Key Features of Budget 2011-2012

PrintPDF Please click on the link below :

Key Features of Budget 2011-2012

Indian Accounting Standards Converged with IFRS Notified

PrintPDF

Reliable, consistent and uniform financial reporting is important part of good corporate governance practices worldwide in order to enhance the credibility ofthe businesses in the eyes of investors to take informed investment decisions. In pursuance of G-20 commitment given by India, the process of convergence of Indian Accounting Standards with IFRS has been carried out in Ministry of Corporate Affairs through wide ranging consultative exercise with all the stakeholders. Thirty five IndianAccounting Standards converged with International Financial Reporting Standards (henceforth called IND AS) are being notified by the Ministry and placed on the website. . These are: IND ASs 1, 2, 7, 8, 10, 11, 12, 16, 17, 18, 19, 20, 21, 23, 24, 27, 28, 29, 31, 32, 33, 34, 36, 37, 38, 39, 40, 101, 102, 103, 104, 105, 106, 107 and 108. The Ministry of Corporate Affairs will implement the IFRS converged Indian Accounting Standardsin a phased manner after various issues including tax related issues are resolved with the concerned Departments. It would be ensured that the implementation of the converged standards in a phased manner is smooth for the stakeholders. The date of implementation of the IND AS will be notified by the Ministry at a later date.

Nothing in language of section 13(1)(b) to suggest that an institution of mixed objects is precluded from getting registration under section 12AA

PrintPDF

DECIDED BY:

ITAT, HYDERABAD BENCH `B’,HYDERABAD, IN THE CASE OF: Rehoboth Mission v. DIT (Exemp), APPEAL NO: ITA No. 352/Hyd/2010,DECIDED ON May 26, 2010

HELD
We have gone through the provisions of sec.13(1)(b) of the Act. There is nothing in the language of this provision to suggest that an institution of mixed objects is precluded from getting registration u/s 12AA of the Act. It is also seen from the objects of the trust in question that the assessee is carrying on no non-charitable or non-religious activities. We place reliance on the judgement of ACIT v. Barkate Saifiyah Society 213 ITR 492 (Guj) and CIT v. Chandra Charitable Trust 294 AITR 86 ( Guj), wherein it was held that a trust can either be for religious purposes or for charitable purposes or it can be for both. Only a trust which is for religious purpose is excluded and debarred from registration u/s 12AA of the Act. A trust whose object is charitable as well as religious is not debarred from registration.

Donations out of 15 Percent accumulation permitted under section 11(1)(a) are not to be restricted by Explanation to section 11(2

PrintPDF

DECIDED BY:

HIGH COURT OF DELHI, IN THE CASE OF: DIT (Exemption) v. Bagri Foundation, APPEAL NO: ITA No. 19/2010, DECIDED ON July 2, 2010

HELD

No conditions are prescribed for the accumulation of up to 15% permitted under Section 11(1)(a). Section 11(2) permits accumulation in excess of 15% also but subject to certain conditions and with which we are not concerned at present. However, the explanation appended w.e.f. 1st April, 2003 to Section 11(2) is as under:-

“Explanation. – Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under Section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub- clause (vi) or sub-clause (via) of clause (23C) of Section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.”

The “explanation” appended after Section 11(2) is nothing but an additional condition attached to accumulation in excess of 15% permitted under Section 11(2). We are unable to hold it as a condition on accumulation up to 15% as provided for in Section 11(1)(a) also. We are unable to find any rational classification for imposing the restriction as contained in the “explanation” to the accumulation of up to 15% also when there is no such restriction to donating the entire income of a year to another charitable trust. The legislature did not do so. Even after the insertion of the “explanation”, if a trust donates its entire income for a year to another charitable trust, it would still be entitled to exemption under Section 11(1)(a). It defies logic as to why such donations cannot be permitted out of 15% accumulation permitted under Section 11(1)(a) itself. There is however rationale for imposing the restriction as contained in the “explanation” (supra) to accumulations in excess of 15%. Such accumulations, but for the conditions imposed in Section 11(2) and in the explanation aforesaid, would have been eligible to be taxed. One of the conditions in Section 11(2)(a) is that the purpose for which accumulation in excess of 15% is being made is to be notified; another condition is of the accumulation being permitted for a period not exceeding 10 years; yet another condition is as to the modes in which the accumulation can be invested. There are no such restrictions on accumulation under Section 11(1)(a). The scheme of the section indicates that the additional condition by way of the aforesaid “explanation” is also intended to apply only to accumulations in excess of 15% under Section 11(2) and not to accumulations upto 15% under Section 11(1)(a). The explanation is not found to be intended to take away something from the accumulation upto 15% permitted without any conditions whatsoever under Section 11(1)(a).

Correction in OLTAS Income Tax/TDS challan after payment

PrintPDF

The power to amend such wrong details in challan after payment of tax in OLTAS has been given to Assessing officer and Bank depending upon the type of correction, which has been provided as follows for the benefit of all concerned.

NSDL receives tax collection data as uploaded by the bank. It is not authorized to carry out any changes in the data sent by the bank to TIN.

The fields that can be corrected and the entity authorized to carry out corrections are as below:

Sl. No.	Type of Correction on Challan	Performed By
1	PAN/TAN	Assessing Officer
2	Assessment Year	Assessing Officer
3	Major Head	Assessing Officer /Bank
4	Minor Head	Assessing Officer
5	Nature of Payment	Assessing Officer
6	Total Amount	Bank
7	Name	Bank

Thus application should be made for correction to the A.O or Bank in case of any mistake in Income Tax/TDS Challan depending upon the type of correction as mentioned above.

IFRS norms format for companies to be notified soon

PrintPDF

The government on Thursday said it will soon notify the format that companies will have to follow while preparing their account books as per the international accounting norm IFRS from next fiscal. In an official statement, the Corporate Affairs Ministry also said that it is ready with the depreciation rates that companies will have to follow while compiling their financial statements.

"The revised Schedule VI(Format of Financial Statements), Schedule XIV (Depreciation Rate) and proposed converged accounting standards are ready and are proposed to be notified shortly," the statement said.

The Ministry also pointed out that companies will have to comply by the International Financial Reporting Standards from April 2011.

"To ensure this and to implement the G-20 commitment to achieve a single set of high quality global accounting standards, the government has taken a decision to achieve convergence of Indian Accounting Standards with IFRS in a phased manner beginning April, 2011," it said.

On industry's apprehensions about implementation of IFRS from the next fiscal, the MCA said that all the issues have been taken care of.

"The Industry has always expressed a feeling of readiness on the matter. The concerns expressed by them at various stages have been redressed through issue of suitable clarifications," it said.

According to the roadmap laid out by the Corporate Affairs Ministry, companies will have to prepare their accounts as per the new norm in a phased manner, beginning with companies that have a networth of over Rs 1,000 crore.

Further, while scheduled commercial banks and urban cooperative banks will adopt IFRS from April 1, 2013, all insurance companies will convert their opening balance sheets with IFRS from April 2012.

Large, listed non-banking finance companies (NBFCs), will converge their opening books of accounts with IFRS norms from April 1, 2013.

Section 641 of the Companies Act, 1956 – Schedules, forms and rules – Power to alter schedules – Amendments in Schedule XIII

PrintPDF

NOTIFICATION NO. GSR 70(E), DATED 8-2-2011

In exercise of the powers conferred by sub-section (1) of section 641of the Companies Act, 1956, the central government hereby makes the following further amendments in Schedule XIII to the Companies Act, 1956, namely:-

1. In the Schedule XIII, in Part II, in Section II-

(i) in sub-para (C), in third proviso, after the word, “scale” occurring at the end, the following words shall be inserted namely:-

“if the company is a listed company or a subsidiary of a listed company”;

(ii) for Explanation IV, to the section II, the following Explanation shall be substituted, namely:-

For the Prupose of this section “Remuneration Committee” means:-

(i) In respect of a listed company, a committee which consists of atleast three non-executive independent directors including nominee director or nominee director, if any; and

(ii) in respect of any other company, a Remuneration Committee of Directors”;

2. It shall come into force from the date of its publication in the Official Gazette.

Section 211 of the Companies Act, 1956 – Accounts – Form and contents of balance-sheet and profit and loss account – Exemptionunder section 211 to cer

PrintPDF

NOTIFICATION NO. SO 301(E), DATED 8-2-2011

In exercise of the powers conferred by sub-section (3) of section 211 of the Companies Act, 1956 (1 of 1956), the Central Government, being of the opinion that it is necessary to grant exemption in the public interest, hereby exempts following classes of companies from disclosing in theirprofit and loss account the information mentioned under column (3), against each class of companies mentioned under column (2) of the table given below subject to fulfillment of the conditions stipulated in paragraph 2 of this notification namely:-

TABLE

Sl. No.	Class of companies	Exemptions from paragraphs of Part-II of Schedule VI
(1)	(2)	(3)
1.	Companies producing Defence Equipments including Space Research;	paragraphs 3(i)(a), 3(ii)(a), 3(ii)(d), 4-C, 4-D (a) to (e) except (d).
2.	Export Oriented company (whose export is more than 20% of the turnover);	paragraphs 3(i)(a) 3(ii)(a), 3(ii)(b), 3(ii)(d).
3.	Shipping companies (Including Airlines);	paragraphs 4-D (a) to (e) except (d).
4.	Hotel companies (including Restaurants);	paragraphs 3(i)(a) and 3(ii)(d)
5.	Manufacturing companies/multi-product companies;	paragraphs 3(i)(a) and 3(ii)(a).
6.	Trading companies;	paragraphs 3(i)(a) and 3(ii)(b).

2. Conditions

A. The Board of Directors of the Company has given consent with regard to non disclosure of information referred to in paragraph 1;

B. The Company shall disclose in the Notes forming part of the balance sheet and profit and loss account, the fact of grant of the exemption under this notification;

C. The company shall conform to the prescribed Accounting Standards;

D. The company shall ensure that its financial documents represent a true and fair state of affairs of its finances;

E. The company shall maintain and file such information as may be prescribed or called for or required by the government or the Reserve Bank of India or any regulator;

F. For representation of foreign currency holdings, if any, exchange rate as on date of closing of accounts shall be applicable;

3. The exemption in respect of the companies referred to in serial numbers 5 and 6 of the Table shall be applicable only for those goods which form less than ten percent of the total value of turnover, purchase, consumption of raw material etc, as the case may be;

4. This notification shall be applicable in respect of balance sheet and profit and loss accounts prepared in respect of the financial year ending on or after the 31st March, 2011.

Section 211 of the Companies Act, 1956 – Accounts – Form and contents of balance-sheet and profit and loss account – Exemption under section 211 to Pu

PrintPDF

NOTIFICATION NO. SO 300(E), DATED 8-2-2011

In exercise of the powers conferred by sub-section (3) of section 211 of the Companies Act, 1956 (1 of 1956), the Central Government, being of the opinion that it is necessary to grant exemption in the public interest, hereby exempts Public Financial Institutions as specified under section 4A of the Companies Act, 1956 from disclosing Investments as required under paragraph (1) of Note (1) of Part-I of Schedule VI in their balancesheet subject to fulfillment of the following conditions, namely:-

(i) the Public Financial Institutions shall make the complete disclosures about investments in the balance sheet in respect of the following, namely: -

(a) immovable property;

(b) capital of Partnership firms;

(c) all unquoted investments and;

(d) investments in subsidiary companies.

(ii) the Public Financial Institutions shall disclose the total value of quoted investments in each of the following respective categories, namely:-

(a) Government and trusts securities;

(b) shares;

(c) debentures;

(d) bonds; and

(e) other securities.

(iii) in each of the above categories referred to in sub-paragraphs (i) and (ii), investments where value exceeds two percent of total value in each category or one crore rupees, whichever is lower, shall be disclosed fully provided that where disclosures do not result in disclosure of at least fifty percent of total value of investment in a particular category, additional disclosure of investments in descending order of value shall be made so that specific disclosures account for at least fifty percent of the total value of investments in that category;

(iv) the Public Financial Institutions shall also give an undertaking to the effect that as and when any of the shareholders ask for specific particulars the same shall be provided;

(v) all unquoted investments shall be separately shown;

(vi) the company shall undertake to file with any other authorities, whenever necessary, all the relevant particulars as may be required by the Government or other regulatory bodies;

(vii) the Investments in subsidiary companies or in any company such that it becomes a subsidiary, shall be fully disclosed.

2. This notification shall be applicable in respect of balance sheet and profit and loss accounts prepared in respect of the financial year ending on or after the 31st March, 2011.

SEBI’s recommendation on related party transactions

PrintPDF

Press release PR No.24/2011 dated 7 February 2011 issued by SEBI

Securities and Exchange Board of India [SEBI] at their Board Meeting held on 7 February 2011 decided to recommend to the Ministry of Corporate Affairs, Government of India [MCA] to suitably amend Clause 166 of the Companies Bill, 2009 [Companies Bill], to disallow interested shareholders from voting on the special resolution of the prescribed related party transaction. SEBI move is aimed to protect small and diversified shareholders in listed companies from abusive related party transactions.

As per Clause 166 of the Companies Bill, the Board of Directors of a company is required to approve specified related party transactions. In case of companies having specified capital, such related party transactions which are not on an arm’s length basis would require prior approval of shareholders by a special resolution. Specified related party transactions shall include any contract or arrangement with a related party with respect to—

(a) sale, purchase or supply of any goods or materials;

(b) selling or otherwise disposing of, or buying, property of any kind;

(c) leasing of property of any kind;

(d) availing or rendering of any services;

(e) appointment of any agents for purchase or sale of goods, materials, services or property;

(f) appointment to any office or place of profit in the company or its subsidiary company; and

(g) underwriting the subscription of any securities or derivatives thereof, of the company.

SEBI has already mandated non-participation in voting in the shareholders meeting by interested shareholders in the following cases:

• In case of issue of sweat equity shares to promoters under SEBI (Issue of Sweat Equity) Regulations, 2002, for obtaining shareholders’ approval by special resolution, the promoters to whom Sweat Equity Shares are proposed to be issued cannot participate in voting.

• In case of voluntary delisting under SEBI (Delisting of Equity Shares) Regulations, 2009, the special resolution for seeking shareholders’ approval is considered to be approved, if the votes cast in favour of the proposal by public shareholders is at least two times the number of votes cast against it.

Conclusion

• The related party transactions which are not on an arm’s length basis in case of listed companies will be subject to a greater scrutiny from non-interested shareholders if the proposal is accepted by the MCA.