ST - Appellant providing rooms to service receiver who booked Conference Hall - details about number of rooms provided, whether on complimentary basis is not forthcoming - addition of room rent in value of service provided as MandapKeeper is proper: CESTAT
By TIOL News Service
MUMBAI, JULY 07, 2014 : THE appellants are running hotel alongwith Banquet Hall and Conference Hall for social functions. When Banquets Hall or Conference Hall is booked, the appellants are also providing rooms.
By taking into consideration the room rent for arriving at the assessable value as provider of Mandap Keeper service, the lower authority confirmed the demand and which was upheld by the Commissioner(A).
Against this order, the appellant is before the CESTAT and submits that the charges which are in respect of renting rooms are not includible for arriving at the assessable value as provider of Mandap Keeper service. They rely on the decisions in the case of Merwara Estates 2009-TIOL-871-CESTAT-DEL and Rambagh Palace Hotels Pvt. Ltd. 2012-TIOL-673-CESTAT-DEL. The appellants also rely on the earlier adjudication order passed by the Dy. Commissioner wherein he had taken into consideration 80% of the total charges towards room rent. In as much as since the earlier order was not challenged by the Revenue, 80% of the amount is to be considered towards room rent, submitted the appellant.
The Revenue representative submitted that the appellants are giving Banquet Hall and Conference Hall for organizing functions and receiving a lumpsum amount and had not produced any evidence regarding quantum of room rent by way of producing bills etc. and, therefore, the demand is sustainable.
The Bench observed that in the case laws relied, the assessees had recovered certain amounts in respect of renting of rooms but in the present case there was no such evidence produced by the appellant. Further, as to how many rooms the service receiver had taken on rent while booking the Conference/Banquet Hall is also not on record and whether the rooms were given complimentary or the appellants were charging separately for the rooms was also not forthcoming.
The CESTAT further observed that in the matter of the earlier order passed by the Deputy Commissioner whereby 80% of the total amount had been considered towards room rent the appellant had produced evidence by way of a Chartered Accountant certificate but nothing of this kind was submitted in the present matter.
Holding that in these circumstances, there is no merit in the appeals, the same were dismissed.
In passing : Also see 2014-TIOL-354-CESTAT-MUM.
10 Income Tax Changes Affecting your investments/personal finance strategy : Budget 14
Impact of Budget (Income Tax Amendments) on your investments/personal finance strategy:
There were few changes (amendments) of Income tax in the current budget. Major highlighted were
- Change in Tax Slab (from Rs. 2Lakhs to Rs. 2.5Lakhs for Individuals)
- Increase of limit U/s. 80C (savings) – from Rs. 1Lakh to Rs. 1.5Lakh
- Increase in deduction of Interest on Housing loan–from Rs. 1.5Lakh to Rs. 2Lakh
However, there were other few changes which will definitely impact you in terms of tax liability, savings strategy etc., We will discuss these now to get more clarity and to start first I will cover the above 3 points and their impact (in brief –as already covered by many).
I. Change of Income Tax Slab:
- Income tax slab was increased from Rs. 2Lakh to Rs. 2.5Lakhs for individuals.
- For Senior Citizens increased from Rs. 2.5Lakhs to Rs. 3Lakhs
- This will save Rs. 5,150 (including cess) and for High Tax bracket individuals savings would be Rs. 5,665
II. Increase of limit U/s. 80C
Now you can save extra Rs. 50,000 and get tax relief. This will save you another Rs. 5,150 to Rs. 16,995 depending on your tax bracket
Now you have to increase your savings/other instruments to get this benefit.
III. Increase in Interest on Housing Loan limit
Interest on housing loan increased from Rs. 1.5 Lakhs to Rs. 2 Lakhs – resulting a saving of Rs. 5150-Rs. 16995 –depending on your tax bracket
Other Changes:
IV. Capital Gains Tax changes
Changes in brief: Budget changed taxation related to non-equity mutual funds like FMPs, Debt Funds, Liquid Funds
- Need to hold 3 years to become long-term (instead of 1year)
- Taxed @ 20% (Earlier minimum of 10% without indexation & 20% with indexation)
Impact: Now, return from these FMP/Funds will be included in your income if holding period is below 3years. Also it will have retrospective effect on your fixed instrument holdings. For example if you have purchased 1year-FMP in Mar-2014 of Rs. 10,000. The return would be included in your income & taxed based on the present slab. Means it may be taxed at 30%(plus SC+Cess)!!!…if you are in 30% slab.
With these changes – you need to rethink of investing in Liquid/Debt Funds & FMP of 1 year vis-à-vis Bank Fixed Deposits.
PS: News agencies reported to change the proposal to be prospective instead of retrospective to give relief to individuals.
V. PPF limit increased
Earlier you can save Rs. 1Lakh/pa in PPF. Now it is allowed to save uptoRs. 1.5Lakhs and get the benefit. Don't forget to save extra amount of Rs. 50K if you have PPF in your wife name etc.,
VI. Long Term Gains- Reinvestment in House Property
Budget proposed to change Section 54& 54F – allowing exemption of long-term capital gains for only one house. Earlier if you have long-term capital gains can be re-invested in house property and claim exemption for any number of houses as long as long term gain is accrued on sale of residential property. Now, exemption is allowed for only 1 house.
VII. Long Term Gains – Exemption on investing in Bonds
Budget proposed to restrict the "Overall" exemption to Rs. 50Lakhs for investment in bonds.
Earlier, considering the 6 months time period- many claimed/allowed to claim exemption of Rs. 50Lakhs in one financial year and another Rs. 50Lakhs in the next financial year.
From current year onwards you can avail a maximum benefit of Rs. 50Lakhs by investing in bonds on your long term capital gain.
VIII. Forfeited Advance
Forfeited advance is now taxable under Other Income instead of adjusting in capital gains.
IX. Dividend Distribution Tax (DDT)
Dividend distribution tax has been proposed for Grossing-up –effectively companies have to pay around 3% extra as tax. Effectively companies may rethink on the dividend percentage.
X. Real Estate Investment Trusts (REIT):
Taxation of REIT has been clarified and bought many amendments. Also proposed that long-term capital gain on sale of REIT units exempted, Short-term capital gains taxed @ 15% – making more attractive to invest in REIT. With these proposals, hope more REITs will come for investment.
(Author – 'Addepalli Bindu Madhav' may be contacted on E-mail: bindumadhavca@gmail.com)
ncome Tax
Whether if Revenue declines to grant exemption u/s 10(23C)(vi), such denial automatically leads to refusal of registration u/s 12AA - NO: HC
THE assessee is a Society registered under the Societies Registration Act since 1991. It was also registered u/s 12A and claimed exemption u/s 10 (23C) (vi) on the income for the AYs 2004-05 to 2006-07 & 2007-08 to 2009-10 on the ground that the Society was imparting education. The said claim had been rejected by the Chief Commissioner of Income Tax, Allahabad vide order dated 25.3.2008. Against the said order, Writ Petition No. 1210 of 2009 had been rejected and the order of the Chief Commissioner of Income Tax, Allahabad had become final.
THE issues before the bench are - Whether if the exemption under Section 10 (23C)(vi) is declined, it would amount to refusal of registration under Section 12AA and Whether registration u/s 12A can be denied without recording the reasons for satisfaction that the activities of assessee are not genuine or are not being carried out in accordance with the objects of the trust or the institution. And the verdict goes against the Revenue.
Securities Laws (Amendment) Bill 2014 Inroduced in Lok Sabha
Securities Laws (Amendment) Bill 2014 Inroduced in Lok Sabha; Makes Provision for Empowering SEBI to Initiate Action Against Unregulated Deposit Taking and Ponzi Schemes ; to call for Relevant Information and Records From any Person Among Others
Securities Laws (Amendment) Bill 2014 has been introduced in Lok Sabha today. Earlier, the Cabinet in its meeting held on 24 July 2014 had given its approval to the Securities Laws (Amendment) Bill 2014 and to introduce it in the current Session of the Parliament.
The Securities Laws (Amendment) Bill 2014 proposes various amendments which inter-alia include empowering Securities Exchange Board of India (SEBI) to call for relevant information and records from any person. There is a provision for disgorgement. The Bill provides that any pooling of funds in any unregistered scheme or arrangement, having corpus of Rs.100 crore or more, shall be deemed to be a collective investment scheme. The Bill provides for express powers for the settlement (compounding); to establish Special Courts; powers of recovery of amounts; and empowering Board to enhance the penalty imposed by an adjudicating officer.
Section 15A–HB of the SEBI Act prescribes penalties to be imposed for various offences. However, these sections only provide one level of penalty with no minimum level or range and without giving any discretion to the Adjudicating Officers. Amendment to these Sections are included in the Securities Laws (Amendment) Bill 2014 by prescribing minimum penalty to be imposed for each violation in the Securities Laws (Amendment) Bill 2014, in addition to the amendments included in the earlier Ordinance.
Earlier, as large number of cases were reported from all over the country of unregulated deposit taking and ponzi schemes, therefore, the Government had promulgated the Securities Laws (Amendment) Ordinance, 2013 on 18th July, 2013 to empower Securities Exchange Board of India (SEBI) to initiate action against such schemes. Subsequently, the Securities Laws (Amendment) Bill 2013 was introduced in the Lok Sabha on the 12th August 2013 to amend the SEBI Act 1992 and corresponding changes under Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. As the First Ordinance would have lapsed, the Securities Laws (Amendment) Second Ordinance, 2013 was promulgated on the 16th September 2013. The second Ordinance ceased to operate on the 16th January, 2014. The Securities Laws (Amendment) Ordinance, 2014 was promulgated on March 28, 2014. The said Ordinance lapsed on July 18, 2014.
Source- PIB
MEF online empanelment dated extended to 10th August, 2014
Due to last date of filing of ITRs being 31st July, 2014, the pressure on MEF site started from 1st August, 2014 whereby the members are facing problem in filling the same. Considering the genuine difficulty, the last date of online filing of MEF 2014-15 is hereby extended from 4th August to 10th August, 2014 and the last date of submission of duly signed declaration is extended to 20th August, 2014.
Cost Audit for cost competitive Indian economy to help future growth of country
Asim Saha
Cost audit is basically & purely audit of resource utilization and an effort to assess value addition. Through cost audit India will be low cost HUB of manufacturing activities. This will help Indian Government to attract huge investment from outside. Every Goods and services manufactured in our country have some input output ratio relationship. The science and technology wing of govt. of India has set some input out ratio in any product so that quality of the goods manufactured comply the prescribed standard in international market. In low wastage economy huge investment is possible both from inside and outside the country because of compliance of standard input / output ratio and proper checking through cost audit mechanism.The industries should start thinking that all expenses are not cost to include in the cost of production. The govt. should have huge data base of cost of every product & services so that root cause of inflation can be tackled. The valuation of every product / services is the only measure in Indian economy from cost data to check inflation. Correct assessment of valuation is possible through cost audit / maintenance of cost records.
It is commonly said that the corporate are maintained cost data. But that records are for internal use and based on internal assessment. The audit of cost records will reflect the proper use of inputs and will also reflect the abnormal usage of inputs. This will help the investor to decide further investment based on cost competitiveness of the industries. Investment in any sector depends on sustain ability & growth opportunities. However, ability to sustain depends on cost saving / cost competitiveness of the management. Avoidance of non productive expenses by deleting from the cost of production will help the management to assess its position in the market.
Every company engaged in manufacturing excisable products are required to submit ER5 stating the input / output ratio. Cost audit is the only means to check the maintenance of standard input / out put norms of every goods / services produced in India and thereby avoidance of abnormal wastage of inputs which will help the industry to save and can maintain low price of its manufactured products. Consumption accounting of all resources are necessary and its audit is also justified in maintaining standard quality and price of that commodity. Some of the schools are of the opinion that cost audit will not serve any purpose to the govt. But take the example of medical treatment / education / consumer construction / consumer item including food sector in which govt. does not have authenticate data to ask the producers to check on the price for the common people. Earning of targeted revenue may fall behind if the valuation of the goods are not assessed through cost audit. Any govt. may go for drive to collect revenue from the nations / industries but it is also a burning issue to the govt. that how to control the inflation for the common people.
Valuation of all the goods and services is possible only when known ingredients of inputs and its cost of each are available to the regulator. In free market economy some observer are needed to feel the price movement of the goods and services available in the market. The observation of the price movement is possible only when the cost data are available to the govt. So the Govt. must know the fact " COST". In recently taken policy on manufacturing where huge employment is possible cost audit is necessary to check the performance of company.
If the Ministry of corporate affairs is of the opinion that cost data will not render any usefulness then we should target Ministry of Finance , Department of Expenditure , Department of revenue to convince them that valuation based revenue can only possible if proper cost data can make available to them . Another organization may be targeted that Centre for monitoring Indian Economy with proper cost data to predict correct future of the economy.
So Indian economy needs to have continuous cost audit to attain its maturity level of sustainability and inflation controlled status for future growth and then only India will get huge Foreign Investment.
FAQs on Section 160 of Companies Act 2013
PC Agrawal
Q.1 What is the text of the Section 160 of Companies Act 2013 and rule framed thereunder?Ans.: Section 160 of Companies Act 2013 which has come into force from 1.4.2014 reads as under:
"Right of persons other than retiring directors to stand for directorship.
160. (1) A person who is not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible for appointment to the office of a director at any general meeting, if he, or some member intending to propose him as a director, has, not less than fourteen days before the meeting, left at the registered office of the company, a notice in writing under his hand signifying his candidature as a director or, as the case may be, the intention of such member to propose him as a candidate for that office, along with the deposit of one lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or, as the case may be, to the member, if the person proposed gets elected as a director or gets more than twenty-five per cent of total valid votes cast either on show of hands or on poll on such resolution.
(2) The company shall inform its members of the candidature of a person for the office of director under sub-section (1) in such manner as may be prescribed."
Rule 13 of Companies (Appointment & Qualification of Directors) Rules 2014 reads as under:
"Notice of candidature of a person for directorship
13. The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office-
(1) by serving individual notices, on the members through electronic mode to such members who have provided their e-mail addresses to the company for communication purposes, and in writing to all other members; and
(2) by placing notice of such candidature or intention on the website of the company, if any:
Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid, if the company advertises such candidature or intention, not less than seven days before the meeting at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and circulating in that district, and at least once in English language in an English newspaper circulating in that district."
Q.2 What was corresponding Section of Companies Act 1956?
Ans.: Section 257 of Companies Act 1956 which corresponds to Section 160 of Companies Act 2013 read as under:
"Right of persons other than retiring directors to stand for directorship.
257. (1) A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for appointment to the office of director at any general meeting, if he or some member intending to propose him has, not less than fourteen days before the meeting, left at the office of the company a notice in writing under his hand signifying his candidature for the office of director or the intention of such member to propose him as a candidate for that office, as the case may be along with a deposit of five hundred rupees which shall be refunded to such person or, as the case may be, to such member, if the person succeeds in getting elected as a director.
(1A) The company shall inform its members of the candidature of a person for the office of director or the intention of a member to propose such person as a candidate for that office, by serving individual notices on the members not less than seven days before the meeting :
Provided that it shall not be necessary for the company to serve individual notices upon the members as aforesaid if the company advertises such candidature or intention not less than seven days before the meeting in at least two newspapers circulating in the place where the registered office of the company is located, of which one is published in the English language and the other in the regional language of that place.
(2) Sub-section (1) shall not apply to a private company, unless it is a subsidiary of a public company."
Q.3: What is the intention behind such provision in the Act?
Ans.: As a general rule, directors are appointed by members at a general meeting. As an exception, Board can also appoint directors in some specified cases. Section 160 provides for right of any person to stand for the position of a director in a company in a general meeting in a democratic way. However, provision for deposit has also been made to avoid abuse of this right by some persons with bad motive. The amount of deposit which was merely Rs.500/- under 1956 Act has been drastically increased to Rs.1 lac under 2013 Act.
Q.4: Whether there is any exemption from application of this Section to some class of companies?
Ans.: Private companies: Section 257 of 1956 Act was not applicable to a private company, unless it was a subsidiary of a public company. On the other hand, Section 160 of 2013 Act is applicable to a private company also. MCA intends to exempt private companies from this Section by a notification under Section 462 of the Act. Draft of notification has already been laid before the Parliament. Final notification in this regard is expected to be issued in this month (August 2014). However, till such time private companies will have to comply with this provision.
Government companies: Under 1956 Act wholly owned Government companies were exempted from Section 257 vide Notification No.GSR 906 dated 30.7.1981. However, exemption notification under 2013 Act is still awaited.
Section 8 companies: Under 1956 Act Section 25 companies whose articles provided for election of directors by ballot were exempted from Section 257 vide S.O. No.1578 dated 1.7.1961. However, exemption notification under 2013 Act is still awaited.
Q.5: In which cases Section 160 will apply?
Ans.: As per wordings used in Section 160, it will be applicable in cases of appointment of directors other than retiring directors. Retiring director means a director retiring by rotation at the meeting. Thus it seems to be applicable in following cases:
- Appointment of additional director as director at AGM
- Appointment of a director to fill casual vacancy
- Any other person seeking appointment as director at general meeting (including alternate director, nominee director etc.)
The erstwhile DCA (now MCA) had clarified as under:
"In the view of the Department, additional director appointed under Section 260 and directors appointed to fill casual vacancies under section 262 are not retiring directors within the meaning of the Explanation below sub-section (5) of section 256. Accordingly, in their case, the provisions of section 257(1) will be attracted and will have to be complied with. In view of the clarification given above, the aforesaid directors should comply with the provisions of section 26491) and (2) also." (Company News & Notes dated July 1, 1963).
Keeping in view above, MCA could take a view that this Section will apply even to appointment of independent directors under Companies Act 2013. Hence, in practice companies are still following Section 160 in such cases to avoid risk of penal provisions, even though not necessary looking to the intention behind the law.
However, as mentioned above, intention behind this provision is to permit a common person to stand for directorship of a company and at the same time deter frivolous proposals and misuse the provision. Hence, this provision should not applicable to a person who is proposed to be appointed as a director by the Board of Directors of the company directly. Thus additional directors being appointed as director at AGM and independent directors to be proposed by the Board should be out of purview of Section 160. MCA should reconsider this and issue a fresh clarification in this regard or amend the Act if required.
Q.6: Give a draft of notice to be given under Section 160.
Ans.: Draft of notice under Section 160 is given below:
"The Board of Directors,
XYZ Ltd
Dear Sirs,
Re: Notice under Section 160 of Companies Act 2013
I, Mr ____, member of the company, hereby propose the candidature of Mr ___ S/o Shri ____ residing at _______________for appointment as a director of the company at the forthcoming Annual General Meeting of the company.
Please find enclosed herewith cheque No._______ dated ______ drawn on ________ for Rs.1,00,000/- being the deposit for proposing the candidature of Mr _____ as a director of the company.
Thanking you,
Yours faithfully,
(__________)"
Q.7: Who can give the notice with deposit?
Ans.: The notice alongwith deposit can be given by the candidate himself or any member of the company. There is no requirement that such member should be an individual only. Hence even a corporate member can also give such notice with deposit. Further, there is no requirement of minimum shareholding for this purpose. Hence even a member holding one equity share can give such notice. Section 160 provides for giving notice by a 'member' which term includes preference shareholders also. However, since preference shareholders cannot vote on the resolution, they cannot give notice under the Section.
Q.8: What should be the mode of payment of deposit amount?
Ans.: The Act has not provided for any specific mode of payment of the deposit amount. However, with a view to ensure transparency and bring the facts on record it would be advisable to make payment through banking channel only, i.e. cheque/DD/RTGS etc. and not in cash.
Q.9: When the notice and deposit is to be given?
Ans.: As per Section 160 notice is required to be given at least 14 days before the general meeting. However, in practice such notice is given before issue of notice of general meeting (which is required to be issued at least 21 days before the meeting) so that it could be incorporated in the same notice of general meeting and additional formality is avoided. The notice of general meeting can state the fact that the company has received notice under Section 160 of the Act or candidature of someone as a director. Hence it will be advisable to give notice under Section 160 alongwith deposit of Rs.1 lac on or before the date of the Board meeting when draft of notice of general meeting is approved.
Q.10: How the intimation about the notice is to be given to the members?
Ans.: Rule 13 of Companies (Appointment & Qualification of Directors) Rules 2014 prescribes method of intimating the members about the notice received under Section 160. As per the Rule at least 7 days before the meeting individual notice has to be served to the members and such notice has also to be placed on company's website, if any. It implies that if the company does not have any website, the requirement of placing the notice on website will not be applicable. It may be noted that requirement of placing such notice on company's website was not there in 1956 Act. Such notice may be removed from the website after the general meeting since it will loose its relevance. Individual notice to members can be dispensed with if notice is issued in newspaper as per the Rule.
Q.11: Whether the company can refuse to give intimation of the notice to the members?
Ans.: No, the company cannot refuse to give intimation of the notice to the members. The word 'shall' used in sub-section (2) indicates that it is mandatory. [Gopal Vyas v. Sinclair Hotels & Transportation Ltd., AIR 1990 Cal 45, 49 : (1990) 68 Com Cases 516 (Cal—DB).
Q.12: When the deposit is to be refunded?
Ans.: In case the candidate is appointed as director at the general meeting, or he gets more than 25% of valid votes cast, the deposit amount has to be refunded by the company to the concerned person. Otherwise, the deposit is to be forfeited by the company. [Circular No.5 dated 15.9.1989].
Q.13: What will be accounting treatment of the deposit?
Ans.: The company should keep the deposit under any appropriate head under Current Liabiities. In case the deposit is forfeited, it should be transferred to Other Income.
Q.14. What is the penalty prescribed in case of contravention of provisions of the Section?
Ans.:Section 172 of the Act provides that if a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5 lacs.
Q.15. Whether offence under the Section can be compounded?
Ans.: Section 441 of the Act provides for compounding of offences punishable with:
a) Fine only
b) Fine or imprisonment
c) Fine or imprisonment or both.
Offences punishable with imprisonment only or imprisonment and fine both are not compoundable.
However, Section 441 has not yet come into force and hence presently offences under the Act are not compoundable.
(Author – P C Agrawal, B.Com., LL.B., CAIIB, FCS, Email- cs.pcagrawal@gmail.com)
Revised Form 3D requires ICAI Guidance & Should be deferred by one Year
CA Sanjeev Lalan
1. The CBDT has vide notification No. 33/2014 dt. 27/07/2014 notified revised forms for tax audit report and details to be furnished. This is just two months prior to completion of tax audits by 30th September, 2014. Hopefully, the ICAI's views would have been invited before making changes in the forms, as has been the case earlier when the forms had been formulated or revised.
2. Simultaneously, the old forms are withdrawn with immediate effect, without any prior intimation or any sort whatsoever. Even the utility for filing the forms electronically was disabled from the date of notification of the revised forms.
3. While the right of CBDT to revise the forms cannot be disputed the timing and manner in which the same is done completely oblivious of the consultative approach that is promised to be adopted under the new regime and there was total lack of transparency in the whole process whatsoever. There is nothing in the forms that required the CBDT to really wait for 4 months from end of the previous year to notify the forms. It also seems that till date, i.e. even after 11 days the new utility is not uploaded and from the past experience one can be virtually sure that the schema will not be available immediately even when the utility is uploaded. Also, one fails to understand what will be the size of data that will be permitted to be uploaded given the limits set for uploading the data.
4. The details that have been asked for in the revised forms are also not going to significantly boost the revenues for the year under consideration, as most of the assessees would have planned their affairs according to the prevalent legal position in any case.
5. In particular the following issues also need to be taken into consideration and date of implementation of the revised forms should be deferred by one year to AY 2015-16, viz.―
(a) In many large cases the terms of engagement are finalised even before the year end.
(b) In case of assessees with large network of branches, the branch auditors would have already completed audit long time back and the consolidation process would be underway in different stages.
(c) The details on TDS and many other matters like section 56(2)(viia)(viib) etc. asked for, are either of humungous volume or require legal interpretations. ICAI guidance in the matter will be very much necessary before any view could be taken in these matters – (i) for conduct of audit and (ii) for reporting purposes.
6. Also, clause wise some of the issues on which clarity will be required are as under―
a. Form 3CB does not provide any option for change if the auditor has to give an adverse of disclaimer report. It should be brought in line with the SA 700 and other standards in this regards. Representation is needed for change of the form.
b. What is the significance of the word "liable" in clause (4) of Form 3CD? Is the auditor also to take a view in the matter? If there are disagreements with the assessee, how should the auditor report on same? What type of representation will be required to be obtained?
c. Clause 11(b) will pose great challenge if an assessee has no. of branches and at all places books are maintained and only consolidation takes place periodically at HO. What will be auditors duty in this regards? What are the checks to be applied? How should reporting be done by the auditor? Whether mere a place from where only data entry is made will be considered to be place where accounts are maintained or the place where server is located will be considered to be place where accounts are maintained? In case server is not located in assessee's premises what address should be mentioned?
d. In clause '17' how would auditor report u/s. 43CA having regards to the method of accounting that is followed. Guidance will also be needed for reporting on sale of distressed assets sale by banks and financial institution where section 43CA will be attracted.
e. For items falling in clause '19' detailed guidance for checks to be performed and documentation to be maintained will be required to be given to members.
f. Clauses '28' and '29' – guidance needs to be provided on nature of auditors' duty for obtaining audit evidence specifically in light of the rules under the Income-tax Rules, representations required to be obtained and manner of reporting, especially when there are disagreements with the assessee?
g. Detailed guidance need on reporting under clause 34 as virtually it tantamount to carrying out assessment of TDS compliance by an assessee.
h. In respect of clause '41' members shall require guidance about the documents and evidence to be obtained. It will also be necessary to obtain representations in appropriate cases. What care should be taken in case reliance is to be placed on representation due to non-availability of documents with the assessee? Can reliance be placed on certificates of experts who are not "auditor's experts"?
7. Ideally Institute should dissuade from seeking any extension in the matter and should insist on deferment of the revised form by one year. As mentioned earlier no significant revenue loss shall occur to the treasury by deferment of an year, as it is the CBDT waited for four months after the year end to finalise changes without even considering the impact it has on reporting requirements. The Institute should take a firm stand in this matter.
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