CAI clarification on applicability of SA 700 on tax audit reports_44AB of ITA - SA 700 deferred by a year only for the limited purpose of tax audit report (emphasis supplied)

ICAI Announcement

Clarification Regarding Applicability of SA 700 on Tax Audit Report under Section 44AB of The Income-Tax Act, 1961. - (05-07-2013) 

As the members are aware that all audit reports in respect of audits of financial statements for period beginning on or after 1st April 2012 are to be issued in accordance with the requirements of SA 700(Revised) - Forming an Opinion and Reporting on Financial Statements. In this regard, ICAI has been receiving mails seeking clarification regarding applicability of SA 700 on tax audit reports, i.e. Form No. 3CA/3CB.

Considering the fact that all tax audit reports are now mandatorily required to be filed online and that the format of tax audit report is prescribed by the Central Government, the Council in its 325th meeting held from 1st June to 3rd June, 2013 decided to defer the applicability of SA-700 (Revised) on the tax audit report under section 44AB of the Income-tax Act,1961 by one year i.e. the requirements of SA-700(Revised) are not applicable for tax audit reports filed up to 31st March, 2014.

ICAI is further taking up the matter with the appropriate authorities so that suitable changes can be brought in the forms relating to tax audit.

Source:  http://www.icai.org/new_post.html?post_id=9687&c_id=219



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Supreme Court stays Delhi High Court's service tax order on rent

January, 13th 2011

The Supreme Court has stayed an order of the Delhi High Court, which stopped the Centre from recovering service tax on renting of immovable property for commercial use, including shops and malls, from some firms.

A Supreme Court bench comprising Justices Mukundakam Sharma and A R Dave stayed the interim order passed by the Delhi High Court on May 18, 2010. The Centre has challenged the order.

"There shall be an interim stay of the operation of the impugned judgement till the next date," said the apex court, directing that the matter be listed for next hearing on January 20.

The High court, allowing the appeal of around 20 firms including Home Solutions Retail, had stayed the amendments made by the government in the Budget, 2010-11.

In the Finance Act, 2010, the government had amended taxing entry of "Renting of Immovable Property service", with retrospective effect, from June 1, 2007

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UPLOADED NEW 5 DIGIT ACTIVITY CODES FOR VAT AUDIT PURPOSE.

MVAT AUDIT 2009-10-ACTIVITY CODES


AS WE FOUND THAT MANY OF OUR CA FRIENDS AND STP'S ARE NOT HAVING THE NEWLY REQUIRED ACTIVITY CODE 5 DIGIT FILES.
HERE BY WE ARE UPLOADING IT FOR OUR COMMUNITY.


CLICK HERE TO DOWNLOAD (2 LINKS)-- DOWNLOADING TAKES TIME (FILE SIZE 1.31 MB)


http://dhavaldesaisays.files.wordpress.com/2010/12/activitycode1-2-1.pdf


OR


https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0Bz0INWeiJAEQNDFiOTQyODItNmQ2MS00ZDgxLWJjNzctYWRlNzRkYTZjMDM3&hl=en

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Case law-Ability to pay demand is no bar for grant of stay on recovery

KEC International Limited vs. ACIT (ITAT Mumbai)

The assessee filed a stay application before the Tribunal. The Department opposed by relying on the observations of the Supreme Court in CCE vs. Dunlop India 154 ITR 172 (SC) and contended that as paucity of funds had not been sufficiently demonstrated, for this reason alone stay should not be granted. HELD rejecting the Department’s contention and granting stay while following B. N. Nobis & Co vs. JCIT 71 TTJ 153 (Kol):

(i) While the Supreme Court has decried ‘the practice of granting interim orders merely because assessee is able to show a good prima facie case’, the observations have to be understood in the context of the case which was one of indirect taxation where the burden had already been passed on to the consumer. Also it was a case of a Writ Petition under Article 226 & not that of an appellate jurisdiction. The observations of the Supreme Court in the context of grant of stay in writ proceedings does not have binding force on, or even direct relevance to, the principles governing grant of stay during appellate proceedings though it does provide guidance on principles governing the decision to grant stay;

(ii) The Court has made it clear that though there are no hard and fast rules regarding grant of stay, prudence, discretion and circumspection are called for and stay should not be granted as a matter of course. Considerations about balance of convenience, question of irreparable injury and implications to public interest have to be borne in mind;

(iii) The Supreme Court’s observations in Dunlop cannot be interpreted to mean that the Tribunal is denuded of the powers to grant stay until case for financial stringency is successfully made out by the applicant. There is no conflict in holding this view as also adhering to the settled principles governing grant of stay which lay down thatfinancial constraints of the applicant are important, even if not sole of qualifying, consideration in entertaining a stay application, besides considerations like existence of strong prima facie case, balance of convenience and possibilities of Revenue’s rights of recovery being prejudiced by waiting till the outcome of appeals.

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Cash Flow v/s Profit & loss A/c

In case of entities like companies which present its financial statements on accrual basis, Cash flow Statements fulfills vital information needs of users?

The Supreme Court in Reliance Energy Ltd Vs. Maharashtra State Road Development Corporation Ltd.

When P&L accounts and balance sheets are prepared on accrual basis, revenues and expenses are recognized on accrual basis

i.e. when events or transaction occurs. However, timing of cash flow is not reckoned in such system of accounting.

Similarly, in cases where accounts are based on accrual system of accounting, recognition of assets & liabilities is not dependent on the actual timing of cash spent on capital Expenditure & Cash inflow on Capital receipts.

Thus, financial statements prepared on accrual basis don not reflect the timing of Cash flow & amount of Cash flow.

The object of the cash flow statement is to assess the company ability to generate the cash flow in future and to assess reason for difference between “NET PROFIT” and “NET CASH FLOW” from operations.

In Fact Cash flow from operations is the regular sources of cash for any enterprise that determines whether or not an enterprise will continue to exist in the long run.

Accrual basis of accounting requires that revenues be recorded when earned and the expenses be recorded when incurred. Earned revenues more often include credit sales that have not been collected in cash & expense incurred that may not have been paid in cash during the accounting period.

Thus, Net Income will not indicate the net cash provided by operating activities or net loss will not indicate the net cash used in operating activities.

 In order to calculate the net cash provided by (or used in) operating activities, it is necessary to replace revenues and expenses on accrual basis with actual receipts and actual payments in cash. This is done by eliminating non- cash revenues and non-cash expenses from the given earned revenues & incurred expenses in the profit & loss account.

Profit & Loss account is also debited with purely non-cash items which reduces and increase the profits respectively but do not affect the cash at all. Eg: Depreciation, P/L on sale of fixed assets, amortization of deferred revenue expenses and so on.

Since Cash provide by operations is to be calculated, certain Non-operation item like rent income, interest income, dividend income, refund of tax etc should be adjusted although these items may have recorded on cash basis. Such items are analysed separately in the cash flow statement as operating, financing & investing activities.


Post uploaded by: Sumeet Mishra.

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Renting Judgement In Favour of Govt. by P&H High Court - Bad News

IN
THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

CWP No. 11597 of 2010 (O&M)

M/s Shubh Timb Steels Limited-----Petitioner
Versus
Union of India and another----Respondents

Coram:Mr. Justice Adarsh Kumar Goel and Mr. Justice Ajay Kumar Mittal

Date of Judgment: 22.11.2010

Excerpts : It cannot be held that renting of property did not involve any service as service could only be in
relation to property and not by renting of property. Renting of property for commercial purposes is certainly a service and has value for the service receiver. Even if it is held that transaction of transfer of right in immovable
property did not involve value addition, the provision cannot be held to be void in absence of encroachment on List II.(Para 22)

It is well settled that competent legislature can always clarify or validate a law retrospectively. It cannot be held to be harsh or arbitrary. Object of validating law is to rectify the defect in phraseology or lacuna and to effectuate and to carry out the object for which earlier law was enacted. We do not find any ground to set aside giving of retrospective effect to the amendment from 1.6.2007 on which date levy was initially provided."
 

FULL TEXT ATTACHED
 

Click here to download: http://dhavaldesaisays.files.wordpress.com/2010/11/renting.doc 

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CA IPCC Group 1 papers with sugested answers.

Frnds,

Just click here to download the IPCC grp1 papers with sugested answers.

Click here: http://docs.google.com/leaf?id=0Bz0INWeiJAEQOTg0NTNlODAtNjg0Zi00NTVkLTkwYTUtMTIwZWQ4NGY2NTI5&hl=en

I am thankful to pavan kumar & Sayad vakeel who have contributed to our blog and this file is shared by them.

Dhaval Desai

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