Journey of Your Organisation from Good to Great
Why this Article is relevant?
First let us be very clear about the fact that every organization does not last forever, forget about forever, majority of them don't even last longer than 10 years. Of course, there has to be something different with your organization in order to be journey itself from Good to Great, and when you focus on becoming Great, survival question gets automatically solved. We are here to analyze this subject in order to open our eyes towards long term thinking process that may positively affect longevity of your organization.
The article is about how your organization can travel the journey from Good to Great and what it takes to create Great organization. Possibly there are infinite ways in which you can do it, but who has time to do the thinking part? Who is putting an effort to think for progress of your organization? Everyone in the corporation is busy with something or the other. 12 hours a day in office and we feel we don't have the time to think for progress of the organization. In this way, we can definitely be good, but not great.
Let's start analyzing the factors that plays a role in the functioning of your organization. Then we will move onto what really matters in the Growth and Greatness of the Organization.
First of all, let's see what you have and what others have, what are the resources that are available to you but may or may not be available to other organization.
1. Technology – I think, technology is available openly to anyone who can invest money into it. So, I guess that cannot be the factor which will differentiate you from others. Now, depending on my first reply, you will say, Money (See, I knew it you would say this). Next we are discussing it.
2. Money/Capital – A serious topic worth spending time on. I just want to brief you about possibly what may be going on in today's capital market. With the introduction of Alternate Investment Funds by SEBI, hitherto unregulated sector is not becoming regulated. So, it will become an attraction point for foreign investors and cautious investors to come into play. Private Equity, Angel Funds are in search of the ideas from super brains that they can tap, commercialize it, take stake and earn 10 to 15 times the initial investment account when the rewards starts flowing. (Remember the movie, Social Network? The rich friend sponsoring Mark Zuckerberg for making his idea go practical.) So, today the time is different than twenty years back when you would keep on begging from banks for loans in order to make your idea come into implementation stage. There are venture capitalist, high net worth Individuals who can pick anybody from slums with a brilliant idea and will make them a slumdog millionaire. Of course, in the process they themselves also earn millions.
My point is that money does not let you stand apart from the crowd.
3. Talent: Here comes a debatable topic, human being comes into play. Let's analyze this. Today, do you think, it is so tough to hire talented Brains. Perhaps no, because there is competition everywhere. Scholar students are in Que for getting admissions in good engineering or commerce or MBA course. Every year, fresh talented job seekers come to market. People will join you as salaried employee because they need a home to stay and they need money to pay off their home loan EMI flashing in his/her bank statement every month. With this type of general scenario, you can hire talent at fairly reasonable costs.
We can go on discussing several other things that affects business but does not make impactful difference when it comes to organizational effectiveness and greatness.
Let's try to find the answer as to how your company can travel from Good to Great.
I will try my best to give justice to the discovery but I request every reader to give their critical evaluation on the aspects being discussed. May be I will improve upon myself after reading your replies.
The Answers are found from lives of Great Leaders: The answers of Organizational effectiveness can be found from lives of great leaders who moved nations or created big corporations and changed the course of history, who tried to play their roles in Independence of their nation, who tried to bring about change in the society, the soldiers who fought exceptionally and created history, the individuals, scientists who gave their life for a particular research, and so on.
Let's discuss some aspects one by one.
| Who?Name of the Person | What?What he possessed? | How?What you can do in your organization to take it to new heights. |
| Narayan Murthy | Aim to build orphanage when he had nothing?What he possessed was concern for people and the willingness to work towards betterment of society. | Always have noble goals of organizations and not just physical. Always give due importance to Social Responsibility. It's not the Companies Act, 2013 which should come and tell you that you should spend on CSR. It's your duty. And believe me or not, it works wonders. Those human beings who encounters happiness because of your spending on CSR blesses you from the bottom of their heart and that unconsciously helps your business grow. Its law of Karma. It applies to human beings, it applies to corporations, it applies to nations also. There are many unknown things in this world that science cannot explain. |
| Narayan Murthy | When Ms. Sudha's father asked him to get a good job in order to marry her, he refused saying he will not do things in life because somebody wanted him to. | If you go a little deep into this philosophy, you will find that actions of leaders are not driven by what others say or suggests. Their actions are driven by purpose. If you want your organization to progress, you need to identify such potential leaders in the organization who can work for a purpose. They have potential of taking your organization from Good to Great. Take the troubled employees seriously. Discuss with them what they want out of their life. You never know you may find a Narayan Murthy/Ratan Tata in your organization. Its all about identifying and grooming the right people for the right place at right time. If you will keep on looking at their resume and degrees they possess, you may never find a Dhirubhai Ambani in your organization. |
| Narayan Murthy | In 1981, He wanted to start Infosys. He had a vision and zero capital.He borrowed Rs. 10,000/- from Mrs. Sudha Murthy and started | If an Idea and vision can take the form of Infosys, then assume how much valuable your employees' ideas are. The young generation is full of creativity and enthusiasm, full of ideas and may be sometimes with better vision than oldies. They can give fresh perspective for everything you do in business or profession. Don't ignore them. For God's sake don't. You might not know how much damage you are doing by ignoring those ideas. It might prevent you from going bankrupt in some years. Keep Listening to them.Foster an environment where ideas are shared easily. Where they can communicate ideas with ease and without fear of rejection. Incentivize them to generate better ideas. Tell them clearly, if your ideas are implemented, we will reward you. Don't just tell them, reward them when they do. After all, new age business cannot be done without ideas. You need their ideas badly, if you have hunger of going from Good to Great. |
| Ratan Tata | Legally and ethically he grown the Tata Empire from $2billion to $100billion and demonstrated the highest level of integrity and with courtesy, grace and humility. | There are several examples where Ratan Tata shown utmost level of humility and grace.What we can learn here? As a leader or an individual manager? Care for people is the key to everything. Formulating culture of care and concern will take an organization long way on the path of Good to Great. Not caring for your workforce will keep you where you are. And may be down the line, you will vanish. Caring does not always mean spending on them financially; it may mean fostering a culture of respect and humanism in the organization. No wonder, there are companies that shuts down within few years of incorporation. What you think? There are only technical or financial reasons that are responsible for the same? No, there is human side of everything in life. We need to have those eyes to see the human side of everything. Even for organizational failures. |
| Jamsetji Tata | He was an extraordinary businessman. He donated one-third of his wealth to start the Indian Institute of Science. | Coming back to Go-Giver concept (CSR), (There is a book named Go-Giver, still to read it but I would like to use the title words). Many companies are already doing CSR activities, and even more than what presently prescribed by Companies Act, 2013.My point here is that it requires guts to do such philanthropic activities. Somewhere down the line the next generation was inherited with 50 times expansion of its empire. Doesn't is seem magical? Yes, it indeed is. What goes around comes around. Here, we need to see the CSR activities in different manner. What you spend on your employee cost is partly your CSR expenses only. However, whatever you do for them going out of the way counts much more in terms of future rewards your organization gets. |
| Jamsetji Tata | 'Jamsetji is a beacon and an example on how businesses should be conducted.' Says Narayan Murthy to Ratan Tata in a conversation | He was first businessman in his family. (Lesson – Never remain behind while taking risk, risk management is a concept for managing the risks that you face after you take the initial risk) |
| Jamsetji Tata | One of his life goal was to set up a world class learning school | Leaders always believed that education is the key to success of this nation. (Built Indian Institute of Science, Bangalore). They lived upto their belief.Many a times, business houses have money to spend but they don't know how to invest, so they invest in shares, mutual funds and such investments. They think these as investments. While, leaders and out of the box thinkers considers charity and strengthening country's foundation also as investments. The same proved to have helped not just the country but to the business also. |
The above list will be unending if I keep on describing the leadership lessons from many such Business leaders, Spiritual Leaders, global political leaders, Scientists, and so on.
Takeaway Points from above discussion:
1. A corporation can learn from Biographies of the popular leaders of this world. They adopted some virtues and visions in their life, if the same are adopted by organisations, we will see different face of this country.
2. Businesses need to learn some crucial virtues from the leaders are:
a. Genuine care and concern for people: Employees, in particular, are the people who gives their everything for the purpose of your business, your profits, your long term visions. Care for them, more importantly, care genuinely. Foster a culture of respect where people are not treated like machines. Mistakes happen, that doesn't mean the person should be given firing till the time he starts crying.
b. Make an impact on the society also: No business can survive without society, being good is not enough, you should also appear to be good.
c. Identify the purpose of your organization: What it wants to do and achieve in its life, if there are no visible purposes of the business, find one or make a purpose to support the nation building)
d. Value for Employee Ideas and Creativity: Foster an environment for easy sharing and communication of ideas. You can ask android developers to make a customized application for such internal communication for ideas and everything. After all, you will boast about having your own app. For your interaction with your customers, suppliers, employees, society at large.
e. Identify leaders in organizations: For god's sake don't do mistake of taking more degree holders as abled leaders. The more the degree a person has, the more fearful he is. Just imagine why a person would like to have a list of degrees on his business card? You yourself may find out the answers. My point is that leaders come in all size and shape, not necessarily with degrees. Best examples, Dhirubhai Ambani, Steve Jobs, Bill Gates, John Rockefeller and many others.
f. Risk Taking and Risk Management: Risk taking comes first, then comes risk management. Without you taking risk on new ideas, you may never reach the Greatness, neither your Organization will.
(Written by CA Rajesh Pabari,Can be contacted at – carajeshpabari@gmail.com)
Service Tax - Section 66E(i) of Finance Act, 1994 is intra vires Constitution - No service Tax on sale and vice versa: High Court
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By TIOL News Service
BILASPUR, MAY 19, 2014: THE validity of the following provision in Ch. V of the Finance Act, 1994 is in challenge in the present Writ Petition filed before the Chattisgarh High Court.
SECTION 66E. Declared services. - The following shall constitute declared services, namely:-(i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.
In respect of the services provided by the hotel, Service Tax of 40% on the bill value of the food and drinks is charged in view of section 66E(i) of the 1994-Act read with rule 2C of the Service Tax (Determination of Value) Rules, 2006.
The following points that arose for determination and the observations of the High Court are as under -
(i) Whether any service tax can be charged on a sale of an item or vice versa;• A tax on the sale and purchase of food and drinks within a State is in exclusive domain of the State. The Parliament cannot impose a tax upon the same. Similarly, there is no entry in List II or List III under which service tax can be imposed. There is no legislative competence with the States to impose a tax on any service;• The Parliament cannot impose tax on sale and purchase within a State (except on newspapers). Similarly State cannot tax a service.Held: NO SERVICE TAX ON SALE AND VICE VERSA(ii) Whether in view of Article 366(29A)(f) service is subsumed in sale of food and drinks; & (iii)Whether section 66E(i) of the 1994-Act is violative of Article 366 (29A)(f) of the Constitution.
Article 366(29A)(f) of the Constitution does not indicate that the service part is subsumed in the sale of the food; it rather separates sale of food and drinks from service.
Section 65B (44) as well Section 66E(i) only charges service tax on the service part and not on the sale part. It indicates that the sale of the food has been taken out from the service part as was interpreted by the Supreme Court in the Associated-Hotel [A.I.R. 1972 S.C. 1131] case and the Northern-Caterers AIR 1980 SC 674: (1980) 2 SCC 163 case.
In our opinion, section 66E(i) of Chapter-V of the Finance Act, 1994 is intra vires the Constitution.
HELD: SECTION 66E(i) is INTRA VIRES
Nonetheless, the High Court after listing out the recommendations observed that there are some difficulties in the working of this rule 2C. They are as under -
+ Sale tax is being charged under the VAT-Act and is known as VAT. Generally, the hotel and restaurant owners charge service tax on 40% or 60% of the bill amount and charge VAT on the bill amount. The 40% or 60% over which service tax has been charged, cannot be subject to VAT. One does not know why they do it but it is possible that this might be resorted to, as the Commercial Tax authorities might be taking the value of the food and drinks to be the bill value. This is not proper.+ As we have already held that no VAT can be charged over the amount meant for service. It will be open to the Petitioner to object the same before the VAT authorities. However, there should be coordination between the State and the Central Government authorities. The amount over which service tax has been charged should not be subject to VAT.+ There is no provision in the VAT-Act to bifurcate the amount. The State Government will do well to frame such rules to this effect. These rules may be in conformity with the bifurcation as provided under the 1994-Act or ensure that the Commercial Tax authorities do not charge VAT on that part of the value of the food and drink on which the service tax is being assessed.+ The restaurant and caterer are also normally charging VAT on the bill value. This is not proper. They may charge service tax on 40% or 60% as the case may be of the bill value and charge VAT at the rate of 60% or 40% of the bill value, but not on the entire bill value.+ The State Government will be well advised to issue a clarification/ direction in this regard and will ensure that the consumers are not unnecessarily doubly taxed over the same amount.
The Writ Petition was dismissed.
In passing: Nonetheless, the order is unique & appealing for reasons more than one, beginning with the layout and the various paragraph headings that make the order. Do take a look.
Regards,
Pawan Singla , LLB
M. No. 9825829075
To It_law_reported@yahoogroups.com
19 May
By TIOL News Service
BILASPUR, MAY 19, 2014: THE validity of the following provision in Ch. V of the Finance Act, 1994 is in challenge in the present Writ Petition filed before the Chattisgarh High Court.
SECTION 66E. Declared services. - The following shall constitute declared services, namely:-(i) service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.
In respect of the services provided by the hotel, Service Tax of 40% on the bill value of the food and drinks is charged in view of section 66E(i) of the 1994-Act read with rule 2C of the Service Tax (Determination of Value) Rules, 2006.
The following points that arose for determination and the observations of the High Court are as under -
(i) Whether any service tax can be charged on a sale of an item or vice versa;• A tax on the sale and purchase of food and drinks within a State is in exclusive domain of the State. The Parliament cannot impose a tax upon the same. Similarly, there is no entry in List II or List III under which service tax can be imposed. There is no legislative competence with the States to impose a tax on any service;• The Parliament cannot impose tax on sale and purchase within a State (except on newspapers). Similarly State cannot tax a service.Held: NO SERVICE TAX ON SALE AND VICE VERSA(ii) Whether in view of Article 366(29A)(f) service is subsumed in sale of food and drinks; & (iii)Whether section 66E(i) of the 1994-Act is violative of Article 366 (29A)(f) of the Constitution.
Article 366(29A)(f) of the Constitution does not indicate that the service part is subsumed in the sale of the food; it rather separates sale of food and drinks from service.
Section 65B (44) as well Section 66E(i) only charges service tax on the service part and not on the sale part. It indicates that the sale of the food has been taken out from the service part as was interpreted by the Supreme Court in the Associated-Hotel [A.I.R. 1972 S.C. 1131] case and the Northern-Caterers AIR 1980 SC 674: (1980) 2 SCC 163 case.
In our opinion, section 66E(i) of Chapter-V of the Finance Act, 1994 is intra vires the Constitution.
HELD: SECTION 66E(i) is INTRA VIRES
Nonetheless, the High Court after listing out the recommendations observed that there are some difficulties in the working of this rule 2C. They are as under -
+ Sale tax is being charged under the VAT-Act and is known as VAT. Generally, the hotel and restaurant owners charge service tax on 40% or 60% of the bill amount and charge VAT on the bill amount. The 40% or 60% over which service tax has been charged, cannot be subject to VAT. One does not know why they do it but it is possible that this might be resorted to, as the Commercial Tax authorities might be taking the value of the food and drinks to be the bill value. This is not proper.+ As we have already held that no VAT can be charged over the amount meant for service. It will be open to the Petitioner to object the same before the VAT authorities. However, there should be coordination between the State and the Central Government authorities. The amount over which service tax has been charged should not be subject to VAT.+ There is no provision in the VAT-Act to bifurcate the amount. The State Government will do well to frame such rules to this effect. These rules may be in conformity with the bifurcation as provided under the 1994-Act or ensure that the Commercial Tax authorities do not charge VAT on that part of the value of the food and drink on which the service tax is being assessed.+ The restaurant and caterer are also normally charging VAT on the bill value. This is not proper. They may charge service tax on 40% or 60% as the case may be of the bill value and charge VAT at the rate of 60% or 40% of the bill value, but not on the entire bill value.+ The State Government will be well advised to issue a clarification/ direction in this regard and will ensure that the consumers are not unnecessarily doubly taxed over the same amount.
The Writ Petition was dismissed.
In passing: Nonetheless, the order is unique & appealing for reasons more than one, beginning with the layout and the various paragraph headings that make the order. Do take a look.
THE issues before the Bench are - Whether when the assessee-Trust fails to produce any of the donors contributing to building fund, such sums are to be treated as unexplained credit u/s 68; Whether the exemption u/s.11(1)(a) is allowable only on income derived from property held under Trust wholly for charitable or religious purposes and Whether in case the amounts received from the third party has been accounted and utilized for charitable purposes by the assessee trust, but the assessee has failed to disclose the names and addresses of the donors as well as the mode of payment, it is entitled for deduction u/s 11. And the verdict favours the assessee.
Facts of the case
The assessee is a Charitable Trust duly registered u/s 12A. The income of the Trust was exempted u/s 11. For the AY 2001-02, the assessee had received donations towards building fund amounting to Rs.54,38,999/- and for the AY 2002-03, it had received a sum of Rs.12,74,672/-. The return filed u/s 139 for those assessment years was accepted by AO. However, notice u/s 148 was issued to the assessee for reopening the assessment. Notices u/s 143(2) and 142(1) were served on assessee. In response to the said notices, an AR of the assessee appeared before the AO and produced all the details. The assessee also objected for reopening of the assessment u/s 148. In the balance sheet filed along with the returns, the assessee had made known the donations received towards the building fund and had also furnished the details of the donors. The bank accounts were also made available and it was contended that major payment was received by way of cheques. There was no cause of action to treat the said receipts as unexplained credit u/s 68. The AO over-ruling the objections raised by the assessee, assessed the donations received towards the building fund as unexplained credit u/s 68 and held that the assessee had failed to produce the donors before AO. Further, the letters issued to 60 – 70 donors were returned unserved with a note that "incomplete address". Hence, the donations received was assessed for income and interest and penalty was imposed by reassessment order. On appeal before CIT(A), it was contended that reopening of the assessment was contrary to law and no reason had been assigned for reopening of the assessment which was already concluded and it was barred by limitation. The major portion of donations towards building fund had been received through cheques. The bank accounts had been made available to AO and the AO got verified those matters through the Bankers. Apart from that, the amount received was utilized for the construction of the building and other charitable purposes of the Trust. Hence, the order passed by the AO treating the said amount as undisclosed income was contrary to law. CIT(A) found that major portion of the donations were received through cheques and that the amount received was utilized for construction of the building and other charitable purposes. Hence, the said amount was entitled for exemption u/s 11. However, the issue of reopening of the assessment was held against the assessee. Accordingly, CIT(A) allowed the appeal and set aside the order passed by the AO in respect of the building donation received. On further appeal, Tribunal found that the amount received as donations had been utilized for construction of the building and other charitable purposes of the Trust. Hence, the assessee was entitled for exemption u/s 11.
On appeal before the HC, the Revenue's counsel contended that the order passed by the Tribunal confirming the order passed by the CIT(A) was contrary to law. The assessee received the donation towards building fund for the AYs 2001-02 and 2002-03. The assessee had not disclosed the sources of the said income and failed to furnish the correct names and addresses of the donors. In order to verify with regard to the donations, letters were addressed to the donors; however, none of them appeared. The Trustee of the assessee was also not able to bring any of the donors before the AO. In the absence of proof of donation and identity of the donors, these donations towards building fund was taxed as income from other sources being unexplained credit u/s 68. Hence the order passed by the Tribunal was contrary to law. On the other hand, assessee's counsel had supported the order passed by the Tribunal and CIT(A) and contended that the major portion of donations were received through cheques. It had also submitted that the bank statements along with the account numbers to the AO for verification. Some of the donors did not want to disclose their names. The amounts received were utilized for the purpose of construction of the building and other charitable purposes. Hence, there was no violation of Sections 11 and 12.
Held that,
++ the records clearly disclose that the assessee is a Charitable Trust duly registered under Section 12A of the Act. For the assessment years referred to above, the assessee had filed return of income showing receipt of donations towards the building fund. Originally, the return filed was accepted under Section 143(1) of the Act, subsequently, the Assessing Authority issued notice under Section 148 for reopening of the said assessment. In pursuance of the notices issued under Section 143(2) and 142(1) of the Act, the authorized representative of the assessee appeared before the Assessing Authority and produced all the documents including Bank accounts. The specific case of the assessee is that the assessee received donations towards construction of the building and for other charitable purposes of the Trust. The major portion of the donation was received through Cheques. Some of the amounts were received in cash, since some of the donors were not willing to furnish their names. The amount received by way of donations was disclosed in the returns filed and also claimed exemption under Section 11 of the Act. The Assessing Authority however, treated the donations received as unexplained credit under Section 68 of the Act and assessed for tax, on the ground that the assessee-Trust has failed to produce the donors before the Assessing Authority. Further, 60 to 70 letters addressed to the donors were returned unserved with a shara "insufficient address". In view of that, the amount received towards donations was treated as unexplained credit and assessed for tax. On an appeal filed by the assessee, the Appellate Authority set aside the order passed by the Assessing Authority and held that the assessee is entitled for exemption under Section 11 of the Act with regard to the donations received towards building fund. The revenue being aggrieved by the order passed by the Appellate Authority preferred an appeal before the Tribunal, the Tribunal once again examined the matter in detail and held that even though the assessee failed to disclose the names of the donors, the amount which was received as building fund was utilized for charitable purpose. Hence, the assessee is entitled for exemption under Section 11 of the Act and dismissed the appeal;
++ the Division Bench of this Court in a judgment reported (2011) 336 ITR 694 (Karn) held that "since the amounts received from the third party has been accounted and utilized for charitable purposes even though the assessee failed to disclose the names and addresses of the donors as well as the mode of payment, entitled for deduction under Section 11 of the Act." A similar view has been taken by the Delhi High Court in a judgment reported in (2005) 276 ITR 152). Further, a similar view was taken by the Bombay High Court in a judgment reported in (1982) 138 ITR 564. During the pendency of the appeal, an opportunity was given to the Revenue to substantiate their contentions and asked to verify the Bank Accounts furnished by the assessee. However, the Revenue informed to us that the details of the donations received through Cheques is in accordance with law. Admittedly, the respondent-assessee is the charitable trust. Some of the donors do not want to disclose their names and some of the donations were received through cheques. The donations received for the assessment years 2001-02 and 2002-03 were disclosed in the accounts and while filing the returns those amounts were shown as income. Any voluntary contribution received by a Trust created wholly for charitable or religious purpose shall be deemed to be income derived from property held under the Trust wholly for charitable and religious purpose. However, the said amounts were used for charitable purposes even though the assessee failed to disclose the names and addresses of the donors. Since the amount was utilized by the Trust wholly for the charitable or religious purposes, the assessee has fulfilled the condition imposed u/s 11. Section 11 of the contemplates that any income derived from property held under Trust wholly for charitable or religious purposes, to the extent to which, such income is applied to such purposes is exempted under Section 11(1)(a). Hence, the assessee is a charitable Trust and its income is to be exempted under Section 11. We find no infirmity or irregularity in the order passed by the Tribunal as well as the Appellate Authority. Both the authorities concurrently held that there is no violation of any of the conditions of Sections 11 and 12 of the Act. Hence, the appellant has not made out a case to interfere with the same. Accordingly, the substantial questions of law is held against the Revenue. Accordingly, the appeals are dismissed.
S.14A: Disallowance of expenditure - Exempt income-Book profit-Disallowance has to be
applied while computing book profits under clause (f) of Explanation to s.115JA. [S.115JA]
The assessee's contention that in view of the Proviso to s. 14A, the said provision could not have been
invoked for AY 2000-01 in a revision u/s 263 is not acceptable because the assessment order was
passed after section 14A was enacted (Honda Siel Power Products 340 ITR 53 (Del) (approved by
SC) followed). The failure of the AO to invoke s. 14A had resulted in the order being erroneous and
prejudicial to the interests of the Revenue. ( ITA No. 1179/2010, dt.9/12/2014)( AY. 2000-01)
CIT .v. Goetze (India) Ltd.(2014) 361 ITR 505(Delhi)(HC)
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