Download Guidance Note on tax Audit u/s 44AB of the Income-Tax Act, 1961 - Edition 2014

Please click on the below link to download Guidance Note on tax Audit u/s 44AB of the Income-Tax Act, 1961 - Edition 2014

http://220.227.161.86/34728gn-taxaudit-dtcicai.pdf

Guarantors may get wilful defaulter tag too - Reserve Bank of India

Companies and individuals who have furnished guarantees for wilful defaulters can also be accused as wilful defaulters, as per the new norms issued by Reserve Bank of India(RBI). 

In a letter issued on Tuesday, RBI has said that if a guarantor refuses to pay lenders despite having sufficient means to pay the dues, banks could declare such a guarantor as a wilful defaulter.

RBI has also said that bankers need not knock on the doors of guarantors after having exhausted all the remedies against the principal debtor.

Recently, banks, led by United Bank of India, declared liquor baron Vijay Mallya's Kingfisher Airlines BSE 0.79 % as a wilful defaulter.

However, this may not affect Mallya's affiliated companies as RBI has specified that these rules are from prospective effect.

"When a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor," RBI said a notification.

RBI also pointed out that where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by banks or financial institution, such group companies should also be classified as wilful defaulters.

However, it clarified that the new rules will apply only prospectively and not to cases where guarantees were taken prior to this circular.

"Banks and FIs may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees," it said.

The norms have come in as the government, Sebi and the RBI are looking at taking measures to arm banks against wilful defaulters.

Recently G S Sandhu, secretary financial services, said that the government will strengthen the law by allowing banks to change the management of wilful defaulters, while Sebi has barred those with a wilful defaulter tag to raise money from the capital market.

RBI governor Raghuram Rajan has also said that 'wilful-defaulter tag is a powerful weapon in the hands of creditors for resolving distressed assets. Data released by employee union, shows as of March 31, 2013-24, PSU banks had declared 406 companies with borrowings of Rs 70,300 crore as wilful defaulters. 

Economic Times)

External Commercial Borrowings (ECB) in Indian Rupees - R.B.I.

RBI/2014-15/206A.P. (DIR Series) Circular No.25

September 3, 2014

To
All Category - I
Authorised Dealer Banks

Madam / Sir,

External Commercial Borrowings (ECB) in Indian Rupees

Attention of Authorised Dealer Category  I (AD Category  I) banks is invited to Regulation 6 of Notification No. FEMA.3/2000-RB dated May 03, 2000 in terms of which persons resident in India may raise foreign currency loans from non-residents in accordance with the provisions contained in this Notification. Their attention is also invited to paragraph 2(ii)(a) of AP (DIR Series) Circular No. 27 dated September 23, 2011; in terms of which all eligible borrowers are eligible to raise ECB in Indian Rupees from foreign equity holders as per the extant ECB guidelines

.

2. With a view to providing greater flexibility for structuring of ECB arrangements, it has been decided that recognised non-resident ECB lenders may extend loans in Indian Rupees subject to the following conditions:

The lender should mobilise Indian Rupees through swaps undertaken with an Authorised Dealer Category-I bank in India.

The ECB contract should comply with all other conditions applicable to the automatic and approval routes as the case may be.

The all-in-cost of such ECBs should be commensurate with prevailing market conditions.

3. For the purpose of executing swaps for ECBs denominated in Indian Rupees, the recognised ECB lender, if it desires, may set up a representative office in India following the prescribed laid down process.

4. It may be noted that the hedging arrangement for ECBs denominated in Indian Rupees extended by non-resident equity-holders shall continue to be governed by the provisions of AP (DIR Series) Circular No. 63 dated December 29, 2011.

5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully

B P Kanungo

Principal Chief General Manager

VPF is better than the PPF: KK Jalan, Central Provident Fund Commissioner

Central Provident Fund Commissioner KK Jalan tells ET Wealth why the Voluntary Provident Fund is a good option for high-income earners and how the use of technology is changing the way the EPFO works.

The interest rate for this year is 8.75%. How does that compare with what other retirement options are offering?

The EPF offers a moderate return but is the best way to save for retirement, especially for high income earners. A lot of investors are excited that the annual investment limit in the PPF has been hiked to Rs 1.5 lakh this year. But this option was always open to EPF subscribers by way of the Voluntary Provident Fund (VPF). They can invest more than the mandatory contribution in the EPF and enjoy the same tax benefits.

A survey shows that one out of every three subscribers to the EPF dips into the corpus prematurely. Why are subscribers not serious about saving through the EPF?

Till recently, subscribers didn't know where their money was and how much had they accumulated. But the launch of the online facility to check the EPF account balance has changed that. One can also get an e-passbook. If you can access your account and track it online, you will be incentivised to save more and n ..

A lot of the withdrawals happen when people change jobs. Rather than wait endlessly for the transfer of the balance, they prefer to withdraw their money.

This problem too has been fixed by the launch of the online transfer facility. All a subscriber has to do is to register online and furnish his account details. Going forward, the allotment of Universal Account Numbers (UANs) to EPF subscribers will obviate the need for transferring the balance. UANs have been allottedto 4.17 crore contributors.

The deficit in the EPS could worsen in the future. Why isn't the pool system being replaced by individual accounts as in case of the EPF?

The intention of the EPS is to provide a minimum pension to the organized work force. It also offers pension to widows, children and. No other scheme offers such a benefit.

source - Economic times - wealth

Panel set up to conduct forensic Audit of NSEL

On a plea made by investors, the Bombay High Court, on Tuesday, formed a committee headed by a retired high court judge to conduct a forensic audit of the troubled NSEL and liquidate the assets of its defaulting borrowers in the over Rs.5,500 crore payments scam.

The three-member committee, headed by Justice (Retd) V. C. Daga, will also have a solicitor and a chartered accountant, according to Advocate Ameet Naik, who represents NSEL in the case.

The committee will ascertain the liability that is outstanding against the defaulting borrowers of NSEL, conduct a forensic audit, and monetise the assets, the court said in its order.

The committee will determine where the amount has gone, and is empowered to ascertain the assets of company.

It has also been empowered to distribute the assets to the duped investors but distribution of funds will require the court’s permission.

Justice S. C. Gupte of the high court said in his order the panel would have to seek separate directions from the court to access the assets that have been attached by the Economic Offences Wing of Mumbai police and the Income Tax Department in the NSEL fraud. It excluded the sale of assets attached by the Enforcement Directorate.

Justice Gupte set up the committee while hearing a representative suit filed by Modern India Ltd., one of the major investors in the bourse, against NSEL and its promoters.

Before any mutual settlement between NSEL and the borrowers, the committee will give a notice to the Forward Markets Commission (FMC) of such a settlement, and also inform the court about it, the HC order said.

The High Court has also allowed the investors or any aggrieved person to challenge the decision of the committee before it.

The court had recently granted bail to NSEL promoter Jignesh Shah in the case.

No any Restriction on Number of Partners for CA, CMA, CS & other professionals' Firm

Raising of no. of partners in CA Firm with reference to the provisions of Companies Act, 2013. – 
(dated - 02-09-2014) 

The Council of the Institute has clarified that the earlier restriction of maximum no. of 20 partners permitted for firms under section 11 of the Companies act, 1956 is no more applicable to the firms as Section 464 of the Companies Act, 2013, has been notified w.e.f  01.04.2014 wherein sub-section (1) provides for a maximum number of partners permissible for business firms at 100 and sub-section (2) provides that nothing in sub section (1) shall apply to an association or partnership, if it is formed by professionals who are governed by special Acts. 

Accordingly, as per proviso to the said section, Chartered Accountants firms are now allowed to be registered/reconstituted with more than 20 partners w.e.f  01.04.2014 under the Indian Partnership Act as in the case of a firm under the Limited Liability Partnership Act. 

-sd- 

Joint Secretary 

M&C-MSS 

Account cannot be classified at Inoperative if Dividend been credited to such account

RBI /2014-15/200 DBOD.No. Leg. BC. 36/09.07.005/2014-15 

September 1, 2014

All Scheduled Commercial Banks (excluding RRBs) Dear Sir/Madam, Inoperative Accounts Please refer to paragraph 2(iv) of our Circular DBOD.No.Leg.BC.34/09.07.005/2008-09 dated August 22, 2008 on Unclaimed Deposits/Inoperative Accounts in Banks in terms of which a savings as well as current account should be treated as inoperative/dormant if there are no transactions in the account for over a period of two years. Further, in terms of paragraph 2(vi), for the purpose of classifying an account as inoperative, both the types of transactions i.e. debit as well as credit transactions induced at the instance of customers as well as third party should be considered. 

2. There may be instances where the customer has given a mandate for crediting dividend on shares to Savings Bank account and there are no other operations in the Savings Bank account. Some doubts have arisen whether such an account is to be treated as inoperative account after two years. 

3. In this connection, we clarify that since dividend on shares is credited to Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the dividend is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the dividend, provided there is no other customer induced transaction. 

Yours faithfully, 

(Sudarshan Sen) 

Chief General Manager– in–Charge 

Avoid the Mistakes of Bull Market Rally

Nifty is at 8000 levels, GDP growth is around 5.7% and the optimism in the Indian economy is galloping. Among all these I find a couple of strong negative battles which we all will be facing in the next 6 months and we all need to take preventive steps. We all know about the Bushan steel matter hence it goes without saying that we need to do cherry picking in the bull phase of the economy. From my memories of 2003-2007 I would like to accentuate couple of areas where I find that history is one the way to repeat. Hence I would like to provide the following advice to my investor friends who are getting ready for the Historic Bull Market Rally of the Indian Equity Markets. We all know that when bully rally begins we take adrenaline based investment rush decision which is very less based on factual. Drive the investment car but not being drunk. 

When bull rallies happen Midcaps and specially the small caps make a Kangaroo style jumping in prices and tends to give stupendous returns within a very short span of time. We have seen historically that small caps are the most dangerous segment of investments in equities. Companies fails in fundamentals and financials but only the price movement’s makes the investors a bee line behind these stocks. You will find among your friends and family members, a numerous numbers of investors who have burnt their fingers by investing in small caps-getting into the trap of short term lucrative returns. It is advisable to invest in large caps and quality midcaps rather getting in to trap of these small cap risky investments.

Over the last decade Indian equity markets have matured enough in terms of knowledge and understanding the basics of investments. Hence it high time that one should remain rigid in terms of going through the rules of investments in equities. Learn and apply stock valuation rules like Price to Book value, Price to earnings ratio, Sales growth, business fundamentals, promoters and share holders’ creditability etc. These things are often missed out when a bull rally happens but one must remember that once the rally gets stuck our adrenaline rush gets a break. Don’t blame the broker or the broking company. It’s the investor’s duty to take care of his investments and not to take adrenaline based investment decisions. If you don’t understand the business, don’t know anything of the company but based on meager words and price appreciation you take up the decision of investments well be ready to face the dark nights.

Greed is good but too much sweetness makes it bitter. Well I have twisted and turned the English proverbs since that’s what we tend to do while doing investments in Bull Run. The current market is already flooded with FPO, Fixed Deposits, IPO and NCD issues. In my recent interaction in some states I found that investors are stuck with investments in some NCD and Fixed Deposit where the investor’s money has gone for a wild toss. The current situations of the Indian corporate are very bad since defaults on loans are at the peak of Indian economy. In the last five years, long-term debt of 966 NSE-listed companies has simply soared, growing by about 30 per cent annually. Infrastructure, iron and steel, mining and textiles sectors had the most stalled projects and these sectors financial conditions are extremely in bad shape. Hence alternative sources of raising capital are now widely available. Investors should be very careful about picking up investments in NCD, Fixed Deposits and IPO. Once should avoid the heard of adrenaline based investment rush. Read the business, financials and credit quality of the papers being offered for subscription. In 2004-20011 we have found both sides of the Primary market where investors made millions from FPO, IPO and NCD but at the same time they burnt their double hands in the same rush. Check the credit quality of the papers and don’t opt for anything below AAA of AA+ rated by Crisil & ICRA. Read carefully the offer document which might seem like a boring task but it’s highly required since that’s the only place where you get all the details. Don’t forget the historic failures of these types of investments. 

Many investors tend to act smart by taking risky calls for the short time having the mind of playing smart with the market and doing timing of the market. They always pronounce that timing of the market is key to make profits. Well these investors are the ones who once get caught in the game will never see in the market again and they cry foul even when someone is playing correctly. We should not forget that market is smarter than your intelligence level. Never do timing of the market. In this globalised inter connected equity markets its quite risky to take these market timing based calls. Avoid these death traps and invest for long term. Remember a peaceful sleep is more required than sleepless nights. 

As equity markets are in the bull phase we will find that we liquidate our investments from other asset classes and invest 100% into equity so that one can become super rich within a very short span of time. This is one of the biggest blunders being committed by the investors. Asset allocation should remain intact and one should not violate the same. Rational changes are to be dropped and only objective based and age based allocation changes should be adopted. Diversifications have been the rule and that should be followed. Remember that the greed based on which you are taking the 100% plunge in direct equity investments might turn out to be 100% loss once the equity markets takes a toll. Increase your allocation but maintain the asset allocation and abide the rules of the same. 

In these bull markets we find many new investors who have just joined the job and have started earnings. They have dreams in their eyes of making and building their own investments. These are the ones who are exploited most for investments. Well they should be careful about investment decisions. For them the simple rule is that what you don’t understand and you don’t have guts and faiths don’t invest. Re-validate every information and statements which leads you for investment decisions. Understand the fundamentals of investments in equities and then take the decision of investments. Park 30% of your salary in investments in equities and prefer to invest in large caps and that too in Monthly basis rather than one short. This will help you to gain confidence as well as develops a disciplined investments approach for your financial planning. In my next article I will exclusively cover this segment. 

Chit funds and other lucrative offers are going to catch the markets in these bull rally and they are mostly focused towards the rural class of investments. Well avoid these traps. Enough hands have been burnt. Opt for only those investments which are recognized by SEBI. The thumb rule to remain safe in these bull rallies is that what you don’t understand and what you are not convinced don’t opt that way. Try to collect information and do cross verification about the investment options which seem to be tempting. Ask your friends and relatives and also do some research at your end while taking plunge in these options. 

Remember it’s your hard earned money and you must be aware about its investments. If you are not careful now and acting blindly be ready to pay the hefty premium of losses later on. Drive the investment car but not being drunk.