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  Union Budget 2010-2011

 Source - indiabudget.nic.in

The disciplinary committee of ICAI has prima-facie found the two auditors responsible for professional misconduct and have issued notices to both of them to appear before the committee. But the matter has been adjourned since the two auditors are in jail.

What is the status regarding the convergence of the Indian accounting standards with the International Financial Reporting Standards (IFRS)?

The ICAI council has reaffirmed its commitment to the government to implement converged standards from April 1, 2011. The council reviewed the level of preparedness of the profession towards implementation and was satisfied with the progress made.

What is ICAI doing in terms of the Indian auditing standards?

The ICAI is moving ahead on the road of convergence of Indian standards of auditing (SA) with International Standards of Auditing (ISA). These new standards will cater to the expectations of society, regulators and government in terms of continuously improving the quality of audit process of providing assurance to the financial statements. The ICAI has approved one more standard on internal audit (SIA) 17, Consideration of Laws and Regulations in an internal audit. This standard distinguishes the internal auditor’s responsibilities in relation to compliance with two different categories of laws and regulations, one that has direct affect on financial statements and other that has significant impact on the functioning of the entity.

Is there any new change that has been introduced in the chartered accountancy course?

The council of the institute has allowed training for the chartered accountancy course even outside India with the institute’s members in practice. This would mean that such a member in practice would be entitled to train chartered accountancy students, even if they are partner in the local firm outside India.

The institute has been given the charge to develop the financial reporting XBRL taxonomy for various sectors. How far has ICAI succeeded in this?

The draft of the taxonomy to prepare financial statements of banks has recently been considered by the expert group under the convenorship of the member from RBI on the steering committee. The same has been finalised for public consultation and placed on our website for…

source: financialexpress.com

The benchmark Sensitive index may trade in a range of 15,000 to 19,000 this year, said Andrew Holland, chief executive officer of equities at Ambit Capital. That’s a decline of as much as 15 percent from yesterday’s close of 17,615.72. The Sensex rose 81 percent in 2009, its best year since 1991.

“It’s not going to be a great year for stock market performance and I would have a defensive portfolio in the first half as global headwinds are a cause for concern,” Holland, the former managing director for equity proprietary trading at Merrill Lynch in India, said in an interview in Mumbai yesterday. “Rising bond yields and stimulus measures being pulled out from the system is worrying.”

The rise in India’s food prices to an 11-year high is adding pressure on the central bank to lift borrowing costs after reductions between October 2008 and April 2009 helped shield Asia’s third-largest economy from the global recession. Finance Secretary Ashok Chawla said this week the extension of stimulus measures isn’t “good” for the economy and that the central bank will decide on interest rates on Jan. 29.

Fund raising by Indian companies and the government’s divestment program may total $25 billion this year and divert funds from existing stocks, Holland said. Indian companies raised $15 billion from share sales in the country last year.

 Source: http://www.businessweek.com

On Thursday, the 30-share Sensex, which breached the 17000-point mark on Wednesday, added over 7 points to close at 17134.55 points. The 50-share Nifty tested the crucial 5100-point level, but settled lower to close at 5083.40, up 0.55 points. In the broader market, declining shares outnumbered advancing shares in the ratio 1663:1123 on BSE.

“There is not really too much left in terms of the pure recovery trade because valuations have surged almost 100% and the upgrade to earnings has been marginal,” said Vetri Subramaniam, head — equity funds at Religare Mutual Fund.

“I think there is perhaps a little bit of upside surprise to come through on these but even if you factor that in, that markets are really trading close to almost around 19 times FY10 earnings and that really does not leave you with too much room for comfort in terms of valuations,” he added.

According to technical analysts, if Nifty manages to break 5100 on good volumes next week, the index could surge to 5200 levels. As per NSE provisional figures, foreign portfolio investors were net buyers of shares worth Rs 976 crore. Domestic institutions net sold shares worth Rs 332 crore.  source - ET
 

” The report of audit under section 44AB is not to be attached with the return. It should not be furnished separately also before or after the due date. However, an assessee should get the report of audit from an accountant under said section before the due date of the furnishing of the return and should fill out the relevant columns of these forms on the basis of such report. The assessee should retain the report with himself. It may be furnished in original during the assessment proceedings. No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report on or before the due date. However, if the audit report has not been obtained before the due date, provisions of section 271B shall be attracted. ”

It is very much evident that the circular lays down in an Unequivocal manner that  the assesses should fill out the relevant columns of these forms on the basis of audit report and No penalty under section 271B shall be initiated or levied for not furnishing the tax audit report

The non penalty clause can’t be interpreted in isolation of the preceding lines. One can not segment it to suit to one’s convenience.

In my opinion, “filling the out the relevant columns of ITRs on the basis of Audit Report” is ‘furnishing” of Audit report as envisaged under section 44AB and 271B.

If for any reason ITR can’t be filed before 3oth September, I strongly recommend that the assessee should fill out only Tax Audit Part (i.e., Part A-OI) in applicable ITR and file it (just like the ITR either manually or electronically as the case may be ) by due date (i. e. 30-09-2009). No doubt, it will require a revision of the ITR later (with all of its drawbacks) . However To me this seems the only pragmatic solution.

Please note that audit report is not required to be filed in paper form whatsoever.

The Government has proposed to reduce CST to 2% in 2006 and ultimately abolish it in 2007. However, CST and VAT are not compatible. CST has not been made VATable. That is, CST paid cannot be claimed for credit under present VAT system.  

Today, all the business units needs to find a local sourcing of materials for a temporary period of two years, which would not be possible for many traders who have been dealing on inter-state purchases for the last several years. The additional tax burden have to be ultimately borne by the final consumer. Until CST is abolished, the main objective of VAT will be lost and will seriously undermine the benefits of VAT in rationalizing the supply chain management and removing distortions in inter-state movement of goods.

The proposal, being pushed by government agencies, has found favour with MCA and the amendments could be made when the recently-introduced Companies Bill comes up for discussion in Parliament.

“This is the fallout of the Satyam [ Get Quote ] case where the accounting firm got away, while the auditors who represented the firm face punishment. Therefore, there should be appropriate action for the firm as a whole so that it is held liable for such fraudulent practices,” said sources privy to the discussions.

They explained that the logic behind the proposition was that auditors work on behalf of a firm with clearly laid down guidelines. They also share the revenues from the audit and are well aware of the developments in audit assignments. Therefore, an auditor does not work independent of his or her firm.

Now, FIIs based in tax havens such as Mauritius and Cypress, which invest in India, do not have to pay any capital gains tax, as they are covered by the double taxation treaties. FIIs, which do not come through these tax havens, are exempt from long-term capital gains, but have to pay 15% tax on short-term capital gains.

Officials at institutional brokerages say a substantial portion of foreign money flowing into Indian equities comes through the Mauritius route, because of the significant savings on tax.   Source: ET

“In order to tide over the slowdown in exports, I propose to extend the sunset clauses for these tax holidays by one more year– financial year 2010-11,” Finance Minister Pranab Mukherjee said in his Budget speech today. The scheme was due to expire on March 2010.

Nasscom President Som Mittal welcomed the extension and said that though the industry had asked for a five-year break, for short term, the one-year tax holiday is well-timed to tide over the slowdown.

Country’s largest software exporter Tata Consultancy Services and its peers like Infosys, Wipro, Mahindra Satyam, Cognizant and HCL also welcomed the decisions. IT and BPO employees union UNITE also hailed the Budget announcements.

Software exporter TCS CEO S Ramadorai said, for the IT industry the extension of tax exemption under the Software Tecnologies Park of India (STPI) for one more year is a step in the right direction as is the abolitiob of the FBT.

Source / Courtesy: ET

a) Transport of Goods through Rail:

b) Transport of Coastal Goods and Goods transported through Inland water

c) Legal Consultancy Service (other than provided by individual or received by individual)

d) Cosmetic and Plastic Surgery service

b) The inter-bank transactions of purchase or sale of foreign currency, when undertaken by scheduled banks, is being exempted. (Notification No. 19/2009-ST dated 07.07.09).

c) Federation of Indian Export Promotion Organization (FIEO) and twenty-one specified export promotion councils sponsored by the Department of Commerce or by the Ministry of Textiles are being exempted from the levy of service tax under the said service. This exemption would remain valid till 31.03.2010. (Notification No. 16/2009-ST dated 07.07.09).

Service tax

Service Tax to be imposed on the following services:

• Service provided in relation to transport of goods by rail

• Service provided in relation to transport of coastal cargo; and goods through inland water including National Waterways

• Advice, consultancy or technical assistance provided in the field of law (this tax would not be applicable in case the service provider or service receiver is an individual).

• Cosmetic and plastic surgery service

Exemption from service tax being provided to inter-State or intra-State transportation of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified onditions.

·         Exemption from service tax (leviable under Banking and other financial services or under Foreign exchange broking service) being provided to inter-bank purchase and sale of foreign currency between scheduled banks.

·         Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission paid to foreign agents’ to be exempted from the levy of service tax, if the exporter is liable to pay service tax on reverse charge basis. However, present cap of 10% on commission agency charges is retained. Thus there would be no need for the exporter to first pay the tax and later claim refund in respect of these services.

·         For other services received by exporters, service tax exemption to be operated through the existing refund mechanism based on self-certification of the documents where such refund is below 0.25 per cent of FOB value, and certification of documents by a Chartered Accountant for value of refund exceeding the above limit.

·         Export Promotion Councils and the Federation of Indian Export Organizations (FIEO) to be exempt from service tax on the membership and other fees collected by them till 31st March 2010.

·         No changes made in the Corporate Tax rates.

·         Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh to Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers.

·         Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.

·         Surcharge on various direct taxes to be phased out; in the first instance, by eliminating the surcharge of 10 percent on personal income-tax.

·         Sun-set clauses for deduction in respect of export profits under sections 10A and 10B of the Income-tax Act being extended by one more year i.e. for the financial year 2010-11.

·         Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees to be abolished.

·         Scope of provisions relating to weighted deduction of 150% on expenditure incurred on in-house R&D to all manufacturing businesses being extended except for a small negative list.

·         Businesses to be incentivised by providing investment linked tax exemptions rather than profit linked exemptions. Investment linked tax incentives to be provided, to begin with, to the businesses of setting up and operating ‘cold chain’, warehousing facilities for storing agricultural produce and the business of laying and operating cross country natural gas or crude or petroleum oil pipeline network for distribution on common carrier principle. Under this method, all capital expenditure, other than expenditure on land, goodwill and financial instruments to be fully allowable as deduction.

·         Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from 10 per cent. The period allowed to carry forward the tax credit under MAT to be extended from seven years to ten years.

·         New Pension System (NPS) to continue to be subjected to the Exempt-Exempt-Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be exempted from income tax and any dividend paid to this Trust from Dividend Distribution Tax. All purchase and sale of equity shares and derivatives by the NPS Trust also to be exempt from the Securities Transaction Tax. Self employed persons to be enabled to participate in the NPS and to avail of the tax benefits available thereto.

·         Alternative dispute resolution mechanism to be created within the Income Tax Department for the resolution of transfer pricing disputes. Central Board of Direct Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the impact of judgemental errors in determining transfer price in international transactions.

·         Commodity Transaction Tax (CTT) to be abolished.

·         Donations to electoral trusts to be allowed as a 100 percent deduction in the computation of the income of the donor.

·         Deduction under section 80E of the Income-tax Act allowed in respect of interest on loans taken for pursuing higher education in specified fields of study to be extended to cover all fields of study, including vocational studies, pursued after completion of schooling.

·         To mitigate the practical difficulties faced by charitable organisations, anonymous donations received by charitable organisations to the extent of 5 percent of their total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.

·         Scope of presumptive taxation to be extended to all small businesses with a turnover upto Rs. 40 lakh. All such taxpayers to have option to declare their income from business at the rate of 8 percent of their turnover and simultaneously enjoy exemption from the compliance burden of maintaining books of accounts. As a procedural simplification, they are also to be exempted from advance tax and allowed to pay their entire tax liability from business at the time of filing their return. This new scheme to come into effect from the financial year 2010-11.

·         Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto available in respect of profits arising from the commercial production or refining of mineral oil, to be extended to natural gas. This tax benefit to be available to undertakings in respect of profits derived from the commercial production of mineral oil and natural gas from oil and gas blocks which are awarded under the NELP-VIII round of bidding. The section to be retrospectively amended to provide that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded in any single contract.

For all others, the limit was increased by Rs 10,000 from Rs 1,50,000 to Rs 1,60,000.

Mukherjee presented the Union Budget for 2009-2010 at the Lok sabha on Monday.

Some headings:

Small businesses up to Rs 40 lakh (Rs 4 million0 turnover exempted from filing advance tax returns.

10 per cent surcharge on personal income tax removed.

Personal income tax exemption limit raised by Rs 10,000.

Tax proposals! Income Tax rates exemption limit to raised from Rs 180,000 to 190,000 for women.

Tax proposals! Income Tax rates exemption limit to 2.25,000 to 2,40,000 for senior citizens.

http://www.icai.org

Sections 14A and 14AA of the Central Excise Act, 1944 provide for special audit, under certain circumstances, to be done only a Cost Accountant, and not by a Chartered Accountant.

In this connection, it may be mentioned that a Chartered accountant is a professional who is regulated by the Chartered Accountants Act, 1949 and has been given the onerous responsibility to attest the fairness, correctness of financial statements as also certify the tax compliance under Income Tax Act, 1961. The syllabus of the final examination has a paper on indirect taxation which tests the in-depth knowledge of the person in this subject. Every Chartered Accountant goes through rigorous 3-years articleship training, which is unparallel in India for any other professional course. A Chartered Accountant possesses complete knowledge of indirect taxation, skill of doing audit and the experience of audit and taxation. There are many Chartered Accountants who have been authoring books on central excise for decades and some of them have been part of important Committees including the Kelkar Committee. Further, there are insignificant number of practising Cost Accountants available, particularly in smaller cities/town, in comparison to the vast and geographical spread of Chartered Accountants in practice, whose number is ever increasing. The Chartered Accountants are not only highly skilled and fully equipped to handle special audits, but are also easily available.
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While a group of investors cashed in profits, others bought on dips sensing revival in economic growth on hopes of a stable government. This resulted in a huge volatility in early session.

Market gave a thumbs-up to the UPA’s victory in 2009 general elections. The new government is expected to carry forward economic reforms more aggressively as it will not be bogged down by the Left parties or other regional parties. Trade halted on Monday after the benchmarks surged around 20 per cent triggering to two-upper circuits for the first time ever.

“We believe investors should use this opportunity to exit from the market as we anticipate a descent to levels of 13,500–13,750. While we recommend that every dip should be used as opportunity to enter into the market, it would be prudent to book profits at 14,800–15,000 levels. For the day we are positive on the market but advice profit booking at higher levels,” said Religare Securities report.

At 10:45 am, Bombay Stock Exchange’s Sensex was at 14386.81, up 102.60 points or 0.72 per cent. The 30-share index witnessed sharp volatility of over 900 points in early trade. The index touched an intra-day high of 14757.82 and low of 13834.13.

National Stock Exchange’s Nifty was at 4328.80, up 5.65 points or 0.13 per cent. The index swung 300 points early in the day between intra-day high of 4464.90 and low of 4167.65.
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