act, 1956 in relation to which clarification was sought
that during the current year, the MCA has amended the
Schedule VI which is to take effect for accounts closing
on March 31, 2012. During the financial year, in case
companies intend to go for Initial Public Offer / Further
Public Offer, they are expected to prepare accounts in the
new Schedule VI format. If previous figures are reclassified
in accordance with new Schedule VI, this will pose
enormous amount of administrative work and difficulty in
making such changes besides making comparison with
previous year unrealistic. Hence, the MCA has clarified
that the presentation of financial statements for the limited
purpose of IPO/FPO during the financial year 2011-12
may be made in the format of the pre-revised Schedule
VI under the Companies Act, 1956. However, for period
beyond March 31, 2012, they would prepare only in the
new format as prescribed by the present Schedule VI of
the Companies Act, 1956. Also, companies would ensure
that it will prepare and file the annual accounts for the
financial year 2011-12 as per revised Schedule VI of the
Companies Act, 1956. One may refer to the above citation
for further details.
4. Compliance of the provisions of the Companies
Act, 1956
www.mca.gov.in
dated September 06, 2011 referring to its earlier
Circular which informed that in order to ensure corporate
governance and proper compliances of provisions of
Companies Act, 1956, no request, whether oral or in
writing or through e-forms, for recording any event based
information / changes shall be accepted by the Registrar
of Companies (RoCs) from such defaulting companies,
unless they file their updated balance sheet and profit &
loss accounts and annual return with the RoCs. However,
in the interest of stakeholders, certain event based
information/changes were being accepted by the RoC from
such defaulting companies. Now, on requests received
from various quarters of the corporates and professionals,
the RoC shall accept Forms 2, 3, 5, 23, 61 in cases of
filing by directors of defaulting companies in respect of
such companies. Forms 61, DIN-3, 32, 21, FTE in cases
of filing by directors of defaulting companies in respect
of companies having the status of dormant companies.
Forms DIN-3, 32, 2, 3, 5, 21, 23, 61, 23AC, 23ACA, 20B,
21A, 66, 23-B, FTE in cases of filing by directors of
defaulting companies in respect of companies having the
status as active in progress companies. This circular shall
be effective from September 18, 2011. One may refer to
the above citation and website for further details.
5. Replacement of LLP annual compliance Form to
enable STP
www.mca.gov.in
The MCA has issued Notification No. F.No.2/17/2011-
CLV dated September 14, 2011 replacing the Form 8

(Statement of Account & Solvency) relating to annual
filing for LLPs. The only change in the form is in relation
to the enabling of the form for submission / uploading of
the same online in a straight-through processing (STP)
manner. There is no other change in the content. One may
SEBI/RBI
6. Transparency in payment of commission and load
structure of mutual funds
www.sebi.gov.in
The SEBI has issued Circular No. Cir/IMD/DF/13/2011
dated August 22, 2011 regarding empowering investors
through transparency in payment of commission and
load structure. In order to enable people with small saving
potential and to increase the reach of Mutual Fund products
in urban areas and smaller towns, it has been decided
that a transaction charge per subscription of R10,000/and above be allowed to be paid to the distributors of
the Mutual Fund products from the date of this circular.
However, there shall be no transaction charges on direct
investments. The transaction charge shall be subject
to guidelines as per this Circular. Also, in the interest of
investors, the need to regulate the distributors through
AMCs (Asset Management Companies) by putting in
place a due diligence process to be conducted by AMCs
is decided and that the due diligence process shall be
initially applicable for distributors satisfying one or more
of the following criteria, (a) Multiple point presence
(more than 20 locations), (b) AUM (Assets Under
Management) raised over R100 crore across industry in
the non-institutional category but including high net worth
individuals (HNIs), (c) Commission received of over R1
crore p.a. across industry, and, (d) Commission received
of over R50 lakh from a single Mutual Fund. Earlier, SEBI
had stipulated that only compounded annualised yield
shall be advertised if the scheme has been in existence
for more than 1 year. It has now been decided that when
the scheme has been in existence for more than three
years, (a) point-to-point returns on a standard investment
of R10,000/- shall also be shown in addition to CAGR
for a scheme in order to provide ease of understanding
to retail investors, and, (b) performance advertisement
shall be provided since inception and for as many twelve
month periods as possible for the last 3 years, such
periods being counted from the last day of the calendar
quarter preceding the date of advertisement, along with
benchmark index performance for the same periods. One
may refer to the above citation and website for further
details.
7. Processing of Investor Complaints in SEBI
Complaints Redress System (SCORES)
www.sebi.gov.in
The SEBI has issued Circular No. CIR/MIRSD/17/2011
LEGAL UPDATE
dated August 24, 2011 referring to processing of investor

complaints in a centralised web based complaints redress
system SCORES (SEBI Complaints Redress System).
The salient features of this system are, (a) centralised
database of all complaints, (b) online movement of
complaints to the concerned intermediaries, (c) online
upload of Action Taken Reports (ATRs) by the concerned
entities, and, (d) online viewing by investors of action
on the complaints and its current status. Henceforth all
complaints shall be forwarded electronically through
SCORES only. The pending complaints will be available
at http://scores.gov.in/admin and the concerned entities
should submit the ATR (Action Taken Report ) along
with supporting documents electronically in SCORES.
Also, updation of action taken would not be possible
with physical ATRs. Hence, submission of physical ATR
will not be accepted for complaints lodged in SCORES.
Intermediaries can view the complaints in the SCORES
system by logging in with their user id and password which
will be communicated separately. A daily alert on pending
complaints will be forwarded at the e-mail ID registered
with SEBI for regulatory communications. Failure on the
part of the entity in updating the ATR on the SCORES will
be considered as non-redressal of complaint and will be
shown as pending against the entity. One may refer to
the above citation and website for further details. Similar
Circulars are issued in relation to redressal of investor
grievances against stock brokers and sub-brokers in
(by Circular No. CIR/MIRSD/18/2011 dated August 25,
2011) and in relation to redressal of investor grievances
against depository participants (by Circular No. CIR/
MIRSD/20/2011 dated September 12, 2011).
8. Business activities of the asset management
company and infrastructure debt fund schemes
www.sebi.gov.in
The SEBI has issued Circular No. LAD-NRO/GN/201112/27668 dated August 30, 2011 amending the (Mutual
Funds) Regulations, 1996 in relation to restrictions on
business activities of the asset management company
(AMC) which provides that the AMC shall not act as a
trustee of any mutual fund and not undertake any business
activities other than in the nature of management and
advisory services provided to pooled assets including
offshore funds, insurance funds, pension funds, provident
funds, if any of such activities are not in conflict with the
activities of the mutual fund. It is provided that the AMC shall
not invest in any of its scheme, unless full disclosure of its
intention to invest has been made in the offer documents,
in case of schemes launched after the notification of
SEBI (Mutual Funds) (Amendment) Regulations, 2011.
Also, the AMC shall not carry out its operations including
trading desk, unit holder servicing and investment
operations outside the territory of India. Also, by this
Circular the Infrastructure debt fund schemes regulations
are also issued which contain detailed regulations on
october
2011
51
LEGAL UPDATE
applicability, eligibility criteria for launching infrastructure

debt fund scheme, conditions for infrastructure debt
fund schemes, permissible investments, valuation of
assets and declaration of net asset value, duties of asset
management company, disclosures in offer document
and other disclosures, transactions by employees, etc.
One may refer to the above citation and website for further
details.
9. Amendment to SEBI (Mutual Funds) Regulations
regarding abridged annual reports
www.sebi.gov.in
The SEBI has issued Circular No. Cir/IMD/DF/16/2011
dated September 08, 2011 amending the SEBI (Mutual
Funds) Regulations, 1996 in relation to abridged scheme
wise annual report format and periodic disclosures to
the unitholders and regarding mailing of scheme wise
annual report or abridged summary. Now, in order to
bring cost effectiveness in printing and dispatching the
annual reports or abridged summary and as a green
initiative measure, it shall be ensured that, (a) In case of
unitholders whose email addresses are available with the
Mutual Fund, the AMCs shall communicate to them stating
that henceforth, the scheme annual reports or abridged
summary would only be sent by email, (b) In case of
unitholders whose email addresses are not available with
the Mutual Fund, the AMCs shall communicate to the
unitholders to obtain their email addresses for registration
of the same in their database, (c) The communication
in both the above cases shall clearly mention that the
scheme annual accounts or abridged summary would
henceforth be sent to these email addresses and not as
physical copies and the communication shall also have
an option for the investors stating that those who still wish
to receive the reports as physical copies may indicate as
such, (d) In case of any request from these unitholders as
detailed above for physical copies notwithstanding their
registration of email addresses, AMCs shall provide the
same without demur. (e) For the rest of the investors, i.e.
whose email addresses are not available with the mutual
fund, the AMCs shall continue to send physical copies of
scheme annual reports or abridged summary, and, (f) The
AMCs shall display the link of the scheme annual reports
or abridged summary prominently on their websites and
make the physical copies available to the investors at their
registered offices at all times. One may refer to the above
citation and website for further details.
10. Simplified issuance of non-convertible
debentures (NCDs)-minimum rating of NCDs
www.rbi.gov.in
The RBI has issued Circular No. IDMD.PCD.
08/14.03.03/2011-12 dated August 23, 2011 relating to
regulation of NCDs of maturity up to one year. In view
of the standardisation of rating symbols and definitions
for credit rating agencies by Securities Exchange Board
52
october
2011
of India (SEBI), the Reserve Bank of India has issued an

amendment Direction, i.e., Issuance of Non-Convertible
Debentures (Reserve Bank) (Amendment) Directions,
2011, inter alia, revising the symbol of minimum rating
required for issuing NCDs of maturity up to one year. The
minimum credit rating shall be A2 [As per rating symbol
and definition prescribed by Securities and Exchange
Board of India (SEBI)].These Directions may be referred
to as the Issuance of Non-Convertible Debentures
(Reserve Bank) (Amendment) Directions, 2011 and shall
be effective from today, i.e., August 23, 2011. One may
11. Infrastructure Finance Companies (IFCs) - as
eligible issuers for FII investment limit in debt
instrument for infrastructure
www.rbi.gov.in
The RBI has issued Circular No. CIR/IMD/FIIC/15/2011
dated August 26, 2011 referring to SEBI circular on FII
investment in the corporate bonds issued by Indian
companies which are in the infrastructure sector, where
infrastructure is defined in terms of the extant guidelines
on External Commercial Borrowings (ECB). The RBI has
now clarified that Non-Banking Financial Companies
(NBFCs) categorised as Infrastructure Finance Companies
(IFCs) by the Reserve Bank of India (RBI) shall also
now be considered eligible issuers for the purposes of
FII Investment under the corporate debt long term infra
category. One may refer to the above citation and website
for further details.
12. Dissemination of credit information of suit-filed
accounts
www.rbi.gov.in
The RBI has issued Circular No. CID.
BC.30/20.16.042/2011-12 dated September 05, 2011
regarding submission of credit information to Credit
Information Bureau (India) Ltd (CIBIL) and dissemination
of credit information as also role of CIBIL in the matter. It
is reiterated that currently certificate of registration (CoR)
has since been issued to 3 Credit Information Companies
(CICs), viz., Experian Credit Information Company of
India Pvt. Ltd., Equifax Credit Information Services Pvt.
Ltd. and High Mark Credit Information Services Pvt. Ltd.
to commence the business of credit information under the
Credit Information Companies (Regulation) Act, 2005. It is
now advised that such CICs should submit the quarterly
list of suit-filed accounts of R1 crore and above, classified
as doubtful or loss, to CIBIL and/or any other credit
information company which has obtained CoR from RBI
and of which the bank is a member. Further, it is advised
that the above CICs have been advised to disseminate
credit information covering data supplied by banks/FIs
on such suit-filed accounts on their respective websites.
One may refer to the above citation and website for further
details.
n
561
OPINION
Segment Reporting
The following is the opinion given by the Expert Advisory Committee of the Institute in response to a query
sent by a member. This is being published for the information of readers.
A. Facts of the Case
published statement of annual accounts:
1. An unlisted public limited company is engaged in

the business of manufacturing products on contract
basis. The turnover of the company for the financial
year 2009-10 was R260 crore. The company
manufactures engineering products, castings,
etc. as per the design, engineering standards and
specifications prescribed by the customers. The
company manufactures industrial valves under
brand name of its customer at USA. The company
also manufactures castings both machined and
unmachined and supplies the same to tractor and
auto sector. Again, these are components used by
manufacturers of tractors, trucks, etc. The company
also supplies components to a public sector
undertaking for use in earth moving equipment.
According to the querist, the company has only
one product sold in its brand name, i.e., gear boxes
which account for less than 3% of the turnover. The
company has not more than 12 customers who
either use components supplied by the company
in their own products, for example, tractor, truck,
earth moving equipment, etc. or sell the products
under their own brand name and the end customer
does not recognise the company.
Segment Reporting
The company has confirmed that they are operating
as a single business and geographical segment.
As such, there are no reportable segments as per
Accounting Standard 17 on 'Segment Reporting.
2. The querist has stated that the geographical

distribution of the sales of the company is also
restricted to one country/region. For example, more
than 95% of valves are supplied to USA. Castings
are sold in India with a small portion of export.
3. The querist has also stated that the financial
statements presented and reviewed by the
Board is for the company as a whole without any
segmentation. Bank facilities are also arranged
based on the financials of the company as a single
segment organisation. Banks have accepted this
position.
4. Based on these facts, the company has given the
following note under Notes on Accounts in the
This is the settled position from the financial year

2001-02 to 2009-10. The company had a change of
auditors recently and they desire that the position
should be re-examined. The querist has stated that to
be consistent, the company would prefer to continue
the present practice.
B. Query
5. On the facts and circumstances stated above, the
querist has sought the opinion of the Expert Advisory
Committee as to whether it is in order to continue
the present practice of treating the business as a
single segment, i.e., contract manufacturing.
C. Points considered by the Committee
6. The Committee, while answering the query, has
considered only the issues raised in paragraph 5
above and has not touched upon any other issue
arising from the Facts of the Case. The Committee
also wishes to state that in the absence of the
facts related to risks and returns associated with
various products of the company or various
regions/countries in which the company operates,
the Committee is, hereinafter, laying down broad
principles to be applied while identifying the
reportable segment as per the provisions of AS
17.
7. The Committee notes that as per the provisions of
Accounting Standard (AS) 17, Segment Reporting,
notified under the Companies (Accounting
Standards) Rules, 2006 (hereinafter referred to as
the Rules), the components of an enterprise that
october
2011
53
562
OPINION
are required to be reported separately have to first

fall within the definitions of the terms business
segment or geographical segment before being
considered as reportable segments as per the
threshold criteria laid down in paragraph 27 of
AS 17, notified under the Rules. In this context,
the Committee notes the definitions of the terms
business segment and geographical segment as
per AS 17, notified under the Rules, which provide
as follows:
5.1 A business segment is a distinguishable
component of an enterprise that is engaged
in providing an individual product or service
or a group of related products or services
and that is subject to risks and returns that
are different from those of other business
segments. Factors that should be considered in
determining whether products or services are
related include:
(a) the nature of the products or services;
(b) the nature of the production processes;
(c) the type or class of customers for the
products or services;
(d) the methods used to distribute the
products or provide the services; and
(e) if applicable, the nature of the regulatory
environment, for example, banking,
insurance, or public utilities.
5.2 A geographical segment is a distinguishable

component of an enterprise that is engaged in
providing products or services within a particular
economic environment and that is subject to
risks and returns that are different from those
of components operating in other economic
environments. Factors that should be considered
in identifying geographical segments include:
(a) similarity of economic and political
conditions;
(b) relationships between operations in
different geographical areas;
(c) proximity of operations;
(d) special risks associated with operations
in a particular area;
(e) exchange control regulations; and
(f) the underlying currency risks.
54
october
2011
8. The Committee also notes that paragraphs 7 and

8 of AS 17, notified under the Rules, provide as
follows:
7. A single business segment does not include
products and services with significantly differing
risks and returns. While there may be dissimilarities
with respect to one or several of the factors listed in
the definition of business segment, the products and
services included in a single business segment are
expected to be similar with respect to a majority of the
factors.
8. Similarly, a single geographical segment does
not include operations in economic environments
with significantly differing risks and returns. A
geographical segment may be a single country, a
group of two or more countries, or a region within
a country.
9. The Committee also notes paragraph 12 of AS

17, notified under the Rules, which is reproduced
below:
12. The predominant sources of risks affect how most
enterprises are organised and managed. Therefore,
the organisational structure of an enterprise and its
internal financial reporting system are normally the
basis for identifying its segments.
The Committee notes from the above that to

identify business and geographical segments, the
enterprise needs to evaluate whether the risks and
returns of different components are different as
per the factors stated in the definitions of the terms
business segment and geographical segment. The
organisational structure of an enterprise and its internal
reporting system are normally the basis for identifying
the segments, subject to their fulfilling the criteria
prescribed in the aforesaid definitions.
10. The Committee notes from the Facts of the Case
that the company is engaged in the manufacturing
of different types of engineering products/
components, castings, valves, etc. These products
are both machine-made and hand-made. Further,
many of these products are manufactured as per
the specifications of the clients for either use in the
products of the clients or for selling these products
in the clients brand name and some of these are
sold by the company in its own name. However,
the information about whether the risks and returns
associated with the various products in which the
563
OPINION
company deals in, are different, is not clear from the

Facts of the Case. In this context, the Committee
notes from the above-reproduced definition of
business segment and other provisions of AS
17 that if various products of the company are
subject to different risks and returns, these would
constitute different business segments. For
instance, in the extant case, some of the products
manufactured by the company, for example, in
the case of valves, sales are restricted to a single
customer and accordingly, the risks and returns
in such cases where the company is relying on
a single customer may be different from the risks
and returns of a product where the company is
not so relying on a single customer. Similarly,
risks and returns in case of products manufactured
by machines may be different from the products
which are hand-made. Thus, the Committee is
of the view that considering the nature of the
products produced, production processes involved
in manufacturing and type or class of customers,
the company should evaluate that whether
there can be different business segments in the
present case.
11. Similarly, in the context of geographical segments,
while, on one hand, the querist has stated that
the geographical distribution of the sales of the
company is restricted to one region, on the other
hand, it is stated that more than 95% of the valves
manufactured by the company are supplied
to USA. Further, castings are sold in India with a
small portion of export. However, the information
as to whether or not the risks and returns
associated with the different regions/countries
in which the company supplies its products are
different, is not clear from the Facts of the Case.
In this context, the Committee is of the view that
there may be different pricing strategies, credit risks
and exchange control regulations involved
for domestic and international sales. In such
a case, the risks and returns in different
geographical regions may be different and
accordingly, the different geographical regions
may be considered as different geographical
segments in the present case. The Committee
is also of the view that geographical segments
may also be identified by segregating its total
turnover into domestic sales and international
sales irrespective of the nature or kind of the
products being sold. Thus, the Committee is of
the view that considering the above-mentioned
october
2011
55
564
OPINION
factors, the company should evaluate that whether

there can be different geographical segments in
the present case.
12. After identifying various business and geographical
segments as discussed above, in the view of the
Committee, the company should decide whether
these segments can be considered as reportable
based on the requirements of paragraphs 27 to 29
of AS 17, notified under the Rules, which provide as
follows:
27. A business segment or geographical
segment should be identified as a reportable
segment if:
(a) its revenue from sales to external
customers and from transactions
with other segments is 10 per cent or
more of the total revenue, external and
internal, of all segments; or
(b) its segment result, whether profit or
loss, is 10 per cent or more of
(i) the combined result of all
segments in profit, or
(ii) the combined result of all
segments in loss, whichever is
greater in absolute amount; or
(c) its segment assets are 10 per cent
or more of the total assets of all
segments.
28. A business segment or a geographical
segment which is not a reportable segment
as per paragraph 27, may be designated as
a reportable segment despite its size at the
discretion of the management of the enterprise.
If that segment is not designated as a reportable
segment, it should be included as an unallocated
reconciling item.
29. If total external revenue attributable to
reportable segments constitutes less than 75 per
cent of the total enterprise revenue, additional
segments should be identified as reportable
segments, even if they do not meet the 10 per
cent thresholds in paragraph 27, until at least 75
per cent of total enterprise revenue is included
in reportable segment.
From the above, the Committee is of the view that if
the segments of the company meet the above-
56
october
2011
reproduced threshold criteria, the company should

report the same as business and/or geographical
segments as discussed above as per the other
requirements of AS 17. The Committee is also of
the view that if it is concluded that there is neither
more than one business segment nor more than
one geographical segment, segment information is
not required to be disclosed. The fact that there is
only one business segment and geographical
segment should be disclosed by way of a note as
per the requirements of Explanation to paragraph 38
of AS 17, notified under the Companies (Accounting
Standards) Rules, 2006.
D. Opinion
13. On the basis of the above, the Committee is of
the opinion that the company should identify the
reportable business and/or geographical segments
based on the considerations stated in paragraphs
9 to 12 above.
1
The Opinion is only that of the Expert Advisory

Committee and does not necessarily represent
the Opinion of the Council of the Institute.
The Opinion is based on the facts supplied and

in the specific circumstances of the querist. The
Committee finalised the Opinion on 03.06.2011.
The Opinion must, therefore, be read in the light
of any amendments and/or other developments
subsequent to the issuance of Opinion by the
Committee.
The Compendium of Opinions containing the

Opinions of Expert Advisory Committee has
been published in twenty eight volumes. A CD of
Compendium of Opinions containing twenty eight
volumes has also been released by the Committee.
These are available for sale at the Institute's office
at New Delhi and its regional council offices at
Mumbai, Chennai, Kolkata and Kanpur.
Recent opinions of the Committee are available

on the website of the Institute under the head
Resources.
Opinions can be obtained from EAC as per its

Advisory Service Rules which are available on the
website of the ICAI, under the head Resources.
For further information, write to eac@icai.org.
n
565
ACCOUNTING
Accounting for Credit Value Adjustments
Counterparty credit risk (CVA) is the risk that the counterparty to a financial contract will default prior to the
expiration of the contract and will not make all the payments required by the contract. CVA is a measure that adjusts
the risk-free value of an instrument to incorporate counterparty credit risk. This article reviews the concept of Credit
Value Adjustment (CVA) from the accounting perspective and attempts to provide answers as to what is meant by CVA
in accounting and should this be adjusted at the portfolio level, or should this be accounted on a trade by trade basis.
This article also attempts to clarify that in a hedging relationship, should hedge effectiveness be calculated with FV
inclusive of Credit Value Adjustments (CVA) or not and is this in any way different for a cash flow hedge? The article
also discusses how should the CVA be disclosed in the financial statements?
CA. R. Venkata Subramani

(The author is a member of the Institute. He
can be reached at eboard@icai.org)
What is Meant by CVA in

Accounting?
Counterparty credit risk (CVA) is
the risk that the counterparty to a
financial contract will default prior
to the expiration of the contract
and will not make all the payments
required by the contract. Obviously
exchange-traded derivatives are not
subject to counterparty risk as the
respective exchange guarantees
the settlement of cash flows as per
the derivative contract. CVA is a
measure that adjusts the risk-free
value of an instrument to incorporate
counterparty credit risk. CVA can
be positive or negative depending
on which of the two counterparties

is most likely to default and the
relative balances due or receivable
to each other.
There were some concerns
expressed in certain quarters as
to whether the Debit Value
Adjustment (DVA) should be
considered in determining the
fair value. Now based on the
recent exposure draft announced
jointly by IASB and FASB on
28th January, 2011 on Offsetting
Financial Assets and Financial
Liabilities it is amply clear that the
DVA also should be recognised
along with CVA.
october
2011
57
566
ACCOUNTING
How Should the CVA Component

be accounted?
(a) Initial Measurement
At the inception of the contract,
CVA component need not be
recognised from the accounting
perspective. Aggressive traders
may have factored this into the
price of the trade that they enter
with the counterparties based on
the CVA measure provided by the
CVA desk if any available. In any
case, even if it is not considered
while pricing, at the inception of the
trade this component need not be
considered.
(b) Subsequent Measurement
CVA is a fair value component that
should be recognised at every
subsequent measurement of a
financial instrument. Hence, at
each subsequent measurement
date, the CVA as a component of
adjustment should be aggregated
to a separate account and shown
as an adjustment from the gross
fair value of the financial instrument.
This, however, should not be netted
with the value of the trade and
this is abundantly clear by virtue
of the ED cited above. In fact, this
exposure draft has come to us
as an eye opener putting at rest
hould the CVA

component be
considered on
the hedging
instrument?
Yes. The CVA component
should be considered on the
hedging instrument while
doing the effectiveness
testing. However, where the
CVA component is available
only at the portfolio level i.e.,
for each counterparty, then
the same should be allocated
to the individual trades based
on the gross exposure of each
trade, before commencing the
effectiveness testing.
58
october
several theories as to how the CVA

component should be accounted
and disclosed in the financial
statements. In the Disclosure
section of the exposure draft it is
given that
an entity shall disclose, as the
minimum, the following information
separately for financial assets and
financial liabilities recognised at the
end of the reporting period by class
of financial instruments:
(A) the gross amounts (before
taking into account amounts
offset in the statement of
financial position and portfoliolevel adjustments for the credit
risk of each of the counterparties or the counterparties
net exposure to the credit risk of
the entity).
(B) Showing separately,
i. the
amounts
offset
in
accordance with the criteria in
paragraph 6 to determine the
net amounts presented in the
statement of financial position;
ii. the portfolio-level adjustments
made in the fair value
measurement to reflect the effect
of the entitys net exposure to
the credit risk of counterparties
or the counterparties net
exposure to the credit risk of the
entity; and (emphasis added)
iii. the net amount presented in the
statement of financial position.
(Para 12 of the Exposure Draft)
Thus the CVA component should
be aggregated at the portfoliolevel and should be shown as
an adjustment against the gross
value of the financial assets or
financial liabilities as the case may
be. This should not be adjusted or
accounted for at the trade level.
CVA Component in a Cash
Flow Hedge
The next important question is
whether the CVA component should
be considered in a cash flow hedge
2011
and fair value hedge.

Treatment in a Cash Flow Hedge
The ASC Topic 815 (US GAAP)
mentions that where the shortcut
method is used, the only question
to be considered is for the entity to
ensure that it will collect the payments
under the contractual provisions
of the derivative instrument. If
the answer is yes, then the CVA
value pertaining to the micro trade
will have to be considered in the
effectiveness testing. If the answer
is no i.e., if the entity cannot ensure
that it will collect the payments
under the contractual provisions
of the derivative instrument, then
the hedging relationship should
be discontinued forthwith without
any need to go into effectiveness
testing.
Where methods other than the
shortcut method are used, the
counterparty credit risk in the form of
CVA should be recognised to arrive
at the fair value for effectiveness
testing. In a cash flow hedge, the
amount of gains or losses on the
designated hedging instrument
that can be deferred in the separate
component of equity is limited to the
lesser of the following (in absolute
amounts):
a) the cumulative gain or loss on
the hedging instrument from
inception of the hedge, and
b) the cumulative change in fair
value (present value) of the
expected future cash flows on
the hedged item from inception
of the hedge
The fair value mentioned in the
previous paragraph is inclusive
of CVA.
CVA Component in a Fair
Value Hedge
Should the CVA component
be considered on the hedging
instrument?
Yes. The CVA component should
be considered on the hedging
567
instrument
while
doing
the
effectiveness testing. However,
where the CVA component is
available only at the portfolio level
i.e., for each counterparty, then the
same should be allocated to the
individual trades based on the gross
exposure of each trade, before
commencing the effectiveness
testing.
A change in the creditworthiness
of the derivative instrument's
counterparty in a fair value
hedge would have an immediate
impact because that change in
creditworthiness would affect the
change in the derivative instrument's
fair value, which would immediately
affect both of the following:
a. The assessment of whether the
relationship qualifies for hedge
accounting
b. The amount of ineffectiveness
recognised in earnings under
fair value hedge accounting.
Should the CVA component be
considered on the hedged item?
If the hedged item carries with it
any counterparty credit risk, i.e.,
if there are any contractual cash
flows still collectible from such
hedged item, then the CVA
component attributable to that
contract should be considered
during
effectiveness
testing.
Usually the hedged item will
be a cash instrument, meaning
there will not be any cash
flows
collectible
from
such
instrument. However, in the case
of a hypothetical derivative, the
hypothetical derivative mimics
the hedged item and no CVA
component should be attributed for
the hypothetical derivative.
CVA - Disclosures
Disclosures as required by the
joint ED of IASB and FASB
How should the CVA component
be disclosed in the financial
statements? The exposure draft
announced jointly by IASB and
ACCOUNTING
FASB on 28th January, 2011 on

Offsetting Financial Assets and
Financial Liabilities gives the
disclosures required when offsetting
financial assets and financial
liabilities. To meet the requirements
of such disclosures, additional line
items are required to be disclosed
and this guides us as to how the
adjustments made in the fair value
of the entitys net exposure to the
credit risk of counterparties or the
counterparties net exposure to the
credit risk of the entity should be
disclosed.
Under the proposals, an entity
would be required to offset (i.e.
present as a single net amount in
the statement of financial position)
a recognised financial asset and a
recognised financial liability when
it has an unconditional and legally
enforceable right of set-off and
intends either to settle the asset and
liability on a net basis or to realise
the asset and settle the liability
simultaneously
(the
offsetting
criteria).
Para 11 of the Exposure Draft
An entity shall disclose information
about rights of set-off and related
arrangements (such as collateral
agreements)
associated
with
the entitys financial assets and
financial liabilities to enable users
of its financial statements to
understand the effect of those rights
and arrangements on the entitys
financial position.
Para 12 of the Exposure Draft
To meet the requirements in
paragraph 11, an entity shall
disclose, as the minimum, the
following information separately
for financial assets and financial
liabilities recognised at the end of
the reporting period by class of
financial instruments:
a) the gross amounts (before
taking into account amounts
offset in the statement of
t the inception
of the contract,
CVA component
need not be
recognised from
the accounting perspective.
Aggressive traders may have
factored this into the price of
the trade that they enter with
the counterparties based on
the CVA measure provided by
the CVA desk if any available.
In any case, even if it is not
considered while pricing,
at the inception of the trade
this component need not be
considered.
b)
iv.
v.
vi.
financial position and portfoliolevel adjustments for the credit

risk of each of the counterparties
or the counterparties net exposure to the credit risk of
the entity).
showing separately,
the
amounts
offset
in
accordance with the criteria
in paragraph 6 to determine
the net amounts presented
in the statement of financial
position;
the portfolio-level adjustments
made in the fair value
of the entitys net exposure to
the credit risk of counterparties
or the counterparties net
exposure to the credit risk of the
entity; and (emphasis added)
the net amount presented in the
statement of financial position.
(Para 12 of the Exposure Draft)

References
1.
2.
3.
Accounting Standards issued by the

Financial Accounting Standards Board
(FASB)
Accounting Standards issued by the
International Accounting Standards Board
(IASB)
Exposure Draft Offsetting Financial Assets
and Financial Liabilities issued by IASB
& FASB n
october
2011
59
568
ACCOUNTING
Forensic Accounting - Another feather in the

Hat of Accounting
Maurice E. Peloubet coined the term Forensic Accounting in 1946. Kautilya was the first economist to articulate the
need of forensic accountants. the growing arena of business and surging number of white-collar crimes that have led
to the development of Forensic Accounting. Forensic Accounting borrows knowledge from Accounting, Finance, Law,
Computerisation, Ethics, Criminology, etc. While Forensic Accounting developed as early as 1995 in USA, it put its
first step in India just few years back. It is desired that in near future an accounting standard will be formulated on
Forensic Accounting. This article aims at throwing light on Forensic Accounting. It encompasses the terminology, a
brief note on its origin, role of Forensic Accountants, the techniques involved in their work and the present scenario of
Forensic Accounting in India.
Introduction
Necessity is the mother of all
inventions. Yes, it is the growing
arena of business and surging
number of white-collar crimes
that have paved the way for
the development of Forensic
Accounting.
According
to
AICPA,
Forensic
Accounting
is the application of accounting
principles, theories and discipline
to facts or hypothesis at issues in
a legal dispute and encompasses
every branch of accounting
knowledge. According to The
Accountants Handbook on Fraud
and Commercial Crime, Forensic
Accounting is the application of
financial skills and an investigative
mentality to unresolved issues,
Dr. Indrani Ghosh and

Dr. Kamal Kishore Banerjee
(The authors can be reached at
eboard@icai.org)
60
october
2011
conducted within the context of

the rules of evidence. Forensic
Accounting borrows knowledge
from
Accounting,
Finance,
Law,
Computerisation,
Ethics,
Criminology, etc. Investigation
plays a pivotal role in Forensic
Accounting. It is the flavour of
investigation that demarcates it
from the conventional accounting
practices. In wide sense, it can be
identified as integrity of accounting,
auditing and investigative skills to
secure a particular result.
Maurice E. Peloubet coined the
term Forensic Accounting in 1946.
Kautilya was the first economist
to articulate the need of forensic
accountants. Centuries ago he inked
his book, Arthashastra (Science
569
of Material Wealth) containing 40

ways of embezzlement. He also
stressed on checks, accounting
and auditing. He also stated that
detecting an appointed officials
dishonesty is as difficult as detecting
the amount of water drunk by a
swimming fish. Another noteworthy
person in this context is Birbal,
one of the famous Navaratnas of
the Moghul Emperor Akbar, who
used various tricks to investigate
various crimes.
Role of a Forensic Accountant
Earlier, we were of the belief that
detection and prevention of frauds
or white-collar crimes is a part of
conventional accounting function.
But the recognition of Forensic
Accounting has changed this
notion of ours that Auditor is a
watchdog and not a bloodhound.
They only check for the compliance
of a companys books to GAAPs,
auditing standards and company
policies. Hence, the need for a
bloodhound was apprehended.
Like, a bloodhound, they are to
sniff out fraud, criminal transactions
out of the financial records of
corporate entities, banks or
any other organisation. Thus, a
forensic accountant is a financial
detective with a suspicious mind
who can pull out the latent truth
and assist in dispute resolution.
His duty is to analyse, interpret,
and summarise complex financial
and business related issues. They
are to look beyond the numbers
and concentrate on substance over
form. This new and groundbreaking
accounting has two main spheres:
- (i) Litigation support and
investigation (ii) Dispute resolution.
The former represents factual
representation of economic issues
encompassing existing litigation. If
the dispute reaches the courtroom,
he may testify as an expert witness.
Whereas in latter case, he quantifies
the damages sustained by parties
involved in legal disputes and can
ACCOUNTING
arlier, we were
of the belief
that detection
and prevention
of frauds or
white-collar crimes is a part
of conventional accounting
function. But the recognition
of Forensic Accounting has
changed this notion of ours
that Auditor is a watchdog
and not a bloodhound. They
only check for the compliance
of a companys books to
GAAPs, auditing standards
and company policies. Hence,
the need for a bloodhound
was apprehended. Like, a
bloodhound, they are to sniff
out fraud, criminal transactions
out of the financial records
of corporate entities, banks
or any other organisation.
Thus, a forensic accountant
is a financial detective with a
suspicious mind who can pull
out the latent truth and assist
in dispute resolution.
assist in resolving disputes, even
before those reach the courtroom.
A Forensic Accountant is supposed
to have a three fold approach:
(a) Base layer Accounting
knowledge
(b) Middle layer- Knowledge of
auditing, internal controls, risk
assessment and fraud detection
(c) Top layer- Knowledge of the
legal environment and strong
communication skills.
According to a Forensic
Accounting expert, the traits of
a forensic accountant could be
compared to a well baked pizza.
The base of Forensic Accounting
is accounting knowledge. Size
and the extent of baking decide
the qualities of the pizza. A middle
layer is a dispersed knowledge
of auditing, internal control, risk
assessment and fraud detection.

It is like the spread of the cheese
on the pizza. The toppings of this
pizza are the basic understanding
of the legal environment. The legal
environment is essential in order to
support the litigations. The cherry
on the toppings of the pizza is a
strong set of communication skills,
both written and oral. It is just the
beautification part. As perfect that
combination of the pizza base,
cheese spread and good toppings
makes the pizza delicious similarly
the perfect knowledge of accounting, auditing, legal environment and
good communication skills make a
Forensic Accountant perfect.
A well- equipped forensic accountant
can provide the following services:
1. Investigate
the
financial
evidence.
2. Analysis and presentation of
the financial evidence in a
computerised form.
3. Communicate their findings in
the form of reports, exhibits and
collection of documents.
4. Assist in legal proceedings,
including testifying in court as
an expert witness and preparing
visual aids to support trial
evidence.
These services of forensic
accountants can be utilised in
various fields. The sphere of their
activities is quite large. They take up
various types of assignments. While
they can be of help in business
related fraud investigation, they can
also handle matrimonial dispute
cases. A list of such cases taken up
by a Forensic Accountant is given
below.
Criminal Investigations: A
Forensic Accountant is normally
called for in case of a criminal
investigation, if it entails financial
and other related frauds. The
Investigative Agencies (EOW, CID,
SFIO, etc), regulatory bodies (SEBI,
TRAI, etc) and other stake-holders
seek for these services from them
as and when required.
october
2011
61
570
ACCOUNTING
Stakeholders and ownership

disputes: These assignments
often involve a detailed analysis of
financial records over a period for
quantifying the issues in a dispute.
For example, amount payable to a
deceased partner or legal heirs of a
deceased partner.
Insurance and other related
claims: Insurance policies differ
significantly as to their terms and
conditions. Accordingly, these
assignments involve an in-depth
review of the policy to investigate
coverage
issues
and
the
appropriate method of quantifying
the economic losses resulting
from an event. These assignments
demand great knowledge of the
forensic accountant in the local
laws and regulations in place. For
example, motor accidents, loss on
account of fire, natural calamities,
business discontinuance, etc.
Business
related
Fraud
investigation: Business investigations involve asset identification
and recovery, tracing funds,
forensic intelligence gathering
and due diligence reviews. These
investigations are carried out with
Forensic
Accountant is
normally called
for in case
of a criminal
investigation, if it entails
financial and other related
frauds. The Investigative
Agencies (EOW, CID, SFIO,
etc.), regulatory bodies
(SEBI, TRAI, etc.) and other
stake-holders seek for
these services from them
as and when required. The
assignments pertaining to
stakeholders and ownership
disputes often involve a
detailed analysis of financial
records over a period for
quantifying the issues in a
dispute.
62
october
the objective of determining the

existence, nature, and extent of fraud
and may concern the identification
of perpetrator. These investigations
often involve interviews of personnel
who had access to the funds and a
detailed review of the documentary
evidence.
Dispute settlement: Business
firms engage forensic accountants
to handle contract disputes,
construction claims, product liability
claims, infringement of patent and
trade marks cases, liability arising
from breach of contracts and so on.
Matrimonial dispute cases:
Forensic accountants entertain
cases pertaining to matrimonial
disputes wherein their role is
merely confined to tracing, locating
and evaluating any form of asset
involved.
Thus, we see how forensic
accountants help the organisations
or individuals and society at large.
They are an indispensable part of
todays legal team.
Tools Used in Forensic
Accounting Assignment
Besides the various techniques
of auditing, forensic accountants
adopt some special techniques
which are as follows:
Benfords Law
It is a mathematical tool used in

determining whether a variable
under study is a case of mistake
or fraud. The steps underlying
this law are very simple. Once the
variable is decided, the left most
digit of the variable is extracted and
summarised for entire population.
The summarisation is done by
classifying the first digit field and
calculating its observed count
percentage. Then Benfords set is
applied. A parametric test called
Z-test is carried out to measure the
significance of variance between
the two populations, i.e. Benfords
percentage of first digit for a
particular level of confidence. If the
2011
AATs are
computer
programs
developed
for assisting
auditors. Forensic Accounting
software comes in two
different varieties data
extraction software and
financial analysis software.
Data extraction software
is designed to conduct
spreadsheet analysis on all
the companys computer
database records, such as
billings, accounts receivable,
payroll, purchasing, etc. This
helps in detecting anomalies
and calls for investigation.
Financial analysis software
uses monthly, quarterly or
annual financial statements
and benchmarks the ratios
between different accounts
such as billings by revenues or
supply costs as a percentage
of revenue.
data conforms to the percentage of
Benfords law, it means that the data
is Benfords set i.e. there is 68%
(almost 2/3rd) chance of no error or
fraud. The 1st digit may not always
be the only relevant field. Benford
has given separate sets for 2nd, 3rd
.and for last digit as well.
Theory of Relative Size Factor (RSF)
RSF is measured as the ratio of

the largest number to the second
largest number of the given set
of data. This technique is used to
identify the highest number in the
data but in some relation with the
second highest data in the number.
In this method the records that fall
outside the prescribed range are
taken into the books of doubt and
it calls for further investigation. It
is very helpful in highlighting all
unusual fluctuations which may be
generated from fraud or genuine
errors.
571
Computer Assisted Auditing Tools

(CAATs)
CAATs are computer programs

developed for assisting auditors.
Forensic
Accounting
software
comes in two different varieties
data extraction software and
financial analysis software. Data
extraction software is designed to
conduct spreadsheet analysis on all
the companys computer database
records, such as billings, accounts
receivable, payroll, purchasing, etc.
This helps in detecting anomalies
and calls for investigation. Financial
analysis software uses monthly,
quarterly or annual financial
statements and benchmarks the
ratios between different accounts
such as billings by revenues or
supply costs as a percentage of
revenue.
Data Mining Techniques
It is a set of computer-assisted
technique designed to automatically
mine large volumes of data for new,
hidden, or unexpected information
or patterns. Data mining techniques
are categorised in three ways:
Discovery, Predictive modeling,
Deviation and Link analysis. It
discovers the usual knowledge or
pattern in data, without a predefined
idea or hypothesis about what the
pattern may be, i.e. without any prior
knowledge of fraud. In predictive
modeling, patterns discovered from
database are used to predict the
outcome and to guess data for new
value items. In deviation analysis the
norm is found first and then those
items are detected that deviate
from the normal. Link discovery
has emerged of late for detecting
a suspicious pattern. It mostly uses
deterministic graphical techniques,
Bayesian
probabilistic
casual
networks. This method involves
pattern matching algorithm to
extract any rare or suspicious case.
Ratio Analysis
Data analysis ratios are used for
ACCOUNTING
detecting fraud. These ratios help

in tracing the possible symptoms of
fraud. Such commonly employed
ratios are
(i) the ratio of the highest value to
the lowest value (max/min)
(ii) the ratio of the highest value to
the second highest value (max1
/max2)
Besides the above-mentioned
ratios, the financial ratios also help
a forensic accountant. Ratios help
in estimating costs, identifying
deviations, etc.
Forensic Accounting in India
Indias economy has been rising for
the past few years. But this rise is
ndias economy
has been rising
for the past
few years. But
this rise is
accompanied by some evils
as well. India has also been
experiencing white-collar
crimes and scams for the past
few years. Thus, the need of
Forensic Accountants was
realised. Forensic Accountants
played a major role in letting
the cat out of the bag in the
2008 Satyam scam. Of late,
the CWG and 2G scams are
in limelight in India. They are
having a major role in these
scams as well. While Forensic
Accounting developed as
early as 1995 in USA, it put
its first step in India just
few years back. Forensic
Research Foundation has been
established in India for the
investigation of fraud. Another
international investigation
organisation has also put its
feet on the Indian land. Serious
Fraud Investigation Office
(SFIO) is another noteworthy
organisation set up in India for
serving the same purpose.
accompanied by some evils as well.

India has also been experiencing
white-collar crimes and scams for
the past few years. Thus, the need
of forensic accountants was
realised. Forensic accountants
played a major role in letting the
cat out of the bag in the 2008
Satyam scam. Of late, the CWG
and 2G scams are in the limelight
in India. They are having a major
role in these scams as well. While
Forensic Accounting developed as
early as 1995 in USA, it put it first
step in India just few years back.
Forensic Research Foundation
has been established in India
for the investigation of fraud.
Another international investigation
organisation has also put its feet
on the Indian land. Serious Fraud
Investigation Office (SFIO) is
another noteworthy organisation
set up in India for serving the same
purpose.
We are looking forward to
Forensic Accounting gaining a
great momentum in India. We
have a great expectation from ICAI
in this respect. We expect that in
near future an accounting standard
will be formulated on Forensic
Accounting. This will strengthen the
walk of Forensic Accounting from
infancy to maturity. This new weapon
of Forensic Accounting will be an
immense help to law enforcement
agencies and regulatory bodies
in curbing white-collar crimes and
scams.
References
1.
Dr. G S Mehta and Tarun Mathur (2007):

Preventing Financial Fraud through Forensic
Accounting. The Chartered Accountant.
2.
Wikipedia, the free encyclopedia
3.
Journal of Forensic Accounting: Editor-In

Chief: Crumbley D. Larry, Publisher: Inc.
Edwards. R.T.
4.
Journal of The Chartered Accountant 2007,

Pages: 1000-1010.Dr. Madan Bhasin
5.
www.forensicaccounting.com
6.
www.indiaforensic.com
7.
www.ezinearticles.com n
october
2011
63
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REPORTING
Disclosures in Corporate Annual Reports

A Case Study of Some Selected Public
Limited Companies in India
Reporting to the shareholders/other stakeholders of the Company such as Regulators, Employees, Bankers, Society
at large (collectively referred to as Stakeholders) is an important activity on the part of the management of the
Company. The quality and the transparency with which such disclosures are made enhance the comfort and the
credibility of the Reporting Entity. Globally, the expectations of the readers of the Annual Reports have increased
exponentially in the recent past and professional managements are making their best efforts to meet those
expectations. The fundamental approach followed in this reporting seems to emanate from the principle of More you
Disclose.More the Comfort to the Reader; but one has to remember Quantity is not a substitute for the Qualitative
Reporting. This Article deals with some of the interesting/ qualitative disclosures which are mandatorily / by general
practice required to be disclosed in the Directors Reports, Auditors Reports, and in other documents in some of the
countries globally and the fundamental principles behind such disclosure stipulations along with a comparison of the
requirement / practices followed in India. Read on to know more
Pintu Sarkar
(The author can be reached at sarkar.pintu97@gmail.com)
64
october
2011
Introduction
Corporate disclosure is a process through which a
corporate entity communicates business and financial
information to their stakeholders. A strong, informative
and transparent system of corporate disclosure is of
paramount importance for the efficient and effective
allocation of resources as well as integrity of financial
markets. High-quality corporate disclosure helps
investors and other capital market participants by
enabling them to make proper assessment of the
potential risks and rewards of alternative investments.
Well- informed investment decision-making by capital
market participants leads to efficient allocation of
capital, which promotes productivity and economic
growth.
With more and more business organisations
attaining a global edge, and expanding in size; and
573
REPORTING
with more retail and institutional investors entering into

capital markets, the corporate disclosure practices
have assumed added importance in the recent past.
Led by these changes, companies listed on stock
exchange have been forced to disclose the minimum
information in their annual reports as set out by the
statutory requirements. However, particularly large and
publicly traded leading companies have gone beyond
those minimum requirements. Reporting information
voluntarily has become a norm for large companies.
In fact, a large proportion of corporate disclosures
made through annual reporting concern an agenda
of visualising the companys core values, mission
statement, business concept, and social responsibility.
This suggests that annual reporting plays a central role
in legitimising the companys existence. Of all the forms
or ways of corporate disclosure, corporate annual
report is the most important, vital and popular source
of information in the arena of the corporate world and
investment market- a focal point of corporate disclosure
mechanism. Annual report today is not simply a means
of communication; it is now being used as a vehicle of
building and enhancing corporate image.
Considering the limited scope, a humble attempt is
hereby however strived for to make a case study on the
disclosures in annual reports of some selected public
limited companies in India with an objective to form a
birds eye view on the emerging scenario of corporate
disclosure practices in India.
Selection of Sample
The sample for this case study comprises 12 renowned
corporate houses as follows:
eporting information voluntarily

has become a norm for large
companies. In fact, a large proportion of corporate disclosures
made through annual reporting
concern an agenda of visualising the companys
core values, mission statement, business
concept, and social responsibility. This suggests that annual reporting plays a central
role in legitimising the companys existence.
Of all the forms or ways of corporate disclosure,
corporate annual report is the most important,
vital and popular source of information in the
arena of the corporate world and investment
market- a focal point of corporate disclosure
mechanism. Annual report today is not simply
a means of communication; it is now being
used as a vehicle of building and enhancing
corporate image.
Companies, being older than 25 years and more, have
been selected on the basis of first 10 BSE Sensex
stocks in descending order of market capitalisation as
on 31-03-2011. However, the banking, financial and
insurance companies have been excluded from the
purview of the analysis as their disclosure practices
are not entirely guided and controlled by Companies
Act,1956; they are rather guided by the Insurance Act,
Banking Regulation Act, and RBI Act requiring some
typical disclosures pertinent to the distinguishing
characteristics of such industries. The logics behind
selection of those companies are:
Table 1
Top 12 Sensex Stocks Based on Market Capitalisation as on 31.03.2011
Serial No.
Name of Sensex Stocks
Market Capitalisation
on 31.03.2011
(Rs Crores)
Number of AGMSs
held including the
current year
Total Number of
pages in Annual
Report
1.
Reliance Industries
338106.39
36th
214
2.
Infosys Technologies
182010.99
29th
94
3.
NTPC
155797.97
34
th
244
th
182
4.
ITC
137506.04
99
5.
WIPRO
116056.30
30th
209
6.
Larsen & Toubro
100868.18
65
th
234
7.
BHEL
100750.56
46
th
258
8.
Tata Motors
79014.34
65
th
126
9.
HUL
61427.85
77th
148
10.
Tata Steel
59125.70
103rd
234
Source: Compilation from Business Standard, Kolkata (Thursday, 31st March, 2011, Page 8) and Annual Reports of
Respective Companies
october
2011
65
574
REPORTING
1. they are renowned companies belonging to various

industries;
2. their scrips dominate and influence the stock
market movement of the country;
3. they are tried, tested and trusted companies for the
last 25 years or more having good track records
leading to wide experiences and maturities in
corporate disclosure practices and,
4. their annual reports are conveniently available.
For this purpose, the published annual reports for
the year 2009-2010 of these companies have been
considered. The reasons for selection of the said
period lies in the fact that annual reports for the year
2009-2010 would give some glimpses of the state of
the latest corporate disclosure practices.
Analysis of Disclosures Made by Sample
Companies
In order to assess the emerging trends in corporate
disclosure practices in annual reports of public limited
companies in India, the annual reports of the aforesaid
seven companies have been scanned with respect
to 22 items of mandatory disclosures shown in
Table 2 and 32 items of voluntary disclosures shown
in Table 3.
Table 2
Mandatory Disclosure Practices of sample companies
Sl
No.
Name of the Company

Items Of Disclosure
Rel.
Inds
Ltd.
Infosys
Tech
Ltd
N
T
P
C
ITC
Ltd.
W
I
P
R
O
L
&
T
B
H
E
L
Tata
Motors
H
U
L
T
A
T
A
Steel
Ltd.
No.
Of
Cos
Rptg
Annexure to Auditors Report
10
Annexure to Directors Report
10
Auditors Certificate on
Corporate Governance
10
Auditors report on
Consolidated Financial
Statements
10
Auditors Report to Members
10
Balance Sheet-Part I of
Sch.VI
10
Balance Sheet Abstract and

Companys General
Business Profile(Part IV)
10
Cash Flow Statement
10
Consolidated Financial statement with Indian GAAP
10
10
Corporate Governance
Report
10
11
Directors Report including disclosures required u/

s217(1) (e),217(2A) and
217(2AA)
10
12
MD&A
10
13
Notice
10
14
Profit & Loss A/C(Part II)
10
15
Related Party Disclosures
10
66
october
2011
575
REPORTING
Sl
No.
Name of the Company

Items
Of
Disclosure
Rel.
Inds
Ltd.
Infosys
Tech
Ltd
N
T
P
C
ITC
Ltd.
W
I
P
R
O
L
&
T
B
H
E
L
Tata
H
Motors U
L
T
A
T
A
Steel
Ltd.
No.
Of
Cos
Rptg
16
Risk Management Report
10
17
Schedules to Financial Statements
10
18
Shareholder Information/Referencer
10
19
Shareholder pattern
10
20
Segment Reporting
10
21
Share Price Chart
10
22
Statement of Significant
Accounting Policies and
Notes to Accounts
10
Total out of 22 items
22
22
22 22
22
22
22
22
22
22
220/220
=100%
Table 3
Voluntary Disclosure Practices of sample companies
Sl
No.
Name of the Company

Items Of Disclosure
Rel.
Inds
Ltd.
Infosys
Tech
Ltd
N
T
P
C
ITC
Ltd.
W
I
P
R
O
L
&
T
B
H
E
L
Tata
Motors
H
U
L
T
A
T
A
Steel
Ltd.
No.
Of
Cos
Rptg
Awards/ Achievements
10
Additional information on
Directors recommended for
or seeking appointment
06
Brand Valuation Statement
00
CEO & CFO Certification
09
Chairmans Letter or CEOs

Message
10
Code of Business Conduct

and Ethics
09
Company Information
10
Corporate Social responsibility Statement/ Report (sep.)
09
Current Cost Adjusted

Financial Statements
01
10
Directors Resume/Profile
09
11
EVA
07
october
2011
67
576
REPORTING
Sl
No.
Name of the Company

Items Of Disclosure
Rel.
Inds
Ltd.
Infosys
Tech
Ltd
N
T
P
C
ITC
Ltd.
W
I
P
R
O
L
&
T
B
H
E
L
Tata
Motors
H
U
L
T
A
T
A
Steel
Ltd.
No.
Of
Cos
Rptg
12
FAQs
07
13
Financial Statements as per

GAAP of other Countries
02
14
Funds Flow Statement
02
15
Graphical Presentation
10
16
Global Presence Information
07
17
Highlights of Performance
09
18
Human Resource Accounting
08
19
Intangible Asset Score Sheet
02
20
Management Structure
07
21
Market Value Added
02
22
Past Performance or Selective Y

Data/ Financial Highlights
10
23
Ratio Analysis
09
24
Reconciliation of Indian
GAAP and US GAAP
02
25
Report on Environment,
Health and Safety (Sep.)
08
26
Product Details with picture
07
27
Product Flow Chart
01
28
Sustainability Updates
(Separate Statement)
10
29
Value Added Statement
02
30
Value Reporting
02
31
Vision and Mission Statement
09
32
The Year At a Glance
08
Total out of 32 items
22
25
21
12
21
20
25
22
20
16
204/320
=63.75%
Source: Annual Reports of Companies, 2009-2010;
Symbol: YYes, disclosed, N- Not disclosed.
In both the tables 2 and 3, the symbol Y stands for

the information on the items disclosed in the annual
report whereas the symbol N stands for the nondisclosure of information relating to the referred items.
It has been observed that all the ten companies
under analysis have included in their annual accounts
balance sheets with supporting schedules, profit & loss
accounts with break-ups, auditors reports, directors
reports, cash flow statement and corporate governance
report. There is 100% compliance with respect to
all the 22 items mentioned in Table 2. Companies

have also ventured to disclose much additional
information in Directors Report, Management
discussion and Analysis Statement and corporate
Governance Report keeping in view the diversified
needs of the users.
In this respect it would be pertinent to mention
that accounting policies and notes on accounts
of Infosys Ltd. are exemplary because they are
elaborate, extensive, unambiguous and significant.
68
october
2011
577
In relation to the voluntary disclosures of additional

information it is observed that there are as many as
32 different items voluntarily disclosed in the annual
reports of the investigated companies. Only one
company disclosed their financial statements under
'current cost accounting' (CCA) basis as a supplement.
Other than this, seven companies out of ten reported
management structure, only two companies presented
fund flow statement , ' market value added statement'
and reconciliation of Indian profits with US GAAPs in
its annual report. In this context, the vision statement of
L&T demands appropriate commendation as it reflects
the companys true spirit of social responsibility as a
corporate citizen.
The companys avowed mission and deep
concern for the societal development can also be
easily perceived from the preface of its annual report.
Such disclosure manifests the companys ideology
in running its business, builds up a socially desirable
and operationally efficient work culture, boosts up the
morale of the personnel within the organisation and
enhances its image.
All the companies reported in the annual
reports information regarding awards and accolades
received by them during the financial year.
Infosys Ltd. exhibited excellence in voluntary
disclosure of information on economic value added,
human resource accounting, current cost adjusted
financial statements and value reporting. ITC Limited
used the annual report as a means of making
wide range of readers aware of its products by
providing product details with pictures. Reliance
Industries Limited uniquely disclosed its product
flow chart. All the companies disclosed past data in a
statement or as a financial highlight. Infosys Limited
proclaimed in this respect that they are committed
to the highest standards of disclosure as an investorfriendly company. Two out of seven companies, viz.,
Infosys Limited and BHEL included statement of
reconciliation between Indian GAAP and US GAAP
in their annual reports. Most distinguishing parts of
the annual report of Tata Steel Limited are that the
report contains production and financial statistics
from 1956-1957, and dividend statistics since
1960-1961 (pp.119121 of AR). Such time series
data help determine trends in their respective
fields. Apart from disclosing an audited Cash
Flow Statement (as per clause 32 of Listing
Agreement), the company has also provided a
Funds Flow statement for five years (pp.118
of AR). Almost all the companies used different
charts, graphs and diagrams to enable the users
easy understanding of the relative facts and figures
over the years.
REPORTING
Summary of the Findings

In fine, it can be concluded:
all the companies selected for analysis have
disclosed mandatory information;
there has been an increase in the quantity of
information provided in the annual reports due to
change in the legal provisions and introduction
of more accounting standards to cope with the
changing societal needs.
There exists a wide diversity in the types and
presentations of voluntary disclosures among
companies for which a common framework
needs to be constructed in order to enhance the
comparability of the information contained in
annual reports.
the quality of information provided by Indian
companies having global presence (e.g. Infosys
Technologies Ltd., L& T Ltd., Tata Steel Ltd.) has
improved considerably and annual reports of such
companies are internationally competitive.
However, the following limitations of the present case
study should be cautiously noted:
The size of the sample is too small to generalise the
findings.
The study analyses position for one accounting
period only. Analysis of annual accounts over a
period of time would have given better picture and
trend in corporate disclosure practices.
Because of limited scope and time constraint, all
the relevant issues could not be meticulously put to
detailed scrutiny.
The study has unveiled the quantitative aspect of
disclosures in annual reports without looking into
the quality of disclosure. It is expected that some
research study should be conducted to consider
the qualitative aspect of corporate disclosure
practices.
Conclusion
In view of our findings it can be summarised that
the information disclosed in the annual reports of
companies today is undoubtedly far more exhaustive
and useful than what was being reported earlier.
Disclosures are presently made in many forms to
address to the needs of shareholders, institutional
investors, trade unions and policymakers. As they
currently stand, the compliance with the statutory
disclosure requirements is a general phenomenon
among Indian companies and financial reports provide
a glimpse of past performance. However, many Indian
companies have taken the initiative to disclose some
additional information keeping in view the diversified
needs of the users.
october
2011
69
578
REPORTING
In this respect it should be ensured that voluntary

information through business reporting should not
be solely used as a branding exercise concerned
with illustrating corporate identity and branding the
company as a good corporate citizen, more than they
are about maximising shareholder value. It is of no
doubt that expanded disclosures increase usefulness
in annual reports, but a caution should be taken in
this direction that redundant or irrelevant disclosures
should be avoided to make it meaningful, systematic,
and comparable because the rapid expansion in the
volume of disclosures in published company accounts
may cause in its wake the problems of information
overload.
In respect of voluntary disclosures, it should
be appreciated that the emergence of narrative
disclosures has largely revolutionised the scenario of
corporate financial reporting. Nonetheless, voluntary
disclosures should cover not only good news but
also disappointments. Disclosures would be more
useful if they report on previously disclosed plans
and goals and the results achieved in meeting those
plans to ensure the feed back value of quality financial
reporting. Although the metrics used by companies
to manage their operations and drive their business
strategies often are very useful voluntary disclosures,
those metrics should be explained and consistently
disclosed from period to period to the extent they
continue to be relevant to a company's success.
Disclosure is good, and it is to be encouraged but
at the same time it should be made within a common
framework in order to meet the test of comparability. In
many cases it has been observed that some voluntary
disclosures made by the companies appear in noncomparable and inconsistent form. This will entail some
timely effort on the part of regulators and standard
setters in right direction to issue some common
guidelines.
In conclusion, it may be said that, although there have
been a marked improvement in the quantity and quality
of information provided in the financial statements by
the Indian companies over the years, there exists still
some diversity in their reporting practices. Thus, more
efforts should be put to unearth the unexplored area of
accounting and reporting within the network of statutory
requirement with a view to reducing the diversity and
ambiguity in their disclosure and hence enhancing the
quality, reliability, comparability and comprehensibility
of accounting information.
American Institute of Certified Public Accountants.

Annual Reports of the ten selected companies for the year 2009-10.
Banerjee, B., (2002), Regulation of Corporate Accounting and Reporting
in India, World Press Pvt. Ltd, Calcutta.
------,(2000), Regulation of accounting in India: Issues and a suggested
Frame work, Indian Accounting Review, Vol.4, No. 2, December.
Basu, A. K., (1998)., Creative Financial Reporting: An Overview; Studies
in Finance and Accounting, Platinum Jubilee Commemorative Volume;
Department of Commerce, University of Calcutta.,Calcutta-73.
------,(1997),Narrative Disclosures in Company Accounts, Indian Journal
of Accounting, December, pp. 23-27.
------, (1995), International Accounting Harmonisation, DSA in Commerce,
University of Calcutta, pp. 21-23.
------, (2006), Towards a Global Financial Reporting Language,
Indian Accounting Review, Indian Accounting Association Research
Foundation, Vol. 4,no.2, December.
Beattie, V. & K.Pratt(2002), Voluntary Annual Report Disclosures: What
Users Want; Institute of Chartered Accountants of Scotland.
Chakraborty, T.( 2000); Economic Value Added (EVA)- A Conceptual Study;
Business Studies Vol. XXIII Nos. 1& 2 January and July; pp. 44-62.
Chaudhuri, P. R.,(2001),The structure of Company Accounts in India,
Corporate Financial Reporting, Special Assistance Programme(UGC),
Department of Commerce, University of Calcutta., pp.29-47.
Eccles, R. G. & S. Mavrinac, (1995),Improving the Corporate Disclosure
Process, Sloan Management Review, Summer, pp.11-25.
FASB (1978), Statement of Financial Accounting Concept (SFAC)
1,Stanford, USA.
FASB (2001), Improving Business Reporting: Insights into Enhancing
Voluntary Disclosures, Steering Committee on Business Reporting
Research Project, Norwalk, USA, Financial Accounting Standard Board.
Hasan, A (2005), Corporate Voluntary Reporting Practices in India, The
Cost and Management Vol. 33, No. 5, September-October, pp. 73-79.
Hendriksen,Eldon.S., and Breda, M.F. Van (1992), Accounting
Theory,(5e),Irwin.
Jiloka, S.K.,and Verma,S (2006),Corporate Financial Disclosures, The
Management Accountant, Volume 41 No.11,November,pp.867-871.
Kaushik, K., and Dutta, K.,(2006), Corporate Reporting Without Shades
of Grey,The Chartered Accountant, volume 54, No.07, pp.975-982.
Meek, G.k., C.B.Roberts & S.J. Gray(1995),Factors Influencing Voluntary
Annual Report Disclosures by U.S. and U.K. and Continental European
Multinational Corporations, Journal of International Business Studies,
Vol. 26,pp. 555-572.
Miller,P.B.W.(2002); Quality Financial Reporting; Journal of Accountancy,
April.
Porwal, L. S.,(2001), Accounting Theory- An Introduction, Tata McGrawhill
Publishin Company Limited, New Delhi.
Rathore, S.,(1996), International Accounting; Prentice Hall of India
Private Limited , New Delhi.
Samuel A. DiPiazza, Jr., and Robert G. Eccles(2002), Building Public Trust:
The Future of Corporate Reporting, John Wiley & Sons, New York.
Sen, S.,( 2005),Segment Reporting in India, Iyotsna Publishing House,
Kolkata.
Taxmann(2005),Taxmanns Corporate Laws, Taxmann Allied Services(P.)
Ltd.; New Delhi.
References:
Vanstraelen, A., M.T. Zarzeski & S.W. G. Robb(2003),Corporate Non-
AICPA(1994), Improving Business Reporting- A Customer Focus: Meeting
financial Disclosure Practices and Financial Analyst Forecast Ability
the Information Needs of Investors and Creditors: and Comprehensive
Across Three European Countries, Journal of International Financial
Report of the Special Committee on Financial Reporting, New York:
Management and Accounting, Vol.14, No.3, pp 249-278.
70
october
2011
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REPORTING
Global Trends in Reporting to the

Stakeholders
Reporting to the shareholders/other stakeholders of the Company such as Regulators, Employees, Bankers, Society
at large (collectively referred to as Stakeholders) is an important activity on the part of the management of the
Company. The quality and the transparency with which such disclosures are made enhance the comfort and the
credibility of the Reporting Entity. Globally, the expectations of the readers of the Annual Reports have increased
exponentially in the recent past and professional managements are making their best efforts to meet those
expectations. The fundamental approach followed in this reporting seems to emanate from the principle of More you
Disclose.More the Comfort to the Reader; but one has to remember Quantity is not a substitute for the Qualitative
Reporting. This Article deals with some of the interesting/ qualitative disclosures which are mandatorily / by general
practice required to be disclosed in the Directors Reports, Auditors Reports, and in other documents in some of the
countries globally and the fundamental principles behind such disclosure stipulations along with a comparison of the
requirement / practices followed in India. Read on to know more
The Regulators worldwide have
also stipulated various disclosure
requirements in the annual reports
to the stakeholders for ensuring
proper disclosure of qualitative/
unbiased information. Though
the regulatory requirements of the
respective countries might have/are
being changed in some of the cases,
since the law is always evolving,
the underlying principle behind
such disclosures and its relevance
in our reporting environment is
still relevant and, hence, these are
taken for analysis in this article.
CA. Sriraman Parthasarathy

(The author is a member of the Institute.
He can be reached at eboard@icai.org)
Annual Report
Typically, the Annual Report sent
to the shareholders once in a year
would contain the Directors Report,
Management Discussion & Analysis, Auditors Report and Financial
Statements. Further, various entities
also provide additional details

such as the Companys Historical
Performance, Report on Current
and Future Operations, Compliance
with
Corporate
Governance
Principles and Practices, Report
on Corporate Social Responsibility
Activities, Shareholder Information,
etc. A majority of the disclosures
are governed by the regulatory
requirements of the respective
countries and the trend of providing newer/innovative information/analysis to the stakeholders,
suomoto, by the professional
managements of the corporate is
also on the rise.
Disclosures in Directors Report
In the Directors Report, in addition
to the regular requirements relating
to the performance of the Company,
the following unique disclosures
october
2011
71
580
REPORTING
are appearing in several Annual

Reports;
Disclosure of Information to
Auditors:
For certain type of companies in
UK, there is a requirement that the
Directors Report should contain a
statement to the effect that, in the
case of each of the persons who
are directors at the time when the
report is approved, the following
applies:
so far as the director is aware,
there is no relevant audit
information (information needed
by the company's auditors in
connection with preparing their
report) of which the company's
auditors are unaware, and
each director has taken all the
steps that he ought to have
taken as a director in order to
make himself aware of any
relevant audit information and
to establish that the company's
auditors are aware of that
information.
Though there are certain specific
provisions relating to directors
responsibilities in the preparation
of the financial statements in India,
there is no such explicit statement
which is required to be made by the
directors in their report.
Considering the transparency
requirement and the expectations
of the society, such a requirement
on the part of the directors and
a confirmation of the same by
the auditors in their report would
go a long way in enhancing
the governance framework of
companies in India.
Disclosure of Details Relating to
Indemnification of Officers and
Auditors:
In Australia, there is a requirement
on the part of the directors to
give the details of indemnification
of officers and auditors of the
company during the year or of any
72
october
related body corporate against a

liability incurred as such as officer
or auditor. Further, they should also
give the details as to whether the
company has paid or agreed to
pay any premium in respect of a
contract insuring against a liability
incurred by an officer or auditor.
There is no such requirement
in India to disclose the details of
any indemnification of officers and
auditors of the company during the
year in the Directors Report.
Disclosure of Directors and
Secretarys Interest in Shares/
Debentures:
One of the disclosure requirements
in Ireland as part of the Directors
Report is to give details of the
interests in the form of shares in
the company of the directors and
secretary specifically as at the
beginning and at the end of the
reporting period. This requirement
also extends to the shareholding, if
any, in the parent company/group
companies. Similar requirement is
also there in Malaysia, Singapore,
etc.
There is no such requirement as
regards the aforesaid disclosure
requirement in the Directors
Report specifically in India. Such
a disclosure in the Annual Report
would go a long way in ensuring
governance obligations on the part
of the Directors.
Disclosure of Directors Benefits:
In Malaysia, directors need
to confirm in their Report, the
following specifically pursuant to
the Malaysian Companies Act;
Whether at the end of that
financial year
there subsist arrangements
to which the company is a
party, being arrangements
with the object or objects
of enabling directors of the
company to acquire benefits
by means of the acquisition
of shares in, or debentures
2011
of, the company or any other

body corporate; or
there have, at any time in
that year, subsisted such
arrangements as aforesaid
to which the company was
a party, and if so the report
shall contain a statement
explaining the effect of the
arrangements and giving the
names of the persons who
at any time in that year were
directors of the company and
held, or whose nominees
held, shares or debentures
acquired in pursuance of the
arrangements;
Similarly, in Singapore, directors

are required to comment specifically
about any arrangements which
enable directors to acquire benefits
by means of the acquisition of shares
and debentures. Similarly, details
of directors receipt and entitlement
to contractual benefits, if any, also
should be disclosed in the Directors
Report in Singapore.
In India, there is no such
disclosure requirement in the
Directors Report as regards the
above items, though certain types
of contracts or arrangements where
the directors are interested would
require approval of the regulators/
shareholders and would require
documentation in the Statutory
Register, Review and Reporting by
the Auditors as stipulated under the
Indian Companies Act, 1956.
Disclosure Relating to Books of

Account:
In certain countries, such as Ireland,
there is a requirement on the part
of the directors to specifically
comment on the measures taken by
them to ensure that proper books
and accounting records are kept in
accordance with the provisions of
the law including the employment of
appropriately qualified accounting
personnel and the maintenance of
appropriate accounting systems.
Further, they are also specifically
581
required to indicate in their Directors

Report, the place where the books
of account are located.
In India, other than the Directors
Responsibility Statement which
deals with the preparation of the
financial statements, application of
accounting standards, accounting
policies, maintenance of accounting
records, etc, there is no requirement
to comment about the location of
Books of Account, employment of
appropriately qualified accounting
personnel, maintenance of appropriate accounting systems, etc.
specifically.
Risks & Uncertainties and Events
after the Balance Sheet Date &
Future Developments:
In some countries such as Cyprus
and Ireland, there is a requirement,
on the part of the directors to
identify the risks and uncertainties
their company faces and to disclose
these in the Directors Report
accompanying the companys
financial statements.
Further, there is also a need
for disclosure of any important
events since the period end in the
Directors Report in many countries.
For example, in Malaysia, there is
a need for specific disclosure in
the Directors Report as to whether
there has arisen in the interval
between the end of the financial
year and the date of the report
any item, transaction or event of a
material and unusual nature likely,
in the opinion of the directors, to
affect substantially the results of
the company's operations for the
financial year in which the report is
made and, if so, giving particulars
of the item, transaction or event.
Details on any future developments the directors intend on
undertaking within the coming years
is also required to be disclosed in
the Directors Report mandatorily
in some of the countries such
as Ireland. The future rather than
the past of each company is
REPORTING
becoming
increasingly
more
important. Thus, an emphasis in
priority is given to this section of
the Directors Report in terms of the
detail and the information being
presented to the reader of the
In India, though there is no
specific stipulation to mandatorily
comment about the Risks &
Uncertainties/Future Developments
in the Directors Report, the
section relating to Managements
Discussions and Analysis, applicable to listed entities, is expected
to deal with various Risks &
Uncertainties, Future Developments
impacting the entity.
Details relating to material
changes and commitments, if any,
affecting the financial position of
the company which have occurred
between the end of the financial
year of the company to which
the balance-sheet relates and the
date of report is required to be
disclosed in the Directors Report in
India as well.
Disclosure relating to Rounding Off
of Amounts in Directors Report:
There is a requirement in Australia
for certain type of companies to
specifically indicate the method
of rounding off of the amounts
disclosed in the Directors Report.
This could be in the form of
rounding off to nearest thousand of
the unit of currency, depending on
the size, etc. subject to the terms
and conditions stipulated in the
regulations.
We do not have any such specific
disclosure requirement relating
to rounding off of amounts in the
Directors Report in India. Though
there are stipulations in India
relating to rounding off of amounts
in
the
financial
statements
depending on the size of the
company, there is no such
requirement as regards the
Directors
Report
and
other
documents submitted as part of
the Annual Report.

Declaration on Financial
Information:
In Malaysia, there is a need for
specific declaration in the Directors
Report from the directors with
respect to the following items
relating to the financial statements;
Whether the directors (before
the profit and loss account
and balance sheet were made
out) took reasonable steps
to ascertain what action had
been taken in relation to the
writing-off of bad debts and
the making of provision for
doubtful debts, and satisfied
themselves that all known
bad debts had been written off
and that adequate provision had
been made for doubtful debts;
Whether at the date of the
report the directors are aware
of any circumstances which
would render the amount
written off for bad debts or the
amount of the provision for
doubtful debts inadequate to
any substantial extent and, if
so, giving particulars of the
circumstances;
Whether the directors (before
the profit and loss account and
balance sheet were prepared)
have taken reasonable steps to
ensure that any current assets
which were unlikely to be
realised in the ordinary course
of business including their value
as shown in the accounting
records of the company have
been written down to an amount
which they might be expected
so to realise;
Whether at the date of the report
the directors are aware of any
circumstances which would render the
values attributed to current
assets in the accounts
misleading; and
which have arisen which
render adherence to the
october
2011
73
582
REPORTING
74
existing method of valuation

of assets or liabilities of the
company misleading or
inappropriate; and, if so,
giving particulars of the
circumstances;
Whether there exists at the date
of the report any charge on the assets
of the company which
has arisen since the end
of the financial year which
secures the liabilities of
any other person and, if
so, giving particulars of any
such charge and, so far as
practicable, of the amount
secured; and
any contingent liability which
has arisen since the end
of the financial year and,
if so, stating the general
nature thereof and, so far as
practicable, the maximum
amount, or an estimate of the
maximum amount, for which
the company could become
liable in respect thereof;
Whether any contingent or
other liability has become
enforceable, or is likely to
become enforceable, within
the period of twelve months
after the end of the financial
year which, in the opinion of the
directors, will or may affect the
ability of the company to meet
its obligations when they fall
due and, if so, giving particulars
of any such liability;
Whether at the date of the
report the directors are aware
of any circumstances not
otherwise dealt with in the
report or account which would
render any amount stated in
the accounts misleading and,
if so, giving particulars of the
circumstances; and
Whether the results of the
company's operations during
the financial year were, in
the opinion of the directors,
substantially affected by any
october
item, transaction or event of a

material and unusual nature
and, if so, giving particulars of
that item, transaction or event
and the amount or the effect
thereof, if known or reasonably
ascertainable.
Such a specific and detailed
confirmation by the directors not
only adds credibility to the financial
statements, but also confirms
the care taken by the directors in
ensuring all specific accounting
aspects.
In India, there is no such
requirement for the aforesaid
disclosures in the Directors
Report other than the Directors
Responsibility Statement which
deals with the above items by way
of giving specific confirmations
relating
to
compliance
with
Accounting Standards and GAAP
and thus, addresses the above
requirements indirectly. But a
specific confirmation on some of
the critical accounting estimates,
realisability of the assets, assessing
the contingent liabilities by the
directors would force those in
charge of governance to look into
the minute accounting details
so as to deal with the same
appropriately.
Auditors Independence
Declaration:
There is a requirement to attach
the Independence Declaration
obtained from the auditors as part
of the Directors Report in certain
countries.
This
independence
declaration is obtained from the
auditor and will specifically give the
required confirmation for ensuring
compliance with the independence
requirements and the other
applicable professional conduct by
the auditors.
Such a requirement of including
the Independence Declarations of
the auditors as part of the Directors
Report is not applicable in India.
2011
However, the auditors are required

to maintain their independence and
confirm the same to the client, but
such an explicit confirmation of the
fact as part of the Directors Report
would provide greater comfort and
confidence to the Stakeholders of
the Company.
Internal Control Declaration:
In Malta there is a requirement of
including a specific declaration by
the directors on the internal control
environment of the company.
This declaration would state that
the directors through oversight
of management are responsible
to ensure that the company
establishes and maintains internal
control to provide reasonable
assurance with regard to reliability
of financial reporting, effectiveness
and efficiency of operations and
compliance with applicable laws
and regulations.
Further, there will be a
declaration that management is
responsible, with the oversight
from the directors, to establish
internal control environment and
hough there are

certain specific
provisions
relating to
Directors
Responsibilities in the
preparation of the financial
statements in India, there is
no such explicit statement
which is required to be
made by the directors in
their report. Considering the
transparency requirement
and the expectations of the
society, such a requirement
on the part of the directors
and a confirmation of the
same by the auditors in their
report would go a long way
in enhancing the governance
framework of companies in
India.
Advertisement
584
REPORTING
n India, other
than the
Directors
Responsibility
Statement which
deals with the preparation
of the financial statements,
application of accounting
standards, accounting
policies, maintenance of
accounting records etc, there
is no requirement to comment
about the location of Books
of Account, employment
of appropriately qualified
accounting personnel,
maintenance of appropriate
accounting systems etc.
specifically.
maintain policies and procedures
to assist in achieving the objective
of ensuring, as far as possible,
the orderly and efficient conduct
of business. This responsibility
also includes establishing and
maintaining controls pertaining
to the companys objective of
preparing financial statements as
required by the regulations and
managing risks that may give rise
to material misstatements in those
financial statements. In determining
which control to implement to
prevent and detect fraud, management considers the risk that
the financial statements may be
materially misstated as a result
of fraud.
Such a requirement relating to
internal control/similar declarations
is applicable in some other countries as well such as UK, Ireland,
and South Africa. Needless to add
that the SOX requirement relating
to internal control in the US for
certain companies and the related
disclosure aspects in the Annual
Reports is well known.
In India, there is a requirement
relating to Directors Responsibility
Statement which deals with the
preparation of financial statements
76
october
on a going concern basis,

by applying Accounting Standards, consistent application of
accounting policies, safeguarding
of assets, controls for preventing/
detecting frauds and other related
declarations. However, there is no
such specific requirement relating
to a declaration by the directors
on internal control aspects for all
the companies, though, for listed
companies, there is a requirement
relating to internal controls in the
Managements Discussion and
Analysis Section and also in the
Certification by the CEO and the
CFO of the Company.
Auditors Report
In addition to the regular report
on the financial statements of
the Company by the Auditors,
the following disclosures are
also mandated by law in various
countries;
Auditors Report on Directors
Report/Managements Review:
As per the UK Laws, in the Auditors
Report, there is a mandatory
requirement on the part of the
auditors to comment about
whether the information contained
in the Directors Report is consistent
with the financial statements.
Hence, naturally, there is a
regulatory requirement on the
part of the auditors to read the
Directors Report and consider the
implications for their report as well.
This requirement is also
applicable in various other countries
such as Denmark which requires a
separate opinion on the part of the
auditors regarding their reading
of the Managements Review
Statements and its consistency
with the disclosures made in the
Further, as per the Cyprus
Companies Law, the auditors are
required to comment about the
consistency of the information
given in the Directors Report
2011
with the financial statements

specifically as part of their Other
Legal reporting requirements.
The underlying principle behind
such a requirement is to make
sure the correct information reaches the stakeholders irrespective
of the form in which it takes. If
the directors report and the
financial statements are not in
sync, the readers of the annual
report may be misguided. Hence
this responsibility has been fixed on
the part of the auditors.
In India, there is a requirement
on the part of the auditors, in view
of the new Auditing Standard
SA 720, effective for periods
beginning on or after 1st April, 2010,
which deals with the auditors
responsibilities in relation to other
information in documents containing audited financial statements,
to review the documents containing
audited financial statements as
the annual report or other similar
documents which are issued to
the owners or similar stakeholders
containing
audited
financial
statements and the auditors report
thereon.
The Auditing Standards requires
here is a
requirement in
Australia for
certain type
of companies
to specifically indicate the
method of rounding off of
the amounts disclosed in the
Directors Report. This could
be in the form of rounding off
to nearest thousand of the unit
of currency, depending on the
size etc. subject to the terms
and conditions stipulated
in the regulations. We do
not have any such specific
disclosure requirement
relating to rounding off of
amounts in the Directors
Report in India.
585
REPORTING
the auditor to read the other

information to identify material
inconsistencies, if any, with the
audited financial statements before
issuing the auditors report on
the financial statements. Further,
the Standard defines Other
Information as financial and nonfinancial information (other than the
audited financial statements and
the auditors report thereon) which
is included, either by law, regulation
or custom, in a document containing
the audited financial statements
and the auditors report thereon.
However, there is no explicit
requirement on the part of the
auditors to indicate their Review/
Reading of the Directors Report
and the result thereof in their
Auditors Report, similar to that of
UK/Denmark, etc.
here is a
requirement
to attach the
Independence
Declaration
obtained from the auditors as
part of the Directors Report
in certain countries. This
independence declaration
is obtained from the auditor
and will specifically give the
required confirmation for
ensuring compliance with the
independence requirements
and the other applicable
professional conduct by the
auditors. Such a requirement
of including the Independence
Declarations of the auditors as
part of the Directors Report is
not applicable in India.
Disclosure Relating to Serious Loss

of Capital
As per the Irish Regulations, there
is a requirement on the part of the
auditors to comment about whether
the net assets of the company, as
stated in the Balance Sheet, are
more than half the amount of its
called up share capital and on
that basis whether in the opinion
of the auditor, there exists, as at
the date of the Balance Sheet, a
financial situation which would
require convening of the extra
ordinary general meeting of the
shareholders of the company. This
requirement is mandated since
there is an obligation on the part of
the directors to convene an extra
ordinary general meeting of the
shareholders in the event of serious
loss of capital and the auditors
have to report this situation on an
independent basis.
In India, as part of the
Companies Auditors Report Order
(CARO), there is a requirement to
comment about whether in case
of a company which has been
registered for a period not less than
five years, its accumulated losses
at the end of the financial year are

not less than fifty per cent of its net
worth and whether it has incurred
cash losses in such financial year
and in the immediately preceding
financial year
However, this is appearing
only in CARO (Annexure to the
Auditors Report) and also does not
directly talk about the requirement
relating to any action to be taken
on the part of the company, if the
financial health of the company is
dismal.
Zakat Deduction at Source:
In Pakistan, the auditors are
required to comment whether any
Zakat is deductible at source under
the statutory provisions in their audit
report in addition to their regular
report on the financial statements.
This requirement is similar to
that of the requirement relating
to commenting on remittance of
statutory dues in India as part of the
CARO requirements.
Directors Interest in Contracts with
Company:
In Sri Lanka, the auditors are
required to comment in their report

about the details of the directors
interests in the contracts with the
company.
This requirement is similar to
that of the requirement in India
relating to disclosure of Section
301 contracts wherein the auditors
are required to comment as to
whether the particulars of contracts
or arrangements referred to in
Section 301 of the Companies Act
have been entered in the register
required to be maintained under
that section;
Conclusion
Considering the global trends
emerging in the area of reporting to
the stakeholders, the professional
managements of corporate could
consider implementing such global
best practices in disclosures in
their Annual Reports, to the extent
relevant and applicable, suomoto,
without waiting for the mandatory
regulatory requirements. Needless
to add that many corporate entities
in India have already initiated
required steps in this direction
and are setting benchmarks for
ensuring enhanced and value
added disclosures in their Annual
Reports to the Stakeholders. Currently, the regulatory environment
in India is also responding swiftly
and favorably to ensure greater/
enhanced disclosure requirements
to the Stakeholders. Greater
transparency and assuming more
and more responsibility by those
in charge of governance, ensuring
unbiased approach in implementing
governance practices and following
the disclosure requirements in
letter and spirit are the corner
stones
of
building
greater
confidence amongst the investors,
general public, regulators and
the global international community
and this could be well achieved
based on enhanced, extensive,
qualitative disclosures in the Annual
Reports to the stakeholders. n
october
2011
77
586
AUDITING
Information Risk and Risk Assurance

in Auditing
Accounting is the art of recording, classifying and summarising of economic events in a logical manner for the
purpose of providing financial information for decision making by the users of the accounting information. To provide
relevant information, accountants must have a thorough understanding of the principles and rules that provide the
basis for the preparation of the accounting information. While conducting the auditing of accounting data, auditors
attention is on determining whether recorded accounting information properly reflects the economic events that
occurred during the accounting period. This is because international accounting standards provide the criteria for
evaluating as to whether the accounting information is properly recorded and reflected through financial statements
and for this purpose the auditors must also understand those accounting standards. As society becomes more
complex, decision makers are more likely to receive unreliable information. There are several reasons for this
unreliable information and this unreliability of information invites risk. Auditing has no effect on either the risk-free
interest rate or business risk, but it can have a significant effect on information risk. This article analyses the concept
of Information Risk and Risk Assurance in auditing.
Dr. (CA.) Sanjib Kumar Basu

(The author is a member of the Institute and
Faculty Member, Department of Commerce,
St. Xaviers College, Kolkata. He can be
reached at eboard@icai.org)
78
october
Need for Accurate Financial

Information
In order to get the idea about
the need of accurate information,
the process of decision making
by a bank manager in granting a
loan to a business (customer) can
be considered. This decision of
the bank manager for granting
loan to the customers will be
based on a number of factors such
as previous financial relationships
with the customer and the present
financial condition of the business
as reflected by its financial state-
2011
ments. If the bank makes the loan,

it will charge a rate of interest
determined primarily by three
factors. These are:
1. Risk-free interest rate: This
is approximately the rate the
bank could earn by investing
in Government Bonds for the
same length of time as the
business loan.
2. Business risk for the customer:
This risk reflects the possibility
that the business will not be
able to repay its loan because
of unfavourable economic
587
or business conditions, such

as recession, poor management decisions or unexpected
competition in the industry in
which this business belongs.
3. Information risk: Information
risk reflects the possibility that
the information upon which
the business risk decision was
made is inaccurate. A likely
cause of the information risk
is the possibility of inaccurate
Auditing has no effect on
either the risk-free interest rate or
business risk, but it can have a
significant effect on information
risk. If the bank officer is satisfied
that there is minimal information risk
because the borrowers financial
statements are audited, then the
banks risk is substantially reduced
and the overall interest rate to the
borrower can be reduced. The
reduction of information risk can
have a significant effect on the
borrowers ability to obtain capital
at a reasonable cost.
Causes of Information Risk
As society becomes more complex,
decision makers are more likely
to receive unreliable information.
There are several reasons for this
unreliable information and this
unreliability of information invites
risk.
The reasons for the unreliable
information are:
i. Remoteness of information
In a global economy, it is
nearly
impossible
for
a
decision maker to have much
firsthand knowledge about the
organisation with which they do
business. Information provided
by others must be relied
upon. It is the fact that when
information is obtained from
others, the likelihood of its being
intentionally or unintentionally
misstated, increases.
ii. Biases and motives of the
AUDITING
provider
If information is provided by
someone whose goals and
objectives are inconsistent with
those of the decision maker, the
information provided may be
biased in favour of the provider.
The reason can be honest
optimism about future events
or an intentional emphasis
designed to influence users.
In either case, the result is a
misstatement of information.
For example, when a borrower
provides financial statements to
a lender, there is considerable
likelihood that the borrower will
bias the statements to increase
the probability of obtaining a
loan. The misstatement could
be incorrect rupee amounts
or inadequate or incomplete
disclosures of information.
iii. Voluminous data
As
organisations
become
larger, so does the volume of
their economic events and
transactions. This increases
the likelihood that improperly
recorded information is included in the records- perhaps
buried in a large amount of
other information. For example,
if a large business organi-sation

overpays a vendors invoice
by R20,000, it is unlikely to be
uncovered unless the concern
has
instituted
reasonably
complex procedures to find this
type of misstatement. If many
minor misstatements remain
undiscovered, the combined
total can be significant.
iv. Complex exchange transactions
In the past few decades,
economic events and trans
actions between organisations
have become increasingly
complex and therefore more
difficult to record properly.
For example, the correct
accounting treatment of the
business combination of one
entity with another poses
relatively difficult accounting
problems. Other examples
include properly combining
and disclosing the results of
operations
of
subsidiaries
with the parent organisation in
different industries and properly
disclosing derivative financial
instruments as prescribed
in the applicable accounting
standards.
fter comparing
costs and
benefits and
required
analysis,
business managers and
financial statement users
may conclude that the best
way to deal with information
risk is simply to have it
remain unreasonably high.
A small company may find
it less expensive to pay
higher interest costs than to
increase the cost of reducing
information risk. For larger
businesses, it is usually
practical to incur costs to
reduce information risk.
Reducing Information Risk

After comparing costs and benefits
and required analysis, business
managers and financial statement
users may conclude that the
best way to deal with information
risk is simply to have it remain
unreasonably high. A small
company may find it less expensive
to pay higher interest costs than
to increase the cost of reducing
information risk.
For larger businesses, it is
usually practical to incur costs to
reduce information risk. There are
three ways to do so. These are:
i. User verifies information
The user may go to the business
premises to examine records
and obtain information about
october
2011
79
588
AUDITING
the reliability of the financial

statements. Normally, this is
impractical because of cost.
In addition, it is economically
inefficient for all users to verify
the information individually.
Nevertheless,
some
users
perform their own verification.
For example, tax department
does considerable verification
of business and individual tax
returns to determine whether
the tax returns filed reflect
the actual tax due to the
government. Similarly, if a
business intends to purchase
another business, it is common
for the purchaser to use a
special
investigation
team
to independently verify and
evaluate key information of the
prospective business.
ii. User shares information risk
with management
There is considerable legal
precedent
indicating
that
management is responsible
for providing reliable information to the users. If users
rely on inaccurate financial
statements and as a result
incur a financial loss, they may
have a basis for lawsuit against
management. A difficulty with
sharing information risk with
management is that users
may not be able to collect on
losses. If a company is unable
to repay a loan because
of bankruptcy, it is unlikely
that management will have
sufficient
fund
to
repay
users.
iii. Audited financial statements
are provided
The most common way for
users
to
obtain
reliable
information is to have an
independent financial audit.
Decision makers can then use
the audited information on the
assumption that it is reasonably complete, accurate and
unbiased.
80
october
Typically,
management
of
a private company or the audit
committee for a public company
engages the auditor to provide
assurances to the users that the
financial statements are reliable.
If the financial statements are
ultimately determined to be
incorrect, the auditor can be
sued by both the users and the
management.
Auditors
obviously have considerable legal
responsibility for their work, because they are providing required
assurance about the reliability
of accounting information to
the users of the information
including the management and
the shareholders.
ssuring information security

is central to
the success of
any business
activity. This is particularly
pertinent in the age of modern
technology, when information
can leak and spread like a
viral infection, and politically
sensitive issues such as ID
theft can bring down powerful
individuals, businesses and
government parties. There
are nine key concepts of
information security, encompassing technology, law, best
practice and ethics.
Information Assurance Services

An assurance service is an
independent professional service
that improves the quality of
information for decision makers.
Such
services
are
valued
because the assurance provider
is independent and perceived as
being unbiased with respect to the
information examined. Who are
responsible for making business
decisions seek assurance services
to help improve the reliability and
relevance of the information used
as the basis for their decisions.
Information assurance covers
all activities that deal with the
issues raised by the following key
information security concepts. This
includes:
Ensuring the integrity, authenticity and reliability of information;
Providing unambiguous identification and availability of this
information;
Establishing which individuals
are authorised to view, edit and
transmit the information;
Protecting sensitive information
from illegitimate recipients or
interference, and unsuspecting recipients from false
information;
Regulating what legitimate

users do with the information to
which they have access.
2011
Key concepts of information

security
Assuring
information
security
is central to the success of any
business activity. This is particularly pertinent in the age of modern
technology,
when
information
can leak and spread like a viral
infection, and politically sensitive
issues such as ID theft can
bring down powerful individuals,
businesses
and
government
parties.
Nine key concepts of information security, encompassing
technology, law, best practice and
ethics are:
1. Confidentiality
As an information security concept,
confidentiality relies on the premise
that there is some information
which should be accessed only by
certain people. If this principle is
accepted, then we might create in
addition information categories that
reflect the degree of confidentiality
required.
For example, we might argue
that medical records should be
completely
private
(available
589
only to the individual and the

appropriate medical practitioners),
internal (shared with all medical
practitioners, and perhaps also with
members of the individuals family)
or public.
Maintaining confidentiality is a
three-step method:
authentication (establish the
identity of the proposed
recipient)
authorisation (confirm whether
the proposed recipient is
authorised to receive the information)
access control (regulate the
level of access available to the
proposed recipient, e.g. through
the use of read-only texts).
2. Integrity
Within the context of information
security and risk management,
integrity means ensuring that
data remains unchanged while in
storage or transmission. This affects
policies regarding both official
records and also communication
systems.
When sending an e-mail, we
rely on the security of the IT system
to ensure that the e-mail reaches
the intended recipient intact. When
we enter or retrieve data from a
spreadsheet, we do not expect
the information to change, either
by technological fault or through
illegitimate interference.
One means of establishing the integrity of data storage or communication systems
are computational techniques
for verifying data, including
comparisons, checksums, message authentication and message
digests.
3. Accountability
Accountability holds an unusual
position within the world of
information security and risk
management. Essentially, it is a
means of protecting information.
However, unlike the digital sign-
AUDITING
atures, passwords and encryption

familiar to the technology savvy,
accountability deals with the
interface
between
information
security, law and ethics.
According to Andreas Schedler
(in his article Conceptualising
Accountability) the basic illustration
of accountability can be states
as follows: "A is accountable to
B when A is obliged to inform B
about As (past or future) actions
and decisions, to justify them, and
to suffer punishment in the case of
eventual misconduct." In real terms,
this means understanding and
fulfilling ones own responsibilities
regarding information security. At
its simplest, these might include
not sharing the contact details
of customers with commercial
organisations. At higher levels of
management, individuals might
be responsible for communication
or even establishing suitable
information security policies.
Within the sphere of corporate
governance, accountability also
encompasses issues such as: to
which individual or organisation
a business leader should be
accountable; how organisational
policies can be regulated; and
how much control the government
should exercise over the information
security policies of individual public
sector departments.
4. Non-repudiation
As a general concept, repudiation
means that a party denies the
validity of a statement or a contract
(for example, by claiming that a
signature has been forged). Within
the context of information security,
non-repudiation means that a
statement or contact cannot be
repudiated. This might be provided
by a service that guarantees
authentication or proof of the
integrity and origin of the data.
Familiar technological means of
providing non-repudiation are
digital signatures and certificates.
5. Authenticity
If a toy car says Made in Japan, we
usually take this on trust. If a wineseller claims that the bottle we have
bought is from Singapore, then
we would expect this information
to be accurate. If we receive a
new pin code from the bank, then
it is vital that we can rely on the
authenticity of the information that
is, assurance that the information
exchanged is from the source that
it claims to be from.
This assurance can be provided
through something that the user
knows (e.g. a password or a pin
code), something that the user has
(e.g. an ID card or a digital certificate)
or even something that the user is
(e.g. checking fingerprints and irisscanning).
6. Identification
So much of information security is
concerned with protecting sensitive
information from illegitimate users
that there is a danger of forgetting
the importance of protecting
unsuspecting users from false or
inaccurate information. Within the
context of information security,
nformation
assurance is
the practice of
managing risks
related to the
use, processing, storage, and
transmission of information
or data and the systems and
processes used for those
purposes. While focused
dominantly on information
in digital form, the full range
of Information Assurance
encompasses not only digital
but also analog or physical
form. Information assurance
as a field has grown from the
practice of information security
which in turn grew out of
practices and procedures of
computer security.
october
2011
81
590
AUDITING
ome
practitioners
make the
mistake of
thinking of the
integrity attribute as being
only data integrity. While data
integrity is a major part of this
attribute, it is not everything.
This attribute also addresses
whether the physical and
electronic systems have been
maintained without breach or
unauthorised change. It even
refers to the people involved
in handling the information;
are they acting with proper
motivation and integrity.
identification means the capability
to retrieve, edit and report specific
data without ambiguity. This
capability is usually delivered
through the use of unique reference
codes, such as ID numbers.
7. Reliability
Information reliability is primarily
concerned with the information
that needs to be retained about the
author or source of information to
assure its authenticity. This raises
issues regarding version control
(logging information about the
changes made to versions of a
document or product), archiving
and document reviews.
In terms of information security,
reliability also means ensuring
that information or an information
system is protected against
tampering and fraud.
Information Assurance Process
The Information Assurance process
typically begins with the enumeration and classification of the
information
assets
to
be
protected. Next, the Information
Assurance
practitioner
will
perform a risk assessment. This
assessment considers both the
probability and impact of the
82
october
undesired events. The probability

component may be subdivided
into threats and vulnerabilities.
The impact component is usually
measured in terms of cost.
The product of these values is the
total risk.
Information assurance is the
practice of managing risks related
to the use, processing, storage,
and transmission of information or
data and the systems and processes used for those purposes.
While focused dominantly on
information in digital form, the full
range of Information Assurance
encompasses not only digital
but also analog or physical form.
Information assurance as a field
has grown from the practice of
information security which in
turn grew out of practices and
procedures of computer security.
In the 1960s, Information
Assurance was not as complex as it
is today. Information Assurance was
as simple as controlling access to
the computer room by locking the
door and placing guards to protect
it. Since the 1970s, information
security has held confidentiality,
integrity and availability (known as
the CIA triad) as the core principles.
One newer model of Information
Assurance adds Authentication and
Non-repudiation to create the five
Pillars of Information Assurance. In
contrast, Donn B. Parker developed
a model that added three attributes
of
authenticity,
utility,
and
possession to the core C-I-A.
Therefore, there are three basic
models used in the practice of
Information Assurance to define
assurance requirements and assist
in covering all necessary aspects or
attributes.
The first is the classic information
security model, also called the
CIA Triad, which addresses
three attributes of information
and
information
systems,
confidentiality, integrity, and
availability. This C-I-A model is
2011
extremely useful for teaching

introductory and basic concepts
of information security and
assurance; the initials are an
easy mnemonic to remember,
and when properly understood,
can prompt systems designers
and users to address the most
pressing aspects of assurance.
The next most widely known
model is the Five Pillars
of
Information
Assurance
model, promulgated by the
U.S. Department of Defense
in a variety of publications,
beginning with the National
Information
Assurance
Glossary,
Committee
on
National Security Systems.
The Five Pillars model is
sometimes criticised because
authentication
and
nonrepudiation are not attributes of
information or systems; rather,
they are procedures or methods
useful to assure the integrity and
authenticity of information, and
to protect the confidentiality of
the same.
A third, less widely known
Information Assurance model
is the Parkerian Hexad, first
introduced by Donn B. Parker
in 1998. Like the Five Pillars,
Parker's Hexad begins with the
C-I-A model, but builds it out
by adding authenticity, utility,
and possession (or control).
It is significant to point out
that the concept or attribute
of authenticity, as described
by Parker, is not identical to
the pillar of authentication as
described by the US Department
of Defense.
Information assurance is closely
related to information security
and the terms are sometimes
used interchangeably. However,
Information Assurances broader
connotation also includes reliability
and emphasises strategic risk
management over tools and
591
tactics. In addition to defending

against malicious hackers and
code (e.g., viruses), Information
Assurance includes other corporate
governance issues such as privacy,
compliance,
audits,
business
continuity, and disaster recovery.
Further, while information security
draws primarily from computer
science, Information Assurance is
interdisciplinary and draws from
multiple fields, including accounting,
fraud
examination,
forensic
science, management science,
systems engineering, security
engineering, and criminology, in
addition to computer science.
Therefore, Information Assurance
is best thought of as a superset of
information security.
The core principles as described
in different models are discussed
below:
I. Core Principles as per CIA
Triad
a. Confidentiality
Confidentiality is the assurance
that information is not disclosed
to
unauthorised
individuals,
processes, or devices. Confidential
information must only be accessed,
used, copied, or disclosed by users
who have been authorised, and
only when there is a genuine need.
A confidentiality breach occurs
when information or information
systems have been, or may have
been, accessed, used, copied or
disclosed or by someone who was
not authorised to have access to
the information.
For
example,
permitting
someone to look over your
AUDITING
shoulder at your computer screen

while you have confidential data
displayed on it would be a breach
of confidentiality if they were not
authorised to have the information.
If a laptop, which contains employment and benefit information about
100,000 employees, is stolen from
a car could result in a breach
of confidentiality because the
information is now in the hands of
someone who is not authorised
to have it. Giving out confidential
information over the telephone is
a breach of confidentiality if the
caller is not authorised to have the
information.
b. Integrity
Some practitioners make the
mistake of thinking of the integrity
attribute as being only data
integrity. While data integrity is
a major part of this attribute, it
is not everything. This attribute
also addresses whether the physical and electronic systems have
been maintained without breach
or unauthorised change. It even
refers to the people involved in
handling the information; are they
acting with proper motivation and
integrity.
Integrity means data cannot be
created, changed or deleted without
proper authorisation. It also means
that data stored in one part of a
database system is in agreement
with other related data stored in
another part of the database system
(or another system).
For example, a loss of integrity
occurs
when
an
employee
accidentally or with malicious
intent, deletes important data files.
A loss of integrity can occur if a
computer virus is released onto
the computer. A loss of integrity
can occur when an on-line shopper
is able to change the price of the
product they are purchasing.
c. Availability
Availability is timely, reliable access
uthenticity is
necessary to
ensure that the
users or objects
(like documents)
are genuine (they have not
been forged or fabricated).
As files are shared across
multiple organisations, there
can be circumstances when
duplicate copies of that file
may exist. In such cases, it
is important to establish not
only which is the master copy,
but also to establish a way
for those who use the data to
know where file, and all of the
tagged data sets in the file,
came from. A Tagged Data
Authority Engine is one way to
do this.
to data and information services
for authorised users. Availability
means that the information, the
computing systems used to
process the information, and the
security controls used to protect
the information are all available
and functioning correctly when the
information is needed. The opposite
of availability is the lack thereof, one
example of this is a common attack
known as a denial of service attack.
II. Additional Pillars as Given in
Newer Model
a. Authentication
Security measure designed to
establish the validity of a transmission, message or originator
or a means of verifying an individual's authorisation to receive
specific categories of information is
considered as authorisation in this
context. Authentication breach can
occur when a user's login id and
password is used by unauthorised
users to send unauthorised
information.
b. Non-repudiation
Non-repudiation
indicates
october
2011
the
83
592
AUDITING
ased on the risk

assessment,
the Information
Assurance
practitioner will
develop a risk management
plan. This plan proposes
countermeasures that involve
mitigating, eliminating, accepting or transferring the risks
and considers prevention,
detection, and response.
Countermeasures may
include tools such as firewalls
and anti-virus software,
policies and procedures
such as regular backups
and configuration hardening,
training such as security
awareness education or
restructuring such as forming
a computer security incident
response team or computer
emergency response team.
assurance the sender of data is
provided with proof of delivery
and the recipient is provided
with proof of the sender's
identity, so neither can later
deny having processed the data.
Non-repudiation implies that one
party of a transaction cannot deny
having received a transaction
nor can the other party deny
having sent a transaction. For
example, electronic commerce
uses technology such as digital
signatures to establish authenticity
and non-repudiation.
III. Donn B. Parkers Additional
Issues
a. Authenticity
Authenticity is necessary to
ensure that the users or objects
(like documents) are genuine
(they have not been forged or
fabricated). As files are shared
across multiple organisations,
there can be circumstances when
duplicate copies of that file may
exist. In such cases, it is important
84
october
to establish not only which is

the master copy, but also to
establish a way for those who
use the data to know where file,
and all of the tagged data sets
in the file, came from. A Tagged
Data Authority Engine is one way
to do this.
b. Utility
Utility means usefulness and
usability. For example, suppose
someone encrypted data on disk
to prevent unauthorised access
or undetected modifications
and then lost the decryption key
that would be a breach of utility.
The data would be confidential,
controlled,
integral,
authentic,
and available they just wouldnt
be useful in that form. Similarly,
conversion of salary data from
one currency into an inappropriate
currency would be a breach of
utility, as would the storage of
data in a format inappropriate for
specific computer architecture.
A tabular representation of data
substituted for a graph could be
described as a breach of utility if
the substitution made it more
difficult to interpret the data. Utility
is often confused with availability
because breaches such as those
described in these examples may
also require time to work around
the change in data format or
presentation. However, the concept
of usefulness is distinct from that
of availability.
c. Possession
Possession means custody or
control over the information, i.e.,
under whose control the information
is kept. If everyone would have the
access to the information generated,
that can be considered as a good
sign for the organisation. However,
if the unauthorised possession of
the information is with the persons
at the input end, that creates
problems to the information users
and also it throws a great challenge
2011
to the information security profile of

the organisation.
Conclusion
Based on the risk assessment, the
Information Assurance practitioner
will develop a risk management
plan. This plan proposes countermeasures that involve mitigating,
eliminating,
accepting
or
transferring the risks and considers
prevention,
detection,
and
response. Countermeasures may
include tools such as firewalls
and anti-virus software, policies
and procedures such as regular
backups
and
configuration
hardening, training such as
security awareness education or
restructuring such as forming a
computer security incident response team or computer emergency response team. The cost and
benefit of each countermeasure
is carefully considered. Thus,
the Information Assurance practitioner does not seek to eliminate
all risks, were that possible, but
to manage them in the most costeffective way.
After the risk management
plan is implemented, it is tested
and evaluated, perhaps by means
of formal audits. The Information
Assurance process is cyclical;
the risk assessment and risk
management plan are continuously
revised and improved based on
data gleaned from evaluation.
References
1.
2.
3.
4.
5.
Auditing and Assurance Services- Arens,

Elder and Beasley: ACL Publisher (13th
Edition).
Principles of Auditing- An Introduction to
International Standards on Auditing- Rick
Hayes, Roger Dassen, Arnold Schilder
and Philip Wallage: Pearson Education
Schweiz.
Auditing Cases- Beasley, Buckleas, Glover
and Prawitt: Prentice Hall (4th Edition).
Parker, Donn B. (1998). Fighting Computer
Crime. New York.
Parker, Donn B: Towards a New Framework
of Information Security- The Computer
Security Handbook (4th Edition) - John
Wiley, New York. n
593
TAXATION
Is Goodwill an Intangible Asset

Eligible for Tax Depreciation?
Intangible assets are those which create significant values for an organisation beyond its tangible assets and
Goodwill is a part of it. However, some of the intangible assets are not capable of recognition in books of accounts in
accordance with Accounting Standard-26. In spite of this, intangibles constitute a larger part of acquisition price in
present era of mergers and acquisitions. Therefore, while structuring M&A deals, the prospective buyer, apart from
considering other legal and commercial considerations, also considers tax cost and benefits involved in the deal.
Thus, the acquirer is always interested to factor-in the tax incidence in the form of tax depreciation that would be
eligible to him on intangible assets which are acquired and embedded within goodwill. Keeping this view in mind, the
article explains accounting principles for recognition of goodwill in financial statements as per prevailing Accounting
Standards. Whether goodwill recognised as above is eligible for tax depreciation? An attempt is also made to
analyse some landmark judgements which provide valuable insights on eligibility of depreciation on intangible assets
accounted for as goodwill.
CA. Namita Kedia

(The author is a member of the Institute. She can be
reached at eboard@icai.org)
Section 32(ii) Intangible Assets Eligible for

Depreciation
Depreciation on intangible assets was, for the first time,
recognised by Finance (No.2) Act, 1998. However, it is
interesting to note that not all intangible assets qualify
for depreciation. The legislature in its wisdom had
identified few intangibles for depreciation. It is evident
from provisions of Section 32(1)(ii) of the Act which
provides that any know-how, patents, copyrights, trade
marks, licences, franchises or any other business or
commercial rights of similar nature, acquired by the
assessee on or after 1-4-1998, shall be eligible for
october
2011
85
594
TAXATION
he term Goodwill has not been

defined in the Income-tax Act,
1961 though in Section 55(2)(a) it
has been recognised as a capital
asset for purposes of computing
capital gains. The cost of acquisition in case
of purchased goodwill is to be taken as the
amount of purchase price and the cost is
taken to be Nil when it is self generated
goodwill. Thus, the fact that goodwill is a
capital asset is recognised under Income-tax
Act, 1961.
depreciation allowance with effect from the assessment
year 1999-2000.
Assets like know-how, patents, copyrights, etc., form
a distinct category since all those items are specific and
represent rights of business or commercial nature. It is,
therefore, important to understand whether goodwill
recognised in books pursuant to business purchase
is an intangible asset and whether same qualifies for
depreciation under Section 32(ii).
Goodwill A Capital Asset under Income Tax Act
The term Goodwill has not been defined in the
Income-tax Act though in Section 55(2)(a) it has
been recognised as a capital asset for purposes of
computing capital gains. The cost of acquisition in case
of purchased goodwill is to be taken as the amount of
purchase price and the cost is taken to be Nil when it
is self generated goodwill. Thus, the fact that goodwill
is a capital asset is recognised under Income-tax Act,
1961.
Purchased Goodwill is Generally Goodwill
Embedded With Intangible assets
Normally, purchased goodwill is the only type which
appears in financial statements since self-generated
goodwill cannot be recognised in books in accordance
with AS 26 on Intangible Assets. This purchased
goodwill is valued as the excess of price paid for
a business as a whole over the agreed value of all
tangible net assets purchased unless any specific
value has been allocated to it.
It is to be noted that alike self-generated goodwill,
those intangible assets which cannot be identified
separately or cannot be reliably measured, are also not
recognised in the financial statements. Therefore, when
a business is purchased such intangible assets are not
assigned separate values, but are embedded together
and recognised as Goodwill in accordance with AS26, which states as follows, in respect of intangible
assets acquired as part of amalgamation:
86
october
2011
31. In accordance with this Statement:
(a) a transferee recognises an intangible asset that

meets the recognition criteria in paragraphs 20
and 21 (i.e. future benefits attributable to the asset
will flow to the enterprise and the cost can be
measured reliably), even if that intangible asset had
not been recognised in the financial statements of
the transferor; and
(b) if the cost (i.e. fair value) of an intangible asset
acquired as part of an amalgamation in the nature
of purchase cannot be measured reliably, that asset
is not recognised as a separate intangible asset but
is included in goodwill.
Amortisation or Depreciation on Goodwill Accounting Methodology vis-a-vis Tax Provisions
Further to above, it is pertinent to note that, for accounting
purposes, goodwill recognised in financial statements
is amortised over its systematic life (preferably five
years) as per Indian Accounting Standards; whereas
Goodwill as such is not included in the list of intangible
assets eligible for depreciation under Section 32(ii) of
Income-tax Act, 1961. Therefore, it can be said that
provisions of said section do not appreciate the fact
that consequent to existing accounting norms, such
purchased goodwill recognised in books of accounts
may have intangibles embedded within it which are
eligible for depreciation.
Due to this non-alignment between provisions of
Income-tax Act, 1961 and the accounting methods
followed by assesses in respect of goodwill recognition
and its subsequent amortisation and/or depreciation,
allowance of depreciation on Goodwill (embedded
with other intangible assets) has always been a subject
matter of considerable uncertainty and litigation.
Jurisprudence for Eligibility of Depreciation on
Goodwill
Although the few existing judicial precedents on this
subject summarised below lends a possible view that
goodwill is eligible for depreciation; these rulings have
not been too successful in putting a conclusive end to
this issue:
ue to this non-alignment between

provisions of Income-tax Act,
1961 and the accounting methods
followed by assesses in respect
of goodwill recognition and its
subsequent amortisation and/or depreciation,
allowance of depreciation on Goodwill
(embedded with other intangible assets) has
always been a subject matter of considerable
uncertainty and litigation.
595
TAXATION
Rulings
Facts of the Case
1
(CIT vs. Hindustan 1. Assessee was engaged in
Coca Cola
manufacturing and trading of nonBeverages Pvt. Ltd).
alcoholic beverages.tt
(Delhi High Court)
Decision Held
1. Nomenclature given to the entries in the books
of accounts is not relevant for ascertaining real
nature of transaction.
2. As per Section 32(ii), intangible assets includes,

2. It paid amounts to various bottlers
along with other things, any other business or
for marketing and trading reputation,
trading style and name, territory knowcommercial rights of similar nature
how, know-how related to business,
customer database, distribution
network, contact and other commercial
rights
3. Commercial rights are rights for effectively
3. A part of slump price paid was
carrying on business and commerce and
allocated to aforesaid intangible
therefore any such right is an intangible asset,
assets and recognised under the head
goodwill on which depreciation under
and so as goodwill which has intangible assets
Section 32 (ii) was claimed
i.e. know-how, patents etc. embedded within it
(Jeypore Sugar
Company Ltd. v
ACIT)
(Visakhapatnam
ITAT)
4.
4. Notes to income tax return stated
the fact that Goodwill represented
difference between consideration paid
for business and value of tangible
assets determined by a reputed valuer.
1. Assessee purchased Chagallu distillery 1.
and difference between price paid
and assets taken over was recognised
under Intangible assets as Goodwill.
2. Goodwill acquired vide sale/purchase 2.
agreement was defined as "goodwill,
interest and connection of transferor
inand concerning business together
with right to carry on business as going
concern in succession but forbidding
right to use existing name
3.
(B.Raveendran Pillai 1. Assessee purchased hospital under

vs. Commissioner of
two separate sale deeds, one for
Income Tax)
immovables and other for movables
(covering trademark, goodwill etc.
(Kerala High Court

(Ernakulam)
2. A value was assigned in sale deed to

Goodwill including name of hospital,
its logo and trademark
Depreciation on such Goodwill is allowed
Goodwill is a bundle of commercial benefits

and commercial rights and by virtue of
Goodwill assessee acquired these benefits and
rights to run Chagallu distillery.
Commercial benefits are not eligible for
depreciation whereas commercial rights being
akin to know-how, patents etc. is eligible for
depreciation
Since cost of acquistion of commercial rights

and commercial benefits cannot be made
available, Goodwill should be bifurcated into two
equal parts and allow depreciation thereon on
50% of Goodwill treated as cost of acquisition of
commercial rights
1. Trade marks and franchises covers name, logo
etc. value of which is included in Goodwill
2. It is important that assessee continued running

the hospital in the very same building, same
premises, same town and with same name.
3. Purchase of Hospital as going concern with its
name and trade mark is nothing but acquisition
of goodwill and cannot be termed anything other
than a commercial/ business right and therefore
Goodwill is entitled for depreciation.
This ruling of Delhi High Court in Hindustan Coca Cola Beverages [(ITA Nos. 1391/2010, 1394/2010 & 1396/2010 ) / (2011-TMI-201786)] has been
followed by Mumbai Tribunal in case of Koch Chemical Technology Group India Pvt. Ltd. vs. Deputy Commissioner of Income Tax in ITA No. 2680/
Mum/09 (AY 2009-10)
2
[ (ITA Nos. 255 & 256 (Vizag) of 2010) / (2010-TMI-203250-ITAT)]
3
[2011] 332 ITR 0531 / 2010-TMI-203081
1
october
2011
87
596
TAXATION
Rulings
4(
KEC International
Ltd vs. Addl.
Commissioner of
Income Tax)
(ITAT Mumbai)
Facts of the Case

1. Assessee acquired Power
Transmission Business and revalued
the assets acquired. It valued Brand
and Goodwill and recognised the
same separately in its books
Decision Held
1. Brand is an intellectual property right and can
be equated with Trademark. Hence, it falls
within the ambit of Section 32(ii) and hence
depreciation should be granted
2. Brand valuation was conducted under 2. When arms length price is determined in
three methods and value assessed in
valuation report, it must be regarded as actual
valuation report was recognised
cost
3. Depreciation will be allowed on Brand but not on
Goodwill
[ITA No. 4420/Mum/2009] / [2010-TMI-204449-ITAT]
A combined reading of aforesaid cases reveals that:

i. The true basis for claiming depreciation is the
real nature of intangible asset with reference to
rights obtained by the acquirer. Nomenclature
given to entries in books of accounts is not
relevant for ascertaining actual nature of
the transaction.
ii. Goodwill is made up of many components.
Depreciation is eligible on intangible assets
recorded as goodwill if same can be established
by the taxpayer.
Therefore, the views expressed by judicial
authorities in above rulings highlights that it may be
possible to claim depreciation on goodwill, where
the facts demonstrate that, it represents underlying
benefits in the nature of know-how, trademark, brands,
or such rights which could be considered as any other
business or commercial rights of similar nature, etc.
which per se are eligible for depreciation.
Like various other issues, allowability of tax
depreciation on goodwill is also surrounded by
contrary rulings. Having regard to what is discussed
above, attention is also invited to these cases where
depreciation was not allowed on goodwill based on the
relevant facts of the case and the matter is still pending
before Special Bench
i. R.G.Keswani v. Assistant Commissioner of Income
Tax [2009] 308 ITR (A.T.) 0271
ii. Borker Packaging 40 DTR 29 (Panaji)
iii. Madular Infoyech 131 TTJ 243 (Pune)
Depreciation on Intangibles under DTC Regime
On a concluding note, a visit to provisions of Direct
Tax Code 2010 (DTC) in respect of depreciation on
intangible assets is of considerable importance. Under
DTC, assets are divided into two categories i.e. (1)
Business Asset and (2) Investment Asset. Business
Asset is further classified into (a) Business Trading
Asset and (b) Business Capital asset.
88
october
2011
Section 314(39) of the Code defines a Business

Capital Asset as:
(a) any capital asset self-generated in the course of
business;
(b) any intangible capital asset in the nature of
(i) goodwill of a business .............................
Therefore as specified above, goodwill whether
self-generated or acquired will be classified as a
business capital asset under DTC regime and any
income arising from transfer, demolition, destruction
or discardment of a business capital asset will be
classified as income from business for the transferor of
such asset.
As regards depreciation allowance on intangible
assets under DTC; it is important to note that there
is no change in the status of a prospective buyer of
intangible assets (including goodwill). As per provisions
of Section 37 of the Code, depreciation will be allowed
on those business capital assets which are listed in the
Fifteenth Schedule. The said Schedule includes and
defines intangible assets as follows for the purposes of
depreciation:
(1) Any right by way of license or franchise, to operate
a business or to use a know-how, patent, copyright,
trademark or any other business or commercial
right of similar nature.
Further to above, Section 38(1)(b) of the Code
specifically provides that depreciation would be nil in
case of those assets which are not specified in Fifteenth
Schedule
Having regard to above, it is well established that
goodwill, as such, is not included in the list of intangible
assets eligible for depreciation under proposed DTC
regime also. Therefore, uncertainty and litigation
on eligibility of depreciation on intangible assets
embedded within goodwill is expected to continue due
to lack of clarity on the subject and contrary views held
by the judicial authorities. n
598
TAXATION
Proposed Goods and Services Tax

and Latest Developments towards its
Implementation
The proposed goods and services tax (GST) is in fact the brainchild of Ex-Finance Minister Mr. P. Chidamabram. It will
be a multi-stage consumption tax to be imposed on wide range of goods and services. With the implementation of
GST the government will surely be able to make the indirect tax regime more transparent and widen. The consumers
shall also be equally benefited by availing the goods and services at lower prices as the cascading effect will be
eliminated under proposed GST. The manufacturers and intermediate sellers shall also get relief from handling
hazards of multiple indirect taxes. Cost of tax collection will be reduced due to merging of existing different indirect
taxes into proposed GST. The revenue of both Central Government and State Governments shall be increased in
the long run. Initial loss of revenue to States will be compensated by the Centre. The only hurdles to cross over in
implementation of GST at the earliest is the disagreement of BJP-led States to implement it from 01-04-2012 after
necessary constitutional amendments. Hopefully, the Union Finance Minister along with the Finance minister of Bihar
and Chairman of the empowered committee will be able to convince all other States finance ministers, to arrive at a
desirable consensus.
CA. Rabin Kr. Ray

90
october
GST or Goods and Services

Tax has been proposed in Union
Budget for the year 2006-2007 to
replace existing indirect tax regime.
GST, if implemented, will replace
most of the existing indirect taxes.
As of now, more than 120 countries
of the world have implemented
GST to minimise the complexity
of multiple taxes. Considering the
fact of globalisation and complexity
of existing multiplicity of indirect
taxes, the Government of India
has proposed to introduce GST.
As proposed, it shall be levied or
charged at the point of sale of goods
and services by replacing existing
indirect taxes, i.e., central sales tax
(CST), State Sales Tax/ Value Added
Tax (VAT), Turnover Tax, Entry Tax,
2011
etc. including Service Tax. Hence,

it will actually be a multi-based
consumption tax imposed on wide
range of goods and services, which
shall have to be ultimately borne
by final consumers. The seller of
goods or service provider shall be
able to claim input credit as is being
claimed in existing VAT. Read on to
know more.
GST as a Broad-Based
Comprehensive Indirect Tax
MODVAT was implemented in India
with effect from 01-03-1986 on
selective goods and gradually it had
been extended to all commodities
in the name of Cenvat from April
2002. Services were also included
with Cenvat from 2004-2005.
599
By replacing sales tax, Value

Added Tax (VAT) was introduced
in the States from 01-04-2005.
At present custom duty and
additional duty in lieu of excise
duty and VAT are levied on import
of goods, central excise is being
levied on manufacturing goods,
VAT is charged on sale of goods
within the states, CST on interstate sale of goods and service tax
on prescribed services are being
charged. Hence, the proposed
GST will be a broad-based comprehensive indirect tax.
Brief Characteristics of GST
Presently Being Observed in
Some Countries
GST in France: France was the first
country to introduce GST in 1954.
GST in Canada: Tax is designed
and collected by the Federal
Government; the Provinces are
empowered to vary tax rates for
the respective Provinces. Here
combined Federal and Provincial
rate is 13%, allocated as 5% for
Federal and 8% for respective
Provinces. The seller acts as an
agent of the Government to collect
tax on behalf of the Government.
The tax revenue is shared among
the participating Provinces on the
basis of consumer expenditure
data for the Provinces.
GST in China: Centralised GST
system is observed here. However,
the revenue is shared between the
Federal Government and concerned
Provinces.
GST in USA: Here the GST is levied
only by the states and thus there is
no dependence on the centre.
GST in Australia: Here both the
Federal Government and States are
empowered to levy tax on sale of
goods or on rendering of services.
Each Province is entitled to collect
tax for sale in its Province only. The
TAXATION
Federal Government does not levy

tax on State property.
GST in Germany: The tax is
designed and controlled by the
Federal Government. However,
the States are entitled to collect
tax.
GST in New Zealand: Here also
GST is framed by the Centre and
the States are entitled to collect tax
from the consumers and buyers.
Initially GST was introduced @10%
with a base consisting of almost all
goods and services.
GST in Austria: Here tax is designed
and controlled by the Centre and
the States collect the tax.
Hence, the basic structure of
GST is more or less same in most
of the implemented countries.
The incidences of levy of tax are
purely on consumption basis and
accordingly there is a system of
availing input credit for intermediary
parties.
Proposed Operating System of
GST in India
The basic purpose of introducing
GST is to eliminate the cascading
effect of all indirect taxes in
valuation of goods and services.
The cascading effect of Cenvat
and service tax would be removed
with comprehensive set-off relief.
If buyer is a registered dealer
he/she will be allowed to avail
input credit for the tax already
paid by him/her to his/her seller
or service provider subject to
holding of proper tax invoice. The
input tax-credit can be set-off only
against tax payable by the dealer
to the Government. The registered
dealer under GST shall collect tax
as collection agent of government
from the customers. Unregistered
dealer shall not be allowed to avail
input credit. All taxable goods and
services shall be brought under
GST umbrella.
An empowered committee has

been formed under 13th Finance
Commission for the purpose of
smoothly implementing GST in
India. The initial propositions of the
committee are given below:
1) The Union and States will levy
tax on sale of goods or provision
of services concurrently on
common and identical base.
2) It will be structured on destination
principle by shifting the tax base
from production to consumption.
Accordingly, out of export and
import transaction only import
goods and services shall be
within the purview of GST. In case
of inter-state sale GST shall be
levied in the state where the final
consumption will take place.
3) GST will be levied on invoice
credit method.
4) Tax shall be levied on all goods
and services excluding items
like unprocessed food items,
education services, health care
etc.
5) Organisations having turnover
more than R10 lakh per annum
shall have to register themselves
under the concerned Act.
6) GST will replace all existing
indirect taxes including service
tax.
Initially the Government proposes three rates- namely, 20% for
goods, 16% for services and 10%
for essential items under GST.
Obstacles or Barriers in
Implementation of GST
The introduction of GST has
already been delayed by a year
and a half mainly due to differences
amongst the Centre and States.
The introduction of GST will need
constitutional amendment, which
is required to be passed with twothird majority in both the houses
of parliament and ratification by
a simple majority by at least half
of state assemblies. Accordingly,
the support of all chief ministers is
october
2011
91
600
TAXATION
he basic
purpose of
introducing GST
is to eliminate the
cascading effect
of all indirect taxes in valuation
of goods and services. The
cascading effect of Cenvat and
service tax would be removed
with comprehensive set off
relief. If buyer is a registered
dealer he/she will be allowed
to avail input credit for the
tax already paid by him/her
to his/her seller or service
provider subject to holding of
proper tax invoice. The input
tax-credit can be set-off only
against tax payable by the
dealer to the Government.
extremely crucial for such radical
reform of indirect taxes. Thus, the
support of the main opposition
party BJP is obviously required to
pass the bill in Parliament.
Initiatives towards
Implementation
The optimistic Union Finance
Minister believes to double the size
of Indias economy within a short
span of time. By the implementation
of GST, India will be able to promote
exports, raise employment, boost
growth and thereby it will be
able to gain yearly $15 billion as
estimated by the experts. The
revenue from GST shall be shared
equally between the centre and
states; implying that out of 20% tax
proposed for goods, 10% would
go to the Centre and balance 10%
would go to the State concerned.
Similarly revenue from services
and essential items shall also be
shared equally. The peak effective
rate will be about 15%, which is
quite acceptable to the trade and
industry.
A joint working group has
been formed comprising officials
of finance and other concerned
92
october
ministries at the Centre and finance

secretaries or commissioners of
commercial taxes at the State level
to decide on the framework for
the constitutional amendment and
model legislation on GST for the
Centre and States in timebound
manner.
The Centre has decided to
review the existing exemptions
from central excise duty so that
list of goods exempt from Central
Goods and Services Tax (CGST)
is aligned to the State Goods and
Services Tax (SGST) list and the 99
items exempted from VAT are taken
off from both the components of
GST. Presently VAT on bulk items
in different States ranges between
8% and 20% and both the service
tax and excise duty attract a rate
of 10%. Union Finance Minister
Pranab Mukherjee said that the
effort should be given to make
the transition to GST smooth and
painless and thus proposed to
adopt a single rate structure with
a unification of rate for goods and
services in a phased manner over
three years.
CGST and SGST shall be
treated separately. The payment of
CGST shall be allowed to be taken
as input credit and will only be
utilised against CGST payment on
that particular goods and services.
As far as SGST is concerned same
rule will be followed; i.e., cross
utilisation of input credit shall not be
allowed between CGST and SGST.
The Union and States shall have
concurrent jurisdiction for entire
value chain and for all tax payers
based on the thresholds for goods
and services prescribed for the
Centre and the States.
In the second year depending
upon the revenue receipts by the
Centre and the States the standard
rate may be reduced to 9% and
in the third year, the standard rate
could be further reduced to 8%,
while raising the concessional
rate on goods to 8% and retaining
2011
the rate on services at 8%. The

Centre has also decided to fully
compensate the States for their
revenue losses on account of CST
losses. The Centre has assured the
states compensation for submitting
purchase tax on food grains in GST
will be considered along with VAT
compensation for the next four
years. The union Finance Minister
urged for a consensus to uniform
threshold of R10 lakh for both the
goods and services under the
CGST and also SGST.
The empowered committee
of State Finance Ministers under
the chairmanship of West Bengal
Finance Minister held a meeting
to
redraft
the
constitutional
amendment bill after the first
bill prepared by the centre was
rejected by the states on the charge
that it would provide veto power to
the Union Finance Minister over
the states taxation issues. The
empowered committee requested
the centre to consider retaining
the exemption threshold of R1.5
crore for the goods under CGST,
while CGST threshold for services
and SGST threshold for both goods
and services at R10 lakh. It is
fundamental to dual GST that every
transaction constituting a supply
of goods and services receives
similar treatment under CGST
and SGST.
On 18th July, 2011, the union
finance minister met with state
finance Ministers to appoint
chairman of the empowered committee and after a prolonged
discussion, Bihar Finance MinisterMr. Sushi Modi has been elected as
chairman of the empower committee
replacing ex-finance minister of
West Bengal- Mr. Asim Dasgupta.
The J&K finance minister, Mr. A.R.
Rather, said that the critical issue
that is likely to crop up soon is the
extent to which the Centre will offset
the CST loss. Also Tamil Nadu Food
grain Merchant Association has
requested Mr. S.K. Modi to ensure
601
he introduction of
GST has already
been delayed
by a year and
a half mainly
due to differences amongst
the Centre and States. The
introduction of GST will need
constitutional amendment,
which is required to be passed
with two-third majority in both
the houses of parliament
and ratification by a simple
majority by at least half of state
assemblies. Accordingly, the
support of all chief ministers
is extremely crucial for such
radical reform of indirect
taxes. Thus, the support of the
main opposition party BJP is
obviously required to pass the
bill in Parliament.
that tax exemption under VAT must
continue under GST also.
Hopefully, amidst the prevailing
varied notions, the new chairman
will try his best possible effort, to
build a consensus on the proposed
GST regime at the earliest as the
same has been pending for years.
According to CBEC chairman
Mr. S. Dutta Majumder, the task
force set up to put together
the legislation on GST will take
necessary immediate steps to
finalise the concerned business
rule.
The proposed structure of GST
shall definitely increase the tax
burden on the common man in
spite of some cascading effects.
However, if the manufacturers pass
on their benefits to the consumers
then their tax burden would only be
reduced.
The Confederation of Indian
Industry (CII) and ASSOCHAM
have already welcomed the
announcement of GST. According
to CII, consensus between Centre
and States empowered committee
on the design of GST would pave
TAXATION
the way for introduction of GST

from April 2012, as desired by the
industry. According to ASSOCHAM,
the proposal is most equitable
distribution of GST which industry
will have to accept and adjust after
implementation of new indirect Tax
regime. However, FICCI expressed
its reservations by saying that the
rates seem to be very high.
Conclusion
It is encouraging that when GST
was introduced in New Zealand
in 1987, it resulted in 45% higher
revenue than expected, mainly due
to improved compliance.
Additionally, with such radical
reforms of indirect taxes, tax
burden due to cascading effect
will be eliminated; the efficiency
in tax administration will be
improved; indirect tax revenue will
be increased considerably due
to inclusion of more goods and
services; the cost of compliance
will be reduced for the dealers.
The implementation of GST will be
in favour of free flow of trade and
commerce throughout the country.
This single most important tax
reform initiative by the Government
of India since independence will
provide a significant fillip to the
investment and growth of the
countrys economy. However, to
get the desired result it should be
assured that the benefit of input
credit is ultimately enjoyed by final
consumers. The concerned tax
administering authority should look
into the matter for final consumers
interest and at the same time, the
authority should ensure that the
intermediate sellers would not suffer
from availing genuine input credit
within the shortest possible time.
The constitutional amendments are
needed without further delay but
BJP-led States have already stalled
the plans to bring in constitutional
amendments by objecting to giving
the parliament power to set up
the GST council, albeit the Union
Finance Minister Pranab Mukherjee

has promised to compensate the
states from revenue loss to be faced
by them as a result of implementation of proposed GST. Hopefully,
the Union Finance minister, along
with Shri Sushil Modi, Finance
Minister of Bihar and Chairman of
the empowered committee, will be
able to convince all other States
Finance Ministers by alleviating
their genuine grievances. It may be
noted that Shri Pranab Mukherjee
promised at a meeting of Empowered Committee to compensate
R14,000 crore for the loss suffered
by the state governments in 20102011 due to reduction of CST rate
from 4% to 2%. The cabinet has
already approved around 50% of
the loss on 10th February, 2011, of
which R3000 crore will be distributed
immediately to the States on adhoc basis. The Union Finance
Minister has also assured to include
necessary legitimate issues in the
amendment bills as desired by
the states through the empowered
committee. Introduction of GST is
a dire need for the multinational
companies as most of the countries
have already implemented GST.
Hence, in spite of several hurdles
there is hope of implementing
flawless GST from 01-04-2012.
As GST is transaction-based, even
if the deadline is missed, it may
be implemented any time in next
fiscal year.
References:
i)
The Management Accountant July 2010

issue
ii)
www. expressindia .com
iii)
www.moneycontrol.com
iv)
en.wikipedia.org
v)
www.ey.com
vi)
THE TELEGRAPH dated 12-02-2011
vii) BARTAMAN dated 12-02-2011

viii) Brochure of 33rd Regional conference of
EIRC.
ix)
Arnaadvisors.com
x)
Taxindiaonline.com
xi)
GSTindia.com n
october
2011
93
602
Taxability of Software Payments under the Act

The Controversy Continues
Taxability of software payments is one of the most debated topics in the field of international taxation. The controversy
basically relates to whether payment for use of computer software can be termed as royalty as per provisions
of Section 9(1)(vi) of the Income-tax Act, 1961 (the Act) or under provisions of relevant double tax avoidance
agreement (DTAA). There have been series of judgements analysing this issue and more or less the issue was
settled with majority rulings holding that payment for use of computer software would not be covered under definition
of royalty under various DTAAs. However, the said position was revisited in the judgement of Delhi Income-tax
Appellate Tribunal (ITAT) in the case of M/s Gracemac Corporation1 , wherein Delhi ITAT held that payment for use of
computer software is taxable as royalty both under the Act as well as DTAAs. The above ruling of Delhi ITAT as well as
position of taxability of computer software under various DTAAs has been analysed in depth in the article published in
the March edition of the Chartered Accountant Journal. However, as against series of judgements analysing taxability
of software payments under DTAAs, there are few judgments analysing taxability of software payments under the Act.
Further, as the definition of royalty under the Act is wider as compared to royalty definition under provisions of the
DTAAs, judgements analysing the provisions of DTAAs may not be applicable while determining taxability under the
Act. Hence, in the instant article, we have examined taxability for software payments under provisions of the Act.
Types of Software Payments
Before analysing whether payment
for use of computer software
would be taxable under the Act it
would be imperative to determine
type of software payments.
Generally, software payments can
be categorised under any of the
following categories:
(i) Use of Off-the-shelf software or
shrink wrapped software
(Contributed by the Committee on International Taxation of the ICAI. Comments can be
sent to citax@icai.org)
Computer software which are

ready to use and are not customised
for any single person are termed as
134 TTJ 257
94
october
2011
off-the-shelf software or shrink

wrapped
software.
Common
example of these types of software
is Microsoft Office, Microsoft Windows, Accounting software like
Tally etc.
Normally, before using any
off the shelf software, a licence
agreement is required to be
signed electronically by the user.
This licence agreement contains
restrictions in terms of its use
and grants its user only a nonexclusive right to use the software
only for the purpose specified in
the licence agreement. Further, the
603
source code for these software is

kept by the companies and hence,
the user cannot modify the software
for its own use.
developed specific for a user, it

may fall under the category of
customised software.
(ii) Use of Customised software
(iii) Granting of rights (excluding

right to use) pertaining to Off-theshelf or customised software
Customised software is software

which is developed based on
specific requirement of its user.
Accordingly, they can be used only
by the user for which it is produced
and not by any other user. An
example of customised software
would be specific accounting
software which is produced and
modified based on requirements
given by the user.
Here, the distinction needs
to be drawn between software
made for a specific industry vis-vis, software made for a specific
user. For example, a software
like AutoCAD may be used only
by the architectural industry or
engineering industry only but is
not made for any one specific user.
Hence, such computer software
would still qualify as off-the-shelf
software and not fall in the category
of customised software.
However,
if
AutoCad
is
n determining
whether or not a
payment is for the
use of copyright,
it is important
to distinguish between a
payment for the right to use
the copyright in a program and
the right to use the program
itself. A payment for the right
to use the program itself only
allows the licensee to operate
or run the program on a
computer. On the other hand,
a payment for the right to use
the copyright in a program
allows the licensee to modify,
adapt or copy, or otherwise
do what would ordinarily
be the exclusive right of the
copyright owner.
Sometimes, software companies also grant rights permitting

to modify the software or use the
software for commercial exploitation
to its users. These rights, which
are normally proprietary rights of
developer of computer software
are granted to the user for certain
additional consideration.
Thus, once we have examined
nature of software payments, we
would now proceed to determine
its taxability under the Act.
Definition of Royalty under
the Act
Under the Indian tax laws, royalty is
deemed to accrue or arise in India if
payable by a resident. Furthermore,
royalty payable by a non-resident is
also deemed to accrue or arise in
India if it is utilised for the purpose
of a business in India or for earning
income from a source in India.
The term royalty has been defined
in Explanation 2 to Section 9(1)(vi)
of the Act as follows:
royalty means consideration
(including any lump sum
consideration but excluding
any consideration which would
be the income of the recipient
chargeable under the head
Capital gains) for
(i) the transfer of all or any
rights (including the granting
of a license) in respect of
a patent, invention, model,
design, secret formula or
process or trade mark or
similar property;
(ii) the imparting of any information
concerning
the
working of, or the use of, a
patent, invention, model,

design, secret formula or
process or trade mark or
similar property;
(iii) the use of any patent,
invention, model, design,
secret formula or process
or trade mark or similar
property;
(iv) the imparting of any information concerning technical, industrial, commercial
or scientific knowledge,
experience or skill;
(iva) the use or right to use any
industrial, commercial or
scientific equipment but
not including the amounts
referred to in Section 44BB;
(v) the transfer of all or any rights
(including the granting of
a license) in respect of any
copyright, literary, artistic or
scientific work including
films or video tapes for use in
connection with television or
tapes for use in connection
with radio broadcasting, but
not including consideration
for the sale, distribution or
exhibition of cinematographic
films ; or
(vi) the rendering of any services in connection with
the activities referred to in
sub-clauses (i) to (iv), (iva)
and (v).
Thus, the phrase royalty has
been widely defined under the Act
and hence, based on the above
definition, one would need to
analyse whether software payments
would fall under any of the above
clauses of royalty definition i.e. (i)
to (vi).
I. Payment for Use of Off the
Shelf Computer Software
Applicability of clause (v) of royalty
definition
On an analysis of above clauses
of royalty definition, it can be
observed that clause (v) of the
october
2011
95
604
Royalty definition specifically

covers consideration for transfer
of all or any rights (including the
granting of a license) in respect
of any copyright. The term
copyright has not been defined
under the Act. Accordingly, one
could take its meaning from the
provisions of Copyright Act,
1957 (Copyright Act).
The Authority of Advance
Rulings (AAR) in the case of
FactSet Research Systems Inc2,
and Dassault Systems KK3 has
also held that as the expression
copyright has not been defined
in the Income Tax, it must be
understood in accordance with
the law governing the copyright
in India i.e. Copyright Act,
1957.
scientific equipment, clause (iv)

and (iva) of the royalty definition
would not be applicable to
software payments.
Applicability of clauses (i), (ii) and
(iii) of the royalty definition
Whether covered by expression
use of process under clauses
(i), (ii) and (iii)
As regards clauses (i), (ii) and
(iii), use of computer software
also cannot be considered to be
as use of any patent, invention,
model, design, secret formula
or trademark. However, it may
need to be evaluated if computer
software can be considered
to be a process so as to be
covered by clauses (i), (ii) and
(iii) of the royalty definition.
In this regards, Delhi ITAT in
the case of Gracemac (supra)
held that computer programme
is a process when it executes
instructions lying in it in
passive state. Therefore, any
consideration made for the
use of process would amount
to royalty under provisions of
the Act.
Under the provisions of

Copyright Act, a computer
programme
is
considered
as literary work and hence,
covered under the provisions of
Copyright Act.
Applicability of clauses (iv) and (iva)
of royalty definition
In case of purchase of packaged
software, it can be said that the
purchaser or licensee obtains
nothing more than a set of
coded computer instructions,
without the underlying source
code. Hence, it cannot be said
that knowledge or information
about the program in the
relevant sense of know-how
has been transferred.
Thus, as payments made for
using a software cannot be
considered as imparting of any
technical, industrial, commercial
or
scientific
knowledge,
experience or skill or granting
any use or right to use any
industrial,
commercial
or
However, recently Mumbai ITAT

in the case of TII Team Telecom
International Pvt. Ltd4 has after
analysing the provisions of
Copyright Act and relying on
the judgement of Delhi High
Court in the case of Asia Satellite Telecommunications5 held
that although software contains
written instructions or codes,
payment for computer software
cannot be construed as
payment for using the process
encoded in the software. The
Mumbai ITAT specifically held
when someone pays for the
software, he actually pays for
a product which gives certain
317 ITR 169

322 ITR 125
ITA No. 3939/Mum/2010
5
332 ITR 340
2
3
4
96
october
2011
results, and not the process

of execution of instructions
embedded therein.
Similar view was also taken by
AAR in the case of Dassault
Systems wherein it held that by
making use of or having access
to the computer programs
embedded in the software, it
cannot be said that the customer
is using the process that has
gone into the end product or
that he acquired any rights in
relation to the process as such.
Thus, although there are
divergent judicial precedents
on this issue, it could be
fairly argued that payment for
computer software cannot be
considered to be payment for
use of process so as to be
covered under clauses (i), (ii)
and (iii) of the royalty definition.
Whether covered by the expression similar property under
clauses (i), (ii) and (iii)
As against clause (v) which
specifically covers payment in
relation to copyright, remaining
clauses, i.e. clauses (i) to (iii)
covers payment in relation
to other similar property like
patent, invention, trademark
etc. Hence, as clause (v)
specifically covers copyright,
hile arguments
exist in favour
of non-taxability
under the Act,
it needs to be
appreciated that the judicial
precedence on taxability under
the Act is limited as majority
of the favourable rulings dealt
with the interpretation of
tax treaties.
605
which
includes
computer
software, one can argue that the
said clause being more specific
in nature would be applicable
over other general clauses.
Similar view was also held by
Special Bench of Delhi ITAT
in the case of Motorola Inc,
Ericsson Radio Systems AB
and Nokia Corporation6 which
observed that the main issue in
relating to software payments
is to examine whether the
payment is for a copyright or
use of a copyrighted article.
Hence, even Delhi ITAT held
that clause (v) is the relevant
clause while analysing taxability
of software payments.
Thus, based on the above
analysis, it should be possible to
argue that the operative clause
should be (v) to Explanation 2 to
Section 9(1)(vi) and the payment
would be taxable under the Act, if
it is for a copyright as per the said
clause.
Accordingly, meaning of the term
copyright as per the provisions
of the Copyright Act is analysed
below:
Copyright Act, 1957
As per Section 14 of the
Copyright
Act,
copyright
means the exclusive right to
do or authorise the doing, of
certain acts, which in the case
of a literary work, includes the
following:
a) In the case of a literary,
dramatic or musical work
not being a computer
programme:(i) to reproduce the work in any
material form including the
storing of it in any medium
by electronic means;
(ii) to issue copies of the work to
the public not being copies
already in the circulation;
(iii) to perform the work in
public, or communicate it to
the public,
(iv) to make any cinematograph
film or sound recording in
respect of the work,
(v) to make any translation of
the work;
(vi) to make any adaptation of
the work;
(vii) to do, in relation to translation
or an adoption of the work,
any of the acts specified in
relation to the work in sub
clauses (i) to (vi)
b) In the case of a computer
programme:(i) to do any of the acts specified
in clause (a),---(ii) to sell or give on commercial
rental or offer for sale or for
commercial rental any copy
of the computer programme
(as amended by Copyright
(Amendment) Act, 1999)
Provided
that
such
commercial rental does not
apply in respect of computer
programmes where the
programme itself is not the
essential object of the rental
c)
d)
Explanation: For the purposes of
this section, a copy which has been
sold once shall be deemed to be a
copy already in circulation.
Thus, based on the above
definition, key points in relation
to computer software for being
covered under the Copyright
definition are summarised below:
i) Presence of an exclusive right
to undertake acts listed in clause
(a) and (b)
Hence, as per above provisions of
the Copyright Act, the copyright
clearly vests in a person who has
an exclusive right to do all or any
of the above mentioned acts to the

exclusion of others. Such a person
may either exercise these exclusive
rights himself or alternatively
authorise others to exercise a
particular right (such as the right to
reproduce) or a combination of the
abovementioned rights. However,
presence of exclusive right is
absolutely essential to be covered
in the definition of copyright.
In the following rulings it has
been held that presence of an
exclusive right is essential to cover
within the ambit of copyright.
Fact Set Research Systems Inc
(supra)
9.1 The learned Departmental
Representative has argued relying
on Section 14a(i) and (vi) of the
Copyright Act that the rights
specified therein are granted to the
customers and therefore there is a
transfer of rights in respect of the
copyright. We find no substance
in this contention. The expression
'exclusive right' in the opening part
of Section 14 is very important
and it qualifies all the components
of clause(a). The applicant is not
conferred with the exclusive right to
reproduce the work (including the
storing of it in electronic medium),
as contemplated by sub clause (i)
of Section 14(a). The exclusive right
remains with the applicant being
the owner of the copyright and by
permitting the customer to store and
use the data in the computer for its
internal business purpose, nothing
is done to confer the exclusive
right to the customer. Such access
is provided to any person who
subscribes, subject to limitations.
Delhi SB in case of Motorola
(supra)
Secondly, under the definition of
"copyright" in Section 14 of the
Copyright Act, the emphasis is that
it is an exclusive right granted to
the holder thereof. This condition
is not satisfied in the case of JTM
96 TTJ 1
october
2011
97
606
because the license granted to it

by the assessee is expressly stated
in clause 20.1 as a "non exclusive
restricted license".
Thus, if the right and license
granted is not exclusive, based on
the above judicial precedents, it
would not tantamount to copyright
within the meaning of Section 14 of
the Copyright Act, 1957.
the right noted in Section 14(b)(ii)

is only available to the owner of a
computer program.
Normally, the above right is not
available to a user of a computer
software and hence, the said
granting the user right cannot
be construed as giving right to
give computer programme on
commercial rental.
ii) Right to reproduce software

is not a right granted under the
Copyright Act
Use of Copyright vis--vis use of

Copyrighted Article
In determining whether or not a
payment is for the use of copyright,
it is important to distinguish
between a payment for the right
to use the copyright in a program
and the right to use the program
itself. A payment for the right to
use the program itself only allows
the licensee to operate or run the
program on a computer. On the
other hand, a payment for the right
to use the copyright in a program
allows the licensee to modify, adapt
or copy, or otherwise do what would
ordinarily be the exclusive right of
the copyright owner.
In this regards, Supreme Court
in the case of Tata Consultancy
Services v. State of Andhra Pradesh7
while determining the issue of
goods under Sales Tax Act held
that programmed software when
put on a media like a CD are
goods under Andhra Pradesh
Sales Tax Act as well as under
Article 366(12) of the Constitution
of India. Thus, sale of programmed
software loaded on a CD would be
chargeable as sales tax.
The Supreme Court even held
that a software program may
consist of various commands which
enable the computer to perform the
designated task and the copyright
in that program may retain with the
originator of the program. However,
the moment copies are made and
marketed, they become goods
which are susceptible to sales tax.
It was further held that even
intellectual property once it is put on
One of the prescribed rights in

a copyright as per Section 14
of the Copyright Act is the right
to reproduce software including
storage of the same by electronic
means. However, Section 52(1)(aa)
of the Copyright Act provides that
making copies of lawfully procured
software program in order to utilise
the software for the purpose for
which it was supplied/or making
backup copies to protect the lawfully
acquired software program does
not tantamount to infringement of
copyright.
Accordingly, based on a
combined reading of Sections
14 and 52(1)(aa) of the Copyright
Act, it could be said that the right
to use a software is not one
of the rights which are vested
with the owner of the copyright
under the provisions of Section 14
of the Copyright Act. Therefore,
making copies of the software for a
purpose for which it was procured
does not result in a right in the
copyright.
iii) Right to sell or give on
commercial rental any copy of
the computer programme
Section 14(b)(ii) refers to the right to
sell or give on commercial rental any
copy of the computer programme.
In this regards, reference is invited
to the Delhi SB ruling of Motorola
(supra) wherein it was held that
271 ITR 401
98
october
2011
the media whether it is in the form of

books or canvas or computer discs
or cassette and marketed would
become goods.
Thus, based on the above ruling,
as sale of software is chargeable
to sales tax, it can be contended
that sale of software is sale of a
copyrighted article and not sale of
copyright.
Therefore, for the purpose
of categorising income from a
transaction as amounting to royalty
what is to be seen is whether the
transferee has the exclusive right
of commercial exploitation of the
intellectual property contained
therein.
Thus, based on the above, it
could be contended that in case
payment is made for use of standard
off-the-shelf software wherein no
exclusive rights are granted to the
user as well as any no right in the
computer software is granted to the
user to undertake any activities as
mentioned in Section 14 read with
Section 52 of the Copyright Act, the
payment for use of software would
be said to be sale of copyrighted
article and not copyright so as to be
covered under clause (v) of royalty
definition under the Act.
n case payment
is made for use of
standard off-theshelf software
wherein no
exclusive rights are granted
to the user as well as any
no right in the computer
software is granted to the user
to undertake any activities
as mentioned in Section 14
read with Section 52 of the
Copyright Act, the payment
for use of software would be
said to be sale of copyrighted
article and not copyright so as
to be covered under clause (v)
of royalty definition under
the Act.
607
Judicial Precedents under the Act

Favourable judicial precedents
under the Act
In below mentioned judicial
precedents, Indian Courts have
distinguished between a Copyright
and a Copyrighted Article and have
held that payments for purchasing
software which does not grant any
right to use a copyright but merely
grants a right to use a copyrighted
article does not amount to royalty
within the definition of the Act and
hence, should not be subject to
withholding tax.
In the case of Dassault Systems
K.K (supra), AAR has held
that a non-exclusive and nontransferable licence enabling
the use of a copyrighted product
cannot be construed as to enjoy
any or all of the rights ingrained
in a copyright. Accordingly,
parting of intellectual property
rights inherent and attached to
the software product in favour
of the licencee/customer is
required so as to be covered
under the royalty definition
under the Act. Hence, merely
authorising or enabling a
customer to have the benefit of
data or instructions contained
in the computer software
without any further right to
deal with them independently
would not amount to transfer
of rights in relation to copyright
or conferment of the right
of using the copyright. The
AAR accordingly, held that
the payments received by
the ABC from various Value
Added Resellers on account of
supplies of software products
to the end customers does not
result in income in the nature of
royalty. Specific observations of
AAR are reproduced below:
17.1. Passing on a right to use
and facilitating the use of a
product for which the owner
has a copyright is not the
same thing as transferring or

assigning rights in relation to
the copyright. The enjoyment
of some or all the rights which
the copyright owner has, is
necessary to trigger the royalty
definition. Viewed from this
angle, a non-exclusive and nontransferable licence enabling
the use of a copyrighted product
cannot be construed as an
authority to enjoy any or all of the
enumerated rights ingrained in
a copyright. Where the purpose
of the licence or the transaction
is only to establish access to the
copyrighted product for internal
business purpose, it would not
be legally correct to state that
the copyright itself has been
transferred to any extent. It does
not make any difference even
if the computer programme
passed on to the user is a highly
specialised one. The parting
of intellectual property rights
inherent in and attached to the
software product in favour of
the licencee/customer is what is
contemplated by the definition
clause in the Act as well as
the Treaty. As observed earlier,
those rights are incorporated in
Section 14. Merely authorising
or enabling a customer to have
the benefit of data or instructions
contained therein without any
further right to deal with them
independently does not, in
our view, amount to transfer of
rights in relation to copyright or
conferment of the right of using
the copyright.
.Different
considerations
will arise if the grant is nonexclusive that too confined to
the user purely for in-house or
internal purpose. The transfer
of rights in or over copyright
or the conferment of the right
of use of copyright implies
that the transferee/licencee
should acquire rights - either in
entirety or partially co-extensive

with the owner/transferor who
divests himself of the rights he
possesses pro tanto. That is
what, in our view, follows from
the language employed in the
definition of 'royalty' read with
the provisions of Copyright
Act, viz., Section 14 and other
complementary provisions.
In the ruling of the Special
Bench of Delhi ITAT in the
case of Motorola Inc, Ericsson
Radio Systems AB and Nokia
Corporation (supra), payments
were made for transfer of a
non-exclusive restricted license
in software (not being shrinkwrap software). The Special
Bench distinguished between
payments for a copyrighted
article and for a copyright right
held that payment for purchase
of software cannot be taxable
as royalty. The Special Bench
reached its conclusion based
on following observations:
Merely
because
the
terminology of the Agreement
is a license, it cannot be
said that the payment should
be categorised as royalty.
Under the Copyright Act,
1957, copyright is an
exclusive right granted to
the holder thereof; whereas
in this case, a non-exclusive
license to use the software
has been given.
The holder of a copyright
can commercially exploit the
same by making multiple
copies of the software;
whereas in the present
case, restricted right to
use the software for the
assesses own purpose
and maintenance has been
given.
To constitute a copyright
right, the assessee should
have had one or more of the
rights mentioned in clause
(a)/ (b) of Section 14 of the
october
2011
99
608
Copyright Act, 1957 (such as

reproduce or make copies
of the work); whereas it
was clear that the assessee
has not been given any of
the rights mentioned in the
section and therefore the
assessee has not acquired
any copyright but only a
copyrighted article.
Further, the Delhi ITAT in the
case of Infrasoft Ltd.8 following
the above decision held that if
the licensees do not have any
of such rights as mentioned in
clauses (a) & (b) of Section 14,
it would mean that they do not
have any right in the copyright
and in such a case, the
payment made to them could
not be characterised as royalty
either under the Income-tax Act
or under the DTAA. Relevant
observations of Mumbai ITAT
are as follows:
The sum and substance of the
relevant clauses material in this
context of the agreement entered
into by the assessee with the
licensee in the present case
thus were similar to that of the
agreement analysed and relied
upon by the Special Bench in
the case of Motorola Inc. (supra)
to come to the conclusion that
the payment made for transfer of
right to use the software was not
for any copyright in the software
but only for the software as such
as a copyrighted article and the
same, therefore, could not be
considered as royalty within
the meaning of explanation
(2) below Section 9(1) of the
Income-tax Act or Article 13.3 of
the relevant DTAA.:
The above decision has been
followed by the Mumbai
ITAT in the case of Tata
Communications
Ltd.9 and
Alcatel
USA
International
Marketing Inc.10 wherein the
ITAT held that payment for use
of copyrighted article cannot be
brought to tax as royalty.
Further the Bangalore ITAT in
the cases of Sonata Software
Limited11 held as follows:
This Tribunal in the case of
Samsung Electronics Co. Ltd.
v. ITO [IT Appeal Nos. 264 to
266 (Bang.) of 2002, dated
18-2-2005] has recently held
that where the software imported
which is a shrink wrapped
software or off the shelf software,
same amounts to purchase
of goods and not payment of
royalties. The payment is for use
of copy rights article and not for
acquiring any copy right. This
view has been arrived at after
considering various decisions
on the subject as well as the
decision of the Supreme Court in
Tata Consultancy Services 'case
(249 ITR 99). We accordingly
hold that the payments for import
of software do not amount to
payment of royalty chargeable
under Section 9(1)(vi) of the
Act. The payments partakes
the character of purchase
and sale of goods. Actually,
the payee has no permanent
establishment in India. Hence,
it can be concluded that no
income is deemed to accrue or
arise in India. Accordingly, the
provision of Section 195 is not
applicable to such payment.
Further, the Bangalore ITAT in
the case of Velankani Mauritius
Ltd. and Bydesign Solutions12
Inc. after placing reliance on
the judgement of Motorola Inc
(supra) and Sonata Software
(supra) also held that sale of
off-the-shelf
shrink-wrapped
software amounted to the sale
125 TTJ 53
138 TTJ 257
2009-TIOL-733-ITAT-MUM
11
6 SOT 700
12
132 TTJ 124
13
327 ITR 1
14
332 ITR 222
8
9
10
100
october
2011
he operative
clause for
determining
the taxability
under the head
royalty would be clause (v) to
Explanation 2 to Section 9(1)
(vi) and would be taxable in
India if the same constitutes
a payment for transfer of
all or any rights in respect
of a copyright. Whether the
payment constitutes for a
copyright would need to be
determined as per Section 14
of the Copyright Act, 1957.
of copyrighted articles and
hence, cannot be treated as
income from royalty under the
Act. The specific observations of
Bangalore ITAT are as follows:
15. Therefore, in the facts and
circumstances of the case, and
in the light of the above binding
decisions, we find that the sale
of software cannot be treated as
income from royalty either under
the IT Act or under the terms of
DTAA.
In the case of GeoQuest
Systems B. V.13, the AAR placing
reliance on the decision in the
case of Dassault Systems K.K
(supra) and Fact Research
Systems Inc. (supra) has
held that the transfer of rights
envisaged by sub-clause (v) of
Explanation 2 to Section 9(1)(vi)
of the Act should be in respect
of copyright. Mere transfer of
computer software de-hors any
copyright associated with it
does not fall within the ambit of
the said sub-clause.
In the recent ruling of Delhi
High Court in the case of M/s
Dynamic Vertical Software India
Pvt. Ltd14, the High Court has
held that payment made to
609
Microsoft towards purchase of

software for distributing in India
is not taxable as royalty. The
specific observations of Delhi
High Court are as under:
What is found, as a matter of
fact, is that the assessee has
been purchasing the software
from Microsoft and sold it further
in Indian market. By no stretch of
imagination it would be termed
as "royalty".
Adverse Judicial Precedents
While arguments exist in favour
of non-taxability under the Act, it
needs to be appreciated that the
judicial precedence on taxability
under the Act is limited as majority
of the favourable rulings dealt with
the interpretation of tax treaties.
Delhi ITAT in the case of
Gracemac Corpn. (supra), held
that consideration received from
licensing of computer software
would be in the nature of royalty
under the provisions of the Indian
Tax Laws and did not accept the
above principles of distinction
between use of copyright and
use of copyrighted article. The
ITAT held that the consideration
from license of shrink wrapped
software is in the nature of royalty
as defined in the Act.
Applicability of phrase including the
granting of licence as mentioned in
clause (v) of the royalty definition
Further, we would like to point out
that the clause (v) also includes
the phrase including the granting
of a license in respect of the
copyright. Accordingly, the issue
for consideration is whether mere
grant of a non-exclusive license
would also be covered within the
ambit of royalty as construed under
clause (v) of the Act.
Favourable
Judicial
Precedents Mere grant of a
15
16
17
license would be covered

within the ambit of royalty
Reference is invited to the
recent ruling of the Bangalore
tribunal in the case of ING Vysa
Bank Ltd.15 dated 5th August,
2011 wherein it has been held
that license to use off the shelf
software would be taxable as
royalty under the Act and tax
treaty.
Adverse Judicial Precedents
Mere non-exclusive license
not covered within the ambit
of royalty
The AAR in the case of Dassault
(supra) while analysing the
phrase including the granting
of licence as mentioned in
held that the said phrase has
to be read in conjunction with
preceding words i.e. transfer of
rights in respect of copyright".
Hence, a mere non-exclusive
licence to use a computer
software would not be covered
under the definition of royalty.
The
specific
observations
of AAR are also reproduced
below:
17.2. We may refer to one
more aspect here. In the
definition of royalty under the
Act, the phrase "including
the granting of a licence" is
found. That does not mean that
even a non-exclusive licence
permitting user for in-house
purpose would be covered
by that expression. Any and
every licence is not what is
contemplated. It should take
colour from the preceding
expression "transfer of rights in
respect of copyright". Apparently,
grant of 'licence' has been
referred to in the definition to
dispel the possible controversy
a licence - whatever be its
nature, can be characterised as
transfer.
The above ratio was also

followed by the Mumbai Tribunal
in the case of Kansai Nerolac
Paints Ltd.16 and Daimler
Chryslar AG.17
II. Payment for Use of Customised
Computer Software
In case of customised computer
software, as the software is made
for a specific user, an exclusive
licence is granted by the developer
to the user. Further, additional rights
relating to the computer software
are also granted by the developer
to the user.
In such a scenario, as explained
above, it may be covered under
the definition of copyright as per
Copyright Act and consequently,
payment in relation to use of
customised computer software
may be covered as royalty under
under the Act.
III. Payments for Granting of
Rights (Excluding Right to Use)
Pertaining to Off-the-Shelf or
Customised Software
In situations, where software
companies grant additional rights
pertaining to the software to the user
like the right to modify the software,
use the software for commercial
exploitation etc. which are normally
available with the copyright holder,
for some additional consideration, as
explained above, the same may be
covered under the phrase transfer
of all or any rights (including the
granting of a licence) in respect of
a copyright as per clause (v) of the
royalty definition.
Hence, in such cases, software
payments may be covered under
royalty definition under the Act.
Applicability of Provisions of
Section 115(1A) of the Act
It is also worthwhile to examine
ITA No. 160 (Bang)/2010

134 TTJ 342
ITA No.3817/Mum/2008
october
2011
101
610
Section 115A(1A) of the Act

which states as under:
(1A) Where the royalty referred
to in clause (b) of sub-section
(1) is in consideration for the
transfer of all or any rights
(including the granting of a
licence) in respect of copyright
in any book to an Indian concern
or in respect of any computer
software to a person resident
in India, the provisions of subsection (1) shall apply in relation
to such royalty as if the words
the agreement is approved
by the Central Government or
where it relates to a matter]
included in the industrial policy,
for the time being in force, of
the Government of India, the
agreement is in accordance
with that policy] occurring in the
said clause had been omitted
In the case of GeoQuest

Systems BV (supra), it was held
as under:
11. Then, coming to Section
115A, it prescribes the rate
of tax applicable to a foreign
company on the income by way
of 'royalty' or 'fees for technical
services'. Sub-section 1A to the
extent relevant reads as under:"where the royalty is in
consideration for the transfer of
all or any rights (including the
granting of a licence) in respect
of copyright in any book to an
Indian concern or in respect
of any computer software to a
person resident in India.........."
This provision, prima facie,
cannot be interpreted to mean
that the transfer of any rights
could only be in respect of
the computer software without
reference to copyright. It is
reasonable to interpret the word
'copyright' to qualify not only the
'book' but also the 'computer
software'. If the transfer of
computer software, per se was
contemplated to fall within the
definition of 'royalty', it should
have been stated so in the
definition clause contained in
Explanation 2 to Section 9(1)
(vi). Clause (v) as noticed earlier
speaks of "transfer of all or any
rights' in respect of any copy
right". Thus, whether copyright
has been transferred or not is
the line of inquiry which should
precede the application of
clause (v).
The issue for consideration is

whether as per Section 115A(1A)
of the Act, it is not necessary
that the copyright therein should
be specifically transferred as
consideration in respect of any
computer software is stated to
be taxable under Section 115A.
In this regards, reference is
invited to the rulings of the AAR in
the case of GeoQuest Systems
BV (supra) and Dassault
Systems KK (supra) wherein it
was held that Section 115A(1A)
cannot be interpreted dehors
of clause (v) to Explanation
2 to Section 9(1)(vi).
n the recent
ruling of Delhi
High Court in
the case of M/s
Dynamic Vertical
Software India Pvt. Ltd 18,
the High Court has held that
payment made to Microsoft
towards purchase of software
for distributing in India is not
taxable as royalty.
Conclusion
Given the analysis above, it may be
possible to summarise the issue as
under:
The operative clause for
determining
the
taxability
under the head royalty would
be clause (v) to Explanation 2
332 ITR 222
18
102
october
2011
to Section 9(1)(vi) and would

be taxable in India if the same
constitutes a payment for
transfer of all or any rights in
respect of a copyright. Whether
the payment constitutes for a
copyright would need to be
determined as per Section 14
of the Copyright Act, 1957.
Section 14 of the Copyright
Act, 1957 refers to grant of an
exclusive right. Accordingly, if
no exclusive right is granted
under the agreement, it may be
possible to argue that the same
would not be covered as royalty.
If payment is for the use of
off-the-shelf software, based
on the current law and limited
judicial precedents on the issue
under the Act, it could be highly
litigative to contend that the
payment for use of computer
software is not taxable as royalty
under the Act.
If payment is for the use of
customised software, it is
possible that licence may be
exclusive in nature and hence,
may be covered under clause
(v) of royalty definition under
the Act.
If payments are made for transfer
of all or any right (as covered by
the Copyright Act) pertaining to
computer software, the same
may be covered under clause
(v) of the royalty definition under
the Act.
It is also important to take note

of evolving nature of the issue and
rulings from the High Court are
also expected in the near future
(e.g. Karnataka HC in the case of
GE Technology/ Samsung, after
the case was remanded by the SC
for consideration on merits, Delhi
HC in the case of Nokia, Ericsson,
Motorola).
Hence, till the time, the issue
gets settled at the highest level,
litigation over taxability of software
payments is likely to continue. n
612
CORPORATE AND ALLIED LAWS
Changing Methodologies- Interpreting

Exemption Notification
As we all know Revenue and Taxation laws usually bristle with uncertainties and ambiguities and there was a time
when the legal position was that in interpreting such provisions the benefit of doubt went to the subject i.e. assessee
and tax payers. Now with the passage of time the parameters have changed and in the construction of statutes in
the event of doubt the beneficiary is now the Revenue. This is termed as an interpretive technique which moderates
letters of law in tune with the spirit of times. This is what has happened in the case of interpreting an exemption
notification. The author in this article very critically examines the interpretative cannon to be applied in the case of an
exemption notification under excise laws as on today.
S.M. Jain
(The author is Vice President (Personnel) Rajasthan Textile Mill, Bhawanimandi,
Rajasthan. He can be reached at smjain@
sutlej-rtm.co.in)
104
october
The Supreme Court has held that

for availing the benefit of exemption
notification under Central Excise
Rules, it is mandatory to follow
the procedure as laid down in
those Rules. A provision especially
a fiscal statute providing for an
exemption, concession or exception
is required to be construed strictly
2011
and similarly an exemption

notification would be required
to be interpreted in the light of
the words employed by it and not
on any other basis. The concept
of substantial compliance and
intended use as propounded in
the Thermax and J.K. Synthetics
case have been distinguished by
613
the Apex court in case of Harichand

& Sri Gopal and its application
has been limited to a great extent.
The law relating to the interpretation
of fiscal statute should be
restructured and restated to provide
for uniformity and promotion of
trade, commerce and business.
The author in this article very
critically examines the interpretative
cannon to be applied in the case
of an exemption notification under
excise laws as on today.
The whys, whens and et alls
of the exemption notification have
been correctly spelled herein
above.
It may not be irrelevant to point
out that whenever we start thinking,
writing or evaluating the verdicts of
our Supreme Court, we find that it
has done laudable work whenever
a complicated legal proposition
was required to be interpreted. It
has mostly displayed a rare juristic
vision although many a time it
unwarrantedly unsettles the already
settled legal issues.
The Constitution Bench of
the Supreme Court very recently
in the case of Commissioner of
Central Excise Vs. Harichand
Shrigopal & ors. (2011) 1 SCC 236
unequivocally and categorically
held that for availing the benefit
of exemption notification under
Chapter X of Central Excise Rules
1944, it is mandatory to follow
the procedure laid down in that
chapter. In Chapter X a detailed
procedure had been laid down
so as to curb and prevent the
diversion
and
mis-utilisation
of goods which are otherwise
exciseable under the statute.
It has further been held that a
provision specially a fiscal state
providing for an exemption,
concession or exception is
required to be construed strictly.
Then an exemption notification
has to be interpreted in the light
of words employed by it and not
on any other basis. A person who
claims exemption or concession

is required to establish clearly that
he is covered by the provision
concerned and in case of doubt or
ambiguity, the benefit of it would
go to the State. So far the majority
position was that in the event of
any doubt or ambiguity the benefit
went to the assessee. Henceforth
the assessee would not have a
liberty to make the interpretation
of fiscal statute subservient to his
preconceived desire of extracting
benefit in a marginal case.
On factual matrix it so happened
that M/s. Gopal Jarda Udyog, M/s.
Harchand Srigopal and M/s. Gopal
Industries had manufactured and
removed from their factories a
certain quantity of preparation
containing Kimam, collectively
valued at several crores during
the period 18.3.1994 to 15.4.1995,
16.6.1995 to 19.6.1996 and
14.6.95 to 24.9.96. The amount
of duty involved was also fixed
at some crores. Consequently
the department. issued notices
to these persons to show cause
why the amounts of duties should
not be demanded from them
jointly
and
severally
under
Rule 9(2) of the Excise Rules read
with the proviso to Section 11-1 (1)
of the Tariff Act and interest thereon
under the same Act besides
penalty under rule 173-Q of the
Excise Rules read with Section
11-AC of the Tariff Act etc. They
were further asked to show cause
why the land, building, plant and
machinery used in their respective
factories for the manufacture
of Kimam should not be confiscated. The respondents filed their
detailed objections disputing the
subject liability and also claimed
exemption under notification No.
121/94 CE. The Commissioner
(Excise) rejected the objections
as filed by the respondents and
determined that M/s. Gopal Jarda
Udyog., M/s. Gopal Industries
and M/s. Harichand Sri Gopal
he Constitution
Bench of the
Supreme Court
very recently
in the case of
Commissioner of Central
Excise Vs. Harichand
Shrigopal & ors. (2011) 1
SCC 236 unequivocally
and categorically held that
for availing the benefit of
exemption notification under
Chapter X of Central Excise
Rules 1944, it is mandatory to
follow the procedure laid down
in that chapter. In Chapter X a
detailed procedure had been
laid down so as to curb and
prevent the diversion and misutilisation of goods which are
otherwise exciseable under
the statute. It has further been
held that a provision specially
a fiscal state providing for
an exemption, concession or
exception is required to be
construed strictly.
were liable to pay Central Excise
Duty. The matter went before
the Tribunal by way of Appeal
and the Tribunal agreed with
the findings of the adjudicating
Commissioner.
Ultimately
the
Commissioner rejected all the
contentions of the respondents
and held that the benefit of the
exemption notification would be
available only if the procedures
laid down were complied with
and that plea of substantial
compliance was not substantiated
and consequently the duty
liability, interest and penalty was
confirmed.
Now the interpretation of the
exemption notification became
the bone of contention and
contentions were advanced for and
against the compliances. At the
level of the Tribunal, reliance was
placed on the judgements of the
Supreme Court in Thermax (P) Ltd.
october
2011
105
Vs. Collector of Customs (1992)

4 SCC 440 and CC Vs. JK
Synthetics (2000) 10 SCC 393.
In these two cases the theory
of intended use of the goods
was invented and it was held that
though there was no compliance
of the procedural conditions of
Chapter X even then the exemption
should not be denied if the concept
of intended use was established.
The Tribunal, therefore, allowed the
appeals and the Commissioner of
Central Excise New Delhi preferred
appeals before the Supreme
Court which has conclusively laid
down the law in the case referred
hereinabove. It was argued on
behalf of the Revenue before
the Supreme Court that the
respondents at the suppliers end
did contravene the provisions of
Rules and that mere maintenance
of some record at the recipients
ollowing judgement
in Commissioner
of Central Excise
Vs. Harichand
Shrigopal &
ors. (2011) 1 SCC 236, the
interpretation of the exemption
notification became the bone
of contention, arguments
were advanced far and
against the compliances.
At the level of the Tribunal
reliance was placed on the
judgements of the Supreme
Court in Thermax (P) Ltd. Vs.
Collector of Customs (1992)
4 SCC 440 and CC Vs. JK
Synthetics (2000) 10 SCC
393. In these two cases the
theory of intended use of
the goods was invented and it
was held though there was no
compliance of the procedural
conditions of Chapter X
even then the exemption
should not be denied if the
concept of intended use was
established.
106
october
end would not be enough even

for the intended use or the plea of
substantial compliance. It was also
argued that the assessee must
comply with the notification strictly
and bring himself within the ambit
of the notification.
The Assistant Solicitor General
appearing on behalf of the Revenue
cited catena of case laws amongst
which some important ones
are Novopan India Ltd. Vs. CCE
& Customs 1994 Supp (3) SCC
606, CCE Vs. Ginni Ltd. (2005) 13
SCC 789; CCe Vs. Mewar Bartan
Nirmal Udyog (2010) 13 SCC
753; State of Haryana Vs. Samtel
India Ltd. (2010) 13 SCC 737 and
G.P. Ceramics (P) Ltd. Vs. CTT
(2009) 2 SCC 90. On the other
hand Sr. Advocate Shri Harish
Salve submitted that there was
documentary evidence to prove
that the entire quantity of Kimam
was transferred from their one unit
to another and was utilised in the
manufacture of branded chewing
tobacco and cleared on payment
of duty. His entire argument was
based on the theory of intended
use and substantial compliance
with the procedure set out in
Chapter X of Excise Rules and
he cited time and again cases of
Thermax and J.K. Synthetics as
referred above.
The Apex court in the instant
case after discussing the pros
and cons of intended use and
substantial compliance held that
for applicability of this doctrine,
a mere attempted compliance
would not be sufficient but actual
compliance with those factors
which are considered essential
was needed. This doctrine was
a judicial invention, equitable in
nature intended to avoid hardships
in cases where party did all that
could reasonably be expected of
it but only failed or faulted in some
minor or inconsequential aspects
which could not be described
as essence or substance of
2011
614
the requirement. It is ruled that

mandatory requirements must
be obeyed and fulfilled exactly.
However, a condition might be
given a liberal meaning if the
same was directory in nature. If
mandatory requirements were
complied with, it would be proper
to say that the enactment had
been
substantially
complied
with,
notwithstanding
the
non-compliance
of
directory
requirements, which are mere
technical provision. In substance
it has been concluded that the
doctrine of substantial compliance sought to preserve the
need to comply strictly with the
conditions or requirements that
were important to invoke a tax or
duty exemption and to forgive noncompliance for either unimportant
and tangential requirements that
were so confusingly or incorrectly
written and that an earnest effort at
compliance should be accepted.
The Supreme Court was,
therefore, reluctant to sustain the
reasoning of the Tribunal that the
procedure laid down in Chapter
X was meant only to establish the
receipt of goods by the recipient
unit and their utilisation and
ultimately the benefit of exemption
was declined to the parties.
The obvious reckoning of this
case for the assessee of excise
duty would be that they should
be all cautious in complying with
the mandatory requirements for
availing exemption benefit and
that the prevalent misconception
that the benefit of doubt of inherent
ambiguity in a statute would
invariably go to the assessee must
abate once for all. With the passage
of time the interpretative technique
of statutes is also undergoing
changes and assuming to be
Revenue-oriented by adopting
a pragmatic and functional
approach. The law in action
is more significant than law in the
book. n
615
SPEECH
As India Grows, CAs Have to Share a

Lot of Responsibilities: Sachin Pilot
Following are excerpts of the speech of Shri Sachin Pilot, Union Minister of State for Communication
and Information
SPEECH
Technology given as the Chief Guest at the Orientation Programme of newly qualified CAs organised on 8th and 9th
August, 2011 at Vigyan Bhawan, New Delhi. ICAI President CA. G. Ramaswamy, Vice President CA. Jaydeep N. Shah
and Chairman of Committee for Members-in-industry CA. K Raghu were among the large gathering of distinguished
guests and newly qualified Chartered Accountants on the occasion.
Shri Sachin Pilot, Union Minister of State for Communication and Information Technology addressing the newly qualified Chartered Accountants at the Orientation
Programme held on 8th August 2011 at Vigyan Bhawan, New Delhi. Others seen on the dais are (L-R) Council Member CA. Pankaj Tyagee, Vice Chairman, Committee for
Members in Industry, CA. G. Ramaswamy, President, ICAI, CA. Jaydeep N. Shah, Vice President, ICAI, Council Member CA. K. Raghu, Chairman, Committee for Members
in Industry and CA. Rajesh Sharma, Chairman, NIRC of ICAI.
You have chosen a profession which, by no means, is

easily gotten one. This is the profession which speaks of
dedication and hard work. But to my mind, once you are
a qualified CA, you have to certainly upgrade your skills,
learn best practices, attain those standards, not just in
India but across the world. So the challenge before you
is not to just graduate and get a job today or tomorrow,
but the challenge is how do you maintain skill sets, how
do you learn those accounting best practices, how can
you make a name for yourself, your firm, your family, your
State, more importantly for your country.
An individual can become a leader once they are
getting scales and success but the nation becomes a

leader when the society is moving together, when there
is equitable distribution of opportunities of resources.
So, we as a nation of 1.2 billion people have a very large
responsibility to move together in tandem.
How do we as Professionals, as Members of Parliament,
as political activists, as members of Government, Civil
Society ensure that what we have achieved today can
also be readily available for those people who dont
have the access to resources of money, education or
opportunities. That challenge will lie with you as you work
as an Accountant. I am here only to convey to you that,
october
2011
107
616
SPEECH
very entity in this country

whether it is a company or
Government or NGO needs to be
audited. Therefore you have a lot
of work to do, no matter which
field you work in, you will be required to
be good accountants to make sure that
there is proper book-keeping and we in
the Government are fully committed in this
regard. I also appreciate the efforts of ICAI.
It is not just about coaching and making
you take the examinations but they are here
to guide you,
as India moves forward, a lot of responsibilities lie on your

shoulders as well. As the economy grows, as the country
grows, the expectations will also grow.
While you make the best of the opportunities
available, as you move along in your professional
career, please do a little bit, whatever you can
individually to help those who perhaps
have not been lucky enough as you and
I have been.
These examinations (CA) that
we conduct in India, I am told that if
you have cleared the examinations,
there is no country in the world where
you cannot go and become qualified
accountants, whether it is US or UK.
I think the quality of the teaching, the
quality of the students who take these
examinations and the whole eco system that
we have been able to create in the last five or six
decades, I think it is a tremendous symbol of the single
minded focus on training young professionals. About
1,72,000 Chartered Accountants being associated with
one body, the second largest in the world, is amazing.
The future to Indias growth will be from the Information
Technology source. In future whatever field of profession
one may choose, but IT will remain with you. Therefore,
it is important for you to inculcate these skills and make
yourself able to demonstrate these skills as we go
along. The Electronic Services Delivery Bill, I think, is a
very powerful Legislation, which, once put passed by
Parliament, will bring a paradigm shift in India. The poor
person in India does not have access to a lot of things
because he has to go to the collectors, the BDOs, SDMs,
MLAs, MPs to get something notified, to get his land
records, to get his certification done. If you are able to
give all of them, I think in local, regional languages at
the click of a button, you can imagine that the amount of
transparency it will bring about at the lowest levels.
I know we are battling with the issue of corruption.
I do also want to make a point that we will work together to
make sure that corruption does not become a bottleneck
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2011
for our progress. What bothers the common people

in this country is the corruption at the lowest levels.
Therefore, accountability and transparency and really
digitising a lot of services will hopefully take away a lot
of loopholes that exist in PDS systems and in our allocation
systems, in subsidies. These are the ways we are trying
to make sure that we are helping and contributing to
make sure that the services, the goods, the finances,
the programmes, the allocations, the budget that we
give from the Government are reaching the common
man. Every entity in this country whether it is a company
or Government or NGO needs to be audited. Therefore
you have a lot of work to do, no matter which field
you work in, you will be required to be good accountants
to make sure that there is proper book-keeping and
we in the Government are fully committed in this regard.
I also appreciate the efforts of ICAI. It is not just about
coaching and making you take the examinations but
they are here to guide you, how to get placed, how to
get better jobs. This hand-holding, this capacity-building,
I think, is really the very essence of a good partnership,
a life-long association that ICAI will have with all
of you and that is why it has gone stronger and
bigger and better as the years went by.
I am quite hopeful that in the times to
come, the fraternity of CAs in India grows
and expands in quality as well as in quantity.
I think in success and victory, one has to
be more humble than anywhere else. So
you approach your job with confidence with
humility. If you do the right thing, you know
the efforts will be appreciated and in the times
that we are going to be working as professionals.
I am working as a politician and like you need to get the
licence every five years, I have to go back and take my
examinations every five yearsBut as we move along
people, I hope to work with you, with the ICAI, with the
Council Members and hopefully be able to engage with
you in time to come in future with new ideas and I hope
that we become a participative society. n
am quite hopeful that in the times

to come, the fraternity of CAs
in India grows and expands in
quality as well as in quantity. I
think in success and victory, one
has to be more humble than anywhere else.
So you approach your job with confidence
with humility. If you do the right thing, you
know the efforts will be appreciated and in
the times that we are going to be working
as professionals. I hope to work with you,
with the ICAI, with the Council Members
and hopefully be able to engage with you in
time to come in future with new ideas
617
Online Filing for Service Tax Return is

Compulsory
The CBEC vide notification No.43/2011- Service Tax
dated 25th August, 2011, made amendments to the service
tax rule 7 with effect from 1st October, 2011, where in the
provision which stated that where an assessee has paid a
total service tax of R10 lakh or more including the amount
paid by utilisation of Cenvat Credit, in the preceding financial
year, he shall file the return electronically has been deleted
and after sub rule (2), a new sub rule (3) has been inserted
namely: (3) Every assessee shall submit the half-yearly
return electronically. With this notification now all assesses
who are registered with the service tax will have to file all
service tax half yearly returns electronically from 1st October,
2011. This means that the half yearly return for the period
1st April, 2011, to 30th September, 2011 will have to be filled
electronically through the ACES site of service tax as the
due date for filling of the return for the period is 25th October,
2011, and by then this notification will be applicable.
Assesses who have not filed previous returns of service
tax will also have to file the same electronically if they are
going to file the same after 1st October, 2011. Hence, after
1st October, 2011, based on this notification, all assesses
will have to file their service tax returns compulsorily online.
Penalty for non filling of service tax return electronically will
be as per Section 77(2), penalty for contravention of any
provisions of the chapter or rules (of service tax) for which
separate penalty has not been provided shall be up to
R10,000. This amount was R5,000 till 7th April, 2011.
(Source: http://beta.profit.ndtv.com/news)
CBEC Waives Onsite Post Clearance Audit for
Exporters
The chairman of the Central Board of Excise and
Customs (CBEC) has confirmed that for the present, the onsite post clearance audit (OSPCA) system by the Customs
will not be applied to exporters. This assurance is given in
a letter dated September 1 by him in response to certain
apprehensions expressed by the President of the Delhi
Exporters Association (DEA) through his letter dated 23rd
August, that OSPCA by the Customs will cause hardships
and inconvenience to the exporters. The apprehensions
of DEA followed the introduction of self assessment in the
Customs Act of 1962, and provisions that were introduced
in Section 17 of the Act to empower the Customs officers
to carry out verification of correctness of assessment of
duty relating to import or export of goods at the premises
of the importer or exporter. CBEC had clarified this will lead
to introduction of On-Site Post Clearance Audit in Customs
in near future. The worry of the trade is that the Customs
auditors will indulge in fault finding that will only increase
harassment and costs for managing the auditors in their
premises. Their view is that the officers can check all their
documents at the port itself. The CBEC chairman has
clarified that the OSPCA system will be implemented in a
phased manner, starting only with importers who avail the
accredited clients programme.
(Source: http://www.economictimes.com)
NATIONAL UPDATE
CBDTs Business Intelligence Data Warehousing

to Boost Tax Mop-Up
To enhance revenue realisation and catch tax evaders
quickly, the Central Board of Direct Taxes is working on
a comprehensive data warehousing system which will
transform the functioning of the Income Tax Department.
From data pertaining to mobile users to electoral records
and database of high net worth individuals, a universe of
diverse information will be assembled in the I-T warehouse for
analysis and generating credible information and reports for
investigation purposes and revenue forecasting. Information
available with the ministry of corporate affairs, select data
from excise and Customs and the Goods and Services Tax,
customised data from think-tanks such as CMIE and data
received from other enforcement agencies in India and
abroad, will also be available at the facility, to be known as
the Revenue Forecasting & Business Intelligence Data Warehouse (RFBIDW). These external data would complement the
internal database of the department which includes information on permanent account number (PAN), e-filing data, tax
deducted at source, share transaction tax payments, annual
information returns on high-value transactions and specific
information gathered by the Central Information Branch. With
this, RFBIDW is also expected to have certain locally relevant
information, especially for investigation, and also specialised
database on venture intelligence, trade analyst reports, equity
analysis and fiscal reports.
(Source: http://www.business-standard.com/india/)
CAG Seeks Powers to Evaluate Performance of
SEBI, TRAI, IRDA
Government auditor CAG is seeking to widen the scope
of its powers to audit the performance of regulators such
as SEBI, TRAI and IRDA as part of the new legislation that
will replace the CAG Act, 1971. The proposed CAG Bill,
now under consideration of the Finance Ministry, is likely to
be tabled in Parliament in its next session. CAG is looking
into the books of regulators like TRAI, SEBI and IRDA, but
now wants to audit their performance also, official sources
said. The Comptroller and Auditor General of India (CAG)
has already submitted a draft Bill to the Finance Ministry for
replacing the CAG Act. The new law is aimed at significantly
expanding the scope of the CAGs audit responsibilities.
We are looking at auditing the regulators. We have asked
in the draft Bill to replace the CAG Act of 1971 to allow audit
of the financial (statements) and performance of regulators
and PPPs. We are hoping that the Bill would be tabled in
the Winter Session, the official said. The draft Bill is likely to
have provisions for punitive action against companies that
delay submission of details sought by the auditor.
(Press Trust of India)
Amnesty Scheme in Works to Get Back Money in
Foreign Accounts
India could announce an amnesty scheme to give its
citizens an opportunity to come clean on their undeclared
assets and bank accounts held overseas, joining the likes
of the US, UK, Italy, and Germany that have announced
october
2011
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NATIONAL UPDATE
similar schemes. The finance ministry is considering a

scheme - offshore voluntary compliance scheme - that
could allow for voluntary declaration of undisclosed assets
held overseas, helping put such funds to productive use
in the country and also raise revenues. The scheme is
under consideration. The income-tax departments flow of
information has become robust. So, it is time to consider
such a scheme, said a finance ministry official. A panel
on black money headed by the Central Board Direct Taxes
chairman is expected to take up the proposal at its next
meeting later this month.
(Source: http://www.hindustantimes.com)
Government Receives Info about 7700 Cases of
Black Money: FinMin
The government has said it has collected specific
information from treaty countries on 7,704 cases where
payments were received from non-residents in various
countries over the past two years and was investigating
the cases. In the last 24 months Income Tax Department
have collected 7,704 discrete items of information from
treaty countries containing details of payments received
by Indian citizens in various countries besides informations
of LGT Bank accounts, the Finance Ministry said in its
document on the measures taken to tackle black money.
This information, the Ministry added, is in various stages
of processing and investigation. The Ministry further said
that based on the prosecution by the Central Board of
Direct Taxes (CBDT) of the LGT bank accounts holders, the
Enforcement Directorate is also taking necessary action
under Foreign Exchange Management Act. Besides, the
government has made more than 175 requests to treaty
partners in case of specific taxpayers in the 2009-2010
financial year, it said.
(Source: http://www.economictimes.com)
RBI Rate Hike to Bring Down Inflation to
Comfortable Level: FM
Finance Minister Pranab Mukherjee has said the 25 basis
points rate hike by the Reserve Bank will help in moderating
inflation to a comfortable level without hurting growth. I am
hopeful that measures taken by RBI would get us back to a
more comfortable inflation situation earlier rather than later...
while (leaving) scope for growth to pick up in the second half
of the year, Mukherjee told reporters. The Reserve Bank
in its mid-quarterly review hiked interest rates by 25 basis
points making credit costly. This is the twelfth time since
March 2010 that the RBI hiked rates in its efforts to tame
inflation. Todays step is consistent with RBIs monetary
stance for the first half of 2011-2012 and overall concern on
growth sustainability in the medium term, Mukherjee said.
(Source: http://timesofindia.indiatimes.com/)
Govt Unveils Anti-Graft Steps, To Set Up Fast-Track
Courts
Weeks after activist Anna Hazares fast for a stronger antigraft law grabbed national attention, the government has
unveiled a host of steps to curb corruption that included
110
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2011
setting up of 71 fast-track special CBI courts, fixing a limit

of three months to grant sanction for prosecution and
abolishing discretionary powers enjoyed by ministers.
Announcing that the government has accepted the
recommendations of a Group of Ministers on corruption,
Union Law Minister Salman Khurshid and Minister of State
for Personnel V. Narayanasamy said ministers will no
longer have discretionary powers in the allotment of land,
telephone and petrol pumps. These powers have been
removed, barring in cases of compensation to victims of
Maoist violence by the home ministry and to war widows
by the defence ministry, said Narayanasamy. The GoM
also decided to bring a new policy and a bill on public
procurement in the winter session of Parliament to tackle
corruption and make the procedure more transparent. The
Group of Ministers (GoM), set up by the government to curb
corruption and improve transparency in governance, was
headed by Finance Minister Pranab Mukherjee. Among
the proposed measures are: Mere retirement would not
be a ground for dropping proceedings against corrupt
government servants who will now face a 10% cut in
pension in case of minor penalty, for a period not exceeding
five years.
(Source: http://timesofindia.indiatimes.com/)
Government Panel for Slashing Customs Duty on
Imported LNG to Zero
A high-level government panel has called for slashing
customs duty on imported liquefied natural gas (LNG)
to zero, instead of cross-subsidising the high-priced
imported fuel by making domestic natural gas users pay
more. An inter-ministerial committee headed by Planning
Commission Member Saumitra Chaudhuri, in its final report,
has recommended that the import duty on liquefied natural
gas (LNG) should be aligned with that of crude oil, on which
customs duty was brought down to zero from 5% in June.
Also, the government should treat LNG/natural gas as a
declared good, so that they have a common concessional
rate of VAT. The Department of Revenue (which was also
part of the committee) has not agreed to the proposal for
aligning import duty on LNG with that of crude. On the issue
of declared good status in regard of VAT, the Department of
Revenue did not wish to record a view, the report noted.
(Source: http://www.thehindubusinessline.com/)
Direct Tax Collection Up 6.7%
Net direct tax collection in the current financial year up
to 15th September is higher by 6.7% at R1,27,858 crore
as against R1,19,849 crore collected from 1st April to 15th
September last year. The net collection has been impacted
by R61,000 crore of refunds. Gross direct tax mop-up during
the period has been R1,88,868 crore, a growth of 29.5% over
the previous years collection during the period of R1,45,825
crore. 15th September was the due date for payment of the
second installment of advance tax. Interestingly, smaller
centres have been doing better in growth of direct tax
collection this year as compared to Mumbai and Delhi.
(Source: http://www.indianexpress.com/)
619
IASB Proposes to Exempt Investment Entities from

Consolidation Requirements
The International Accounting Standards Board (IASB)
recently published proposals to define investment entities
as a separate type of entity that would be exempt from
the accounting requirements in IFRS 10 Consolidated
Financial Statements. Investment entities are commonly
understood to be entities that pool investments from a wide
range of investors for investment purposes only. Currently,
IFRS 10 Consolidated Financial Statements would require
consolidation if an investment entity controls an entity it is
investing in. However, when developing IFRS 10, investors
commented that this would not provide them with the
information they need to assess the value of their investments.
To address this issue, the exposure draft published recently
proposes criteria that would have to be met by an entity in
order to qualify as an investment entity. These entities would
be exempt from the consolidation requirements and instead
would be required to account for all their investments at
fair value through profit or loss. The exposure draft also
includes disclosure requirements about the nature and
type of these investments. This project is being undertaken
jointly by the IASB and the US national standard-setter,
the Financial Accounting Standards Board (FASB). Both
boards proposals are broadly aligned. However, the FASB
is considering proposing that the exemption would extend
to cases in which the investment entity is owned by a larger
group that is not itself an investment entity. The FASB will
publish its exposure draft in due course. The exposure
draft Investment Entities is open for public comment until 5th
January, 2012. The FASB will align its comment period with
that of the IASB to ensure joint redeliberations. If adopted,
the proposals would be integrated into IFRS 10.
(Source: http://www.ifrs.org/News)
IFRS Taxonomy Interim Release for CommonPractice Concepts
The IFRS Foundation, the oversight body of the
International Accounting Standards Boards (IASB), recently
completed the first part of its project to address requests
by regulators and preparers for extensions to the full
International Financial Reporting Standards (IFRS) XBRL
Taxonomy. The IFRS XBRL Taxonomy is used to help
those filing IFRS financial statements electronically to tag
the information with identification tags (called concepts
in an XBRL taxonomy). Currently, the IFRS taxonomy
includes all core concepts included in IFRSs as issued by
the IASB. However, preparers often need to provide more
detailed financial information than is reflected by the core
IFRS concepts. To ensure that those creating and using
electronic filings do not need to create their own extensions
to the IFRS taxonomy, the IFRS Foundation has created
an extension taxonomy by analysing and drawing from
common practice. For instance, although IFRSs require
the disclosure of an analysis of expenses, the IFRSs do not
include a prescriptive listing of all the possible categories
of expenses. The common-practice taxonomy includes
concepts for the most commonly used types of expenses,
such as sales and marketing. The interim taxonomy released
recently completes the first part of a project to address
this issue, by providing about 350 extensions for the most
common concepts used in the financial statements. Work
is continuing on extensions to the detailed tagging of the
footnotes to the financial statements. The IFRS XBRL team
expects to publish proposals this month. The commonpractice concepts are in line with IFRS requirements and will
help to alleviate the burden on preparers and to increase the
INTERNATIONAL UPDATE
comparability between financial statements in accordance

with IFRSs that are electronically submitted.
Effect Analysis for IFRS 10 and IFRS 11 Available
The effect analysis for IFRS 10 Consolidated Financial
Statements, which also includes the effect analysis for IFRS
12 Disclosure of Interests in Other Entities, and the effect
analysis for IFRS 11 Joint Arrangements are now available
for download on the project pages at IFRS website. The
effect analyses provide detailed insights into the potential
impacts of the new requirements using case studies and
other quantitative and qualitative material, as appropriate
IFAC Begins Search for Next Chief Executive
Officer
The International Federation of Accountants (IFAC), the
global organisation for the accountancy profession with
members and associates in 125 countries is seeking an
outstanding individual to become its next chief executive
officer (CEO), based in New York City. The candidate will
succeed current CEO Ian Ball, whose contract is set to expire
in February 2013 and who is not seeking a further term. An
executive search firm, which is premier global provider of
talent management solutions, based in Los Angeles, has
been retained for the search. IFACs management team
will partner with the search firm to actively engage IFAC
member bodies, the accountancy community, and other
stakeholders in the recruitment process to encourage a
diverse and international applicant base. IFAC is initiating
the recruitment process in the fourth quarter of 2011 to
allow time for a comprehensive search, Board approval, and
relocation, and to provide the new CEO with a positive and
seamless transition before Ian Balls departure. Current CEO
Ian Ball joined IFAC as its chief executive officer in March
2002, having previously served IFAC as chair of its Public
Sector Committee (now the independent International
Public Sector Accounting Standards Board) and as a
member of its Nominating Committee. Prior to that, Mr. Ball
was Professor of Accounting and Public Policy at Victoria
University of Wellington, an international consultant in public
management, an accounting standard setter, and a senior
official in the New Zealand Treasury.
(Source: http://press.ifac.org/news)
EFRAG Invites Companies to Participate in the
Field-testing of New Standards
The European Financial Reporting Advisory Group
(EFRAG) will conduct field-testing of the new requirements
on joint arrangements (IFRS 11 Joint Arrangements and
IFRS 12 Disclosure of Interests in Other Entities) and the
new requirements on consolidation (IFRS 10 Consolidated
Financial Statements and IFRS 12 Disclosure of Interests
in Other Entities), all published by the IASB in May 2011.
The purpose of the field-testing is to identify potential
implementation and application difficulty, and to estimate the
effort required to implement and apply the new requirements.
The findings of the field-testing will be used by EFRAG in
developing its technical and its cost and benefit assessment
of the new standards against the EU endorsement criteria.
(Source: http://www.iasplus.com)
GRI and ISO Co-operate on Sustainability
The Global Reporting Initiative (GRI) and the International
Organization for Standardization (ISO) have signed a
Memorandum of Understanding (MoU) to increase their
october
2011
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INTERNATIONAL UPDATE
co-operation on sustainability matters. GRI has developed

a widely used sustainability reporting framework (G3.1,
with work commenced on the fourth generation guidelines,
G4). GRI also participated in the development of ISO 26000
Social Responsibility, published by the ISO in November
2010. The MoU is intended to leverage the activities of the
two organisations related to reporting and benchmarking
by business and on sustainable development by sharing
information on ISO standards and GRI programs, teaming up
with other partners, participating in the development of new
or revised documents, joint promotion and communication.
Monitoring Board Summary of Comments on IFRS
Foundation Governance Review
The Monitoring Board has released a document
summarising responses to its Consultative Report on the
Review of the IFRS Foundations Governance, published
on 8th February, 2011. The report provides a summary of
responses from the 80 comment letters received, which
expressed a wide variety of views.
IIRC Issues Discussion Paper on Integrated
Reporting, Proposes a New Approach to Corporate
Reporting
The International Integrated Reporting Committee (IIRC)
recently released a Discussion Paper Towards Integrated
Reporting Communicating Value in the 21st Century.
The IIRC seeks to bring together world leaders from the
corporate, investment, accounting, securities, regulatory,
academic, civil society and standard-setting sectors to
develop a new approach to reporting. The Discussion
Paper is the first step in the development of an International
Integrated Reporting Framework, with an exposure draft
expected to be published in 2012. It seeks to build on
existing developments in reporting such as the international
convergence of accounting standards, sustainability
guidance published by organisations such as the Global
Reporting Initiative (GRI), and the IASBs IFRS Practice
Statement Management Commentary. Integrated reporting
aims to combine the different strands of reporting (financial,
management commentary, governance and remuneration,
and sustainability reporting) into a coherent whole that
explains an organisations ability to create and sustain
value. The focus of an Integrated Report would be a broader
explanation of performance than traditional reporting, by
describing and measuring where practicable, the material
components of value creation and, more importantly,
demonstrating the links between an organisations financial
performance and the social, environmental and economic
context in which it operates. The IIRC believes an Integrated
Report should be an organisations primary reporting vehicle,
replacing rather than adding to existing requirements.
Under the IIRCs vision, much information currently
produced (including detailed financial reporting information,
operational data and sustainability information) would move
to an online environment enabled by technology, reducing
clutter in the primary report so that report can focus only
on the matters the organisation considers most material to
long-term success.
EFRAG Draft Comment Letter on IASBs Exposure
Draft on Mandatory Effective Date of IFRS 9
The European Financial Reporting Advisory Group
(EFRAG) has issued its draft comment letter on the IASB
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october
2011
Exposure Draft Mandatory Effective Date of IFRS 9. In this

draft letter, EFRAG agrees that there should be a delay in the
effective date of IFRS 9 Financial Instruments, but expresses
concern about the revised effective date of 1st January,
2015. An excerpt from the draft letter: EFRAG believes that,
rather than setting a fixed effective date, it would be more
appropriate to allow entities at least three years to implement
IFRS 9 after the completion of all phases of IFRS 9 and the
standard on insurance contracts. We believe that not requiring
restatement of comparative information in the first year of
application of IFRS 9 would be an inappropriate alternative
to setting a proper effective date in the first place. EFRAG is
seeking comments on its draft letter by 17th October, 2011.
2011 IFRS Green Book Coming Soon
The IFRS Foundation has announced that A Guide through
IFRS July 2011 will be available in October 2011.This
volume (nicknamed the Green Book) will include the full
text of the Standards and Interpretations and accompanying
documents (such as the Basis for Conclusions) issued by the
IASB as at 1st July, 2011 with extensive cross-references and
other annotations. This edition does not contain documents
that are being replaced or superseded but remain applicable
if a reporting entity chooses not to adopt the newer versions
early. Accordingly, this edition will include new standards
such as IFRS 10 Consolidated Financial Statements and
IFRS 11 Joint Arrangements, but will not contain IAS 31
Interests in Joint Ventures.
US SEC Outlines Alternative for Moving to IFRS
US securities regulators outlined recently, an alternative
way of merging US and international accounting standards
that could keep down transition costs, especially for small
issuers. The approach would allow the United States to
keep generally accepted accounting principles, or GAAP,
and incorporate international standards into GAAP over a
period of time. Outlined in a staff paper from the Securities
and Exchange Commission, the approach could avoid a socalled big bang, or immediate move to new international
rules. The SEC has been grappling with whether to move
US companies to international accounting standards and
has said it would decide this year whether to make the
switch. Under the alternative approach, the SEC could keep
its authority over standard-setting, according to the staff
paper from SECs office of the chief accountant. While US
companies are required to use GAAP, much of the rest of the
world has been adopting International Financial Reporting
Standards, or IFRS. Financial centres such as Hong Kong
and the European Union already require the international
rules, set by the International Accounting Standards Board.
The alternative approach, dubbed condorsement has been
mentioned by SEC staff at accounting conferences. It shares
features of endorsing IFRS and converging it with GAAP.
The Financial Accounting Standards Board, responsible for
US accounting rule-making, would be able to change IFRS
when it was in the public interest, the SEC said. FASB and
IASB have been working to converge US and international
standards and eliminate as many differences as possible,
although the two groups are still divided on several key
issues. Under the alternative approach, differences between
IFRS and GAAP would be eliminated through FASB standardsetting over a period of perhaps five to seven years, the
SEC said.
(Source: http://bx.businessweek.com)
621
ECONOMIC UPDATE
october
2011
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REFERENCE
ACCOUNTANTS BROWSER
PROFESSIONAL NEWS & VIEWS PUBLISHED ELSEWHERE

Index of some useful articles taken from Periodicals/Newspapers received during August-September 2011
for the reference of Faculty/Students & Members of the Institute.
1. ACCOUNTING
Comparison of XBRL Filings to Corporate 10Ks Evidence from the Voluntary Filing Program by
Jom Bartley, etc. Accounting Horizons, Vol.25/2, 2011,
pp.227-245.
European IFRS Experiment: Objectives, Research
Challenges & Some Early Evidence by Peter F. Pope &
S.J. Mcleay. Accounting & Business Research, August
2011, pp.233-266.
IFRS: The First Quarter by Robert Colapinto. CA
Magazine, August 2011, pp.28-34.
IFRS Monopoly: The Pied Piper of Financial Reporting
by Shyam Sunder. Accounting & Business Research,
August 2011, pp.291-306.
Issues in Lessor Accounting: The forgotten half of
Lease Accounting by M. P. Bauman & R.N. Francis.
Accounting Horizons, Vol.25/2, 2011, pp. 247-266.
Management Reporting in Current Business
Environment XBRL as a tool for business reporting
by Mahesh Kumar. Chartered Secretary, August 2011,
pp.1063-1067.
New Era of Business Reporting by Naveen
Garg. Chartered Secretary, August 2011, pp.10611062+1067.
New Institutional Accounting & IFRS by Peter Wysocki.
Accounting & Business Research, August 2011, pp.309328.
Reporting of General Infrastructure Assets under GASB
Statement No.34 by Thomas E. Vermeer, etc. Accounting
Horizons, Vol.25/2, 2011, pp.381-407.
Why India should consider adopting the IFRS for
SMEs by Paul Pacter. Chartered Secretary, August 2011,
pp. 1041-1043.
XBRL Enabler of Digital Financial Reporting by Vinod
Kashyap. Chartered Secretary, August 2011, pp.10471049.
XBRL: Revolutionizing Financial Reporting by Ram
Iyer. Chartered Secretary, August 2011, pp. 1044-1046.
XBRL A Revolution in Financial Reporting World by
Amit Kumar Sharma. Chartered Secretary, August 2011,
pp.1053-54.
XBRL What is in it for Accounting Professionals? By
Aman Puri. Chartered Secretary, August 2011, pp. 10501052.
2. AUDITING
Auditors liability & risk: a changing world indeed by
Steven Louw. Accountancy SA, Aug. 2011, pp.28-29.
Effect of section 404 of the Sarbanes-Oxley Act on

earnings quality by Zvi Singer & Haifeng You. Journal of
Accounting Auditing & Finance, Vol.26/3, pp.556-589.
Industry specialist Auditors, outsider directors, &
financial analysts by Jerry sun & Guoping Liu. Journal
Account. Public Policy, Vol.30, 2011, pp.367-382.
Reputation concerns & herd behavior of Audit
Committees a corporate Governance problem by B.S.
Pirchegger & J.R. Schondube. J. Account. Public Policy,
Vol.30, 2011, pp.327-347.
Stupid Fraud tricks by David Malamed. CA Magazine,
August 2011, pp.36-38.
3. ECONOMICS
Aftermath of the US debt downgrade by EPW Research
Foundation. Eco. & Pol. Weekly, August 20, 2011, pp.61-67.
Economic crisis & Accounting evolution by Gregory
Waymire & Sudipta Basu. Accounting & Business
Research, August 2011, pp. 207-232.
Economic reforms for sustainable growth by Subir
Gokarn. RBI Bulletin, August 2011, pp.1267-1277.
Employment guarantee & its environmental impact:
are the claims valid ? by M. Dinesh Kumar etc. Eco. & Pol.
Weekly, Aug. 20, 2011, pp. 69-74.
Striking the balance between growth & inflation in India
by Subir Gokarn. RBI Bulletin, August 2011, pp.1253-1262.
4. MANAGEMENT
Effect of managerial ownership on the cost of debt:
evidence from Japan by Akinobu Shuto & Norio Kitagawa.
Journal of Accounting, Auditing & Finance, Vol.26/3,
pp.590-620.
Management & oversight: a key driver for clean Audits
by Terence Nombembe. Accountancy SA, August 2011,
pp.16-17.
Strategic revelation of differences in segment earnings
growth by Qian Wang etc. J. Account. Public Policy,
Vol.30, 2011, pp.383-392.
Voluntary disclosure & the cost of equity capital:
evidence from Management earnings forecasts by Joung
W. Kim & Yaqi Shi. J. Account. Public Policy, Vol.30, 2011,
pp.348-366.
5. TAXATION & FINANCE
Is a single European VAT rate viable? by Rachel
Fielding. Accountancy, August 2011, pp.31-34.
Taxation of Capital gains under Direct Taxes Code by
P.N. shah. BCAJ, August 2011, pp.9-15.
Full Texts of the above articles are available with the Central Council Library, ICAI, which can be referred on
all working days. For further inquiries please contact on 011-23370154 or by e-mail at library@icai.org
114
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2011
623
CAREER WATCH
Report on Campus Placement

Programme August-September, 2011
The Committee for Members in Industry organises
Campus Placement Programmes for all levels of
Chartered Accountants at frequent intervals throughout
the year. The Committee for Members in Industry is
committed to provide world class placement services
to the Members and best accounting and finance
talents to the industry.
In its endeavour to provide quality Accounting,
Finance, Tax, Audit and Management Consultancy
personnel to recruiting entities, the Committee has
successfully organised one more round of Campus
Placement Programme for newly qualified Chartered
Accountants at 16 centres viz. Ahmedabad, Bangalore,
Bhubaneswar, Chandigarh, Chennai, Coimbatore,
Ernakulam, Hyderabad, Indore, Jaipur, Kanpur,
Kolkata, Mumbai, Nagpur, New Delhi and Pune in
August-September, 2011.
9. 177 Interview Panels have participated in this

Campus Placement Programme.
Brief summary of the placement programme of both

the phases is as follows:
The following table shows the statistical information of

campus interview at a glance:
Number of Candidates Registered
10317
Number of Interview Teams
177
Number of Organisations
74
Number of Jobs Offered
1262
Percentage of jobs offered vis-a-vis registered

candidates
12.23%
Executive Summary
1. Highest salary offered for Domestic posting in the
Campus Placement Programme is R13.93 lacs per
annum.
2. The minimum salary paid is R3.75 lacs per annum.
3. The average salary offered was R6.25 lacs per
annum.
4. Total 9460 candidates have participated in phase I
interviews and 8299 candidates have participated in
phase II interviews after merger of candidates from
Bigger centres. In all 10317 candidates registered
for availing the services of Campus Placement
Programme.
5. Around 12621 jobs were offered to the candidates who participated in Campus Placement
Programme.
6. In all 12.23% of registered candidates were offered
jobs.
7. 1098 candidates accepted the job offers.
8. 74 entities, including the corporate organisations
and
the
Chartered
Accountancy
Firms,
have participated in the Campus Placement
Programme.
Salient Features
1. Candidates have been given two choices to meet
the recruiting organisations. First at bigger cities and
second (if the candidates has not been selected at
bigger cities) at smaller cities.
2. The committee organised Orientation Programme
for candidates to sharpen their soft skills and give
updates on the technical side.
3. In this Campus Placement Programme all the
candidates have been permitted to attend the
orientation programme at any of the centres
to avoid the requirement to travel to centres
chosen for interviews for attending the orientation
programme.
Phase I
Centre
Number of
Interview
Teams
Total
Registered
Candidates
Number
of Offers
Made
Number
of Offers
Accepted
Bangalore
16
624
136
132
Chennai
15
678
98
90
Hyderabad
274
52
33
Kolkata
15
1067
89
87
Mumbai
29
3421
227
201
New Delhi
24
3396
291
254
Rank Holder
List
Total
109
Result
Awaited
9460
893
797
Phase II
Centre
Number
of
Interview
Teams
Total
Registered
Candidates*
Offered
Accepted
Ahmedabad
1522
54
44
Bhubaneswar
631
52
43
Chandigarh
815
12
12
Coimbatore
305
22
Ernakulam
136
Indore
266
23
23
Jaipur
12
1860
82
72
Kanpur
200
13
*Comments/suggestions for improvement in placement programme, particularly to improve the penetration are welcome at placements@icai.org
1
This write up reflects the status as on 20/09/2011 04:00 PM. Results are awaited from some of the companies. For further details kindly visit
http://www.cmii.icai.org
october
2011
115
624
CAREER WATCH
Centre
Number
of
Interview
Teams
Total
Registered
Candidates*
Offered
Accepted
Nagpur
123
20
Pune
14
2441
87
66
Total
68
8299
369
301
S
No.
Company
Name
Bharat
Petroleum
Corporation
Limited
Nestle India
Ltd.
Indian Oil
Corporation
Ltd,
20
3
1100000
New Delhi
930000
49
Vedanta
Resources
6
Narayana
Hrudayalaya
Private
Limited
7(A) Hindustan
Petroleum
Corporation
Limited
7(B) Tata Steel
926000
45
Kolkata,
Mumbai,
Chennai & New
Delhi
Multi Locations
840000
Bangalore
800000
31
800000
16
7(C) Wipro Ltd,
800000
23
8(A) Aviva Life

Insurance
Company
Ltd.
8(B) Hindustan
Coca Cola
Beveraged
Pvt. Ltd.
8(C) Axis Risk
Consulting
8(D) Essar
Investments
Limited
8(E) IIFL
9(A) TVS Motor
Limited
750000
Bangalore,
Chennai,
Mumbai &
Chandigarh
Kolkata &
Bhubaneshwar
Bangalore,
Kolkata,
Bhubaneshwar
& New Delhi
New Delhi
750000
Ahmedabad &
Jaipur
750000
21
New Delhi
750000
Mumbai
750000
700000
4
16
9(B) Schneider
Electric
9(C) Titan
10
Evolutionary
Systems
Private Ltd.
700000
700000
669000
3
5
Mumbai
Coimbatore,
Bangalore &
Chennai
New Delhi &
Mumbai
Bangalore
Ahmedabad
* The figures also include candidates merged from bigger centre to

the smaller centres as per their choice.
5
Salary Range
Salary Range
(per annum)
Number of
Candidates
Aug-Sept,
2010
Number of
Candidates
Feb-March,
2011
Number of
Candidates
Aug-Sept,
2011
R9,00,000 and
above
79
108
72
R7,50,000 to
R8,99,000
169
413
119
R5,00,000 to
R7,49,000
756
989
780
R3,50,000 to
R4,99,000
137
142
127
R2,50,000 to
R3,49,000
11
Total
1144
1663
1098
The Chart above depicts the comparison between the number of the
candidates selected within the various salary ranges offered during
Campus Placement Programme August-September, 2011, FebruaryMarch, 2011 and August-September, 2010.
Top 10 Remunerations Offered During AugustSeptember, 2011 Campus Interviews

S
No.
Company
Name
ITC Limited
Finance
116
Remuneration Candidates Centre

Offered (R In Selected
lacs P. A.)
1393000
12
Bangalore,
Kolkata & New
Delhi
october
2011
Remuneration Candidates Centre

Offered (R In Selected
lacs P. A.)
1180000
12
Mumbai &
Chennai
Top Recruiters during the August-September, 2011

Campus Interviews
S
No
1
2
3
4
5
6
7
8
9
10
Name of Company
Accepted
Genpact
Tata Consultancy Services Ltd.
Bank of Baroda
Indian Oil Corporation Limited
Vijaya Bank
Jindal Steel & Power Limited
Vedanta Resources
L&T
Canara Bank
Indiabulls Financial Services
100
67
53
49
47
46
45
44
32
28
626
TECH FOR YOU
TECH FOR YOU

Mobile Computing: Concepts, Challenges and
Opportunities for Chartered Accountants1
The Digital Revolution

The confluence of communication and
information technology (known as ICT)
has powered the massive growth in
the deployment of ICT in automation
of business process as well as new
features in personal appliances. When
rightly deployed, it is said that more
technology results in less work,
transformation of business processes
and increased employee productivity.
Digital power is the resultant effect of
growth in the technologies relating to
computers, communication, storage
and content. The following extracts from
research studies show the enormous
growth of ICT components:
Moores law predicted 50 years
back that computing power will
double every 18 months and this
has so far proven to be right and is
expected to continue.
Fibre (communication cable) is
doubling every nine months.
Traffic on the worlds networks has
been nearly doubling every two
years.
Mobile data traffic is roughly
doubling every year.
Storage capacity is doubling every
year.
Content for the known Internet - the
Internet excluding the Deep Web is
growing by more than 10 million
new, static pages each day.
Mobile Computing
Mobile computing is enabled by use
of mobile devices (portable and hand
held computing devices) such as
PDA, laptops, mobile phones, MP3
players, digital cameras, tablet PC
and Palmtops on a wireless network.
Mobile technology is at the forefront of
the digital revolution and its usage is no
longer optional but imperative to remain
productive in an increasingly connected
world. In the near future, going to
work could include flexible locations
and schedules that suit individual
1
professional needs and personal

lifestyles leading to a reinvention of the
workplace. It is predicted that emerging
Internet cloud and mobile technologies
will increasingly shift work lives away
from the corporate office altogether
and towards an in-my-own-place and
on-my-own-time work regimen. It is
predicted that smart phones, tablets
and other mobile computing devices
will become the go-to-computing
devices for most of the world.
Growth of Mobile Devices

Researchers foresee shift to mobile
computing devices and include
mobile computing as one of the top
10 strategic technologies for 2011. It
is estimated that more than 1.2 billion
people carry handsets capable of rich,
mobile commerce providing an ideal
environment for the convergence of
mobility and the Web. Mobile devices
are becoming computers in their own
right, with high processing ability
and bandwidth. The Mobile devices
available in the market now have
enough processing power and storage
capacity for software vendors to make
some reasonably good applications for
them. One of the factors contributing
to this growth is the development of
processors by chip makers that look like
the PC processors of earlier years with
the potential to create an environment
on smart phones which support an
enormous pool of PC applications.
The importance of Mobile devices can
be understood from these surveys by
AICPA:
1. Control and Use of Mobile Devices
ranks No. 1 in the list of 2011 Top
Ten Technology Initiatives
2. Control and Use of Mobile
Devices ranks No. 2 in the list
of top issues identified by CPAs
in Public Accounting in the Top
Technology Initiatives for Business
& Industry.
3. Remote Access ranks No. 3 in
2011 Top Technology Initiatives for

Public Accounting
4. Mobile Technology ranks No. 8 in
the Top 10 Technologies to watch
in 2011
Mobile Devices/Mobile Technology
Mobile technology has inherent
communication capabilities which
facilitate use of wireless networks to
communicate via phone, e-mail and
text. Mobile technology refers to a large
range of mobile devices such as: fullfeatured mobile phones with personal
computer-like functionality, or smart
phones, laptop, notebook and tablet
computers, portable digital assistants
(PDAs), portable universal serial bus
(USB) devices for storage (such as
thumb drives and MP3 devices)
and for connectivity (such as Wi-Fi,
Bluetooth and modem cards), digital
cameras, radio frequency identification
(RFID) and mobile RFID (M-RFID)
devices for data storage, identification
and asset management, infraredenabled (IrDA) devices such as printers
and smart cards.
Benefits
Mobile technology is changing the way
business processes are performed and
services are rendered by enterprises
and individuals. It enables enterprises
to scale up their process efficiency and
also instantaneously customise specific
services used by customers, suppliers
and employees which are capable of
being individually identified and located
through their mobile devices. Mobile
devices enable authorised users to
access and update information as
required anytime, anywhere, anyhow
based on the access rules defined,
on an online and real-time basis thus
enhancing employee productivity and
enterprise services. Some of the benefits
of mobile technology are: increase in
workforce productivity, better customer
service, employee satisfaction, etc.
Contributed by CA A. Rafeq (The Author is a member of the Institute. He can be reached at rafeq@vsnl.com.)
118
october
2011
627
Most of the high-end and medium ERP

and business software applications
have in-built capabilities of mobile
computing.
Risk Management
As with every technology, mobile
devices offer enterprises considerable
benefits primarily on account of
portability and location free access.
However, these benefits also have
inherent risks and these need to be
mitigated by implementing appropriate
controls. Mobile devices may contain
an enterprises sensitive information,
data obtained from business/customer
applications, customer information
which is private, corporate e-mails, and
documents. The mobile computing
devices may be used to provide input
to business applications on wireless
networks which can impact enterprise
data on a real-time basis.
Some of the business risks are given
below:
Loss or theft of enterprise
information/asset due to virus
attacks or malware.
Exposure due to information
interception
through
wireless
sniffers/intrusion resulting in a loss
or breach of sensitive data, privacy
impacting enterprise reputation
and legal implications.
Propagation of malware resulting in
data leakage, data corruption and
non-availability of required data.
Physical damage to devices,
data corruption, data leakage,
interception of calls and possible
exposure of sensitive information.
Possibility of fraud through remote
access and inability to prevent/
detect it.
Copying of critical enterprise
information by hackers using
remote access.
Lost devices or unauthorised
access to unsecured devices
allowing exposure of sensitive data,
resulting in loss to the enterprise,
customers or employees
Risk Mitigation Strategy
The risk mitigation strategy should be
holistic and derived from the overall
enterprise risk strategy. It is advisable
to use best practices from standard
frameworks as appropriate. The overall
approach should consider the risks
of mobile technology and commit
TECH FOR YOU
resources to take decisive actions

that will control their vulnerabilities.
Risk register should be prepared with
detailed inventory of high-value data,
relevant risks and related countermeasures to be implemented to
mitigate these risks. Mobile computing
security policy should be implemented
covering all mobile devices used in
the enterprise. The policy should
include security procedures covering
appropriate physical and logical
aspects. The access policy for mobile
devices should define user rights, type
of information, and kind of devices
and information services that may
be accessible through the devices.
Specific controls for mitigating each
of the identified risks need to be
implemented as required. These
could be relating to implementing:
anti-virus software on regular basis,
classification and protection of data,
secure transmission of data, asset
management policy, user training,
user
accountability,
performance
management and monitoring.
Opportunities for Chartered
Accountants
As with any technology, Chartered
accountants need to understand
mobile computing technology from
three perspectives:
A. Using Mobile computing within a
CA firm.
B. Provide consulting services on
mobile computing for clients.
C. Provide assurance services on
mobile computing for clients.
A. Using Mobile computing in CA firm:
Mobile computing can be used by
Chartered Accountants in their own
offices for enhancing overall efficiency
and effectiveness of services rendered
by the firm. However, implementation
has to be based on the overall IT
strategic plan of the firm and should
take into consideration the current
technology deployed, organisation
structure, technical competency of
the staff, services offered currently
and planned in the future, client
profile, usage of technology by clients,
cost benefit analysis, etc. A detailed
project plan with specific milestones
and timelines has to be prepared and
implemented considering all the above
factors rather than just buying mobile
devices with connectivity.
B. Consulting on mobile technology

implementation:
1. Business
strategy/business
process transformation.
2. Risk Assessment, risk mitigating
strategy and security at different
layers of technology.
3. Designing security policy for the
enterprise.
4. Access controls at different layers
of technology and for devices/
employees.
5. Application and business process
controls to be implemented.
6. Training to users on risks, security
and controls.
C. Assurance services on Mobile
technology implementation:
1. Information systems audit of all/any
aspect of security policy, business
continuity, environmental access,
physical access, logical access
and application security.
2. Compliance
with
enterprise
policies, procedures, standards
and practices as relevant
3. Physical verification or confirmation
of usage of mobile devices.
4. Compliance with regulations as
applicable.
5. Network
security,
Database
security and Penetration testing as
required.
Conclusion
Mobile technology can lead to
transformation of business processes
and how customers are serviced by
leveraging the two key advantages
of
location
independence
and
personalisation. There will a drastic
increase in use of mobile computing
by enterprises. Every technology offers
immense benefits but has inherent
risks. Chartered Accountants with good
understanding of security, risks and
controls of mobile computing can not
only use it within their firm to enhance
overall effectiveness of deliverables
but they can also offer consulting/
assurance services as required by their
clients. However, required competence
and skill sets need to be identified
and enhanced as required. Mobile
computing implementation has generic
aspects which Chartered accountants
are already conversant with but there
may also be technical skills which need
to be acquired internally or added by
using help of technology experts.n
october
2011
119
628
UDIN
UNIQUE DOCUMENT IDENTIFICATION

Way to Authenticate Attested Documents
ime and again, various authorities across the

country have reposed their faith in chartered
accountants as professionals realising the
work of their attributes like Integrity, Excellence and
Independence. Based on the same, they are relying
on various certifications being issued by chartered
accountants in practice in the normal course of
business. They look up to Chartered Accountants as
reliable source of authentic information and to ensure
compliance with various
rules, regulations and
procedures
stipulated
under different statutes.
However,
many
instances have been
brought to our attention
wherein
financial
statements and certificates
issued either by non
members or members
not holding Certificate
of Practice have been
relied upon by authorities
as true statements and
certificates. It needs no
reiteration that a certificate
issued by a practicing
chartered
accountant
binds him to its accuracy
and subject him to
Disciplinary Proceedings
of the Institute, in case a
complaint in that regard is
filed with the Institute by
the concerned authorities (or any affected party).
To ensure the authenticity of various statements
and documents being certified/attested by Chartered
Accountants, ICAI has introduced the new concept
of Unique Document Identification Number. The said
120
october
2011
scheme is available at the link http://www.icai.org/uid

UDIN is a maximum 32 character Unique Document
Identification Number which will be issued to every
document certified/attested by a Chartered Accountant
and registered with the Institute of Chartered Accountants
of India (ICAI).
Step 1: Practicing Chartered Accountants can visit
the link: www.icai.org/uid?mode=login and get
themselves registered
Step 2: For initial registration, please click on For

first time sign up, click here; on submission of
members details as regards to Membership No.,
date of birth and date of enrolment as a member, a
registration password will be generated which will
629
UDIN
be sent by the system to the e-mail ID provided

and also to the mobile number registered with the
ICAI. On non-receipt of the password, please get
in touch with the respective regional office for data
correction. The board numbers are: CRO: (0512)
3989398 (epjames@icai.in), ERO: (033) 39893989
(abasu@icai.in), NRO (011) 39893990 (hkjain@
icai.org), WRO: (022) 39893989 (marazak@icai.
org), SRO (044) 39893989 (ysrawat@icai.in). To
reset the password, please make use of the same
link.
Q1. What are the facilities available in the said

module?
A. In the said module, one can add a certificate, list and
search already added certificates, change password
or logout:
1. Add a certificate: The Add certificate option
provides an algorithm, using which a member can
generate the 30 digit UDIN so the same can be
indicated on the certification done by the member.
Algorithm so used comprise of:
Client Code: This is a 5 characters client code
for your internal reference. You are free to use
any combination of alphabets and characters
here.
Type of Certificate: This is a document type
that you intend to add in the system. If you
do not find a suitable document type, you can
select "Any other report or document". Please
note that you must specify other type of report
or document.
Date of Issue: This will be the date (dd/mm/
yyyy) when certificate is issued. Document

can be registered and UDIN can be generated
within 30 days of being issued only.
Firm Registration Number: It is the number
on whose behalf you are issuing this report or
document. You should be an active partner of
this firm. Even a sole practitioner can generate
UDIN with membership number.
Narration: Narration is a brief description for
this report or document.
The (maximum) 32 Characters UDIN so
generated is ready for registration.
2. List and search certificates: You can select

this option to view and search already added
certificates. These reports and certificates can be
searched through various criteria like UDIN, Client
Code, Type of report or document, Date of Issue,
FRN or Firm Registration Number, Check Digits
and Status. You can select Search Type "Match All"
to filter list according to all matching input criteria
or you can also select Search Type "Match Any" to
filter list according to any matching input criteria.
3. Change Password: You can set a new password
for your MyICAI login activities.
4. Log Out: You can click logout, if you wish to
leave this application. Please note, you will be
automatically logged out after 5 minutes of non
activity.
Q2. Is UDIN necessarily to be registered for the
search?
A. Only after registration UDIN will be available for
search by the end user.
Q3. What are the key values to be entered?
A. Key values can be any financial figure extracted from
attested statement or certificate such as balance in
october
2011
121
630
UDIN
general reserve, balance in building account, printing

and stationery expenses, sales, etc. Please enter key
values while registering the UDIN, this is compulsory.
When UDIN is registered, the User would enter the
given Key values (minimum two and maximum five)
which are found in the document or certificate issued.
Q4. What is the link to cross check whether the
certificate number so indicated is valid or not?
A. The link to cross check the certificate numbers so
generated is http://www.icai.org/searchudin.html
Q8. Can a Certificate number once issued can be

revoked?
A. The Certificate number once generated can be
withdrawn with narration and hence if any user searches
for this certificate number appropriate narration
indicated by the ICAI Member will be displayed for
reference.
Q9. Whether one can see the various certificate
numbers generated?
A. Yes one can see and search the various certificate
numbers generated using the search option
with the dashboard.
Q10. How to reach the Central IT
Department in case of any issue?
A. You may reach to the Central IT Department
at (0120) 3045912 or udin@icai.org.
For registration of the UDIN, there will be
time limit of 30 days. If UDIN is not registered
after generation, an alert SMS, MAIL would
be auto sent by 10th, 20th and 25th day.
When key values are provided then the system

displays the details with the key values entered when
the UDIN was registered.
Q5. Whether UDIN is mandatory for the Members of
ICAI for each certification done?
A. No. Using this facility is optional for the time being.
But ICAI is mulling to make the same compulsory in
due course. The objective is to curb the menace of
probable fake or forged documents.
Q6. Shall I change the password after I login?
A. The passwords generated at the end of the ICAI
is in encrypted format so proper safety is ensured.
However, in your own interest, you may change the
password any time.
Q7. What the Add Certificate option does?
A. The Add certificate option provides an algorithm
using the same one can generate the 30 digit UDIN
so the same can be indicated on the certifications
done by the ICAI Members. Using UDIN, the user of
Certificate can cross check whether the certificate is
authentic or not.
122
october
2011
Why UDIN?
Once the practicing Chartered

Accountants are on UDIN database, it will
enable them to establish the authenticity of
the documents certified by them.
It will help in tracing fake or forged

documents prepared by any person in the
name of any Chartered Accountants as that person
will not be able to upload the documents to this
portal.
The UDIN will consequently form the basic,
universal identity for the document certified by CAs
and filed with various authorities such as ROC,
Income Tax Department, Sales Tax Department,
excise department, banks, financial institutions,
etc. It will ensure increased transparency, trust
among all the concerned stakeholders.
UDIN will make certified/attested documents easily
verifiable on ICAI website in a cost-effective way by
making them available online.
It will help in bringing more accountability as well
as transparency and also help the regulators and
other stakeholders to check the authenticity of the
document used.
Chartered Accountants will be required to upload
the key values (minimum two and maximum five)
at ICAI website in one month time.
It will be Unique and robust enough to eliminate
the large number of duplicate, fake and forged
Financial Documents shown before various
authorities. n
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ICAI NEWS
Committee on Public Finance & Government Accounting

Invitation to Contribute Articles for E-Newsletter - Prudence
The Committee on Public Finance & Government
Accounting of The Institute of Chartered Accountants
of India is regularly coming up with its E-Newsletter
-Prudence featuring various articles on economic
issues and measures on bi-monthly basis. The AugustSeptember 2011 issue of the E-Newsletter is available
at the URL http://www.icai.org/new_post.html?post_
id=3825&c_id=241.
The Committee invites experts, researchers and
writers to contribute articles in different areas of Public
Finance and Government Accounting preferably on Public
Debt, Public Expenditure, Fiscal Policy, Monetary Policy,
Accounting Reforms, Accrual Accounting, Accounting for
Intangible Assets and Restructuring of Chart of Accounts
in Accrual System in Public Sector for publication in the
October-November 2011 issue of its E-newsletter. If the
article is published, a token honorarium of R2000/- per
article shall be paid. Discretion of the Committee regarding
publication /non-publication of the article shall be final
and abiding therewith under copyright of the Committee.
Material of this E-Newsletter may not be reproduced,

whether in part or in whole, without the consent of
Editorial Board of Committee. Authors may only submit
original work that has not been appeared elsewhere in
any publication.
The articles (500 to 700 words) may be sent to us in
the form of soft copy through mail/CD or in printed format
through post giving details of the subject matter.
Those desirous may please contact at the following
address:
The Secretary
Committee on Public Finance and Government
Accounting
The Institute of Chartered Accountants of India
ICAI Bhawan, A-29, Sector-62,
Noida- 201 309
Phone: 0120-3045950(O)
Email: cpf_ga@icai.org
Announcement - Peer Review Board

The Peer Review Board has revised the notification cost
to be paid by the Practice Unit to the Peer Reviewer
for conducting the Peer Review. The revised cost is as
follows :-
Total Revenue from Attestation

service clients of practice unit
(Per Annum)
Cost
Less than R10 lakh p.a.
R15,000/-
Notification No: PRB/Notfn./008/11-12, issued on:

August 2011
From R10 lakh to 50 lakh p.a.
R25,000/-
From R50 lakh to 1 crore p.a.
R40,000/-
In exercise of power vested in the Peer Review Board by

the Statement on Peer Review, the Board hereby notifies
that the cost of Peer Review for Stages-I, II, III, including
honorarium and TA/DA for reviewer and his qualified
assistant, shall be as under:
From R1 crore to 3 crore p.a.
R60,000/-
From R3 crore to 5 crore p.a.
R75,000/-
Above R5 crore p.a.
R1,00,000/-
Statutory audit of public sector and private/foreign banks simultaneously

In terms of the existing guidelines, an audit firm can take
up statutory central audit of one PSB, four private sector
banks and four foreign banks simultaneously each year.
The policy has been reviewed and it has been decided
that an audit firm which takes up statutory central audit
124
october
2011
assignment in private and foreign banks will not qualify

to take up statutory audit in public sector banks during
that particular year. The revised guidelines will come into
effect from the year 2012-2013.
633
ICAI NEWS
ICAI- ROC
A MCA-21 Compliance software for Members in practice and CA Firms of ICAI...

An Initiative of the Committee for Capacity Building of CA Firms and Small & Medium Practitioners, ICAI...
The Committee for Capacity Building of CA Firms and

Small & Medium Practitioners (CCBCAF & SMP) of ICAI
has arranged a MCA-21 Compliance Software namely
ICAI-ROC, for members in practice and CA firms.
ICAI-ROC software was launched on 1st July, 2011 by
Honourable CA. K. Rahman Khan, Deputy Chairman of
Rajya Sabha, Parliament of India.
An Overview of the arrangement of ICAI-ROC

1. About the arrangement
i) The ICAI-ROC will be provided initial license for free of
cost for two years.
Salient Features
The ICAI-ROC software provides a complete package
to manage secretarial requirements & generates forms
as per MCA21 Requirements. It provides the facility
to prepare Auto filing of e-Forms, Shares Records/
Certificates, Meetings and Minutes, Resolutions/Drafting,
Annual Return forms and maintenance of Registers and
Reports etc.
ii) The license renewal charges will be Rs. 1,500/- after

30th September, 2013. Statutory taxes on License
Renewal shall be extra as applicable.
Generates Forms as per MCA 21 Requirement

Picks Up Data Directly From MCA Site
Predrafted Resolutions
Maintains Minute Book
Calculation of Filing Fees
Preparation of Memorandum and Articles
Complete Shareholder Management
Consolidation/Splitting of Share Certificates
Share Certificate Printing
Annual Return Preparation in Minutes
Preparation of Statutory Registers
Mortgage and Charges Management
Manages Unlimited Companies
Description of the Software
Offer to Members in Practice & CA

Firms
ICAI-ROC
Free
2. Downloading the Software

The ICAI-ROC Software may be downloaded free of cost
from the website of Committee for Capacity Building of
CA Firms and Small & Medium Practitioners, www.icai.
org.in on request by members.
3. Support on use of Software
The MDA Softwares Ltd. will provide technical support
to the users and renewed customers via Phone, Email
and Remote PC access from the date of registering the
license.
E-Mail: support@mdasoft.in
Phone No.-09621813973, 09621387418
Chairman
Small & Medium Practitioners, ICAI
www.icai.org.in
A Exclusive Website for Members in practice and CA Firms of ICAI...

The Committee for Capacity Building of CA Firms

and Small & Medium Practitioners (CCBCAF &
SMP) of ICAI has launched its exclusive website
www.icai.org.in for members in practice and
CA
firms.
The
website
www.icai.org.in
was
launched on 1st July, 2011 by Honourable Shri R.P.N.
Singh, Minister of State of Corporate Affairs, Government
of India.
Creating Firms Website: In the website
www.icai.org.in, the Firms and Practitioners may
create their websites as per the norms laid down by
the Council of the Institute of Chartered Accountants
of India. The website provides a platform for the CA
Firms to upload their firms details and gives them an
opportunity to reach out to the members and CA firms
practicing worldwide.
Knowledge Resources: The website has various

downloadable software useful for office management
and efficient documentation for the members and CA
firms. The website includes e-library facility containing
various Knowledge resources such as Guidance
Notes, Accounting Standards, Publications, Expert
Advisory Opinions etc. for easy reference by the
practitioners. This will be helpful in enhancing the
knowledge base of the members and CA Firms.
Code of Ethics: The website also contains the Code
of Ethics issued by the Council of the Institute of
Chartered Accountants of India so that members may
be aware of the ethical standards and ensure ethical
compliance while rendering their services.
Minimum Recommended Scale of Fees: The
website contains Minimum Recommended Scale
of Fees for the Professional Assignments done by
october
2011
125
634
ICAI NEWS
the Chartered Accountants, which is about the fee

as per the work performed for various professional
assignments and the amount quoted under respective
heads of professional work for Metro and Non Metro
cities separately.
Forum for Consolidation: The website also acts as
a forum for consolidation of the members and CA
Firms by providing for consolidation measures like
Networking, Merger and Corporate Form of Practice.
The members may visit portals of other members
and firms and like-minded persons may join hands
to grow big to compete in the international front. The
website also contains a Discussion Forum wherein the
members may share their knowledge and experience
gained through their practice.
Discussion Forum: The website also contains a

Discussion Forum wherein the members may share
their knowledge and experience gained through their
practice.
Awareness through Website: The Committee
has initiated various measures to strengthen and
enhance the portfolio of members and CA Firms
and awareness on such measures is being created
through this website so that the Practitioners may be
benefitted by such endeavors of the Committee.
Chairman,
The Committee for Capacity Building of
CA Firms and Small & Medium Practitioners, ICAI
ICAI- Tax Suite
A Tax Compliance software for Members in practice and CA Firms of ICAI...


Small & Medium Practitioners (CCBCAF & SMP) of
ICAI has arranged a Tax Compliance Software namely
ICAI- Tax Suite for members in practice and CA
firms. The ICAI- Tax Suite software was launched
on 1st July, 2011 by Honourable CA. K. Rahman
Khan, Deputy Chairman of Rajya Sabha, Parliament
of India.
Salient Features of ICAI- TAX Suite
ICAI- Tax Suite is a comprehensive package that
combines features of Income Tax, Audit Reports, Service
Tax, e-TDS, e-AIR, CMA/Project Report, Form manager
software and Document manager.
1. Physical ITR Forms (ITR 1 to ITR 7 Including
Form Sahaj and Sugam (As per Department Print
Specification) and Return Form BA (Wealth Tax)
2. XML File ITR 1 to ITR 6 according to schema provided
by the Income Tax Department and Upload of XML
File directly from Software without browsing Income
Tax Portal manually
3. Computation of Total Income, thereof Tax and
Computation Summary along-with comparison of
previous assessment year
4. Option to manage the sequence of Set Off of current
year losses and unabsorbed depreciation.
5. Tax details import from 26AS.
6. Import from excel is available for various inputs
7. Comparison of Financial Ratios of Current and
Previous Assessment years
8. Tax Audit Reports, Company Audit reports, Trial
Balance import from Tally, Busy and Excel.
9. Facility to prepare Quarterly, Annual TDS Returns, for
form No. 24Q, 26Q, 27Q and 27EQ and correction
returns also.
10. Generation of TDS Certificates Form 16/16A/27D.
126
october
2011
11. Error locator in TDS.

12. Online TAN Registration, e-Payment, Challan
verification and CSI File download.
13. Option to Import New Deductee entries in TDS
correction returns.
14. Bulk TDS data Import from Excel /TDS /FVU file.
15. Generation of various MIS Reports for Income Tax
and TDS Returns.
16. Preparation of Form ST-1, ST-3 and e-Filing of ST-1,
ST-3, GAR 7 Challan & Online Payment and Refund
Form R.
17. Enable Client wise documents management for easy
listing, storing.
18. Preparation of CMA Project Report with relevant
ratios.
19. Preparation of CMA data and calculation of MPBF as
per Tandon and Nayak Committee.
20. Approximately 1000 Blank forms and filled forms with
Circulars & Notification of Income Tax
21. Facility to Prepare Annual Information Return and eFiling thereof (with correction statement).
Features of the Arrangement
ICAI- Tax Suite to CA Members holding COP and
Practicing Firms: ICAI- Tax Suite will provide initial
license free of cost with first two years activation for
CA members holding COP and Practicing Firms as
per the following table:
ICAI-Tax
Suite
Income Tax/
Service Tax
Balance
Sheet/ AIR
TDS
1st Year
Activation
A. Y. 2011-2012
F.Y. 2010-2011
A.Y. 2012-2013
2nd Year
Activation
A. Y. 2012-2013
F.Y. 2011-2012
A.Y. 2013-2014
For activation of assessment year immediately next

to initial free license, license renewal charges would
be Rs2,100/-. Software capacity to accommodate 700
635
ICAI NEWS
email and remote PC access from the date of

registering the license.
returns would be increased to 1000 returns for each

assessment year/ financial year.
Downloading the software
The software may be downloaded free of cost from the
exclusive website of Committee for Capacity Building
of CA Firms and Small & Medium Practitioners
(http://www.icai.org.in)
Phone: (0141) - 4123456

Email: support@kdksoftware.com
Chairman
The Committee for Capacity Building of
CA Firms and Small & Medium Practitioners, ICAI
Technical Support for software

KDK Software(I) Pvt. Ltd. will provide the technical
support to users and renewed customers via phone,
ICAI CARES FOR YOU!
CABF Group Term Insurance Scheme for Chartered Accountants and Spouse
CABF OF ICAI has tied up with the Life Insurance
Corporation of India for a special scheme for insuring
the Life of its members and their spouse. The scheme
is effective w.e.f. 1.1.2007 and open for all the members
of the Institute.
The salient highlights of the scheme are as under:
Offering a High Insurance Cover of R10 lacs per
member.
A provision for spouse for insurance cover of R5
lacs.
A unique SINGLE PREMIUM approach to the
scheme.
No EVIDENCE OF HEALTH OR MEDICAL
UNDERWRITING REQUIREMENTS For member
as well as for Spouse
Highly Competitive Premium Rates specially for ICAI
members.
24 Hrs. Comprehensive, Global Death Risk cover
without any Pre conditions. The amount of cover can
be increased up to double in case of death due to
Accident.
FULL PREMIUM RETURN OFFER in case of Normal
Death within Lien Period
Easy administration of insurance premium payment
and claim settlement through CABF.
Details of the Scheme are as under
S.No Particulars
Terms
1)
Age at entry
18-60 years
2)
Validity Period of Three years
Life Cover
3)
Type of Cover
24 hour Comprehensive Global risk cover
for the period of insurance from date of
commencement which also includes death
due to accident
4)
Sum Assured
R10 lacs
5)
Mode of
Single Premium payable for Three Years
Premium
6)
Single premium Age [Completed
Total Amount
to be paid in
Years]
R
4390
case of Members 18-30
31-35
4700
for the sum
36-40
6240
assured of R10 41-45
7890
lacs for a term of
46-50
11810
3 years
51-55
19880
56-60
29160
7)
Single premium 18-30

31-35
to be paid in
case of spouse 36-40
41-45
for the sum
46-50
assured of R5 lac 51-55
56-60
for a term of 3
years
2195
2350
3120
3945
5905
9940
14580
(*This scheme includes an Accidental death cover in addition to the life

cover. This cover will, in case a member dies through an accident, provide
additional cover to the extent of R10,00,000/- and in case of spouse of
R5,00,000/-).
Special Conditions
Lien : The assurances granted under the scheme are
subject to a lien clause. No claim is admissible for deaths
during the first 45 days from the entry date, except for
cases of death due to accident. However, in case of
a Normal Death, taking place during the Lien Period,
PREMIUMS charged on the life of the deceased Member
shall be refunded in full.
Special Benefits
Insurance cover for
Members Spouse
: Will be considered to the

: extent of 50% i.e. up to
R5,00,000/- Premium for
Spouse to be charged as
per Spouses age
Evidence of Health: No medical examination nor any

self-declaration of health is required.
1. The Scheme has been established and shall be
administered with the P&GS Delhi Division I Office of
LIC at New Delhi.
2. All matters relating to the Scheme including settlement
of claim etc shall be looked after by the said office in
New Delhi.
3. The period of 3 years & the lien period of 45 days will
reckon from the date of entry in the scheme.
4. CABF will forward premium received from members to
LIC. The date for the lien period & 3 years insurance
scheme will start from the date of receiving premium
by LIC subject to realisation of cheque.
5. The updation of members list will be done on quarterly
basis. For renewal of scheme members are required
to forward the due premium to CABF in one month
october
2011
127
636
ICAI NEWS
advance.
6. The members may apply for the life insurance by
giving the following details along with the premium in
duplicate :
*a) Name b) Address, Contact details such as Phone No,
Email & Fax no. etc c) Membership no. of ICAI d) Date
of Birth e) Age f) Name of Nominee g) Name of spouse
h) Date of Birth of spouse i) Age of spouse j) Name of
Nominee (in case of spouse)
Self
Spouse
Basic sum assured
Premium
Yes/No
(* a sample format is given on icai website at www.icai.org alongwith

disablement)
Example : A member aged 36 years with a spouse of

32 years decides to opt for insurance along with double
accidental coverage for both. The total premium would
be calculated as under :
Self
- Premium
- R6240/Spouse - Premium
- R2350/7. Demand Draft needs to be drawn in favour of
CABF Insurance Scheme and forwarded to The

Institute of Chartered Accountants of India, ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg,
New Delhi 110 002.
8. On receiving premium by CABF at ICAI, New Delhi,
copy of Master Policy covering the name of the
member will be sent subsequently.
9. This is a group policy. Acknowledgement of premium will be issued by ICAI.
10. For any clarification with regard to the scheme
may please write to :
Sr.Branch Manager
LIC of India
P&GS Department,Delhi Divisional Office- I
6th Floor,Jeevan Prakash
25 K.G.Marg,New Delhi,Pin Code-110001
Members are urged to avail of this unique offer
specially brought for the members of the Institute and
their spouses.
Committee on Financial Markets and Investors Protection

Invitation for Empanelment of Resource Persons for Investor Awareness Programmes
The Committee on Financial Markets and Investors
Protection (CFM&IP) is one of the Non-Standing
Committees of the Institute. The functions of the Committee
include spreading awareness among the investor about
their rights and responsibilities besides preparing
suggestions on various Regulations/Circulars relating
to Financial Markets for submission to the Government/
Regulators.
We are pleased and proud to state that the Institute of
Chartered Accountants of India has been designated as
the nodal authority by the Ministry of Corporate Affairs,
Government of India to organise 4000 Investor Awareness
Programmes across India through the Institutes vast
network of Regional Councils and Branches during the
year 2011-2012.
The Committee invites proposals from Chartered
Accountants, Bankers, Capital Market experts, MBAs,
professors and teachers having a flair of capital market
and public speaking skills for acting as Resource Persons
for conducting the aforesaid programmes. The resource
persons have to plan and organise such programmes
of two hours duration in small towns (other than district

headquarters) at their own initiative. Arranging venue,
assembling at least 50 participants per programme
and disseminating financial literacy will be their key
responsibilities. For this, MCA will pay a lump sum
amount of R5,000/- per programme inclusive of TA/DA
and honorarium of the Resource Person.
Interested persons are requested to send their
detailed profile along with name of the towns where
they can conduct programmes to the following
address:
The Chairman,
Committee on Financial Markets and Investors
Protection
The Institute of Chartered Accountants of India,
A-29, Sector 62
Noida--201309
Ph: 09350799912, 0120-3045905/945
E-Mail: cfmip@icai.org
Integrated Professional Competence Examination [Paper 7 - Section B] and Professional

Competence Examination [Paper 6 - Section B]
Strategic Management
The students of Integrated Professional Competence containing five sub-divisions carrying three marks each
Course [Paper 7 - Section B Strategic Management] would be included to cover maximum possible topics
and Professional Competence Course [Paper 6 - Section from the syllabus.
The new pattern of the question paper shall be
B Strategic Management] may note that there will be no
applicable from November, 2011 examinations.
Case Study (carrying 15 marks) in the examinations.
Instead of the Case Study a compulsory question
Director, Board of Studies
128
october
2011
637
EVENTS
CPE
12
Hours
Training Programme on An insight

on the concepts applicable to
Autonomous Bodies
Date
3rd & 4th October 2011 (Monday & Tuesday)
Venue
Ahmedabad Branch of WIRC of ICAI
ICAI Bhawan, 123, Sardar Patel Colony, Near
Usmanpura Under Bridge, P.O. Navjivan, (Behind
Swastik School), Naranpura, Ahemdabad-380 014
Organised by
Theme
With ever increasing outlays of the Government and
changes & complexities introduced in the system of
public service delivery, the task of audit has become
not only more extensive but also more onerous. This
Training Programme is primarily intended for enhancing
the quality of financial reporting in Autonomous Bodies
and to help the organisations to prepare their financial
statements within the stipulated time.
Day 1-Monday, 3rd October 2011
9.00 a.m. to
Registration of Participants and
11.00 a.m.
Inaugural Session
Technical
Basic principles of Accounts such as
Session I- 11.15 principle of accrual accounting, dual
a.m. to 12:45
concept, going concern concept and
p.m.
consistency concept
Technical
Uniform Format Linked with accrual
Session II-1:45 basis, dual concept, going concern
p.m. to 3:15 p.m. concept and consistency concept
Technical
Uniform Format Linked with accrual
Session III- 3:30 basis, dual concept, going concern
p.m. to 5:00 p.m. concept and consistency concept
Day 2-Tuesday, 4th October 2011
Technical
Internal Control
Session I- 9.30
a.m. to 11.00
a.m.
Technical
Practical Problems related to
Session II-11.15 preparation of annual accounts of
a.m. to 12:45
Autonomous Bodies
p.m.
Technical
Accounting Standards An overview
Session III-1:45 AS 1, 4,5,10,6
p.m. to 3:15 p.m.
Technical
Accounting Standards: 9, 12, 13, 15,
Session IV-3:30 21, 29 and Introduction of IFRS
p.m. to 5:00 p.m.
Registration Fees: R1500/- per Participant
DD/Pay order/Cheque should be drawn in favour of
Ahmedeabad Branch of WIRC of ICAI payable at
Ahmedabad and sent to Ahmedabad Branch of ICAI,
ICAI Bhawan, 123 Sardar Patel Colony, Nr. Usmanpura
Underbridge, PO. Navjivan, Ahmedabad 380014. Please
mention your name, membership number and contact
details at the back of the cheque/demand draft.
Please contact: Ahmedabad Branch on Phone no (79)
27680946, 27680537.
Registration on First Come, First Serve Basis.
Programme
Programme
Programme
Convener
Director
Chairman
CA. Devang A.
CA. Mahesh P
CA. Anuj
Doctor, Chairman,
Sarda, Central
Goyal,
Ahemdabad
Council Member,
Chairman
Branch of WIRC
Committee on ICAI
of ICAI
Public Finance
& Government
Accounting,
ICAI
For further details & information, please contact:
Secretary, Committee on Public Finance & Government
Accounting, Phone: (0120) 3045950, 3045968,
E-mail: cpf_ga@icai.org, Website: www.icai.org
CPE
6
Hours
Workshop on Capacity Building

Measures of Practitioners &
CA Firms
Date
15th October, 2011
Venue
2nd Floor, Saifee Building, Dutch Road, Nanpura, Surat
Organised by
Committe for Capacity Building of CA Firms and Small &
Medium Practitioners, ICAI
Hosted By
Surat Branch of WIRC of ICAI
9.30 a.m. to 10.30 a.m. - Registration of Participants and
Inaugural session
Session- I [10.30 a.m. to
12.00 p.m.]
Capacity building measures

: Networking, Merger &
Corporate form of practice
Session-II [12.00 p.m. to 1.30

p.m.]
Emerging opportunities
for practice development
& office management for
Chartered Accountants
Session-III [2.30 p.m. to 4.00

p.m.]
Code of ethics Emerging

issues
Session-IV [4.00 p.m. to 5.30

p.m.]
Effective use of presentation

skills as a part of business
Registration Fees: R400/- per participant

Cheque/DD should be Drawn in Favour of Surat Branch
of WIRC of ICAI and sent to Surat Branch of WIRC of
ICAI,
2nd Floor, Saifee Building, Dutch Road, Nanpura,
Surat
Phone: 0261- 2472932; 2464413 E-mail: surat@icai.org
Advance confirmation of registration is required.
Programme Chairman
Programme Coordinator
CA Vijay Kumar Garg

Chairman
Committee for Capacity
Building of CA Firms
and Small & Medium
Practitioners, ICAI
Email: chairman.ccbcaf@
icai.org
Phone: 9414041872 (M)
CA. Harishankar Tosniwal

Chairman
Surat Branch of WIRC of ICAI
Phone: 9327140497,
9925532000
Email: tosniwal_h@yahoo.
com
For Registration & Information, contact details:

CA. Nishith Mehta, Secretary, Surat Branch of WIRC of
ICAI, Email: nishithrm@yahoo.com, Phone: 09099050888
october
2011
129
638
EVENTS
CPE
12
Hours
Training Programme on An insight

on the concepts applicable to
Autonomous Bodies
Date
13th & 14th October 2011 (Thursday & Friday)
Venue
Bangalore Branch of SIRC of ICAI
ICAI Bhawan 16/0, Millers Tank Bed Area, Bangalore560 052
Organised by
Theme
With ever increasing outlays of the Government and
changes & complexities introduced in the system of
public service delivery, the task of audit has become
not only more extensive but also more onerous. This
Training Programme is primarily intended for enhancing
the quality of financial reporting in Autonomous Bodies
and to help the organisations to prepare their financial
statements within the stipulated time.
Day 1-Thursday, 13th October 2011
9.00 a.m. to 11.00 Registration of Participants and
a.m.
Inaugural Session
Technical Session I- Basic principles of Accounts such
11.15 a.m. to 12:45 as principle of accrual accounting,
p.m.
dual concept, going concern
concept and consistency concept
Technical
Session Uniform Format Linked with
II-1:45 p.m. to 3:15 accrual basis, dual concept, going
p.m.
concern concept and consistency
concept
Technical
Session Uniform Format Linked with
III- 3:30 p.m. to 5:00 accrual basis, dual concept, going
p.m.
concern concept and consistency
concept
Day 2-Friday, 14th October 2011
Technical Session
Internal Control
I- 9.30 a.m. to 11.00
a.m.
Technical Session
Practical Problems related to
II-11.15 a.m. to 12:45 preparation of annual accounts of
p.m.
Autonomous Bodies
Technical Session
III-1:45 p.m. to 3:15
p.m.
Technical Session
IV-3:30 p.m. to 5:00
p.m.
Accounting Standards An
overview AS 1, 4,5,10,6
Accounting Standards: 9, 12, 13,
15, 21, 29 and Introduction of
IFRS
Registration Fees: R1500/- per Participant

DD/Pay order/Cheque should be drawn in favour of
Bangalore Branch of SIRC of ICAI payable at Bangalore.
Please mention your name, membership number and
contact details at the back of the cheque/demand draft.
Please contact: Phone no. 080-30563500/513 email:
blrregistrations@icai.org for registration.
Registration on First Come, First Serve Basis,
Restricted to 200 Members.
130
october
2011
Programme
Programme Director
Chairman
CA. K. Raghu, Central
CA. Anuj
Council Member, ICAI
Goyal,
Chairman
Committee on
Public Finance
& Government
Accounting,
ICAI
Programme
Convener
CA. Venkatesh
Babu TR
Chairman,
Bangalore
Branch of
SIRC of ICAI
For further details & information, please contact:

Secretary, Committee on Public Finance & Government
Accounting, Phone: (0120) 3045950, 3045968,
E-mail: cpf_ga@icai.org, Website: www.icai.org
CPE
6
Hours

CA Firms
Date
15th October, 2011
Venue
Hotel rang Inn, Nr. ABC Crossing, Dahej By Pass Road,
Bharuch-392002
Organised by
Hosted By
Bharuch Branch of WIRC of ICAI
9.30 a.m. to 10.30 a.m. - Registration of Participants and
Inaugural session
Session- I 10.30 a.m. to 12.00
p.m.
XBRL-Introduction & Analysis
Session-II - 12.00 p.m. to 1.30

p.m.
E-filing under Companys Act
Session-III - 2.30 p.m. to 4.00

p.m.
FEMA provisions and

investment by NRI in
Immoveable Properties
Session-IV - 4.00 p.m. to 5.30

p.m.
NRI Investment, Various

Remittances and FEMA.
Registration Fees:- R750/- per participant

Cheque/DD should be Drawn in Favour of Bharuch
Branch of WIRC of ICAI and sent to Bharuch Branch
of WIRC of ICAI, 104, First Floor, Vadilo-nu-ghar, Kasak
Circle, Bharuch 392 002, Gujarat. Phone Nos:-2642246224. E-mail Id: bharuch@icai.in
Limited Seats, Registration on First Come First Serve
Basis.
Programme Chairman
Programme Coordinator
CA Vijay Kumar Garg

Chairman, Committee for
Capacity Building of CA
Firms and Small & Medium
Practitioners, ICAI
icai.org
Phone: 9414041872 (M)
CA. Niraj Surti

Chairman
Bharuch Branch of WIRC of
ICAI
Phone: 9825327360
Email: nirajsurti@yahoo.co.in

Secretary, CCBCAF&SMP Phone: 011-30110561
Email: ccbcaf@icai.org
639
EVENTS
CPE
15
Hours
NATIONAL RRC on CA Profession

towards excellence through
Capacity Building
Date
11th, 12th and 13th November 2011
Venue
Shree Balaji Seva Sadan, Salasar, Churu(Rajasthan)
Organised by
Hosted By
Jaipur Branch of CIRC of ICAI
11th November 2011- 12 p.m. to 2.30 p.m.- Registration
of participants and Inaugural session
Chief Guest
Shri Namo Narain Meena, Union Minister of State for
Finance
Session Chairman
CA Jaydeep N Shah, Vice President, ICAI
Day 1: 11th November, 2011
Session- I (2.30 p.m. to 4.30 p.m.)
Critical issues in Direct Taxes
Session Chairman : CA. S. C. Jain
Practical Issues in Income Tax - Dr Girish Ahuja
Taxation and accounting in Real estate transactions - CA
Vijay Goyal
Session-II [4.45 p.m. to 6.45 p.m.]
Panel Discussion on New Challenges in CA
Profession
Session Chairman : CA Amarjit Chopra, Past President ,
ICAI
CA Satish Gupta
CA Ravi Raniwala
CA Prakash Sharma
CA Sudhir Bhansali
Session-III [8.00 AM to 10.00 AM]
Critical Issue in Indirect Taxes
Chairman: CA Ravindra Holani, Council Member, ICAI
Practical issues in service tax - CA Ashok Batra
Critical Issues in Rajasthan VAT - Shri K B Gupta
Session-IV [10.15 a.m. to 12.15 p.m.]
Panel Discussion on Audit Documentations for SMPs
Chairman: CA Rajkumar Adukia, Central Council
Member, ICAI
CA K L Jhanwar
CA Shyam Lal Agarwal
CA Pawan Goel, Past Chairman CIRC
Session-V [12.30 p.m. to 2.00 p.m.]
Panel Discussion on Profession with Ethics
Chairman: CA Subodh Kumar Agrawal, Chairman, ESB,
ICAI
CA Devaraja Reddy M, Central Council Member, ICAI
Special Address by CA. S S Bhandari, Past Council
Member, ICAI
CA Vimal Chopra, Past Chairman, CIRC
Session-VI [8.00 AM to 11.00 AM]
Office Management & Corporate form of Practice
Chairman: CA Sanjeev Maheshwari, Central Council
Member, ICAI
Office Management - CA. Nilesh Vikamsey, Central

Council Member, ICAI
Corporate form of Practice - CA. Atul C. Bheda, ViceChairman, CCBCAF & SMP, ICAI
Session-VII [11.15 a.m. to 1.45 p.m.]
Capacity Building through IT Tools
Chairman: CA Atul C. Bheda, Vice-Chairman, CCBCAF
& SMP, ICAI
K-Doc & e-Sec - CA. B C Chechani
ICAI- ROC - CA. Manu Agarwal
ICAI-Tax Suite - CA Kapil Goyal
Open House and Valedictory Session [1.50 p.m. to 2.30
p.m.]
Chief Guest
Shri Rajendra Pareek, Cabinet Minister-Industry,
Government of Rajasthan
Session Chairman
CA Vijay Kumar Garg, Chairman, CCBCAF & SMP, ICAI
Registration Fees
Particulars
With
Accommodation
in Rupees
Without
Accommodation
In Rupees
FCA
3000
2500
ACA
2800
2300
Accompaning
Person
1800
1300
Child(3-12 Yr)
1200
700
Child(above 12 Yr)
1800
1300
Note
Payment may be made by Cheque / Demand Draft
in favour of Jaipur Branch of CIRC of ICAI & Should
be sent to-Jaipur Branch of ICAI, The Institute of
Chartered Accountants of India, ICAI Bhawan, D-1,
Jhalana Institutional Area, JLN Marg, Jaipur-302004
Special Attraction:
a) Special Darshan Salasar Balaji(Churu), Rani Sakti Dadi
Mandir(Jhuujhunu), Khatu Shyam ji (Sikar), Reengus
Bheru Ji
b)Bhajan Sandhaya and Shekhawati folk Dance
c) Pick up & Drop facility from Jaipur ( Pickup on
11/11/2011 at 7.00AM from ICAI Jaipur Branch and
Drop on 13/11/2011 at 8.00 PM at Jaipur)
Basis.
Programme Chairman
Programme Convenor
CA Vijay Kumar Garg

Chairman
Building of CA Firms and
Small & Medium Practitioners
(CCBCAF & SMP), ICAI
E-mail: chairman.ccbcaf@
icai.org,rrc.salasarbalaji@
icai.org
Phone: 9414041872
CA. Rakesh Jhalani

Chairman
Phone: 09829064513
E-mail: rrc.salasarbalaji@icai.
org, jaipur@icai.org

CA. C. L. Yadav, Past Chairman, Jaipur Branch of
CIRC of ICAI, E-mail: clyadav1@yahoo.com, Phone:
09829291148 or CA. Sunil Mor, E-mail: mor_sk@yahoo.
com, Phone: 09414039265
october
2011
131
640
EVENTS
CPE
12
Auto Connect- CMII National

Conference on Auto Industry Pune
Hours
Date
4th and 5th November (Friday, Saturday), 2011
Venue
Pune
Organised by
Committee for Members in Industry of ICAI
Hosted By
Pune Branch of WIRC of ICAI
Theme and programme outline
Pune is the hub of automobile industry in India. CMII is
organizing this conference to bring together leaders from
the industry to discuss the current state of the industry
and vision for the future. The conference is divided into
four broad themes. Each theme will be covered in a halfday session consisting of speeches by eminent speakers
followed by panel discussion by industry veterans.
Inaugural Session -9:00 am
to 10.30 am
CA. Jaydeep N Shah, Vice

President , ICAI
CA. Jaydeep N Shah, Vice
President , ICAI
Day 1: 4th November 2011

Technical Session 1- 10.30 am to 1:00 pm
Vision for Auto industry in India
Vision from the Government of India (Government
perception)
Vision from Maharashtra State government
Global outlook towards auto industry in India
Panel discussion on vision.
Technical Session 2 2:00 pm to 5:00 pm
Regulatory Environment
Current regulatory matters
Compliance beyond regulations
Direct Tax, Indirect Tax and International Tax issues for
Auto Industry
Special Session
Auto Industry as Growth Engine of the Economy
Technical Session 4- 10:00 am to 1:00 pm
Financing, including corporate finance, private equity,
working capital and also auto financing
Effectiveness of supply chain management
(component/ automobiles)
Finance to Auto Industry
Auto consumer finance- trends
Panel discussion
Technical Session 5- 2:00 pm to 5:00 pm
Accounting and internal controls with specific reference
to auto industry
Beyond internal controls/ audit Risk management
Key accounting matters/ IFRS/ Issues in Accounting
Standards impacting Auto Industry
Opportunities for Chartered Accountants in auto
industry
Panel discussion.
Conference Director
CA K. Raghu,
Chairman Committee for
Members in Industry
132
Conference Convener
CA S. B. Zaware,
Central Council Member, ICAI
and Member, CMII
october
2011
For Registration and Further Details--Fees: R3,000 for members, R4,000 for non-members
Payment should be made by Cheque / DD in favour
of Pune Branch of WIRC of ICAI payable at Pune
and should be sent to - Pune Branch of Western India
Regional Council,
The Institute of Chartered Accountants of India,ICAI
Bhawan, Plot No.8, Parshwanath Nagar, CTS No. 333,
Sr. No. 573,Munjeri, Opp. Kale hospitale, Near Mahavir
Farniture, Bibawewadi, Pune 411 037. Phone No. - 02024212251/52 E-mail : pune@icai.org, punecpe@gmail.
com
CPE
6
Hours

CA Firms
Date
Sunday, 23rd October, 2011
Venue
Om Complex, Near Neetan Hospital, Circular Road,
Bharatpur ( Rajasthan)
Organised by
Committe for Capacity Building of CA Firms and Small
& Medium Practitioners, ICAI
Hosted By
Mathura Branch of CIRC of ICAI
9.00 a.m. to 10.30 a.m. - Registration of participants and
Inaugural session
Chief Guest
CA Jaydeep Narendra Shah*, Vice President, ICAI
Session- I [10.30 a.m. to 1.30 p.m.]
Practical Aspect in Rajasthan VAT - CA Natwar Sarda,
Jaipur
Practical Issue in Capital Gain , TDS & Assessment
Procedure of Income Tax Act - CA Sandeep Jhanwar,
Jaipur
Audit Documentation and SMPs - CA Mukesh Singh
Kushwah, Regional Council Member CIRC
Session-II [2.30 p.m. to 5.30 p.m.]
K-Doc & e-Secretary - CA B C Chechani, Mumbai
ICAI- ROC Software - CA Amit Agarwal, Kanpur
ICAI-Tax Suite Software - CA Vinod Khandelwal
p.m.]
Session Chairman
Registration Fees:- R500/- per participant ( excluding
those members who contributed CPE fees for the
year 2011)
Cheque/DD should be Drawn in Favour of Mathura
Branch of CIRC of ICAI and sent to ICAI Bhawan,
Bohreji Ka Bada, Near K R Degree College, Bhains
Bahora, Mathura-281001. Phone Nos:-0565-2501122.
E-mail :-mathurabranch@gmail.com Limited Seats,
Registration on First Come First Serve Basis.
* Subject to the consent
641
EVENTS
Programme Chairman
Programme coordinator
CA Vijay Kumar Garg

Chairman, Committee for
Capacity Building of CA
Firms and Small & Medium
Practitioners, ICAI
icai.org
Phone: 9414041872 (M)
CA K K Agarwal
Chairman, Mathura Branch of
CIRC of ICAI
Phone: 94122-79707(M)
Email: kkcamathura@
rediffmail.com

CA Girish Kumar Garg Phone: 94142-22311 Email:
gkgca@rediffmail.com
CPE
12
Hours
Residential Refresher Course on

Tax Reforms and SMPs: Issues,
Suggestions & Solutions
Date & Time

6th and 7th October, 2011 (8 am to 4 pm)
Venue
Aranya Hill Resort, Mount Abu, Rajasthan
Organised by
Medium Practitioners, (CCBCAF & SMP),ICAI
Hosted By
Jodhpur Branch of CIRC of ICAI
Thursday, 6th October,2011
08.00AM to 9.30 AM-Registration of Participants and
Inaugural session
Chief Guest : Respected Pujya Janki Dadi Ji, (The
International Chief of Brahma Kumari)
Guest of Honour: CA Uttam Prakash Agarwal, Past
president, ICAI and Member SMP Committee, IFAC
First Technical Session - 9.30 AM to 1.30PM
Utilisation of the power within. Be an efficient
Communication CA. C.S. Nanda, Central Council
Member
An Overview of XBRL CA. Tanuj Agarwal, Mumbai
Practical Aspect-Survey under Income Tax Act, 1961
CA. Amit Kothari, Jodhpur
Second Technical session - 2.30 PM to 4.30 PM
An Overview-New Amendments in Service Tax CA.
Pradeep Jain
Penalty provision on Concealment of income under
Income Tax CA. Arun Choradia, Jodhpur
Second Day
Friday, 7th October,2011
Third Technical session - 9.00 AM to 1.00 PM
Practical Aspects- Accounting Standards CA. O.P.
Maheshwari, Regional Council member, CIRC of ICAI
Critical Issue- Capital Gain & Exemption CA. Surendra
Chopra, Jodhpur
Fourth Technical Session- 12.15 P.M. to 2.15 P.M.
An Overview- Rajasthan VAT CA. Arpit Haldia, Jodhpur
Fifth Technical session - 3.00 PM to 4.00 PM
Practical Approach- Auditing Standards and SMPs CA.
Abhijit Bandyopadhyay, Central Council Member, ICAI
Open House & Valedictory Session
Session Chairman
CA Vijay Kumar Garg - Chairman, CCBCAF & SMP, ICAI
Delegates Fees
Applicable Fees: Residential Fees (including registration,
accommodation, meals, transportation and course
material)
Super Deluxe
R11,000/- (Member with

Spouse)
Deluxe

Spouse)
Normal

Spouse)
Single Member
R3,500/- (On Twin Sharing

Basis, Normal)
For children above 8 years
R2000/- extra
Registration Fees
R2,500/- (without
accommodation and
transportation)
* Cheque/DD Should be drawn in favour of Jodhpur

Branch of CIRC of ICAI and sent to Jodhpur Branch of
CIRC of the ICAI
Guru Rooprajat, E-32, Kalpatru Shooping Centre,
Jodhpur-342003, Email: icaijdh@gmail.com
* Registration shall be on the First Come First Served
basis for each of above Category and non refundable
and will close Immediately after total 50 registration.
*Advance confirmation of registration is required.
Conference Chairman
CA Vijay Kumar Garg
Chairman-CCBCAF & SMP
Email: chairman.ccbcaf@icai.
org Mobile: 9414041872
Conference Convenor
CA Manish Sukhani, Jodhpur
Email: msukhani@gmail.com
Mobile: 09828126465
For Further Details & Registrations, Please Contact:

CA Ramesh Mundara, Mobile: 098280-30235,
mundragattani@yahoo.com or CA Sudhir Bhansali,
Mobile: 093147-13923, labdhij@rediffmail.com
CPE
10
Hours
Residential refresher Course on

Capacity Building Measures of
Practitioners & CA Firms
Date
10th & 11th December, 2011
Venue
Shri Saurastra Leswa Patel Samaj Trust, Opposite Girls
College, Udaipur Highway, Nathdawara (Rajsamand),
Rajasthan.
Organised by
Hosted By
Bhilwara Branch of CIRC of ICAI
10th December, 2011
9:30 a.m. to 11.00 a.m.
Registration of participants and Inaugural session
october
2011
133
642
EVENTS
Chief Guest
Dr. C. P. Joshi*, Union Cabinet Minister for Road
Transport & Highway, Government of India
Vice Presidential Address
CA Jaydeep N Shah, Vice President- ICAI
Special By Address
Shri Madan Lal Paliwal, M.D.,Miraz group
Capacity Building & Office Management
Session-I [11:00 am to 02:00 pm]
Capacity Building of Practitioners - CA. Dhinal Ashvinbhai
Shah, Central Council member, ICAI
Office management & Opportunity in Stock Market - CA.
C.S. Nanda, Central Council member, ICAI
Importance of Audit Documentation & XBRL
Session-II [03:00pm to 05:00pm]
XBRL- Overview - CA Rajkumar Adukia, Central Council
member, ICAI
Documentation & SMPs - CA Shyam Lal Agarwal, Jaipur
Sunday,11th December, 2011
Critical Issues & Opportunities In Direct & Indirect Tax
Session-III [10:00am to 01:00pm]
Interpretation of Law CA. Ravindra Holani, Central
Council member,ICAI
Critical Aspects in Direct Taxes & Issues in TDS and
Assessment - CA. (Dr.) Girish Ahuja
Critical Aspects in Service Tax CA. Manoj Jain, Jaipur
Critical Aspects in Rajasthan VAT CA. Ajay Saria,
Udaipur
Session-IV [02:00pm to 04:00pm]
K Doc & E-Secretary - CA B C Chechani
ICAI-Tax Suite - CA Vinod Khandelwal, Jaipur
ICAI-ROC - Mr. Amit Mehta
Open House and Valedictory Session [04:00 p.m. to
04:30 p.m.]
Session Chairman
Registration
Fees
Particulars
With
Accommodation
(R)
Without
Accommodation
(R)
FCA
1500.00
1100.00
ACA
1400.00
1000.00
Accompanying
Person
1100.00
900.00
Child (above
12 Yrs.)
1100.00
900.00
Child (3-12
Yrs.)
900.00
700.00
Cheque/DD should be drawn in favour of Bhilwara

Branch of CIRC of ICAI and sent to Bhilwara Branch of
CIRC of the ICAI,ICAI BHAWAN, Opp. Hotel Surya Mahal,
Shastri Nagar, Bhilwara, Rajasthan-3011001, Ph: 01482252434, e-mail: icaibhl@gmail.com, bhilwara@icai.org
Basis.
Programme Chairman
CA Vijay Kumar Garg

Chairman, Committee
CA Ajay Kasliwal
Chairman, Bhilwara Branch
of CIRC of ICAI
Email: kasliwal.ajay@gmail.
com
Phone: 09828146872 (M)
for Capacity Building of

CA Firms and Small &
Medium Practitioners,
ICAI
icai.org
Phone: 9414041872 (M)

CA Ashok Jathliya,Past Chairman, Bhilwara Branch of
CIRC of ICAI,* jathliya@gmail.com, nvagrecha@gmail.
com
(09414112165, 09414112304)
* Subject to the consent
CPE
6
Hours

CA Firms
Date
14th October, 2011
Venue
Hotel Allahabad Regency,
Tashkand Marg, Civil Lines, Allahabad
Organised by
Hosted By
Allahabad Branch of CIRC of ICAI
9.30 a.m. to 10.30 a.m. - Registration of participants and
Inaugural session
Session
Topics to be discussed
Session- I - 10.30 a.m. to

12.00 p.m.
Capacity Building Measures:

Networking, Merger &
Corporate Form of Practice
Session-II - 12.00 p.m. to 1.30 Representation before
p.m.
Authorities
Session-III - 2.30 p.m. to 4.00 Issues related to Uttar
p.m.
Pradesh VAT Audit
Session-IV - 4.00 p.m. to 5.30 Issues relating to Uttar
p.m.
Pradesh VAT Annual Return

Cheque/DD should be Drawn in Favour of Allahabad
Branch of CIRC of ICAI and sent to Allahabad Branch of
CIRC of ICAI, ICAI Bhawan, Tulsiani Plaza, 2nd Floor, M.
G. Marg, Civil Lines, Allahabad - 211 001. Phone:- 0532
2427614 E-mail: icaiald@gmail.com
Limited Seats, Registration on First Come First
Serve Basis. Advance confirmation of registration is
required.
Programme Chairman
CA Vijay Kumar Garg
Chairman
Committee for Capacity Building
of CA Firms and Small &
Email: chairman.ccbcaf@icai.
org
Phone: 9414041872 (M)
Programme Convenor
CA. Mukesh Singh
Kushwah
Regional Council Member,
CIRC of ICAI
Phone: 09810470274,
09310470274
Email: kushwah@rediffmail.
com

CA. Amit Agarwal, Chairman, Allahabad Branch of CIRC
of ICAI Phone: 09415238605 Email: aocald@gmail.com
134
october
2011
643
EVENTS
CPE
Residential Refresher Course
12
Hours
Date & Time

21st and 22nd January, 2012 (8 AM to 5 PM)
Venue
Valley View, Club & Resort, Near Nakoda Ji Gate,
Nakoda Ji Tirth Road, Balotra, Rajasthan
Organised by
and Small & Medium
Practitioners(CCBCAF &
SMP),ICAI
Jointly Hosted by
and Pali Branch of CIRC of ICAI
Saturday, 21st January, 2012

08.30AM to 10.00 AM-Registration and Inaugural
Session
Chief Guest : *CA Jaydeep Narendra Shah, Vice
President , ICAI
Technical Session
First Technical Session - 10.00 AM to 1.00 PM
Topic: Office Management & Capacity Building
Chairman session: Kamal Kishore Kasat, Jodhpur
Speaker:
1) Offfice Management For SMPs CA. Nilesh
Vikamsey, Central Council Member, ICAI
2) Capacity Building of SMPs CA. Pankaj Tyagee,
Central Council member, ICAI
3) SMPs & Minimum Recommendatory Fees CA. C.L.
Yadav, Jaipur
Second Technical Session - 2.00PM to 5.00 PM
Topic: Importance of Audit Documents and Ethical
Issues
Chairman session: CA. V.P. Goyal , Jodhpur
Speaker:
1) Importance of Audit Documentations CA. K.L.
Jhanwar, Jaipur
2) Practical Aspects in Ethical Issue for Members CA.
Rajendra P. Kumar, Central Council Member, ICAI
3) Practical aspects of Audit Documentation CA.
J.K.Agarwal, Jaipur
Sunday, 22nd January,2012
Third Technical Session- 9.00AM to 12.00 PM
Topic: Critical Issues in Direct Tax & Indirect Tax
Chairman session: CA Jeetmal Parakh Binraj, Pali
Speaker:
1) Practical issues in Direct Tax Dr. Girish Ahuja
2) Issues in Service Tax & Central excise CA. Pankah
Malik, Jaipur
3) Issues In Rajasthan VAT CA. Sumer Patawa,
Jodhpur
Fourth Technical Session - 1.00 PM to 4.00 PM

Topic: Capacity Building Through I T Tools
Chairman session: CA. O.P. Maheshwari, Regional
Council member
Speaker:
1) CA B C Chechani, K doc & E Secretary
2) CA Vinod Khandelwal, ICAI Tax Suite
3) CA Saurabh Mishra, Delhi, ICAI ROC
Open House & Validatory Session
4.00 PM to 4.30 PM
Chairman Session: CA Vijay Kumar Garg, Chairman
CCBCAF & SMP Committee, ICAI
Registration Fees Particulars
With
Accommodation(In
Rupees)
Without
Accommodation(In
Rupees)
FCA
2100
1200
ACA
2000
1100
Child (3-12 Yrs.)
800
500
Child (above
12 Yrs.)
1500
800
Note:
1) Payment may be made by cheque /Demand draft
in favour of Jaipur Branch of CIRC of ICAI & should
be sent to Jaipur Branch of ICAI. The Institute of
Chartered Accountants of India, ICAI Bhawan,D1,Jhalana Institutional Area, JLN Marg,Jaipur-302004
2) Limited seats, Registration on First come First serve
basis.
3) * Pick & drop Facility from Balotra to Venue.
Conference Chairman
CA. Vijay Garg
Chairman-CCBCAF & SMP
Email:chairman.ccbcaf@
icai.org
Mobile: 9414041872
Conference Co- Chairman

CA. Rakesh Jhalani
Chairman Jaipur Branch
Email:jaipur@icai.org
Mobile: 9829064513
For Further Details please Contact:

CA. Ashok Jain , *jainak90@gmail.com,
shahpali@hotmail.com, (09414078881, 09829048278)
october
2011
135
644
EVENTS
CPE
12
Hours
National Conference on Excellence

in Profession through Capacity
Building
Date
9th & 10th October, 2011
Venue
ICAI Bhawan, G-Block, Sector No.-14,
Hiran Magri, Udaipur (Raj.)
Organised by
Hosted By
Udaipur Branch of CIRC of ICAI
9th October, 2011
8:30 a.m. to 10:15 a.m. Registration of participants and
Inaugural Session
Chief Guest
Shri C. P. Joshi*, Minister for Road & Transport,
Government of India
Presidential Address
CA G. Ramaswamy, President- ICAI
Special Address
CA Jaydeep N. Shah, Vice President- ICAI
Session-I
10:30am to
01:30pm
IFRS & SMPs - CA. Yagnesh Desai, Mumbai

Strategic Planning for Development of Small
& Medium CA Firms
CA. Mahesh P. Sarda, Central Council
Member, ICAI
Session-II
02:00pm to
03:30pm
Taxation on Real Estate Transactions

including provisions of Section 50C & 55A
of the IT Act, 1961 - CA. (Dr.) Girish Ahuja,
New Delhi
Session-III
03:45pm to
05:15pm
An Overview on XBRL - CA. Atul C. Bheda,

Vice-Chairman, CCBCAF & SMP
10th October, 2011

Session-IV
10:00am to 12:00noon
Recent Issues under Service Tax CA. Ashok Batra, New Delhi
Session-V
Issues related to Assessment &
12:00noon to 02:00pm Concealment of Income - CA. Kapil
Goel, New Delhi
Session-VI
02:30pm to 04:30pm
Technicalities of RTI Act, 2005 - Shri

Naresh Gupta, Advocate, Jaipur
Taxation on Charitable Trust - CA.
Sanjay Kumar Agarwal, Chairman
Direct Tax Committee , ICAI
Open House and Valedictory Session [4:30 p.m. to

5:00 p.m.]
Session Chairman
136
october
2011
Registration Fees: For Member- R1100/- , For

Members: Spot Registration R1250/-, For NonMembers- R1500/-, For Students R900/-)
Cheque/DD should be drawn in favour of Udaipur
Branch of CIRC of ICAI and sent to Udaipur Branch of
CIRC of the ICAI,ICAI BHAWAN, G-Block, Sector No.14, Hiran Magri,, Ph: (0294) 2641515, 2641616, e-mail:
udaipur@icai.org
required.
Conference Chairman
Conference Coordinator
CA Vijay Kumar Garg

Chairman
and Small & Medium
Practitioners, ICAI
Phone: 9414041872 (M)
icai.org
CA. Sudhir Mehta

Chairman
Udaipur Branch of CIRC of
ICAI
Phone: 09414169128 (M)
Email: casudhirmehta@
gmail.com

Secretary, Udaipur Branch of CIRC of ICAI, Phone:
09414470818 Email: deepakaren@yahoo.com
Secretary, CCBCAF & SMP, ICAI, New Delhi, Email:
ccbcaf@icai.org, Phone: 011-30110561
*Subject to the consent

CPE
6
Hours

CA Firms
Date
22nd October, 2011
Venue
Hotel Radisson, Taj East Gate Road, Agra-282001
Organised by
Hosted By
Agra Branch of CIRC of ICAI
9.30 a.m. to 10.30 a.m.- Registration of participants and
Inaugural session
Chief Guest
Shri Ram Shanker Katheria, Member of Parliament, Agra
Shri Raj Babbar*, Member of Parliament, Firozabad
Guest of Honour
CA. Jaydeep N Shah*, Vice President, ICAI
Session- I (10.30 a.m. to 1.30 p.m.)
An Overview-XBRL - CA H R Iyer, Delhi
Audit Documentation & SMPs - CA Mukesh Singh
Kushwah, Regional Council Member CIRC
Amendments in Schedule VI - CA Amarjit Chopra, Past
President, ICAI
645
EVENTS
Session- II (2.30 p.m. to 5.30 p.m.)

SMP Initiative and Capacity Building through I T Tools
K-Doc & e-Sec - CA B.C Chechani, Mumbai
ICAI- ROC Software - CA Amit Agarwal, Kanpur
ICAI-Tax Suite Software - Sahib Singh Satsangi
p.m.]
Session Chairman
Cheque/DD should be Drawn in Favour of Agra Branch
of CIRC of ICAI and sent to ICAI Bhawan, Block
No.77, M-K Towers, Sanjay Place, Agra-282002.
Phone Nos:-0562-2856598, 4040598. e-mail Id:icaiagra@gmail.com
Basis.
Programme Chairman
CA Vijay Kumar Garg

Chairman
and Small & Medium
Practitioners, ICAI
E-mail: chairman.ccbcaf@
icai.org
Phone: 9414041872
CA. Nitesh Gupta

Chairman
Agra Branch of CIRC of ICAI
Phone: 9837073938
E-mail: nitesh.gupta2004@
gmail.com

CA Alok Agarwal Phone: 9997165253 E-mail:
alokca2004@gmail.com
Study Tour on International Taxation to

Vienna, Austria
Organised by Committee on International
Taxation of ICAI
2nd to 6th November, 2011 (5 days & 4 nights)
With a view to acclimatise the members of the Institute

about the best practices in the area of International
Taxation and to provide an opportunity to participate
and interact with the renowned experts of Institute for
Austrian and International Tax Law, Vienna University,
Austria, the Committee on International Taxation of
the Institute of the Chartered Accountants of India
proposes to organise a Study Tour on International
Taxation to Vienna, Austria from 2nd to 6th November,
2011 for the members on self-financing basis.
Institute for Austrian and International Tax Law, Vienna
University of Economics and Business, Austria will
provide Certificate of Participation to all the participating
members in the course as per their norms.
Most current topics are selected for the short duration
course of this study tour to ensure maximisation of
benefits and to empower members of the profession to

render high quality professional services in the field of
International Taxation. It will be a great opportunity to
update your knowledge on the latest development in
the field of International Tax.
Schedule and Course Contents
A tailor-made course for the Indian group which would
contain the following topics:
Day I (3rd November)
08:00 to 09:30 Introduction to Tax Treaty Law
10:00 to 11:30 Tax Treaty Entitlement, Abuse of Tax
Treaties Where are the Limits?
12:00 to 13:30 Scope of Tax Treaties, Business Profits
14:00 to 15:30 Transfer Pricing: Attribution of profits to
permanent Establishments; Associated Enterprises
Day II (4th November)
08:00 to 09:30 Interest, Dividends and Royalties in
Treaty Law
10:00 to 11:30 Employees, Stock Options
12:00 to 13:30 Artists and Sportsmen; Capital Gains
14:00 to 15:30 Methods to Avoid Double Taxation:
Exemption and Credit
Day III (5th November)
08:00 to 09:30 Qualification Conflicts and the Tax Treaty
Treatment of Partnerships
10:00 to 11:30 Protection against Discrimination on
Double Tax Treaties, Exchange of Information and
Legal Protection in Treaty Law
12:00 to 13:30 The Impact of European Law (ECJ
Decisions) on Tax Treaty Law
14:00 to 15:30 Inheritance Tax; Recent OECD
Developments with regard to Income Taxes
Overall professional co-ordination:
Prof. Dr. Michael Lang,
Prof. Dr. Josef Schuch,
Prof. Dr. Claus Staringer, Prof Dr. Pasquale Pistone
Prof. Dr. Alfred Storck
Duration: 3 training days, 8:00 to 15:30
Venue: Seminar Room at the Institute for Austrian and
International Tax Law or equivalent room in the same
building, modern technical equipment (incl. overhead,
smart board, Internet-Access on demand)
Lecturers: Senior Research and Teaching Staff of the
Institute for Austrian and International Tax Law
The cost of the above study tour has been tentatively
fixed at R1,50,000/- (Rs. One Lakh Fifty Thousand
only) per person Ex-New Delhi inclusive of Course
session fees, economy class airfare, relevant visa fee,
hotel accommodation on twin-sharing basis, meals,
applicable taxes and transport arrangements for
meetings, sight seeing etc.
october
2011
137
646
EVENTS
After the completion of the learning course sessions

in Vienna, if any member interested to go to Munich,
Prague, Budapest, then they are allowed to have two
night extension on self-financing basis. The Supplement
Cost on FIT Basis/ tentative cost per person are also
available with the Study Tour Coordinator.
Since, the delegation size would be limited; registration
for the study tour would be on first-come-first-serve
basis.
For registration, the interested members may kindly
send the registration form along with Passport, duly
filled Visa application Forms which appear at web site:
www.icai.org relevant enclosures and payment of full
amount, as aforesaid, by Demand Draft only drawn
in favour of The Secretary, The Institute of Chartered
Accountants of India payable at New Delhi so as to
reach us latest by Wednesday 10th October, 2011 at
below mentioned address:
Study Tour Coordinator
Ashish Bhansali,
Secretary, Committee on International Taxation,
The Institute of Chartered Accountants of India,
ICAI Bhawan, Administrative Office Block,
4th Floor, A-29, Sector-62,
Noida (U.P.) - 201301, India,
Telephone Direct - +91 120 3045923
Mobile No. 09310532063; E-mail: citax@icai.org
CPE
6
Hours

Measures for Practitioners &
CA Firms
Date
5 November, 2011
th
Venue
ICAI Bhavan, 20/1, Behind Vijayanand Society, Dhantoli,
Nagpur 440 012.
Organised by
Committe for Capacity Building of CA Firms and Small
& Medium Practitioners, ICAI
Hosted By
Nagpur Branch of WIRC of ICAI
9.30 a.m. to 10.30 a.m.- Registration & Breakfast and
Inaugural session
9.30 a.m. to 10.30 a.m.- Registration & Breakfast and
Inaugural session
138
october
2011
Session- I
Capacity Building Measures10.30 a.m. to 12.00 p.m. Networking, Merger and
Corporate Form of Practice
Session-II
12.00 p.m. to 1.30 p.m.
Strategies for Wealth

Creation, Wealth
Maximisation and Wealth
Management
Session-III
2.30 p.m. to 3.30 p.m.
Frequently found
shortcomings in Auditing
Annual Statement of
Accounts
Session-IV
3.30 p.m. to 4.30 p.m.
Small & Medium

Practitioners The Future
Session-V
4.30 p.m. to 5.30 p.m.
Modus operandi for

calculation of professional
charges - Ways and
Difficulties

Cheque/DD should be Drawn in Favour of Nagpur
Branch
of WIRC of ICAI and sent to Nagpur Branch of WIRC
of ICAI, ICAI Bhawan, 20/1, Behind Vijayanand Society,
Dhantoli, Nagpur 440 012. Phone:- 0712 2443968,
2441196
E-mail: nagpur@icai.org
required.
Programme Chairman
CA Vijay Kumar Garg

Chairman, Committee
for Capacity Building of
CA Firms and Small &
Medium Practitioners,
ICAI
Email: chairman.
ccbcaf@icai.org
Phone: 9414041872 (M)
CA. Satish Sarda

Chairman, WIRC of ICAI
Phone: 09822229601
Email: info@sardasoni.com

CA. Abhijit Kelkar, Vice-Chairman Nagpur Branch of
WIRC of ICAI Phone: 09422126890, 09096021215
Email: abhijit@kelkarcoca.com
Advertisement
648
INSPIRATION
Where There is a Will, There is a Way

Some are born great; some achieve greatness through single minded devotion. But they are rare who can triumph
a tragedy a serious physical disabilityand make a mark for themselves as a budding music maestro and
newly qualified Chartered Accountant. A naturally gifted strong-willed Bhushan Toshniwal is one of those rare
personalities, who has not only excelled as a budding singer but has also recently become Chartered Accountant
despite being blind.
A resident of Pimpri Chinchwad in Maharashtra, 24 CA exams. He learnt music from Padmashree Padmaja
years old Mr. Bhushan passed his CA Final Exam in Fenani Joglekar, Bhajan Samrat Anup Jalota Ustad
May 2011. His success story is an inspiration for all Rasid Khan. Presently he is learning Karnatic music
those who pursue their professional careers.
and the violin.
Born in a very educated and cultural family he lost
When asked about his way of studying he revealed
his eye sight due to detachment of his retina when he that he didnt join any classes for any of his course.
was just 20 days old. However, discovering
He believed in self study and understanding
his liking for music, his parents taught
the intricacies of the subject. His
him Indian Classical music from the
parents use to read for him and
age of four and half year. He was
he took the help of Internet to read
sent to Blind school at Koregaon
the various laws, accounting
Park to pursue his education. He
standards, auditing standards
showed signs of brilliance in
and other theory part. He
both fields from a tender age.
did this with the help of the
He sang five ragas at the age
screen-reader software which
of five in a Grand Musical
reads whatever comes on
Function and was felicitated
the screen of a computer. His
by the then Governor Shri C.
parents were instrumental
Subramaniam. His success
in his upbringing as they put
graph continued to rise high
enormous efforts in his studies
as he won Tak-Dhina-Dhin
and helping him out through
competition at Doordarshan.
thick and thin in his life.
He scored 87% in 10th and was
His
talents
have
been
11th in Merit List Hsc- Pune board. After
appreciated and recognised on
that he decided to take up CA course as a
various occasions as he has been conferred
challenge, although he was discouraged Bhushan Toshniwal with several awards like Swami Vivekanand
by people saying that it is a very difficult
Purskar,
Swami
Dayanand
Sarswati
course. But he never gave up; he proved his ability by Purskar, Moraya Purskar, Yuva Gaurav Purskar, and
passing PE I Exam in the first attempt.
Rashtraguarav Purskar. He is also a winner of classical
Even while pursuing CA course, music didnt take and semi-classical competition at national level. He
a back seat. He participated in Reality Shows like has received the National Scholarship of Government
Idea Sa Re Ga Ma Pa at Zee TV and Maharashtra of India and Sawai Gandharv Mahotsav Samitee. He
Sangeet Ratna at Sahyadri and got great acclaim from was awarded the Dheerubhai Ambani Scholarship
the doyens of music and reached the semifinal in both to pursue Academic Education after his remarkable
the shows.
performance in 12th exams.
His striving for perfection and determination helped
Indeed, Bhushan is a great example of grit and
him pass the CA final Exam with good marks. He had determination and inspires all those striving to excel
to take help of an undergraduate writer for writing his against all odds. n
140
october
2011
649
GENERAL
How to Succeed in Life Against All Odds
Success is not measured by what you accomplish, but by the opposition you have encountered, and the courage with
which you have maintained the struggle against overwhelming odds. To know how to succeed in life, it is imperative
to know at first hand what success actually is. Let us understand some definitive terms used in the article, before
proceeding to look into the requisites to achieve success. Success: It is something you achieve (or) conquer. Success
is a relative term and it differs from person to person. Example: Becoming a Chartered Accountant is one of the most
successful events of an aspiring CAs life. Odds: Odds are the roadblocks/obstacles which come in the success path.
Succeeding against all Odds: It means to achieve what you are desirous of even when others are trying to ensure you
dont do so.
CA. K. S. Karthikeyan
Just like there are two sides of a

coin, the success strategies consist
of four components. This article
classifies the topic into four parts
(the first two are the positive ones
and the next two are the negative
ones).
The Positive Components

1. Dreams/Goals: Dreams/Goals
are yardsticks, which you would
want to achieve in your life. It brings
purpose to your life. If you want to
succeed in life you must know what
to succeed at and you must write
october
2011
141
650
GENERAL
them down. Unless you write

down your goals it remains just
a Wish. It is difficult to understand
as to how it happens, that wishes
are nurtured without undertaking
any actions for the achievement
of the same. This is when wishes
come from the mind and not from
the heart. If the heart is not in
harmony with the mind the wish
will not come true, as any mental
discomfort will push away the
desired events from you. When
the mind finds something, that is
in sync with your heart, you are
ready to work and put your efforts
towards achieving your dream.
Then you simply stop wishing, and
start acting. You realise that it is
already yours, but when it appears
in your physical reality is just a
matter of time. The belief becomes
so strong that you start realising
that your desire is on its way to you.
Your goal tells you the destination
to reach. Unless you know where
you would want to go, no road will
take you there. So write down your
goals and make a habit of reading
them at least once in a week so that
you would be constantly reminded
of your purpose in Life.
A Quote to Ponder
The Future Belongs to all those
people who believe in the Beauty
of their Dreams George
Washington.
2. Belief/Confidence: Once you
know your desired Destination,
its time to ensure that you are
our components
that revolve round
success are dream,
belief, criticism and
worry. If you have
a Dream and if you Believe
in that dream no matter how
much Criticism and Worry is
thrown at you, it wont cause
you much trouble in the
achievement of your goals.
142
october
s you are on your

road to success
you will have
to face a lot of
Criticism. So you
better be prepared for it. Why
should someone criticise
you in the first place? The
answer is very simple you
are doing something which
all these critics have never
ever dreamed of doing in their
lives. However, it is suggested
to take criticism positively,
as someone who is testing
your Determination to the
achievement of the Goal. If
you dont want to be criticised
be nothing and do nothing
confident enough of reaching there.
This is what is called as Believing
in yourself (or) Backing yourself.
The Question you might want to ask
is why should I believe in myself?
The answer is extremely simple:
If you dont believe in your ability
and talent, who else will. As long
as you believe in yourself you will
be doing all the necessary things
to reach your destination. Belief
is what separates the Successful
people from the Talented Ones.
A Quote to Ponder
You have to have belief in
yourself when no one else does,
thats what makes you a winner
- Venus Williams.
The Negative Components
1. Criticism: It means expressing an
unfavourable judgement or giving
the expression of disapproval. As
you are on your road to success,
you will have to face a lot of criticism.
So you better be prepared for it.
Why should someone criticise you
in the first place? The answer is very
simple you are doing something
which all these critics have never
ever dreamt of doing in their lives.
However, it is suggested to take
criticism positively, as someone
2011
who is testing your determination

to the achievement of the Goal.
A Quote to Ponder
If you dont want to be criticised
be nothing and do nothing
2. Worry: We often worry about
what others think about us. What
others think of you is none of your
business. To be practical, there are
seven billion people in this world
and if you were to worry about
what these people think about you,
you will have no time living your life
your way.
A Quote to Ponder
I would rather be alone at the
Top rather than to be at the
Bottom with crowded mediocre
people
Conclusion
To conclude the above discussed
positive and negative components
of success strategies in a single
sentence, it may be put as; If you
have a Dream and if you believe in
that Dream no matter how much
criticism and worry is thrown at you,
it wont cause you much trouble
in the achievement of your goals.
We often wait for the ideal path
to appear in front of us, but what
we forget is that paths are made
by walking and not by waiting". n
Advertisement
652
BACKPAGE
064
ACROSS
1. Name Indias first film producing

company to go public that was set
up by a Chartered Accountant?
(1,1,5)
5. One of the car brands in India,
which is one of the names of Lord
Hanumana. (6)
6. Language for electronic
communication of business and
financial data.(4)
9. New Secretary of the Ministry of
Corporate Affairs.(5,6)
11. India has recently signed an
Agreement and Protocol for
Avoidance of Double Taxation with
the Government of _______. (9)
12. First Intellectual Capital Report was
published by this company. (7)
14. A practicing member cannot use the
designation of Distract _______ in
his rotary visiting card along with the
designation Chartered Accountant.
(8)
15. New Chairman of CBDT.(1,1,5)
4. Who was the

longest serving
President of
ICAI?
7. Board of
Studies of ICAI
was known as
_______ Board,
when established
in the year 1954.
(8)
8. The major
considerations
governing
the selection and application of
accounting policies are _______,
Substance over Form, and
Materiality. (8)
10. Club or association service provided
by an association of _____ units in
relation to the specified project has
been exempted from the payment of
service tax. (6)
13. The oldest chapter of ICAI.
NOTE: Members can claim one hour

CPE Credit Unstructured Learning for
attempting this crossword by filling the
details in the self-declaration form to be
submitted to your regional office annually
to avail CPE hours credit for Unstructured
Learning activities under the activity
Providing Solutions to Questionnaires/
puzzles available on Web/ Professional
Journals. There is no need to individually
send this crossword in hard copy or email.
DOWN
1. The head quarter of European

Central Bank is situated at
_________. (7)
2. A new Corporate Form of practice
which is a hybrid between the limited
liability company and a partnership
firm. (3)
3. Software launched by the ICAI which
combines features of Income-tax,
Audit Reports, Service Tax, e-TDS,
e-AIR, CMA/Project Report, Form
Manager software and Document
Manager. (3,5)
SOLUTION CROSSWORD 0 6 3
An investment advisor decided to start his own business. He was sharp and diligent, so business
kept coming in, and soon he realised that he needed an in-house counsel. The investment banker
began to interview young lawyers.
Im sure you can understand, he started off with one of the first applicants, in a business like this,
our personal integrity must be beyond question. He leaned forward. Are you an honest lawyer?
Honest? replied the job applicant. Let me tell you something about my honesty. Im so honest
that my father lent me R50,000 for my education, and I paid back every penny the minute I finished
my very first case.
Impressive. And what sort of case was that? asked the investment counselor.
The lawyer squirmed in his seat and admitted, He sued me for the money.
144
october
2011

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CHARTERED

SET UP BY AN ACT OF PARLIAMENT

Shri Lal Bahadur Shastri

VOLUME 60 NO. 4 OCTOBER 2011 R100

Concept of Independence in Independent Auditor

corporate entity is not merely a legal personification

amongst the shareholders and public of the nature and

THE CHARTERED ACCOUNTANT

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

Other students & faculties

: R1,400 for 3.5 years

EDITORIAL SUPPORT, DESIGN, ADVERTISEMENT & MARKETING

SET UP BY AN ACT OF PARLIAMENT

An Auditor is often described

Shri Lal Bahadur Shastri

R1,000 per annum

For Overseas Members/Subscribers

VOLUME 60 NO. 4 OCTOBER 2011 R100

Invitation to Contribute Articles for E-Newsletter - Prudence

Training Programme on An Insight on the Concepts Applicable to

Workshop on Capacity Building Measures of Practitioners & CA

Training Programme on An Insight on the Concepts Applicable to

Workshop on Capacity Building Measures of Practitioners & CA

NATIONAL RRC on CA Profession towards excellence through

Auto Connect- CMII National Conference on Auto Industry, Pune

Workshop on Capacity Building Measures of Practitioners & CA

Residential Refresher Course on Tax Reforms and SMPs: Issues,

Residential Refresher Course on Capacity Building Measures of

Workshop on Capacity Building Measures of Practitioners & CA

Residential Refresher Course, Balotra (Rajasthan)

National Conference on Excellence in Profession through Capacity

Workshop on Capacity Building Measures of Practitioners & CA

Study Tour on International Taxation to Vienna, Austria

Workshop on Capacity Building Measures for Practitioners & CA

VOLUME 60 NO. 4 OCTOBER 2011 R100

CORPORATE & ALLIED LAWS

TECH FOR YOU

THE CHARTERED ACCOUNTANT

FROM THE PRESIDENT

of the Council or till further orders, whichever is earlier.

CA. G. Ramaswamy, President, ICAI

et me first wish all our readers moments of great

THE CHARTERED ACCOUNTANT

Suggestions on CBEC Draft Circular Submitted:

Income-tax Department. Our views were well received.

FROM THE PRESIDENT

Workshop on Municipal Accounting Reforms Held: I

FROM THE PRESIDENT

retained. I also participated in the 18th CAPA Conference

THE CHARTERED ACCOUNTANT

Roadmap for Robust FRRB Mechanism: I feel happy

Strategy Meeting of ICAI Council: In my last

FROM THE PRESIDENT

44AF of the Income-tax Act, 1961 in the specified number

FROM THE PRESIDENT

Profession: Excellence, Integrity and Independence

THE CHARTERED ACCOUNTANT

this unique academic tradition of integrity also. These

Technology really stood out and

Congratulations to the team

I am a member since 1986 and

Journal Highlights through

Please accept my congratulations