TAXMAN SPOILS INDIAN M&A PARTY

Three years after the great Indian deals party of 2007-08 got over, the taxman is playing the party pooper. Indian companies that purchased assets abroad are facing an up to 10 per cent increase in deal costs due to transfer pricing adjustments raised by the income tax department. The department is raising these adjustments on commission or fees chargeable for corporate guarantees given by the acquirers to their subsidiaries abroad. The financial year 2007-08 was one of the best years in terms of outbound merger and acquisition (M&A) deals in India. According to Bloomberg data, Indian companies acquired assets abroad worth $19.6 billion in 302 deals. According to government rules, transfer pricing officials have a43-month window to raise adjustments on transfer pricing. The deadline for raising adjustment orders for the tax year ending March 2008 concluded on October 31. A significant number of companies have already received the orders. In the Mumbai region alone, tax authorities have raised claims of around Rs.30,000 crore, consultants said. This is higher than all transfer pricing orders passed across the country in previous years. Outbound M&A deals contribute a major portion of this sum, said consultants advising the firms. "The size of orders is touching dangerous levels. In some cases, they have fixed commission as high as 10 per cent," said the tax head of a big accounting firm. Some of the significant cross-border deals that happened during the period are United Spirits-Whyte and Mckay($1.7 bn), Tata MotorsJaguar Land Rover ($2.3 bn) and Suzlon-RE Power, showed Bloomberg data. According to the Grant Thornton deal tracker for the year 2007, the largest proportion of outbound acquisitions in terms of value were in Europe (52 per cent of deal value), followed by North America (38 per cent ). In terms of volume, Indian companies acquired more companies in North America (95 deals) than in Europe (84 deals). Many of these acquisitions were done through a subsidiary domiciled abroad, to enable raising of foreign currency loans. This was necessary as Indian banks are not allowed to fund M&A activities abroad. At the same time, since the foreign vehicles did not have assets on their book to cover the loans, the local companies usually gave guarantees to secure these. The tax department has started to view such guarantees as `intra-group services', which require to be charged. The charges payable for such guarantees are calculated and added to the income of the party concerned. While this is a valid concept, the imputation of guarantee charge in the hands of Indian companies needs to be considered differently, given the regulatory environment, say experts. "Many Indian multinationals have acquired big corporates outside India requiring significant funds, which, for various regulatory and commercial reasons, cannot be borrowed in India. In such cases, a Special Purpose Vehicle is formed which borrows from lenders on the basis of guarantee by the Indian parent. Given this, such a guarantee cannot be considered a service. At the most, it is shareholder services. The passive association of a parent-subsidiary relationship needs to be considered before computing the guarantee charge," said Samir P Gandhi, partner, Deloitte Haskins & Sells. The position taken by the tax department for tax year 2007-08 has cast a shadow on outbound deals that happened in subsequent years, too, said experts. According to Bloomberg data, Indian companies have acquired foreign companies worth $60.29 bn in 662 deals since April 2008. While corporate India is gearing up to challenge these orders within the available framework, industry bodies have called for reforms in the transfer pricing framework. Assocham has called for fundamental reforms in the regulations to allay the risk of tax base erosion. "The sheer magnitude of transfer pricing disputes in India has heralded its place at the forefront of the global dispute resolution roadmap," its statement said. Experts said the I-T dispute resolution panel, set up a couple of years before, can play a very efficient role in resolving transfer pricing disputes. "Panel members can be made fulltime to ease the process for all stakeholders. Some guidance by CBDT (Central Board of Direct Taxes) on the power to resolve disputes can be of assistance," said Gandhi of Deloitte. - www.business-standard.com

PANEL ON CURBING BLACK MONEY GETS 2-MONTH EXTENSION

PANEL ON CURBING BLACK MONEY GETS 2-MONTH EXTENSIONTHE government has given a two-month extension to the term of the Central Board of Direct Taxes (CBDT) committee that is examining ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery. The panel was originally given time till November to submit its recommendation. But, it was yet to finish consultations, as inputs from various quarters had not received as yet, senior CBDT official said today. "We asked for time till January 31. (Finance minister) Pranab Mukherjee has approved it," he told Business Standard. The official said the response from most of the industry chambers and professional bodies were still awaited. In a bid to get recommendations from the income tax department officials with expertise in this area, a nodal officer has been appointed to collate the inputs by mid-December, he added. The government had constituted this committee in May this year under the CBDT chairman to examine ways to strengthen laws to curb the generation of black money. Apart from the top CBDT officials, including two members of the board, the members of the committee comprise the director of the enforcement directorate, director-general of the directorate of revenue intelligence and director general (currency). The panel is examining the existing legal and administrative framework to deal with the menace of generation of black money through illegal means such as declaring wealth generated illegally as national asset. It is also entrusted with the task of enacting and amending laws to confiscate and recover such assets. Further, the body will provide for exemplary punishment against its perpetrators. - www.business-standard.com

THE AGREEMENT BETWEEN THE GOVERNMENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REG

THE AGREEMENT BETWEEN THE GOVERNMENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE FRENCH REPUBLIC FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL AND THE PREVENTION OF FISCAL EVASION COMES INTO EFFECT ON 1 DECEMBER 2011 (1 DECEMBER 2011)The Agreement between the Government of the Hong Kong Special Administrative Region of the People's Republic of China and the Government of the French Republic for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Fiscal Evasion ("the Agreement") was formally signed on 21 October 2010.

According to Article 28 of the Agreement, the Agreement shall, upon the written notifications by both sides of the completion of their respective required approval procedures, enter into force on the first day of the month following the day when the later of these notifications has been received.

For the purposes of giving effect to the Agreement, an Order was made by the Chief Executive in Council on 3 May 2011 under section 49(1A) of the Inland Revenue Ordinance. The Order was published in the Gazette as Legal Notice 65 of 2011. The Order was laid before the Legislative Council for negative vetting on 18 May 2011. The vetting period expired on 6 July 2011 and no resolution was made by the Legislative Council to amend the whole or any part of the Order. On 8 July 2011, Hong Kong sent a notification of the completion of the ratification procedures to France. On 3 November 2011, Hong Kong received a notification dated 3 November 2011 from France confirming the completion of the requisite approval procedures. The Agreement therefore becomes effective on 1 December 2011 and shall have effect in Hong Kong, according to paragraph 2 of Article 28 of the Agreement, for any year of assessment beginning on or after 1 April 2012. – www.ird.gov.hk

IFAC Issues Proposed International Guidance to Help Accountants Improve Internal Control

 

IFAC ISSUES PROPOSED INTERNATIONAL GUIDANCE TO HELP ACCOUNTANTS IMPROVe INTERNAL CONTROL

(New York/December 1, 2011) – The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has issued proposed International Good Practice Guidance, Evaluating and Improving Internal Control in Organizations for public comment. The aim of this guidance is to establish a benchmark for good practice in maintaining effective internal control in response to risk, and help professional accountants in business and their organizations create a cycle of continuous improvement for their internal control systems.

“Strong internal control is both one of the best defenses against business failure, and an important driver of business performance. It mitigates risk and adds sustainable value,” said Roger Tabor, chair of the PAIB Committee. “We looked at the sort of things that can go wrong with the way organizations apply internal controls, and drew out principles that professional accountants in business can apply to support their organizations in avoiding these problems.”

With this proposed publication, the PAIB Committee aims to provide principles-based guidance that focuses on the role of professional accountants in business and how they can support their organizations in evaluating and improving internal control as an integrated part of the organization’s governance, risk management, and internal control systems.This proposed guidance can be implemented regardless of the existing internal control frameworks or standards used, as it deals with those internal control issues that are often unsuccessful because of poor implementation and design.

Professional accountants, their organizations, and other interested parties are encouraged to respond to the proposed guidance to help improve its applicability to professional accountants in organizations of all sizes.

How to Comment

The PAIB Committee invites all stakeholders to comment. To access the exposure draft and submit a comment, visit the PAIB Committee section of the IFAC website at www.ifac.org/paib. Comments on the exposure draft are requested by February 29, 2012.

About the PAIB Committee
The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in commerce, industry, financial services, education, and the public and the not-for-profit sectors. Its aim is to promote and contribute to the value of professional accountants in business by increasing awareness of the important roles professional accountants play, supporting member bodies in enhancing the competence of their members, and facilitating the communication and sharing of good practices and ideas.

About IFAC

IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 167 members and associates in 127 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

INCOME-TAX (NINTH AMENDMENT) RULES, 2011 - INSERTION OF RULE 40BA AND FORM NO. 29C NOTIFICATION NO. 60/2011 [F. NO. 133/70/2011-SO(TPL)], DATED 1-12-2011

INCOME-TAX (NINTH AMENDMENT) RULES, 2011 - INSERTION OF RULE 40BA AND FORM NO. 29C

NOTIFICATION NO. 60/2011 [F. NO. 133/70/2011-SO(TPL)], DATED 1-12-2011

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (9th Amendment) Rules, 2011.

(2) They shall come into force on the 1st day of April, 2012.

2. In the Income-tax Rules, 1962, (hereafter referred to as the "said rules"), after rule 40B, the following rule shall be inserted, namely:-

"Special provisions for payment of tax by certain limited liability partnerships

40BA. The report of an accountant which is required to be furnished by the assessee under sub-section (3) of section 115JC, shall be in Form No.29C."

3. In Appendix-II of the said rules, after Form No.29B, the following form shall be inserted, namely:-

"FORM NO. 29C

[See rule 40BA]

Report under section 115JC of the Income-tax Act, 1961 for computing adjusted total income and minimum alternate tax of the limited liability partnership

1. I/We* have examined the accounts and records of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (name and address of the assessee with PAN) engaged in business of. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (nature of business) in order to arrive at the adjusted total income and the minimum alternate tax for the year ended on the 31st March, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. (a) I/We* certify that the adjusted total income and the minimum alternate tax has been computed in accordance with the provisions of Chapter XII-BA of the Income-tax Act. The tax payable under section 115JC of the Income-tax Act in respect of the assessment year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . is Rs.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  , which has been determined on the basis of the details in Annexure A to this Form.

3. In my/our * opinion and to the best of my/our* knowledge and according to the explanations given to me/us* the particulars given in the Annexure A are true and correct.

Date. . . . . . . . . . . . . . . . . . . .

Signed

†Accountant

Notes:

1. *Delete whichever is not applicable.

2. †This report is to be given by-

 (i)  a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949); or

 (ii) any person, who in relation to any State, is by virtue of the provisions in sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), entitled to be appointed to act as an auditor of companies registered in that State.

3. Where any of the matters stated in this report is answered in the negative or with a qualification, the report shall state the reasons therefor.

ANNEXURE A

[See paragraph 2]

Details relating to the computation of Adjusted Total Income and Minimum Alternate Tax for the purposes of section 115JC of the Income-tax Act, 1961

1.	Name of the assessee
2.	Address of assessee
3.	Permanent Account Number
4.	Assessment year
5.	Total income of the assessee computed in the manner laid down in the Income-tax Act before giving effect to Chapter XII-BA of the Income-tax Act
6.	Income-tax payable on total income referred to in Column 5 above
7.	The amount of deduction claimed under any section included in Chapter VI-A under the heading "C." - "Deductions in respect of certain incomes"	Sl. No.	Section under which deduction claimed	Amount of deduction claimed
8.	The amount of deduction claimed under section 10AA
9.	Adjusted total income of the assessee (5+7 + 8)
10.	Minimum alternate tax (18.5% of adjusted total income computed in column 9 above)

■■

INVITATION FOR EMPANELMENT OF RESOURCE PERSONS FOR INVESTOR AWARENESS PROGRAMMES

The Institute  have a fervent desire and duty to undertake the noble task of educating investors. ICAI has been designated as the nodal authority by the Ministry of Corporate Affairs, Government of India to organise 4000 Investor Awareness Programmes for the current financial year throughout India. As a professional Institute, we always provide best support to MCA and maintain a leadership role. To keep the brand image and capability of the Institute at the top, we need your involvement as Resource Persons in conducting the programmes in towns so as to achieve the target given to us.

Necessary guidelines from MCA for organizing programmes by Resource persons are as follows:

1. Programmes will be at small towns.
2. It will be of 2 hrs duration with minimum 50 participants
3. Maximum four (4) programmes may be conducted in each town by 31st March, 2012. Time gap between two consecutive programmes in a town should not be less 20 days.
4. Arranging venue will be done by your goodself.
5. ICAI will pay a lump sum amount of Rs. 5,000/- per programme or actuals which ever is lower against the following documents to be submitted :

•  
  • An undertaking by you that you have conducted a programme giving place, date and   outcome.
  • A statement of expenditure duly certified by your goodself.
  • 3-4 Photograph of participants with banner as a proof of conducting programme
  • Attendance sheet containing the details (name, address, mobile No. & emai-id
  • A brief report of the programme.

I am of the firm belief that your rich experience, expertise and accumen will prove to be a valuable asset to the Institute in taking the mission of the Ministry of Corporate Affairs further forward and ensure this programme a grand success.

The formalities of recognition of resource person by the Institute will be followed by your response.

For any query, please send an email to the following i.e. cfmip_rp@icai.org


With kind regards,

Yours truly,


[CA. Vinod Jain]
Chairman, Committee on Financial Markets &
Investors’ Protection, ICAI

ICAI E LEARNING- AUDITING ASSURANCE STANDARDS Credit of CPE Hours: 3 Hours

E-Learning on Standards on Audit - (02-12-2011)
--------------------------------------------------------------------------------

E-Learning on Standards on Audit
by Auditing and Assurance Standards Board


As a part of its initiatives to create awareness among the members
regarding the Clarified Standards on Audit, the Auditing and Assurance
Standards Board has launched the first phase of e-learning on these
Standards on Audit.



Significant features of E-learning:

Step by step coverage on all important aspects of a Standard.
Colourful and interactive lessons.
Learning at your speed and convenience.
Quiz at the end of each module to test understanding.

The First Phase to the E-learning on Standard on Audit covers:

SA 210, Agreeing the Terms of Audit Engagements
SA 230, Audit Documentation
SA 240, The Auditor’s Responsibility Relating to Fraud in An Audit of
Financial Statements
SA 250, Consideration of Laws and Regulations in An Audit of Financial
Statements
SA 330, The Auditor’s Responses to Assessed Risks
SA 450, Evaluation of Misstatements Identified During the Audit
SA 501, Audit Evidence-Specific Considerations for Selected Items
SA 570, Going Concern
SA 705, Modifications to the Opinion in the Independent Auditor’s Report
SA 706, Emphasis of Matter Paragraphs and Other Matters Paragraphs in
the Independent Auditor’s Report

E-learning on remaining Standards is in progress and will be released soon.



Other Details:
Duration of Course: 7 hours (Maximum time limit- 3 months)
Credit of CPE Hours: 3 Hours
Course Fees: Rs. 500/-
Log on to http://elearn.icai.org for registration and other details.

"Goldman Sach's 7 Economic Forecasts for World in 2012"

 "Goldman Sach's 7 Economic Forecasts for World in 2012"

European Sovereign Debt Crisis: The drawn out sovereign debt crisis across the Atlantic has already rattled investor confidence. The slow pace towards resolution, and the possibility that the Euro could collapse, means the region will continue to weigh on markets. If leaders are not able to come to a consensus on fiscal integration or a way to keep PIIGS nations aloft, it can only lead to further economic deterioration

US Elections:  Goldman believes that ultimately the election will not have tremendous impact on the markets. However, uncertainty in the beginnings of 2012 will roil investors, particularly as debates and plans on issues like federal spending, health care, taxes and financial reform are floated and debated. Already, investors have stomached relatively outrageous proposals to overhaul the American tax code.

US credit Further Down-grade: Unexpectedly, credit rating agencies left the U.S. sovereign credit rating unchanged following the* super committee's failed attempt at cutting $1.2 trillion from the U.S. budget. A downgrade by a second firm, following Standard & Poor's move this summer, would increase borrowing costs on the federal government and impact spending abilities. Fitch Ratings has already moved the country to negative watch, a precursor to a lower rating.

Further Financial Deleveraging: Since the economic crisis began, U.S. financial institutions have deleveraged portfolios by more than 30%. As bank management considers further reductions to leverage — against greater regulatory requirements, slower economic growth, declining home prices, European write downs, illiquidity, or tightening credit — both growth and valuations would be negatively hit. 

US Housing Market Weakness: The depressed U.S. housing market, which kick started the financial crisis in 2007 and 2008, will weigh further on investors. Mostly, markets have predicted that foreclosures will continue to increase as banks begin to process claims they had put on hold. However, if unemployment begins to rise and mortgage holders who were up-to-date on payments begin defaulting, the picture could get all the worse. 

Sharp Higher Movements in Oil:  Economists at Goldman Sachs are already predicting that global oil prices will continue on their upward trend, driven by increased demand in developing markets, low inventory levels in OECD countries and producer constraints that have limited supply. However, a sharp movement up could stall world growth, similar to how the rally beginning in August 2010 was stymied by oil volatility in February 2011.

Global Recession:  Weak developed economies, a common thread since 2008, have had difficulty posting consistent GDP growth. Instead, the global economy has been buoyed by expansion in markets like China, India and Brazil. Goldman thinks any slowdown there, particularly next to sluggish growth in the U.S. and Europe, would lead investors to price a recession into equity markets, hampering returns.

Extracts from Goldman Sachs Report

Vacancy for Chartered Accoutant in Tata Capital

Designation	Sr. Manager / AVP
No. of Positions	1
Location	Mumbai

Mauritius Route, Not 'Objectionable Treaty Shopping': Recent Advance Ruling

Mauritius Route, Not 'Objectionable Treaty Shopping': Recent Advance Ruling

Confirming the Mauritius route for the fifth time in the recent past,1 the Authority for Advance Rulings ("AAR") has held that gains arising from the transfer of shares of an Indian company by a Mauritian resident should not be taxable in India under the India-Mauritius tax treaty ("Treaty").2 While rejecting the Revenue's attempts to disregard the Mauritian entity on grounds of substance, the AAR has made interesting comments on issues such as tax avoidance, beneficial ownership and the validity of treaty shopping.

The taxpayer, Ardex Investments Mauritius Limited ("AIML") was incorporated in Mauritius in 1998 and is held by Ardex Holdings U.K. Ltd ("Ardex Holdings"), a UK based company engaged in the business of manufacturing construction material. AIML is a resident of Mauritius and possesses a tax residency certificate issued by the Mauritian tax authorities. It currently holds 50% of the shareholding in Ardex Endura (India) Pvt. Ltd ("AEIPL"), an Indian company engaged in the business of manufacturing flooring adhesives.

AIML proposes to sell its entire stake in the Indian company to Ardex Beteiligungs GmbH ("ABG"), a German group company, at fair market value. It sought an advance ruling on whether capital gains on the proposed sale would be chargeable to tax in India having regard to the provisions of the Treaty.


Taxman Disregards Mauritius

The Revenue argued that AIML was brought into existence as a façade to make investments in India on behalf of Ardex Holdings UK, just to take advantage of the India-Mauritius Tax Treaty and thereby avoid being taxed under the India-UK tax treaty. It was argued that the assets of AIML comprised only the investment in AEIPL and that AIML did not earn any income in the year prior to the proposed transfer. The Revenue also proposed that the beneficial ownership of the shares of the Indian company vested with Ardex Holdings since the funds for purchase of such shares were sourced from the parent company. It was also alleged that the decision to sell the shares in AEIPL was taken by Ardex Holdings, which AIML followed, being its subsidiary. On this basis, the Revenue sought to disregard the corporate veil of the Mauritian entity and bring the transaction to tax.

Treaty Shopping Not Taboo

The AAR did not agree with the Revenue's submissions. It noted that the shareholding in AEIPL was acquired over a period a period of 10 years and did not come to existence all of a sudden. It also noted that although the formation of AIML was with an eye on the Mauritius Treaty, it cannot be viewed as objectionable treaty-shopping.

Relying on the landmark Mauritius case3, the AAR held that there is nothing taboo about treaty shopping.4 In the Mauritius case, the Indian Supreme Court held that treaty shopping is a legitimate exercise of tax planning and taxpayers cannot be denied benefits of the Mauritius Treaty in the absence of express treaty provisions limiting such benefits.

Considering that the shares were held by AIML for a considerable period of time and are proposed to be sold at fair market value, the AAR did not view the arrangement as a tax avoidance scheme. It also did not consider the theory of beneficial ownership to be relevant for deciding whether Ardex Holdings is the holder of the shares of the Indian company. Beneficial ownership is an anti-avoidance tool used in tax treaties aimed at restricting the availability of lower withholding tax rates to persons who exercise real and complete ownership rights over specific streams of income such as dividends, interest, royalty and fees for technical services. Interestingly, in an earlier case,5 the AAR had noted that the concept of beneficial ownership may not be relevant for the purpose of capital gains, since treaties generally do not use this expression in the clause dealing with capital gains income. 

Mauritius: It's Not Only About Tax

The Mauritius saga - a story of irony and suspense – continues to capture the attention of professionals, foreign investors and policy makers.

For almost a decade, the Mauritius case has provided a good degree of certainty to taxpayers investing through Mauritius. They have been reassured of their right to structure their affairs in a legitimate manner that minimizes the incidence of tax. For instance, US investors are able to avoid double taxation in India and the US on capital gains earned from the sale of shares of Indian companies. It is therefore not surprising that over 40% of India's FDI is invested through Mauritius.

Ironically, in the Mauritius case it was the Indian Government which defended the Mauritius route and convinced the Supreme Court that treaty shopping is legitimate and that the Mauritius Treaty does not exclude shell holding companies investing into India.

In the recent past, however, the tax department has been actively challenging offshore holding structures and Mauritius residents' entitlement to tax treaty benefits. Cases such as Vodafone, Aditya Birla Nuvo and E*Trade Mauritius reflect the sudden volte face in the Government's approach.6 These cases are currently before the Supreme Court. Today, there is much suspense on the fate of the Mauritius route and whether the Supreme Court will qualify its decision in the Mauritius case. This has created quite a bit of uncertainty for cross-border mergers and acquisitions.

Of course, the important question is whether the final conclusion to the Mauritius saga is a matter of judicial interpretation or one of Government policy. In the Mauritius case, the Supreme Court was of the view that `treaty shopping' is essentially a policy issue and Courts may only look at whether it is expressly prohibited by the treaty. It also observed that such policy choices are influenced by the state of a country's development and other economic and political considerations.

From a broader policy perspective, the ostensible loss of revenue on account of treaty shopping using the Mauritius route may not be as significant as:

        i.            India's close economic, cultural and diplomatic relations with Mauritius built over more than half a century;

      ii.            USD 271,866 million in FDI that India received from Mauritius over the last decade;

      iii.            Mauritius' unswerving support of India's candidature for permanent membership of an expanded United Nations Security Council;

    iv.            India's economic interest in the Mauritian continental shelf and the security of the Indian ocean; and

      v.            the importance of Mauritius as a gateway to Africa.

While developing its policy for Mauritius, it is necessary for the Government to recognize these macro considerations and take a reasonable, stable and balanced view in the interest of the nation.


____________________
1 Earlier cases decided in 2010 and 2011: E* Trade Mauritius Ltd. v. DIT, [2010] 324 ITR 1 (AAR); Praxair Pacific Limited v. DIT, [2010] 326 ITR 276 (AAR); D.B. Zwirn Mauritius Trading No. 2 Limited v. DIT, (2011) 240 CTR (AAR) 6; D.B. Zwirn Mauritius Trading No. 3 Limited v. DIT, [2011] 333 ITR 32 (AAR).

2 Ardex Investments Mauritius Limited, AAR No. 886/2010, decision dated November 14, 2011.

3 Azadi Bachao Andolan, 263 ITR 706 (SC).

4 The AAR also noted that the earlier McDowell case, AIR 1986 SC 649 did not address issues of treaty shopping and was hence not relevant. In the Mc Dowell case, the Supreme Court held that colorable devices and subterfuges do not constitute legitimate tax planning.

5 KSPG Netherlands Holding B.V. v. DIT, [2010] 322 ITR 696 (AAR).

6 Our earlier hotlines providing insights on these cases are available at: Vodafone decision: All is not lost, perhaps nothing, Taxing a Permitted Transferee: Any IDEAs? and A Happy End to the E*Trade Mauritius Saga.

the name of Lucknow CA Tax Bar has been changed

the name of Lucknow CA
Tax Bar has
been changed to Lucknow CA Tax Practioners Association as confirmed by
Registrar of Societies, Lucknow by issuing fresh certificate of registration.

V.B. Bhargava
Secretary
Lucknow CA Tax Practioners Association

CURIOUS LITIGATION

The PIL on top SEBI appointments raises too many questions

On 21st November, the Supreme Court dismissed as withdrawn (for the
second time) one of the most bizarre public interest litigations
(PILs) one has come across. It was regarding the selection process for
the post of the chairman and whole-time members (WTMs) of the
Securities and Exchange Board of India (SEBI).

The PIL was filed by a very eminent trio—former air chief marshal S
Krishnaswamy, India’s ‘super cop’ Julio Rebeiro, and former joint
director of the Central Bureau of Investigation (CBI) BR Lall. None of
them is known to have evinced any previous serious interest in the
capital market and its regulations.

Nevertheless, they seemed dead serious about SEBI’s functioning and
this litigation. After all, they had filed the writ directly in the
Supreme Court and also persuaded India’s former solicitor general
Gopal Subramanium to represent them.

Yet, their writ has had to be ‘withdrawn’ not once but twice. The
first time, the apex court asked them to remove unfounded allegations
against the finance minister. The next time, the court made it clear
that the badly drafted petition wasn’t going to be admitted. Instead,
it gave the petitioners (probably because of their own eminence and
that of their counsel) one last opportunity to plead substantive
constitutional issues.

Now that the Supreme Court, as expected (by us, not other media) has
seen through this, the question is: What motivated these eminent
persons to file this litigation? A simple reading shows that the
petitioners’ objective was extremely narrow: to get UK Sinha’s
appointment as SEBI chairman annulled and probably have CB Bhave and
his two WTMs—Dr KM Abraham and MS Sahoo—recalled for another two
years. Towards this end, a well-orchestrated media campaign launched.
The campaign stretches way back to last year when the finance ministry
made it clear that it was determined to find a new chairman.
Strangely, none of the journalists found it odd that the finance
ministry, under another minister and team of bureaucrats, had
surreptitiously tried to extend the term of the SEBI chairman and WTMs
just a year after they were given a three-year term.
Stranger still is the fact that such an eminent group hadn’t done its
homework about CB Bhave’s own odd, last-minute, selection for the
post—a result of some quick machination. A petition about Mr Bhave’s
appointment from the public interest angle would have certainly made
sense then. Consider this. The finance ministry’s affidavit in
response to the PIL shows there were three persons in the race for
SEBI chairmanship in 2008—M Damodaran (the incumbent), UK Sinha and
Jaimini Bhagwati. All three had been joint secretaries in the finance
ministry’s capital market division and had a good service record.

An objective PIL on the selection process would have made sense when
all three were ignored and CB Bhave (who had formally expressed his
reluctance to accept the post because SEBI had slapped a charge
against the National Securities Depository Ltd of which he was the
founding chairman for 15 years) was appointed. Why appoint a person
who would be hobbled by a ring-fence on important decisions, when
equally, or more, competent alternatives were available? Dr Jaimini
Bhagwati, then considered the strongest contender, has a PhD in
derivatives and, more uniquely, had hands-on experience at running a
derivatives desk at the World Bank. Surely, a PIL at the Supreme Court
level should have done adequate homework to know that past
appointments have been more capricious and arbitrary.

I also learn from an impeccable source that the ‘eminent’ petitioners
didn’t even brief their counsel Gopal Subramanium before the last
hearing and he ended up doing his own homework to find a
constitutional peg on which to hang the shaky petition and avoid
withdrawal. Unfortunately for him, it didn’t impress the bench.

Instead, Chief Justice SH Kapadia called it a ‘publicity-seeking
petition’ and told the petitioners that they could come back one last
time with proper pleadings based on constitutional doctrines. He also
observed that ‘regulatory independence’ is a very important issue. He
asked why only bureaucrats are appointed as regulators instead of
considering candidates from a wider circle with domain expertise.

Unfortunately, the withdrawn petition shows what concerned the Supreme
Court did not agitate the eminent citizens. After all, every single
person in the shortlist when Mr Bhave was appointed was from the
Indian Administrative Service (IAS). So was Dr Abraham; while MS Sahoo
had earlier worked with SEBI, the National Stock Exchange and the
finance ministry. But the eminent citizens who filed the PIL are
clearly not worried at the capture of all regulatory agencies by
bureaucrats with or without domain expertise.

What then are the issues that these citizens ought to raise to help
improve the functioning of SEBI? They will find plenty, in most issues
of Moneylife. In the past few years, SEBI’s failure to discharge its
regulatory duties has forced ordinary investors as well as market
intermediaries to approach high courts or the Competition Commission
of India for redress.

After nearly five years of capricious, non-transparent orders
amounting to a gross abuse of regulatory power, a group of investors
has challenged the legality of SEBI’s consent order mechanism. Once
the court took cognizance of the contentions, the entire consent
mechanism (which was often used to bury mega-scams by paying a
settlement fee) has come to a halt.

Moneylife has already reported how SEBI officials have illegally
issued ‘administrative warnings’ to repeatedly let off entities
involved in market manipulation, insider trading and worse. Although
the SEBI Act does not allow such ‘administrative warnings’, a former
executive director told us that it was done because of inadequate
proof or documentation to substantiate the charges. The fact is that
shoddy investigation, sloppy procedures and vanishing files are the
tricks used by all corrupt investigation agencies to let off
offenders.

SEBI’s failure to create fair market practices over the past two
decades has caused India’s retail investor population to shrink from
20 million to 8 million (according to official studies). The exit of
retail investors, victimised by mis-selling, price manipulation and
poor grievance redressal, has been concealed by large foreign
portfolio investment, soaring stock indices and frothy trading
volumes.

The irony is that our capital market system attracts kudos from
foreign investors because it works well for them. While domestic
investors are harried by paperwork and KYC norms, foreign investors
have no such issues. Hedge funds and India’s super-rich (with loads of
unaccounted overseas funds) route it through non-transparent
participatory notes (PNs) issued by foreign institutional investors
(FIIs) registered in India. So each FII has hundreds of sub-accounts
representing these separate investors. Moneylife has recently made the
shocking discovery that SEBI regulations simply do not require each
sub-account to disclose a separate permanent account number (PAN) for
their transactions. In contracts, domestic Indians have to submit PANs
for all transactions above Rs10,000. SEBI chairman UK Sinha has
maintained complete silence over our query on this vital issue.

Clearly, the group of ‘eminent citizens’ would have served public
interest far better by agitating these critical issues before the
Supreme Court. Calling their petition a ‘publicity-seeking’ ploy is
probably the most charitable comment on their action.

Sucheta Dalal is the managing editor of Moneylife. Subscribers get
free help in resolving their problems with select providers of
financial services. She can be reached at sucheta@moneylife.in

ICAI PACT WITH NEW ZEALAND

CA institute plans to ink pact with New Zealand accounting body
K. R. Srivats
Share  ·  print  ·  T+  New Delhi, Dec 1:  The CA institute plans
to ink a mutual recognition agreement (MRA) with the New Zealand
Institute of Chartered Accountants (NZICA) in January next year.

“We are in the final stages. The agreement may be signed during an
international conference at Chennai on January 6-8. Our central
council had recently cleared this,” Mr G. Ramaswamy, ICAI President,
told Business Line here.

The central council of the Institute of Chartered Accountants of India
(ICAI) had in the second week of November given its nod for the
signing of mutual recognition agreement with NZICA, which is the
operating name for the Institute of Chartered Accountants of New
Zealand.

The MRA provides for recognition of qualifications in each other’s
country. Once the MRA is signed, an Indian chartered accountant can
become a member of this New Zealand body. However, the Indian CA would
not get practising rights in New Zealand, according to Mr Ramaswamy.

There would be opportunities for Indian CAs to provide corporate
advisory services. Similarly, New Zealand chartered accountant cannot
practice here.

The MRA proposal is now before the Corporate Affairs Ministry, sources
said. While ICAI has over 1.75 lakh members, NZICA has over 30,000
members

MCA circulars for cost audit

Ministry of Corporate Affairs has issued General circular No. 67/2011 dated 30/11/2011 stating clarifications about exclusion of certain sectors from the cost audit rules 2011 & General Circular No. 68/2011 dated 30/11/2011 stating clarifications regarding applicability & compliance requirement for the companies and cost auditors.

GLOBAL ACCOUNTANCY MARKET

Highlights:

The global accountancy market grew by 3.4% in 2010 to reach a value of $364.3 billion.
In 2015, the global accountancy market is forecast to have a value of $487.6 billion, an increase of 33.9% since 2010.
Audit is the largest segment of the global accountancy market, accounting for 48.2% of the market's total value.
Americas accounts for 48.6% of the global accountancy market value.
Moderate market growth encourages market entry and tends to weaken rivalry to some degree, despite the difficulty of competing with the largest players.
Market Definition

The accountancy market consists of revenues generated by firms engaged in designing, preparing and auditing accounting records. Income from tax, auditing, and advisory service provision is included. For Japan, the market covers certified public accountant firms only. Any currency conversions used in the creation of this report have been calculated using constant 2010 annual average exchange rates.

ICAI PRESIDENT MESSAGE DECEMBER 2011

President's Message - December 2011 - (01-12-2011)
--------------------------------------------------------------------------------

Dear Friends,


While presenting the Annual Budget for 1956-1957, the then Union
Finance Minister Shri C. D. Deshmukh had said: It is enough to state
broadly my view that by means of the First Five Year Plan we have laid
sound foundations for a more massive superstructure in building up the
country’s economy. He went on to present the vision of his mission
which is relevant even today: The problem is not merely one of raising
the statistical average of per capita incomes which could easily be a
will of the wisp; it is one of raising the lowest incomes and of
opening out to the younger generation avenues of growth and
advancement that will bring out the best in them. For this, the
present generation has to make sacrifices. It has to work harder and
it has to abstain from asking for immediate returns. He always
considered our profession a Public Service. He had advised us to
follow high ideals amidst an abundance of pressures and temptations,
besides carrying out our statutory responsibilities to report on
accounts to the shareholders. I keep his advice in high regard: it is
essential to be ceaselessly vigilant…because of the greatly enlarged
sphere of our activities.




In fact, when the great philosopher Shri Aurobindo says: The truth
sits veiled behind the appearance, selfabsorbed; there is in all
things, without exception, “That which is conscious in these conscious
& unconscious existences, that which is awake in those who sleep”, we
are instantly reminded of our conviction about the consciousness that
we must possess while carrying out our professional responsibilities.
He informs us about the weaknesses of human beings that we may be a
reasoning animal, but our conclusions spring from our preferences,
prejudices and passions. It is, therefore, necessary for us to rise
above these preferences, prejudices and passions and come up to the
expectations of our time.

We need to be quite watchful about the way we conduct ourselves in
profession so that we could augment the public trust in the profession
and its performance. Moreover, the profession now needs to be more and
more communicative to the public about its roles, duties and
responsibilities in the national economy, and members of the
profession need to be in strict compliance with the existing Code of
Ethics, so that the gap between our image and identity gets reduced.
Our motto that we have to be awake in those who sleep becomes quite
functional in this context, as it demands us to update our technical
skills and develop the scope of auditing processes. We must continue
our professional journey on this note with a vigilant attitude.

Let me update our stakeholders now with some recent and important
developments in the profession that have taken place in the past one
month:



International Initiatives


IFAC Council and Edinburgh Group Meetings and ICAI Nominees in IFAC: I
attended the IFAC events in Berlin, Germany, recently along with the
Vice-President CA. Jaydeep N. Shah, and Additional Secretary of the
ICAI. I take pride to inform our stakeholders that our Institute has
been able to retain its Board position at the IFAC. My candidature as
Board member of IFAC was approved by the Nominating Committee after a
detailed interview and was ratified by the IFAC Board as well. The
matter, however, came up for election at the recently concluded IFAC
Council meeting, wherein out of seven candidates I secured the highest
number of affirmative preferences. The Board position to ICAI is a
testimony to our growing stature amongst the global accounting
fraternity and the international forums and the role played by ICAI in
the India’s economic momentum. I also feel satisfied to acknowledge
that another ICAI nominee, my colleague and ICAI Vice- President CA.
Jaydeep N. Shah has been nominated to the International Accounting
Education Standards Board (IAESB) of IFAC. Coinciding with the IFAC
events, the Edinburgh Group meeting was also held, focusing on SMP
issues. IFAC events provided an apt forum to the ICAI functionaries to
discuss our various initiatives with the global accounting bodies.

Visit of IAASB Chairman and IAASB Executive Director: Recently, Prof.
Arnold Schilder, Chairman, International Auditing & Assurance
Standards Board (IAASB) and Mr. Jim Sylph, Executive Director,
Professional Standards, IAASB visited India. During the visit, the
IAASB delegation interacted with regulatory bodies like RBI, SEBI,
C&AG, MCA and the ICAI on various issues, including recent global
financial crisis and the auditing profession, quality of audits,
convergence with international auditing standards, issues relating to
auditing standards in India, perspective of the various regulators on
the expectations of the stakeholders from auditors, how the regulators
and the auditing profession can work together towards a more resilient
world economy and protection of the investors. In particular, the
delegation met the Minister of Corporate Affairs Dr. M. Veerappa
Moily, MCA Secretary Shri Naved Masood and Deputy C&AG Shri A. K.
Awasthi to discuss the issues of mutual interests. The IAASB
delegation also interacted with the members of the Auditing and
Assurance Standards Board of ICAI at the meeting of the Board held on
22nd November, 2011 at New Delhi.

As a part of the Institute’s initiatives to create more awareness
among the members about Standards on Audit, to encourage their
compliance and implementation, the first phase of e-learning on
Standards on Audit was launched by the IAASB delegation, comprising
ten standards. Work on developing e-learning on the remaining
standards is in full swing. We also released three publications,
“Handbook of Auditing Pronouncements 2011 Edition”, “Guidance Note on
Certification of XBRL Financial Statements” and “Guide to Audit of
Complex Financial Instruments”, during the visit of the IAASB
delegation.

ICAI Representation in XBRL International: I am pleased to inform you
that ICAI Vice-President CA. Jaydeep N. Shah has been appointed a
member of the Nominations Committee of XBRL International, while my
Central Council colleagues, CA. Abhijit Bandyopadhyay and CA. K. Raghu
have been appointed members of the Finance and Human Resource
Committee, and the Membership Development Committee of XBRL
International respectively. The aforementioned positions have been
decided by the Member Assembly of XBRL International at its
International Conference held in October 2011. Decision regarding the
other two nominations of the ICAI is likely to be taken hopefully in
December 2011. Here I also wish to inform you that XBRL initiatives of
the ICAI will be showcased in a big way at our forthcoming
International Conference.

SAFA-EFAA Joint Initiative: I am happy to inform that the South Asian
Federation of Accountants (SAFA) representing accountancy in the SAARC
region and European Federation of Accountants and Auditors (EFAA)
representing SMPs of the Europe have decided to come together to share
their expertise for the benefit of SMPs of both the regions. A two-day
joint Seminar on SAFA-EFAA Alliance was organised recently in New
Delhi, where the MoU between SAFA and EFAA was signed in the august
presence of Hon’ble Secretary, Ministry of Corporate Affairs, Shri
Naved Masood, with an objective to create a common platform for
sharing knowledge resources for the benefit of SMPs and help the
members of both the regions for establishing a professional network.

Capacity-Building in Maldives: I take pride in informing you that the
Research and Information System (RIS) for Developing Countries, an
autonomous research institution established and funded by the Ministry
of External Affairs, has approached us and requested us to provide
capacity-building programmes for accounting technicians in Maldives.
It is important to mention that the Government of India is extending a
full-stage services and technology cooperation facility arrangement to
the Government of Maldives. In this regard, I called on the Chairman
of RIS, Mr. Shyam Saran, former Foreign Secretary, recently and had
discussions on our proposed arrangement which could be offered to the
relevant stakeholders in Maldives. It was also discussed that these
programmes would have an interface and, for this, option of running a
part of these courses in India through our Centre of Excellence, etc.,
would also be explored. We have asked the RIS to indicate the nodal
point for recipients of these services, so that focused discussions
could be held.

Submission of Report on Admitting Membership of Overseas Citizens of
India: A group had been constituted under the convenorship of my
Central Council colleague CA. Sanjay K. Agarwal to consider
appropriate steps for identifying a qualification-bridging mechanism
in line with the arrangements in place for MoU/MRAs with various
international accounting bodies and feasibility of considering
provision to be prescribed for admitting membership of overseas
citizens of India and to work out the modalities. I would like to
inform that the said group has completed its task and its report has
been submitted.

Application of the definition of ‘financial liability’ in IAS 32 to
FCCBs: In a meeting of our Accounting Standards Board held recently in
Mumbai, IASB member CA. Prabhakar Kalavacherla was invited for a
discussion on the carve-outs made in Indian Accounting Standards (Ind
AS). He suggested that India would meet greater success in getting its
point of view accepted by the IASB if it prioritises the issues to be
taken up at a time with the IASB rather than taking all issues at the
same time. It was, accordingly, suggested to first send the issue
regarding application of the definition of ‘financial liability’ to
Foreign Currency Convertible Bonds (FCCBs), to the IFRS Interpretation
Committee so that the amendment made by India in the definition as
presently done in Ind AS 32, Financial Instruments: Presentation,
could be avoided. Further, for greater effectiveness, other carve outs
such as that related to giving an option to defer foreign currency
gains and losses in respect of long term foreign currency items as
provided in Ind AS 21, The Effects of Changes in Foreign Exchange
Rates, can be taken up along with other countries such as South Korea.
The Accounting Standards Board is examining the suggestions made at
the meeting.

Towards Constitution of Working Groups of AOSSG: A teleconference of
the Working Group of AOSSG on the proposed limited revisions to IAS
41, on Agriculture, regarding scoping out Bearer Biological Assets
(BBAs) out of IAS 41 and scoping the same in IAS 16, Property, Plant
and Equipment, was held recently leading to another teleconference
between India, Malaysia, and Japan, during which it was suggested
that, in the Issues Paper on Agriculture to be sent to the IASB, two
paragraphs on alternative Indian approach should be included, and that
a covering letter should be written by the AOSSG to the IASB Chairman
in this regard. Accordingly, a letter has been sent to the IASB.
Another teleconference was held to discuss India’s suggestion to
constitute Working Groups of AOSSG on Rate Regulated Activities and
Extractive Activities, where India, Japan and Australia participated
and decided to initially constitute taskforces instead of the working
groups to carry out research by the interested countries in the AOSSG
region. Thereafter, the taskforces can be upgraded to working groups
on requirement basis. For this purpose, India would take a lead in the
taskforces and few other countries are being identified to join in
this endeavour.



Strengthening Ties


Meeting with Minister of State: Recently I, along with ICAI
Vice-President, met Shri V. Narayanaswamy, Minister of State in the
Ministry of Personnel, Public Grievances & Pension, and Prime
Minister’s Office. We apprised him of the activities of the Institute
and its role in development of accountancy profession in India and
globally, and also invited him for our International Conference to be
held shortly.

Meeting with President ITAT: I met the recentlyelected President of
Income Tax Appellate Tribunal (ITAT), Shri G. E. Veerabhadrappa, and
congratulated him on assuming new office. On this platform, I would
like to acknowledge before our accounting fraternity and congratulate
Shri Veerbhadrappa, also our member, for bringing yet another glory to
our profession in public service of our nation.

Meeting with CBEC Chairman: I also had an opportunity to meet the
Central Board of Excise & Customs Chairman, Shri S. K. Goel, recently
along with the ICAI Vice-President CA. Jaydeep N. Shah and my Central
Council colleague CA. Bhavna Doshi.



Initiatives towards Nation-Building


BANCON 2011 in Chennai: I am pleased to inform that I recently
attended the annual bankers’ conference BANCON 2011 – Gateway to a
Defining Decade on the theme Catalysing economic growth by unlocking
financial savings, successfully and jointly organised by Indian
Overseas Bank and Indian Banks’ Association in Chennai. I addressed
the august audience on the topic Capturing Opportunities in India’s
Gen Next. On the sidelines of the conference, I also interacted with
many bankers and the officials of the RBI highlighting the active role
that we chartered accountants can play in banking sector in particular
and national economy in general.

Awareness Programmes on Challenges in Public Finance & Government
Accounting: I am happy to acknowledge that we are organising awareness
programmes on Rising to the Challenges in Public Finance & Government
Accounting to identify opportunities for our members in public finance
and Government accounting, to assist in developing public finance
structure and to ensure appropriate sectoral allocation for inclusive
growth and economic development. We have organised such programmes in
Dehradun, Ghaziabad and Noida, where eminent faculties exchanged their
views on amendments of service tax, problems of indirect taxation,
wealth tax policy, taxation of real estate transaction, XBRL, among
others, with the participants.

MSHRC Request for Training in Accounts & Finance: It is satisfying to
inform that Shri Mafiul Hussain, Secretary, Maharashtra State Human
Rights Commission (MSHRC), recently met my Central Council colleague
CA. Anuj Goyal in Mumbai with regard to a proposal from MSHRC
requesting to avail our services for capacity building of his
officials in maintenance of accounts and improving the financial
discipline of the Commission.



Professional Developments


Meeting with Secretary, Financial Services, Ministry of Finance: I had
an opportunity to meet Shri D.K. Mittal, Secretary, Department of
Financial Services, Ministry of Finance, recently along with the ICAI
past-President and Chairman of Professional Development Committee CA.
Amarjit Chopra wherein we discussed various issues of mutual
professional interest. In respect of the issue of managerial autonomy
given to Boards of the public-sector banks for appointment of
auditors, I would like to inform that the Reserve Bank of India has
gone ahead with the Roadmap and as suggested therein, the complete
list of eligible Central Statutory Auditors has been sent to banks for
the purpose. We are in the process of making suitable representations
in this regard.

Towards a Crusade for Spreading Ethics in Profession: We have been
constantly engaged in spreading awareness about the Code of Ethics and
preparing ways to familiarise our members with it across the nation.
We have been holding programmes, seminars and workshops on various
ethical subjects for the members, and we ensure that all
Branches/Regional Councils hold at least one such programme in a
quarter, i.e. four in a year. So far, 28 programmes have been
conducted in the current year. Further, we have also introduced a
regular column on Ethics, Know Your Ethics, in our journal.

Guidelines on Conversion to LLPs: As per the recent Council decisions,
guidelines for conversion of CA firms into LLPs and constitution of
separate LLPs by the practicing chartered accountants have been
finalised which are applicable for conversion of CA firms into LLPs or
formation of new LLPs by the members-in-practice of the Institute
subject to the provisions of the Limited Liability Partnership (LLP)
Act, 2008 and Rules & Regulations framed there under. These guidelines
came into effect from 4th November, 2011, and will certainly help the
members and CA firms for conversion/formation of LLPs and rendering
professional services through LLP Model. The said guidelines are
available on the website of the Institute and have been published in
this issue of the Journal. The name of the LLP shall be approved by
the Registrar for LLP and after issuance of certificate of
incorporation of LLP by the Registrar for LLP, the LLP name will be
required to be registered with the ICAI like registration of firms
with ICAI.

Filings of Financial Statements in XBRL: As you are kindly aware that
the Ministry of Corporate Affairs has switched from normal e-filings
to XBRLfilings of financial statements for a certain class of
companies from this year. The filings in XBRL mode have started and
the due date is 30th November, or, 60 days from the due date whichever
is later. I urge the members of profession to complete the
certification of their corporate clients at the earliest, so that the
filings can be made by the due date.

ICAI Awards for Excellence in Financial Reporting: For the annual
competition ICAI Awards for Excellence in Financial Reporting, this
year, a record number of about 225 entities have participated in
various categories. As per the procedure, these entities pass through
a robust three-tier evaluation process, i.e. evaluation of annual
reports on the basis of compliance with accounting standards and
relevant applicable laws, etc., evaluation by the Shield Panel and,
eventually, that by an independent jury.

Christ University Offers MPhil/PhD: I am quite happy to inform you
that the Christ University, Bangalore, has approved the eligibility of
our members to pursue the MPhil/PhD programme in its disciplines of
Commerce and Management that include interdisciplinary areas, subject
to MPhil/ PhD regulations of the University.

Support CABF Initiative: This is my appeal to all my stakeholders to
come actively forward to support and contribute to the CABF (Chartered
Accountants Benevolent Fund) initiative of the Institute towards the
cause of the profession and its members. It provides financial
assistance to our members in distress for fundamental needs including
sustenance. You should know that contributions to CABF are exempted
under Section 80(G) of the Income-tax Act, 1961.



Infrastructure Initiatives


Auditorium Inaugurated in Bhilai: I recently inaugurated an auditorium
at our Bhilai Branch with a capacity for 225 persons and complete
soundand echo-proof interior with WiFi. It is a matter of pride for us
that this auditorium is currently one of the biggest auditoriums in
the state of Chattisgarh.



Initiatives for Students


Best Wishes to All 2.5 Lakh Students: About 2.5 lakh students (83000,
131000 and 36000 students for Final Examinations, IPC Examinations and
PC Examinations respectively) have appeared in the Institute’s
November 2011 Chartered Accountants Examinations at 345 centres
including three centres abroad. All the examinations were conducted
without any inconvenience or issue. The Examination Department is
fully geared up to evaluate the answer books and declare the results
in time. I wish all students would pass the examination with flying
colours.

Recommendations for Amendment of Regulation 28E(1)(b): It has also
been decided to recommend for amendment of Regulation 28E(1)(b),
whereby the study for IPCC would be reduced from existing nine months
to eight months to make candidates eligible to appear in the
Integrated Professional Competence Examination (IPCE) from the date of
Registration for IPCC.

Review of CA Syllabus: We have taken a muchdesired initiative and
formed a Committee as per direction of the Council to review
comprehensively our syllabus for CA course curriculum that has not
been undertaken since 2006.

Orientation Content for GMCS I & II: We recently deliberated on the
proposed contents of Orientation Programme for GMCS-I and GMCS-II and
finalised the same. All the necessary initiatives have been taken to
prepare the course material for these courses along with a trainer’s
manual as soon as possible.

Winter is a time for making new promises and finding wayss of keeping
up the old ones. We get more time for ourselves in this season.
American author Ruth Stout had said: …only in the winter…can you have
longer, quiet stretches when you can savor belonging to yourself. I
realise, all of us feel that it also is time for creating comfort and
warmth for our friends, family and loved ones.

However, I do realise that concerns of the impoverished of our nation,
who are in dire need of resources during winters for survival, must be
first on our agenda. We come across numerous incidents how the crises
strike these citizens across the nation during winters. According to a
Japanese proverb, one kind word can warm three winter months. Think,
then, what one kind act can do. For example, in the beginning of
winters, we normally discard our old winter clothes. This time, we can
hand over those clothes in person to the people on pavements. This
gesture of ours will generate warmth literally as well as
metaphorically for those fellow citizens. We must do something for our
fellow citizens being on the stronger side of our society. This will
be our return against our social debt to society. Such acts make our
society capable, happy and warm.

When it is summer, we want rainy season to arrive. When we get bored
of the rainy days, we want them to be over. In the peak winter, we
yearn for spring. Actually we start missing whatever we lose; we love
to have whatever is not with us. This is a basic human instinct.
Weather in itself is a lesson, i.e. we should learn from our past,
face our present and prepare ourselves for future. I would like to
recall the beautiful inspiring lines written by the English poet P. B.
Shelley, which exude hope and trust: …O, wind, If Winter comes, can
Spring be far behind?

While we leave our fate to the time to be positive and bright, we can
be tough on ourselves to turn our fate positive and bright for the
society we live in.

May we all stakeholders of the profession join hands in this mission!

Best wishes

CA. G. Ramaswamy
President, ICAI

EMPLOYEES DUES- FORMER MANAGING DIRECTOR PROPERTY ATTACHED

Former MD's property attached for recovery of dues to employees
Special Correspondent Share · print · T+
Holding a former Managing Director of a group of companies guilty of contempt of court, the Madras High Court on Wednesday ordered the attachment of his property in Mylapore here, which should be sold through public auction for recovery of dues payable to employees. The court also imposed a fine of Rs.five lakh on him.

In its order on a contempt petition, the First Bench comprising Chief Justice M.Y.Eqbal and Justice T.S.Sivagnanam observed, "Taking note of the conduct of the respondent under normal circumstances, any court would feel convinced that the appropriate punishment is to commit the respondent to civil prison. However, in our view, such order would not meet the ends of justice, more so, when the employees are languishing without employment or wages and it is stated that some employees have died during pendency of the litigation, which has been pending for over 20 years."

The Bench said the property should be sold by the Industrial Tribunal by public auction. The children and wife of the contemnor, S.Srinivasan of Macneil and Magor Kilburn Group of Companies, should vacate the premises and hand over vacant possession of the building to the tribunal within 15 days.

Sale proceeds

The sale proceeds should be remitted to the credit of the complaint filed by Macneil and Magor Kilburn Group Companies Employees Union before the tribunal. The fine amount should also be remitted to the credit of the complaint within four weeks. This sum should be utilised for the settlement of the workers dues in addition to the sale proceeds.

Originally, the union filed a complaint under the Industrial Disputes Act with the tribunal against Macneil and Magor Ltd, Kilburn Electrical Ltd, Kilburn Control Systems Ltd., Kilburn Starters Ltd., and Kilburn Fabrication Ltd. In the dispute, the issue related to transfer of undertaking of its employees from Macneil and Magor Ltd., to other four companies. The substance of the allegations was that the four companies violated the ID Act and deprived workmen work and wages.

Ultimately, by an order of April 30, 2004, a Division Bench of the High Court directed the companies to implement the tribunal's award and the orders of a single Judge, which were in the union's favour.

Contending that this order was not implemented, the union filed the present contempt petition in 2006.

The petitioner's counsel, S.Vaidyanathan, contended that the tribunal's award had become final. As it was not implemented, Mr.Srinivasan was liable to be punished for committing contempt.

Mr.Srinivasan contended that violation of ID act would not arise. He was placed as a Non-Executive Director of the company and was not required to manage its affairs. The other executives placed as whole time Directors were managing its operations. Therefore, the contempt petition was not maintainable. However, the High Court rejected the contention as wholly untenable.