Govt Said that UTN no. is scrapped which was to come on 01.01.10

The government has decided to shelve the introduction of the Unique Transaction Number (UTN) which tax payers need to quote along with Permanent Account Number (PAN) when tax is deducted/collected at source. The scheme was to have come into force from the New Year.

However, the finance ministry has not ruled out the possibility of introducing a new identity number like UTN from the next fiscal, in addition to the PAN to ensure prompt verification and granting of tax credits to tax payers.

“The introduction of UTN, which was scheduled to be implemented from January 2010, has been shelved in all probability . The process of filing tax returns remains the same as earlier,” a finance ministry official said.

HOW TO PREPARE FOR CPT?

Dear Fri+ends,

 Here is my first Article,written especially for taxpert blog.Please read it, it is for the benefit of CPT students.

ur Fri+end
Vakeel Ali
 

To download the belowgiven article click here: http://www.box.net/shared/nrmsbc0le7

HOW TO PREPARE FOR CPT?

1.For all subjects

Read module carefully and prepare ur own short and sweet notes. Prepare ur notes after understanding in depth. Use these notes for revision purpose. Solve all the previous exam questions chapter- wise. ie complete one chapter with ur notes and then solve the question papers. While solving the question papers do not see the given answers. Firstly give ur answer and then compare the same with suggested given answer. Do this for each chapter. After completing whole chapters and all syllabus be prepare for self test which is similar to final exam.ie Use previous question papers and solve it within the given time(Do this assuming that u r appearing for the final exam ). After observing and solving previous question papers u will come to know that what is imp. for theory and practical and u definitely get an idea of format of question papers linking with each chapter. That means on which chapters questions are mostly asked.  Have group discussions with CPT appearing/passed students.

Do not solve directly objective type questions. Firstly absorb the chapter in detail.

Be habitual of solving at least 100 objective questions regularly so that in one month u will cover near about 3000 objective questions.

Do not be hurry while selecting the alternative from the given options, firstly understand the question and then match ur required answer from alternatives.

Sometimes it is observed that students take much times in confusing questions. Do not waist ur valuable time, firstly solve the questions on which u have more confidence.

IFRS convergence PPT

Just click on the below mentioned link to download the PPT.

ifrs convergence.pdf

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No ST on foreign service prior to 18.4.2006 Says Supreme Court

Now It is Final - No Service Tax on foreign service prior to 18.4.2006: Supreme Court dismisses Revenue SLP

TIOL-DDT 1258
15.12.2009
Tuesday
IS it 1.1.2005 or 18.4.2006?

In the Hindustan Zinc case - 2008-TIOL-1149-CESTAT-DEL-LB, a Larger Bench of the Tribunal headed by the President held that, “the taxable service provided by a non-resident or from outside India, who does not have any office in India, having been specified as 'taxable service' with effect from 1.1.2005, under notification No.36 /2004, recipient of such service could not be held liable for paying service tax prior to 1.1.2005 notwithstanding the amendment in rule 2(1)(d) of the Service Tax Rules under notification no. 12/2004.”

The Department had challenged this in the Supreme Court and the Supreme Court had dismissed the Government's appeal - 2009-TIOL-87-SC-ST.

This, many in the Government, take as a reason to state that the Supreme Court had confirmed that Service Tax on import of services is payable from 1.1.2005 and not 18.4.2006 as held by the Bombay High Court in Indian National Shipowners Association – 2008-TIOL-633-HC-MUM-ST

 

The Supreme Court had not held that the tax is payable from 1.1.2005, but only dismissed the Revenue appeal against the CESTAT order holding that it was not payable before 1.1.2005. And there is a lot of difference in the two concepts.

Anyway not satisfied with the dismissal of its appeal by the Supreme Court, the Government filed a review petition in the Supreme Court in the Hindustan Zinc case. The Supreme Court found no merit in the prayer for Review and dismissed the Review Petition. - 2009-TIOL-117-SC-ST

 

You will remember that in Indian National Shipowners Association – 2008-TIOL-633-HC-MUM-ST the Bombay High Court held that the tax is payable only from 18.04.2006 and this decision had been widely followed.

But the litigation loving government does not keep quiet. It has filed a Special Leave Petition in the Supreme Court against the Bombay High Court judgement.

Yesterday the Supreme Court dismissed the SLP and in tune with TIOL tradition – we are the first to bring you this news.  

Kind regards,

 Rebecca Andrews

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New Perquisite Rules Notified dated: 18.12.09

THE much-awaited perquisite valuation rules have finally been notified by the CBDT. The Board has amended Rule 3 to give effect to the abolition of FBT, announced in the Budget 2009. Vide Income Tax (13th) Amendment Rules, the Board has notified the new valuation guidelines w.e.f April 1, 2009 for the AY 2010-11.

You can Download this notification click here:http://www.box.net/shared/8oqh6xp1oh

INCOME-TAX (THIRTEENTH AMENDMENT) RULES, 2009 - SUBSTITUTION OF RULE 3 AND INSERTION OF RULE 40F

Notification No. 94/2009/F.NO. 142/25/2009-SO (TPL), dated 18-12-2009

In exercise of the powers conferred by section 295 read with sub-section (2) of section 17 of the Income-tax Act, (43 of 1961). The Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namlely :-

(1) These rules may be called the Income-tax (13th Amendment) Rules, 2009.
(2) They shall be deemed to have come into force on the 1st day of April, 2009.

In the Income-tax Rules, 1962, for rule 3, the following shall be substituted, namely: -


"3. For the purpose of computing the income chargeable under the head "Salaries", the value of perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules, namely:—

(1) The value of residential accommodation provided by the employer during the previous year shall be determined on the basis provided in the Table below:

HELP: Soon Starting Blog specially devoted to CA,CS,ICWAI students.

Friends,

Some of the goods news.

1.Our blog www.taxpertindia.blogspot.com formerly know as www.taxmannindia.blogpsot.com has now touched the visitor mark of  27,000 visitors.

2.Our google group "ca_taxmannindia" has now more than 900 members.

3.Our SMS group "ca_taxmannindia" has now more than 400 members.

And also starting soon an exclusive blog devoted to CA,CS,ICWAI students

(As many suggestions and comments were received from students for a blog were all kinds of details, suggested answer papers, Mock test papers and so on would be provided.)

I REQUEST ALL MY CA,CS,ICWAI FRIENDS TO HELP US TO CREATE A DATABASE PROVIDING SUGGESTED ANSWER PAPERS OR ANY ARTICLES ETC

SO I REQUEST YOU TO CONTRIBUTE 

TO CONTRIBUTE US MAIL US AT :taxpertindia@gmail.com

WE NEED

1.SUGGESTED ANSWER PAPERS FROM 1998 TO 2008 (CA.CS AND ICWAI STUDENTS)

2.ANY KIND OF NOTES FOR (CA.CS AND ICWAI STUDENTS)

3.FORMULAE SET FOR PRACTICAL SUBJECTS OF (CA.CS AND ICWAI STUDENTS)

4.OR ANY KIND OF THINGS WHICH YOU THINK WHICH MAY HELP STUDENTS.

SO HELP US TO CREATE AN ONLINE LIBRARY WHERE ALL KIND OF THINGS WHICH A STUDENTS NEED IS PROVIDED.

EMAIL US AT: taxpertindia@gmail.com

Thanks & regards

From the Desk of:DHAVAL DESAI

Taxpertindia Team

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MCA:~MKT. RESEARCH N ANALYSIS unit in Serious Fraud Investigation Office

Press Information Bureau Government of India

Thursday, December 10, 2009
	Ministry of Corporate Affairs
	MARKET RESEARCH AND ANALYSIS UNIT IN THE SERIOUS FRAUD INVESTIGATION OFFICE
	15:17 IST
	LOK SABHA                                     The Government has set up a Market Research and Analysis Unit in the Serious Fraud Investigation Office with the objective of improvements in the regulatory system in Corporate Sector. Giving this information in the Lok Sabha today Shri Salman Khurshid, Minister of Corporate Affairs said the unit will inter-alia perform following main functions: (i)         Repository of Information                         To collect information from various sources including media, other investigating agencies, employees, investors, deposit holders, banks, financial institutions etc. and analyse the trends. (ii)         Improving investigation skills             To analyse all the completed investigation cases to see if investigation process was followed in letter and spirit.  Any deviation and its resultant effect on the outcome of investigation would be brought out to form a base for further improvement in investigation skills. (iii)        Inputs for adopting best international practices             To study investigation cases carried out by the investigation departments of the respective agencies in other countries to analyse the procedure and systems followed in those countries. Investigation modules based on best international practices shall be developed by the Unit for guiding cases of investigation. (iv)        Coordination with other investigative agencies             To co-ordinate with other investigative agencies on continuous basis to collect the requisite information on managerial and corporate behavior.  The information thus collected would be synthesised with the information collected through media and the data gathered from MCA-21 project.  This information bank can be used to throw early alerts on deviation from the legally accepted behavior of the corporate entities. -----------------------------------------               KKP/ska

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NON-BANKING FINANCIAL COMPANIES (Frequently Asked Questions)

 To download this file click here:http://www.mediafire.com/file/3ojjyzjjmlm/NBFCpart1.pdf
 

Frequently Asked Questions on NBFCs

QUES -1   What is a Non-Banking Financial Company (NBFC)?

ANS -1  A Non-Banking Financial Company (NBFC) is a  company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

QUES 2.  NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?

ANS 2. NBFCs are doing functions akin to that of banks; however there are a few differences:

(i) an NBFC cannot accept demand deposits;

(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and

 (iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks. 
  

Import & export rate for the month of December (Issued by custom authorities)

Just click the below mentioned link to download the notification:
http://www.cbec.gov.in/customs/cs-act/notifications/notfns-2k9/csnt174-2k9.htm

Reversal of cenvat credit on WIP/ finished goods written off in the books of accounts -reg

Circular No. 907/27/2009-CX


F.No.267/141/2009-CX8
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)

New Delhi, dated the 7th December, 2009.

To,

All Chief Commissioners of Central Excise (including LTU),
All Commissioners of Central Excise (including LTU),
All Director Generals.

Sir/ Madam,

Subject: Clarification on issues related to reversal of cenvat credit on WIP/ finished goods written off in the books of accounts -reg.

References have been received from field formations stating that as per Rule 3(5B) of CENVAT Credit Rules, 2004, if the value of inputs is fully written off, then the manufacture is required to pay an amount equal to cenvat credit taken. However, there is no provision to demand reversal of credit taken on inputs which have gone into manufacture of work in progress (WIP), semi finished goods and finished goods which have also been written off fully in the books of accounts.

Scope for making addition on a/c of disallowance of expenditure u/s 40(a) in a case where assessee follows ‘completed contract method’: ITAT MUMBAI, BENCH ‘J’

Scope for making addition on a/c of disallowance of expenditure u/s 40(a) in a case where assessee follows ‘completed contract method’
The correct procedure in “completed contract method” is that instead of making addition, if some expenditure are found to be not allowable, the AO should correct the amount of work-in-progress by reducing or enhancing work-in-progress as the case may be


ITAT MUMBAI, BENCH ‘J’

Savala Associates

v.

ITO

ITA No. 4441/M/2008

October 27, 2009

RELEVANT EXTRACTS:

** ** ** ** ** ** ** ** ** ** ** **

6.1 On plain reading of above section, we find that certain expenditures are not allowable if the assessee failed to deduct tax or after deduction same was not paid in time. However, such expenditures are allowable Provided that where in respect of any such sum. Tax has been deducted in any subsequent year, or has been deducted—

Change of method of accounting of overdue charges from mercantile basis to cash system does not create any income : HIGH COURT OF MADRAS

Change of method of accounting of overdue charges from mercantile basis to cash system does not create any income

HIGH COURT OF MADRAS

CIT

v.

Annamalai Finance Ltd.

TAX CASE (APPEAL) NO. 1087 OF 2009

NOVEMBER 2, 2009

RELEVANT EXTRACTS :

** ** ** ** ** **
In the instant case, learned counsel for the Revenue is not in a position to demonstrate or satisfy us that due to the change of accounting method adopted by the respondent/assessee, which is permissible in law as per the ratio laid down in (i) CIT v. Matchwell Electricals (I.) Ltd. (2003)263 ITR 227 (Bom) and (ii) Hela Holdings Pvt. Ltd. v. CIT (2003) 263 ITR 129 (Cal), the Revenue suffered any loss or such a change of methodology attracts tax evasion. Concededly, there is no finding to that effect in the assessment order or in the order of the Commissioner of Income-tax (Appeals).

Set off of long term capital loss with indexation against long term capital gains without indexation is allowable ITAT, MUMBAI BENCH ‘B’

Set off of long term capital loss with indexation against long term capital gains without indexation is allowable
ITAT, MUMBAI BENCH ‘B’, MUMBAI
 
Keshav S. Phansalkar

v.

ITO

ITA NO. 3261/MUM/2007

JUNE 3, 2009

RELEVANT EXTRACTS :

** ** ** ** ** **

8. Section 70(3) of the Act postulates that for any assessment year where there is a loss in respect of long term capital asset, the asscssee shall be entitled to have the amount of such loss set off against the income, if any fas arrived at under a similar computation) made for the assessment year in respect of any other long term capital asset. Section 112 of the Act provides for tax on long term capital gains. Section 112 of the Act provides that where the total income of the assessee includes any income arising from the transfer of a long term capital asset, assessable under the head 'income from capital gains', the tax payable by the assessee on the total income shall be aggregate of the amount of income tax payable on the total income as reduced by the amount of such long term capital gains and the amount of income tax calculated on such long term capital gains @ 20% in the case of an individual / Hindu undivided family, being resident and domestic company and also in the case of nonresident, not being a company or foreign company and in any other cases. The proviso under section 112 of the Act reads as under:-

ITAT, DELHI BENCH ‘G’ Allowability of expenditure on modification and renovation of a building before commencement of business

Allowability of expenditure on modification and renovation of a building before commencement of business

Expenditure incurred on modification and renovation of a building before commencement of business is neither allowable under section 30(a)(ii) nor section 37.

ITAT, DELHI BENCH ‘G’, DELHI

Punj Hospitality Pvt. Ltd.
v.
ITO

ITA NO. 3425(Del) of 2009

OCTOBER 23, 2009

RELEVANT EXTRACTS :

** ** ** ** ** **

6. We have heard both the parties and gone through the material available on record. The assessee company was incorporated on 5th October. 2005 with the object to carry on business of restaurant and hotels etc. The company entered into agreement on 10th October. 2005 with M/s. Aggarwal Motels P. Ltd. [AHPLJ for a period of 18 months to manage and operate their AHPL business of hotel and bar which they were carrying on for the several years under the name and style as "Tavern on the Greens".

ITAT, MUMBAI BENCHES ‘E’,Establishment of identity of creditor, creditworthiness of creditor and genuineness of transaction

Establishment of identity of creditor, creditworthiness of creditor and genuineness of transaction


It would depend upon facts of each case whether all the three ingredients to discharge the onus to prove cash credit have been proved by the assessee or not; if an NRI, engaged in business of real estate development with substantial means, decided to invest in real estate in India, genuineness of same cannot be doubted unless there is any evidence to contrary.



ITAT, MUMBAI BENCHES ‘E’, MUMBAI (THIRD MEMBER)

Tulip Hotels Pvt. Ltd.

v.

DCIT

ITA Nos. 6490 & 6491/Mum/2008

November 27, 2009



RELEVANT EXTRACTS:

** ** ** ** ** ** ** ** ** ** ** **

5. I have carefully considered the argument of both the sides and perused the material placed before me. It is a settled law that the onus is upon the assessee to prove the cash credit in his books of account. To discharge such onus, the assessee has to prove – (i) the identity of the creditor, (ii) the creditworthiness of the creditor, and (iii) genuineness of transaction. It would depend upon facts of each case whether all the above three ingredients to discharge the onus have been proved by the assessee or not.

Change of Examination Centre in Mumbai - CPT December-2009 - (01-12-2009)

Sub: Change of Examination Centre in MUMBAI

This is to inform that due to unavoidable circumstances the Examination Centre for Common Proficiency Test –December-2009 is changed in respect of candidates who have been allotted Roll Nos.: 114112 to 114311 at H & GHM Institute of Management , Smt. CHM College Campus , Opp. Ulhas Nagar Railway Station , Ulhasnagar , Mumbai-421003 to:

Birla College of Arts, Science & Commerce
Birla College Road( Murbad Road)
Kalyan ( West)
Distt. THANE-421301


In view of the above , the concerned candidates are requested to kindly note the above change in the Examination Centre and the address of the new Examination Centre.

Inconvenience caused in the matter is regretted.

( G. Somasekhar)
Addl. Secretary(Exams)

Download MICR code list in Excel & PDF format

JUST click here to download
EXCEL Format: http://www.mediafire.com/download.php?nnuo3nzbzzj

PDF Format: http://www.mediafire.com/download.php?mtg4jiejtnn

A very good PDF file on Stampduty

Following are the details covered in this PDF file
CONTENTS
1. Levy of Stamp Duty in India
2. Types of Stamp in India
3. Important Provisions of Stamp Duty
4. Bombay Stamp Act, 1958 (the “Bombay Stamp Act”)
5. Frequently Asked Questions on Stamp Duty




Just click here to download : http://www.mediafire.com/download.php?thjzmzndywg

(This are the materials provided at the lecture meeting in WIRC seminar)

A very good presentation on Tax audit issues

                A very good presentation on Tax audit issues 

It covers Following subjects
1.Turnover/Gross Receipts meaning for various types of assessee
-In case of a day trader/speculator
-In case of security derivatives transactions
-In case of commodity derivatives transactions
-In case of a clearing & forwarding agent
-In case of a multimodal transport operator
-In case of travel agent, where no commission is payable by airlines
-In case of an advertising agency booking space
-In case of a construction contractor
-In Case of Partner of Partnership firm

2.Tax Audit in case of Charitable Trust

3.Format of Report & Accounts

4.Important clauses, section & guidance notes of institute

5.Clause 17(a) - Software –Capital or Revenue Expenditure?

6.Clause 17(f) & 27 – TDS r.w.s. 40(a)(ia)


7.CBDT Instruction No.9/2008 dated 31.7.2008 


Just click here to download: http://www.mediafire.com/download.php?xwmnowee1zk
 

(This are the materials provided at the lecture meeting in BCA'S seminar)

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Very Good Presentation on DTC Code bills

 I Am uploading herewith some of the good presentation on Direct tax code bill (Topic wise)

Just click on the below mentioned link to download:-

 1.TAX IMPLICATIONS ON FOREIGN ENTITIES AND TDS ON PAYMENTS TO NR
http://www.mediafire.com/download.php?ztmv42wwiw0

2.NPOs, Unincorporated Bodies, Financial
http://www.mediafire.com/download.php?mkojewlttmz

3.Business Reorganisation GAAR
http://www.mediafire.com/download.php?iznmajidily

4.DTC Anti-avoidance Rules
http://www.mediafire.com/download.php?tjydmjnnz3a

(This are the materials provided at the lecture meeting in BCA'S seminar)

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Applicability of provisions under section 194J of Income Tax Act' 61 in the case of transactions by the Third Party Administrators (TPAs) with hospitals etc.

CIRCULAR NO 8/2009, Dated: November 24, 2009

Sub: Applicability of provisions under Section 194J of Income Tax Act'61 in the case of transactions by the Third Party Administrators (TPAs) with Hospitals etc.

A number of representations have been received from various stakeholders regarding applicability of provisions under Section 194J of Income Tax Act'61 on payments made by Third Party Administrators (TPAs) to hospitals on behalf of insurance companies for settling medical/insurance claims etc with the hospitals.

2. The matter was examined by the Board. As per provisions of section 194J (1) ‘Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of—

( a ) fees for professional services, or

( b ) fees for technical services, [or]

[( c ) royalty, or

( d ) any sum referred to in clause ( va ) of section 28 ,]

shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax on income comprised therein …”. Further as per Explanation (a) to 194J “professional services” means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession etc.. ' .

3. The services rendered by hospitals to various patients are primarily medical services and, therefore, provisions of 194J are applicable on payments made by TPAs to hospitals etc. Further for invoking provisions of 194J, there is no stipulation that the professional services have to be necessarily rendered to the person who makes payment to hospital. Therefore TPAs who are making payment on behalf of insurance companies to hospitals for settlement of medical/insurance claims etc under various schemes including Cashless schemes are liable to deduct tax at source under section 194J on all such payments to hospitals etc.

3.1. In view of above, all such past transactions between TPAs and hospitals fall within provisions of Section 194J and consequence of failure to deduct tax or after deducting tax failure to pay on all such transactions would make the deductor (TPAs) deemed to be an assessee in default in respect of such tax and also liable for charging of interest under Section 201 (1A) and penalty under Section 271C.

4. Considering the facts and circumstances of the class of cases of TPAs and insurance companies, the Board has decided that no proceedings u/s 201 may be initiated after the expiry of six years from the end of financial year in which such payment have been made without deducting tax at source etc by the TPAs. The Board is also of the view that tax demand arising out of Section 201 (1) in situations arising above, may not be enforced if the deductor(TPA) satisfies the officer in charge of TDS that the relevant taxes have been paid by the deductee assessee (hospitals etc.). A certificate from the auditor of the deductee assessee stating that the tax and interest due from deductee assessee has been paid for the assessment year concerned would be sufficient compliance for the above purpose. However, this will not alter the liability to charge interest under Section 201 (1A) of the Income Tax Act till payment of taxes by the deductee assessee or liability for penalty under Section 271C of the Income Tax Act as the case may be.

5. The contents of the circular may be brought to the notice of officers and officials working under you for strict compliance.

Hindi version will follow

F.No. 385/08/2009-IT(B)

(Ansuman Pattnaik)

Director (Budget)

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Survey in relation to classes (Exclusively for CA Students)

Hi Friends,
     Just i want to remind my CA Friends about the survey which is being conducted in relation to classes and is due to be closed on 6th of December 2009.


I request all my CA Friends to take part in this survey and help us to get valuable inputs in relation to your classes and what do you think are the essential requirements in relation to classes?

As per the sources the INSTITUTE itself is planning to start classes for CA CPT/PCC/IPCC and some of the students have also received letters in relation to this.

 Click here to fill the survey form: http://spreadsheets.google.com/viewform?formkey=dDVPSEVyUVAtMC1rTi1meVNJNlE1N1E6MA


This questionnaire is an attempt to gauge the current scenario of the coaching classes for CA students. Does it meet your expectations? Does it meet your requirements and your needs? It shall attempt to identify the gaps between what YOU desire, and what is currently available. Hopefully, this should make a difference to your life in due course as a future Chartered Accountant!!

Thanks!!
I request all my CA Friends to reply to this survey.
Dhaval Desai.

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New VAT Audit Form as on 25.11.2009

Just click here to download the new vat audit form
 http://www.mediafire.com/file/m2nzgxgtzrf/FORM-704 25112009.xls


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CRITERIA FOR CLASSIFICATION OF ENTERPRISES

Accounting Standards

CRITERIA FOR CLASSIFICATION OF ENTERPRISES

1.     Criteria for classification of non-corporate entities as decided by the Institute of Chartered Accountants of India

Level I Entities
Non-corporate entities which fall in any one or more of the following categories, at the end of the relevant accounting period, are classified as Level I entities:

        i.            Entities whose equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India.

       ii.            Banks (including co-operative banks), financial institutions or entities carrying on insurance business.

     iii.            All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees fifty crore in the immediately preceding accounting year.

    iv.            All commercial, industrial and business reporting entities having borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year.

      v.            holding and subsidiary entities of any one of the above.

Level II Entities (SMEs)
Non-corporate entities which are not Level I entities but fall in any one or more of the following categories are classified as Level II entities:

        i.            All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees forty lakh but does not exceed rupees fifty crore in the immediately preceding accounting year.

       ii.            All commercial, industrial and business reporting entities having borrowings (including public deposits) in excess of rupees one crore but not in excess of rupees ten crore at any time during the immediately preceding accounting year.

     iii.            Holding and subsidiary entities of any one of the above.

Level III Entities (SMEs)
Non-corporate entities which are not covered under Level I and Level II are considered as Level III entities.

2.     Criteria for classification of companies under the Companies (Accounting Standards) Rules, 2006

Small and Medium-Sized Company (SMC) as defined in Clause 2(f) of the Companies (Accounting Standards) Rules, 2006:
(f) “Small and Medium Sized Company” (SMC) means, a company-

        i.            whose equity or debt securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India;

       ii.            which is not a bank, financial institution or an insurance company;

     iii.            whose turnover (excluding other income) does not exceed rupees fifty crore in the immediately preceding accounting year;

    iv.            which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year; and

      v.            which is not a holding or subsidiary company of a company which is not a small and medium-sized company.

Explanation: For the purposes of clause (f), a company shall qualify as a Small and Medium Sized Company, if the conditions mentioned therein are satisfied as at the end of the relevant accounting period.
Non-SMCs
Companies not falling within the definition of SMC are considered as Non-SMCs.
Harmonisation of differences between the Accounting Standards issued by the ICAI and those notified by the Central Government
The Central Government, on December 7, 2006, notified Accounting Standards in the Companies (Accounting Standards) Rules, 2006. These Accounting Standards were different in certain respects from the Accounting Standards issued by the council of ICAI. It has now been decided to harmonise these differences and clarify as to the applicability of both the sets of Accounting Standards to various entities.
Harmonisation of Differences caused by Accounting Standards Interpretations (ASIs)
The consensus portion of most of the ASIs has been included as ‘Explanation’ to the relevant paragraphs in the notified Accounting Standards. The Council has decided to follow the same. Accordingly, Standards issued by ICAI will also have these ASIs inbuilt in the standard itself. Thus, the Standards are being amended to incorporate the consensus portion of the ASIs as explanation to the relevant paragraphs.

Withdrawal of Accounting Standards Interpretations

ASI 2, Accounting for Machinery Spares (Re. AS 2 and AS 10) and ASI 11, Accounting for Taxes on Income in case of an Amalgamation (Re. As 22) have been withdrawn. These ASIs would not be included in the standards.

Issuance of Guidance Notes in lieu of ASIs

The council decided to withdraw the following ASIs and issue the same as Guidance Notes.
ASI 12 Applicability of AS 20 (Re. AS 20)
ASI 23 Remuneration paid to key management personnel — whether a related party transaction (Re. AS 18)
ASI 27 Applicability of AS 25 to Interim Financial Results (Re. AS 25)
ASI 29 Turnover in case of Contractors (Re. AS 7 (Revised 2002)

Harmonisation of Definition of Smaller Companies

The Council has retained three levels of entities, for Non- Corporate Enterprises. However, the ICAI has harmonized the definitions for smaller companies to fall in line with the Companies (Accounting Standards) Rules, 2006.
It must be noted here, that only corporate entities shall be governed by the Accounting Standard provisions contained in the notified Rules.
The applicability of Accounting Standards to various entities is summarized in the following tables.
Note:

·         The under mentioned Accounting Standards shall be applicable to all corporate entities for accounting periods commencing on or after December 7, 2006;

·         For Non-Corporate entities, it shall be applicable from 1st April 1, 2008 (with standards which are being amended to incorporate changed definitions of SMEs and the consensus portion of the ASIs)

Applicability of Accounting Standards - An overview

Accounting Standards		To all Corporate Entities [As per Companies (Accounting Standards) Rules]	To all Non-Corporate entities [As per ICAI Accounting Standards]
AS 1	Disclosure of Accounting Policies	Y	Y
AS 2	Valuation of Inventories	Y	Y
AS 4	Contingencies and Events Occurring After the Balance Sheet Date	Y	Y
AS 5	Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies	Y	Y
AS 6	Depreciation Accounting	Y	Y
AS 7	Construction Contracts (Revised 2002)	Y	Y
AS 9	Revenue Recognition	Y	Y
AS 10	Accounting for Fixed Assets	Y	Y
AS 11	The Effects of Changes in Foreign Exchange Rates (Revised 2003)	Y	Y
AS 12	Accounting for Government Grants	Y	Y
AS 13	Accounting for Investments	Y	Y
AS 14	Accounting for Amalgamations	Y	Y
AS 15	Employee Benefits (Refer Note 1)	Y	Y
AS 16	Borrowing Costs	Y	Y
AS 18	Related Party Disclosures	Y	Not applicable to Level III
AS 19	Leases (Refer Note 2)	Y	Y
AS 20	Earnings Per Share (Refer Note 3)	Y	Y
AS 22	Accounting for Taxes on Income	Y	Y
AS 24	Discontinuing Operations	Y	Not applicable to Level III
AS 25	Interim Financial Reporting (Refer Note 6)	Y	Y
AS 26	Intangible Assets	Y	Y
AS 28	Impairment of Assets (Refer Note 4)	Y	Y
AS 29	Provisions, Contingent Liabilities and Contingent Assets (Refer Note 5)	Y	Y

Note: The Notes referred to in the previous table are given in the table titled "Relaxations of certain requirements for SMCs/Level II & Level III enterprises" below.
The Exemptions available to both, SMCs (i.e., governed by the Rules) and also available to Level II and Level III Enterprises (i.e., governed by the ICAI Accounting Standards) in entirety are given in the following table:

AS 3	Cash Flow Statements
AS 17	Segment Reporting
AS 21*	Consolidated Financial Statements
AS 23*	Accounting for Investments in Associates in Consolidated Financial Statements
AS 27*	Financial Reporting of Interests in Joint Ventures (to the extent of requirement relating to Consolidated Financial Statements)

Note: * AS 21, 23 and 27 are applicable only when relevant regulator requires compliance of these standards
Relaxations of certain requirements for SMCs / Level II & Level III enterprises :

Note No.	Accounting Standards	Relaxations available to Small and Medium Companies, Level II Enterprises and Level III Enterprises
1	AS 15, Employee Benefits	• Paragraphs 11-16 dealing with recognition and measurement of short term accumulating compensated absences which are non-vesting • Paragraphs 46 and 139 dealing with discounting of amounts that fall due more than 12 months after the balance sheet date • Paragraphs 50–116 dealing with Defined Benefit plans • Paragraphs 117–123 dealing with actuarial valuations • Paragraphs 129-131 in respect of other long-term benefits Note: AS 15 (Revised 2005) issued by ICAI exempts Level II enterprises having less than 50 employees from the application of PUC method, i.e., these enterprises can use other rational method for accrual of liabilities. However, the Companies (Accounting Standards) Rules, 2006 do not contain such exemption.
2	AS 19, Leases 22(c),	• Requirements relating to disclosures as given in paragraphs  (e) and (f); 25(a), (b) and (e); 37(a) and (f); and 46(b) and (d) are not applicable to SMCs and level II/III enterprises. • Further to these relaxations, Level III enterprises are also not required to give Paragraphs 37(g) and 46(e) disclosures.
3	AS 20, Earnings Per Share	• Diluted earnings per share (both including and excluding extraordinary items) is not required to be disclosed for SMCs and level II/III non corporate enterprises. • Further, Information required by paragraph 48(ii) of AS 20 regarding disclosures for parameters used in calculation of EPS, are also not required to be disclosed by Level III entities.
4	AS 28, Impairment of Assets	• Value in use can be based on reasonable estimate instead of computing it by present value technique. Further, information required by paragraph 121(g) relating to discount rate used, need not be disclosed.
5	AS 29, Provisions, Contingent Liabilities and Contingent Assets	• Paragraphs 66 and 67 relating to disclosures for amount and description for each class of provision are not required to be disclosed.
6	AS 25, Interim Financial Reporting	• AS 25 is applicable only if a company/non-corporate entity elects to prepare and present an interim financial report. Only certain Non-SMCs/Level I entities are required by the concerned regulatory to present interim financial results, eg, quarterly financial results required by the SEBI.

Shared by Pappu Mishra

(CA Final Student) 

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