EDITORIAL

Volume XXII, No. 1, January 2011

CAG NORMS - PSU AUDIT -NEED FOR A REVIEW

A major fraud has recently been unearthed, wherein as perallegations reported in the press one of the senior employeesof Citi Bank persuaded various high net-worth investors andtop corporates to invest large sums of money with a minimumassured return up to 18% per annum. It is further reportedthat this money was diverted to capital marketunauthorizedly.This scam is similar to Harshad Mehta scam in 1992 and it issurprising that the banks have still not learnt adequate lessons.Some important questions which will require investigationinclude -• Whether the cheques were received in the name of CitiBank or in the name of some other entities?• In case the cheques were paid by the Investers in favourof Citi Bank, how these were diverted to certain unauthorizedaccounts. The Reserve Bank of India instructions are fairlyclear that the cheques drawn in favour of bank should alsohave written instructions of the issuer regarding beneficiaryof the proceeds.It is important to understand the need for a detailed internalcontrol procedure and risk management techniques to beimplemented by the bank and other entities dealing in largesums of money.RBI and other regulators should prescribe a detailedmandatory compliance audit by a independent charteredaccountant firm of all public sector, private sector and foreignbanks to ensure that various RBI guidelines, internal controlprocedure prescribed by the Board of Directors of theconcerned banks and various other requirements of theregulators have been complied with by the banks and itsfunctionaries.The regulators definitely need to ensure that variousregulatory guidelines, circulars and other provisions arestrictly adhered to by the banks and other institutions dealingwith public money. This may also include insurancecompanies, mutual funds, portfolio managers, besides banks.

CITI BANK FRAUD - LESSONSTO BE LEARNED

Contd...................on page 3

The Office of Comptroller and AuditorGeneral of India (CAG) has recentlyrevised empanelment norms for CAfirms wherein the criteria for selectionof CA firms for appointment asStatutory Auditors of Public SectorUndertakings where the audit fee isabove Rs. 1.5 lakh has beencomprehensively changed (details atpage No. 6 ).

The Hon'ble CAG needs to review the new prescription onceagain and may consider :

• To apply the new norms only for next year empanelment,it is important to give adequate notice to the firms to beempanelled, particularly when a large number of firms arealready empanelled.

• The requirement of exclusive association with a CA firmneeds to be replaced by a provision that credit of standing ofa particular chartered accountant is to be considered only inone of the firms of chartered accountants, where he isassociated with. The requirement of exclusive association isacting against public interest and is the biggest hurdle in thegrowth of Indian firms of chartered accountant. It may benoted that no other regulators, for example, for telecomlicence, or for mining lease, or for allotment of any othercontracts, for example, construction of highways etc. insiston that a particular businessman should have associationonly with one Company. The business people are completelyfree to set up businesses with very complex structures, jointventures and various other kinds of associations to enablethem to grow and prosper. A similar liberty is necessary forChartered Accountant Firms so that the CA firms can grow insize, capability and capacity. Even RBI should reconsidertheir stand requiring exclusive association.

CA Vinod Jain*

* Mr. Vinod Jain, FCA, FCS, FICWA, LL.B., DISA (ICA), Chairman, INMACS Management Services Limited and Convenor, National Economic Forum (NEF). vinodjain@inmacs.com, vinodjainca@gmail.com, 9811040004

Contd...................on page 3

CAG Empanelment Norms on page No.-6

2 THE CHARTERED ACCOUNTANT WORLD – January 2011

LATEST IN FINANCE

LATEST IN FINANCE1.0 RBI ISSUES FINAL GUIDELINES FOR

OVER-THE-COUNTER FOREXDERIVATIVES

The Reserve Bank of India (RBI) has issued finalguidelines on over-the-counter foreign exchangederivatives and overseas hedging of commodityand freight prices. It includes:

• Allowing the use of cost-reduction structuresand embedded cross-currency options forforeign currency-rupee swaps for companieshaving net worth of Rs. 100 crore to enter suchcontracts.

• The maturity of the hedge by the companiesmust not exceed the maturity of the underlying.

• In case of trade transactions being theunderlying, the tenor of the structure shall notexceed two years.

• Banks must periodically inform companiesabout the mark-to-market position of thecontract.

• The Companies could enter into buy and sellpositions simultaneously for plain vanillaoptions.

The new norms will be effective from February 1.

2.0 NON-PROFIT ENTITIES ALLOWED TOESTABLISH TECHNICALINSTITUTIONS

Companies registered as non-profit entities undersection 25 of the Companies Act will now be ableto establish technical institutions in the countrybut joint ventures will not be allowed. The benefitsof mega cities will be extended to other regionsalso for setting up technical institutes, i.e rural andother areas where the land requirement will be 10acre and 2.5 acre, respectively.

3.0 BANKS OPPOSE GRANTING NEWLICENCES TO BUSINESS HOUSES

Banks have opposed corporate houses being givenbanking licences due to "unsatisfactory pastexperiences" in their feedback to the Reserve Bankof India's discussion paper on new licences inAugust. According to banks, it would also createan uneven playing field due to the large capitalbuffer that would be available to banks sponsoredby industrial or business houses. Banks do notfavour non-banking finance companies promoted

by industrial houses entering the banking sector,either. Banks were in favour of allowing onlystandalone NBFCs to promote banks and, at thesame time, barring NBFCs sponsored by industrial/ business houses.

4.0 MONETARY REVIEW: RBI TO BUYBACK GOVT. SECURITIES FROMBANKS

The RBI permanently reduced the quantum ofGovernment securities that they must mandatorilyhold (statutory liquidity ratio or SLR) by onepercentage point to 24 per cent of their deposits.

5.0 SEBI REVOKES BAN FOR ISSUE OFODIs

The Securities and Exchange Board of India (SEBI)has revoked the ban of Societe Generale for issuingoffshore derivative instruments (ODIs).

6.0 CCI: BANKS WITHIN RIGHTS TOLEVY FORECLOSURE PENALTY

The levy of penalty by banks and housing financecompanies for foreclosure of home loans does notamount to abuse of dominant position, theCompetition Commission of India (CCI) ruled,quashing borrowers' hopes that the practice couldbe abolished.

7.0 CREDIT INSURANCE DOOR OPENS,CONDITIONS APPLY

Three months after it banned all forms of creditinsurance, the regulator has allowed companiesto provide limited trade credit protection. Creditinsurance will, however, not be available forsecuring bank credit. In September, the InsuranceRegulatory and Development Authority (IRDA)banned all forms of credit insurance except forthe cover provided by the Export Credit GuaranteeCorporation. The ban came in the wake of largedefaults on credit insurance policies issued bystate-owned companies. The state-owned OrientalInsurance was left with a large credit risk exposureof close to Rs.400 crore after paramount Airlinesfailed to meet its obligations to lenders. The newguidelines enable insurance companies to providecover for trade, but the credit insurance policiescannot be assigned to banks. In other words, theseller cannot realize the proceeds of sale from abank using the credit insurance policy as a security.Second, insurers have been barred from sellingprotection for a single transaction and have tocover all the trades.

3A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

EDITORIAL / CORPORATE LAW

CAG NORMS.................

Contd...................from page 1

• The requirement of a minimum remuneration /compensation to a ACA Partner of Rs. 1.80 lakh per annumand to a FCA Partner of Rs. 3 lakh per annum is completelyun-required. The requirements of profit sharing ratio arejustified but there could be a situation that a charteredaccountant firms have much lower net-profit, after payingtaxes and it may not be possible for them to distributemore than the actual profit earned by them. Thisrequirement will disentitle less profitable firms from theCAG empanelment and allotment and will considerablyreduce the firms available with CAG for conducting mid-size and large size audits.• The requirements of minimum 6 fulltime CAs with atleast 5 fulltime partners is again not necessary. CAG neednot distinguish between partners and employees and inany case 6 is a very large number considering the auditfee of only Rs. 1.5 lakh plus.• The requirements to have a minimum existence of10 years or more will disentitle younger CAs and youngerfirms from CAG audit. The younger chartered accountantsare filled with latest knowledge and capability and ratherCAG can consider certain categories of audit to be givento younger firms on a priority basis.• In case of merger, the lock-in period of 5 years forrecognizing longitivity of a partner's association, will actas a dampener to the entire efforts of ICAI to promotenetworking and merger.• The Hon'ble CAG may also please consider asubstantial increase in currently very low audit fee beingpaid by large and mid-size public sector undertakings. Inview of more and more financial frauds and scams andcorruption cases coming to light. The profession ofchartered accountants will like to support the CAG toact as preventors of frauds and scams. It may, therefore,be necessary to utilize the services of charteredaccountants more elaborately with adequate depth andelaborate of the scope of audit, so that all major problemscan be brought to light. We understand that while auditingPSU undertaking, the profession of CAs is contributingto the cause of the nation and the professional fee paidmay only be indicative. Even then, it may be necessary toat least adequately pay for the costs of the manpower,overheads and other resources allocated by the CA firms,while conducting audit and other risk managementexercises on behalf of the Government and CAG.

CORPORATE LAW1.0 NO TIME LIMIT FOR REFERENCE OF

DISPUTES TO LABOUR COURTThe Supreme Court has held in its judgment,Kuldeep Singh Vs. Instrument DesignDevelopment Centre that Industrial Disputes Actdoes not prescribe any time limit for referring adispute to the labour court.2.0 PFRDA RAISES INCENTIVE TO BOOST

CITIZEN PENSION PLANThe Pension Fund Regulatory and DevelopmentAuthority (PFRDA) has decided to enhanceincentives to distributors from Rs. 50 to Rs. 150for each subscriber for this financial year, a moveaimed at popularizing the citizen pension plan,which has received lukewarm response so far.3.0 SEBI PLEAD FOR PROTECTING

AUTONOMY OF REGULATORSThe capital market regulator has sought provisionsto ensure the autonomy of regulatory bodies.According to CB Bhave, Chairman, Securities &Exchange Board of India (SEBI), it is imperativeto make sure there are adequate supportiveprovisions in the laws and rules to maintain theautonomous character of these institutions.d. Ifregulators have to depend on the executive forrelease of funds, the independent behaviour ofregulators will be jeopardized.4.0 SC- DISMISSED, CONVICTED

EMPLOYEE CANNOT CLAIM BACKWAGES

A person who was convicted for an offence andremoved from service cannot claim backwageseven if he was acquitted later, the Supreme Courtruled in the case, Corp Mithilesh vs Union of India.Merely because he is acquitted, he is not entitledto backwages and other consequential benefits.5.0 INDEPENDENT DIRECTORS' PAY

MUST BE BASED ON TIME SPENT ONCOMPANY WORK

Independent directors should be paid at least asmuch as the CEO on a man-day basis, accordingto Mr. Martin Steindl, Corporate GovernanceOfficer at International Finance Corporation.Speaking at a CII seminar on corporategovernance, he said that the daily salary of theCEO multiplied by the number of days spent bythe independent director should form the basis ofhis compensation. Independent directors shouldnot be paid just sitting fees but should becompensated adequately in terms of the time thatthey have spent on company work.

CITI BANK FRAUD.................

Contd...................from page 1

The problems are recurring more in case of foreign banks,public sector banks as they have freedom to appoint theirown auditors subject to approval of Reserve Bank of Indiaand there are no detailed guidelines or procedures toverify as to whether internal control procedure and riskmanagement practices have been duly adhered to by them.

4 THE CHARTERED ACCOUNTANT WORLD – January 2011

TAXATION

TAXATION

1.0 PAN MANDATORY FOR ALL MFINVESTMENTS

All mutual fund investors, new as well as existing,will need to mandatorily furnish their PermanentAccount Number details from 1st Jan,2011irrespective of the size of their investment.

2.0 HIGHER TAX BREAKS FORTRANSPORT EMPLOYEES

Operational level employees of transport systemsincluding railways and domestic airlines havecause for cheer. The Finance Ministry has raisedthe tax exemption ceiling on the allowance paidto them for meeting their personal expenses duringthe duty performed in running the transport systemfrom one place to another in India. The taxexemption ceiling on such allowances has beenhiked to Rs. 10,000 a month from an earlier ceilinglevel of Rs. 6,000 a month. The exemption isavailable only if such an employee is not in receiptof any daily allowance.

3.0 CUT CORPORATE TAX TO 25%Industry chambers have asked the FinanceMinistry to reduce corporate tax to 25 per centfrom the existing rate of 30 per cent so that IndiaInc is left with more money to make big-ticketinvestments. The reduction of the corporate taxrate to 25 per cent would bring the tax regime inthe country at par with that of developed Westernnations and make the country's corporate sectormore competitive globally.

4.0 IN THE CASE OF SAMSUNGENGINEERING CO. LTD. FOLLOWINGHAS BEEN DECIDED

• Interest on FD is Business IncomeInterest income earned on Fixed Depositmade for the purpose of business should beconsidered as business income and not asincome from other sources.

• Salary and Welfare not covered undersection 44CThe Tribunal held that salary and welfareexpenses of taxpayer's staff will not becovered under section 44C of the Income-tax Act, 1961 (the Act) since the expensesare directly related to the Indian Project.

• Payment for procurement services cannotbe considered to be a payment towards feesfor technical servicesThe Tribunal also held that the payment madefor procurement services cannot beconsidered to be a payment towards fees fortechnical services as per India-Korea TaxTreaty (the tax treaty) since procurementservices were purely commercial in natureand had nothing to do with rendering of anytechnical managerial or consultancy services.

Citation: DDIT v. Samsung Engineering Co. Ltd. [2010-TII-169-ITAT-MUM-INTL] Judgement Date 10 November 2010 AY 200 1-02, 2002-03 and 2004-05)

5.0 PASS-THROUGH COSTS (PAID TOTHIRD PARTY VENDORS) NOT TO BEINCLUDED IN COST BASE FORDETERMINING NET PROFIT MARGINFOR TRANSFER PRICING PURPOSES

The ITAT Delhi held where a taxpayer engagedin rendering advertising and related services to itsAssociated Enterprises (AEs) is also acting as anintermediary between the AEs and the third partyvendor to rent advertisement space from thevendor, costs recovered by the taxpayer from theAEs for such renting and then passed on to thevendors (pass-through costs) would not be valueadding costs for the taxpayer and would, therefore,not be taken into account for computing net profitmargin (Operating Profit / Total Cost) of thetaxpayer for applying the Transactional Net MarginMethod (TNMM).Citation: DCIT v. Cheil Communications India Private Limited (I.T.A. No712/Del/2010)

6.0 TAXABILITY OF BENEFIT OF WAIVEROF LOANS AND UNPAID INTERESTFOR BORROWER

The ITAT ruled that waiver of unpaid interest,which was not allowed as deduction in the past, isnot liable to tax under the specific provisions ofIndian Tax Laws (ITL) which provide for taxationof remission of trading liability. The ITAT alsoruled that waiver of term loans used for acquiringcapital assets is not liable to tax under the specificprovisions of the ITL which provide for taxationof benefit or perquisite arising from business. TheITAT further held that waiver of cash creditfacility used for trading operations is liable to taxsince the benefit bears revenue character and,therefore, in the nature of benefit or perquisitearising from business.Citation: Addl. CIT v. Rollatainers Ltd. [2010- TIOL-379-ITAT-DEL]

5A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

TAXATION /INDIRECT TAXATION7.0 HOW SHOULD THE ADVANCE TAX BE

CALCULATED WHEN THE COMPANYHAS MAT CREDIT?

Supreme Court held that, MAT credit to be set offbefore computing advance-tax shortfall andliability for Section 234B/ 234C interestCitation: CIT Versus Tulsyan NEC Ltd. New Delhi; December 16, 2010

8.0 NO PPF ACCOUNT FOR HUFIn a notification issued on December 7, thegovernment said a PPF account opened on behalfof a Hindu Undivided Family (HUF) prior to May13, 2005, be closed after expiry of 15 years fromthe end of the year in which the initial subscriptionwas made. The notification came into effect fromthe date of issue. The move is aimed to check themisuse as several people invested in PPF to earneight per cent tax-free return as an individual aswell as an HUF.9.0 WHETHER INTEREST UNDER SECTION

234B CAN BE CHARGED ON MATHeld by Hon'ble Supreme Court of India thatInterest under Section 234B is charged on the taxcalculated on book profits under Section 115JA/115JBCitation: JT. C. I. T., MUMBAI VS. M/S ROLTA INDIA LTD.(Civil Appeal No.135 of 2011, Order Dated 07/01/2011, HON'BLE SUPREME

COURT OF INDIA)

INDIRECT TAXATION1.0 SERVICE TAX SOP FOR RETAIL SALE

OF PACKAGED SOFTWAREPackaged software for retail sales has not beenbrought under the Maximum Retail Price (MRP)-based excise levy. Simultaneously, the Centre hasallowed 15 per cent abatement for calculation ofexcise duty on such software. The abatement isbeing given to cover the margins in the distributionchain. Post the change in the basis of excise levy,the Centre has also accorded service tax exemptionon all packaged software where excise duty hasbeen paid on MRP basis. Also, there will now beno service tax levy on imported packaged softwarewhere countervailing duty has been paid. This willset to rest the confusion caused at the ground levelby the Centre's move in 2008 to levy service taxon "transfer of right to use software".2.0 CONSTITUTIONAL VALIDITY OF

SERVICES TAX ON FINANCIALLEASING SERVICES

Service tax imposed by section 66 of the Finance

Act, 1994 on the value of taxable services referredto in section 65(105)(zm), read with section 65(12)of the said Act, insofar as it relates to financialleasing services including equipment leasing andhire-purchase is within the legislative competenceof the Parliament under Entry 97, List I of theSeventh Schedule to the Constitution.Citation: Association of Leasing and Financial services companies Vs. UOI

and Ors (2010) (235) CTR (521) SC

3.0 CENVAT RULES APPLICABLITYWHEN ASSESSEE IS ENGAGED IN'TRADING ACTIVITY' ANDPROVIDING 'OUTPUT SERVICES'

There is no provision in the Rules to cover asituation where an assessee is providing a taxableservice and also undertaking another activitywhich is neither a service nor a manufacturingactivity. In such a situation, the correct legalposition is to choose and segregate the quantumof 'input services' attributable to trading activityand exclude the same from the records maintainedfor availment of credit. The above proportionatereduction can be done once in a quarter or in sixmonths, by applying the standard accountingprinciples.Citation: Orion Appliances Ltd. v. CST Ahmedabad 2010-VIL-10-CESTAT-AHM

4.0 EXCISE BENEFIT DENIED FOR USE OFCOMBINATION BRAND NAMES

The Supreme Court (SC) has set aside the orderof the excise appellate tribunal which had grantedduty benefits to Ace Auto Co Ltd, a small scaleindustry which supplied clutch plates and relateditems to Tata vehicles. On the cover assembly ofthe products manufactured by Ace Auto, itprefixed its symbol and logo with Tata. Ace Autothen claimed excise benefits granted to small scaleunits. It was denied by the Commissioner ofCentral Excise, Delhi. In the dispute, the tribunalruled that the company was entitled to the benefit.However, the Supreme Court stated that in orderto avail of the exemption notification of October2002, the SSI manufacturer must prove that itsproduct was not associated with another person.If it is shown that the manufacturer has affixedthe brand name of another person on its goodswith the intention of a connection between theirproducts, the benefit would not be available tothe SSI. However, if the assessee company is ableto prove there was no such intention or that theuse of the brand name was entirely fortuitous, itwould be entitled to the benefit of exemption.

6 THE CHARTERED ACCOUNTANT WORLD – January 2011

AUDIT/ CAPITAL MARKET

AUDIT1.0 CAG-POLICY OF EMPANELMENT OF CA FIRMS

AND SELECTION OF AUDITORS OF PSUs

1. Eligibility:- Chartered Accountant firms in India with at

least one full time FCA (Partner/Sole Proprietor)

2. Selection process

Where Audit Fees is upto Rs.1.5 lakh

Depends upon the points earned by each chartered accountant

firm.Particulars No. of Points

Experience of Firm .5 For every calendar year.

Full Time FCA Partners 5 for 1st five partners

2.5 for 6th onwards

Full Time ACA Partners 3 for 1st five partners

1.5 for 6th onwards

Points for association with firm 5 for >25 years

4 for >20 years

3 for >15 years

2 for >10 years

1 for >5 years

Full Time CA employees 1 for each (Max.20)

CISA/ISA qualified partners 2 for each (Max.6 Points)

CISA/ISA qualified Employees 1 for each (Max.3 points)

Where Audit Fees is beyond Rs.1.5 lakhCriteria for short-listing eligible firms of CAs for allotment ofMajor Audits:-

1. The firm should have at least 6 CAs (out of which 5 shouldbe full time partners and one could be a full time paid CA employee

2. At least one partner having min.10 yrs of association + 3partners having association of min.5 years + the remaining twohaving association of min.1 yr

3. Existence of firm for min.10 yrs

Other Points having relevance in allotting major audits:-

• No.of partners in the firm.• Their association with the firm.• Zone where head office is situated.• Sectoral experience.• Service tax paid for assurance services.• Location of branch offices.• Past performance.• Firm's capacity to handle Big audits.❖❖❖❖❖ Full time partner does not includeA person who is(a) a partner in other firms(b) Employed full time/part time elsewhere, practicing in theirown name or engaged in practice otherwise or engaged in otheractivity which would be deemed to be in practice under Section2(2) of the Chartered Accountants Act, 1949.

(c) i) Partners whose total compensation@ from the firm isbelow the following limit:Head office of the firms located in Delhi, Mumbai, Chennai,Kolkata, Bangalore and Hyderabad:ACA partner Rs. 1.80 lakh in a year (Rs. 15000/- permonth)FCA partner Rs. 3.00 lakh in a year (Rs. 25000/- per month)Head office of the firms located other Places:ACA partner Rs. 1.20 lakh in a year (Rs. 10000/- per month) FCA partner Rs. 1.80 lakh in a year (Rs. 15000/- per month)(c) ii) A partner whose total compensation@ from the firm isless than:Firms having more than 14 partners 1%Firms having 10 to 14 partners 3%Firms having 5 to 9 partners 5%Firms having less than 5 partners 8%@Total compensation = Sum total of share of profit, remunerationand interest on capital.All members (sole proprietors/partners/ CA employees) will getpoints if they were exclusively associated with the firm throughoutthe calendar year immediately preceding the year of empanelment.In case of merger, the partners of the merging firms will beassigned points after one year of merger and points for partner'sassociation to be given after five years from the date of merger.

3. Additional Points:-

1. Submission of applications:- From 1st January 2011.

(The format of application will be available on the website:www.cag.gov.in)

2. Firms can apply & update the data showing the status of thefirm as on 1st January 2011, till 31st March 2011 and generateonline acknowledgement letter for the year.

3. Any changes in the constitution of the firm occurring afterthe cutoff date of 1st January 2011 should continue to be updatedin the website. However such change will lead to a reduction inthe rank of the applicant.Note:- ICAI-empanelment last date-31JAN-2011(No condonation of delay in submission of Form No. 18 beyond 31st Januarypreceding the financial year under audit will be done by the Institute.)

2.0 ICAI FAVOURS PEER REVIEW OF SOCIALSCHEMES

The audits of government schemes like the national ruralemployment guarantee act by professional auditors will be subjectto peer review, accounting regulator the Institute of CharteredAccountants of India (ICAI) has said. The government is in theprocess of selecting audit firms through a tender process wherethe assignment will be awarded to the firm quoting the lowestfees. The ICAI fees the method of selection runs the risk ofcompromising the quality of audit. ACCOUNTING regulatorICAI is opposed to the tendering process of selecting accountantsfor auditing state-run schemes and has taken up the issue with thePlanning Commission and the CAG. The ICAI wants theappointment to be done through fixing the fees district-wise andnot through tender saying it may lead to compromise of auditwork.

7A JOURNAL OF ALL INDIA CHARTERED ACCOUNTANTS’ SOCIETY

CAPITAL MARKET

FINANCIALFINANCIALFINANCIALFINANCIALFINANCIAL INDICA INDICA INDICA INDICA INDICATTTTTORSORSORSORSORSCurrent Rate*Current Rate*Current Rate*Current Rate*Current Rate* Month AgoMonth AgoMonth AgoMonth AgoMonth Ago

(in %)(in %)(in %)(in %)(in %) (in (in (in (in (in %)%)%)%)%)3 3 3 3 3 Month Month Month Month Month LIBORLIBORLIBORLIBORLIBOR 0.300.300.300.300.30 0.300.300.300.300.303 3 3 3 3 Month MIBORMonth MIBORMonth MIBORMonth MIBORMonth MIBOR 9.089.089.089.089.08 8.608.608.608.608.60SENSEXSENSEXSENSEXSENSEXSENSEX 1918319183191831918319183 1950819508195081950819508NIFTYNIFTYNIFTYNIFTYNIFTY 57525752575257525752 58575857585758575857CRRCRRCRRCRRCRR 66666 66666REPOREPOREPOREPOREPO 6.256.256.256.256.25 6.256.256.256.256.25REVERSE REPOREVERSE REPOREVERSE REPOREVERSE REPOREVERSE REPO 5.255.255.255.255.25 5.255.255.255.255.25Gold (per 10 gm)Gold (per 10 gm)Gold (per 10 gm)Gold (per 10 gm)Gold (per 10 gm) 2041320413204132041320413 2050020500205002050020500Silver (per kg)Silver (per kg)Silver (per kg)Silver (per kg)Silver (per kg) 4474544745447454474544745 4341543415434154341543415Crude (USD/bbl)Crude (USD/bbl)Crude (USD/bbl)Crude (USD/bbl)Crude (USD/bbl) 98.3098.3098.3098.3098.30 90.4890.4890.4890.4890.48Rs. vs USDRs. vs USDRs. vs USDRs. vs USDRs. vs USD 45.1345.1345.1345.1345.13 45.2245.2245.2245.2245.22Rs. vs EuroRs. vs EuroRs. vs EuroRs. vs EuroRs. vs Euro 59.1059.1059.1059.1059.10 59.9959.9959.9959.9959.99

*As on 13 January, 2011

(Sources: Bloomberg, NSE, BSE,RBI)

1.0 DISCLOSE SHAREHOLDING PATTERNAHEAD OF LISTING : SEBI

• Public Details Of Shareholding

A company after a public issue, will have to make publicdetails of its shareholding a day prior to its listing. Italso said that the stock exchanges should upload thesame on their web sites before the share of the companyare listed.

• Filing of shareholding patternAny listed companies whose capital restructuring makesa change of more than two per cent to its paid-up sharecapital, will have to file its revised shareholding withthe stock exchanges within ten days from the date ofallotment of the shares that constituted the restructuring.

• Maintaining of Web Site

It added that all listed companies should maintain a"functional Web site" with all relevant updatedinformation as prescribed.

• Media relation

The stock markets regulator has also mandated thatthose corporates which have agreements with mediacompanies have to disclose such details on their Websites and also to the stock exchanges.

• Announcement of Date For Dividend

The companies will now have a pre-announced fixedpay date for payment of dividends and for the credit ofbonus shares.

• Uniform Procedure For Dealing WithUnclaimed Shares

SEBI has mandated uniform procedure for dealing withunclaimed shares (both demat and in physical form).If there is no response to three reminders by a registrarregarding unclaimed shares, the shares shall go intothe Unclaimed Suspense account. The issuer companyshall dematerialize the shares held in this account withone of the depository participants. All benefits accruingon such shares shall be credited to this account. Thevoting rights will remain frozen till the rightful ownerclaims the shares.

2.0 SEBI WANTS CLEAN OFF-MARKETDEALS

OFF-MARKET DEALS:

• These are not routed through the stock exchangeclearing house. It involves transfer of shares fromone demat account to another, at a negotiated priceand happens at the depository level.

CAPITAL MARKET SEBI Proposal

• It plans to make it mandatory for companiesto disclose more while placing shares privatelywith institutional investors.

• The regulator is also set to tighten norms forreporting block and bulk deals.

• SEBI may also make it mandatory forcompanies to disclose the list of all institutionalinvestors participating in a qualifiedinstitutional placement.

3.0 BSE, NSE AGREE TO UNIFORM STAMPDUTY PLAN

The government's plan to have a uniform stamp dutyrate for all stock market transactions has moved astep closer to reality. The two major stockexchanges have agreed to take responsibility forcollecting the duty and passing it on to stategovernments. How this will be done has beendecided. Each state will authorize exchanges tocollect duty on its behalf and electronically transferthe funds every fortnight.

4.0 SEBI ISSUES GUIDELINES FORTRADING ON SME EXCHANGES

The stock markets regulator SEBI has made marketmaking mandatory in respect of all scrips listed andtraded on SME exchanges. SEBI issued a mastercircular on its framework for setting up both newexchanges and separate platforms of existing stockexchanges having nationwide terminals for SMEs.SEBI said that these guidelines will be applicable toall registered market makers for creating a marketfor all scrips listed and traded on SME exchanges.

8 THE CHARTERED ACCOUNTANT WORLD – January 2011

� Contact details : Dharampal (9013363257) All India Chartered Accountants’ Society - CFO World 504, Chiranjiv Tower, 43, Nehru Place,New Delhi-110019. Ph: 26223712, 26228410, 26226933 E-mail:aicas.cfo@gmail.com / cfoworld@gmail.com �EDITOR: Pankaj Gupta, LLB, FCSE-mail: pankajguptafcs@gmail.com � PUBLISHED & PRINTED: At New Delhi by Satish Chandra, Administrative Officer, on behalf of All India CharteredAccountants’ Society, 4696, Brij Bhawan, 21A, Ansari Road, Darya Ganj, New Delhi-110 002 Phone 23265320, 23288101 E-mail : aicas.cfo@gmail.comPrinted at: EIH Ltd., Unit : Printing Press, No. 7, Sham Nath Marg, Delhi-110054. Views expressed by contributors are their own and the Society does not acceptany responsibility.

If undelivered, please return to :All India Chartered Accountants’ Society4696, Brij Bhawan 21A, Ansari Road,Darya Ganj, New Delhi-110 002

Date of Publishing : 13th JANUARY, 2011R.N.I. No. 50796/90Posting Date: 14/15 January, 2011

Registration No. DL(c)-01/1268/2009-11Licenced to post without prepayment No. U-(C)-82/2009-11

ACCOUNTING1.0 FINANCE MINISTER CAUTIONS AGAINST

WINDOW DRESSING BY ACCOUNTANTS

Accountants have a critical role in guarding againstwindow dressing of Balance sheets that encouragesentities to take more and more risk until they aredangerously leveraged," Mr. Mukherjee said at aconference organized by the Institute of CharteredAccountants of India (ICAI).

2.0 FINMIN: ENFORCE IFRS ONLY FORCONSOLIDATED ACCOUNTS

The finance ministry has taken the view that theInternational Financial Reporting Standards (IFRS) needsto be adopted only on consolidated accounts of corporategroups as is the practice in Europe. It feels the proposedfair-value-based accounting regime cannot be enforcedon a standalone basis to individual firms as has beenrecommended by the accounting rule maker ICAI andthe corporate affairs ministry.

3.0 ICAI TO FRAME ACCOUNTING FORMATFOR POLITICAL PARTIES

The Election Commission of India has approached theInstitute of Chartered Accountants of India (ICAI) toframe accounting formats exclusively meant for politicalparties. These, once made mandatory, are expected tobring in more financial accountability from politicalparties. ICAI recommend rotation of auditors forpolitical parties as the proposed Companies Bill is makingit mandatory for all companies.

4.0 I-T DEPT ORDERS SPECIAL AUDIT OFC'WEALTH GAMES OC BOOKS

The Income Tax Department has ordered a special auditof the accounts of Commonwealth OrganizingCommittee.