Deferred Revenue Expenditure/ Deferred Marketing Expenditure

As per para 2 of the announcement Published in ‘The Chartered Accountant’, November 2003 (pp. 479).

An issue has been raised as to what should be the treatment of the expenditure incurred on intangible items, which were treated as deferred revenue expenditure and ordinarily spread over a period of 3 to 5 years before AS 26 became mandatory and which do not meet the definition of an ‘asset’ as per AS 26. The examples of such items are expenditure incurred in respect of lump sum payment towards a Voluntary Retirement Scheme (VRS), preliminary expenses etc. In this context, it is clarified as below:

(i) The expenditure incurred on intangible items (referred to in paragraph 2 above) after the date AS 26 became/becomes mandatory (1-4-2003 or 1-4-2004, as the case may be) would have to be expensed when incurred since these do not meet the definition of an ‘asset’ as per AS 26.

(ii) In respect of the balances of the expenditure incurred on intangible items (referred to in paragraph 2 above) before the date AS 26 became/becomes mandatory, appearing in the balance sheet as on 1-4-2003 or 1-4-2004, as the case may be, paragraphs 99 and 100 of AS 26 are applicable.

On Accounting Standard (AS) 26, Intangible Assets, becoming mandatory, an enterprise cannot recognise any expenditure as ‘deferred revenue expenditure’.

 Thus, presently, for the purpose of preparation and presentation of the financial statements, expenditure will be recognised as an asset if it meets the criteria in this regard laid down in relevant standard, e.g. AS 10, AS 26, AS 13 etc.; otherwise it has to be expensed. In other words, for accounting purposes, the concept of ‘deferred revenue expenditure’ has ceased to exist unless otherwise specified in standard, e.g. voluntary retirement expenditure as a transitional measure in the revised AS 15, ‘Employee Benefits’.

Further as per para 56 of AS 26

56. In some cases, expenditure is incurred to provide future economic benefits to an enterprise, but no intangible asset or other asset is acquired or created that can be recognised. In these cases, the expenditure is recognised as an expense when it is incurred. For example, expenditure on research is always recognised as an expense when it is incurred (see paragraph 41). Examples of other expenditure that is recognised as an expense when it is incurred include:

(a) Expenditure on start-up activities (start-up costs), unless this expenditure is included in the cost of an itemof fixed asset under AS 10. Start-up costs may consist of preliminary expenses incurred in establishing a legal entity such as legal and secretarial costs, expenditure to open a new facility or business (pre-opening costs) or expenditures for commencing new operations or launching new products or processes (pre-operating costs);

(b) Expenditure on training activities;

(c) Expenditure on advertising and promotional activities; and

(d) Expenditure on relocating or re-organising part or all of an enterprise.

Search Phone Number Trace Mobile number

Whenever we try to locate a mobile number there can be two type of information that can be gathered..

1) About the Service Provider, Circle and country.
2) About the caller.

1) If you want the first type of information (In which no one is really interested)

Go to this webpage 

http://www.indiaonapage.com/mobilenumbertrace

The technique used is simple that there is common telecom authority in every country which allots the number schema to be followed by all mobile operators ( had this schema not been there same number would have been issued by mobile companies which would have led to Chaos). 

2) If you want second type of information ( Yes.. u have come to right spot baby).

Go to this webpage 


http://www.truecaller.com/
For searching u need to provide ur yahoo,gmail, fb id and pwd..

The technique used is simple people download and install this application to trace any mobile number, in return this application stores there contact details in their database. The chances are quite bright that out of all the friends of ur unknown caller, any of them uses this application and has provided the details sought by you in this company's database.

Maximum foreign currency permitted/allowed

The RBI prescribes separate limits for remittances such as travel, education or medical expenses (see table). These limits are in addition to the limits prescribed by the LRS.

Purpose	Limit
Private travel	$10,000 per financial year
Business travel	$ 25,000 per trip
Studies	$ 1,00,000 per academic year
Medical treatment	$ 1,00,000 per financial year
Liberalised Remittance Scheme	$ 2,00,000 per financial year

These limits are also gross limits. That is, you can remit up to these limits out of the country irrespective of how much you bring in.

In 2004, Reserve Bank of India (RBI) announced the Liberalised Remittance Scheme (LRS). Thanks to this scheme, foreign remittances today can be freely made by residents to the extent of $2,00,000 per financial year. Remittances made under the LRS can be used to buy property abroad or to invest in shares, mutual funds or debt instruments in any foreign country without prior approval of the RBI.

While the scheme looks attractive on paper, it is ridden with several practical roadblocks. Confusion exists on what is allowed under the scheme, what documents are needed to be submitted and so on. Let us try to throw light on these practical aspects.

What can the LRS be used for?

LRS can be used for:

• Buying property abroad
• Investing in shares, securities, bonds, mutual funds abroad
• Opening and maintaining foreign currency accounts with banks outside India for carrying out the above mentioned transactions
• Gifts and donations abroad

For instance, if a customer decides to open a broking account abroad and deposits $2,00,000 (under the Liberalised Remittance Scheme) and later that year, decides he wants to withdraw all his money and open an account at another financial institution, he will not be able to do so.

What is not permitted under the LRS?

The following transactions are not permitted for remittance under the LRS:

·         · Transactions that are explicitly prohibited by RBI such as purchase of lottery tickets, sweepstakes etc

·         · Remittance from India for margins or margin calls to overseas exchanges

·         · Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

·         · Remittance for trading in foreign exchange abroad;

·         · Remittance by a resident individual for setting up a company abroad;

·         · There is also restriction on remittance to some countries like Bhutan, Nepal, Mauritius, Pakistan and certain other countries that are enlisted by the Government from time to time.

How does the bank verify your purpose of remittance?

At the time of making remittance, you would have to submit a self- declaration form stating the purpose of your remittance. The bank or authorised dealer will only go by your declaration.

What is the procedure to remit funds under the LRS?

Step 1: Approach your bank to make the remittance. If you have been an account holder in the bank for less than one year, you would need to provide copies of bank statement of the previous year or copies of the latest income tax return or assessment order.

Step 2: Submit the application cum declaration form A2

Step 3: Submit a draft for the amount you want to remit

While these are the only documents needed to be submitted, several banks ask for other documents such as a Form 15CA and 15CB.

In fact, a 2011 the RBI called for a review of the remittance facilities. The report recognized the need for clarity on remittance procedures:

‘There is no clarity or uniformity among ADs and while some ADs insist on the submission of the Form 15 CA/CB for remittances under the Liberalised Remittance Scheme (LRS), some insist only for remittances above US $ 5000 and some don't obtain Form 15 CA/CB at all. This is borne out by the survey results (Annex V) and is not an acceptable situation as it means some residents are subjected to unnecessary costs and harassment while others are not,’ the report stated. The report further went on to recommend, ‘To enable hassle-free remittances by resident individuals banks may be advised by RBI not to insist on the submission of form 15 CA/15 CB for any remittances under the Liberalised Remittance Scheme (LRS).’

We can hope that the process becomes clearer and more transparent in the coming days.

An individual needs to be very well aware of these limitations. There is an extensive list of FAQs on the RBI site which might be helpful. Although some of it might still be unclear, we recommend that you go through it to understand the requirements. One needs to go into the bank, educated, before giving the bank an opportunity to pose difficulties. Most the time, it's the bank which is actually unaware of the LRS process.

Member in employment cannot perfom ISA attestation

The Council in this connection clarified that the Attest function would cover services pertaining to audit, review, certification, agreed upon procedures, and compilation, as defined in the Framework of Statements on Standard Auditing Practices and Guidance Notes on Related Services published in the July, 2001 issue of the Institute’s Journal.”

   

   In view of the above provisions, a member in practice is not allowed to engage in any other business or occupation other than the profession of chartered accountants except with the permission of the council. Further, a member of the Institute while attesting / certifying any document as Information System Auditor shall be deemed to be in practice.  

As per clarification received via letter no 29-CA/ESB-232 (R636)/2012 dated  Jul 31, 2012  received from Ethical Standard Board. 

Got Income Tax Notice

Here is a basic checklist of things to do when you get a tax notice

It may be noted that the intimation under section 143(1) cannot be treated as a notice/order of assessment as its a mere acknowledgement of the return filed online.

A notice under Sec 143(3) for scrutiny assessment has to be served within 6 months from the end of the financial year in which the return was filed. If served later than 6 months, it will be deemed invalid.

However, a notice served under Sec 148 can reopen a case even up to 6 years from the end of the relevant assessment year if the AO has reasons to suspect income escapement. If the amount in question is less than Rs 1 lakh, only up to 4 year old returns can be reopened for scrutiny.  

Preserve envelope: The envelope in which the notice is sent is an important piece of evidence. It will have the Speed Post number which establishes when the notice was posted and served to you. 

Check your details: It could be that the notice was meant for someone who shares your name or date of birth. Check if it has your PAN. Go by the PAN even if there is a discrepancy in the name and address. The department issues notices according to PAN, not by name. 

Make copies of notice: You can't afford to lose the notice so make photocopies or scan and store it on your computer. 

Check sender's details: A notice must have the name and designation of the officer, his signature, stamp, official address and must mention the income tax ward and circle. There is a new concept of notices being sent via email, in such cases one should ensure that the notices/intimations which are received via emails contain a document identification number.

Organise documents: It could be that your return has been picked up for scrutiny at random. So don't panic and gather all the documents and other information sought by the AO.

Seek professional help: If it is just a simple demand notice for excess tax, an individual can handle it on his own. But if the matter is a little complicated, it is best to take help from a professional. You may be required to appear before the AO to explain any discrepancy in the return or make a clarification. A professional can help you organise your response so that you can provide cogent and specific clarifications.

From MK Aggarwal's Website

Excise Duty in Closing Stock

Concept of Excise

According to Rule 4 of the Central Excise Rules, 2002

RULE 4. Duty payable on removal. — (1) Every person who produces or manufactures any excisable goods, or who stores such goods in a warehouse, shall pay the duty leviable on such goods in the manner provided in rule 8 or under any other law, and no excisable goods, on which any duty is payable, shall be removed without payment of duty from any place, where they are produced or manufactured, or from a warehouse, unless otherwise provided :

Payment of Excise

Taxable Event:

It is the event the happening of which attracts the liability to pay tax. In Central Excise Act it is production or manufacture of excisable goods.

Payment Liability:

The duty is payable at the time of removal of goods from the factory.

Accordingly, though the taxable event for excise duty is manufacture or production of excisable goods but a person shall be liable to pay excise duty at the time of clearance of excisable goods from the factory or warehouse. No sale or further utilization of excisable goods can take place unless the duty is paid hence the duty is a necessary expense to be incurred if the goods are to be put on the location and condition from where they can be sold or further used in the manufacturing process.

Where the liability for excise duty has been incurred but its collection is deferred, provision for unpaid liability should be made.

Calculation of Excise

Excise duty is always calculated on Cost of Manufacture and not on the selling price. Excise duty is payable not on the point of sale but on the point of production

General Guidelines on stock

Stock should be valued at cost or market value, whichever is lower, as it is a prudent business practice.

As per Accounting Standard of ICAI (AS-2), inventory cost should comprise of all cost of purchases, cost of conversion and other costs incurred in bringing the inventories to the present location and condition. Cost of purchases should be exclusive of duties which are recoverable from the taxing authorities. (e.g. Cenvat). Inventory should be valued at lower of cost or net realisable value.

Excise under Income Tax Act
As per section 145A of Income Tax Act, stock valuation should be inclusive of any tax, duty, cess or fee actually paid by assessee to bring the goods to the place of its location and condition as on date of valuation, even if such tax or duty is includible even if any right arises as a consequence to such payment. Thus, duty paid on inputs will have to be added while valuing stock, even if Cenvat credit availed of such duty paid. In respect of finished stock, excise duty payable should be added to the inventory valuation even if not paid as goods are still lying in the factory. Both opening as well as closing stock should be valued on same basis.

Harmonious Interpretation of various acts

Thus, for purposes of Income Tax, inventory is required to be valued inclusive of excise duty, even if assessee is entitled to get Cenvat credit of duty. However, for purposes of balance sheet as per Companies Act, inventory should be valued exclusive of excise duty, if assessee is entitled to get Cenvat credit of duty paid on inputs. In view of this conflict, Institute of Chartered Accountant of India has advised that in the company accounts, inventory of inputs should be valued without considering Cenvat (i.e. first method should be adopted). For purposes of income tax section 145A, computation should be made outside the books, as made in case of some other items like depreciation. [Chartered Accountant - November 1999 - page 83].

Accounting entries

1) When u purchase the raw material the entry would be:

Purchases A/c              Dr    920

CENVAT Input  A/c            Dr      80

  To Creditors A/c                             1000

2) a) For excise duty on the closing stock of finished goods remaining on the date of balance sheet. The entry would be:

 Excise duty (P&L A/c)              Dr

  To Prov for ED (Current Lianlity)

 b) For inclusion in Closing Stock as at 31st March

No separate entry. The usual closing stock entry value is increased by estimated ED

Closing Stock A/c Dr

       To Trading A/c

Net Result  In P&L A/c

Closing Stock stand increased, and an ED Expense also stands increased.

 In Balance Sheet

Stock on Asset includes ED. Current Liabilities includes ED on Closing Stock.

Though there is no impact in P&L account but management/auditor can’t escape their responsibility in case of non compliance as, the financial position of the company is getting affected since results in understatement of value of inventory as well as liabilities of the company by the same amount.

In Next FY Entry Would be

By bringing in Opening Stock, automatically, excise is debited to your trading account

c) Reversal Entry for Provision

Provision for ED A/c Dr (Current Liablity)   

      To ED A/c                    (P&L ) To knock of the excess expense booked in opening stock

3) Later when the FG is sold the entry would be:

Debtors A/c                  Dr    2000

  To Sales A/c                                 1840

  To ED payable A/c                          160

4) Payment entry:

ED A/c                            Dr    160

   To CENVAT Cr. A/c                        80

   To PLA (Bank/cash)                      80

Logic for Inclusion of Excise in cost

Closing stock to be values at cost and only profit element to be removed and excise duty form part of cost, as it is charged on manufacture. Then you will say all cost incurred are not our cost since will be recovered from customer 

Inventory Valuation and Auditor

Inventory valuation is responsibility of auditor also - A note in balance sheet of many companies states - 'Inventory - (As valued and certified by Management). This gives an impression that inventory valuation is not responsibility of auditor. Hence, ICAI has advised that these words should not be used in balance sheet, as auditor is required to perform audit procedures to check inventory. - Chartered Accountant - September, 1999 - page 66]. [Thus, auditor has responsibility of stock valuation also]