Had a great interactive discussions at Ludhiana Branch on the below mentioned topics. The ppt is available now at http://lunawat.com/Uploaded_Files/Presentation/CashRestrictions,ScheduleIIIAmendments&ICDS-Ludhiana.pdf
Hope it is useful
Regards
CA Pramod Jain
3. Lunawat & Co.
TRUSTSTRUSTSTRUSTSTRUSTS
• Deduction u/s 80G restricted if donation in cashDeduction u/s 80G restricted if donation in cashDeduction u/s 80G restricted if donation in cashDeduction u/s 80G restricted if donation in cash
exceedingexceedingexceedingexceeding RsRsRsRs. 2000 by a person (old 10k). 2000 by a person (old 10k). 2000 by a person (old 10k). 2000 by a person (old 10k)
• ABC Trust receivesABC Trust receivesABC Trust receivesABC Trust receives RsRsRsRs. 9000/. 9000/. 9000/. 9000/---- from Mr. B in cash onfrom Mr. B in cash onfrom Mr. B in cash onfrom Mr. B in cash on
22.4.2017. Is there any implication on Trust?22.4.2017. Is there any implication on Trust?22.4.2017. Is there any implication on Trust?22.4.2017. Is there any implication on Trust?
• Mr. X gives following donation to PQR Trust. Can he getMr. X gives following donation to PQR Trust. Can he getMr. X gives following donation to PQR Trust. Can he getMr. X gives following donation to PQR Trust. Can he get
S. 80G benefit?:S. 80G benefit?:S. 80G benefit?:S. 80G benefit?:
• 20.4.201720.4.201720.4.201720.4.2017 RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
• 25.4.201725.4.201725.4.201725.4.2017 RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
• 10.5.201710.5.201710.5.201710.5.2017 RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
• Mr. A gives following donations:Mr. A gives following donations:Mr. A gives following donations:Mr. A gives following donations:
• To ABC TrustTo ABC TrustTo ABC TrustTo ABC Trust RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
• To PQR TrustTo PQR TrustTo PQR TrustTo PQR Trust RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
• To XYZ TrustTo XYZ TrustTo XYZ TrustTo XYZ Trust RsRsRsRs. 1500/. 1500/. 1500/. 1500/----
4. Lunawat & Co.
S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)
• Expenditure u/s 40A(3) / 40A(3A)Expenditure u/s 40A(3) / 40A(3A)Expenditure u/s 40A(3) / 40A(3A)Expenditure u/s 40A(3) / 40A(3A)
disallowed in payment made in cashdisallowed in payment made in cashdisallowed in payment made in cashdisallowed in payment made in cash
exceedingexceedingexceedingexceeding RsRsRsRs. 10000/. 10000/. 10000/. 10000/---- per person perper person perper person perper person per
day (Old 20k)day (Old 20k)day (Old 20k)day (Old 20k)
• Limits:Limits:Limits:Limits:
• RsRsRsRs. 2500/. 2500/. 2500/. 2500/---- 1.4.19691.4.19691.4.19691.4.1969
• RsRsRsRs. 10000/. 10000/. 10000/. 10000/---- 1.4.19891.4.19891.4.19891.4.1989
• RsRsRsRs. 20000/. 20000/. 20000/. 20000/---- 1.4.19971.4.19971.4.19971.4.1997
• RsRsRsRs. 10000/. 10000/. 10000/. 10000/---- 1.4.20171.4.20171.4.20171.4.2017
5. Lunawat & Co.
S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)S. 40A(3) / 40A (3A)
• ABC & Co. pays to its 8 employees as per theABC & Co. pays to its 8 employees as per theABC & Co. pays to its 8 employees as per theABC & Co. pays to its 8 employees as per the
minimum wages Actminimum wages Actminimum wages Actminimum wages Act RsRsRsRs. 15000/. 15000/. 15000/. 15000/---- per month in cash?per month in cash?per month in cash?per month in cash?
• Payment of RentPayment of RentPayment of RentPayment of Rent RsRsRsRs. 15000 pm?. 15000 pm?. 15000 pm?. 15000 pm?
• Service of Car ofService of Car ofService of Car ofService of Car of RsRsRsRs. 12500/. 12500/. 12500/. 12500/----????
• Payment of bill at restaurant ofPayment of bill at restaurant ofPayment of bill at restaurant ofPayment of bill at restaurant of RsRsRsRs. 11400/. 11400/. 11400/. 11400/----
• XYZ P. Ltd. purchases through an invoiceXYZ P. Ltd. purchases through an invoiceXYZ P. Ltd. purchases through an invoiceXYZ P. Ltd. purchases through an invoice dtdtdtdt
18.4.2017 of18.4.2017 of18.4.2017 of18.4.2017 of RsRsRsRs. 90000/. 90000/. 90000/. 90000/----. Makes payment. Makes payment. Makes payment. Makes payment RsRsRsRs....
9000/9000/9000/9000/---- per day?per day?per day?per day?
• Would there be any difference if invoice is ofWould there be any difference if invoice is ofWould there be any difference if invoice is ofWould there be any difference if invoice is of RsRsRsRs. 2.50. 2.50. 2.50. 2.50
Lakhs and payment is less thanLakhs and payment is less thanLakhs and payment is less thanLakhs and payment is less than RsRsRsRs. 10K per day?. 10K per day?. 10K per day?. 10K per day?
• XYZ P. Ltd. makes payment to its Sundry CreditorXYZ P. Ltd. makes payment to its Sundry CreditorXYZ P. Ltd. makes payment to its Sundry CreditorXYZ P. Ltd. makes payment to its Sundry Creditor ofofofof
FYFYFYFY 2015201520152015----16161616 ofofofof RsRsRsRs. 2 Lakhs. 2 Lakhs. 2 Lakhs. 2 Lakhs ofofofof RsRsRsRs. 15000/. 15000/. 15000/. 15000/---- per day inper day inper day inper day in
cash incash incash incash in April 2017?April 2017?April 2017?April 2017?
6. Lunawat & Co.
ASSETSASSETSASSETSASSETS
• Depreciation disallowed on cashDepreciation disallowed on cashDepreciation disallowed on cashDepreciation disallowed on cash
component of asset cost exceedingcomponent of asset cost exceedingcomponent of asset cost exceedingcomponent of asset cost exceeding RsRsRsRs....
10000/10000/10000/10000/---- per person per day.per person per day.per person per day.per person per day.
• Capital Gain?Capital Gain?Capital Gain?Capital Gain?
• Deferred Tax?Deferred Tax?Deferred Tax?Deferred Tax?
• Books, MAT?Books, MAT?Books, MAT?Books, MAT?
• Rule 6DD?Rule 6DD?Rule 6DD?Rule 6DD?
• S. 35AD benefit not allowed on exp.S. 35AD benefit not allowed on exp.S. 35AD benefit not allowed on exp.S. 35AD benefit not allowed on exp.
incurred exceedingincurred exceedingincurred exceedingincurred exceeding RsRsRsRs. 10000/. 10000/. 10000/. 10000/---- perperperper
person per dayperson per dayperson per dayperson per day
7. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• No person to receive an amountNo person to receive an amountNo person to receive an amountNo person to receive an amount >>>> RsRsRsRs....
2 L in cash2 L in cash2 L in cash2 L in cash
• in aggregate from a person in ain aggregate from a person in ain aggregate from a person in ain aggregate from a person in a
day; orday; orday; orday; or
• in respect of a single transaction;in respect of a single transaction;in respect of a single transaction;in respect of a single transaction;
orororor
• in respect of transactions relatingin respect of transactions relatingin respect of transactions relatingin respect of transactions relating
to one event or occasion from ato one event or occasion from ato one event or occasion from ato one event or occasion from a
personpersonpersonperson
8. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• Not applicable to receipts by:Not applicable to receipts by:Not applicable to receipts by:Not applicable to receipts by:
• Government,Government,Government,Government,
• Bank,Bank,Bank,Bank,
• Post Office Savings Bank or CoPost Office Savings Bank or CoPost Office Savings Bank or CoPost Office Savings Bank or Co----operativeoperativeoperativeoperative
Bank,Bank,Bank,Bank,
• S. 269SS transactionsS. 269SS transactionsS. 269SS transactionsS. 269SS transactions
• No applicable to receipts from bank,No applicable to receipts from bank,No applicable to receipts from bank,No applicable to receipts from bank, Post
Office Savings Bank or CoOffice Savings Bank or CoOffice Savings Bank or CoOffice Savings Bank or Co----operative Bankoperative Bankoperative Bankoperative Bank
• Penalty of equal amount u/s 271DAPenalty of equal amount u/s 271DAPenalty of equal amount u/s 271DAPenalty of equal amount u/s 271DA
• Rule 6DD?Rule 6DD?Rule 6DD?Rule 6DD?
9. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• Ms. C receives gifts from various persons on theMs. C receives gifts from various persons on theMs. C receives gifts from various persons on theMs. C receives gifts from various persons on the
occasion of her marriage ofoccasion of her marriage ofoccasion of her marriage ofoccasion of her marriage of RsRsRsRs. 3 Lakhs in. 3 Lakhs in. 3 Lakhs in. 3 Lakhs in
aggregate?aggregate?aggregate?aggregate?
• On the occasion of marriage of Ms. C the eventOn the occasion of marriage of Ms. C the eventOn the occasion of marriage of Ms. C the eventOn the occasion of marriage of Ms. C the event
manager receivesmanager receivesmanager receivesmanager receives RsRsRsRs. 3.95 L in cash:. 3.95 L in cash:. 3.95 L in cash:. 3.95 L in cash:
• For RokaFor RokaFor RokaFor Roka RsRsRsRs. 1.50 Lakhs from mother from C. 1.50 Lakhs from mother from C. 1.50 Lakhs from mother from C. 1.50 Lakhs from mother from C
• For receptionFor receptionFor receptionFor reception RsRsRsRs. 1.95 Lakhs from father from C. 1.95 Lakhs from father from C. 1.95 Lakhs from father from C. 1.95 Lakhs from father from C
• ForForForFor pherepherepherephere RsRsRsRs. 50000/. 50000/. 50000/. 50000/---- from brother of Cfrom brother of Cfrom brother of Cfrom brother of C
• On the occasion of marriage Mr. B’s father madeOn the occasion of marriage Mr. B’s father madeOn the occasion of marriage Mr. B’s father madeOn the occasion of marriage Mr. B’s father made
payments ofpayments ofpayments ofpayments of RsRsRsRs. 2.75 Lakhs in cash to following:. 2.75 Lakhs in cash to following:. 2.75 Lakhs in cash to following:. 2.75 Lakhs in cash to following:
• To horse cartTo horse cartTo horse cartTo horse cart –––– RsRsRsRs. 50K. 50K. 50K. 50K
• To event manager for partyTo event manager for partyTo event manager for partyTo event manager for party RsRsRsRs. 1.75 Lakhs. 1.75 Lakhs. 1.75 Lakhs. 1.75 Lakhs
• To band masterTo band masterTo band masterTo band master RsRsRsRs. 50K. 50K. 50K. 50K
10. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• On the occasion of marriage of Ms. C, ABOn the occasion of marriage of Ms. C, ABOn the occasion of marriage of Ms. C, ABOn the occasion of marriage of Ms. C, AB
Jewellers sold jewellery as under:Jewellers sold jewellery as under:Jewellers sold jewellery as under:Jewellers sold jewellery as under:
• Mother of Ms. CMother of Ms. CMother of Ms. CMother of Ms. C RsRsRsRs 1.90 Lakhs on 18.4.20171.90 Lakhs on 18.4.20171.90 Lakhs on 18.4.20171.90 Lakhs on 18.4.2017
• MotherMotherMotherMother----in Law of Ms. Cin Law of Ms. Cin Law of Ms. Cin Law of Ms. C RsRsRsRs. 2.50 Lakhs on 18.4.17. 2.50 Lakhs on 18.4.17. 2.50 Lakhs on 18.4.17. 2.50 Lakhs on 18.4.17
• Mother of Ms. CMother of Ms. CMother of Ms. CMother of Ms. C RsRsRsRs. 1.75 Lakhs on 20.4.2017. 1.75 Lakhs on 20.4.2017. 1.75 Lakhs on 20.4.2017. 1.75 Lakhs on 20.4.2017
• Sister of Ms. CSister of Ms. CSister of Ms. CSister of Ms. C RsRsRsRs. 1.50 Lakhs on 20.4.2017. 1.50 Lakhs on 20.4.2017. 1.50 Lakhs on 20.4.2017. 1.50 Lakhs on 20.4.2017
• Bua of Ms. CBua of Ms. CBua of Ms. CBua of Ms. C RsRsRsRs. 1 lakh on 20.4.2017. 1 lakh on 20.4.2017. 1 lakh on 20.4.2017. 1 lakh on 20.4.2017
• For marriage the event manager receivesFor marriage the event manager receivesFor marriage the event manager receivesFor marriage the event manager receives RsRsRsRs....
3.50 Lakhs where father of bride pays3.50 Lakhs where father of bride pays3.50 Lakhs where father of bride pays3.50 Lakhs where father of bride pays RsRsRsRs....
1.75 L & groom’s father pays1.75 L & groom’s father pays1.75 L & groom’s father pays1.75 L & groom’s father pays RsRsRsRs. 1.75 L in. 1.75 L in. 1.75 L in. 1.75 L in
cash?cash?cash?cash?
11. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• Mr. X takes cash loan ofMr. X takes cash loan ofMr. X takes cash loan ofMr. X takes cash loan of RsRsRsRs. 1.90 Lakhs from. 1.90 Lakhs from. 1.90 Lakhs from. 1.90 Lakhs from
Mr. Y?Mr. Y?Mr. Y?Mr. Y?
• Mr. Y makes repayment of loan along withMr. Y makes repayment of loan along withMr. Y makes repayment of loan along withMr. Y makes repayment of loan along with
interest ofinterest ofinterest ofinterest of RsRsRsRs. 2.10 Lakhs in Cash to Mr. X?. 2.10 Lakhs in Cash to Mr. X?. 2.10 Lakhs in Cash to Mr. X?. 2.10 Lakhs in Cash to Mr. X?
• AAAA GurudwaraGurudwaraGurudwaraGurudwara in Ludhiana on the occasion ofin Ludhiana on the occasion ofin Ludhiana on the occasion ofin Ludhiana on the occasion of
Baisakhi receivesBaisakhi receivesBaisakhi receivesBaisakhi receives RsRsRsRs. 5 lakhs on opening of. 5 lakhs on opening of. 5 lakhs on opening of. 5 lakhs on opening of
Golak?Golak?Golak?Golak?
• Mr. Y from China comes to India on tour. OnMr. Y from China comes to India on tour. OnMr. Y from China comes to India on tour. OnMr. Y from China comes to India on tour. On
reaching he falls ill and is hospitalised. His billreaching he falls ill and is hospitalised. His billreaching he falls ill and is hospitalised. His billreaching he falls ill and is hospitalised. His bill
is ofis ofis ofis of RsRsRsRs. 2.25 Lacs which he wants to pay in. 2.25 Lacs which he wants to pay in. 2.25 Lacs which he wants to pay in. 2.25 Lacs which he wants to pay in
3500 dollars. Can the hospital accept it3500 dollars. Can the hospital accept it3500 dollars. Can the hospital accept it3500 dollars. Can the hospital accept it
without violating S. 269ST?without violating S. 269ST?without violating S. 269ST?without violating S. 269ST?
12. Lunawat & Co.
SECTION 269 STSECTION 269 STSECTION 269 STSECTION 269 ST
• Mr. A receives cash payment ofMr. A receives cash payment ofMr. A receives cash payment ofMr. A receives cash payment of RsRsRsRs. 3.50 Lakhs from. 3.50 Lakhs from. 3.50 Lakhs from. 3.50 Lakhs from
ABC P. Ltd. on 15ABC P. Ltd. on 15ABC P. Ltd. on 15ABC P. Ltd. on 15thththth May 2017 for the following:May 2017 for the following:May 2017 for the following:May 2017 for the following:
• RsRsRsRs. 2.10 Lakhs part payment for invoice no. 4.. 2.10 Lakhs part payment for invoice no. 4.. 2.10 Lakhs part payment for invoice no. 4.. 2.10 Lakhs part payment for invoice no. 4. dt.dt.dt.dt.
17.4.2017 of17.4.2017 of17.4.2017 of17.4.2017 of RsRsRsRs. 3 Lakhs. 3 Lakhs. 3 Lakhs. 3 Lakhs
• RsRsRsRs. 1 Lakh part payment for invoice no. 6. 1 Lakh part payment for invoice no. 6. 1 Lakh part payment for invoice no. 6. 1 Lakh part payment for invoice no. 6 dt.dt.dt.dt.
30.4.2017 of30.4.2017 of30.4.2017 of30.4.2017 of RsRsRsRs. 2.50 Lakhs. 2.50 Lakhs. 2.50 Lakhs. 2.50 Lakhs
• RsRsRsRs. 40K part payment for invoice no. 12. 40K part payment for invoice no. 12. 40K part payment for invoice no. 12. 40K part payment for invoice no. 12 dtdtdtdt
10.5.2017 of10.5.2017 of10.5.2017 of10.5.2017 of RsRsRsRs. 2 Lakhs. 2 Lakhs. 2 Lakhs. 2 Lakhs
• Implications are:Implications are:Implications are:Implications are:
• 271DA penalty on Mr. A for271DA penalty on Mr. A for271DA penalty on Mr. A for271DA penalty on Mr. A for RsRsRsRs. 3.50 Lakhs. 3.50 Lakhs. 3.50 Lakhs. 3.50 Lakhs
• Mr. A to reportMr. A to reportMr. A to reportMr. A to report RsRsRsRs. 2.10 Lakhs in AIR in Form 61A. 2.10 Lakhs in AIR in Form 61A. 2.10 Lakhs in AIR in Form 61A. 2.10 Lakhs in AIR in Form 61A
• ABC P. Ltd expense ofABC P. Ltd expense ofABC P. Ltd expense ofABC P. Ltd expense of RsRsRsRs. 3.50 Lakhs would be. 3.50 Lakhs would be. 3.50 Lakhs would be. 3.50 Lakhs would be
disallowed u/s 40A(3)disallowed u/s 40A(3)disallowed u/s 40A(3)disallowed u/s 40A(3)
14. SCHEDULE IIISCHEDULE IIISCHEDULE IIISCHEDULE III
AmendedAmendedAmendedAmended wwww....eeee....ffff.... 30303030thththth MarchMarchMarchMarch 2017201720172017....
EveryEveryEveryEvery companycompanycompanycompany totototo disclosedisclosedisclosedisclose detailsdetailsdetailsdetails ofofofof SBNSBNSBNSBN
heldheldheldheld &&&& transactedtransactedtransactedtransacted duringduringduringduring 8888////11111111////2016201620162016 totototo
30303030////12121212////2016201620162016 ....
Lunawat & Co.
SBNsSBNsSBNsSBNs OtherOtherOtherOther
denominadenominadenominadenomina
tion notestion notestion notestion notes
TotalTotalTotalTotal
Closing cash in hand as on 8.11.2016Closing cash in hand as on 8.11.2016Closing cash in hand as on 8.11.2016Closing cash in hand as on 8.11.2016
(+) Permitted receipts(+) Permitted receipts(+) Permitted receipts(+) Permitted receipts
((((----) Permitted payments) Permitted payments) Permitted payments) Permitted payments
((((----) Amount deposited in Banks) Amount deposited in Banks) Amount deposited in Banks) Amount deposited in Banks
Closing cash in hand as onClosing cash in hand as onClosing cash in hand as onClosing cash in hand as on 30.12.201630.12.201630.12.201630.12.2016
16. ICAIICAIICAIICAI IMPLEMENTATION GUIDEIMPLEMENTATION GUIDEIMPLEMENTATION GUIDEIMPLEMENTATION GUIDE
ICAIICAIICAIICAI Implementation Guide on Auditor’sImplementation Guide on Auditor’sImplementation Guide on Auditor’sImplementation Guide on Auditor’s
Report under Rule 11(d) of CompaniesReport under Rule 11(d) of CompaniesReport under Rule 11(d) of CompaniesReport under Rule 11(d) of Companies
(Audit and Auditors) Amendment Rules,(Audit and Auditors) Amendment Rules,(Audit and Auditors) Amendment Rules,(Audit and Auditors) Amendment Rules,
2017 and Amendment to Schedule III to2017 and Amendment to Schedule III to2017 and Amendment to Schedule III to2017 and Amendment to Schedule III to
Companies Act, 2013Companies Act, 2013Companies Act, 2013Companies Act, 2013 issued on 15issued on 15issued on 15issued on 15thththth AprilAprilAprilApril
2017201720172017
Disclosures are applicable to FS which areDisclosures are applicable to FS which areDisclosures are applicable to FS which areDisclosures are applicable to FS which are
issued after March 30, 2017 and whichissued after March 30, 2017 and whichissued after March 30, 2017 and whichissued after March 30, 2017 and which
include the period from 8th Novemberinclude the period from 8th Novemberinclude the period from 8th Novemberinclude the period from 8th November
2016 to 30th December 20162016 to 30th December 20162016 to 30th December 20162016 to 30th December 2016
Lunawat & Co.
17. ICAIICAIICAIICAI IMPLEMENTATION GUIDEIMPLEMENTATION GUIDEIMPLEMENTATION GUIDEIMPLEMENTATION GUIDE
Disclosure shouldDisclosure shouldDisclosure shouldDisclosure should be mentioned in termsbe mentioned in termsbe mentioned in termsbe mentioned in terms
of INR, thus there is no specificof INR, thus there is no specificof INR, thus there is no specificof INR, thus there is no specific
requirement to mention the denominationrequirement to mention the denominationrequirement to mention the denominationrequirement to mention the denomination
also in which closing cash balance duringalso in which closing cash balance duringalso in which closing cash balance duringalso in which closing cash balance during
the specified period was heldthe specified period was heldthe specified period was heldthe specified period was held
Auditors also to report for all reportsAuditors also to report for all reportsAuditors also to report for all reportsAuditors also to report for all reports
issued after 30issued after 30issued after 30issued after 30thththth April 2017April 2017April 2017April 2017
Lunawat & Co.
18. WHAT TO DOWHAT TO DOWHAT TO DOWHAT TO DO
Obtain cash book and bank statements forObtain cash book and bank statements forObtain cash book and bank statements forObtain cash book and bank statements for
demonetization perioddemonetization perioddemonetization perioddemonetization period –––– keep a signedkeep a signedkeep a signedkeep a signed
copy in audit documents, wherever feasiblecopy in audit documents, wherever feasiblecopy in audit documents, wherever feasiblecopy in audit documents, wherever feasible
Perform audit proceduresPerform audit proceduresPerform audit proceduresPerform audit procedures
Verifying permitted SBN transactionsVerifying permitted SBN transactionsVerifying permitted SBN transactionsVerifying permitted SBN transactions
Obtain information as per ICAIObtain information as per ICAIObtain information as per ICAIObtain information as per ICAI
implementation guideimplementation guideimplementation guideimplementation guide
Obtain due MRObtain due MRObtain due MRObtain due MR
Issue report accordinglyIssue report accordinglyIssue report accordinglyIssue report accordingly
Lunawat & Co.
19. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
Obtain cash balance certificates withObtain cash balance certificates withObtain cash balance certificates withObtain cash balance certificates with
denominations as on 8.11.2016 & 30.12.2016denominations as on 8.11.2016 & 30.12.2016denominations as on 8.11.2016 & 30.12.2016denominations as on 8.11.2016 & 30.12.2016
Obtain an understanding of the controlsObtain an understanding of the controlsObtain an understanding of the controlsObtain an understanding of the controls &&&&
procedures implementedprocedures implementedprocedures implementedprocedures implemented bybybyby company during thecompany during thecompany during thecompany during the
periodperiodperiodperiod 9.11.9.11.9.11.9.11. 2016 to as at2016 to as at2016 to as at2016 to as at 30.12.201630.12.201630.12.201630.12.2016 totototo
ensure that there were no payments andensure that there were no payments andensure that there were no payments andensure that there were no payments and
receipts made in SBN other than thosereceipts made in SBN other than thosereceipts made in SBN other than thosereceipts made in SBN other than those
permitted by regulators from time to time.permitted by regulators from time to time.permitted by regulators from time to time.permitted by regulators from time to time.
WhetherWhetherWhetherWhether the controls (if implemented by thethe controls (if implemented by thethe controls (if implemented by thethe controls (if implemented by the
company) were reasonable to prevent andcompany) were reasonable to prevent andcompany) were reasonable to prevent andcompany) were reasonable to prevent and
detect any nondetect any nondetect any nondetect any non----permitted transactionspermitted transactionspermitted transactionspermitted transactions
Lunawat & Co.
20. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
Confirm the balances as certified by theConfirm the balances as certified by theConfirm the balances as certified by theConfirm the balances as certified by the
management from the books of accounts as atmanagement from the books of accounts as atmanagement from the books of accounts as atmanagement from the books of accounts as at
those datesthose datesthose datesthose dates
In case the auditor had conducted physical cashIn case the auditor had conducted physical cashIn case the auditor had conducted physical cashIn case the auditor had conducted physical cash
counts oncounts oncounts oncounts on 8.11.20168.11.20168.11.20168.11.2016 andandandand 30.12.201630.12.201630.12.201630.12.2016 or aor aor aor a
closer date before or after that date (forcloser date before or after that date (forcloser date before or after that date (forcloser date before or after that date (for
exampleexampleexampleexample 31.12.201631.12.201631.12.201631.12.2016), he should consider), he should consider), he should consider), he should consider
performing rollperforming rollperforming rollperforming roll----forward or rollforward or rollforward or rollforward or roll----back proceduresback proceduresback proceduresback procedures
to confirm the balance as certified by theto confirm the balance as certified by theto confirm the balance as certified by theto confirm the balance as certified by the
management has been arrived at correctlymanagement has been arrived at correctlymanagement has been arrived at correctlymanagement has been arrived at correctly
Lunawat & Co.
21. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
Obtain a listing fromObtain a listing fromObtain a listing fromObtain a listing from managementmanagementmanagementmanagement as to howas to howas to howas to how
SBNsSBNsSBNsSBNs available withavailable withavailable withavailable with them as on 8.11.2016 werethem as on 8.11.2016 werethem as on 8.11.2016 werethem as on 8.11.2016 were
dealt with, example.dealt with, example.dealt with, example.dealt with, example.
UsedUsedUsedUsed for payment for permittedfor payment for permittedfor payment for permittedfor payment for permitted transactions.transactions.transactions.transactions.
Deposited in bank accounts (with datesDeposited in bank accounts (with datesDeposited in bank accounts (with datesDeposited in bank accounts (with dates &&&& amount,amount,amount,amount,
with denominationswith denominationswith denominationswith denominations).).).).
UsedUsedUsedUsed for Payment for nonfor Payment for nonfor Payment for nonfor Payment for non----permitted transactionspermitted transactionspermitted transactionspermitted transactions
SBNsSBNsSBNsSBNs as available with the company as at closingas available with the company as at closingas available with the company as at closingas available with the company as at closing
hours of 30 December, 2016.hours of 30 December, 2016.hours of 30 December, 2016.hours of 30 December, 2016.
Lunawat & Co.
22. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
Obtain a listingObtain a listingObtain a listingObtain a listing fromfromfromfrom management if there weremanagement if there weremanagement if there weremanagement if there were
any receipts of the SBNs during the period fromany receipts of the SBNs during the period fromany receipts of the SBNs during the period fromany receipts of the SBNs during the period from
9.11.20169.11.20169.11.20169.11.2016 totototo 30.12.201630.12.201630.12.201630.12.2016, including the nature, including the nature, including the nature, including the nature
of transaction and amount with denominations.of transaction and amount with denominations.of transaction and amount with denominations.of transaction and amount with denominations.
Further examine with the relevant notificationFurther examine with the relevant notificationFurther examine with the relevant notificationFurther examine with the relevant notification
that they were eligible to accept SBNsthat they were eligible to accept SBNsthat they were eligible to accept SBNsthat they were eligible to accept SBNs
Obtain a reconciliation of the cash balance fromObtain a reconciliation of the cash balance fromObtain a reconciliation of the cash balance fromObtain a reconciliation of the cash balance from
the management.the management.the management.the management. TheTheTheThe figures required to befigures required to befigures required to befigures required to be
disclosed in Schedule III in INR, but for auditorsdisclosed in Schedule III in INR, but for auditorsdisclosed in Schedule III in INR, but for auditorsdisclosed in Schedule III in INR, but for auditors
working and reconciliation, obtain the figuresworking and reconciliation, obtain the figuresworking and reconciliation, obtain the figuresworking and reconciliation, obtain the figures
with denominationwith denominationwith denominationwith denomination
Lunawat & Co.
23. Lunawat & Co.
SBNsSBNsSBNsSBNs Other DenominationOther DenominationOther DenominationOther Denomination
NotesNotesNotesNotes
TotalTotalTotalTotal
DenomDenomDenomDenom
inationinationinationination
AmoAmoAmoAmo
untuntuntunt
DenominatiDenominatiDenominatiDenominati
onononon
AmountAmountAmountAmount DenomiDenomiDenomiDenomi
nationnationnationnation
AmoAmoAmoAmo
untuntuntunt
Closing Balance as onClosing Balance as onClosing Balance as onClosing Balance as on
8.11.20168.11.20168.11.20168.11.2016
Add: Withdrawal from bankAdd: Withdrawal from bankAdd: Withdrawal from bankAdd: Withdrawal from bank NANANANA NilNilNilNil
Add: Receipts for permittedAdd: Receipts for permittedAdd: Receipts for permittedAdd: Receipts for permitted
transactionstransactionstransactionstransactions
Add: Receipts for nonAdd: Receipts for nonAdd: Receipts for nonAdd: Receipts for non----
permitted transactionspermitted transactionspermitted transactionspermitted transactions
Less: Paid for permittedLess: Paid for permittedLess: Paid for permittedLess: Paid for permitted
transactionstransactionstransactionstransactions
Less: Paid for nonLess: Paid for nonLess: Paid for nonLess: Paid for non----permittedpermittedpermittedpermitted
transactionstransactionstransactionstransactions
Less: Deposited in BankLess: Deposited in BankLess: Deposited in BankLess: Deposited in Bank
Closing Balance as onClosing Balance as onClosing Balance as onClosing Balance as on
30.12.201630.12.201630.12.201630.12.2016
24. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
For the details of payments given by theFor the details of payments given by theFor the details of payments given by theFor the details of payments given by the
company, verify the following with reference tocompany, verify the following with reference tocompany, verify the following with reference tocompany, verify the following with reference to
relevant notifications issued from time to time :relevant notifications issued from time to time :relevant notifications issued from time to time :relevant notifications issued from time to time :
PaymentsPaymentsPaymentsPayments for permitted transactions:for permitted transactions:for permitted transactions:for permitted transactions:
VerifyVerifyVerifyVerify cash payment vouchers andcash payment vouchers andcash payment vouchers andcash payment vouchers and
WhetherWhetherWhetherWhether the purpose for which payments were made arethe purpose for which payments were made arethe purpose for which payments were made arethe purpose for which payments were made are
covered under permitted/ noncovered under permitted/ noncovered under permitted/ noncovered under permitted/ non----permitted transactionspermitted transactionspermitted transactionspermitted transactions
DepositedDepositedDepositedDeposited in bank accounts (with dates and amount,in bank accounts (with dates and amount,in bank accounts (with dates and amount,in bank accounts (with dates and amount,
with denominations):with denominations):with denominations):with denominations):
VerifyVerifyVerifyVerify deposit slips or deposit form which would containdeposit slips or deposit form which would containdeposit slips or deposit form which would containdeposit slips or deposit form which would contain
details of denominations and would also be acknowledgeddetails of denominations and would also be acknowledgeddetails of denominations and would also be acknowledgeddetails of denominations and would also be acknowledged
by the bank.by the bank.by the bank.by the bank.
Lunawat & Co.
25. ILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDUREILLUSTRATIVE PROCEDURE ---- ICAIICAIICAIICAI
Obtain bank statement regarding depositsObtain bank statement regarding depositsObtain bank statement regarding depositsObtain bank statement regarding deposits
made with the banksmade with the banksmade with the banksmade with the banks
WhereWhereWhereWhere the entity is covered under the permittedthe entity is covered under the permittedthe entity is covered under the permittedthe entity is covered under the permitted
list to receive payments in SBN (e.g. hospital,list to receive payments in SBN (e.g. hospital,list to receive payments in SBN (e.g. hospital,list to receive payments in SBN (e.g. hospital,
tolltolltolltoll----collection companies, petrol pumps, aircollection companies, petrol pumps, aircollection companies, petrol pumps, aircollection companies, petrol pumps, air
ticket etcticket etcticket etcticket etc.),.),.),.), obtain details of receipts made byobtain details of receipts made byobtain details of receipts made byobtain details of receipts made by
the company and deposits made with the bank.the company and deposits made with the bank.the company and deposits made with the bank.the company and deposits made with the bank.
AlsoAlsoAlsoAlso verify the same from the books of accountsverify the same from the books of accountsverify the same from the books of accountsverify the same from the books of accounts
of the company, bank deposit slips and Bankof the company, bank deposit slips and Bankof the company, bank deposit slips and Bankof the company, bank deposit slips and Bank
Statements.Statements.Statements.Statements.
Obtain ManagementObtain ManagementObtain ManagementObtain Management RRRRepresentationepresentationepresentationepresentation
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26. SUGGESTED M. R.SUGGESTED M. R.SUGGESTED M. R.SUGGESTED M. R.
WeWeWeWe have appropriately disclosed {Refer Note [ ]},have appropriately disclosed {Refer Note [ ]},have appropriately disclosed {Refer Note [ ]},have appropriately disclosed {Refer Note [ ]},
the details of Specified Bank Notes (SBN) heldthe details of Specified Bank Notes (SBN) heldthe details of Specified Bank Notes (SBN) heldthe details of Specified Bank Notes (SBN) held
and transacted during the period fromand transacted during the period fromand transacted during the period fromand transacted during the period from
8.11.20168.11.20168.11.20168.11.2016 totototo 30.12.201630.12.201630.12.201630.12.2016 pursuant to thepursuant to thepursuant to thepursuant to the
requirement of Notification G.S.R 308(E) datedrequirement of Notification G.S.R 308(E) datedrequirement of Notification G.S.R 308(E) datedrequirement of Notification G.S.R 308(E) dated
30th March 2017.30th March 2017.30th March 2017.30th March 2017.
FurtherFurtherFurtherFurther we confirm that we have compliedwe confirm that we have compliedwe confirm that we have compliedwe confirm that we have complied withwithwithwith
all relevantall relevantall relevantall relevant guidelines / notificationsguidelines / notificationsguidelines / notificationsguidelines / notifications issued byissued byissued byissued by
RBIRBIRBIRBI from time to time in respect of holding andfrom time to time in respect of holding andfrom time to time in respect of holding andfrom time to time in respect of holding and
dealing withdealing withdealing withdealing with SBN,SBN,SBN,SBN, and that the company hadand that the company hadand that the company hadand that the company had
proper controls, system and procedures in placeproper controls, system and procedures in placeproper controls, system and procedures in placeproper controls, system and procedures in place
for such compliances.for such compliances.for such compliances.for such compliances.
Lunawat & Co.
32. ICDSICDSICDSICDS BACKGROUNDBACKGROUNDBACKGROUNDBACKGROUND
CG notified 10 ICDS vide notification no. 32 of 2015CG notified 10 ICDS vide notification no. 32 of 2015CG notified 10 ICDS vide notification no. 32 of 2015CG notified 10 ICDS vide notification no. 32 of 2015
dated 31dated 31dated 31dated 31stststst March 2015 which were applicable fromMarch 2015 which were applicable fromMarch 2015 which were applicable fromMarch 2015 which were applicable from
AY 2016AY 2016AY 2016AY 2016----17 onwards17 onwards17 onwards17 onwards
Due to various issues and representations madeDue to various issues and representations madeDue to various issues and representations madeDue to various issues and representations made
referred to Expert committee.referred to Expert committee.referred to Expert committee.referred to Expert committee.
ICDS deferred by 1 year (P. R. Dt. 6ICDS deferred by 1 year (P. R. Dt. 6ICDS deferred by 1 year (P. R. Dt. 6ICDS deferred by 1 year (P. R. Dt. 6thththth July 2016).July 2016).July 2016).July 2016).
CBDT rescinded the old ICDS through notification no.CBDT rescinded the old ICDS through notification no.CBDT rescinded the old ICDS through notification no.CBDT rescinded the old ICDS through notification no.
86/2016 dated 2986/2016 dated 2986/2016 dated 2986/2016 dated 29thththth September 2016 and issuedSeptember 2016 and issuedSeptember 2016 and issuedSeptember 2016 and issued
revised ICDS vide notification no. 87/2016 andrevised ICDS vide notification no. 87/2016 andrevised ICDS vide notification no. 87/2016 andrevised ICDS vide notification no. 87/2016 and
amendedamendedamendedamended TTTTaxaxaxax AAAAudit Form 3CD.udit Form 3CD.udit Form 3CD.udit Form 3CD.
Also issued FAQs dated 25Also issued FAQs dated 25Also issued FAQs dated 25Also issued FAQs dated 25thththth March 2017March 2017March 2017March 2017
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33. WHO TO FOLLOWWHO TO FOLLOWWHO TO FOLLOWWHO TO FOLLOW ICDSICDSICDSICDS
Lunawat & Co.
AssesseeAssesseeAssesseeAssessee
havinghavinghavinghaving
PGBP &PGBP &PGBP &PGBP &
OtherOtherOtherOther
SourceSourceSourceSource
incomeincomeincomeincome
havinghavinghavinghaving
Method ofMethod ofMethod ofMethod of
AccountingAccountingAccountingAccounting
MercantileMercantileMercantileMercantile
Individual &Individual &Individual &Individual &
HUFHUFHUFHUF
Tax AuditTax AuditTax AuditTax Audit ––––
To followTo followTo followTo follow
ICDSICDSICDSICDS
No TaxNo TaxNo TaxNo Tax
AuditAuditAuditAudit –––– NoNoNoNo
ICDSICDSICDSICDS
OthersOthersOthersOthers
To followTo followTo followTo follow
ICDSICDSICDSICDS
CashCashCashCash No ICDSNo ICDSNo ICDSNo ICDS
34. SUMMARYSUMMARYSUMMARYSUMMARY
•Section 145(2)Section 145(2)Section 145(2)Section 145(2)SourceSourceSourceSource
•W.e.fW.e.fW.e.fW.e.f. AY 2017. AY 2017. AY 2017. AY 2017----18181818Effective DateEffective DateEffective DateEffective Date
•Only on PGBP & Other SourceOnly on PGBP & Other SourceOnly on PGBP & Other SourceOnly on PGBP & Other Source
•If accounts on mercantile basisIf accounts on mercantile basisIf accounts on mercantile basisIf accounts on mercantile basis
Heads ofHeads ofHeads ofHeads of
IncomeIncomeIncomeIncome
•10 vide Not. Dt. 29.09.201610 vide Not. Dt. 29.09.201610 vide Not. Dt. 29.09.201610 vide Not. Dt. 29.09.2016
No. ofNo. ofNo. ofNo. of
StandardsStandardsStandardsStandards
•Para 13 of Form 3CD & ITRPara 13 of Form 3CD & ITRPara 13 of Form 3CD & ITRPara 13 of Form 3CD & ITRDisclosureDisclosureDisclosureDisclosure
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35. CORRESPONDING AS /CORRESPONDING AS /CORRESPONDING AS /CORRESPONDING AS / INDINDINDIND ASASASAS
Lunawat & Co.
ICDICDICDICD
SSSS
Name of ICDSName of ICDSName of ICDSName of ICDS CorrespondiCorrespondiCorrespondiCorrespondi
ng ASng ASng ASng AS
CorrespondingCorrespondingCorrespondingCorresponding
IndIndIndInd ASASASAS
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies 1 & 51 & 51 & 51 & 5 1111 & 8& 8& 8& 8
IIIIIIII Valuation of InventoriesValuation of InventoriesValuation of InventoriesValuation of Inventories 2222 2222
IIIIIIIIIIII Construction ContractsConstruction ContractsConstruction ContractsConstruction Contracts 7777 11111111
IVIVIVIV Revenue RecognitionRevenue RecognitionRevenue RecognitionRevenue Recognition 9999 18181818
VVVV Tangible Fixed AssetsTangible Fixed AssetsTangible Fixed AssetsTangible Fixed Assets 10101010 16161616
VIVIVIVI Changes in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange Rates 11111111 21212121
VIIVIIVIIVII Government GrantsGovernment GrantsGovernment GrantsGovernment Grants 12121212 20202020
VIIIVIIIVIIIVIII SecuritiesSecuritiesSecuritiesSecurities 13131313 109109109109
IXIXIXIX Borrowing CostsBorrowing CostsBorrowing CostsBorrowing Costs 16161616 23232323
XXXX Provisions, Contingent Liabilities &Provisions, Contingent Liabilities &Provisions, Contingent Liabilities &Provisions, Contingent Liabilities &
ContingentContingentContingentContingent AssetsAssetsAssetsAssets
29292929 37373737
36. BASICSBASICSBASICSBASICS
It’s for income computation only and NOT forIt’s for income computation only and NOT forIt’s for income computation only and NOT forIt’s for income computation only and NOT for
books maintenancebooks maintenancebooks maintenancebooks maintenance
ICAI standards amendedICAI standards amendedICAI standards amendedICAI standards amended –––– Examples removedExamples removedExamples removedExamples removed
Would it impact incomes u/s 44AD, 44AE,Would it impact incomes u/s 44AD, 44AE,Would it impact incomes u/s 44AD, 44AE,Would it impact incomes u/s 44AD, 44AE, etcetcetcetc????
FAQFAQFAQFAQ ---- ApplicableApplicableApplicableApplicable on 44on 44on 44on 44 AD…whereverAD…whereverAD…whereverAD…wherever possiblepossiblepossiblepossible ––––
exampleexampleexampleexample constructionconstructionconstructionconstruction contracts, revenuecontracts, revenuecontracts, revenuecontracts, revenue
recognition??recognition??recognition??recognition??
What about firms under s. 44AD?What about firms under s. 44AD?What about firms under s. 44AD?What about firms under s. 44AD?
No ICDS details in ITR 1, 2 & 4No ICDS details in ITR 1, 2 & 4No ICDS details in ITR 1, 2 & 4No ICDS details in ITR 1, 2 & 4
Lunawat & Co.
37. BASICSBASICSBASICSBASICS
WouldWouldWouldWould it impact MAT / AMT??it impact MAT / AMT??it impact MAT / AMT??it impact MAT / AMT??
ICDS not to apply on MAT but applicable on AMTICDS not to apply on MAT but applicable on AMTICDS not to apply on MAT but applicable on AMTICDS not to apply on MAT but applicable on AMT –––– QQQQ
6 FAQ6 FAQ6 FAQ6 FAQ
Take care of AS 22Take care of AS 22Take care of AS 22Take care of AS 22
Transitional provisionsTransitional provisionsTransitional provisionsTransitional provisions ---- neither double taxation norneither double taxation norneither double taxation norneither double taxation nor
escapement ofescapement ofescapement ofescapement of incomeincomeincomeincome
Disclosure requirements in 8 ICDSDisclosure requirements in 8 ICDSDisclosure requirements in 8 ICDSDisclosure requirements in 8 ICDS
No changes from 2015 to 2016 inNo changes from 2015 to 2016 inNo changes from 2015 to 2016 inNo changes from 2015 to 2016 in
ICDS I (Accounting Policies),ICDS I (Accounting Policies),ICDS I (Accounting Policies),ICDS I (Accounting Policies),
ICDS VII (Government Grants) &ICDS VII (Government Grants) &ICDS VII (Government Grants) &ICDS VII (Government Grants) &
ICDS X (Contingencies..)ICDS X (Contingencies..)ICDS X (Contingencies..)ICDS X (Contingencies..)
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38. ICDSICDSICDSICDS VS. JUDICIAL PRECEDENTSVS. JUDICIAL PRECEDENTSVS. JUDICIAL PRECEDENTSVS. JUDICIAL PRECEDENTS
InInInIn AvinderAvinderAvinderAvinder Singh [AIR 1979 SC 321]Singh [AIR 1979 SC 321]Singh [AIR 1979 SC 321]Singh [AIR 1979 SC 321] SCSCSCSC held that whatheld that whatheld that whatheld that what
constitutes an essential feature cannot be delineated.constitutes an essential feature cannot be delineated.constitutes an essential feature cannot be delineated.constitutes an essential feature cannot be delineated. ItItItIt
laidlaidlaidlaid downdowndowndown followingfollowingfollowingfollowing tests for valid delegationtests for valid delegationtests for valid delegationtests for valid delegation ::::
LegislatureLegislatureLegislatureLegislature cannot effacecannot effacecannot effacecannot efface itselfitselfitselfitself
It cannot delegateIt cannot delegateIt cannot delegateIt cannot delegate plenaryplenaryplenaryplenary or the essential legislative functionor the essential legislative functionor the essential legislative functionor the essential legislative function
Even if there beEven if there beEven if there beEven if there be delegationdelegationdelegationdelegation, Parliamentary control over, Parliamentary control over, Parliamentary control over, Parliamentary control over
delegated legislation should be a living continuity as adelegated legislation should be a living continuity as adelegated legislation should be a living continuity as adelegated legislation should be a living continuity as a
constitutional necessityconstitutional necessityconstitutional necessityconstitutional necessity....
Preamble to every ICDS statesPreamble to every ICDS statesPreamble to every ICDS statesPreamble to every ICDS states ---- in case of conflictin case of conflictin case of conflictin case of conflict
between provisions of Act & ICDSbetween provisions of Act & ICDSbetween provisions of Act & ICDSbetween provisions of Act & ICDS ---- Act shall prevailAct shall prevailAct shall prevailAct shall prevail
FAQFAQFAQFAQ ---- ICDS notified u/s 145(2)ICDS notified u/s 145(2)ICDS notified u/s 145(2)ICDS notified u/s 145(2) &&&& would be applicable towould be applicable towould be applicable towould be applicable to
transactional issues dealt therein from AY 2017transactional issues dealt therein from AY 2017transactional issues dealt therein from AY 2017transactional issues dealt therein from AY 2017----18181818
onwardsonwardsonwardsonwards
Lunawat & Co.
39. SEQUENCE OF PREVALENCESEQUENCE OF PREVALENCESEQUENCE OF PREVALENCESEQUENCE OF PREVALENCE
Lunawat & Co.
ACTACTACTACT
RULESRULESRULESRULES
ICDSICDSICDSICDS
JUDICIALJUDICIALJUDICIALJUDICIAL
PRECEDENTSPRECEDENTSPRECEDENTSPRECEDENTS
40. VALIDITY OF DELEGATED LEGISLATIONVALIDITY OF DELEGATED LEGISLATIONVALIDITY OF DELEGATED LEGISLATIONVALIDITY OF DELEGATED LEGISLATION
AS 22 validity (delegated legislation) came upAS 22 validity (delegated legislation) came upAS 22 validity (delegated legislation) came upAS 22 validity (delegated legislation) came up
before the Supreme court in the case ofbefore the Supreme court in the case ofbefore the Supreme court in the case ofbefore the Supreme court in the case of J.K.J.K.J.K.J.K.
Industries Ltd. v. Union of India [2008] 297 ITR 176Industries Ltd. v. Union of India [2008] 297 ITR 176Industries Ltd. v. Union of India [2008] 297 ITR 176Industries Ltd. v. Union of India [2008] 297 ITR 176
(SC)(SC)(SC)(SC)
Supreme Court upheld the validity of the RuleSupreme Court upheld the validity of the RuleSupreme Court upheld the validity of the RuleSupreme Court upheld the validity of the Rule
adopting ASadopting ASadopting ASadopting AS‐‐‐‐22 and held that the disclosure of22 and held that the disclosure of22 and held that the disclosure of22 and held that the disclosure of
true and fair view of the profits and the state oftrue and fair view of the profits and the state oftrue and fair view of the profits and the state oftrue and fair view of the profits and the state of
affairs is the guideline inherent in the provisionsaffairs is the guideline inherent in the provisionsaffairs is the guideline inherent in the provisionsaffairs is the guideline inherent in the provisions
of the Companies Act delegating the powers toof the Companies Act delegating the powers toof the Companies Act delegating the powers toof the Companies Act delegating the powers to
notify accounting standards and that thenotify accounting standards and that thenotify accounting standards and that thenotify accounting standards and that the
adoption of ASadoption of ASadoption of ASadoption of AS‐‐‐‐22 was within such guideline22 was within such guideline22 was within such guideline22 was within such guideline
Lunawat & Co.
43. ICDSICDSICDSICDS CHECKLISTCHECKLISTCHECKLISTCHECKLIST
Lunawat & Co.
ICDICDICDICD
SSSS
Name of ICDSName of ICDSName of ICDSName of ICDS WhetherWhetherWhetherWhether
ApplicableApplicableApplicableApplicable
Amounts inAmounts inAmounts inAmounts in
ITR & 3CDITR & 3CDITR & 3CDITR & 3CD
DisclosurDisclosurDisclosurDisclosur
es in 3CDes in 3CDes in 3CDes in 3CD
RemaRemaRemaRema
rksrksrksrks
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies YesYesYesYes
IIIIIIII Valuation of InventoriesValuation of InventoriesValuation of InventoriesValuation of Inventories
IIIIIIIIIIII Construction ContractsConstruction ContractsConstruction ContractsConstruction Contracts
IVIVIVIV Revenue RecognitionRevenue RecognitionRevenue RecognitionRevenue Recognition YesYesYesYes
VVVV Tangible Fixed AssetsTangible Fixed AssetsTangible Fixed AssetsTangible Fixed Assets
VIVIVIVI Changes in Foreign ExchangeChanges in Foreign ExchangeChanges in Foreign ExchangeChanges in Foreign Exchange
RatesRatesRatesRates
VIIVIIVIIVII Government GrantsGovernment GrantsGovernment GrantsGovernment Grants
VIIIVIIIVIIIVIII SecuritiesSecuritiesSecuritiesSecurities
IXIXIXIX Borrowing CostsBorrowing CostsBorrowing CostsBorrowing Costs
XXXX Provisions, ContingentProvisions, ContingentProvisions, ContingentProvisions, Contingent LiabLiabLiabLiab. &. &. &. &
ContingentContingentContingentContingent AssetsAssetsAssetsAssets
44. FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE ---- 13131313
Method of accounting employed in previousMethod of accounting employed in previousMethod of accounting employed in previousMethod of accounting employed in previous
yearyearyearyear
Change in method of accounting appliedChange in method of accounting appliedChange in method of accounting appliedChange in method of accounting applied
If, yes, effect thereof on profit / lossIf, yes, effect thereof on profit / lossIf, yes, effect thereof on profit / lossIf, yes, effect thereof on profit / loss
Deviation in method of accounting fromDeviation in method of accounting fromDeviation in method of accounting fromDeviation in method of accounting from
accounting standards prescribed u/s 145accounting standards prescribed u/s 145accounting standards prescribed u/s 145accounting standards prescribed u/s 145
and effect thereof on P/Land effect thereof on P/Land effect thereof on P/Land effect thereof on P/L
ICDS reporting brought inICDS reporting brought inICDS reporting brought inICDS reporting brought in w.e.fw.e.fw.e.fw.e.f. 1.4.2017. 1.4.2017. 1.4.2017. 1.4.2017
Lunawat & Co.
45. FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE ---- 13131313
((((d)d)d)d) –––– whether any adjustment is required towhether any adjustment is required towhether any adjustment is required towhether any adjustment is required to
be made to the profits or loss for complyingbe made to the profits or loss for complyingbe made to the profits or loss for complyingbe made to the profits or loss for complying
with the ICDS notified u/s 145(2)with the ICDS notified u/s 145(2)with the ICDS notified u/s 145(2)with the ICDS notified u/s 145(2)
(e)(e)(e)(e) –––– Is, yes, give detailsIs, yes, give detailsIs, yes, give detailsIs, yes, give details
(f)(f)(f)(f) –––– Disclosure as per ICDSDisclosure as per ICDSDisclosure as per ICDSDisclosure as per ICDS
For 8 standardsFor 8 standardsFor 8 standardsFor 8 standards
Two omitted as no disclosure required as perTwo omitted as no disclosure required as perTwo omitted as no disclosure required as perTwo omitted as no disclosure required as per
the standard:the standard:the standard:the standard:
Changes in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange Rates
SecuritiesSecuritiesSecuritiesSecurities
Lunawat & Co.
46. FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE –––– 13131313 ---- ICDSICDSICDSICDS
Lunawat & Co.
ICDICDICDICD
SSSS
Name of ICDSName of ICDSName of ICDSName of ICDS IncreaseIncreaseIncreaseIncrease
in Profitin Profitin Profitin Profit
DecreaseDecreaseDecreaseDecrease
in Profitin Profitin Profitin Profit
NetNetNetNet
((((RsRsRsRs.).).).)
DescriptiDescriptiDescriptiDescripti
onononon
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies
IIIIIIII Valuation of InventoriesValuation of InventoriesValuation of InventoriesValuation of Inventories
IIIIIIIIIIII Construction ContractsConstruction ContractsConstruction ContractsConstruction Contracts
IVIVIVIV Revenue RecognitionRevenue RecognitionRevenue RecognitionRevenue Recognition
VVVV Tangible Fixed AssetsTangible Fixed AssetsTangible Fixed AssetsTangible Fixed Assets
VIVIVIVI Changes in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange RatesChanges in Foreign Exchange Rates
VIIVIIVIIVII Government GrantsGovernment GrantsGovernment GrantsGovernment Grants
VIIIVIIIVIIIVIII SecuritiesSecuritiesSecuritiesSecurities
IXIXIXIX Borrowing CostsBorrowing CostsBorrowing CostsBorrowing Costs
XXXX Provisions, ContingentProvisions, ContingentProvisions, ContingentProvisions, Contingent LiabLiabLiabLiab & Assets& Assets& Assets& Assets
TotalTotalTotalTotal
47. ITRITRITRITR
Lunawat & Co.
Schedule ICDS Effect of Income Computation Disclosure Standards on profit
Sl. No. ICDS Amount
(i) (ii) (iii)
I Accounting Policies
II Valuation of Inventories
III Construction Contracts
IV Revenue Recognition
V Tangible Fixed Assets
VI Changes in Foreign Exchange Rates
VII Government Grants
VIII Securities
IX Borrowing Costs
X Provisions, Contingent Liabilities and Contingent Assets
XI Total Net effect (I+II+III+IV+V+VI+VII+VIII+IX+X) 0
Is there any impact of this disclosure onIs there any impact of this disclosure onIs there any impact of this disclosure onIs there any impact of this disclosure on
Computation in ITR automatically?Computation in ITR automatically?Computation in ITR automatically?Computation in ITR automatically?
48. WHAT IFWHAT IFWHAT IFWHAT IF ICDSICDSICDSICDS NOT FOLLOWEDNOT FOLLOWEDNOT FOLLOWEDNOT FOLLOWED
Section 145(3Section 145(3Section 145(3Section 145(3)))) ---- AOAOAOAO has the power to make besthas the power to make besthas the power to make besthas the power to make best
judgementjudgementjudgementjudgement assessment u/s. 144 if he is notassessment u/s. 144 if he is notassessment u/s. 144 if he is notassessment u/s. 144 if he is not
satisfied about thesatisfied about thesatisfied about thesatisfied about the ::::----
CorrectnessCorrectnessCorrectnessCorrectness or completeness of the accounts of theor completeness of the accounts of theor completeness of the accounts of theor completeness of the accounts of the
assesseeassesseeassesseeassessee ; or; or; or; or
MethodMethodMethodMethod of accounting is not regularly followedof accounting is not regularly followedof accounting is not regularly followedof accounting is not regularly followed
;;;;orororor
IncomeIncomeIncomeIncome not computed as per ICDSnot computed as per ICDSnot computed as per ICDSnot computed as per ICDS
HenceHenceHenceHence ICDS has to be mandatorily followed or elseICDS has to be mandatorily followed or elseICDS has to be mandatorily followed or elseICDS has to be mandatorily followed or else
bestbestbestbest judgementjudgementjudgementjudgement assessment can be done byassessment can be done byassessment can be done byassessment can be done by
Assessing OfficerAssessing OfficerAssessing OfficerAssessing Officer.
Lunawat & Co.
49. CBDT FAQS DT. 23CBDT FAQS DT. 23CBDT FAQS DT. 23CBDT FAQS DT. 23RDRDRDRD MARCH 2017MARCH 2017MARCH 2017MARCH 2017
Total 25 FAQsTotal 25 FAQsTotal 25 FAQsTotal 25 FAQs
ICDS to apply onICDS to apply onICDS to apply onICDS to apply on IndIndIndInd AS FS tooAS FS tooAS FS tooAS FS too
Applicable to all including bankApplicable to all including bankApplicable to all including bankApplicable to all including bank etcetcetcetc unlessunlessunlessunless
specifiedspecifiedspecifiedspecified –––– like ICDS VIII (securities) for certainlike ICDS VIII (securities) for certainlike ICDS VIII (securities) for certainlike ICDS VIII (securities) for certain
financial institutions & ICDS I for Insurancefinancial institutions & ICDS I for Insurancefinancial institutions & ICDS I for Insurancefinancial institutions & ICDS I for Insurance
businessbusinessbusinessbusiness
ReasonableReasonableReasonableReasonable cause is an existing conceptcause is an existing conceptcause is an existing conceptcause is an existing concept
conferring flexibility in deservingconferring flexibility in deservingconferring flexibility in deservingconferring flexibility in deserving casescasescasescases
No specific ICDS yet for real estate developers &No specific ICDS yet for real estate developers &No specific ICDS yet for real estate developers &No specific ICDS yet for real estate developers &
BOT projects and leases. Normal Act & ICDSBOT projects and leases. Normal Act & ICDSBOT projects and leases. Normal Act & ICDSBOT projects and leases. Normal Act & ICDS
applicableapplicableapplicableapplicable
Lunawat & Co.
50. CBDT FAQS DT. 23CBDT FAQS DT. 23CBDT FAQS DT. 23CBDT FAQS DT. 23RDRDRDRD MARCH 2017MARCH 2017MARCH 2017MARCH 2017
For Derivative contracts :For Derivative contracts :For Derivative contracts :For Derivative contracts :
Forward contracts and similarForward contracts and similarForward contracts and similarForward contracts and similar ---- ICDS VI [ForeignICDS VI [ForeignICDS VI [ForeignICDS VI [Foreign
Exchange] subject to para 3 of ICDS VIII [securities]Exchange] subject to para 3 of ICDS VIII [securities]Exchange] subject to para 3 of ICDS VIII [securities]Exchange] subject to para 3 of ICDS VIII [securities]
For others ICDS IFor others ICDS IFor others ICDS IFor others ICDS I
DisclosureDisclosureDisclosureDisclosure where to be madewhere to be madewhere to be madewhere to be made –––– Q 25Q 25Q 25Q 25
Net effect of ICDS to be disclosed in IT ReturnNet effect of ICDS to be disclosed in IT ReturnNet effect of ICDS to be disclosed in IT ReturnNet effect of ICDS to be disclosed in IT Return
Form 3CDForm 3CDForm 3CDForm 3CD
No separate disclosures persons who are notNo separate disclosures persons who are notNo separate disclosures persons who are notNo separate disclosures persons who are not
liable for taxliable for taxliable for taxliable for tax auditauditauditaudit
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52. ICDS IICDS IICDS IICDS I –––– ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
MaterialityMaterialityMaterialityMateriality and Prudenceand Prudenceand Prudenceand Prudence not followed.not followed.not followed.not followed. OnlyOnlyOnlyOnly
substance oversubstance oversubstance oversubstance over form. No prudence as:form. No prudence as:form. No prudence as:form. No prudence as:
ICDS VIIICDS VIIICDS VIIICDS VII –––– Govt.Govt.Govt.Govt. grantsgrantsgrantsgrants totototo be recognized not laterbe recognized not laterbe recognized not laterbe recognized not later
than its actual receipt eventhan its actual receipt eventhan its actual receipt eventhan its actual receipt even ifififif condition w.r.t to suchcondition w.r.t to suchcondition w.r.t to suchcondition w.r.t to such
grant has not met.grant has not met.grant has not met.grant has not met.
ICDS IVICDS IVICDS IVICDS IV ---- Reasonable certainty of ultimate collectionReasonable certainty of ultimate collectionReasonable certainty of ultimate collectionReasonable certainty of ultimate collection
is ignored for recognition of revenue throughis ignored for recognition of revenue throughis ignored for recognition of revenue throughis ignored for recognition of revenue through
rendering of service and onrendering of service and onrendering of service and onrendering of service and on RentRentRentRent, interest, royalty and, interest, royalty and, interest, royalty and, interest, royalty and
dividend.dividend.dividend.dividend.
ICDS IIIICDS IIIICDS IIIICDS III ---- Non recognition of expected loss fromNon recognition of expected loss fromNon recognition of expected loss fromNon recognition of expected loss from
construction contractconstruction contractconstruction contractconstruction contract &&&& provisioning for loss onprovisioning for loss onprovisioning for loss onprovisioning for loss on
onerous contractonerous contractonerous contractonerous contract
Lunawat & Co.
53. ICDS IICDS IICDS IICDS I –––– ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
Selection of accounting policy so as to representSelection of accounting policy so as to representSelection of accounting policy so as to representSelection of accounting policy so as to represent
a true and fair view of:a true and fair view of:a true and fair view of:a true and fair view of:
State of affairs; andState of affairs; andState of affairs; andState of affairs; and
Income of business, profession or vocation.Income of business, profession or vocation.Income of business, profession or vocation.Income of business, profession or vocation.
Change in accounting policy only if reasonableChange in accounting policy only if reasonableChange in accounting policy only if reasonableChange in accounting policy only if reasonable
cause. AS 5cause. AS 5cause. AS 5cause. AS 5 –––– only if required by statute,only if required by statute,only if required by statute,only if required by statute,
compliance with AS or more appropriatecompliance with AS or more appropriatecompliance with AS or more appropriatecompliance with AS or more appropriate
presentation of FSpresentation of FSpresentation of FSpresentation of FS
No deduction of expected losses or marked toNo deduction of expected losses or marked toNo deduction of expected losses or marked toNo deduction of expected losses or marked to
marked loss unless as per other ICDSmarked loss unless as per other ICDSmarked loss unless as per other ICDSmarked loss unless as per other ICDS
Lunawat & Co.
54. ICDS IICDS IICDS IICDS I –––– ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
Judicial Precedents:Judicial Precedents:Judicial Precedents:Judicial Precedents:
DCITDCITDCITDCIT (International Taxation) v. Bank of Bahrain & Kuwait(International Taxation) v. Bank of Bahrain & Kuwait(International Taxation) v. Bank of Bahrain & Kuwait(International Taxation) v. Bank of Bahrain & Kuwait
[2010] 41 SOT 290 (Mum) (SB)[2010] 41 SOT 290 (Mum) (SB)[2010] 41 SOT 290 (Mum) (SB)[2010] 41 SOT 290 (Mum) (SB) ---- LossLossLossLoss incurred onincurred onincurred onincurred on a/ca/ca/ca/c ofofofof
evaluation of contract on last date ofevaluation of contract on last date ofevaluation of contract on last date ofevaluation of contract on last date of B/S is allowableB/S is allowableB/S is allowableB/S is allowable.
AnticipatedAnticipatedAnticipatedAnticipated losseslosseslosseslosses allowed as deductionsallowed as deductionsallowed as deductionsallowed as deductions ‐‐‐‐ ABNABNABNABN AmroAmroAmroAmro
SecuritiesSecuritiesSecuritiesSecurities IndIndIndInd (P.) Ltd. v. ITO [2011] 15 taxmann.com 177(P.) Ltd. v. ITO [2011] 15 taxmann.com 177(P.) Ltd. v. ITO [2011] 15 taxmann.com 177(P.) Ltd. v. ITO [2011] 15 taxmann.com 177
(Mum(Mum(Mum(Mum.).).).)
MarkMarkMarkMark‐‐‐‐totototo‐‐‐‐market loss on derivatives held as stockmarket loss on derivatives held as stockmarket loss on derivatives held as stockmarket loss on derivatives held as stock‐‐‐‐inininin‐‐‐‐tradetradetradetrade
allowedallowedallowedallowed ‐‐‐‐ DCITDCITDCITDCIT v.v.v.v. KotakKotakKotakKotak Mahindra [2013]Mahindra [2013]Mahindra [2013]Mahindra [2013] 35 taxmann.com 22535 taxmann.com 22535 taxmann.com 22535 taxmann.com 225
(Mumbai(Mumbai(Mumbai(Mumbai ‐‐‐‐ Trib.)Trib.)Trib.)Trib.)
FAQFAQFAQFAQ ---- Market to Market loss or expected loss as well asMarket to Market loss or expected loss as well asMarket to Market loss or expected loss as well asMarket to Market loss or expected loss as well as
Market to Market gain or expected gain not to beMarket to Market gain or expected gain not to beMarket to Market gain or expected gain not to beMarket to Market gain or expected gain not to be
recognised unless as per ICDSrecognised unless as per ICDSrecognised unless as per ICDSrecognised unless as per ICDS
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55. ICDS IICDS IICDS IICDS I –––– ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
What happens when income is recognised inWhat happens when income is recognised inWhat happens when income is recognised inWhat happens when income is recognised in
computation but not in books as per ICDS, andcomputation but not in books as per ICDS, andcomputation but not in books as per ICDS, andcomputation but not in books as per ICDS, and
later becomes bad?later becomes bad?later becomes bad?later becomes bad?
S. 36(1)(S. 36(1)(S. 36(1)(S. 36(1)(vii)vii)vii)vii) ----for deduction of bad debt, the debtfor deduction of bad debt, the debtfor deduction of bad debt, the debtfor deduction of bad debt, the debt
should be written of irrevocably in the books ofshould be written of irrevocably in the books ofshould be written of irrevocably in the books ofshould be written of irrevocably in the books of
account??account??account??account??
S.S.S.S. 36(1) (vii36(1) (vii36(1) (vii36(1) (vii) amended by Finance Act 2015) amended by Finance Act 2015) amended by Finance Act 2015) amended by Finance Act 2015 ---- ifififif
income has been offered to tax but has not beenincome has been offered to tax but has not beenincome has been offered to tax but has not beenincome has been offered to tax but has not been
recognized in books of accounts, the same isrecognized in books of accounts, the same isrecognized in books of accounts, the same isrecognized in books of accounts, the same is
deemed to have been recognized in the booksdeemed to have been recognized in the booksdeemed to have been recognized in the booksdeemed to have been recognized in the books
for the purpose offor the purpose offor the purpose offor the purpose of s. 36(1) (viis. 36(1) (viis. 36(1) (viis. 36(1) (vii))))
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56. ICDS IICDS IICDS IICDS I –––– DISCLOSURESDISCLOSURESDISCLOSURESDISCLOSURES
All significant accounting policiesAll significant accounting policiesAll significant accounting policiesAll significant accounting policies
Change in accounting policy which has materialChange in accounting policy which has materialChange in accounting policy which has materialChange in accounting policy which has material
effect including amount to the extent ascertainableeffect including amount to the extent ascertainableeffect including amount to the extent ascertainableeffect including amount to the extent ascertainable
If change in accounting policy to have materialIf change in accounting policy to have materialIf change in accounting policy to have materialIf change in accounting policy to have material
effect in later years, then disclosure to beeffect in later years, then disclosure to beeffect in later years, then disclosure to beeffect in later years, then disclosure to be made:made:made:made:
InInInIn year of adoption as well asyear of adoption as well asyear of adoption as well asyear of adoption as well as
IIIIn 1st yearn 1st yearn 1st yearn 1st year of material effectof material effectof material effectof material effect ---- not as per ASnot as per ASnot as per ASnot as per AS
Disclosure or change in accounting policy cannotDisclosure or change in accounting policy cannotDisclosure or change in accounting policy cannotDisclosure or change in accounting policy cannot
remedy a wrong or inappropriate treatment of itemremedy a wrong or inappropriate treatment of itemremedy a wrong or inappropriate treatment of itemremedy a wrong or inappropriate treatment of item
IfIfIfIf fundamental accounting assumptions of goingfundamental accounting assumptions of goingfundamental accounting assumptions of goingfundamental accounting assumptions of going
concern, consistency and accrual notconcern, consistency and accrual notconcern, consistency and accrual notconcern, consistency and accrual not followed.followed.followed.followed.
Lunawat & Co.
57. ICDS IICDS IICDS IICDS I –––– PRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONS
Disclosure of all significant accounting policies inDisclosure of all significant accounting policies inDisclosure of all significant accounting policies inDisclosure of all significant accounting policies in
Clause 13 of Form 3CD, wherever applicable.Clause 13 of Form 3CD, wherever applicable.Clause 13 of Form 3CD, wherever applicable.Clause 13 of Form 3CD, wherever applicable.
Give completeGive completeGive completeGive complete
Where similar may refer of policies in notes to FSWhere similar may refer of policies in notes to FSWhere similar may refer of policies in notes to FSWhere similar may refer of policies in notes to FS
Disallowances or deductions to be disclosed in ICDSDisallowances or deductions to be disclosed in ICDSDisallowances or deductions to be disclosed in ICDSDisallowances or deductions to be disclosed in ICDS
schedule in Form 3CD as well as ITR:schedule in Form 3CD as well as ITR:schedule in Form 3CD as well as ITR:schedule in Form 3CD as well as ITR:
MaterialityMaterialityMaterialityMateriality
PrudencePrudencePrudencePrudence
Mark to market loss / gainMark to market loss / gainMark to market loss / gainMark to market loss / gain
Expected lossesExpected lossesExpected lossesExpected losses
Take care of change in accounting policies havingTake care of change in accounting policies havingTake care of change in accounting policies havingTake care of change in accounting policies having
material effect in both yearsmaterial effect in both yearsmaterial effect in both yearsmaterial effect in both years
Lunawat & Co.
59. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
QualifyingQualifyingQualifyingQualifying
AssetsAssetsAssetsAssets
ICDSICDSICDSICDS
Tangible / IntangibleTangible / IntangibleTangible / IntangibleTangible / Intangible
AssetsAssetsAssetsAssets
Inventories thatInventories thatInventories thatInventories that
require 12require 12require 12require 12 mnsmnsmnsmns orororor
more to bring tomore to bring tomore to bring tomore to bring to
saleable conditionsaleable conditionsaleable conditionsaleable condition
AS 16AS 16AS 16AS 16
Asset that necessaryAsset that necessaryAsset that necessaryAsset that necessary
takes substantialtakes substantialtakes substantialtakes substantial
period to get readyperiod to get readyperiod to get readyperiod to get ready
for sale whichfor sale whichfor sale whichfor sale which
generally is 12generally is 12generally is 12generally is 12 mnsmnsmnsmns
Lunawat & Co.
60. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
ICDS does not include exchangeICDS does not include exchangeICDS does not include exchangeICDS does not include exchange
differences arising from foreign currencydifferences arising from foreign currencydifferences arising from foreign currencydifferences arising from foreign currency
borrowings to the extent that they areborrowings to the extent that they areborrowings to the extent that they areborrowings to the extent that they are
regarded as an adjustment to interest costregarded as an adjustment to interest costregarded as an adjustment to interest costregarded as an adjustment to interest cost
as a borrowing costas a borrowing costas a borrowing costas a borrowing cost
FAQFAQFAQFAQ –––– Q 21Q 21Q 21Q 21 –––– bill discounting charges arebill discounting charges arebill discounting charges arebill discounting charges are
borrowingborrowingborrowingborrowing costscostscostscosts
Capitalization:Capitalization:Capitalization:Capitalization:
Specific BorrowingSpecific BorrowingSpecific BorrowingSpecific Borrowing
General BorrowingGeneral BorrowingGeneral BorrowingGeneral Borrowing
Lunawat & Co.
61. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
Specific Borrowing:Specific Borrowing:Specific Borrowing:Specific Borrowing:
ActualActualActualActual borrowing costs incurred duringborrowing costs incurred duringborrowing costs incurred duringborrowing costs incurred during periodperiodperiodperiod
onononon funds so borrowed from the date fundsfunds so borrowed from the date fundsfunds so borrowed from the date fundsfunds so borrowed from the date funds
borrowedborrowedborrowedborrowed
Other than specific borrowing:Other than specific borrowing:Other than specific borrowing:Other than specific borrowing:
Capitalization of general borrowing costs asCapitalization of general borrowing costs asCapitalization of general borrowing costs asCapitalization of general borrowing costs as
per para 6 of ICDS IX formula to be done onper para 6 of ICDS IX formula to be done onper para 6 of ICDS IX formula to be done onper para 6 of ICDS IX formula to be done on
assetassetassetasset----bybybyby----asset basis. FAQasset basis. FAQasset basis. FAQasset basis. FAQ –––– Q 22Q 22Q 22Q 22
AAAA X B / CX B / CX B / CX B / C
AAAA = borrowing costs incurred except on= borrowing costs incurred except on= borrowing costs incurred except on= borrowing costs incurred except on
specific borrowingsspecific borrowingsspecific borrowingsspecific borrowings
Lunawat & Co.
62. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
B = (excluding directly funded by specific borrowing)B = (excluding directly funded by specific borrowing)B = (excluding directly funded by specific borrowing)B = (excluding directly funded by specific borrowing)
average of costs of qualifying asset as appearing in B/S ofaverage of costs of qualifying asset as appearing in B/S ofaverage of costs of qualifying asset as appearing in B/S ofaverage of costs of qualifying asset as appearing in B/S of
a person ona person ona person ona person on 1st1st1st1st day & last day of PY;day & last day of PY;day & last day of PY;day & last day of PY;
in case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S of
a persona persona persona person onononon 1st day, half of the cost of qualifying asset; or1st day, half of the cost of qualifying asset; or1st day, half of the cost of qualifying asset; or1st day, half of the cost of qualifying asset; or
in case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S ofin case the qualifying asset does not appear in the B/S of
a persona persona persona person onononon last day oflast day oflast day oflast day of PY,PY,PY,PY, average ofaverage ofaverage ofaverage of costscostscostscosts of qualifyingof qualifyingof qualifyingof qualifying
asset as appearing inasset as appearing inasset as appearing inasset as appearing in B/SB/SB/SB/S of a person onof a person onof a person onof a person on 1st1st1st1st day ofday ofday ofday of PYPYPYPY
and onand onand onand on datedatedatedate of put to use or completion,of put to use or completion,of put to use or completion,of put to use or completion, asasasas case may becase may becase may becase may be
C = average of amount of total assets as appearing inC = average of amount of total assets as appearing inC = average of amount of total assets as appearing inC = average of amount of total assets as appearing in B/SB/SB/SB/S ofofofof
a persona persona persona person onononon 1st day & last day1st day & last day1st day & last day1st day & last day ofofofof PY, other than assets to thePY, other than assets to thePY, other than assets to thePY, other than assets to the
extent they are directly funded out of specific borrowingsextent they are directly funded out of specific borrowingsextent they are directly funded out of specific borrowingsextent they are directly funded out of specific borrowings
For this formulae qualifying assetFor this formulae qualifying assetFor this formulae qualifying assetFor this formulae qualifying asset ---- ifififif it requires 12 months orit requires 12 months orit requires 12 months orit requires 12 months or
more for acquisition or construction or productionmore for acquisition or construction or productionmore for acquisition or construction or productionmore for acquisition or construction or production))))
If less than 12 months… no capitalization?If less than 12 months… no capitalization?If less than 12 months… no capitalization?If less than 12 months… no capitalization?
Lunawat & Co.
63. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
ICDS is silent on suspension ofICDS is silent on suspension ofICDS is silent on suspension ofICDS is silent on suspension of
capitalization during extended periods incapitalization during extended periods incapitalization during extended periods incapitalization during extended periods in
which active development is interrupted.which active development is interrupted.which active development is interrupted.which active development is interrupted.
Cessation of borrowing costs:Cessation of borrowing costs:Cessation of borrowing costs:Cessation of borrowing costs: ----
In case of tangible fixed asset and intangibleIn case of tangible fixed asset and intangibleIn case of tangible fixed asset and intangibleIn case of tangible fixed asset and intangible
asset whenasset whenasset whenasset when first put to usefirst put to usefirst put to usefirst put to use; and; and; and; and
In case of inventory when substantialIn case of inventory when substantialIn case of inventory when substantialIn case of inventory when substantial
activities necessary to prepare such inventoryactivities necessary to prepare such inventoryactivities necessary to prepare such inventoryactivities necessary to prepare such inventory
for its intended sale arefor its intended sale arefor its intended sale arefor its intended sale are completecompletecompletecomplete
Lunawat & Co.
64. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
HoweverHoweverHoweverHowever AS 16AS 16AS 16AS 16 –––– Cessation whenCessation whenCessation whenCessation when
substantially all the activities necessary tosubstantially all the activities necessary tosubstantially all the activities necessary tosubstantially all the activities necessary to
prepare the qualifying asset for itsprepare the qualifying asset for itsprepare the qualifying asset for itsprepare the qualifying asset for its
intended useintended useintended useintended use or sale are complete, i.e.or sale are complete, i.e.or sale are complete, i.e.or sale are complete, i.e.
when the asset iswhen the asset iswhen the asset iswhen the asset is ready to be put to useready to be put to useready to be put to useready to be put to use
Difference between ready to be put to useDifference between ready to be put to useDifference between ready to be put to useDifference between ready to be put to use
and put to use is important…and put to use is important…and put to use is important…and put to use is important…
Loan for vehicle. Interest between loanLoan for vehicle. Interest between loanLoan for vehicle. Interest between loanLoan for vehicle. Interest between loan
taken and vehicle on road… capitalisetaken and vehicle on road… capitalisetaken and vehicle on road… capitalisetaken and vehicle on road… capitalise
Lunawat & Co.
65. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
FAQFAQFAQFAQ ---- Q 20Q 20Q 20Q 20 ----Borrowing costs disallowed u/s 14A, 43B,Borrowing costs disallowed u/s 14A, 43B,Borrowing costs disallowed u/s 14A, 43B,Borrowing costs disallowed u/s 14A, 43B,
40(a)(40(a)(40(a)(40(a)(iiii), 40(a)(), 40(a)(), 40(a)(), 40(a)(iaiaiaia), 40A(2)(b):), 40A(2)(b):), 40A(2)(b):), 40A(2)(b):
Capitalization shall exclude those borrowing costsCapitalization shall exclude those borrowing costsCapitalization shall exclude those borrowing costsCapitalization shall exclude those borrowing costs
which are specifically disallowed under specificwhich are specifically disallowed under specificwhich are specifically disallowed under specificwhich are specifically disallowed under specific
provision of the Actprovision of the Actprovision of the Actprovision of the Act
Capitalization of borrowing costs shall apply for thatCapitalization of borrowing costs shall apply for thatCapitalization of borrowing costs shall apply for thatCapitalization of borrowing costs shall apply for that
portion of the borrowing cost which is otherwiseportion of the borrowing cost which is otherwiseportion of the borrowing cost which is otherwiseportion of the borrowing cost which is otherwise
allowable as deduction under the Actallowable as deduction under the Actallowable as deduction under the Actallowable as deduction under the Act
FinanceFinanceFinanceFinance Act, 2015Act, 2015Act, 2015Act, 2015 already insertedalready insertedalready insertedalready inserted proviso to secproviso to secproviso to secproviso to sec
36(36(36(36(iiii)(iii) that the interest expenses incurred for)(iii) that the interest expenses incurred for)(iii) that the interest expenses incurred for)(iii) that the interest expenses incurred for
acquisition of capital assetacquisition of capital assetacquisition of capital assetacquisition of capital asset uptouptouptoupto put to use shall not beput to use shall not beput to use shall not beput to use shall not be
deductible.deductible.deductible.deductible.
Lunawat & Co.
66. ICDS IXICDS IXICDS IXICDS IX –––– BORROWING COSTSBORROWING COSTSBORROWING COSTSBORROWING COSTS
AS 16AS 16AS 16AS 16 –––– Income earned on temporaryIncome earned on temporaryIncome earned on temporaryIncome earned on temporary
investment of borrowings is to be deducted frominvestment of borrowings is to be deducted frominvestment of borrowings is to be deducted frominvestment of borrowings is to be deducted from
borrowing costs.borrowing costs.borrowing costs.borrowing costs.
No similar provision in ICDS?No similar provision in ICDS?No similar provision in ICDS?No similar provision in ICDS?
It does not restrictsIt does not restrictsIt does not restrictsIt does not restricts even !!even !!even !!even !!
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67. ICDS IXICDS IXICDS IXICDS IX –––– DISCLOSUREDISCLOSUREDISCLOSUREDISCLOSURE
AccountingAccountingAccountingAccounting policy adopted for borrowing costspolicy adopted for borrowing costspolicy adopted for borrowing costspolicy adopted for borrowing costs
AmountAmountAmountAmount of borrowing costs capitalised duringof borrowing costs capitalised duringof borrowing costs capitalised duringof borrowing costs capitalised during
the previous year.the previous year.the previous year.the previous year.
ASASASAS ---- SimilarSimilarSimilarSimilar
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68. ICDS IXICDS IXICDS IXICDS IX –––– PRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONSPRACTICAL IMPLICATIONS
Disclosure … same as per ASDisclosure … same as per ASDisclosure … same as per ASDisclosure … same as per AS
Exchange differences arising from foreignExchange differences arising from foreignExchange differences arising from foreignExchange differences arising from foreign
currency borrowings to the extentcurrency borrowings to the extentcurrency borrowings to the extentcurrency borrowings to the extent ........ interest costinterest costinterest costinterest cost
In books revenueIn books revenueIn books revenueIn books revenue
In computationIn computationIn computationIn computation
If related to s. 43AIf related to s. 43AIf related to s. 43AIf related to s. 43A –––– capitalizecapitalizecapitalizecapitalize
If related to revenueIf related to revenueIf related to revenueIf related to revenue –––– not borrowing butnot borrowing butnot borrowing butnot borrowing but
exchange differenceexchange differenceexchange differenceexchange difference
Interest if charged to revenueInterest if charged to revenueInterest if charged to revenueInterest if charged to revenue –––– capitalize:capitalize:capitalize:capitalize:
From date of ready to be put to use and put to useFrom date of ready to be put to use and put to useFrom date of ready to be put to use and put to useFrom date of ready to be put to use and put to use
From loan taken and vehicle on roadFrom loan taken and vehicle on roadFrom loan taken and vehicle on roadFrom loan taken and vehicle on road
Lunawat & Co.