New (Setup by an Act of Parliament) HYDERABAD BRANCH OF SIRC … · 2018. 6. 25. · Gangaiah - 2hrs Branch Premises Monday 23rd April, 2018 05.30 PM -08.30 PM Crypto currency and

www.hydicai.org [email protected] Volume: 22/ Issue: 12 / April, 2018

The Institute of Chartered Accountants of India (Setup by an Act of Parliament)

HYDERABAD BRANCH OF SIRC

E-NEWSLETTER

mailto:[email protected]

April, 2018

The Institute of Chartered Accountants of India 1

Chairman Writes…. Dear Members and Students Quality of work is the key to success. Our profession owes its sustainability to strong regimen of

ethics. It is right time to face the disruptions through introspection by corrective actions,

if so needed. Let us all pledge to stand united in our avowed task of being guardians of

financial probity.

The Indian accountancy profession has to undergo a paradigm shift in terms of

embracing technology. The key to this transition is technology-driven capacity building.

We at branch have been considering these concerns by reaching to you through various

CPE seminars. Most of us will be commencing our bank audits by the first week of April. In view of the

increase in non-performing assets and scams reported our duty as auditors of banks gains paramount

importance. With the overall emphasis on Bank audit during the month of March, we have conducted

three one day seminars on Bank Audit for the members and students which were well received.

We have organized crash coaching classes, several workshops and mock tests for the students from the

point of view of the examinations.

The online payment option for membership is active and members may utilize this option for payment of

fee for up to a period of two years. You may click the following link for payment of fees.

http://memfee.icai.org/memfee.html

Certificate course on GST is planned in the third week of April, 2018. Members are requested to register

for the ten days course which will be held on weekends starting from 21st April. We are also planning

various seminars at the branch on topics of current importance like auditing standards, ICDS and GST.

We are forming study groups on various topics like Auditing & Accounting standards, Indirect taxes,

Direct Taxes, FEMA, Company law, International Taxation, Valuation and IBC which will start from

May 2018. Our intention is to have a groups that will study the various aspects and developments in the

subject and give their suggestions and observations which will be published in the newsletter of the

branch. Members interested may kindly mail to the following mail id [email protected].

Young members are facing several hardships while they set up practice and keeping this in mind we are

organizing a one day workshop for young members on “Practice development strategies” in the month

of May the details of the programme will be hosted on the website shortly.

I wish all the members a very successful bank audit season and the students all the very best for their

exams.

Yours Sincerely,

CA. Mandava Sunil Kumar

Chairman [email protected]

1st April,2018

http://memfee.icai.org/memfee.html



April, 2018


Programmes for the Month of April, 2018 Day & Date Name of the Programme Speaker Delegate

Fee CPE

Hours

Venue

Saturday 21st April,2018 06PM -08PM

Study Circle Recent Judgements in

Income Tax

CA. A.C. Gangaiah

- 2hrs Branch Premises

Monday 23rd April, 2018

05.30 PM -08.30 PM

Crypto currency and its Taxation

CA. Deepak Nagori

150/- 3Hrs Branch Premises

Tuesday 24th April, 2018

05.30 PM -08.30 PM

Survey Proceedings Under Income Tax

CA. Rama Murthy.T

150/-

3Hrs Branch Premises

Tuesday 24th April, 2018 06 PM -08PM

Study Circle IND AS Accounting Standards Revenue

Recognition

CA. Vijay T - 2hrs Branch Premises

Wednesday 25th April, 2018

05.30 PM -08.30 PM

ICDS CA. P.S.R.V. V Surya Rao


Thursday 26th April, 2018

05.30 PM -08.30 PM

Recent Developments in GST

CA. Sri Ram K 150/- 3Hrs Branch Premises

Friday 27th April, 2018

05.30 PM -08.30 PM

E- Filing of TDS, TCS & SFT Returns

CA. Ritesh Mittal


Saturday 28th April, 2018

03.00 PM -07.00 PM

Half Day Seminar on RERA

CA. Vinay Thagaraj

Adv.E Suhail Ahmed


April, 2018


SCHEDULE – III, D – II COMPANIES ACT – 2013

Complied by: CA. Ravindranath Reddy .P

[email protected]

I) Introduction: The Ministry of Corporate Affairs has made it mandatory certain

companies to comply with IND – AS in presenting the financial statements. Schedule – III, D-II has been introduced in the Companies Act with some modifications in the Balance Sheet and Statement of Profit and Loss. A brief discussion is made on the subject in the Article.

II) APPLICABILITY: IND-As read with Schedule – III, D-II is applicable to all listed Companies and other Companies whose net worth is 250 Crore or more. These Companies have to present their Financial Statements in Compliance with the above mentioned standards and the Schedule of the Act.

III) DEFINATIONS:i) Current Assets: An Entity shall classify an asset as current when a) it expects to realize the asset o intends to sell or consume it, in its normal operating cycle. b) It holds the asset primarily for the purpose of trading, c) it expects to realize the asset within twelve months after the reporting period, d) the asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at-least twelve months after the reporting period. ii)Operating Cycle: The operating cycle of an entity is the time between the acquisition of asset for processing and their realization in cash or cash equivalent. When the entity‟s normal operating cycle is not clearly identifiable, it is assumed as twelve months.

iii) Financial Asset:a) cash b) an equity instrument of another entity, c) a contractual right i) to receive cash or another financial asset, ii) to exchange financial asset or liability with another entity if the conditions are potentially favorable to the entity, d) a contract that will or may be settled in the entity‟s own equity instrument. (IND –AS 32). iv) Trade Receivable: A Receivable shall be classified as “trade receivable” if it is in respect of the amount due on account of goods sold or services rendered in the normal course of business. v) Cash and Cash Equivalent: Cash Comprises cash on hand and demand deposits. Cash equivalents are short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to as insignificant risks of changes in value.

IV) PRESENTATION BALANCE SHEET: The Balance sheet presentation starts with Assets. Assets are mainly divided into Non- Current and Current. Non-current Assets Comprise, a) Property, plant and equipment, b) Capital Work in progress, c) Investment property d) goodwill, e) other intangible assets, f) Intangible assets under development, g) Biological Assets other than bearer plants h) financial assets, i) deferred tax assets (Net) j)other non-current assets. Current Assets include a)Inventories b) Financial Assets, c)Current Tax Assets (NET), d) other current assets.

Articles

[email protected]

April, 2018


i)Non-Current Assets:Property, Plant and Equipment: The assets under this head have to be classified further as, a)land b) buildings, c)plant and equipment, d)furniture and fixtures, e)Vehicles f) office equipment g) bearer plants and h)others. The assets has to be capitalized as per IND-AS 16 and depreciation has to be provided as per schedule – II of the Companies Act. The Company may adopt

cost mode or revaluation mode. In case revaluation mode is adopted necessary adjustments have to be made regularly. A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals acquisitions through business combinations and other adjustments and the related depreciation and impairment losses or reversals shall be disclosed separately. Capital work in progress: Any asset under construction / installation including appropriate allocable expenditure has to be disclosed as capital work in progress. Any advance for capital work in progress shall not be included in CWIP but to be disclosed as other non-current assets. Investment Property: It is the property held to earn rentals or for capital appreciation rather than for use in production or supply of goods or services or for administrative purposes or sale in the ordinary course of business. Necessary disclosures applicable to PPE are applicable to these Assets also. Goodwill: to be disclosed as a separate line item apart from „other intangible assets‟. The same disclosures are applicable to Goodwill also. Other Intangible Assets: Other Intangible Assets have to be classified as a) Brands or trademarks b) Computer software c)Master heads and publishing titles, d)Mining rights e) Copy right, patents, other intellectual property rights, service and operating rights, f) Recipes, formulae, models, designs and prototypes g) Licensees and Franchises h)Others. Necessary disclosures have to be made in the notes that are applicable to PPE in this group of assets. Biological Assets other than bearer plants: Reconciliation of the carrying amount of each class of assets between the beginning and the end of the period. FinancialAssets: Comprise a) Non-Current Investments b) Trade Receivables c) Loans and d) others. Non-Current Investments: To be classified as, a) Equity Instruments b) Preference Shares c) Government or trust securities d) debentures or bonds e) mutual funds f) Partnership firms g) other investment. Under each classification details of the names of the bodies corporate are to be given as i) Subsidiaries ii) Associates iii) Joint ventures iv) Structured entities. The following further details to be disclosed a) aggregate amount of quoted investments and market value thereof, b) aggregate amount of unquoted investments and c) aggregate amount of impairment in value of investment. Further the investment have been grouped as a) Investments at amortized cost b) at fair value through other comprehensive Income c) at fair value through profit and loss, either in the Balance Sheet or in the Notes (IND – AS 107). Investments in Partnership: Name of the firms, their partners‟ total capital and share of each partner to be disclosed separately. This is not applicable to Limited liability Partnership, since it is a body corporate. Trade Receivables: to be classified as a) Secured and considered good, b) Unsecured considered good c) doubtful. Allowance for bad and doubtful debts

shall be disclosed under the relevant heads separately. Debts due by directors or

April, 2018


other officers of the Company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is a partner or director or a member to be stated separately. Loans: To be classified as a) Security deposits b) Loans to related parties (giving details) c) other loans. Further to be classified and disclosed as specified to „Trade Receivable‟.

Others: Bank deposits with more than twelve months maturity shall be disclosed. The following further disclosures are made a) Earmarked balances shall be separately stated (e.g. Unpaid dividends), b) balance with banks held as margin money are security against borrowings, guarantees, other commitments shall be disclosed separately. Repatriation restrictions to be stated separately. Other Non-Current Assets: To be classified as i) Capital advances and ii)other advances to be classified further as a) security deposits b)Advance to related parties and c) other advances to be disclosed as applicable to loans and trade receivables, iii) others. ii) Current Assets: i) Inventories: to be classified as a) Raw materials b) work in progress c) finished goods d) stock in trade (acquired for trading) e) stores and spares f) loose tools g) others. ii) Goods in transit shall be disclosed under the relevant sub-head. iii) Inventories shall be valued as per IND – AS 2 and mode of valuation to be stated. Financial Assets: (Current) Current Investments: To be valued, classified, presented and necessary disclosures are to be made on par with non-current investments. Trade Receivables: To be classified, valued and presented on par with non-current trade receivables. Cash and Bank Balances: Cash and cash equivalent a) Balance with banks b) Cheques, drafts on hand c) Cash on hand d) others. Bank Balances other than cash and cash equivalent shall be disclosed separately. Necessary disclosures to be made on par with non-current bank balances. Current Loans: To be classified on par with non-current loans and disclosed in the Balance Sheet. Current Tax Assets (net): If the amount of tax paid in respect of current or prior periods exceeds the tax dues for those periods (Assessment year wise not cumulative) then such excess tax shall be recognized as an asset. If it is realizable within one year from the date of the Balance Sheet to be disclosed as a Current Asset. Otherwise as a non-current asset.Other Current assets: Any advances other than capital advances shall be grouped under this head, to be classified and presented on par with other advances under non-current assets. Financial assets have to be presented valued and disclosed in compliance with the IND – AS 32, 39, 107 and 109 for better presentation of financial statements.

V) Conclusion: Every company shall take necessary measures to comply with the norms prescribed under IND – AS and the disclosures mentioned in the Schedule – III of the Companies Act, so that adequate and proper disclosures are made in the financial statements. The Statutory auditorhas to consider the importance of the standards and law before submitting the report on the same.

(to be continued…)

April, 2018


GST UPDATE Compiled by CA SATISH SARAF

[email protected]

S. No Notificatio

n No

Issued

under

Effective

from

Brief particulars

01 12/2018 Central Tax 07-03-2018

Notifying the due date, for filing Form TRAN-02 for the months of July, 2017 to December 2017, as 31-03-2018.

Substitution of Rule 138 relating to E-Waybills.

02 13/2018 Central Tax 07-03-2018 Removal of waiver of late filing fee for Form

GSTR-5A

03 10/10/2017 Central Tax

- Circular 18-10-2017

Clarification on movement of goods from one

state to another on the basis of approval.


– Circular 20-10-2017

Clarification on taxability of printing contracts


– Circular 27-10-2017

Clarification on applicable rate of tax on

unstitched Salwar Suits


– Circular 06-11-2017

Procedure regarding procurement of supplies

of goods from DTA by EOU / EHTP / STP /

BTP under deemed export benefits


– Circular 15-11-2017

Clarification regarding applicability of GST &

availability of ITC in respect of certain services


– Circular 15-11-2017

Procedure for processing of refund claims in

respect of Zero Rates Supplies (Exports &

Supplies to SEZ Units, Etc)


– Circular 16-11-2017

Prescribed the procedure for refund of

Unutilized Input Tax Credit paid on Inputs in

case of Exporter of Fabrics


– Circular 20-11-2017

Clarification on taxability of custom milling of

paddy, taxable @ 5%


April, 2018



– Circular 22-11-2017

Clarification regarding taxability of Terracotta

Idols, taxable at Nil Rate


– Circular 22-11-2017

Interstate movement of Rigs, Tools, Spares

and all goods on Wheels like Cranes will not

be liable to CGST/SGST/IGST subject to

conditions prescribed. Any repair or

maintenance done on conveyance will be liable

to GST.


– Circular 21-12-2017

Clarification on issues regarding treatment of

supply by an artist in various states and supply

of goods by artist from galleries.


– Circular 21-12-2017

Clarification on issues in respect of

maintenance of books of accounts relating to

additional place of business by principal or an

auctioneer for the purpose of auction of Tea,

Coffee, Rubber etc.


– Circular 21-12-2017

Manual filing and processing of refund claims

on account of Inverted Duty Structure, Deemed

Exports and excess balance in Electronic Cash

Ledger.

Direct tax and transfer pricing updates

(Contributed by CA Vikram Doshi andCA VaibhavMehta)

1. Referral fees are not in the nature of fees for technical services (‘FTS’) but business income and not taxable

in India.

Recently, the Mumbai Bench of the Income-tax Appellate Tribunal („the Tribunal‟) in the case of Credit Suisse

AG1 („Assessee‟) held that the referral fees paid by the Indian group company of the Assessee to Credit Suisse

AG, Dubai Branch (CSDB) for referring clients in India are not in the nature of FTS. It is in the nature of

business income and since the Assessee‟s Permanent Establishment (PE) in India has no role to play in

performance of such referral activities, the same are not attributable to such PE in India. Therefore, payment for

such services is not taxable in India under India-Switzerland tax treaty („the tax treaty‟).

1 DCIT v. Credit Suisse AG ([2018] 90 taxmann.com 181)-Mumbai Tribunal

April, 2018


- The Assessee is an entity incorporated in Switzerland. The Assessee is a part of the Credit Suisse group, a

global bank providing various financial services in the field of investment and personal banking to its clients

across the globe.

- The Assessee has group company in India namely Credit Suisse Securities (India) Private Limited („Indian

company‟). The Assessee also has a branch in Dubai (i.e. CSDB) as well as in India.

- The Indian company paid referral fee to CSDB for referring an Indian resident client for bringing out the

issue of convertible bonds. The Assessee contended that such a referral fee received by CSDB was a

'business income' and notliable to tax in India because CSDB did not have a PE in India.

- The Assessing Officer („AO‟) did not accept the Assessee‟s stand and instead held that the referral fee was

liable to be taxed in India having regard to section 5(2)(b) of the Income-tax Act, 1961 („Act‟) read with

Section 9(1)(i) of the Act. Since the referral fee was payable to CSDB in relation to the execution of

transaction between Indian company and referred client, such referral fee is deemed to accrue or arise in

India. In other words, by virtue of the source of the „referral fee‟ being located in India, the same was taxable

in India. The AO held that the payment was in the nature of FTS and not 'business income'.

- The Dispute Resolution Panel („DRP‟) upheld the contention of the Assessee of non-taxability of the said

receipts in India and held that the referral fee is not in the nature of FTS. The referral fee was not attributable

to the Assessee‟s PE in India as per Article 7 of the tax treaty. Further, CSDB undertook the referral activity

and it had no PE in India.

- On appeal, the Hon‟ble Tribunal held as follows:

- CSDB referred an India resident client to the investment banking division of the Indian company. The Indian

company worked on the assignment of the issue of convertible bonds for the referred client, and 50 per cent of

the fee earned by the Indian company was paid to CSDB in terms of the global policy of the group.

- The Tribunal held that referral fee which was payable by the Indian company to CSDB after execution of the

work of the referred client is no grounds to determine the nature of the payment.

- The Authority for Advance Rulings („AAR‟) in the case of Cushman & Wakefield(S) Pte. Ltd.2 held that such

„referral fee‟, being in the nature of „commission‟ was to be treated as being in the nature of „business

income‟ both, under the Act as well as under the India-Singapore tax treaty. No contrary decision has been

referred by the tax department. Accordingly, the Tribunal held that the referral fees were not in the nature of

FTS.

2Cushman and Wakefield(S) Pte. Ltd. ([2008] 305 ITR 208) -AAR

April, 2018


- There is no dispute that CSDB has no PE in India. Further considering that the referral activity was

undertaken outside India and Assessee‟s PE had no role to play in the performance of the referral activity, the

referral fee earned by CSDB could not be construed to be attributable to Assessee‟s PE in India and thus, the

DRP rightly held the same to be non-taxable in India.

2. Investment in building, furniture, fixture in case of a hotel will qualify to be treated as investment in plant

and machinery for purpose of section 80IC of the Act.

Recently, the Chandigarh Bench of the Tribunal in the case of Sirmour Hotels (P) Ltd.3(„Assessee‟) held that

the investments in building, furniture and fixtures etc. in case of a hotel will qualify to be treated as investment

in plant & machinery for the purpose of substantial expansion under section 80IC of the Act.

- The Assessee is a private limited company running a hotel in the State of Himachal Pradesh. During the FY

2005-06, the Assessee claimed 100% deduction under section 80IC of the Act on account of substantial

expansion of the unit as defined under section 80IC (8). The Assessee claimed it was running an Eco-

Tourism project as mentioned in XIV schedule, Part C of the Act.

- The AO did not accept the Assessee‟s contention and instead held that the Assessee‟s hotel did not

constitute an Eco-tourism unit and without prejudice to the above the AO also contended that Assessee did

not undertake „substantial expansion‟ as per 80IC (8) of the Act i.e. increase in investment in the plant and

machinery by at least 50% of the book value. The AO observed that the expansion in the hotel building,

furniture and equipment did not constitute expansion in the plant and machinery.

- Aggrieved by the above order of AO, the Assessee preferred an appeal before Commissioner of Income-tax

(Appeals) [„CIT(A)‟]. The CIT(A) allowed the Assessee‟s claim to be an Eco-tourism unit however upheld

the findings of the AO that the substantial expansion had to be looked into only after excluding the building,

furniture and fittings.

- On appeal by the Assessee, the Hon‟ble Tribunal held as follows:

- The deduction under section 80IC of the Act is not only allowable on the commencement / start of operation

of such units as are listed in the XIV schedule but also on the substantial expansion of such units.

- The special provisions of section 80IC of the Act are enacted for promoting investment activity in certain

undertaking or enterprises in the special category of states including state of Himachal Pradesh.

- The Eco-tourism unit including the hotel has been specifically allowed in the list eligible for deduction as per

special provisions which otherwise does not involve installation of plant and machinery. If the original

investment made for setting up of such unit is eligible for deduction under section 80IC of the Act, then

3 Sirmour Hotels (P.) Ltd. v. DCIT ([2018] 91 taxmann.com 450)- Chandigarh Tribunal

April, 2018


certainly the further investment in the same infrastructure for the purpose of expansion cannot be denied,

merely because the investment does not involve setting up / installment of plant and machinery.

- Any other or strict definition of word 'substantial expansion', would defeat purpose for which the special

provisions under the section 80IC of the Act have been made. Therefore, the Tribunal held that the

investment in building, furniture, fixture in the case of a hotel will qualify to be treated as investment in plant

and machinery for the purpose of section 80IC of the Act and, further held that the Assessee will be entitled

to deduction under section 80IC of the Act on account of substantial expansion of the unit.

Disclaimer : The views and opinions expressed or implied in the Hyderabad Branch of

SIRC of ICAI E- Newsletter are those of the authors and do not necessarily reflect those

of Hyderabad Branch of SIRC of ICAI. Material in the Publication may not be reproduced,

whether in part or in whole, without the consent of Hyderabad Branch of SIRC of ICAI

CA. Mandava Sunil Kumar Chairman

09866996662 [email protected]

CA. Bhanu Narayan Rao Y. V Vice- Chairman


CA. Chadalawada.Venkatram Secretary

09849069009 cvenkatram@ gmail.com

CA. Pankaj Kumar Trivedi Treasurer


Documents

New (Setup by an Act of Parliament) HYDERABAD BRANCH OF SIRC … · 2018. 6. 25. · Gangaiah - 2hrs Branch Premises Monday 23rd April, 2018 05.30 PM -08.30 PM Crypto currency and