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MANAGING COMMITTEE
VOLUME - III MAY 2015l
Baroda Branch of Western India Regional Council ofThe Institute of Chartered Accountants of India
The Institute of Chartered Accountants of India(Setup by an Act of Parliament)
INDEX
CA. Yash N Bhatt 99243 88339
CA. Viral K Shah 98243 62211
CA. Arpan Dodia 98983 83530
CA. Dhiren Parikh 93762 11099
CA. Abhishek Nagori 94260 75397
CA. Nayan Kothari 98244 33445
CA. Kejal Pandya 98259 77220
CA. Utpal Shah 98250 28960
CA. Hitesh Agrawal 99980 28737
Chairman
Vice-Chairman
Secretary
Treasurer
Ex-officio
Immediate Past Chairman
Committee Member &Study Circle Convener
Committee Member
Committee Member
EDITORIAL TEAM
CA. Yash Bhatt
CA. Hitesh Agrawal
CA. Jay Shah
CA. Sanjay Joshi
Forthcoming Events ... 02
Direct Tax Updates ... 03
Judicial Decisions on Excise andService Tax ... 04
3D ... 05
Indirect Tax Updates ... 07
FAQs on IFRS transactions ... 08
Finance Bill 2015 ... 09
Due Date Planner ... 10
PhotoFlash ... 11
THE INSTITUTE OF CHARTEREDACCOUNTANTS OF INDIA
Tel. :E-mail :
Web :
ICAI Bhawan, Post Box No. 7100,Indraprastha Marg, New Delhi - 110002.
+91 (11) [email protected]
www.icai.org
“ICAI Bhawan”, Kalali-Tandalja Road, Atladra,Vadodara - 390 012. +91 8511077115
+91 8511125959+91 (265) 2681115 / 2680593
BARODA BRANCH OF WIRC OF ICAI
M.:Chairman Mobile:
Telefax :E-mail:
Web :
WESTERN INDIA REGIONAL COUNCIL
Tel. :Email :
Web :
ICAI Tower, Plot no C-40, G BlockOpp MCA Ground, Bandra Kurla Complex,
Bandra (E), Mumbai - 400 051+022-33671400/33671500
Dear Members,
Its vacation time!!! The month of May apart from being the hottestmonth of the year is also the time when a large part of our fraternitytakes a break from their year round work pressures and spends some quality time withtheir family. We wish members a happy and healthy vacation time. The month of May isalso the month of endurance for our students who have to face exams during this month.My best wishes to all CA students appearing in the May Exams.
The first half of April, 2015 saw the Baroda Branch take a break from its normally hecticpace of activities and concentrated on mitigating timeliness with respect to closer offinancials of Branch given by Head Office & also to allow member to complete their BankBranch Audits and Insurance Audits. Activities resumed with a lecture meeting on Place ofEffective Management followed by half day seminar on Audit Reporting Requirements &CARO 2015, both of which were very well received. We also saw a two very interestingstudy circle meetings, wherein a large number of members have participated.
The coming months promise to be equally exciting with a number of refresher coursesand intensive study courses being organized. It is equally challenging task for members tocarry out audit of co-operative banks and Societies due to constitutional change in theSociety Act. We have organised full day seminar on Co-operative Banks wherein we haveinvited Registrar(highest authority for administration of society Act) as one of the speaker& also invited Board members of various co-operative Banks as participants. Bill on GSThas been proposed to be table for its discussion in Loak Sabha and is a subject of an hour.We have organised half day seminar on 16th of May. Marching towards moreliberalisation and boom in stock market, we are arranging one public programme on 9thof May wherein faculty of national fame will be a speaker to address the gathering. Wehave also arranged full day seminar on FEMA where the Regional Director of RBI will bethe Chief Guest & will address the gathering. The Seminar will be organised on 30th ofMay, 2015. To achieve the object of the seminar, we are planning to organise programmeson technical subject more in work shop style in months to come. I trust members willappreciate these concepts and will be attending in large numbers.
We at Branch always believe that the success cannot be achieved by one way performanceand every member and students of Baroda is contributory in its success and therefore welook forward for your feedback and suggestion for continuous improvement in theservices rendered by the Branch and also requesting everyone to come out withinnovative ideas and/or programme for the benefits of members and students.
With warm regards,
ChairmanCA. Yash N. Bhatt
Baroda Branch of WIRC of ICAI
2Success is going from failure to failure without losing enthusiasm
Day & Date :
Time :
Inaugural & Key Shri Prakashchandra Sahoonote Address
Session: 1
Session: 2
CA. Anup Shah
Session: 3
CA. Hiren Shah,
Session: 4
CA. Chirag Bakshi,CA. Hiren Shah,
Fees :
Venue :
Saturday, May 30, 2015
9.30 a.m. to 05.30 pm
Regional Director, RBI
Compounding of non-compliances (Team RBI)
Inbound Investments( including Valuation of equity shares, repatriable andnon-repatriable option and compliance with RBI )
, Mumbai
Outbound Investments including Investment underLiberalised scheme and compliance with RBI
Ahmedabad
Brain Storming Sessions – Case Studies
Vadodara &Ahmedabad
Rs. 900/-
ICAI Bhawan, Vadodara
CPE 6
FULL DAY SEMINAR ONFOREIGN EXCHANGE MANAGEMENT ACT (FEMA)
Forthcoming EventsBRANCH EVENTS
Day & Date :
Time :
Fees :
Topics & Speakers
Session 1
Speaker: Shri. M.A. Narmawala
Session 2
Speaker: Mr.P K Pradhan
Session 3
Speaker:
Speaker:
Session 4
Speaker:
Session 5
Saturday, May 9, 2015
09.30 am to 05.30 pm
Upto May 7, 2015 - Members Rs. 900/- & Youngmembers Rs. 750/- then after Rs. 1100/- &950/- respectively
Amendment of Gujarat Co-Operative Act & Provisionsrelated to Amendment for Co-Operative banks includingallotment of Audit of Co-Operative & other Co-OperativeSocieties
,Registar of Co-operative societies, Gandhinagar
Various Provisions applicable to Co-Operative bank withrespect to RBI Compliances
( DGM-UBD,RBI)
Practical Issues in Audit of Co-Operative Banks withrespect to filing of Part-1, Part-2, Notes to Accounts,Accounting Standards, etc.
CA. Samir Parikh, Vadodara
Taxation of Co Operative Banks including deductionsavailable, Issues arise in Assessment and RecentAmendment In Finance Bill relating to TDS applicableto Co Operative Banks
CA. C.I.Shah, Vadodara
Change in the current CBS environment in line of NewFinance Act,2015
Eminent Speaker
Question- Answer Session
CPE 6FULL DAY SEMINAR ON CO-OPERATIVE BANKS & SOCIETIES
Day & Date :
Time :
Speaker :
Fees :
Venue :
Saturday, May 9, 2015
04.00 pm to 06.00 pm
CA. S P. Tulsian, Mumbai & Mr. Kartik Mehta
Nill
Vasvik Hall, Nr. Trident Complex, Race Course
Day & Date :
Time :
Topic Speakers
Fees :
Venue :
Saturday, May 16 ,2015
10.00 am to 01.00 pm
GST - Basic Structure CA. Anirudh Sonpal, Vadodara
Intricacies & Critical Issues CA. Bhavna Doshi, Mumbai
Rs. 300/-
ICAI Bhawan, Vadodara
CPE 2
CPE 3
PUBLIC PROGRAM ON INVESTOR AWARENESS
HALF DAY SEMINAR ON GST
Date :
Time :
Date TOPICS
CA. Nihar Jambusaria,
Adv. Tushar Hemani, Ahmedabad
Adv. Manish J. Shah,
CA. Milin Mehta,
Sr. Adv. K. H. Kaji,
Fees :Venue :
June 20 to July 11, 2015
Will be announce Later
Jun-20 1 Deeming Fiction Under Income Tax ActFaculty : CCM, Mumbai
2 Recent Trend in Capital GainFaculty : Eminent Speaker
Jun-27 1 Appeal & Stay Proceedings(both at first appellate and at tribunal)Faculty :
2 Recent Judgement of High Court & TribunalFaculty : Ahmedabad
Jul-04 1 Issues in PenaltiesFaculty : Eminent Speaker
2 Important Issues in Business DeductionFaculty : Eminent Speaker
Jul-11 1 Taxation of LLP including ReorganizationFaculty : Vadodara
2 Taxation of Private Trust & Representative AssesseeFaculty : Ahmedabad.
Will be announce LaterICAI Bhawan, Vadodara
DIRECT TAX REFRESHER COURSE (DTRC) CPE 12
Organized by : Committee on Financial Markets & Investor's ProtectionHosted by : Baroda Branch of WIRC of ICAI
WICASA EVENTS
Date Topics Time
May 23 Full day seminar on Branding yourself 10 to 05 pm
May 25-29 English speaking workshop 06 to 08 pm
May 29 Industrial Visit 02 to 06 pm
June 6 & 7 Sports & Cultural Event 09 to 05 pm
July 23 & 24 National Convention
Baroda Branch of WIRC of ICAI
How people treat other people is a direct reflection of how they feel about themselves3
Day & Date :
Time :
Topics :
Faculty :
Fees :
Tuesday, 26th May 2015
06 pm to 08 pm
CA. Vinay Sehgal
For Study Circle members – Rs. Nil,for other members, Rs. 200/-
Industry specific Internal Control
Day & Date :Time :
Topics Speakers
Session - I (June 12, 2015)
Session - II (June 13, 2015)
Panel Discussion
Friday & Saturday , June 12- 13, 2015June12 -4pmto7.30pm&June13 -9amto5.30pm
ICD Standards CA. Dhinal Shah, Ahmedabad
Panel Moderator: Eminent Speaker
A) New Companies Act - CS. Keyoor Bakshi,challenges & threats Past President, ICSI
B) Accounting & Auditing Eminent SpeakerStandards
C) Other regulatory legal CA. Vardhan Dharkar,compliance CFO, Gamon India Ltd, Mumbai
Merger & Acquisition - Experience CA. Sanjeev Shah, Vadodara2014 & Challenges 2015
Business Valuation – CA. Sujal ShahSpecifically for start up companies
CFO to CEO – A well deserve Eminent Speakerjourney
CONFERENCE FOR MEMBERS IN INDUSTRY
STUDY CIRCLE MEETING
Direct Tax UpdatesWritten by CA. Narendra Hindocha
Income computation and disclosure standards
Valuation of inventories
Construction contracts
Some observations relating to the standards notified on 31st March,2015:
- Standards apply for computation of income andof accounts.
- Standards are
- Standardsmethod of accounting.
- In case of conflict, provisions of the Act shall prevail.
- Treatment of transactions and events shall be
-However,
This
- Transitional provisions to consider the income, expense orloss, if any, recognised in earlier years
- Provisions require cer tain disclosures, hence, likelymodifications in Income-tax return forms may follow.
- For valuation of inventories,of the
production facilities.
- There does not appear to be a specific provision for reducingCenvat for valuation of stocks. While the standards appear tohave drawn substantially from AS 2, provision in AS 2 toreduce the amount of discount, rebate, duty drawback etc ismodified to exclude 'duty drawback'.
- Contract revenue and contract costs to be recognised byreference to the stage of completion. Hence,
This is subject toreasonable certainty of collection.
- thus overridingjudicial decisions to the contrary.
- Departing from the Accounting Standard, the standardcontemplates Oneimplication that I can think of is that interest cannot be claimedfully u/s 36 but will need to be claimed with reference to thestage of completion. Also if stage of completion is computedwith reference to costs, interest will need to be considered forthis purpose.
-and
consequently income.
not for the
purpose of maintenance of books
effective from A.Y.2016-17
apply only to assessees following mercantile
governed by
their substance and not merely by legal form.
Marked to market loss or an expected loss shall not be
recognized. restatement of customer and supplier
accounts held in foreign currency (but not foreign exchange
fluctuations on other account) are saved by separate
standard. may affect loss expected at the conclusion of a
long term contract.
allocation of fixed production
overheads shall be based on the normal capacity
no option to
follow completed contract method.
Contract revenue will include retentions,
inclusion of interest in contract costs.
Receipts from customers / advance payments to contractors
are irrelevant for ascertaining stage of completion
CPE 9
Fees :
Venue :
Rs. 2000/- for Members for Both Session (Note : Rs. 300/-for session of June, 12, 2015)June 12 - ICAI Bhawan, VadodaraJune 13 - The Gateway Hotel, Akota, Vadodara
CPE 2STUDY CIRCLE MEETING
Day & Date :
Time :
Topics :
Faculty :
Fees :
Venue :
Tuesday, May 12, 2015
06 to 08 pm
Important aspects of Project Financing/CMA datafrom Bank's perspective
Mr. Trilok Lalwani
For Study Circle members – Rs. Nil, For Othermembers, Rs. 200/-
ICAI Bhawan, Vadodara
Baroda Branch of WIRC of ICAI
Some people tend to forget that kindness and manners are free 4
Revenue recognition
Fixed assets
Changes in foreign exchange rates
Government grants
- Revenue from service transactionsshall be recognised by the percentagecompletion method
- Revenue shall be recognised whenthere is reasonable certainty of itsultimate collection. This recognizesbasic premises for recognition ofrevenue also for the purpose ofIncome-tax Act. This may do awaywith litigation regarding matters likeinterest accrued on loans which isunlikely to be collected.
- All Interest and Discount or premiumon debt securities shall accrue ontime basis. Thus no option to accounton the date on which a fixed deposit ordebentures mature nor can the tax bepreponed to the date of issue ofsecurities when interest is paid inadvance.
- Machinery spares shall be charged tothe revenue when consumed (notwhen purchased). When such sparescan be used only in connection with anitem of tangible fixed asset and theiruse is expected to be irregular, theyshall be capitalized and not debited toprofit and loss account.
- Exchange differences shall berecognised as income or as expensein the previous year subject to section43A. consideringthat section 43A only applies to assetsacquired outside India,
- W h i l e A c c o u n t i n g s t a n d a r dcontemplates three possibilities ofaccount ing for grants, thesestandards
I am notsure if we can still treat incentiveswhich are in the nature of promotercontribution or of capital nature as
From my reading,
in case of
loans in foreign currency to finance
assets sourced in India, exchange
differences shall be treated as
revenue expenditure.
contemplate only reduction
from cost of fixed assets or
recognition as revenue but not taking
the amount to capital reserve.
capital receipt not liable to tax and notliable to be reduced from value of fixedassets.
- While the standard is
statesthat `To the extent that the amountrefundable exceeds any such deferredcredit, or where no deferred creditexists, the amount
-paid for the securitytherefrom after allocation of interestlater received.
- Stocks to be valued
Comparison of costand net realisable value shall be donecategory wise. For this purpose, allshares to be treated together.
- Borrowing costs directly attributableto qualifying asset shall be capitalizeduntil assets are put to use. Otherborrowing costs to be attributableproportionately.
Borrowingcosts include incidentals as alsodiscount/premium.
A provision (which will coverimpairment of assets and doubtfuldebts) shall be recognised only whena person has a present obligation as aresult of a past event, outflow ofresources is reasonably certain anda reliable estimate can be made.
- Contingent assets and liabilities not tobe recognized.
- No discounting to be done.
I welcome corrections or furthero b s e r v a t i o n s t [email protected] Maydeal with it in next issue.
stated to be not
for the purpose of maintenance of
books of account, para G 11
shall be charged to
profit and loss statement.’
Unpaid interest included in the price
to be deducted
at cost except in
case of listed and traded securities
which can be written down to net
realizable value.
Qualifying assets
include all plant and machinery,
furniture and building even if they do
not take 1 year to get ready.
Costs
that need to be incurred to operate in
the future not to be provided.
Securities held as stock in trade.
Borrowing costs
Provisions, contingent liabilities andcontingent assets
Judicial Decisions on
Excise and Service TaxReviewed By CA. Anirudh Sonpal
I. INTEREST & PENALTIES
II. CENVAT CREDIT
1.1 Sections 76 and 78 of the FinanceAct,1994 do not envisage impositionof simultaneous penalties.
[Care & Cure Pvt Ltd vs CCE,Chandigarh – P&H H.C.]
1.2 Penalty imposed u/s 78 of the FinanceAct, 1994 set aside by invoking theprovisions of Section 80 when theappellant had not paid service tax onaccount of liquidity crisis which gotworse because of various Courtpetitions filed by lenders and creditors.
[UB Engineering Ltd Vs CCE – MumbaiCestat]
1.3 When the appellant had paid theservice tax and interest prior toissuance of SCN and had also paid25% penalty within one month fromreceipt of adjudication order, quantumof penalty u/s 70 of the FinanceAct,1994 was reduced; the CESTATobserved that the penalty ofRs.20,000 for not filing the return isnot a mandatory fixed amount ofpenalty.
[M R Mahana Vs CCE – MumbaiCestat]
1.4 Interest not payable on cenvat creditwrongly avai led but reversedimmediately before utilization.
[Oswal Cable Products vs CST, Delhi I– Delhi Cestat]
2.1 Cenvat Credit is eligible of GTAservices for freight upto the premisesof buyer when the goods are sold onFOB basis.
[Mangalore Refinery & Petrochem Ltd
vs CST, Mangalore – Bangalore
Cestat]
2.2 The respondent assessee was eligible
to take cenvat credit on material inputs
like oxygen and nitrogen used by
intermediate processors in their
premises when the respondent
Baroda Branch of WIRC of ICAI
Success is doing ordinary things extraordinarily well5
assessee had entered into a Strategic
Alliance Agreement with other units to
undertake intermediate processes.
The Honourable High Court observed
that cenvat Credit cannot be denied on
the ground that credit is being availed
by one factory and material inputs are
used by three factories, because the
CENVAT able input is being used for
common share and continuous
purpose of manufacturing dutiable
goods; though there are three separate
units with separate registrations, the
entire raw material is being converted
into final dutiable product in
continuous, inter connected and
integrated process conforming to the
definition of a single factory under
Section 2 (f) of the Central Excise Act.
[CST vs Mukund Ltd – Karnataka H.C]
2.3 A manufacturer of excisable goods
can utilize cenvat credit of duty paid on
inputs for payment of service tax on
providing of commission agent’s
services from the same premises and
for which the manufacturer was
registered under provisions of service
tax. No restriction under Cenvat Credit
Rules, 2004 for utilisation of common
input credit availed on inputs and input
services for payment of excise duty or
service tax.
[CCE vs V.Thangavel & Sons (P) Ltd –
Chennai Cestat]
2.4 A 100% EOU which manufactured and
exported goods was eligible to take
cenvat credit of service tax paid under
reverse charge on services taken from
overseas service provider for quality
control and cleaning operations; the
revenue authorities had denied the
cenvat credit on the ground that the
said activities have no nexus to the
manufacture of final products and the
service activity was rendered outside
the place of removal of excisable
goods.
[CCE & ST vs Axles India Ltd – Chennai
Cestat]
III. VALUATION & EXEMPTIONS
IV. TAXABLE SERVICES
3.1 In the course of repair of transformers,
where the value of consumables like
transformer oils, coils etc is shown
separately in the invoice and VAT is
paid on such values, and where the
value of services is shown separately,
the contract with customers can be
treated as split contracts for supply of
goods and provision of services;
service tax would be chargeable only
on the value of the services and labour
charges.
[Samtech Industries vs CCE, Kanpur –
Delhi Cestat – Principal Bench]
3.2 Goods got manufactured by the
appellant as a Loan Licensee through
other manufacturers & goods
manufactured by appellant for Loan
Licensees as a job worker is not to be
included while computing the
aggregate value of clearances for
determining small scale exemption
limit under Notification 9/2003-CE.
[Redicura Pharmaceuticals Pvt Ltd vs
CCE – Delhi Cestat]
3.3 SSI exemption is not available to a
manufacturer under Notification 1/93-
CE if the brand name of another person
is used – exemption would be denied
even if the brand name is used only on
the sales invoices and not affixed on
the goods.
[CCE vs Tubes & Structurals – SC]
4.1 Composite contracts involving
transfer of property in goods and
rendition of services, in the nature of
Industrial Construction, Construction
o f C o m p l e x o r E r e c t i o n ,
Commissioning or Installation, would
be taxable under the respective
classifications even prior to 1-7-2007
when service tax on works contract
was introduced; it is not so that prior to
1-7-2007, only the labour contracts
under the respective services were
taxable.
[Larsen & Toubro Ltd vs CST, Delhi – 5
member LB of Delhi Cestat Principal
Bench by majority decision 3:2]
4.2 Work undertaken of harvesting of
sugar cane and transporting the same
to the sugar factory for which labour is
employed – not taxable as Manpower
Recruitment or Supply Agency
Service since this classification
envisages supply of labour per se.
[CCE vs Shriram SAOTVS Ltd –
Mumbai Cestat]
4.3 Transpor tation of sugarcane by
individual truck owners from cane
collection centres to sugar mills by
issuing fortnightly bills is not in nature
of GTA service for payment of service
tax under reverse charge; GTA has to
issue consignment notes of challans
or other documents containing the
particulars prescribed in Rule 4B of
Service Tax Rules, 1994.
[Nandganj Sihori Sugar Co Ltds vs
CCE – Delhi Cestat]
In case of Export of Services, the
‘relevant date’ for filing refund claim
under Rule 5 of the Cenvat Credit
Rules, 2004 would be the date of
receipt of consideration.
[CST vs Hyundai Motor Engineering
Pvt Ltd – Andhra Pradesh H.C.]
V. REFUND
3-DWritten by CA. Abhay Desai
CENVAT CREDIT OF INPUT SERVICESUSED BY EMPLOYEES
Lao Tzu said “The key to growth is theintroduction of higher dimensions ofconsciousness into our awareness”.Thinking about an issue only from one-dimension may result in faulty action.This is also true for indirect taxes. Onehas to think from all points of view toget the best answer. This columnattempts to discuss various issuespertaining to indirect taxes from all thethree dimensions i.e. Central Excise,Service Tax & VAT.
Baroda Branch of WIRC of ICAI
Life is short; Remember focus on what matters and let go of what doesn’t 6
1) BACKGROUND
2) CONTROVERSY
3) RECENT DECISION AND REASONING
3.1) FACTS OF THE CASE
3.2) ARGUMENTS
Clause (l) of Rule 2 of CENVAT CreditRules, 2004 (CCR) defines inputservice. Vide notification no. 3/2011-C.E.(N.T.) dated 1-3-2011, w.e.f.01.04.2011, following shall beexcluded from the definition of inputservice:
“© such as those provided in relationto outdoor catering, beauty treatment,health services, cosmetic and plasticsurgery, membership of a club, healthand fitness centre, life insurance,health insurance and travel benefitsextended to employees on vacationsuch as Leave or Home TravelConcession, when such
”
Thus as per said rule, CENVAT Creditshall not be admissible for abovestated services.
Con t rove rsy faced by manymanufacturers/service providers iswith respect to meaning of the words
. Can services of outdoor caterersprovided in the canteen of amanufacturer/service provider beregarded as used primarily forpersonal use of the employees andhence CENVAT credit is not available ?
Recently Hon. Mumbai CESTAT incase of
was faced with similarquestion.
Appellant is a manufacturer of softdrinks. For the period from December2011 to December 2012, appellantavailed CENVAT Credit on outdoorcatering services. Department deniedthe claim of the appellant on theground that w.e.f. 01.04.2011,CENVAT Credit is not available on anyinput services used for personal use ofthe employee.
It was argued on behalf of the appellant
services are
used primarily for personal use or
consumption of any employee.
“services used primarily for personal
use”
Hindustan Coca Cola
Beverages Pvt. Limited (2015 (38)
S.T.R. 129)
that what are excluded from thedefinition of input service are specifiedservices when they are primarilymeant for the use of employees. In theinstant case it was pointed out thatservice of outdoor caterers has beenused in relation to carrying out thebusiness of manufacturing excisablegoods. It was also argued that cost ofsaid services forms part of the cost offinal product. It was also submittedthat credit has been claimed only to theextent of cost borne by the appellantand not recovered from theemployees. Reliance was also placedon the TRU Circular D.O.F. No.334/3/2011-TRU dated 28-02-2011wherein it has been stated as under:
“1.9 On the same lines, a servicemeant primarily for the personal use orconsumption of employees will notconstitute an input service. A list ofspecific services has also been givenby way of example in the definition.Most of these services constitute apart of the cost-to-company packageof the employee and are providedei ther f ree of charge or onconcessional basis to companyemployees.”
Hence it was argued that only thoseservices which form part of cost-to-company package of the employeeshall be excluded from the definition ofinput service.
Reliance was also placed on theCircular no. 943//2011-CX, dated29.0.2011 which clarified as under:
Is the credit of only specified goodsand services listed in the definition ofinputs and input services not allowedsuch as goods used in a club, outdoorcatering etc, or is the list onlyillustrative?
The list is only illustrative. Theprinciple is that cenvat credit is notallowed when any goods and servicesare used primarily for personal use orconsumption of employees.
It was also submitted that deletion of
Issue
Clarification
the word “activities relating tobusiness” from the definition of inputservice and adding exclusion onlymakes it explicit what in the past wasimplicit. It was argued that CENVATcredit of the services relating tobusiness was eligible and hencespecific exclusion of service used forpersonal use was not required. Sincethe words “activities relating tobusiness” has been deleted and henceexclusions have been specified. Thusfundamentally there is no change inthe intention of legislators and allservices used for the business are stilleligible for CENVAT Credit.
Reliance was also placed on thedecision of Hon. Bombay High Courtin the case of
wherein it is held that serviceforming part of cost of manufacturingthe final product will be entitled tocredit.
Hon. CESTAT observed that since thewords used are “services primarily forpersonal use or consumption of anyemployee” and in the instant case asthe outdoor catering services wereused by all the employees in generaland has been used in relation tobusiness, credit is admissible. It wasalso observed that what is not eligibleis the cost of services which is meantfor personal use of the employee orwhich is included as part of salary ofthe employee as cost to the company.
Following conclusions can be drawnfrom the analysis of law as well asabove discussed judgment:
A service can be excluded under sub-clause (C) of clause (l) of CCR only if atfirst it is included in the definition ofinput service. As per clause (l)CENVAT Credit is available of:
Coca Cola (I) Pvt. Ltd. v.
CCE, Pune-III (2009 (242) E.L.T. 168
(Bom.))
“any service,—
used by a provider of output service
for providing an output service; or
used by a manufacturer, whether
directly or indirectly, in or in relation to
the manufacture of final products and
3.3) DECISION
4) CONCLUSION
4.1)
Baroda Branch of WIRC of ICAI
The best things come to those who don’t give up7
clearance of final products upto the
place of removal a n d i n c l u d e s
ser vices used in relat ion to
modernisation, renovation or repairs
of a factory, premises of provider of
output service or an office relating to
s u c h f a c t o r y o r p r e m i s e s ,
advertisement or sales promotion,
market research, storage upto the
place of removal, procurement of
inputs, account ing, audi t ing,
financing, recruitment and quality
control, coaching and training,
computer networking, credit rating,
share registry, security, business
exhibition, legal services, inward
transportation of inputs or capital
goods and outward transportation
upto the place of removal”
Thus only services having nexus withthe manufacture or providing of anoutput service are eligible for CENVATCredit. Once that is established, in myopinion there is no question of anypersonal use by an employee. Oncebusiness use of a service isestablished, same cannot be excludedby categorizing the same aspersonally used.
Thus services like beauty treatment,cosmetic and plastic surgery, healthand fitness centre, membership of aclub, life insurance, health insuranceand travel benefits having a remotenexus with manufacture or providing anoutput services are not eligible for creditin the first limb of the definition itself.Hence there is no question of excludingthe same under sub-clause ©.
With respect to services like outdoorcatering & health services, once it isestablished that they are used inrelation to manufacture or providing ofan output service and are given to allthe employees in general, it cannot beregarded as “services used primarilyfor personal use or consumption ofany employee” and hence credit isadmissible.
I do not agree with the interpretationstated in the above referred circularthat the list of services specified undersub-clause (C) is only illustrative. Sub-clause (C) categorically specifies that
4.2)
4.3)
only specified services are to beexcluded if used primarily for personaluse by an employee. It nowhere usesthe words which expands the scopebeyond the listed services.
Relying on the decision of Hon.Bombay High Court in the case of
, Hon.CESTAT in the referred case has heldthat if the cost of service forms part ofcost of final product, credit isavailable. By that logic even a view canbe taken that even in respect ofservices listed at point (1) abovewhich are remotely connected with themanufacture or provision of services,as they form part of assessable value,credit is available.
4.4)
Coca Cola (I) Pvt. Ltd. v. CCE, Pune-III
(2009 (242) E.L.T. 168 (Bom.))
Indirect Tax UpdatesWritten by CA. Manilal Parsiya
NOTIFICATION NO.10/2015-ST,DATED 8-4-2015
NOTIFICATION NO.11/2015-ST,DATED 8-4-2015
Instructions regarding issue of summonsin Central Excise and Service Tax matters– reg. [F. No. 207/07/2014-CX-6, dated20.01.2015]
exempts the taxable services providedor agreed to be provided against ascrip by a person located in the taxableterritory from the whole of the servicetax leviable thereon under section 66Bof the said Act. "Scrip" meansMerchandise Expor ts from IndiaScheme duty credit scrip issued to anexporter by the Regional Authority inaccordance with paragraph 3.04 readwith paragraph 3.05 of the ForeignTrade Policy.
exempts the taxable services providedor agreed to be provided against ascrip by a person located in the taxableterritory from the whole of the servicetax leviable thereon under section 66Bof the said Act. "Scrip" means ServiceExports from India Scheme duty creditscrip issued to an exporter by theRegional Authority in accordance withparagraph 3.10 read with paragraph3.08 of the Foreign Trade Policy.
1. It has been brought to the notice of theBoard that in some instances, thesummons under Section 14 of theCentral Excise Act, 1944 have beenissued by the field formations to thetop senior officials of the companies ina routine manner to call for materialevidence/ documents. Besides,summons have been issued to enforcerecovery of dues, which are underdispute. As per Section 14 of CentralExcise Act, 1944, summons can beused in an inquiry for recordingstatements or for collecting evidence/documents. While the evidentiaryvalue of securing documentary andoral evidence under the said legalprovision can hardly be overemphasized, never theless, it isdesirable that summons need notalways be issued when a simple letter,politely worded, can also serve thepurpose of securing documentsrelevant to investigation. It isemphasized that the use of summonsbe made only as a last resort when it isabsolutely required.
2. On this issue, Board has alreadyissued a circular vide F. No208/122/89-CX.6 dated 13.10.1989in respect of Central Excise.Instruction has also been issued videF. No. 137/39/2007-CX.4 dated26.2.2007 in Service Tax matters.
3. The following guidelines are beingissued to be followed in both CentralExcise and Service Tax matters:–
I. Power to issue summons areg e n e r a l l y e x e r c i s e d b ySuperintendents, though higherofficers also issue summons.Summons by Superintendentsshould be issued after obtainingprior written permission from anofficer not below the rank ofAssistant Commissioner with thereasons for issuance of summonsto be recorded in writing;
II. where for operational reasons it isnot possible to obtain such priorwritten permission, oral/telephonicpermission from such officer mustbe obtained and the same shouldbe reduced to writing and intimated
Baroda Branch of WIRC of ICAI
Do something each day to bring you a little closer to your dreams 8
to the officer according suchpermission at the ear l iestopportunity;
III. In all cases, where summons areissued, the off icer issuingsummons should submit a reportor should record a brief of theproceedings in the case file andsubmit the same to the officer whohad authorised the issue ofsummons.
4. Further, senior management officialssuch as CEO, CFO, General Managersof a large company or a PSU shouldnot generally be issued summons atthe first instance. They should besummoned only when there areindications in the investigation of theirinvolvement in the decision makingprocess which led to loss of revenue.
5. These instructions may be brought tothe notice of all the field officers forstrict compliance. Non observance ofthe instructions will be viewedseriously. Hindi version would follow.
FAQs on IFRS: IAS 21:Ind AS 23: Borrowing Cost:
Written by CA. Prashant Upadhyay
1) What is borrowing cost?
2) Borrowing cost in relation toqualifying asset is capitalized, whichtype of asset is qualifying asset?
In terms of Para 5, interest and othercost incurred by an enterprise inconnection with borrowing of fundslike interest expense calculated usingeffective interest method as covered inInd AS 109 Financial Instruments orfinance charges on finance lease inaccordance with Ind AS 17: leases andexchange difference as an adjustmentto interest cost covered by para 6A ofstandard.
In terms of Para 5, an asset that takessubstantial period of time to get readyfor intended use or sale is a qualifyingasset. Hence an asset manufacturedover a short period of time or ready forintended use or sale are not qualifyingasset and a qualifying asset measuredat fair value like a biological asset arenot covered by the standard. Assets
like manufacturing plants, powergeneration facilities, intangible assets,investment properties, bearer plantsetc can be covered within thedefinition.
In terms of para 8, borrowing costattributable to qualifying asset shouldbe capitalized and other borrowingcost should be charged to profit & lossaccount.
Borrowing cost should be capitalizedat weighted average of borrowingcosts applicable to borrowings of theenterprise that are outstanding duringthe period, other that borrowings madespecifically for the purpose ofobtaining a qualifying asset. Anyincome from temporary investmentsof these borrowings should be reducedfrom borrowing cost. Amount ofborrowing cost capitalized during theperiod should not exceed borrowingcosts actually incurred during thatperiod.
Capitalization of borrowing costsshould be suspended during extendedperiods in which active development isinterrupted. Capitalization ofborrowing costs should cease whensubstantial ly al l the activit iesnecessary to prepare the qualifyingasset for its intended use of sale arecomplete. When the construction of aqualifying asset is completed in partsand a completed part is capable ofbeing used while constructioncontinues for the other par ts,capitalization of borrowing costs inrelation to a part should cease whensubstantial ly al l the activit iesnecessary to prepare that part for itsintended use or sale are complete.
Entity should disclose a) amount ofborrowing cost capitalized during theperiod and b) the capitalization rateused to determine the amount ofbor rowing cos ts e l ig ib le fo rcapitalization.
3) At what rate the borrowing costshould be capitalized?
4) When bor rowing shou ld besuspended or when cessation ofcapitalization takes place?
5) What are disclosure requirements ofInd AS 23?
6) What are difference between Ind AS23 and AS 16?
Following chart covers Ind AS 23 & AS16:
No.
1.
2.
3.
4.
5.
6.
Ind AS 23
Standard excludesassets measured atf a i r v a l u e &i n v e n t o r i e smanufactured inbulk.
E m p h a s i s o ncalculation usingeffective interestr a t e m e t h o dcovered by AS 109F i n a n c i a lI n s t r u m e n t s .Does not coveramor t i za t ion o fd i s c o u n t s /p r e m i u m a n danc i l l a r y cos t sseparately.
Silent on meaningo f “ s u b s t a n t i a lperiod of time”.
Specific disclosureof capital izat ionrate of interest.
In some instances,b o r r o w i n g s o fp a r e n t a n dsubsidiary are alsow e i g h t e d f o rc o m p u t i n gweighted averagecost.
Part of borrowingcost relat ing toinflation coveredb y I n d A S 2 9Financial reporting
i nhyperinf lat ionarye c o n o m i e s , i fc o m p e n s a t e sinflation should becharged to Incomestatement and notcapitalized.
AS 16
Does not providesuch exclusion.
Include interest &c o m m i t m e n tc h a r g e s ,amor t i za t ion o fd i s c o u n t s o rp r e m i u m a n damor t i za t ion o fanc i l l a r y cos t si n c u r r e d i nconnection with thea r rangemen t o fborrowings.
Covers explanationo f m e a n i n g o f“substantial periodof time” appearingin def in i t ion of“qualifying asset”.o f m e a n i n g o f“substantial periodof time” appearingin def in i t ion of“qualifying asset”.
Not required bystandard.
Not required bystandard.
Not required bystandard.
Baroda Branch of WIRC of ICAI
9 Act as though it is impossible to fail
On April 30, 2015, the Lok Sabha passed the
Finance Bill. The Bill which was presented
originally in the Lok Sabha on February 28,
2015 is not passed in its original shape.
Various changes have been made in the Bill.
New amendments are proposed, some
proposed amendments are removed, so on
and so forth. A snippets of all changes made
in the Finance Bill, 2015 as passed by the
Lok Sabha viz-a-vizthe Finance Bill, 2015 as
presented in the Lok Sabha are presented
here.
The Finance Bill, 2015 presented
originally proposed that long-term
capital gains and short-term capital
gains (on which STT is paid) arising to
FIIs would be excluded from the
chargeability of MAT. Fur ther,
expenditures, if any, debited to the
p r o f i t a n d l o s s a c c o u n t ,
corresponding to such income would
also be added back to the book profit
for the purpose of computation of MAT.
In case of Timken Co., In re [2010]
193 Taxman 20 the Authority for
Advance Ruling held that a foreign
company was not liable to MAT as it
had no 'physical presence' in India and
it earned only exempted 'long-term
capital gains'. However, contrary
ruling was given in case of Castleton
Investment Ltd., In re [2012]
24taxmann.com 150 (AAR – New
Delhi), wherein it was held that
provisions of MAT would be equally
applicable to a foreign company.
Thus, the Finance Bill, 2015 proposed
to provide relief from MAT only to FIIs
without extending such relief to foreign
companies. The foreign company
would be liable to pay MAT on capital
gains arising from transfer of
securities and income arising from
royalty, interest or FTS even if such
income would not be chargeable to tax
or taxable at lower rate in India by
I. M AT e x e m p t i o n t o f o r e i g n
companies
Changes Made In
Finance Bill, 2015Written by Team Baroda
virtue of applicable double taxation
avoidance agreements ('DTAA')or any
provision of the Income-Tax Act.
The impact of such proposal would be
that foreign companies would be liable
to pay MAT even on that income which
was exempt from tax by virtue of
DTAAs or Income-tax Act.
Therefore, the Finance Bill, 2015 as
passed by Lok Sabha proposes to
provide relief from MAT to foreign
companies as well. Capital gains from
transfer of securities, interest, royalty
and FTS accruing or arising to foreign
company has been proposed to be
excluded from chargeability of MAT if
tax payable on such income is less
than 18.5%. Further, expenditures, if
any, debited to the profit loss account,
corresponding to such income shall
also be added back to the book profit
for the purpose of computation of MAT.
The Finance (No. 2) Act, 2014 inserted
clause (xvii) in Section 47 to provide
that transfer of share of special
purposes vehicle ('SPV') to a business
trust in exchange of units allotted by
that trust to the transferor shall not be
regarded as transfer, thus, no capital
gain would arise on such transaction.
The Finance Bill, 2015 as passed by
Lok Sabha proposes to exclude the
following from the chargeability of
MAT:
(a) notional gain resulting from
transfer of shares of SPV to a
business trust in exchange of
units allotted by that trust;
(b) notional gain resulting from any
change in carrying amount of
said units; and
(c) actual gains from transfer of said
units.
A new clause is proposed to be
inserted to re-compute the gains
from transfer of said units (as
referred to in point (c) above)
which shall be added back for
II. MAT exemption on notional gain
arising on transfer of share of SPV
computation of MAT. It is
proposed that the amount of gain
from transfer of said units shall
be computed by taking into
account the cost of shares
exchanged with units or the
carrying amount of the shares at
time of exchange where such
shares are carried at a value
other than the cost through profit
& loss account.
Accordingly, notional loss arising from
transfer of asset or notional loss
arising from change in carrying
amount of said units and actual loss
from transfer of said units shall be
added back to the book profit for the
purpose of computation of MAT.
A new clause is proposed to be
inserted to re-compute the loss from
transfer of said units which shall be
reduced from the book profit. It is
proposed that the amount of loss from
transfer of said units shall be
computed by taking into account the
cost of shares exchanged with units or
the carrying amount of the shares at
time of exchange where such shares
are carried at a value other than the
cost through profit & loss account.
The Finance Bill, 2015 as presented
original ly omitted to propose
amendment to clause (a) and clause
(b) of sub-section (2) of Section 80D
to enable assessee to claim deduction
of Rs. 25,000 instead of Rs. 15,000.
However, sub-section (4) of Section
80D was amended to allow deduction
of Rs. 30,000 instead of Rs. 25,000 if
individual or his family member or any
of his parent is a senior citizen or very
senior citizen.
Accordingly, it is proposed in the
Finance Bill, 2015 as passed by the
Lok Sabha that the existing deduction
of Rs. 15,000 shall be substituted with
Rs. 25,000. The following table
highlights the deduction available to an
Individual under Section 80D:
III. Deduction under Section 80D in case
of individual
DATES COMPLIANCE PERIOD
05-May-15 Payment of Service Tax - Monthly Cases / Excise Duty (for NON SSI) April'15
06-May-15 E-Payment of Service Tax / Excise Duty (for NON SSI) April'15
07-May-15 TDS Payment / E-payment and Declaration received for 'No TDS' / 'No TCS' copies to be submitted to CIT April'15
09-May-15 VAT / CST E-return - Monthly (For VAT or CST > Rs. 5,000/-) February' 15
10-May-15 Excise Returns - ( Monthly Return by Large Units / Return by EOU / Monthly return of receipt & consumption of
each of Principal Inputs, assessees required to submit ER-5 return) April'15
11-May-15 ESIC Return Oct.’14 – March’15
Payment of Professional Tax / PF / Excise Duty (for SSI) April' 15
Professional Tax return April' 15
TDS / E-TDS Return – Quarterly Qtr. 4 (F. Y.: 2014-15)
16-May-15 Excise Duty E-Payment (for SSI) April'15
21-May-15 ESIC Payment April' 15
22-May-15 VAT / CST payment / E-payment April'15
25-May-15 PF Return April' 15
VAT /CST E-Return - Monthly (with Jan. '15 to Mar. '15 Stock Details) (For VAT or CST <= Rs. 5,000/-) March'15
TDS Certificate issuance – Form 16A (for other than Salary cases) Qtr 4 (Fin. Yr.: 2014-15)
Audited Yearly Financial Results - filing with Stock Exchange - by Listed Companies Fin. Yr.: 2014-15
TDS Certificate issuance – Form – 16 (Salary cases) Fin. Yr.: 2014-15
15-May-15
30-May-15
31-May-15
Baroda Branch of WIRC of ICAI
Do or do not. There is no try 10
Important Due Dates for May, 2015 Written by CA. Abhijit J. Kotecha
Health Insurance 25,000 25,000 30,000 30,000
Contribution to CGHS 25,000 - 25,000 -
Preventive healthcheck-up (refer Note) 5,000 5,000 5,000 5,000
Medical expenditureif no amount is paid inrespect of healthinsurance - - 30,000 30,000
(only in case of (only in case ofvery very
senior citizen) senior citizen)
Maximum Deduction 25,000 25,000 30,000 30,000
Deduction for preventive health check-up of assessee, spouse, dependent children and parents shall not exceed in aggregateRs 5,000.
(a) Maximum deduction, if individual or any member of his family or any of his parent is not senior or very senior citizen: Rs. 50,000[(a) + (b)]
(b) Maximum deduction if individual or any member of his family is not senior citizen but any of his parent is a senior citizen or verysenior citizen: Rs. 55,000 [(a) + (d)]
(c) Maximum deduction if individual or any member of his family and any of his parent is senior citizen or very senior citizen:Rs. 60,000 [ (c) + (d)]
■
■
■
■
Note:
Deduction in respect of
Individual and his family(none of them is a
senior citizen)
Parents of Individual(none of them is a
senior citizen)
Individual and his family(if senior citizen orvery senior citizen)
Parents of Individual(if senior citizen or very
senior citizen)
(a) (b) (c) (d)
Continue... in next volume
PHOTOFLASH
Baroda Branch of WIRC of ICAI
11 Fear regret more than failure
Half day seminar on Audit Reporting Requirements & CARO 2015 on 25 4 2015
Lecture Meeting On “Place of Effective Management (POEM)” on 21 4 2015
CA. Dhwani C. Shah
CA. Parin Shah CA. Altaf Gohil CA. Sunita Soni
Study Circle Meeting on “ Critical Issues in Advances and Operations areas ofConcurrent Bank Branch Audit 28.04.2015
Study Circle Meeting on “ Opinions byExpert Advisory Committee on 14 4 2015
CA. Jayesh Mehta CA. Mayur Swadia
Lecture on Place of Effective Management (POEM) by CA. Dhwani C. Shah
Baroda Branch of WIRC of ICAI
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12Your Hardest Times often lead to the greatest moments of your life
CONGRATULATIONS
Rajesh N Shah,Elected as
Co-opted Member in Committee for CapacityBuilding of CA Firms and Small & MediumPractitioners (CCBCAF & SMP) for the Year
2015-16 of ICAI
CA. Pradeep AgrawalElected as Co-opted
Member -Committee for
Members in Industryat WIRC
CA. Dipak MavaniElected as Co-optedMember-Committeeof Indirect Taxes at
WIRC
CA. Vishal ThakkarElected as Co-opted
Memberof Internal Audit
Committee at WIRC
CA. Abhishek Nagori Chairman
Convener
Elected as ,Committee on International Taxation &
Committee on Financial Markets and Investors’Protection of WIRC of ICAI
,Public Finance and Government Accounting
Committee of WIRC of ICAI.
Cross Section of Audience
CA. Vinit sodhani on Revisionary session on Indirect Tax
CA. Vinit sodhani
Pro.Vice- Chancellor MSU-Dr. Parimal Vyas 10.04.2015
