The Institute of Chartered Accountants of India (Set up by an Act of Parliament) Branch of SIRC N e w s l eEnglish t t Monthly e r

` 5/- per copy Volume 04 | Issue 02 | September, 2015 | Pages : 32 For Private Circulation only Heritage of Namma Bengaluru

Statue of Kempe Gowda - I in reverential pose in front of Sri Gangadhareshwara Swamy at Shivaganga Temple

Kempe Gowda Tower at Military Premises

“Your success and happiness depends upon “Constant development is the law of life, your own self. No one person can shape and a man who always tries to maintain the life of another. Think for yourself and his dogmas in order to appear consistent drives have a plan of life.” himself into a false position.” Advt.

Advt. Advt.

Advt. cannot follow it; I also know what is Adharma (vice/ non- righteousness), but I cannot retire from it.” This means that Guest Editorial Duryodhana was not ignorant but was adamant. He knew what was good and what was bad. He was knowledgeable. But, his What is Good Knowledge? knowledge did not lead to anything good. Many people believe knowledge is neutral. Its goodness or badness Dr. Gururaj Karajagi, is determined by the way it is used. The "neutral" view of knowledge, however, does not emphasize the important fact that Chairman, the more we know the more likely we are to act and do good. In Academy for Creative Teaching other words, knowledge can be used for both good and evil; however, if we employ the tools of statistics or probability we will It is not when truth is dirty, easily show that knowledge is overwhelmingly "good". but when it is shallow, My claim that knowledge is good originates from this simple five- that the lover of knowledge is step reasoning: reluctant to step into its waters. 1. there is one truth - Friedrich Nietzsche 2. knowledge helps reveal the truth 3. the truth about goodness is no different than other truths; i.e. o me Mahabharata has been a fount of knowledge. I am with more knowledge we are more likely to agree what is true mesmerised to see how every modern management concept T and what is good being taught in the prestigious B- schools of the world has been 4. knowledge must therefore act as a universal unifier of value explained with examples at various situations in Mahabharata. systems across all philosophical and religious systems When I was pondering on the issue of “What is good knowledge?”, 5. knowledge is thus increasing the chances we will act "good" to I immediately recollected the famous statement that Duryodhana the best of our understanding of what "good" is. makes. He says, “I know what Dharma (righteousness) is, but I (Contd. on Page 9)

Heritage) to create awareness and interest about our natural heritage among students. During 2014-15, about 150 students were exposed to issues concerning conservation of Heritage and Jnanasagara Culture." A newspaper column (2-8-2015) reports: CA. S. Krishna Swamy "India has won the top UNESCO prize 'Award of Excellence' 2015 says for the remarkable conservation efforts of the majestic Sree Vadakkunnathan Temple in Kerala, the U.N.body announced on Tuesday. "The award recognizes the remarkable conservation effort undertaken at the sacred site which employed age-old rituals and Cultivating Awareness towards conservation techniques drawn from Vastu Sastra focusing on Conservation of Heritage architecture and construction," UNESCO said in a statement. A Special Feature- UNESCO

ome CEOs refer in their letter to social concerns, Corporate The cultural sites in India are marked by their brilliant craftsmanship SSocial Responsibility and detail the expenditure incurred on on stone. Most of the temples in India are built in stone without any several projects/also talk above creation of charitable trust besides mortar and with sculpture marked on it. complying with CSR. We are a Secular state, our Constitution in Article 51A- Fundamental duties states "it shall be the duty of every citizen of INDIAN OIL CORPORATION (PSU) 2014-15 India ……………'to value and preserve the rich heritage of our Annual Report (Page 35) composite culture." [Article 51A (f)] "THE INDIAN OIL FOUNDATION You will also notice that the definition of Charitable purpose in sec The Indian Oil Foundation (IOF), a non-profit trust, in collaboration 2(15) of the Income Tax Act refers to with the archeological survey of India (ASI) and the National Culture “[preservation of environment (including water-sheds, Fund (NCF), Government of India, is under taking works to develop forests and wild life) and preservation of monuments or tourist-friendly facilities at various national monuments of places or objects of artistic or historic interest,] and the archeological and historical importance, viz., Sun Temple, Konark (Odisha), Khajuraho (Madhya Pradesh), Vaishali (Kolhua) (Bihar), advancement of any other object of general public utility.” Kanheri Caves (Maharashtra) and Bhoga- Nandeeshwara Temple The branch journal carries a column 'Heritage of Namma (). New projects identified during 2014-15 are Hampi Bengaluru' and month after month identifies a heritage site which (Karnataka), Golconda Fort (Rajasthan) and Brihideswara Temple, is commendable . Tamil Nadu. EXCELLENCE IN REPORTING - BEYOND NUMBERS In the line with its objectives, IOF has also launched a programme (Contd. on Page 10) titled CATCH ( Cultivating Awareness Towards Conservation of 4 Bangalore Branch of SIRC of the Institute of Chartered Accountants of India

UNESCO World Heritage Convention recognized places of importance of cultural or natural heritage and Chairman’s Communique... declared them as World Heritage Sites. It was specifically noted that the cultural sites in India are Dear Esteemed Member, marked by their brilliant craftsmanship on stone and most of the temples of India stated in the list were built Namasthe, in stone, without any mortar and with sculpture carved Heritage our National Pride – on it. The Convention went beyond the Religion and ecently, ICAI has come out with a CSR policy, classified them as World Heritage Sites.

Rthe brain child of our immediate past president The Government of India has a separate Ministry of CA. K. Raghu, which inter alia, includes adoption Culture with the first agenda in its Mission Statement of Section 135, Item (v) of the Schedule VII of the as “Maintenance and conservation of heritage, historic Companies Act 2013 states: sites and ancient monuments” followed by “Promotion (v) protection of national heritage, of institutional and individual non-official initiatives in art and culture including restoration the fields of art and culture”

of buildings and sites of historical “It shall be the duty of every citizen of India importance and works of art; setting to value and preserve the rich heritage of our up public libraries; promotion and composite culture” – states Article 51 A(f) of the development of traditional arts and Constitution of India as one of the Fundamental handicrafts; Duty.

India is the largest repository of heritage monuments; The Branch News Letter carrying information about the each one is a tangible link to our glorious past. Heritage monuments is doing one of its fundamental Conservation of Heritage sites could be effective duties as stated in the Constitution. only when awareness about the same is created by Our ancestors possessed special skills with respect to appropriate propagation of information. the construction of temples. They had perspective of Performing a fundamental duty of creating awareness size and spatial imagination. They were intellectually about a heritage monument, which could also be driven people. They derived satisfaction from their endorsed as a CSR activity, should be welcome and achievements and accomplishments that were encouraged by one and all. beneficial to the Society. They treated all religions

I am happy to inform you that the Bangalore Branch has alike. All religions flourished in this land and were taken steps in this direction which is being appreciated complimentary and supplementary to each other. by many Members. “Religious Courteousness & Harmony” are the precious contributions to the Universe made by the Indian * * * * *

September Follow us on www.facebook.com/bangaloreicai 5 2015 Culture; the great virtue that has been demonstrated methodology and technology. His article has further to the world is the precious “Religious Concord”. enhanced the esteem of our News Letter.

For our ancestors, the meaning of Secularism was JNANADAYINI : ICAI National Conference: different – Acceptance of all religions and respecting all religions as their own. On 29th & 30th of August 2015, Jnanadayini: ICAI National

All Kings nurtured all religions and had full belief in Conference was conducted at Jnanajyothi Auditorium, God. Hence we have innumerable number of religious Bengaluru. The Conference was jointly hosted by All places dedicated to various deities. the Branches of Karnataka and was inaugurated by the Chief Guest Dr. B.T. Rudresh and the Guest of Honour When we start the journey to know about our Heritage, CA. Manoj Fadnis, President, ICAI. in the chronological order, incidentally and inevitably we come across Temples. Thousands of Temples are During the inaugural session, on behalf of the there in Bengaluru and only those Temples having high Bangalore Branch, we also submitted a Memorandum heritage value are selected. When details about such to the honorable President of ICAI, requesting for a Temples are published it should not be construed as special status for the Bangalore Branch with respect to promotion of a particular religion and colour it as non the Infrastructure Purchase Policy. secular. I am grateful to our immediate past president

These Temples are nothing but Heritage Signature CA. K. Raghu for his invaluable advice and Monuments. encouragement. I also thank the Managing Committee members and the Regional Council Members for One should fully appreciate the magnificence of supporting me. the historical significance embedded in such monuments instead of paradoxically looking for a On behalf of the Bangalore Branch I sincerely thank the particular religion. delegates and resource persons who happen to be the life blood and the back bone of the Conference. I also It is time to get excited about the enthralling antiquity recognize and appreciate the sincere and dedicated of Bengaluru and enjoy visiting the heritage sites with efforts of all the staff of the Bangalore Branch who family and friends. relentlessly supported me in all possible ways for the success of the Conference.

GUEST EDITORIAL: With warm regards I heartily thank Dr. Gururaj Karajagi for his editorial Dhanyavada article. He is a great motivational speaker; the man who walks the talk. He believes that the quality of education will be just as good as the quality of teachers; he also believes that the only way to improve the standard of CA. Allama Prabhu M.S. education is to empower the teachers with content, Chairman

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7 Fascinating Bengaluru

undreds of Kings were feudatories of the great Vijaya the new venture. Achyutadeva Raya recognized the zeal HNagara Empire which was ruled by able and highly and loyalty of kempe Gowda and further granted him 12 competent emperors like Harihara and Krishnadevaraya. places with revenue of 30000 gold varahas.

The most prominent and highly supporting among the HOW THE LAYOUT OF MODERN BENGALURU WAS feudatories were the Rulers of viz., Yelahanka FORMED: Nadaprabhus, who ruled Bengaluru and Magadi from A marvelous book about Bengalure viz., “Bangalore Yelahanka. The first known figure of the family was through Centuries” has been written by Mr. M. Fazlul Ranabhaire Gowda; the first ruler being Jaya Gowda, Hasan. The author gives an interesting narration of all followed by his son Gidde Gowda. the significant historical events relating to Bengaluru. Gidde Gowda’s son Kempa Nanje Gowda ruled the Here is an extract from the Book which gives how the provinces for nearly 70 years, from 1443AD to 1513AD. boundaries of the new city were defined even before the Kempa Nanje Gowda’s eldest son was none other than construction of the City. Kempe Gowda I (1513AD to 1569AD), the person Extract from the book: instrumental in building the modern city of Bengaluru. “The founding of Bangalore in 1537, was Kempe During this period, Achutaraya was the ruler of Gowda’s epic achievement. Thick jungle with a mass the Vijaya Nagara Empire. Kempe Gowda and his of wild weeds once grew luxuriantly at the place where ascendant’s remained loyal to the Vijaya Nagara Empire now Bangalore stands. For centuries, eery wind whistled and enjoyed great respect from the Empire because of through that nightmarish jungle. Kempe Gowda had the the extraordinary administrative skills and also for the jungle cut down, for, he had conceived an idea to build strategic military acumen they exhibited during the his dream town there with a strong fortress and well warfare. laid streets studded with shops, choultries, temples, etc. BENGALURU : The Dream Town of Kempe Gowda I And, choosing an auspicious occasion, in consultation One day when Kempe Gowda was on a hunting with his astrologers, he commenced his town building expedition he saw a very strange sight of a Hare work in a typical Gowda way. Right at the spot where encountering and challenging his hunting dog. The very now stands the Dodpet Square, in the heart of city, sight significantly influenced him who was convinced one fine morning in 1537, four pairs of milk about the attribute of Heroism in that area and declared white bullocks stood harnessed to four decorated it as a Heroic Land. He also noticed that the surrounding ploughs, and at the royal command off they went, place was highly conducive to build a big new town, driven by young men, furrowing the ground in destined to prosper and flourish. He immediately the four directions up to the limits marked. The obtained imperial permission from the Vijaya Nagar routes traversed by those four ploughs became Emperor who happily gave his accord and encouraged the nucleus of the new town’s four main streets.

September Follow us on www.facebook.com/bangaloreicai 7 2015 Thus were laid Bangalore’s oldest streets- and · Balepete – for trading Bangles, Kum Kum and other Dodpet which ran east to west from the Halsoor Gate to auspicious items Sondekoppa Gate and north to south from Yelahanka · Kumbara-pete, Ganigarapete, Upparapete were Gate to Anekal Gate respectively. Those narrow for the trades, crafts and residences of Kumbara, streets continue to exist to this day and are the busiest Ganiga, Uppara castes. commercial centres of Bangalore. A strong mud fort, reckoned impregnable in those days, erected around the Kempe Gowda - I was just fascinated by the Name – new township guarded the country round about. Within Bengaluru and thus named the new town. the fort were localities earmarked for people of different Kempe Gowda - I shifted his capital from Yelahanka to avocations. The numerous ‘Petes’ of the town, which the new town i.e., Bengaluru. He further consolidated soon came into being not only indicated professions his conquests by acquiring Halsoor, hesarghatta and carried on in particular localities, but also indicated Dommlur and expanded his kingdom. particular goods sold in those areas.” Kempe Gowda was a man with great vision; he was The blue print of the broad spectrum magnificent magnanimous, righteous and religious. He wanted his commercial mall catering to the needs of all the sections works tobe everlasting and ever celebrated. He amazed of the society was thus laid down. the world with his meticulous planning. In a very short The mud fort which Kempe Gowda built at this place span of time he performed momentous endeavours ! consisted of four batteries (where cannon were mounted) Thus, he is reckoned and categorized as a competent and was of eight gates, the most prominent of which and a distinguished ruler with Decorum and glory. were the Yelahanka Gate in the north, the Halsoor Gate If Kempe Gowda – I had built Modern Bengaluru then in the east, the Anekal Gate in the South and the what is that we now have ? Ultra-Modern Bengaluru ? Gate in the West.

Halsoor Gate is opposite to BBMP, please note the police COVERPAGE PHOTOS: station there is called Ulsoor Gate Police station, even The cover page contains two rare photos of significant now. importance; the first one is the Kempe Gowda Tower Yelahanka Gate is where the present SBM head office is at Ulsoor, one of the four watch towers erected by located. Kempegowda II, which is now inside the Military To accommodate the expansion of the town, the British premises. We are thankful to Mr. A.B. Agarwal, had demolished the fortifications way back a century ! Lt. Col, Group Adjutant for Commandment, for according special permission to take photographs for publishing The Pete s indicated either the nature of trade or the ’ them in our News Letter. commodity sold in that particular place. Just to narrate few of them : The second one is the statue of Kempe Gowda I erected in front of the sanctum Sanctorum (Garbha · Doddapete was formed for wholesale trade, covering Gudi) of Sri Gangadhareshwara Temple at Shiva Ganga major areas of thepresent Avenue Road. Hills. The inscription on the base of the statue, which · Chickpete – was for retail trade. is states “Gowdara Kempaiah Gowdanu Gangadharaswamiya paadakke sadaa namaskaara and · Aralepete – for trading Cotton and its products ” is dated 1609, obviously posthumously made by Kempe · Akkipete – for trading Rice, Paddy and its products Gowda II. · Ragipete – for trading Ragi

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or some knowledge. When knowledge is available to people they would be able to learn it, from books, nature, friends, teachers, or their own senses and experience. What is Good Knowledge? Since, knowledge is available to everyone, how do we know which is good and which is bad? If you study an esoteric (Contd. from Page 4) moment in the history of art, or become an expert on ancient

One of the most durable arguments is that knowledge literature in some corner of the world, or are concerned with is and ought to be a public good. Here I don’t want to the ways that racism and inequality impact peoples on the restate or evaluate the whole argument, which is complex marginalized edges of society, this view usually suggests that and has many threads. But I do want to pull at a few of your knowledge is not good for anything. If it cannot be those threads. What is a public good? In the technical sense bought or sold, it has no value.This way of thinking erodes used by economists, a public good is non-rivalrous and non- society. excludable. A good is non-rivalrouswhen it is undiminished In better days, we should deliberate the value of knowledge by consumption. We can all consume it without depleting it by sustaining public support for universities and public debate or becoming “rivals”. Television broadcasts are non-rivalrous; over such issues. Yet this push to marketise or commodify my reception doesn’t block yours or vice versa. A good is non- knowledge is a form of privatising knowledge. This push says excludable when consumption is available to all, and attempts that the market will decide what knowledge has value. Which to prevent consumption are generally ineffective. Radio or is to say, only those with money will decide what knowledge television broadcasts are non-excludable for people with has value.This erodes society and erodes the social value that the right equipment in the right area. Breathable air is non- knowledge has for creating enlightened, informed, citizen, a excludable for this purpose even though a variety of barriers, “good” that the market does not necessarily value. from pollution to suffocation, could stop people from This market logic also erodes the critical value of knowledge consuming it. Knowledge is non-rivalrous. Your knowledge – that is, our knowledge as a means to critique and reflect on of a fact or idea does not block mine, and mine does not society, one of our capacities as human beings. Knowledge is block yours. not simply a “thing” that can be assigned a monetary value. It Thomas Jefferson described this situation beautifully in an is not simply about “discovery” of facts. Knowledge is a social 1813 letter to Isaac McPherson: “If nature has made any one practice – of making and creating. It emerges through social thing less susceptible than all others of exclusive property, it is relationships, between people and between people and the the action of the thinking power called an idea....Its peculiar world. character...is that no one possesses the less, because every Relations between people raise moral and ethical questions other possesses the whole of it. He who receives an idea from such that knowledge-making is never “pure and detached” me, receives instruction himself without lessening mine; as he science. Knowledge-making is always socially and morally who lights his taper at mine, receives light without darkening positioned. When we produce knowledge, we explore, mine.”George Bernard Shaw also described it: “If you have an reveal and speak about ongoing social life. In doing so, the apple and I have an apple and we exchange apples then you pursuit of knowledge often reveals that which power would and I will still each have one apple. But if you have an idea and like to obscure.Knowledge-making is not just counting and I have an idea and we exchange these ideas, then each of us measuring some “reality” out there. It is an interpretative act will have two ideas.” that mobilizes the empirical and imaginary capacity of human- Knowledge is also non-excludable. We can burn books, but beings. It engages and creates reality as a creative practice. It not all knowledge is from books. We can raise the barriers to seeks to think the possibility of a world otherwise. knowledge, through prices, punishments or impractical social laws, but that only create local exceptions for some people

September Follow us on www.facebook.com/bangaloreicai 9 2015 Jnanasagara CA. S. Krishna Swamy says better performance or issues. Reports now probably need to more frequent as business changes are more frequent (Contd. from Page 4) than in the past, possibly driven by Big an Fast Data being EXCELLENCE IN REPORTING made available to all businesses as well as consumer - BEYOND NUMBERS preferences changing faster than in the past as people are more connect than in the past with Smart phones and Fundamental Duties - To strive towards excellence in all handheld devices that are connected to the net always. spheres of individual and collective activity, so that the In addition to this we have Social media that is impacting nation constantly rises to higher levels of Endeavour and business to react faster to customer comments. achievement. 6. Well written reports will help management and the Board Article 51A(j) of The Constitution of India of directors get straight to the cause of the issue and action resolution. In today’s fast world a swift organization is one 1. An interesting part of corporate annual report that will get an edge over its competitors. It can be said accompanying financial statements, especially in the that excellent and timely reports are foundation of case of intelligence/knowledge, based companies is the an excellent management team that can address issues CEO report highlighting the achievement of excellence in fast to keep the organization ahead in the market as well fields that transform the way we live in. The focus shifts as maintain a high customer satisfaction. from numbers. We live in digital times where the Indian 7. In the external world as well statutory reports need to intelligence has its day and very heartening to see an be telling a story of the organization to the external Indian taking the place of CEO of such large companies stakeholders to ensure appropriate awareness of the succeeding founder CEO’s. For Eg :- CEO Sunder Pichai @ business climate and health of operations. This is key to Google and Satya Nadella @ Microsoft. ensure the Board and Executive management can maintain 2. Financial metrics and Statistics form a significant basis of and grow the market capitalization of the organization - all business reports. Over time reporting has evolved the final measure of a company’s success. from being a simple reporting of numbers - financial 8. I take the example of Google which is in the news. A few or otherwise, leaving a lot of the interpretation to the paragraphs from the CEO letter. reader, to the present where better reports include a lot of 8(1) “GOOGLE WAS BORN IN 1998. If it were a person, the interpretation of the data. This is the case in external it would have started elementary school late last summer / statutory reporting as well as in internal management (around August 19), and today it would have just about reporting. finished the first grade. 3. As the role of the CFO evolved over time, so has the way Of course companies are not people. Among other CFOs and their organization report on data. With Finance obvious differences, they must be responsible and self playing a more strategic role in the business, reporting sufficient at a very early age. But a long perspective, like has become more of story -telling - story that is built that of a human lifespan, is useful in assessing year by-year on the basis of financial dataas well as other relevant developments. While it may seem that we have come far data (like marketing; external research; competitor etc.) already, this is just the beginning of a lifetime. 4. All the work done at the different levels of the organization And while Google is not a single person, it does embody culminate in a report to internal or external stakeholders the effort, ability, and commitment of thousands of who act in their own way based on what they take away individuals. Together we strive toward a common mission: from contents in these reports. Technology has made to organize the world’s information and make it universally more data available to organization, for employees and accessible and useful. This is an infinitely large task for a management to digest and act on. long-term company. 5. With explosion of data (Big Data and Fast Data), it has 8(2) 345 DAYS become even more critical to be able to identify the most important or relevant data that is important for the It is hard to believe less than a year has passed since our stakeholders to be able to zero in on the real causes of last letter, given how much has happened. We made

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some big strides toward making more web information I believe this is a landmark moment for the company nearly instantly available. But just as important, we and for our industry as a whole. Cloud and mobile branched out to make a growing array of media forms technologies are redefining how people work and play. and information types more accessible and, hopefully, Three billion people will soon be connected to Internet- more useful to people all around the world. enabled devices; 212 billion sensors will come online in Here are some of the highlights: a few short years; trillions will be spent in consumer and 8 billion pages business technologies. But it’s not about technology for Google Maps technology’s sake! It’s our mission to enable the use of Keyhole technology to realize the true potential of people, teams Google SMS and organizations. Google Print 10. Mark Zuckerberg - CEO of Face book - Google Scholar “We just passed an important milestone. For the first time Google Desktop Search ever, one billion people used Face book on a single day. Google Video One in 7 people on 24-08-2015 on earth used face book Gmail to connect with their friends and family.” Picasa Blogger CEO - IPO LETTER 8(3) We also launched a number of improvements to our “we don’t build services to make money; we make money Ad Words and Ad Sense programs to make it easier and to build better services. And we think this is a good way more rewarding for both advertisers and publishers to to build something. These days I think more and more participate in the increasing use of commercial information people want to use services from companies that believe online. Notably, we have focused on improving our ads in something beyond simply maximizing profits. quality, which increases ads relevance for users, and click By focusing on our mission and building great services, we through rates for our advertisers and publishers.” believe we will create the most value for our shareholders 9. Shareholder Letter -Microsoft ( Satya Nadella ) and partners over the long term — and this in turn will enable us to keep attracting the best people and building TO OUR SHAREHOLDERS, CUSTOMERS, PARTNERS AND more great services. We don’t wake up in the morning with EMPLOYEES: the primary goal of making money, but we understand that It is a when I took this role, I originally joined Microsoft the best way to achieve our mission is to build a strong and to have an opportunity to change the world through valuable company.” technology and empower people to do amazing things. 11. The ICAI also gives awards for excellence in financial Many companies aspire to change the world, but very reporting to companies who develop best accounting few have humbling experience to write this letter to you policies and methods. as only the third CEO in Microsoft’s history. As I said the talent, resources and perseverance of Microsoft.

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September Follow us on www.facebook.com/bangaloreicai 11 2015 CALENDAR OF EVENTS - SEPTEMBER & OCTOBER 2015 Date/Day/ Topic / Speaker CPE Credit Time 02.09.2015 Study Circle Meet Wednesday Critical Issues in Service Tax and Interactive Session hrs 6.00pm to 2 8.00pm VENUE: Branch Premises 03.09.2015 National Seminar on GST Thursday jointly with St. Joseph College of Commerce NO CPE 9.15am to 5.30pm VENUE: St. Joseph College Auditorium, Bengaluru 04.09.2015 Study Circle Meet Friday Practical Aspects of Tax Audit hrs 6.00pm to CA. Dr. Vishnu Bharath Alampalli 2 8.00pm VENUE: Branch Premises 05.09.2015 Intensive Workshop on International Taxation - 3 Saturday CA. Rishi Harlalka hrs 5.00pm to 3 8.15pm VENUE: Branch Premises No Delegate Fee 02.10.2015 Holiday on account of Gandhi Jayanthi Friday ––– 03.10.2015 Intensive Workshop on International Taxation - 4 Saturday CA. K.R. Sekar hrs 5.00pm to 3 8.15pm VENUE: Branch Premises No Delegate Fee 07.10.2015 Study Circle Meet Wednesday Service Tax : Import and Export of Services hrs 6.00pm to CA. Madhur Harlalka 2 8.00pm VENUE: Branch Premises 09.10.2015 PRACTICE ALERT - DISCUSSIONS Friday FEMA hrs 6.00pm to CA. G. Murali Krishna 2 8.00pm VENUE: Branch Premises 14.10.2015 Study Circle Meet Wednesday Critical Issues in the Implimentation of Companies Act 2013 hrs 6.00pm to CS. M.S. Shivashankaran & CS. Ms. Mangala Rohith 2 8.00pm VENUE: Branch Premises 16.10.2015 PRACTICE ALERT - DISCUSSIONS Friday VAT Updates hrs 6.00pm to CA. S. Ramasubramanian & CA. Prateek Marlecha 2 8.00pm VENUE: Branch Premises 17.10.2015 Intensive Workshop on International Taxation - 5 Saturday CA. Narendra J. Jain hrs 5.00pm to 3 8.15pm VENUE: Branch Premises No Delegate Fee 21.10.2015 Study Circle Meet Wednesday Start up deal cycle - Structure and raising of Funds hrs 6.00pm to CA. Amith Raj A.N. & CA. Krishna Prasad 2 8.00pm VENUE: Branch Premises

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CALENDAR OF EVENTS - OCTOBER & NOVEMBER 2015 Date/Day/ Topic / Speaker CPE Credit Time 23.10.2015 Holiday on account of Vijayadashami Friday ––– 28.10.2015 Study Circle Meet Wednesday Digital Threats and Cyber Law - Growing need and Professional Opportunity hrs 6.00pm to CA. Anand P. Jangid 2 8.00pm VENUE: Branch Premises 04.11.2015 Study Circle Meet Wednesday Income Tax Issues and Legal Solutions hrs 6.00pm to Mr. M.V. Seshachala 2 8.00pm VENUE: Branch Premises 06.11.2015 PRACTICE ALERT - DISCUSSIONS Friday Income Tax 6.00pm to CA. H. Padamchand Khincha, CA. Sudheendra B.R. & 2 hrs 8.00pm CA. Shivanand Nayak VENUE: Branch Premises 07.11.2015 Intensive Workshop on International Taxation - 6 Saturday CA. Sharath Rao hrs 5.00pm to 3 8.15pm VENUE: Branch Premises No Delegate Fee 11.11.2015 Holiday on account of Lakshmi Pooja Wednesday ––– 13.11.2015 PRACTICE ALERT - DISCUSSIONS Friday Service Tax hrs 6.00pm to CA. Rajesh Kumar T.R. & CA. Lakshmi G.K. 2 8.00pm VENUE: Branch Premises 18.11.2015 Study Circle Meet Wednesday Fraud Awareness & Detection in Current Business Environment hrs 6.00pm to CA. Zaid Razvi & Mr. Siddharth Sharma 2 8.00pm VENUE: Branch Premises 20.11.2015 Corporate Accountants Meet Friday hrs 6.30pm to 2 8.30pm Details will be informed later 21.11.2015 One day workshop on ICDS Saturday hrs 09.30am to Co-ordinator: CA K Gururaj Acharya 6 04.30pm Details will be informed later 21.11.2015 Intensive Workshop on International Taxation - 7 Saturday CA. P.V. Srinivasan hrs 05.30pm to 3 08.30pm VENUE: Branch Premises No Delegate Fee 25.11.2015 Study Circle Meet Wednesday Indirect Taxes Implications on Sale of Software (Covering Customs, Central Excise,VAT & Service Tax) 6.00pm to 2 hrs CA. N. Anand 8.00pm VENUE: Branch Premises 27.11.2015 PRACTICE ALERT - DISCUSSIONS Friday VAT hrs 6.00pm to CA. S. Venkataramani & CA. Annapurna D. Kabra 2 8.00pm VENUE: Branch Premises

September Follow us on www.facebook.com/bangaloreicai 13 2015 DIGEST OF RECENT DECISIONS OF THE INCOME TAX APPELLATE TRIBUNAL

CA. K.S. Satish, Mysore

CHARITABLE INSTITUTION and for efficiently carrying on business present value of the constructed area constituted revenue expenditure as no as estimated by the developer has nce registration to a charitable new asset was created and the items to be taken as the full value of the Oinstitution has been granted under on which the expenditure was incurred consideration under section 48 for section 12A by the Commissioner, the could not be reused on vacation of the purposes of computing capital gains charitable character of the institution premises. and not the fair market value thereof cannot be questioned by the Assessing opined the Bangalore ‘A’ Bench in ITO Officer during the course of assessment REJECTION OF ACCOUNTS v. N.S. Nagaraj (2015) 170 TTJ (Bang) proceedings opined the Delhi ‘B’ Bench In Yamaha Motor India (P) Ltd. v. ACIT 599. in Divya Yog Mandir Trust v. JCIT (2015) (2015) 153 ITD 49 (Del) (TM) where the 153 ITD 368 (Del). INCOME FROM OTHER SOURCES Assessing Officer rejected the books NOT BUSINESS EXPENDITURE of account of the assessee-company In Kumarpal Mohanlal Jain v. ITO In Chryscapital Investment Advisors for the reason that the average sale (2015) 153 ITD 292 (Mum) where the India (P) Ltd. v. DCIT (2015) 170 TTJ price of motorcycles during the year facts were that the assessee paid Rs. (Del) 185 where the assessee-company was low as compared to that during 6,40,000 to the builder in pursuance paid bonus to its managing director the earlier year, the Delhi ‘H’ Bench of an agreement for purchase of and director exactly in the same ratio in (Third Member Bench) took the view two residential flats, the agreement which they held shares and it failed to that merely because the realisation per provided for an option to the assessee justify the payment as reward for the motor cycle during the year was low in to secure refund of the amount paid work done by them, the Delhi ‘I’ Bench comparison with that in the preceding together with interest if possession observed that had the bonus not been year, the Assessing Officer could not of the flats was not given in time by paid to them, then it could have been assume that the selling price charged the builder, the builder did not give paid as dividend in the same ratio in by the assessee was understand and possession of the flats even after ten which bonus had been paid and held that the Assessing Officer was not years and the assessee approached that the bonus paid was not allowable justified in rejecting the books of the District Consumer Forum which as a deduction from business profits. account of the assessee for the said directed the builder to refund the entire reason. amount of Rs. 6,40,000 with interest at REVENUE EXPENDITURE 9% per anum, the Mumbai ‘A’ Bench CAPITAL GAINS The Mumbai ‘F’ Bench has in Urban held that the interest received by the Infrastructure Venture Capital Ltd. Where the assessee entered into a assessee constituted compensation for v. DCIT (2015) 170 TTJ (Mum) 663 joint development agreement with non-performance of the contract by expressed the view that expenditure a developer in terms of which he the specified date and being a revenue of Rs. 86,48,765 incurred by the handed over possession of the land to receipt, was assessable as income assessee-company for making the the developer against a consideration under the head ‘ Income from other rented premises useful for its business of 50% of the built up area, the sources ‘. (Contd. on Page 19)

September 2015 14 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Jnanadayini – ICAI National Conference held on 29th & 30th of August 2015 at Jnanajyothi Auditorium, Bengaluru

Welcoming the Chief Guest Dr. B.T. Rudresh

Chairman's address Vice Chairman's address Invocation dance

Inaugural Session

Presidential address by Chief Guest Dr B T Rudresh CA Manoj Fadnis, President, ICAI

Inauguration Release of GST Research Paper

Presenting 'Certificate of Appreciation' to Members of GST Research Group - Few Snapshots

15 Jnanadayini – ICAI National Conference

Release of Souvenir Presenting ICAI Logo Wall Plate to Bengaluru Branch

Presenting ICAI Logo Wall Plate to Presenting ICAI Logo Wall Plate to Presenting ICAI Logo Wall Plate to Presenting ICAI Logo Wall Plate to Belagavi Branch Ballari Branch Hubballi Branch Mysuru Branch

Presenting ICAI Logo Wall Plate to Felicitation to Chief Guest Dr B T Rudresh Felicitation to Guest of Honor CA Manoj Fadnis, President, ICAI Udupi Branch

Inaugural Vote of Thanks CA Shivanand Halbhavi, Chairman Belagavi Branch, Dr Parthasarathi Shome presenting the books CA Padamchand Khincha with Dr. Parthasarathi Shome he authored to Bengaluru Branch Library

CA Satyanarayana C S, CA Nandaraj Khatavkar, Secretary of Hubballi branch, CA Prashanth Holla, Chairman, Udupi Branch with Chairman, Mysore Branch thanking CA Anjana Vivek CA K S Ravi Shankar and CA K K Chythanya

CA Bhat Shivaram Shankar Entertainment Programme Lucky Couple

16 Jnanadayini – ICAI National Conference

Dr. Gururaj Karajagi Felicitation to Dr. Gururaj Karajagi Pt. Pravin Godkhindi & Pt. Gurumurthy Vaidya

Lucky Delegate Cross section of audience

Mr. Khurshed Batliwala delivering his spiritual address Felicitation to Mr. Khurshed Batliwala CA K Raghu CA K Gururaj Acharya

Thanking to CA K Raghu Thanking to CA Dilip J Thakkar CA Shravan Guduthur thanking CA. V. Raghuraman & CA. S. Venkataramani CA Gururaja Acharya K CA Nanu R Mallya

CA. Sanjay M Dhariwal, Panel Discussion CA. S. RamasubramanianCA. K.R. Sekar Moderator

Office Bearers with Branch Staff MC's CA Sanjana Hegde and Thanking the MC's CA Sandhya P Nagar 17 Advt.

Advt. Bangalore Branch of SIRC of the Institute of Chartered Accountants of India

DIGEST OF RECENT DECISIONS OF Jain v. Addl. CIT (2015) 170 TTJ (Mum) THE INCOME TAX APPELLATE TRIBUNAL 676 held that where the assessee claimed exemption under section 10(38) without paying securities (Contd. from Page 14) an order granting stay for the collection of the demand till the disposal of the transaction tax and deduction under CHAPTER VI-A appeal by it and the Assessing Officer section 80-IB in excess of the amount Job works carried out by the assessee after obtaining a consent letter from determined in the audit report, he from the raw material supplied by the the assessee collected a sum of Rs. was guilty of concealment of income customers amounts to manufacture 16.64 crores during the subsistence of and liable for penalty under section and the income from the job works the stay order, the Mumbai ‘K’ Bench 271(1)(c). constitutes income derived by the opined that the Assessing Officer TAX DEDUCTION AT SOURCE industrial undertaking for the purpose should not have collected the amount of deduction under section 80-IB held even with the consent of the assessee The assessee is obliged to deduct the Mumbai ‘B’ Bench in Addl. CIT as neither the assessee nor the Revenue tax at source under section 194A v. Narendra Polyplast (2015) 170 TTJ could flout the decision of the Tribunal on interest paid even if it has not (Mum) (UO) 53. and directed the Assessing Officer claimed the interest as a business expenditure or has disallowed RECOVERY to refund the amount collected with interest within 15 days to the assessee. the same under section 40(a)(ia) ruled In Johnson & Johnson Ltd. v. Addl. CIT the Cochin Bench in Agreenco Fibre PENALTY (2015) 170 TTJ (Mum) 422 where the Foam (P) Ltd. v. ITO (2015) 153 ITD 262 facts were that the Tribunal had passed The Mumbai ‘J’ Bench has in Joit Kumar (Coch).

Advt.

September Follow us on www.facebook.com/bangaloreicai 19 2015 COMPANIES ACT 2013 – UPDATES ON AUDIT REPORTS

CA K Gururaj Acharya

his article brings about a Snap could ensure that the chances of · Consolidated Financial TShot of the Latest Developments errors or unintentional omissions are Statements with respect to Audit and Reporting avoided. - CARO required for CFS also. [First requirements under the Companies Act b. Report only on the clauses which are Time requirement] 2013read with the respective rules– applicable and no comment required The Illustrative Audit Report CARO – Notified pursuant to at all regarding the clauses not formats have been changed to S.143(11) on 10thApril 2015 applicable. This would be in line with accommodate the provisions of Main Audit Report Format issued by · CARO to be given for All Audit Companies Act 2013. There are ICAI, which refers to CARO annexure Reports signed on or after 10th no changes in the requirements as follows: April 2015. of SA 700/705/706. “As required by the Companies CARO is not required to be given G/N of ICAI issued on Reporting (Auditor’s Report) Order, 2015 for- Banking, Insurance, S.8 Cos, OPC, u/s 143(3) (f) & (h) of Cos. Act (“the Order”) issued by the Central Small Cos&Pvt. Cos.With PUC+FR Government of India in terms of S. 143(3) Auditor’s Report shall < Rs. 50 Lacs, Loans < Rs.25 Lacs or sub-section (11) of section 143 of state if: TO < Rs. 5 Cr.In all such cases, when the Act, we give in the Annexure a a) Information & Explanation Sought CARO is not given the “Statement on statement on the matters specified received CARO” issued by ICAI mandates that in paragraphs 3 and 4 of the Order, a para be included in the main audit b) Proper books maintenance (#) to the extent applicable.” report as follows: c) Branch Auditor’s report how dealt Reporting on the clauses which are “This report does not include a c. with (*) applicable and clubbing the non- statement on the matters specified d) Agreement with books applicable clauses in one place (as in paragraph 3 of the Companies e) Compliance with A/S perICAI Council Decision taken on (Auditor’s Report) Order, 2015, 3rd & 4th Jan 2014). f) Observation or comments of issued by the Ministry of Corporate Auditor’s on financial transactions Affairs, in terms of section 143(11) “Illustrative Audit Report or matters which have any of the Companies Act, 2013, since Formats” released by ICAI adverse effect on the functioning in our opinion and according to the The Illustrative formats are available of Co. information and explanations given in the ICAI website for different to us, the said Order is not applicable g) Director disqualification situations for to the company.” h) Any qualification, reservation · Stand alone Financial Statements · If certain clauses of CARO are not or adverse remarks relating to + Engagement letter applicable, CARO Reporting can the maintenance of A/Cs and Formats are given both with & be done in the following 3 ways– - other matters connected without reporting on Internal Report on all 12 points and state that therewith. (#) (*) a. Financial Control and its operating a particular clause is not applicable i) IFC in place & operating effectiveness effectiveness (IFC). It may be noted in the respective clause. of such control OPTIONAL for FY that reporting on IFC is optional for – 14-15. This also acts as a checklist which FY 2014-15.

September 2015 20 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Bangalore Branch of SIRC of the Institute of Chartered Accountants of India j) Such other matter as may be prescribed: - Rule 11 - 3 points i. Pending litigation impact ii. Material foreseeable losses on long term contracts iii. Any delay in transfer to IEPF. * Can be dropped if not applicable – See Table below for Gist of ICAI’s G/N on Reporting. # Inter-connected Gist of ICAI’s G/N on Reporting u/s 143(3) (f) & (h) of Cos. Act

143(3)(f) 143(3)(h)

Matters having Qln. Reservation or adverse remark Adverse Effect on relating to maintenance of A/Cs & Co’s functioning ? other matters connected therewith.

1. Clean – unmodified – SA 700 No comment Generally NO Comment reqd. (Drop required Para) (Drop Para) [Exception when 143(3)(b) reg. maintenance of proper books Para is adversely commented]

2. Modified (SA 705) or EOM SA 706 Qln, Adverse opinion or disclaimer or EOM Comment required EOM SA 706 a) Matters adversely affecting Co.’s functioning: – · Is pervasive affecting going concern or significantly Generally NO Comment reqd. (Drop impact the ops. of the Co. Para)

b) Other than ‘a’: [Exception when 143(3)(b) reg. · Managerial remuneration st. approval NO comment maintenance of proper books Para is · Management estimate based contract receivable required adversely commented] where ultimate collection could be different (Drop Para) · Frauds dealt in FS NOT having continuing effect on Modified– SA 705: Required FS.

3. If IFC & OE is commented as NOT OK Comment required Comment reqd. only if IFC weakness RESULTS IN modification of Auditor’s Opinion in FS

4. S.143(1) inquiries on certain matters@, if reported Comment required NA

@ a) L&A made – If secured, is it properly secured & terms are prejudicial to co. b) Transactions rep. by Book entries - prejudicial c) Shares, Debn or other securities are sold at loss. d) L& A made – Is it shown as Deposits e) Are personal exp. – Charged to Revenue Account. f) Shares allotted for cash – Has Cash been received & properly accounted.

September Follow us on www.facebook.com/bangaloreicai 21 2015 DIGEST ON RECENT DECISIONS UNDER VALUE ADDED TAX LAWS

CA Annapurna D Kabra

Case1: In case of Gerb Vibration coupled with free transferability transportation. The appellant was control systems Vs State of made REP license into a marketable filing nil return and hence Assessing Karnataka 2015 (82) KLJ 33 (T-DB): commodity. They were goods properly Authority has levied penalty for misuse The Appellant manufactured large so called having innate value and a of C form for the purchase of vehicles range of sprint supports vibration ready market. against C form. As per the SC decision control systems. They also provided in the case of Commissioner of Sales In case of Sunrise Associates Vs engineering drawing and designs. It Tax Vs Modi Sugar Mills Limited; East Government of NCT of Delhi and was an argument that whether the India Cotton Manufacturing Company Others (SC) wherein it is stated that engineering drawings and designs Limited, V.V.S. Sugars Vs Government a lottery ticket being in essence for a can be considered as goods. The of Andhra Pradesh and Others, it prize the sale of a lottery ticket can Appellant contended that the technical is held that “on going through the only be a sale of that chance. There is specifications and designs and provisions of Section 10 of the act, no other element. Every right can be drawings were claimed as part of the it is evident that in case of offences sub divided into lesser rights. It is when supply, installation and commissioning mentioned in clauses (a) to (d), “mens these lesser rights culminate in a legally of Vibration control system. As the rea” is a pre-requisite for initiating recognizable right, it is the latter which same is not only drawings, but also penal provisions and therefore in cases defines the right. provided technical specifications, co- of those offences “bona fide” mistake ordinates of the system and other Therefore analysing the various judicial will not call for penalty. technical factors and hence held pronouncement wherein it has to be Case 3: In the case of State of that the same is ‘technical know- considered that transfer of technical Punjab and another Vs Shreyans how’. As per the SC decision in the know along with Vibration control Industries Limited 2015 (78) VST case of Associated Cement Company system will become goods only it has 264 (P & H) the transporter was Limited Vs Commissioner of Customs a legally recognizable right and has a carrying the additional document in as well as Kerala High Court decision innate value. excess of the documents required for in the case of Mechanical Assembly Case 2: In the case of Avaya the transportation of goods and the Systems (India) Private Limited Vs Construction Company Bangalore additional documents were showing State of Kerala, it is held that technical Vs State of Karnataka 2015 (82) KLJ the loaded goods were to be delivered knowhow is nothing but goods which 104 (T-DB) wherein the appellant is a to C at Delhi and concluded that the is very much essential to deploy and sub contractor for a main contractor and goods were not being transferred operate the system. the contract was executed for removal as branch transfer but were actually In the case of Yasha Overseas Vs of rock particles from the underground moving in the course of inter-state Commissioner of Sales Tax and Others cavern to a main contractor, who has sale and thus concluded evasion of (2008) 17 VST 182 (SC), where it is undertaken certain works contract to a tax. Due to this, check post officer held that REP licenses had always a Central Government Undertaking. The ordered for detention of the goods. market and there were people willing sub contractor has registered under The Honourable High Court held that to sell and others willing to buy REP CST as works contractor and got the check post officer is not competent license at all times. Their innate value tyres, vehicles etc., (own purpose) for to go into nature of transaction. He

September 2015 22 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Bangalore Branch of SIRC of the Institute of Chartered Accountants of India cannot assume jurisdiction of assessing 539 (Tri)(DB) wherein the dealer was a case wherein, the appellant has to officer and determine whether its engaged in the business of buying claim the special rebate available on branch transfer or inter-state sale. Levy and selling of paddy and rice. The the stock transfers as per Section 14 of penalty on ground goods sold in penalty was imposed under section read with Section 11(a)(5) of the Act. course of inter-state sale and attempt 74(4) by the prescribed Authority for Therefore, the appellant is not correct to evade tax is not justified under the non submission of audited financial in pleading to accept his formula which law. statement (VAT 240). The penalty of is beyond the statutory limits. Rs. 14900/- imposed by calculating at Case 4: In the case of the Assistant In the above case the appellant has Rs. 50/- per day is cancelled whereas Commissioner of Commercial Taxes calculated and declared the input tax the minimum penalty of Rs. 5000/- as (Audit-52) Bangalore Vs. Federal credit by applying the special rebate prescribed under section 74(4) of the Mogul Goetz (India) Limited-2015 formula and has disclosed the same Act is confirmed so that appellant (82) KLJ 426 (K-HC-DB) The Appellant in his monthly return and annual complies with the provisions of the has filed revised return under Section audited statement. The Assessing Act and cannot take shelter stating 35(4) beyond 6 months with additional Authority while assessing the books of that he is dealer in exempted goods. tax liability. The Commissioner Circular accounts of the appellant has revised The liberal view is supported by the dated 7.7.2008 had clearly provided the formula by calculating the eligible decision of Honourable High Court that if revised return indicated any input tax credit and ineligible input tax rendered in case of Fosroc chemicals additional tax liability, then revised credit and the benefit of eligible input (India) Private Limited Bangalore Vs return filed beyond 6 months should tax credit is not given to the appellant State of Karnataka 2014(80) Kar.L.J. be accepted. The Assessment order on the basis that the same is not 497 (HC)(DB) has passed ignoring the Commissioner declared within six months from filing circular. Earlier single member judge Case 6: In the case of Rane (Madras) the original return. The revised return had quashed the assessment order Limited, Mysore Vs State of should be filed within six months only and consequential demand notice was Karnataka 2015(82) Kar.L.J 625 (Tri) when there is discovery of omission issued. It is held that circular issued by (DB) The appellant has arrived his own or incorrect statement therein by the the commissioner would be binding formula for the purpose of computing dealer. The Assessing Authority has on the department and hence held the non-deductible input tax credit as referred the case of Centum industries that earlier order of single member per Section 11 (a)(5) read with Section private Limited, Bangalore 2014 Judgment does not require any 14 of the Act and total ineligible input (80) Kar L.J 65(HC)(DB) and Infinite interference. tax credit to arrive at the correct eligible Builders and Developers, Bangalore input tax credit. This is permissible only Vs The Additional Commissioner of Therefore the revised return filed when Section 17 is applicable read Commercial Taxes, Zone II, Bangalore beyond six months should be accepted with Rule 131 of the KVAT Rules. Rule 2013 (76) Kar. L. J. 390 (HC)(DB). It is subject to that there is additional tax 131(5) makes it clear wherein the case believed that the Assessing Authority payable but while calculating the of any dealer the formula prescribed should assess the output tax and additional tax payable and if there is under Rule 131 (3) does not give correct eligible input tax credit based on the any input tax credit which was missed amount of deductible input tax then books of Accounts and should not deny out in those periods then it is believed only the Commissioner is empowered the eligible input tax credit on revised that such input tax credit should be to adopt a special formula as he may special rebate formula stating that it allowed while calculating the additional specify. But this is a case where as is not declared in the monthly return. tax payable. admitted by the appellant only, it is Input tax credit is the justifiable right Case 5: In the case of Mohamed not the issue of partial rebate coming of the dealer and such rights should Assadulla proprietor rice and under the purview of Section 17 of not be denied for the procedural Paddy dealer Bhadravathi Vs State the Act and Rule 131 for the purpose compliance of the dealer. of Karnataka 2015 (82) Kar.L.J. of apportionment of input tax. This is

September Follow us on www.facebook.com/bangaloreicai 23 2015 CUSTOMS & CENTRAL EXCISE

CA. N.R. Badrinath, B.Com, Grad CWA, FCA & CA. Madhur Harlalka, B.Com, FCA, LL.B

· Present structure of Customs Duty in India he effective rate of Customs duty has increased from 28.85% to 29.45% from March 1st, 2015. This is due to increase in Tthe rate of Excise Duty from 12% to 12.5%. Below is a table showing the computation of Customs Duty:

Upto 28th Feb, 2015 From 1st March, 2015

Particulars Rate of Amount Rate of Duty Amount Duty (%) (Rs.) (%) (Rs.) Assessable Value (Incl. 1% loading on 1000.00 1000.00 account of landing charges) Add: BCD 10.00% 100.00 10.00% 100.00 Assessable value for CVD 1100.00 1100.00 Add: CVD 12% 132.00 12.50% 137.50 Assessable value for Customs Cess 1232.00 1237.50 Add: Customs Cess 3.00% 6.96 3.00% 7.13 Assessable value for SAD 1238.96 1244.63 Add: SAD 4.00% 49.56 4.00% 49.79 Total - 1288.52 - 1294.42 Effective Rate of Duty 28.85% 29.45%

· CENVAT Credit matrix Availability of Cenvat Credit of Customs duty paid is as follows subject to other provisions of Cenvat Credit Rules, 2004:

DUTY Manufacturer Service Provider Dealer BCD   

CVD    Cess on customs duty    SAD   

· Dealer/Importer can pass on the incidence of CVD/SAD to buyer subject to other provisions of Cenvat Credit Rules, 2004. · Refund of SAD is available, if the imported goods are re-sold in India by charging VAT – Notification No. 102/2007-Customs dated 14-9-2007 · The effective rate of customs duty after considering credits available would be as follows: · Manufacturer – 10.70% · Service Provider – 15.69%

September 2015 24 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Bangalore Branch of SIRC of the Institute of Chartered Accountants of India

· Central Excise duty payable in case of DTA clearance made by an EOU As per proviso to Section 3(1) of the Central Excise Act, 1994, an amount equivalent to aggregate customs duty will be leviable as Excise Duty when an EOU manufactures and clears goods to DTA. Further, Notification No. 23/2003-CE dated 31-3-2003states the effective excise duty payable by an EOU in this regard as follows:

Upto 1st Feb, 2015 From 1st March, 2015

Particulars Rate of Duty Amount Rate of Duty Amount (%) (Rs.) (%) (Rs.)

Assessable Value (Incl. 1% loading on 1000.00 1000.00 account of landing charges)

Add: BCD (50% of 10%) 5.00% 50.00 5.00% 50.00

Assessable value for CVD 1050.00 1050.00

Add: CVD 12.00% 126.00 12.50% 131.25

Assessable value for Customs Cess 1176.00 1181.25

Add: Customs Cess 0.00% - 3.00% 5.44

Assessable value for SAD 1176.00 1186.70

Add: SAD 0.00% - 0.00% -

Basic Excise Duty - 1176.00 - 1186.70

Education Cess 2.00% 3.52 - -

Secondary Higher Education Cess 1.00% 1.76 - -

Total 1181.28 - 1186.70

Effective Rate of Duty 18.13% 18.67%

Central Excise Update

Scrutiny of Central Excise return Central Excise returns are filed in a self-assessment procedure. Hence, it is the responsibility of the department to scrutinize and verify the correctness of the returns filed by the assessee. The Board vide Circular No.1004/11/2015-CX dated 21-07-2015 has laid down the following procedure for carrying out detailed scrutiny of returns. · Detailed scrutiny has to be conducted regularly. Minimum of 2% and maximum of 5% of the total returns received during a month should be taken up for detailed scrutiny. · Selection of assessees for scrutiny will be based on risk scores given by DG (Audit) · The Chief Commissioner and Commissioners shall have the powers to manually select returns for detailed scrutiny. · Assessees who are selected for audit in a given financial year shall not be selected for detailed scrutiny. · Once the return of an assessee has been selected for scrutiny, the return of that assessee should not be selected for the next 12 months. · The officer scrutinising the returns of an assessee, where necessary, may ask for documents and records for verification.

September Follow us on www.facebook.com/bangaloreicai 25 2015 SERVICE TAX CASES PARTS DIGESTED – VOLUME 39, PARTS 3 & 4

CA. A. Saiprasad

Departmental Clarifications lakh thereon and availed the same as and Road Shows to promote sale of Service Tax Returns – Detailed credit. It was held that credit of Rs.20.18 cars manufactured by Hindustan Motors Manual Scrutiny – Procedure lakh was ineligible since it related to (HM). Expenses were shared equally. trading and was not in or in relation to Assessee issued debit notes for expenses he focus would be on assessees who manufacture of goods. payable by HM. Department confirmed are not being audited. It would be T demand under BAS. Commissioner set conducted for assessees whose total tax F.L. Smith Pvt Ltd V. CCE, 2015 (39) STR aside department’s order. Tribunal held paid (cash+cenvat) is below Rs.50 Lakhs. 373 (Mad) that to the extent assessee recovered The assessees are further classified into Delay in filing appeal before expenses from HM, they would be 3 categories – Up to Rs.10 lakhs, 10-25 Commissioner (Appeals) – Not treated as providing as providing sales lakhs and 25-50 lakhs. condonable promotion service to HM and hence Delay in filing appeal before M.F. (D.R.) Circular No.185/4/2015-S.T. amount recovered would be liable to Commissioner (Appeals) beyond dt.30.6.15 service tax. Digital Signature Maintenance condonable period of 30 days – Even – CCE V. Premier Motor Garage, 2015 (39) of Records in Electronic Form High Court does not have the power to STR 490 (T) and Authentication of Records - condone delay. Instructions Sturdy Industries Ltd V. UOI, 2015 (39) Guarantee provided on behalf of customers for payment of dues – The salient features of Notification STR 422 (P&H) Whether liable for BAS? No.18/2015 CE (NT) dt.6.7.15 has been Note: Neither High Court not Supreme listed down in the instant circular. N/ Court has power to condone delay Appellant guaranteed solvency of No.18/2015 CE (NT)has been issued beyond condonable period wrt customer but was not responsible for prescribing conditions, safeguards and Commissioner (A) but have power when payment by customer. Hence appellant procedures for preserving electronic delay in filing appeal is before Tribunal. contended that they are not Del Credere records by digital signature. Service Tax otherwise eligible Agent and not liable to BAS. Department relied upon definition of BAS which CBEC Circular – F.No.224/44/2014-CX.6 for refund, not paid – Whether includes ‘any person who guarantees dt.6.7.15 recoverable? for collection or payment for such goods Service Tax was not paid by assessee for Case Laws as services’. Tribunal held that appellant transporting iron ore to port of export. Whether input service paid on was liable to service tax. However service tax paid on GTA would trading is available as credit? have been eligible for refund during Millenium Marketing Co. V. CC&CE, Appellant entered into contract relevant period, if used for export. 2015 (39) STR 491 (T). for supply of parts of pre-heaters Hence fit case for waiver of per-deposit. Note: Also see L&T V. Commissioner, for Rs.41.45 Crores. Appellant Monnet Ispat & Energy Ltd V. CCE&C, 2006 (3) STR 321 (T-Larger Bench) manufactured and supplied parts worth 2015 (39) STR 434 (Chhattisgarh) only Rs.5.41 Crores. Remaining 36.04 Whether renting of Bullock Cart Crores was supplied by procuring from Advertisement and Road Shows is ‘Right to Use’ (i.e. liable to sales other manufacturers (i.e. trading and organized to promote sales - tax) or ‘Supply of Tangible Goods not manufacture). Appellant paid Rs.2 Taxability service’ (i.e. liable to service tax)? Crores Commission for procuring the Assessee is an Authorised Service Tribunal held that when bullock carts goods and paid Service Tax of Rs.20.18 Station. It organized Advertisements are supplied, effective control and

September 2015 26 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Bangalore Branch of SIRC of the Institute of Chartered Accountants of India possession of bullock cart does not lie Note: Also see ITA V. Alcatel Lucent exclusion only to Railway tracks, with service provider. Supply of tangible Canada, decided on 27.2.15 by Delhi bridges and station. Tribunal held goods service is applicable only when HC. term ‘Railways’ wide enough to service provider retains effective control Whether refund of cenvat credit cover all properties of railways. and possession. Hence Tribunal held could be more than the amount Hence painting not liable to tax is that assessee was not liable to service shown in the returns filed with the aforesaid case. tax. department? (C) Appellant also undertaking painting Bhima SSK Ltd V. CCE&ST, 2015 (39) STR Appellant was a 100% exporter of of Bus Stand. ‘Transport Terminals’ 440 (T). ‘Design Service’. The appellant had excluded from commercial Whether unutilized and accumulated filed a refund claim for Rs.4,52,084/- construction service. Tribunal held cenvat credit is eligible for refund whereas the appellant had taken credit ‘Bus Stand’ falls under transport if services are exported from of Rs.3,73,289/- during the impugned terminals and hence painting unregistered premises? period as per ST-3 returns. The Tribunal thereof not liable to tax. The Tribunal has held that there is no bar held that refund cannot be restricted (D) Appellant undertaking painting or prohibition in law for making export only to the amount of credit availed as of plant and machinery of NTPS. from un-registered premises. Once per the ST-3 return, since it was a case Tribunal held that painting of cenvat credit is used to export service of continuous business activity. The plant and machinery falls under and when such credit is accumulated, Tribunal held that Appellant was eligible commercial construction service. refund of such credit has to be granted. for Rs.78,795/-, rejected on account of However NTPS set-up for generating Tribunal further held that subsequent non-inclusion in service tax return for electricity for public. Hence itis not registration of premises of export was the impugned period. engaged primarily in commerce sufficient. Cararo Technologies India Pvt Ltd V. or industry. Therefore service falls under exclusion clause and not Embitel Technologies (India) Pvt Ltd V. CCE, 2015 (39) STR 673 (T). liable to tax. CST, 2015 (39) STR 612 (T). Note: Also see CBEC Circular DOF P.B. Rathod V. CCE, 2015 (39) Note: Also see mPortal India Wireless No.334/1/2010-TRU dt.26.2.10 STR 650 (T).Note: Also See CBEC Solutions V. CCE, 2012 (27) STR 134 (Kar) Whetherpainting of (a) plant and Circular No.80/10/2004 ST machinery (b) properties belonging Downloading of data stored on Whether consignee liable to pay to railways (c) bus stand (d) plant website whether liable to service service tax on GTA service when and machinery is liable to service tax? consignor has actually paid tax? Appellant have website,where photos freight to GTA. (A) Appellant undertaking painting are available for viewing. Viewing of Appellant (i.e. consignee) purchased of residential quarters of Nashik photos is free. However viewers can goods from M/s. Reliance (i.e. Thermal Power Station (NTPS). download the photos only after paying consignor) and paid freight charges Painting is included in ‘completion amount to appellant. Department to Reliance. Invoice issued by and finishing service’ under demands tax under ‘Online database Reliance shows freight separately. construction service. However access and retrieval service’. Assessee Goods have been transported construction of residential complex contends that amount charged is for by GTA. The consignment note for own purpose (i.e. employees), is copyright of photos. Tribunal held issued by GTA stated that ‘service excluded by the definition. Hence that collection of photos may be tax has to be paid by consignee painting not liable to tax in the copyrightable but access to such photos (i.e. Appellant)’. Tribunal held that aforesaid case. and retrieval thereof for consideration is service tax is liable to be paid by a web based service of providing access/ (B) Appellant also undertaking painting consignee though freight is paid to downloading digital content and hence of properties belonging to railways. GTA by consignor since they have liable to service tax. ‘Railways’ excluded from definition been told by GTA to pay freight. Photolibrary India Pvt Ltd V. CST, 2015 of commercial construction service. That the understanding between (39) STR 637 (T). Department seeking to restrict the parties is that freight would be

September Follow us on www.facebook.com/bangaloreicai 27 2015 charged separately, transportation the Tribunal is able to demonstrate Consignee cannot decide amongst would be by GTA and tax liability and show that M/s. Reliance (i.e. themselves the person liable to pay would fall on consignee. consignor) acted as agent of the tax. Merely because GTA states that Bhagyalaxmi Electroplast Pvt Ltd V. appellant (i.e. consignee), service consignee is liable to pay service tax, CCE&C, 2015 (39) STR 622 (T) tax is liable to be paid by person the consignee would not become Note: (A) The author respectfully who paid the freight to GTA i.e. M/s statutorily liable, especially since disagrees.As per Rule 2(1)(d)(v) Reliance. it is only the person who pays of STR,94, person who pays or is (B) The author is of the view that freight is liable to tax and no one liable to pay freight either himself contractual obligations/ directions else, in the seven cases listed in or through his agent is the ‘person are subordinate to statutory Rule 2(1)(d)(v). liable to pay service tax’. Unless obligations. The GTA/ Consignor/

KIND ATTENTION: MEMBERS Members are requested to pass on the information to their Articled students Admissions open for Subject wise Coaching IPCC & FINAL For May 2016 Examinations & CPT for June 2016 Examination Coaching classes will be commencing at the Bangalore Branch of SIRC of ICAI from 26th Nov. 2015. The classes will be concluded by 7th March 2016. For further details please contact: Tel: 080-3056 3500 / 551 / 555 Email: [email protected] | For more details, visit website :www.bangaloreicai.org

KIND ATTENTION: MEMBERS Members are requested to pass on the information to their clients

COURSE ON FINANCE FOR NON-FINANCE EXECUTIVES – A Management Development Programme The course is open for Non-Finance Executives such as Engineers, Architects, Doctors, Human Resource Personnel, Department Heads / Administrators / Entrepreneurs and various other professionals, those who are not having adequate knowledge of Accounts / Finance. The course does not call for any prior knowledge in Accountancy, Finance and Tax Laws. The course coverage will be basic in all subjects. Duration : October 2015 to January 2016 Course Contents: Timings : 02.00pm to 07.00pm (Only on Saturdays) Course Fee : Rs.15000/- per participant · Financial Accounts & Company Accounts

Mode of payment: · Direct Taxes · Financial Analysis DD/Cheque in favour of Bangalore Branch of SIRC of ICAI · Project Reports · Indirect taxes Contact Tel : 080 - 30563500 / 511/ 512 E-mail : [email protected] / [email protected] · Corporate Finance · Cost Accounts website : www.bangaloreicai.org

September 2015 28 Online Registration is available. Visit our website: bangaloreicai.org Follow us on www.facebook.com/bangaloreicai Independence Day Celebrations

Students at the Flag Hoisting ceremony

Flag hoisting by Chief Guest CA Yashwant Dagliya Distribution of Sweets

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Awarding prizes to Rank Holders

Distribution of Scholarships SICASA Sports Meet - Prize Distributions

29 Intensive Workshop on Intensive Workshop on International Taxation Issues in Tax Audit Report Practice Alert-Discussions

CA K R Sekar CA K Gururaj Acharya CA Madhur Harlalka CA N R Badrinath Practice Alert-Discussions

CA Dayananda K & CA Annapurna Kabra CA A Rafiq Dr B V Muralikrishna, JCCT

Training Programme on Accounting & Auditing aspects involved in the Service Tax Law to Officials of Service Tax Dept.

Inauguration Welcoming Sri Sanjay Pant, Sri Sanjay Pant CA Chinmay Hegde Commissioner of Service Tax Practice Support Workshops - Hands on Training Workshop on e-Filing of VAT & Service Tax Forms

CA Annapurna D Kabra CA Lakshmi G K Cross section of the participants

Speakers at Study Circle Meetings

CA Srikant Parthasarathy CA D S Vivek CA. Naveen G Khariwal CA Rajeev Kumar

Study Circle Meet at Tumkur SICASA Programmes - Intensive Crash Course

CA Naveen G Khariwal

30 Advt.

Advt. Licensed to Post without prepayment License No. WPP-326, "Registered" News Letter Total No. of Pages printed : 32 for India vide No.KA/BG GPO-2523/2015-17 & RNI No. KARENG/2012/45348 Date of Posting 7th & 8th of the month, at Bangalore PSO, Mysore Road, Bangalore-560026

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32 Bangalore Branch of SIRC News Letter English Monthly Printed & Published & Edited by Editor CA. Allama Prabhu M.S., Chairman, on behalf of Bangalore Branch of SIRC of ICAI., No.16/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka Tel : 080 - 3056 3500, Fax : 080 - 3056 3542, www.bangaloreicai.org e-mail : [email protected] Printed at: Jwalamukhi Mudranalaya Pvt. Ltd., 44/1, K.R. Road, , Bangalore-560 004, Ph : 080-26617243, e-mail : [email protected] Published at: No.16/O, 'ICAI Bhawan', Millers Tank Bed Area, Vasantnagar, Bangalore-560052, Karnataka, EDITOR: CA. Allama Prabhu M.S.