KYC Norms for Chartered Accountants

All the members of Institute of Chartered Accountants of India (ICAI), who are in practice,  are hereby informed that the Council has formulated the following Know Your Client Norms (KYC norms)  at it’s 307th Meeting held on 13^th July, 2011, which shall be recommendatory in nature, and apply only in case of attest function.

KNOW YOUR CLIENT (KYC) NORMS

The financial services industry globally is required to obtain information of their clients and comply Know Your Client Norms (KYC norms).

Keeping in mind the highest standards of Chartered Accountancy profession in India, the Council of ICAI thought it necessary to recommend such norms to be observed by the members of the profession who are in practice.

In light of this background, the Council of ICAI approved the following KYC Norms. However, these norms are recommendatory in nature and every Chartered Accountant carrying out attest function is encouraged to follow them.

Video Confrencing for AGMs of Listed Companies

The Ministry of Corporate Affairs has recognized participation by shareholders in the Annual General Meetings under the Companies Act, 1956 for all companies through video conference. Vide Circular dated 06.06.2011 issued by the Ministry, it is proposed to be mandatory for all listed companies for financial year 2012-2013 and onwards.

This information was given by the Minister of State in the Ministry of Corporate Affairs Shri R.P.N. Singh in reply to a written question in the Lok Sabha today whether the Government has any proposal to make Video Conferencing mandatory in Annual General Meetings (AGMs) of listed companies to facilitate the stakeholders to participate in the meetings 

International Private Leased Circuit charges are liable to service tax under Business Support Servicess

Because If service provider is Indian , then he gets covered under definition of  Telegraph Authority and hence under Telecommunication Service. However International Service provider can not be telegraph authority . Hence CBEC has clarified that if BPO/MNCs or other person is availaing such service then under reverse charge (i.e. import of service ) it will get covered under Business Support Servicve. 

Air passengers prohibited to carry rice in baggage from India

US Department of Agriculture, Animal, Plant & Health Inspection Service(USDA-APHIS) has notified new phytosanitary regulation for entry of rice from countries Including India where khapra beetle is known to occur. This will also apply to consignment throgh courier and mail. Hence non commercial consignment of rice prohibited from 30-07-2011
Customs 34/2011 dtd 03-08-2011

Section 43B :When tax, duty paid in advance under merchantile system

In Paharpur Cooling Towers Ltd v CIT (High Court of Calcutta) I.T.A. No. 2 of 2004 Decided on: 15 July 2011, High Court held that:

 It was never the intention of the legislature to deprive an assessee of the benefit of deduction of tax, duty etc. actually paid by him during the previous year, although in advance, according to the method of accounting followed by him. If we accept the reasoning given by the Tribunal, an advance payer of tax, duty etc. payable in accordance with the method of accounting followed by him will not be entitled to get the benefit even in the next year when liability to pay would accrue in accordance with the method of accounting followed by him because the benefit of Section 43B is given on the basis of actual payment made in the previous year. We, thus, find that the Tribunal below committed substantial error of law in denying the benefit of Section 43B (a) of the Act to the appellant only on the ground that the tax was paid in advance in accordance with the mercantile system of accounting.

TELECOM COMPANIES WILL PAY SERVICE TAX ON SALE OF SIM CARDS: SUPREME COURT

The Supreme Court has held that telecom operators will have to pay service tax on the sale of SIM cards as these transactions entail their processing and activation for providing cellphone services.
Upholding the judgement of the Kerala high court, a bench of justices Mukundakam Sharma and A R Dave said the sale of SIM cards was part of the activation and processing fee, on which the telecom firms pay service tax.

ANTI TAX AVOIDANCE MEASURES

Westminister’s Law

“Avoidance of tax is not evasion and carries no ignominy” has been held in famous English decision IRC Vs. Duke of Westminister and famously known as Westminister’s law. It further said “Every citizen has legal right to dispose of his capital and income so as to attract upon himself the least amount of tax……. Given a document of transaction is genuine the court can not go beyond it to some underlying substance”

Analysis of Mcdowell’s Case

However the Mcdowell’s case upheld by Supreme Cout in 1985 did not find favour with tax planning resulting tax avoidance.Justice Ranganatha Mishra however in this case stated tax planning is legitimate provided it is with in framework of law, colourable devices can not be part of tax planning and it is wrong to promote avoidance of tax by resorting to dubious methods” In this judgement certain facts were misstaed by Justice Chinnappa Reddy like it was said that westminister principle is not applicable now even in England.

However just three years later English law upheld the validity of westminister principle in 1988 in “Craven v. White” and then again in 2001 in Mac Niven v. West Morland Investments Ltd.

Impact of opening LLP route for Chartered Accountants

Recent Changes

Pre-amendmend Legal Position

As per section 2(7)(c) of the Companies Act 1956, the Central Government may by notification, notify that a Body Corporate, will not be recognized as Body Corporate for the purpose of the Companies Act 1956.

The text of section is given below:
s. 2(7)  “body corporate” or “corporation” includes a company incorporated outside India but does not include—
(a)  a corporation sole ;
(b)  a co-operative society registered under any law relating to co-operative societies ; and
(c)  any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification in the Official Gazette, specify in this behalf ;

On the other hand, Section 226 (3) of the Companies Act 1956 provides for the disqualification for appointment of auditor of a company and as per clause (a) of this sub section, a body corporate cannot be appointed as Auditor

Notifications by MCA

MCA vide its notification dated 23-5-2011, has, in exercise of its powers under 2(7)(c) of the Companies Act 1956,notified that LLP, which is  a Body Corporate as per the Limited Liability Partnership Act 2008, shall not be treated as Body Corporate, for the purpose of section 226(3)(a) of the Companies Act 1956,

Thus MCA by its aforesaid notification has taken LLP out of the purview of the Body Corporate under this sub section and therefore, LLP can be appointed as the Auditor of the company.

Further MCA vide its circular no No 10/2011 dated 04/04/2011 has allowed CA/CS/CWA to practice under LLP in partnership with other fellow members of same institute and in case of CS, also with members of such recognized profession as may be prescribed.

DIRECTOR IDENTIFICATION NUMBER: RECENT CHANGES AT A GLANCE

1. MCA vide circular 5/2011 dated 4-3-11, provided that DIN application can be digitally signed by the applicant or Practicing CA/CS/ICWA or CS in Full time employment. Scanned documents required to be submitted along e-form and physical submission of documents dispensed with.           If din is signed by applicant the din shall be allotted after one or two days but if application is signed by professional din shall be immediately allotted. If false information is furnished, penal action shall be taken including professional misconduct against professional along cancellation of DIN.

2. There after vide notification dated 26-3-2011, it was mentioned that photo, proof of ID, proof of residence, verification by applicant in prescribed format shall be scanned and enclosed. It further notified the matter mentioned in circular dated 4-3-11 and further mentioned that defects shall be notified through mail and on web site and if defect is not rectified in 15 days, DIN shall be cancelled. DIN 4 to be signed by practicing CA/CS/ICWA only NO cost for DIN-4
3. There after vide circular 11/2011 dated 7-4-2011, PAN made mandatory for Indian nationals and passport made mandatory for foreign nationals and all DIN holders required to furnish PAN till 31-5-2011 if they had not earlier furnished PAN.

4.    Vide circular 32/2011 dated 31-5-2011,  furnishing of Din for PAN information extended to 30-9-2011 failing which DIN to be diabled along heavy penalty.

5. Later vide notification dated 2-6-2011 made effective from 12-6-2011, the digital sign by director dispensed with and signing by practicing CA/CS/ICWA or CS in full time employment made mandatory. For DIN-4 also full time employee CS allowed to sign DIN-4 beside PCA/PCS/PICWA

Exemption from filing ITR for Total Income up to Rs. 5 lacs

Notification dated 23-6-2011 for AY 2011-12 and Notification 9/2012 dtd 17-2-2012 for AY  2012-13

- Only Individual assessees have been exempted
- Exemption is available only for assessment year 2011-12 & 2012-13. It is not available for ITRs of AY 2010-11 which   are filed during 2011-12
- Exemption is available for total income equal to or less than rs. 5 lacs. Hence Gross total Income can exceed Rs. 5,00,000 in such cases.
- Further exemption is available only if assessee has following income only:
    a) Salary Income
    b) Saving Bank Account Interest up to Rs. 10,000
- Where assessee is having exempt income also say receipts from LIC or dividend income or interest from post office saving account (declared taxable recently) whether the exemption shall be available is not certain.

20% SURCHARGE TO BE DEPOSITED IN PMIDF (NOTIFICATION 20-6-11)

DIFFCULT WAYS OF DOING EASY THINGS

                        The state government of Punjab appears to have mastered the art of finding difficult ways of doing easy things. Gone are the days when administrators used to think not only twice but also used to invite comments by issuing draft notifications. Order of the day is first issue ordinance, then convert it into law and if people make hue and cry about it then just quash it or make it optional.

                        Continuing its vendetta with dealers in Punjab, the excise and taxation department has come out with another notification adding some more burden to already crippling trade and industry of Punjab. The notification effective from 20-06-2011, requires additional tax under section 8B under Punjab Vat Act, 2005 popularly known as surcharge @ 10%, to be bifurcated in ratio 0f 80:20, out of which 80% shall go to vat department and 20% shall go to Punjab Municipal Infrastructure Development Fund, which is a fund altogether different from Punjab Municipal Fund and Punjab Infrastructure Development Fund. This fund finds its genesis from Punjab Municipal Infrastructure Development Fund Act 2011 created on 11-04-2011 for a period of 10 years with annual commitment to contribute 200 crore.

E-DATA ENTRY OF TRANSACTIONS (NOTIFICATION 5-5-11)

                             In another move to devastate the already crippling trade and industry in state of Punjab, a public notice has been promulgated by the purists in excise and taxation department. The notification mandates that all the dealers making transactions with in state of Punjab for value exceeding more than 2 lakhs through single bill shall compulsorily upload the information on the website of Punjab government before the goods leave the premises of a dealer. In respect of deals in commodities of iron and steel, cotton bales and yarn, edible oils, timber, marble and tiles every transaction exceeding Rs. 20,000 is required to be uploaded.

                        This notification is applicable from 01-06-2011.

Comprehensive analysis of section 44AD

Context of the Section: The family of provisions on presumptive taxation applicable to residents originated as under:

Insertion by Finance Act 1994 wef. 01-04-1994 i.e. A.Y. 1994-95:

44AD: Presumptive taxation of civil construction (8% of Gross Receipts)
44AE: Presumptive Taxation of Transport Business

WEF ASSESSMENT YEAR	Presumptive Income for month or part of month during which owned
	Heavy Goods Vehicles	Others
1994-95	2000	1800
2003-04	3500	3150
2011-12	5000	4500

There after in Finance Act 1997, w.e.f. 01-04-1998, i.e. A.Y, 1998-99 another section in row was inserted

44AF: Presumptive taxation of retail business (5% of total Turnover)
Recent Changes made:

Now by virtue of Finance Act 2009, section 44AD has been substituted with new avatar to encompass entire range of businesses wef  AY 2011-12. In this new era, while section 44AE still holds the ground, section 44AF has been put to rest w.e.f. AY 2011-12.

ICAI MEMBERSHIP FEE REVISED WEF 01-04-2011 (NOTIFICATION DATED 25-02-2011)

PARTICULARS OF FEE	REVISED FEE
MEMBERSHIP FEE -ENTRANCE FEE - FELLOW ADMISSION FEE	1200 1800
ANNUAL MEMBER SHIP FEE -AASOCIATE FEE - FELLOW FEE	800 2200
COP FEE	2000
RESTORATION FEE	1200

FEE FOR SENIOR CITIZENS i.e. Age of 65 Years or more on 01-04-2011

PARTICULARS OF FEE	REVISED FEE
Annual membership Fee -         Associate fee -         Fellow fee	600 1600
COP FEE	1500

Changes in VAT rates wef 07-01-2011

Goods Declared Tax Free: 1.Punjabi Jutti, Crudely tanned leather and desi jutti made there of.2.Non branded atta, maida and suji 3. Rice Husk, Rice Bran, deoiled rice bran and phack 4. naku and kinki when used by distilleries.            
Taxable @ 1%: Pulses, Unbranded Besan.
Taxable @ 5.5%: 1.RCC pipes, sewerage pipes 2. Scrap,parings and waste of metals (except iron & steel), non metals, Glass, Plastic 3. Naku and Kinki (except when used by distilleries)
Taxable @ 8.8%:  1.Plastic Grannuels, Plastic Powder, Master batches2. Spectacles, Goggles/sunglasses, parts and components thereof, contact lens and lens cleaners.3. UPS 4. Invertor
Taxable @ 12.5%: Microphone, Multimedia speakers, headphones etc,Telephone answering machines, Transmission appratus other than appratus for radio or TV broadcasting, Walkie Talkie set, cordless handset, car telephone, transportable telephone, marine radio communicaiton equipment, Amateur Radio Equipment, Cellular Telephone. LCD panels, LED panels and parts. Permanant magnets and articles, Electrical Apparels for the telephony or line telegraphy.

Mobile Phones: As per verbal discussion with worthy DETC patiala since entry no.60 of Schedule-B reads as "telephones, cell phones, teleprinter, wireless equipment and parts there of. DVD,CD and IT products" remains the same. There fore rate of tax on mobile phones will continue @ 5.5%