Guidance note issued on Depreciation as per Companies Act, 2013

Accounting for depreciation by Indian corporates is governed by the provision of Section 123 read with Schedule II of the Companies Act, 2013 and accounting standards, AS 6 and AS 10. To provide a practical guidance on accounting for depreciation (Schedule II) to preparers and auditors of the financial statements, the Institute of Chartered Accountants of India (ICAI) has released a guidance note on the same. Major guidance provided by the guidance note are as follows:

(i)           Depreciation should be charged on the basis of useful life. Useful life is specified in the Schedule II, but an entity may use different useful life subject to certain disclosures.

Assessee can change its claim of credit either as input or as capital goods at any stage of proceedings

Facts

1.    Assessee took CENVAT Credit on rails and other track materials, namely, sleepers, paints and crossings etc.Department denied credit on ground that same did not fall within definition of inputs, as they did not go in mainstream manufacture.

2.    Subsequently, during the appellate proceedings, assessee claimed credit of such goods as capital goods.The department argued that since ground of goods being 'capital goods' was not raised before lower authorities, same could not be raised for first time before Tribunal.

Subsidy received from AE for specific purpose can't be treated as income until it is spent

Facts:

1)    Assessee was a wholly owned subsidiary of Canon Singapore Pvt. Ltd (hereafter ‘CSPL’). It was engaged in purchase and resale of 'Canon' products for its holding company ‘CSPL’ in India.

2)    Assessing Officer (AO) made certain additions to the income of assessee which reflected unutilised subsidy received by assessee from its holding company.

3)    AO observed that the subsidies received by the assessee become its property notwithstanding that the same had not been spent for the purposes for which they were received.

4)    On appeal, tribunal reversed the observation taken by AO; aggrieved-revenue filed instant appeal before the High Court.

MCA issues draft format for financial statements in line with Ind AS

On 9th February, 2016, Ministry of Corporate Affairs issued draft format for financial statements (Revised Schedule III) in line with Indian Accounting Standards (Ind AS). The said format, if approved, shall be applicable on companies who are applying Ind AS voluntarily or  shall apply mandatorily w.e.f 1st Aril 2016 or 1st April, 2017, as the case may be which is specified in Companies (Indian Accounting Standards) Rules, 2015.

Proposed revised Schedule III is similar to existing Schedule III of the Companies Act, 2013 subject to some differences. The major differences are as follows:

Guidance notes issued on fraud reporting and bank audit

Guidance note on fraud reporting

The Institute of Chartered Accountants of India (ICAI) has issued guidance note on fraud reporting under section 143(12) of the Companies Act, 2013. It provides guidance on how an auditor of a company can fulfill requirements of the aforesaid section. It clarifies that provisions of Section 143(12) apply to the auditor only when he is the first person to identify the instances of fraud during performance of his duties as an auditor. The auditor should report any fraud under section 143(12) even if the same is required to be/has been reported under any other statute or to any other regulator.

Govt. isn't abusing its powers if it requires employees to travel via Air India to avail of LTC

Where Government employees were asked by Government to undertake air travel under LTC from OP airlines, Government being consumer enjoyed liberty to exercise its choice of airlines and no case of contravention of sections 3 and 4 was made out against Government and OP airlines

Facts:

a)  The informant, a Government employee, filed information against Air India, its subsidiaries and the Government of India alleging contravention of section 4 of Competition Act, 2012

No additional depreciation if manufactured goods were captively consumed for construction activity

Facts of the case:

a) The assessee was engaged in laying pile foundation on job work basis, which was required in construction activities.

b) Piling work was used to be done at the site itself by digging bores of required sizes and erecting concrete pipes inside the bore, hence, assessee purchased new machinery, which enabled him to fabricate piles of standard size.

c) He claimed additional depreciation under section 32(1)(iia) on machinery contending that the pre-cast or pre-fabricated piles manufactured by using the new machinery resulted in manufacture of new article or thing.

d) Assessing Officer rejected the claim holding that pile was constructed and it was not manufactured or produced and the business of civil construction would not amount to carrying on any manufacturing activity.

No withdrawal of sec. 54 relief if new house was transferred to daughter within 3 years

Facts of case:

a) Assessee sold his residential property and invested sale proceeds in another residential property. He claimed exemption under section 54 in respect of capital gains arising on sale of property.

b) Later on, he had settled the new property to his daughter out of love and affection.

c) He submitted that the settlement of property in favour of the daughter was a gift falling under section 47(iii) and was not taxable.

d) Assessing Officer held that settlement did not cover under section 54(i) or 54(ii) and accordingly denied exemption.

6 changes you must know for registration of company’s name under new Rules

The Govt. has notified the Companies (Incorporation) Amendment Rules, 2016 (‘Amended Incorporation Rules’). Now the process of reservation of name of companies has been simplified. Following changes have been made for ease of doing business in India: 

1) Name of company need not to be in consonance with principal object:

Under extant norms, the company’s name was necessarily required to be in consonance with principal object, if such name resembled any object of company. Now as per the amended Rules the name of company will not be considered undesirable even if it is not in consonance with the principal objects of the company as set out in Memorandum of association. Let us understand this condition with the help of an example. Suppose if a company wants to opt its name as ‘ABC Builders Pvt. Ltd.’ then it is not necessary that its principal object should be related to construction and development only. Thus, now company is free to choose such name which is not in consonance with principal object.

Employer not liable to deduct TDS at flat rate of 20% on nonfurnishing of PAN by employees: ITAT

Assessee-employer deducted TDS as per section 192 in respect of salary of the employees who failed to furnish their correct PAN.

AO applied a flat rate of 20% as per section 206AA and held assessee liable for short-deduction of TDS. ITAT held that as per section 206AA if the deductee fails to furnish PAN, then the deductor shall deduct tax at the rates which is higher of (i) at the rates specified in the relevant provisions of the Act, or (ii) at the rate or rates in force,