Critical issues in tax audit & ICDS

CA. PRAMOD JAIN
FCA, FCS, FCMA, LL.B, MIMA, DISA
CA. PRAMOD JAIN
FCA, FCS, FCMA, LL.B, MIMA, DISA
Critical Issues
in
Tax Audit & ICDS
Critical Issues
in
Tax Audit & ICDS
Shared at
Bhopal Branch of CIRC of ICAI
15th July 2017
Shared at
Bhopal Branch of CIRC of ICAI
15th July 2017

LEGISLATION FOR AY 2017LEGISLATION FOR AY 2017LEGISLATION FOR AY 2017LEGISLATION FOR AY 2017----18181818
•BusinessBusinessBusinessBusiness –––– exceedsexceedsexceedsexceeds RsRsRsRs. 1 Crore. 1 Crore. 1 Crore. 1 Crore
•ProfessionProfessionProfessionProfession –––– exceedsexceedsexceedsexceeds RsRsRsRs. 50 L. 50 L. 50 L. 50 L
•Business u/s 44AE /44BB /44BBB; income < deemedBusiness u/s 44AE /44BB /44BBB; income < deemedBusiness u/s 44AE /44BB /44BBB; income < deemedBusiness u/s 44AE /44BB /44BBB; income < deemed
profits;profits;profits;profits;
•Profession u/s 44ADA; deemed profit < 50% & TI >ANCTProfession u/s 44ADA; deemed profit < 50% & TI >ANCTProfession u/s 44ADA; deemed profit < 50% & TI >ANCTProfession u/s 44ADA; deemed profit < 50% & TI >ANCT
•Business u/s 44AD (4)Business u/s 44AD (4)Business u/s 44AD (4)Business u/s 44AD (4)
S. 44ABS. 44ABS. 44ABS. 44AB
•Prescribing the Forms for Report u/sPrescribing the Forms for Report u/sPrescribing the Forms for Report u/sPrescribing the Forms for Report u/s
44AB44AB44AB44ABRule 6GRule 6GRule 6GRule 6G
• Report in case of a person who is required toReport in case of a person who is required toReport in case of a person who is required toReport in case of a person who is required to
get his A/get his A/get his A/get his A/cscscscs audited under any lawaudited under any lawaudited under any lawaudited under any lawForm 3CAForm 3CAForm 3CAForm 3CA
•Report in any other caseReport in any other caseReport in any other caseReport in any other caseForm 3CBForm 3CBForm 3CBForm 3CB
•Particulars as required u/F 3CA orParticulars as required u/F 3CA orParticulars as required u/F 3CA orParticulars as required u/F 3CA or
3CB3CB3CB3CBForm 3CDForm 3CDForm 3CDForm 3CD
•Penalty ½% maximumPenalty ½% maximumPenalty ½% maximumPenalty ½% maximum RsRsRsRs. 1.50 L. 1.50 L. 1.50 L. 1.50 LS. 271BS. 271BS. 271BS. 271B
CA. Pramod Jain

44AD / 44AB44AD / 44AB44AD / 44AB44AD / 44AB
A’s turnover is Rs.
1.75 Crores and
is opting for S.
44AD
Is Tax Audit u/s
44AB
mandatory?
CA. Pramod Jain

APPLICABILITY OF 44AD(44ADA) /44ABAPPLICABILITY OF 44AD(44ADA) /44ABAPPLICABILITY OF 44AD(44ADA) /44ABAPPLICABILITY OF 44AD(44ADA) /44AB ---- AY 2017AY 2017AY 2017AY 2017----18181818
• ADADADAD ---- NoNoNoNo
• ABABABAB ---- YesYesYesYes
Mfg.Mfg.Mfg.Mfg. ---- TurnoverTurnoverTurnoverTurnover –––– 120L; NP120L; NP120L; NP120L; NP –––– 10 L; 8010 L; 8010 L; 8010 L; 80----IAIAIAIA –––– 7 L;7 L;7 L;7 L;
TITITITI----2.40L2.40L2.40L2.40L
• ADADADAD –––– NoNoNoNo
• ADAADAADAADA ---- NoNoNoNo
TradingTradingTradingTrading---- TurnoverTurnoverTurnoverTurnover –––– 90L; NP90L; NP90L; NP90L; NP ----3L; Architect3L; Architect3L; Architect3L; Architect ––––
FeeFeeFeeFee –––– 55 L; NP55 L; NP55 L; NP55 L; NP---- 15 L; TI15 L; TI15 L; TI15 L; TI----7L7L7L7L
• ADADADAD –––– NoNoNoNo
• ADAADAADAADA ---- YesYesYesYes
DoctorDoctorDoctorDoctor –––– Trading TurnoverTrading TurnoverTrading TurnoverTrading Turnover –––– 120L120L120L120L ---- NPNPNPNP –––– 8 L;8 L;8 L;8 L;
FeeFeeFeeFee –––– 27 L27 L27 L27 L –––– NP 15 L; TINP 15 L; TINP 15 L; TINP 15 L; TI---- 20 L20 L20 L20 L
• ADADADAD ---- NoNoNoNo
Trading; TurnoverTrading; TurnoverTrading; TurnoverTrading; Turnover ----120L; Commission120L; Commission120L; Commission120L; Commission ---- 2L; NP2L; NP2L; NP2L; NP----
5L; TI 4L5L; TI 4L5L; TI 4L5L; TI 4L
CA. Pramod Jain

PRESUMPTIVE TAXATIONPRESUMPTIVE TAXATIONPRESUMPTIVE TAXATIONPRESUMPTIVE TAXATION ---- CHANGESCHANGESCHANGESCHANGES
• Limit u/s 44AD increased from 1 Cr to 2 CrLimit u/s 44AD increased from 1 Cr to 2 CrLimit u/s 44AD increased from 1 Cr to 2 CrLimit u/s 44AD increased from 1 Cr to 2 Cr
• S. 44ADA introduced for ProfessionalsS. 44ADA introduced for ProfessionalsS. 44ADA introduced for ProfessionalsS. 44ADA introduced for Professionals –––– LimitLimitLimitLimit
50 Lacs50 Lacs50 Lacs50 Lacs –––– Deemed IncomeDeemed IncomeDeemed IncomeDeemed Income ----50%50%50%50%
• For firmsFor firmsFor firmsFor firms ---- partners salary & interest notpartners salary & interest notpartners salary & interest notpartners salary & interest not
allowable for business as well as professionalallowable for business as well as professionalallowable for business as well as professionalallowable for business as well as professional
• If benefit u/s 44AD not claimed in 1 year thenIf benefit u/s 44AD not claimed in 1 year thenIf benefit u/s 44AD not claimed in 1 year thenIf benefit u/s 44AD not claimed in 1 year then
cannot claim in next 5 years. In such case tocannot claim in next 5 years. In such case tocannot claim in next 5 years. In such case tocannot claim in next 5 years. In such case to
maintain books if income > maximum amountmaintain books if income > maximum amountmaintain books if income > maximum amountmaintain books if income > maximum amount
not chargeable to tax and audit u/s 44ABnot chargeable to tax and audit u/s 44ABnot chargeable to tax and audit u/s 44ABnot chargeable to tax and audit u/s 44AB
• No similar clause for professionals u/s 44ADANo similar clause for professionals u/s 44ADANo similar clause for professionals u/s 44ADANo similar clause for professionals u/s 44ADA
• Advance Tax for 44AD /44ADAAdvance Tax for 44AD /44ADAAdvance Tax for 44AD /44ADAAdvance Tax for 44AD /44ADA–––– 15151515thththth MarchMarchMarchMarch
CA. Pramod Jain

APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY----44AD /44AB FOR AY 201744AD /44AB FOR AY 201744AD /44AB FOR AY 201744AD /44AB FOR AY 2017----18181818
•Y/N
AY 2017AY 2017AY 2017AY 2017----18181818 –––– TTTT –––– RsRsRsRs. 120 Lacs . P. 120 Lacs . P. 120 Lacs . P. 120 Lacs . P
–––– 10 L, TI10 L, TI10 L, TI10 L, TI –––– 9 L9 L9 L9 L
•N/Y
AY 2018AY 2018AY 2018AY 2018----19191919 –––– TTTT –––– RsRsRsRs. 120 Lacs . P. 120 Lacs . P. 120 Lacs . P. 120 Lacs . P
–––– 8 L, TI8 L, TI8 L, TI8 L, TI –––– 6 L6 L6 L6 L
•N/Y
AY 2019AY 2019AY 2019AY 2019----20202020 –––– TTTT –––– RsRsRsRs. 70 Lacs . P. 70 Lacs . P. 70 Lacs . P. 70 Lacs . P ––––
10 L, TI10 L, TI10 L, TI10 L, TI –––– 9 L9 L9 L9 L
•N/N
AY 2020AY 2020AY 2020AY 2020----21212121 –––– TTTT –––– RsRsRsRs. 60 Lacs . P. 60 Lacs . P. 60 Lacs . P. 60 Lacs . P ––––
10 L, TI10 L, TI10 L, TI10 L, TI –––– 2 L2 L2 L2 L
CA. Pramod Jain

WHO CAN CONDUCT AUDITWHO CAN CONDUCT AUDITWHO CAN CONDUCT AUDITWHO CAN CONDUCT AUDIT
W.e.fW.e.fW.e.fW.e.f. 1. 1. 1. 1stststst June 2015June 2015June 2015June 2015
AccountantAccountantAccountantAccountant as defined in Explanationas defined in Explanationas defined in Explanationas defined in Explanation
below S. 288 (2)below S. 288 (2)below S. 288 (2)below S. 288 (2)
AAAA CCCChartered Accountanthartered Accountanthartered Accountanthartered Accountant as defined inas defined inas defined inas defined in
sectionsectionsectionsection 2222 (1) (b) of(1) (b) of(1) (b) of(1) (b) of the Charteredthe Charteredthe Charteredthe Chartered
Accountants Act, 1949 who holds a validAccountants Act, 1949 who holds a validAccountants Act, 1949 who holds a validAccountants Act, 1949 who holds a valid
certificate of practicecertificate of practicecertificate of practicecertificate of practice u/su/su/su/s 6666 (1) of(1) of(1) of(1) of thatthatthatthat ActActActAct
CA in practice (can represent)CA in practice (can represent)CA in practice (can represent)CA in practice (can represent)
CA. Pramod Jain

DISQUALIFICATIONDISQUALIFICATIONDISQUALIFICATIONDISQUALIFICATION ---- COMPANIESCOMPANIESCOMPANIESCOMPANIES
CA. Pramod Jain

DISQUALIFICATIONDISQUALIFICATIONDISQUALIFICATIONDISQUALIFICATION –––– OTHERSOTHERSOTHERSOTHERS
AssesseeAssesseeAssesseeAssessee himselfhimselfhimselfhimself
InInInIn case ofcase ofcase ofcase of aaaa firmfirmfirmfirm ---- any partner of theany partner of theany partner of theany partner of the firmfirmfirmfirm
In case of AOPIn case of AOPIn case of AOPIn case of AOP ---- membermembermembermember of the associationof the associationof the associationof the association
In case of HUFIn case of HUFIn case of HUFIn case of HUF ---- member of the familymember of the familymember of the familymember of the family
PersonPersonPersonPerson referred to inreferred to inreferred to inreferred to in section 13(3)(a),(b),(c),section 13(3)(a),(b),(c),section 13(3)(a),(b),(c),section 13(3)(a),(b),(c),
(cc);(cc);(cc);(cc);
Relative of any of above personsRelative of any of above personsRelative of any of above personsRelative of any of above persons
Other than above, personOther than above, personOther than above, personOther than above, person who is competentwho is competentwho is competentwho is competent
to verifyto verifyto verifyto verify return u/s 139/140;return u/s 139/140;return u/s 139/140;return u/s 139/140;
OfficerOfficerOfficerOfficer or employee ofor employee ofor employee ofor employee of assesseeassesseeassesseeassessee;;;;
CA. Pramod Jain

RELATIVERELATIVERELATIVERELATIVE –––– INCOME TAX AUDITORINCOME TAX AUDITORINCOME TAX AUDITORINCOME TAX AUDITOR
SSSSpousepousepousepouse of the individual;of the individual;of the individual;of the individual;
BBBBrotherrotherrotherrother or sister of the individual;or sister of the individual;or sister of the individual;or sister of the individual;
BBBBrotherrotherrotherrother or sister of the spouse of the individual;or sister of the spouse of the individual;or sister of the spouse of the individual;or sister of the spouse of the individual;
AAAAnynynyny lineal ascendant or descendant of thelineal ascendant or descendant of thelineal ascendant or descendant of thelineal ascendant or descendant of the
individual;individual;individual;individual;
AAAAnynynyny lineal ascendant or descendant of thelineal ascendant or descendant of thelineal ascendant or descendant of thelineal ascendant or descendant of the
spouse of the individual;spouse of the individual;spouse of the individual;spouse of the individual;
SSSSpousepousepousepouse of a person referredof a person referredof a person referredof a person referred aboveaboveaboveabove
AAAAnynynyny lineal descendant of a brother or sister oflineal descendant of a brother or sister oflineal descendant of a brother or sister oflineal descendant of a brother or sister of
either the individual or ofeither the individual or ofeither the individual or ofeither the individual or of spouse of individualspouse of individualspouse of individualspouse of individual
CA. Pramod Jain

DISQUALIFICATIONSDISQUALIFICATIONSDISQUALIFICATIONSDISQUALIFICATIONS ---- OTHERSOTHERSOTHERSOTHERS
WWWWhohohoho is a partner, or who is in employment, of anis a partner, or who is in employment, of anis a partner, or who is in employment, of anis a partner, or who is in employment, of an
officer or employee ofofficer or employee ofofficer or employee ofofficer or employee of assesseeassesseeassesseeassessee;;;;
WWWWhohohoho has been convicted by a court of an offencehas been convicted by a court of an offencehas been convicted by a court of an offencehas been convicted by a court of an offence
involving fraud and a period of 10 years has notinvolving fraud and a period of 10 years has notinvolving fraud and a period of 10 years has notinvolving fraud and a period of 10 years has not
elapsed from the date of such convictionelapsed from the date of such convictionelapsed from the date of such convictionelapsed from the date of such conviction
AnAnAnAn individual who, or his relative or partnerindividual who, or his relative or partnerindividual who, or his relative or partnerindividual who, or his relative or partner
IsIsIsIs holding any security of or interest inholding any security of or interest inholding any security of or interest inholding any security of or interest in assesseeassesseeassesseeassessee––––
RelativeRelativeRelativeRelative face valueface valueface valueface value ---- RsRsRsRs. 1 L. 1 L. 1 L. 1 L
Is indebted to theIs indebted to theIs indebted to theIs indebted to the assesseeassesseeassesseeassessee. Relative. Relative. Relative. Relative –––– RsRsRsRs. l. l. l. l LLLL
Has given a guarantee /provided securityHas given a guarantee /provided securityHas given a guarantee /provided securityHas given a guarantee /provided security . Relative. Relative. Relative. Relative ––––
1111 LLLL
CA. Pramod Jain

AAAA person or a firm who, whether directly orperson or a firm who, whether directly orperson or a firm who, whether directly orperson or a firm who, whether directly or
indirectly, has business relationship withindirectly, has business relationship withindirectly, has business relationship withindirectly, has business relationship with
assesseeassesseeassesseeassessee. i.e.,. i.e.,. i.e.,. i.e., any transaction entered into forany transaction entered into forany transaction entered into forany transaction entered into for
commercial purpose except:commercial purpose except:commercial purpose except:commercial purpose except:
In nature of professional services permittedIn nature of professional services permittedIn nature of professional services permittedIn nature of professional services permitted
IIIInnnn thethethethe ordinary course of business ofordinary course of business ofordinary course of business ofordinary course of business of cocococo.... atatatat ALPALPALPALP likelikelikelike
salesalesalesale of products orof products orof products orof products or
servicesservicesservicesservices
TTTToooo auditorauditorauditorauditor, as customer, in the ordinary course of, as customer, in the ordinary course of, as customer, in the ordinary course of, as customer, in the ordinary course of
businessbusinessbusinessbusiness, by companies engaged in, by companies engaged in, by companies engaged in, by companies engaged in businessbusinessbusinessbusiness ofofofof
telecommunications, airlines, hospitals, hotelstelecommunications, airlines, hospitals, hotelstelecommunications, airlines, hospitals, hotelstelecommunications, airlines, hospitals, hotels &&&&
such other similar businessessuch other similar businessessuch other similar businessessuch other similar businesses
DISQUALIFICATIONSDISQUALIFICATIONSDISQUALIFICATIONSDISQUALIFICATIONS –––– TAX AUDITORTAX AUDITORTAX AUDITORTAX AUDITOR
CA. Pramod Jain

????????????
Can a CA in practice who is givingCan a CA in practice who is givingCan a CA in practice who is givingCan a CA in practice who is giving
accounting services to a company conductaccounting services to a company conductaccounting services to a company conductaccounting services to a company conduct
tax audit of that company?tax audit of that company?tax audit of that company?tax audit of that company?
Can an internal auditor of a company issueCan an internal auditor of a company issueCan an internal auditor of a company issueCan an internal auditor of a company issue
Form 15CB certificate for that company?Form 15CB certificate for that company?Form 15CB certificate for that company?Form 15CB certificate for that company?
Can a CA in practice who is givingCan a CA in practice who is givingCan a CA in practice who is givingCan a CA in practice who is giving
accounting services to a companyaccounting services to a companyaccounting services to a companyaccounting services to a company issueissueissueissue
certificate in Form 29B for MATcertificate in Form 29B for MATcertificate in Form 29B for MATcertificate in Form 29B for MAT
calculation?calculation?calculation?calculation?
CA. Pramod Jain

Audit ReportsAudit ReportsAudit ReportsAudit Reports
CompaniesCompaniesCompaniesCompanies
ActActActAct
CAROCAROCAROCARO
NonNonNonNon----
CAROCAROCAROCARO
Other ActsOther ActsOther ActsOther Acts
TaxTaxTaxTax
AuditAuditAuditAudit
FormFormFormForm
3CA3CA3CA3CA
FormFormFormForm
3CB3CB3CB3CB
LLPLLPLLPLLP SocietySocietySocietySociety
CA. Pramod Jain

FORM 3CAFORM 3CAFORM 3CAFORM 3CA
Total 3ParasTotal 3ParasTotal 3ParasTotal 3Paras
Reporting period for PL amended from 31Reporting period for PL amended from 31Reporting period for PL amended from 31Reporting period for PL amended from 31stststst March toMarch toMarch toMarch to
period wise.period wise.period wise.period wise.
Examination of books by auditor included beforeExamination of books by auditor included beforeExamination of books by auditor included beforeExamination of books by auditor included before
giving opiniongiving opiniongiving opiniongiving opinion
Opinion now to be given subject to observations /Opinion now to be given subject to observations /Opinion now to be given subject to observations /Opinion now to be given subject to observations /
qualifications, no annexures … Para 3qualifications, no annexures … Para 3qualifications, no annexures … Para 3qualifications, no annexures … Para 3
Name of signatory to be given. FRN??Name of signatory to be given. FRN??Name of signatory to be given. FRN??Name of signatory to be given. FRN??
To be signed by person eligible as per s. 44ABTo be signed by person eligible as per s. 44ABTo be signed by person eligible as per s. 44ABTo be signed by person eligible as per s. 44AB
(earlier CA, auditor as per Companies Act, other(earlier CA, auditor as per Companies Act, other(earlier CA, auditor as per Companies Act, other(earlier CA, auditor as per Companies Act, other
person entitled to auditperson entitled to auditperson entitled to auditperson entitled to audit
CA. Pramod Jain

FORM 3CBFORM 3CBFORM 3CBFORM 3CB
Total 5 ParasTotal 5 ParasTotal 5 ParasTotal 5 Paras
Same as Form 3CA except examinationSame as Form 3CA except examinationSame as Form 3CA except examinationSame as Form 3CA except examination
of booksof booksof booksof books
Opinion subject to observations /Opinion subject to observations /Opinion subject to observations /Opinion subject to observations /
qualifications to be given:qualifications to be given:qualifications to be given:qualifications to be given:
Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements –––– 3(a)3(a)3(a)3(a)
Form 3CDForm 3CDForm 3CDForm 3CD –––– 5555
SA 700?SA 700?SA 700?SA 700?
CA. Pramod Jain

SA 700SA 700SA 700SA 700
Assessee’sAssessee’sAssessee’sAssessee’s Responsibility for the Financial StatementsResponsibility for the Financial StatementsResponsibility for the Financial StatementsResponsibility for the Financial Statements
andandandand the Statementthe Statementthe Statementthe Statement of Particulars in Form 3CDof Particulars in Form 3CDof Particulars in Form 3CDof Particulars in Form 3CD
1.1.1.1. TheTheTheThe assessee is responsible for the preparation of theassessee is responsible for the preparation of theassessee is responsible for the preparation of theassessee is responsible for the preparation of the
aforesaid financialaforesaid financialaforesaid financialaforesaid financial statementsstatementsstatementsstatements that give a true and fairthat give a true and fairthat give a true and fairthat give a true and fair
view of theview of theview of theview of the financial positionfinancial positionfinancial positionfinancial position and financial performanceand financial performanceand financial performanceand financial performance
(if applicable) in accordance(if applicable) in accordance(if applicable) in accordance(if applicable) in accordance with thewith thewith thewith the applicableapplicableapplicableapplicable
Accounting Standards issued by the InstituteAccounting Standards issued by the InstituteAccounting Standards issued by the InstituteAccounting Standards issued by the Institute ofofofof
CharteredCharteredCharteredChartered Accountants ofAccountants ofAccountants ofAccountants of India.India.India.India. This responsibilityThis responsibilityThis responsibilityThis responsibility
includesincludesincludesincludes the designthe designthe designthe design, implementation and maintenance, implementation and maintenance, implementation and maintenance, implementation and maintenance
of internal control relevantof internal control relevantof internal control relevantof internal control relevant to theto theto theto the preparation andpreparation andpreparation andpreparation and
presentation of the financial statements thatpresentation of the financial statements thatpresentation of the financial statements thatpresentation of the financial statements that give agive agive agive a truetruetruetrue
and fair view and are free from material misstatement,and fair view and are free from material misstatement,and fair view and are free from material misstatement,and fair view and are free from material misstatement,
whether duewhether duewhether duewhether due to fraud or error.to fraud or error.to fraud or error.to fraud or error.
CA. Pramod Jain

SA 700SA 700SA 700SA 700
2.2.2.2. TheTheTheThe assessee is also responsible for theassessee is also responsible for theassessee is also responsible for theassessee is also responsible for the
preparation of thepreparation of thepreparation of thepreparation of the statement ofstatement ofstatement ofstatement of particularsparticularsparticularsparticulars
required to be furnished under section 44ABrequired to be furnished under section 44ABrequired to be furnished under section 44ABrequired to be furnished under section 44AB ofofofof
thethethethe IncomeIncomeIncomeIncome----tax Act, 1961 annexed herewith intax Act, 1961 annexed herewith intax Act, 1961 annexed herewith intax Act, 1961 annexed herewith in
Form No. 3CD readForm No. 3CD readForm No. 3CD readForm No. 3CD read with Rulewith Rulewith Rulewith Rule 6G(1)(b) of6G(1)(b) of6G(1)(b) of6G(1)(b) of
Income Tax Rules, 1962 that give true andIncome Tax Rules, 1962 that give true andIncome Tax Rules, 1962 that give true andIncome Tax Rules, 1962 that give true and
correct particularscorrect particularscorrect particularscorrect particulars as per the provisions of theas per the provisions of theas per the provisions of theas per the provisions of the
IncomeIncomeIncomeIncome----tax Act, 1961 readtax Act, 1961 readtax Act, 1961 readtax Act, 1961 read with Ruleswith Ruleswith Ruleswith Rules,,,,
Notifications , circularsNotifications , circularsNotifications , circularsNotifications , circulars etcetcetcetc that are to bethat are to bethat are to bethat are to be
included inincluded inincluded inincluded in the Statementthe Statementthe Statementthe Statement....
CA. Pramod Jain

SA 700SA 700SA 700SA 700
Tax Auditor’s ResponsibilityTax Auditor’s ResponsibilityTax Auditor’s ResponsibilityTax Auditor’s Responsibility
3.3.3.3. OurOurOurOur responsibility is to express an opinion onresponsibility is to express an opinion onresponsibility is to express an opinion onresponsibility is to express an opinion on
thesethesethesethese financial statementsfinancial statementsfinancial statementsfinancial statements based onbased onbased onbased on ourourourour audit.audit.audit.audit.
WeWeWeWe have conducted this audithave conducted this audithave conducted this audithave conducted this audit in accordancein accordancein accordancein accordance
with the Standards on Auditing issued by thewith the Standards on Auditing issued by thewith the Standards on Auditing issued by thewith the Standards on Auditing issued by the
InstituteInstituteInstituteInstitute of Charteredof Charteredof Charteredof Chartered Accountants of India.Accountants of India.Accountants of India.Accountants of India.
Those Standards require thatThose Standards require thatThose Standards require thatThose Standards require that we complywe complywe complywe comply withwithwithwith
ethical requirements and plan and perform theethical requirements and plan and perform theethical requirements and plan and perform theethical requirements and plan and perform the
auditauditauditaudit to obtainto obtainto obtainto obtain reasonable assurance aboutreasonable assurance aboutreasonable assurance aboutreasonable assurance about
whether the financialwhether the financialwhether the financialwhether the financial statements arestatements arestatements arestatements are free fromfree fromfree fromfree from
material misstatementmaterial misstatementmaterial misstatementmaterial misstatement....
CA. Pramod Jain

SA 700SA 700SA 700SA 700
4.4.4.4. An audit involves performing procedures to obtain auditAn audit involves performing procedures to obtain auditAn audit involves performing procedures to obtain auditAn audit involves performing procedures to obtain audit
evidenceevidenceevidenceevidence aboutaboutaboutabout the amounts and disclosures in the financialthe amounts and disclosures in the financialthe amounts and disclosures in the financialthe amounts and disclosures in the financial
statements.statements.statements.statements. The proceduresThe proceduresThe proceduresThe procedures selected depend on the auditor’sselected depend on the auditor’sselected depend on the auditor’sselected depend on the auditor’s
judgment, includingjudgment, includingjudgment, includingjudgment, including the assessmentthe assessmentthe assessmentthe assessment of the risks of materialof the risks of materialof the risks of materialof the risks of material
misstatement of themisstatement of themisstatement of themisstatement of the financial statementsfinancial statementsfinancial statementsfinancial statements, whether due to, whether due to, whether due to, whether due to
fraud or error. In making thosefraud or error. In making thosefraud or error. In making thosefraud or error. In making those risk assessmentsrisk assessmentsrisk assessmentsrisk assessments, the auditor, the auditor, the auditor, the auditor
considers internal control relevant toconsiders internal control relevant toconsiders internal control relevant toconsiders internal control relevant to the preparationthe preparationthe preparationthe preparation and fairand fairand fairand fair
presentation of the financial statements in orderpresentation of the financial statements in orderpresentation of the financial statements in orderpresentation of the financial statements in order to designto designto designto design
audit procedures that are appropriate in theaudit procedures that are appropriate in theaudit procedures that are appropriate in theaudit procedures that are appropriate in the circumstances butcircumstances butcircumstances butcircumstances but
notnotnotnot for the purposes of expressing an opinion on thefor the purposes of expressing an opinion on thefor the purposes of expressing an opinion on thefor the purposes of expressing an opinion on the
effectivenesseffectivenesseffectivenesseffectiveness of theof theof theof the entity’s internal control. An audit alsoentity’s internal control. An audit alsoentity’s internal control. An audit alsoentity’s internal control. An audit also
includes evaluatingincludes evaluatingincludes evaluatingincludes evaluating the appropriatenessthe appropriatenessthe appropriatenessthe appropriateness of accounting policiesof accounting policiesof accounting policiesof accounting policies
used and theused and theused and theused and the reasonableness ofreasonableness ofreasonableness ofreasonableness of the accounting estimatesthe accounting estimatesthe accounting estimatesthe accounting estimates
made by management, as wellmade by management, as wellmade by management, as wellmade by management, as well as evaluatingas evaluatingas evaluatingas evaluating the overallthe overallthe overallthe overall
presentation of the financial statements.presentation of the financial statements.presentation of the financial statements.presentation of the financial statements.
CA. Pramod Jain

SA 700SA 700SA 700SA 700
5.5.5.5. WeWeWeWe believe that thebelieve that thebelieve that thebelieve that the audit evidenceaudit evidenceaudit evidenceaudit evidence wewewewe have obtainedhave obtainedhave obtainedhave obtained
isisisis sufficient andsufficient andsufficient andsufficient and appropriateappropriateappropriateappropriate to provide a basis forto provide a basis forto provide a basis forto provide a basis for
ourourourour audit opinion.audit opinion.audit opinion.audit opinion.
6.6.6.6. WeWeWeWe are alsoare alsoare alsoare also responsible for verifying the statementresponsible for verifying the statementresponsible for verifying the statementresponsible for verifying the statement
ofofofof particulars requiredparticulars requiredparticulars requiredparticulars required to be furnished under sectionto be furnished under sectionto be furnished under sectionto be furnished under section
44AB44AB44AB44AB of the Incomeof the Incomeof the Incomeof the Income----taxtaxtaxtax Act, 1961Act, 1961Act, 1961Act, 1961 annexed herewithannexed herewithannexed herewithannexed herewith
in Form No. 3CD read with Rule 6G (1) (b)in Form No. 3CD read with Rule 6G (1) (b)in Form No. 3CD read with Rule 6G (1) (b)in Form No. 3CD read with Rule 6G (1) (b) of Incomeof Incomeof Incomeof Income----
taxtaxtaxtax Rules, 1962.Rules, 1962.Rules, 1962.Rules, 1962. WeWeWeWe havehavehavehave conducted my/ourconducted my/ourconducted my/ourconducted my/our
verificationverificationverificationverification of theof theof theof the statement in accordance withstatement in accordance withstatement in accordance withstatement in accordance with
Guidance Note on Tax AuditGuidance Note on Tax AuditGuidance Note on Tax AuditGuidance Note on Tax Audit under sectionunder sectionunder sectionunder section 44AB of44AB of44AB of44AB of
the Incomethe Incomethe Incomethe Income----tax Act, 1961, issued by the Institutetax Act, 1961, issued by the Institutetax Act, 1961, issued by the Institutetax Act, 1961, issued by the Institute ofofofof
CharteredCharteredCharteredChartered Accountants of IndiaAccountants of IndiaAccountants of IndiaAccountants of India....
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD –––– OVERVIEWOVERVIEWOVERVIEWOVERVIEW
3CD3CD3CD3CD
Part APart APart APart A 1111----8888
Part BPart BPart BPart B 9999----41414141
Clause 13Clause 13Clause 13Clause 13
w.e.fw.e.fw.e.fw.e.f....
1.4.20171.4.20171.4.20171.4.2017
Clause 31Clause 31Clause 31Clause 31
w.e.fw.e.fw.e.fw.e.f....
19.7.201719.7.201719.7.201719.7.2017
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE ---- 11111111
Whether books prescribed u/s 44AA? If yes, list ofWhether books prescribed u/s 44AA? If yes, list ofWhether books prescribed u/s 44AA? If yes, list ofWhether books prescribed u/s 44AA? If yes, list of
books prescribed.books prescribed.books prescribed.books prescribed.
List of books maintained &address at which maintainedList of books maintained &address at which maintainedList of books maintained &address at which maintainedList of books maintained &address at which maintained
List of books of a/List of books of a/List of books of a/List of books of a/cscscscs & nature of relevant documents& nature of relevant documents& nature of relevant documents& nature of relevant documents
examined.examined.examined.examined.
S. 2(12A)S. 2(12A)S. 2(12A)S. 2(12A) ---- booksbooksbooksbooks or books ofor books ofor books ofor books of a/ca/ca/ca/c includes ledgers, dayincludes ledgers, dayincludes ledgers, dayincludes ledgers, day----
books, cash books, accountbooks, cash books, accountbooks, cash books, accountbooks, cash books, account----booksbooksbooksbooks &&&& other books,other books,other books,other books,
whether kept inwhether kept inwhether kept inwhether kept in writtenwrittenwrittenwritten form or ..electronic.form or ..electronic.form or ..electronic.form or ..electronic.
Relevant documentsRelevant documentsRelevant documentsRelevant documents ---- directlydirectlydirectlydirectly related to transactionsrelated to transactionsrelated to transactionsrelated to transactions
reflectedreflectedreflectedreflected inininin books ofbooks ofbooks ofbooks of a/a/a/a/cscscscs like invoicelike invoicelike invoicelike invoice,,,, bankbankbankbank statementsstatementsstatementsstatements,,,,
vouchers,vouchers,vouchers,vouchers, dr. notedr. notedr. notedr. note,,,, cr. notecr. notecr. notecr. note, inventory register, inventory register, inventory register, inventory register,,,,
agreements /contractsagreements /contractsagreements /contractsagreements /contracts or any other document onor any other document onor any other document onor any other document on basisbasisbasisbasis
of which preliminary entries are passed inof which preliminary entries are passed inof which preliminary entries are passed inof which preliminary entries are passed in booksbooksbooksbooks ofofofof a/a/a/a/cscscscs
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD –––– CLAUSECLAUSECLAUSECLAUSE –––– 21(A)21(A)21(A)21(A)
FurnishFurnishFurnishFurnish the details of amounts debitedthe details of amounts debitedthe details of amounts debitedthe details of amounts debited
to the profit and loss account, being into the profit and loss account, being into the profit and loss account, being into the profit and loss account, being in
the nature of Capital, personal,the nature of Capital, personal,the nature of Capital, personal,the nature of Capital, personal,
advertisement expenditureadvertisement expenditureadvertisement expenditureadvertisement expenditure club fee,club fee,club fee,club fee,
etcetcetcetc::::
Loss on sale of AssetsLoss on sale of AssetsLoss on sale of AssetsLoss on sale of Assets
Fee for increase in authorised CapitalFee for increase in authorised CapitalFee for increase in authorised CapitalFee for increase in authorised Capital
Loss on sale of investmentsLoss on sale of investmentsLoss on sale of investmentsLoss on sale of investments
CA. Pramod Jain

CL. 31CL. 31CL. 31CL. 31 ---- S. 269 SS/TS. 269 SS/TS. 269 SS/TS. 269 SS/T –––– AMENDEDAMENDEDAMENDEDAMENDED W.E.FW.E.FW.E.FW.E.F. 19.7.17. 19.7.17. 19.7.17. 19.7.17
((((a) Particulars of each loan or deposit in an amounta) Particulars of each loan or deposit in an amounta) Particulars of each loan or deposit in an amounta) Particulars of each loan or deposit in an amount
exceedingexceedingexceedingexceeding limit specified inlimit specified inlimit specified inlimit specified in s.s.s.s. 269SS269SS269SS269SS taken/acceptedtaken/acceptedtaken/acceptedtaken/accepted
during the previous yearduring the previous yearduring the previous yearduring the previous year ––––
((((iiii) to (iv)) to (iv)) to (iv)) to (iv) ---- samesamesamesame
Old (v)Old (v)Old (v)Old (v) –––– whether the loan was taken or accepted otherwisewhether the loan was taken or accepted otherwisewhether the loan was taken or accepted otherwisewhether the loan was taken or accepted otherwise
than by a/c payee cheque / bank draft?than by a/c payee cheque / bank draft?than by a/c payee cheque / bank draft?than by a/c payee cheque / bank draft?
New (v)New (v)New (v)New (v) ---- whether the loan or deposit was taken or acceptedwhether the loan or deposit was taken or acceptedwhether the loan or deposit was taken or acceptedwhether the loan or deposit was taken or accepted
by cheque or bank draft or use ofby cheque or bank draft or use ofby cheque or bank draft or use ofby cheque or bank draft or use of electronic clearingelectronic clearingelectronic clearingelectronic clearing systemsystemsystemsystem
through a bank account;through a bank account;through a bank account;through a bank account;
New (vi)New (vi)New (vi)New (vi) ---- inininin case the loan or deposit was taken or acceptedcase the loan or deposit was taken or acceptedcase the loan or deposit was taken or acceptedcase the loan or deposit was taken or accepted
by cheque or bank draft, whether the same was taken orby cheque or bank draft, whether the same was taken orby cheque or bank draft, whether the same was taken orby cheque or bank draft, whether the same was taken or
accepted by an account payee cheque or an account payeeaccepted by an account payee cheque or an account payeeaccepted by an account payee cheque or an account payeeaccepted by an account payee cheque or an account payee
bank draft.bank draft.bank draft.bank draft.
CA. Pramod Jain

New (b)New (b)New (b)New (b) ---- Particulars of eachParticulars of eachParticulars of eachParticulars of each specified sumspecified sumspecified sumspecified sum in anin anin anin an
amount exceeding the limit specified in section 269SSamount exceeding the limit specified in section 269SSamount exceeding the limit specified in section 269SSamount exceeding the limit specified in section 269SS
taken or accepted during the previous yeartaken or accepted during the previous yeartaken or accepted during the previous yeartaken or accepted during the previous year
name, address and PAN (if available with thename, address and PAN (if available with thename, address and PAN (if available with thename, address and PAN (if available with the assesseeassesseeassesseeassessee) of) of) of) of
the person from whom specified sum is received;the person from whom specified sum is received;the person from whom specified sum is received;the person from whom specified sum is received;
amountamountamountamount of specified sum taken or accepted;of specified sum taken or accepted;of specified sum taken or accepted;of specified sum taken or accepted;
whether the specified sum was taken or accepted by chequewhether the specified sum was taken or accepted by chequewhether the specified sum was taken or accepted by chequewhether the specified sum was taken or accepted by cheque
or bank draft or use of electronic clearing system through aor bank draft or use of electronic clearing system through aor bank draft or use of electronic clearing system through aor bank draft or use of electronic clearing system through a
bank account;bank account;bank account;bank account;
inininin case the specified sum was taken or accepted by chequecase the specified sum was taken or accepted by chequecase the specified sum was taken or accepted by chequecase the specified sum was taken or accepted by cheque
or bank draft, whether the same was taken or accepted byor bank draft, whether the same was taken or accepted byor bank draft, whether the same was taken or accepted byor bank draft, whether the same was taken or accepted by
an account payee cheque or an account payee bank draftan account payee cheque or an account payee bank draftan account payee cheque or an account payee bank draftan account payee cheque or an account payee bank draft....
(a)(a)(a)(a) &&&& (b) need not be given in case(b) need not be given in case(b) need not be given in case(b) need not be given in case ofofofof Govt. Co., bank orGovt. Co., bank orGovt. Co., bank orGovt. Co., bank or
aaaa corp.corp.corp.corp. established by Central, State or Provincial Actestablished by Central, State or Provincial Actestablished by Central, State or Provincial Actestablished by Central, State or Provincial Act
CA. Pramod Jain

(c)(c)(c)(c) ---- Particulars of each repayment of loan or depositParticulars of each repayment of loan or depositParticulars of each repayment of loan or depositParticulars of each repayment of loan or deposit
or any specified advance in an amount exceeding theor any specified advance in an amount exceeding theor any specified advance in an amount exceeding theor any specified advance in an amount exceeding the
limit specified in section 269T made during thelimit specified in section 269T made during thelimit specified in section 269T made during thelimit specified in section 269T made during the
previous yearprevious yearprevious yearprevious year –––– (Old b)(Old b)(Old b)(Old b)
((((iiii) to () to () to () to (iii)iii)iii)iii) –––– samesamesamesame
OldOldOldOld (iv(iv(iv(iv)))) –––– whether thewhether thewhether thewhether the repayment was made otherwiserepayment was made otherwiserepayment was made otherwiserepayment was made otherwise than bythan bythan bythan by
a/c payee cheque / banka/c payee cheque / banka/c payee cheque / banka/c payee cheque / bank draft ?draft ?draft ?draft ?
New (iv)New (iv)New (iv)New (iv) ---- whether the repayment was made by cheque orwhether the repayment was made by cheque orwhether the repayment was made by cheque orwhether the repayment was made by cheque or
bank draft or use of electronic clearing system through a bankbank draft or use of electronic clearing system through a bankbank draft or use of electronic clearing system through a bankbank draft or use of electronic clearing system through a bank
account;account;account;account;
New (v)New (v)New (v)New (v) ---- in case the repayment was made by cheque or bankin case the repayment was made by cheque or bankin case the repayment was made by cheque or bankin case the repayment was made by cheque or bank
draft, whether the same was taken or accepted by an accountdraft, whether the same was taken or accepted by an accountdraft, whether the same was taken or accepted by an accountdraft, whether the same was taken or accepted by an account
payee cheque or an account payee bank draft.payee cheque or an account payee bank draft.payee cheque or an account payee bank draft.payee cheque or an account payee bank draft.
CA. Pramod Jain

New (d)New (d)New (d)New (d) ---- Particulars of repayment of loan or deposit orParticulars of repayment of loan or deposit orParticulars of repayment of loan or deposit orParticulars of repayment of loan or deposit or
any specified advance in an amount exceeding theany specified advance in an amount exceeding theany specified advance in an amount exceeding theany specified advance in an amount exceeding the
limit specified in section 269Tlimit specified in section 269Tlimit specified in section 269Tlimit specified in section 269T receivedreceivedreceivedreceived otherwise thanotherwise thanotherwise thanotherwise than
by a cheque or bank draft or use of electronic clearingby a cheque or bank draft or use of electronic clearingby a cheque or bank draft or use of electronic clearingby a cheque or bank draft or use of electronic clearing
system through a bank accountsystem through a bank accountsystem through a bank accountsystem through a bank account during the previousduring the previousduring the previousduring the previous
yearyearyearyear
name, address andname, address andname, address andname, address and PANPANPANPAN (if available with the(if available with the(if available with the(if available with the assesseeassesseeassesseeassessee) of) of) of) of
thethethethe payerpayerpayerpayer;;;;
amountamountamountamount of loan or deposit or any specified advance receivedof loan or deposit or any specified advance receivedof loan or deposit or any specified advance receivedof loan or deposit or any specified advance received
otherwise than by a cheque or bank draft or use of electronicotherwise than by a cheque or bank draft or use of electronicotherwise than by a cheque or bank draft or use of electronicotherwise than by a cheque or bank draft or use of electronic
clearing system through a bank account during the previousclearing system through a bank account during the previousclearing system through a bank account during the previousclearing system through a bank account during the previous
year.year.year.year.
CA. Pramod Jain

New (e)New (e)New (e)New (e) ----ParticularsParticularsParticularsParticulars of repayment ofof repayment ofof repayment ofof repayment of loan/depositloan/depositloan/depositloan/deposit or anyor anyor anyor any
specified advance in anspecified advance in anspecified advance in anspecified advance in an amt. exceedingamt. exceedingamt. exceedingamt. exceeding limit specified inlimit specified inlimit specified inlimit specified in
s.s.s.s. 269T269T269T269T receivedreceivedreceivedreceived bybybyby chequechequechequecheque //// bank draft which is not anbank draft which is not anbank draft which is not anbank draft which is not an
account payee chequeaccount payee chequeaccount payee chequeaccount payee cheque //// bank draftbank draftbank draftbank draft duringduringduringduring PYPYPYPY
name, addressname, addressname, addressname, address & PAN& PAN& PAN& PAN (if available with(if available with(if available with(if available with assesseeassesseeassesseeassessee)))) ofofofof payer;payer;payer;payer;
amountamountamountamount of loan or deposit or any specified advance receivedof loan or deposit or any specified advance receivedof loan or deposit or any specified advance receivedof loan or deposit or any specified advance received
by a cheque or a bank draft which is not anby a cheque or a bank draft which is not anby a cheque or a bank draft which is not anby a cheque or a bank draft which is not an a/ca/ca/ca/c payee chequepayee chequepayee chequepayee cheque
//// bank draft during the previousbank draft during the previousbank draft during the previousbank draft during the previous yearyearyearyear
(c), (d)(c), (d)(c), (d)(c), (d) &&&& (e) need not be given in(e) need not be given in(e) need not be given in(e) need not be given in case ofcase ofcase ofcase of repayment ofrepayment ofrepayment ofrepayment of
any loan or deposit or any specified advance taken orany loan or deposit or any specified advance taken orany loan or deposit or any specified advance taken orany loan or deposit or any specified advance taken or
accepted from theaccepted from theaccepted from theaccepted from the Govt., Govt. Co., bank orGovt., Govt. Co., bank orGovt., Govt. Co., bank orGovt., Govt. Co., bank or aaaa
corporation established bycorporation established bycorporation established bycorporation established by CentralCentralCentralCentral, State or Provincial, State or Provincial, State or Provincial, State or Provincial
ActActActAct
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD –––– CLAUSE 40CLAUSE 40CLAUSE 40CLAUSE 40
Ratios:Ratios:Ratios:Ratios:
Total Turnover of theTotal Turnover of theTotal Turnover of theTotal Turnover of the assesseeassesseeassesseeassessee
GP / TurnoverGP / TurnoverGP / TurnoverGP / Turnover
NP / TurnoverNP / TurnoverNP / TurnoverNP / Turnover
StockStockStockStock----inininin----trade / Turnovertrade / Turnovertrade / Turnovertrade / Turnover
Material Consumed / Finished Goods producedMaterial Consumed / Finished Goods producedMaterial Consumed / Finished Goods producedMaterial Consumed / Finished Goods produced
To be given for allTo be given for allTo be given for allTo be given for all assesseesassesseesassesseesassessees????????????
Only Manufacturing & TradingOnly Manufacturing & TradingOnly Manufacturing & TradingOnly Manufacturing & Trading
Ratios in value onlyRatios in value onlyRatios in value onlyRatios in value only
To be given for business as wholeTo be given for business as wholeTo be given for business as wholeTo be given for business as whole
CalculationCalculationCalculationCalculation of the ratios are also to be statedof the ratios are also to be statedof the ratios are also to be statedof the ratios are also to be stated
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD –––– CLAUSE 40CLAUSE 40CLAUSE 40CLAUSE 40
NPNPNPNP –––– before / after tax?before / after tax?before / after tax?before / after tax?
BeforeBeforeBeforeBefore
StockStockStockStock----inininin----trade includes what items?trade includes what items?trade includes what items?trade includes what items?
Only finished goodsOnly finished goodsOnly finished goodsOnly finished goods
Material consumedMaterial consumedMaterial consumedMaterial consumed would includewould includewould includewould include RMRMRMRM
consumed, stores, spare parts andconsumed, stores, spare parts andconsumed, stores, spare parts andconsumed, stores, spare parts and loose toolsloose toolsloose toolsloose tools
Relevant previous year figures are to be takenRelevant previous year figures are to be takenRelevant previous year figures are to be takenRelevant previous year figures are to be taken
from last previous year audit report.from last previous year audit report.from last previous year audit report.from last previous year audit report.
In case the precedingIn case the precedingIn case the precedingIn case the preceding PY isPY isPY isPY is not subject tonot subject tonot subject tonot subject to
audit, nothing should be mentioned inaudit, nothing should be mentioned inaudit, nothing should be mentioned inaudit, nothing should be mentioned in relevantrelevantrelevantrelevant
columncolumncolumncolumn
CA. Pramod Jain

WHO TO FOLLOWWHO TO FOLLOWWHO TO FOLLOWWHO TO FOLLOW ICDSICDSICDSICDS
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
CA. Pramod Jain

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
CA. Pramod Jain

CORRESPONDING AS /CORRESPONDING AS /CORRESPONDING AS /CORRESPONDING AS / INDINDINDIND ASASASAS
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 11111111
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
CA. Pramod Jain

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
Is separate books to be maintained?Is separate books to be maintained?Is separate books to be maintained?Is separate books to be maintained?
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 onononon partnership firm u/s 44ADpartnership firm u/s 44ADpartnership firm u/s 44ADpartnership firm u/s 44AD
…wherever…wherever…wherever…wherever possiblepossiblepossiblepossible –––– exampleexampleexampleexample constructionconstructionconstructionconstruction
contracts, revenue recognition??contracts, revenue recognition??contracts, revenue recognition??contracts, revenue recognition??
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
Draft ICDS on Real Estate TransactionsDraft ICDS on Real Estate TransactionsDraft ICDS on Real Estate TransactionsDraft ICDS on Real Estate Transactions –––– 11.5.1711.5.1711.5.1711.5.17
CA. Pramod Jain

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 onICDS not to apply on MAT but applicable onICDS not to apply on MAT but applicable onICDS not to apply on MAT but applicable on
AMTAMTAMTAMT –––– Q 6 FAQQ 6 FAQQ 6 FAQQ 6 FAQ
Take care of AS 22Take care of AS 22Take care of AS 22Take care of AS 22
What if assesse has no business incomeWhat if assesse has no business incomeWhat if assesse has no business incomeWhat if assesse has no business income
but only income from other sources?but only income from other sources?but only income from other sources?but only income from other sources?
What if has one business on mercantileWhat if has one business on mercantileWhat if has one business on mercantileWhat if has one business on mercantile
basis and other on cash ?basis and other on cash ?basis and other on cash ?basis and other on cash ?
CA. Pramod Jain

STRUCTURESTRUCTURESTRUCTURESTRUCTURE
CA. Pramod Jain
PreamblePreamblePreamblePreamble
ScopeScopeScopeScope
ContentsContentsContentsContents
Transitional ProvisionsTransitional ProvisionsTransitional ProvisionsTransitional Provisions
DisclosureDisclosureDisclosureDisclosure

PREAMBLEPREAMBLEPREAMBLEPREAMBLE
1.1.1.1. ThisThisThisThis IncomeIncomeIncomeIncome ComputationComputationComputationComputation andandandand DisclosureDisclosureDisclosureDisclosure
StandardStandardStandardStandard isisisis applicableapplicableapplicableapplicable forforforfor computationcomputationcomputationcomputation ofofofof
incomeincomeincomeincome chargeablechargeablechargeablechargeable underunderunderunder thethethethe headheadheadhead "Profits"Profits"Profits"Profits
andandandand gainsgainsgainsgains ofofofof businessbusinessbusinessbusiness orororor profession"profession"profession"profession" orororor
"Income"Income"Income"Income fromfromfromfrom otherotherotherother sources"sources"sources"sources" andandandand notnotnotnot forforforfor thethethethe
purposepurposepurposepurpose ofofofof maintenancemaintenancemaintenancemaintenance ofofofof booksbooksbooksbooks ofofofof accountaccountaccountaccount....
2.2.2.2. InInInIn thethethethe casecasecasecase ofofofof conflictconflictconflictconflict betweenbetweenbetweenbetween thethethethe provisionsprovisionsprovisionsprovisions
ofofofof thethethethe IncomeIncomeIncomeIncome----taxtaxtaxtax Act,Act,Act,Act, 1961196119611961 ('the('the('the('the Act')Act')Act')Act') andandandand thisthisthisthis
IncomeIncomeIncomeIncome ComputationComputationComputationComputation andandandand DisclosureDisclosureDisclosureDisclosure Standard,Standard,Standard,Standard,
thethethethe provisionsprovisionsprovisionsprovisions ofofofof thethethethe ActActActAct shallshallshallshall prevailprevailprevailprevail totototo thatthatthatthat
extentextentextentextent....
CA. Pramod Jain

WHAT TO DOWHAT TO DOWHAT TO DOWHAT TO DO
Get the FSGet the FSGet the FSGet the FS
preparedpreparedpreparedprepared
complying AScomplying AScomplying AScomplying AS
//// IndIndIndInd ASASASAS
Check & ListCheck & ListCheck & ListCheck & List
out theout theout theout the
applicableapplicableapplicableapplicable
ICDSICDSICDSICDS
Note DifferencesNote DifferencesNote DifferencesNote Differences
in accountingin accountingin accountingin accounting
policy as per ASpolicy as per ASpolicy as per ASpolicy as per AS
in books & ICDSin books & ICDSin books & ICDSin books & ICDS
If different, effectIf different, effectIf different, effectIf different, effect
on profit /loss toon profit /loss toon profit /loss toon profit /loss to
be disclosed inbe disclosed inbe disclosed inbe disclosed in
Form 3CD & ITRForm 3CD & ITRForm 3CD & ITRForm 3CD & ITR
Is there anyIs there anyIs there anyIs there any
adjustmentadjustmentadjustmentadjustment
required inrequired inrequired inrequired in
computation fromcomputation fromcomputation fromcomputation from
Profit as per BooksProfit as per BooksProfit as per BooksProfit as per Books
& IT?& IT?& IT?& IT?
Does any ofDoes any ofDoes any ofDoes any of
those relate tothose relate tothose relate tothose relate to
any ICDS?any ICDS?any ICDS?any ICDS?
If yes, disclosureIf yes, disclosureIf yes, disclosureIf yes, disclosure
may be requiredmay be requiredmay be requiredmay be required
in 3CD & ITR tooin 3CD & ITR tooin 3CD & ITR tooin 3CD & ITR too
Verify relatedVerify relatedVerify relatedVerify related
ICDSICDSICDSICDS
disclosures indisclosures indisclosures indisclosures in
Form 3CDForm 3CDForm 3CDForm 3CD
Fill ICDS effectFill ICDS effectFill ICDS effectFill ICDS effect
details in ITRdetails in ITRdetails in ITRdetails in ITR
CA. Pramod Jain

ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
If in books as perIf in books as perIf in books as perIf in books as per
AS /AS /AS /AS / IndIndIndInd ASASASAS
Effect andEffect andEffect andEffect and
disclosure indisclosure indisclosure indisclosure in
CA. Pramod Jain
If in books asIf in books asIf in books asIf in books as
per ICDSper ICDSper ICDSper ICDS
Qualify inQualify inQualify inQualify in
Audit ReportAudit ReportAudit ReportAudit Report
Disclosure inDisclosure inDisclosure inDisclosure in

ICDSICDSICDSICDS CHECKLISTCHECKLISTCHECKLISTCHECKLIST
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
Liabilities& ContingentLiabilities& ContingentLiabilities& ContingentLiabilities& Contingent AssetsAssetsAssetsAssets
CA. Pramod Jain

(a) Method of accounting employed in(a) Method of accounting employed in(a) Method of accounting employed in(a) Method of accounting employed in
previous yearprevious yearprevious yearprevious year –––– Mercantile / cashMercantile / cashMercantile / cashMercantile / cash
(b) Change in method of accounting applied(b) Change in method of accounting applied(b) Change in method of accounting applied(b) Change in method of accounting applied
(c) If, yes, effect thereof on profit / loss(c) If, yes, effect thereof on profit / loss(c) If, yes, effect thereof on profit / loss(c) If, yes, effect thereof on profit / loss
(Old d) Deviation in method of accounting(Old d) Deviation in method of accounting(Old d) Deviation in method of accounting(Old d) Deviation in method of accounting
from accounting standards prescribed u/sfrom accounting standards prescribed u/sfrom accounting standards prescribed u/sfrom accounting standards prescribed u/s
145 and effect thereof on P/L145 and effect thereof on P/L145 and effect thereof on P/L145 and 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
CA. Pramod Jain

((((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
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE –––– 13(E)13(E)13(E)13(E)
ICDICDICDICD
SSSS
Name of ICDSName of ICDSName of ICDSName of ICDS IncreaseIncreaseIncreaseIncrease
in Profitin Profitin Profitin Profit
DecreaseDecreaseDecreaseDecrease
NetNetNetNet
((((RsRsRsRs.).).).)
DescriptiDescriptiDescriptiDescripti
onononon
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies 14141414 ChChChCh
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
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE –––– 13(F)13(F)13(F)13(F)
ICDS Name of ICDS Disclosures Descrip.
I Accounting Policies 500
Character
II Valuation of Inventories
III Construction Contracts
IV Revenue Recognition
V Tangible Fixed Assets
VII Government Grants
IX Borrowing Costs
X Provisions, Contingent Liab &
Assets
CA. Pramod Jain

ITRITRITRITR
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?
CA. Pramod Jain

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
judgmentjudgmentjudgmentjudgment 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 ::::----
Correctness or completeness of the accounts ofCorrectness or completeness of the accounts ofCorrectness or completeness of the accounts ofCorrectness or completeness of the accounts of
thethethethe 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.
CA. Pramod Jain

CBDT FAQS DT. 25CBDT FAQS DT. 25CBDT FAQS DT. 25CBDT FAQS DT. 25THTHTHTH 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) forlike ICDS VIII (securities) forlike ICDS VIII (securities) forlike ICDS VIII (securities) for
certain financial institutions & ICDS I forcertain financial institutions & ICDS I forcertain financial institutions & ICDS I forcertain financial institutions & ICDS I for
Insurance businessInsurance businessInsurance businessInsurance business
NoNoNoNo specific ICDS yet for real estatespecific ICDS yet for real estatespecific ICDS yet for real estatespecific ICDS yet for real estate
developers & BOT projects and leases.developers & BOT projects and leases.developers & BOT projects and leases.developers & BOT projects and leases.
Normal Act & ICDSNormal Act & ICDSNormal Act & ICDSNormal Act & ICDS applicableapplicableapplicableapplicable
CA. Pramod Jain

CBDT FAQS DT. 25CBDT FAQS DT. 25CBDT FAQS DT. 25CBDT FAQS DT. 25THTHTHTH 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 VIICDS VIICDS VIICDS VI
[Foreign Exchange] subject to para 3 of ICDS[Foreign Exchange] subject to para 3 of ICDS[Foreign Exchange] subject to para 3 of ICDS[Foreign Exchange] subject to para 3 of ICDS
VIII [securities]VIII [securities]VIII [securities]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 inNet effect of ICDS to be disclosed inNet effect of ICDS to be disclosed inNet effect of ICDS to be disclosed in ITRITRITRITR
No separate disclosures persons who areNo separate disclosures persons who areNo separate disclosures persons who areNo separate disclosures persons who are
not liable for taxnot liable for taxnot liable for taxnot liable for tax auditauditauditaudit
CA. Pramod Jain

IIII ---- ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
CA. Pramod Jain

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 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 contract & provisioning for loss onconstruction contract & provisioning for loss onconstruction contract & provisioning for loss onconstruction contract & provisioning for loss on
onerous contractonerous contractonerous contractonerous contract
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 on Rent, interest, royalty andrendering of service and on Rent, interest, royalty andrendering of service and on Rent, interest, royalty andrendering of service and on Rent, interest, royalty and
dividenddividenddividenddividend
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 metgrant has not metgrant has not metgrant has not met....
CA. Pramod Jain

ICDS IICDS IICDS IICDS I –––– ACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIESACCOUNTING POLICIES
No deduction of expected losses orNo deduction of expected losses orNo deduction of expected losses orNo deduction of expected losses or markedmarkedmarkedmarked to markedto markedto markedto marked
loss unless as per other ICDSloss unless as per other ICDSloss unless as per other ICDSloss unless as per other ICDS
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.(P.) Ltd.(P.) Ltd.(P.) Ltd. v.ITOv.ITOv.ITOv.ITO [[[[2011]152011]152011]152011]15 taxmann.comtaxmann.comtaxmann.comtaxmann.com 177(Mum)177(Mum)177(Mum)177(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 ---- MarkedMarkedMarkedMarked to Market loss or expected loss as well asto Market loss or expected loss as well asto Market loss or expected loss as well asto Market loss or expected loss as well as
MarkedMarkedMarkedMarked to Market gain or expected gain not to beto Market gain or expected gain not to beto Market gain or expected gain not to beto 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
CA. Pramod Jain

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.
CA. Pramod Jain

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 (f) of Form 3CD, wherever applicable:Clause 13 (f) of Form 3CD, wherever applicable:Clause 13 (f) of Form 3CD, wherever applicable:Clause 13 (f) 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 (other thanschedule in Form 3CD as well as ITR (other thanschedule in Form 3CD as well as ITR (other thanschedule in Form 3CD as well as ITR (other than
those covered by other ICDS):those covered by other ICDS):those covered by other ICDS):those covered by other ICDS):
Marked to market loss / gainMarked to market loss / gainMarked to market loss / gainMarked 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 the year of effect too.material effect in the year of effect too.material effect in the year of effect too.material effect in the year of effect too.
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE –––– 13(E)13(E)13(E)13(E)
ICDICDICDICD
SSSS
Name of ICDSName of ICDSName of ICDSName of ICDS Increase inIncrease inIncrease inIncrease in
ProfitProfitProfitProfit
Net (Net (Net (Net (RsRsRsRs.).).).) DescriptionDescriptionDescriptionDescription
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies 2000200020002000 2000200020002000 Mark toMark toMark toMark to
MarketMarketMarketMarket
Loss onLoss onLoss onLoss on
DerivativesDerivativesDerivativesDerivatives
TotalTotalTotalTotal 2000200020002000
CA. Pramod Jain

FORM 3CDFORM 3CDFORM 3CDFORM 3CD ––––CLAUSECLAUSECLAUSECLAUSE –––– 13(F)13(F)13(F)13(F)
ICDSICDSICDSICDS Name of ICDSName of ICDSName of ICDSName of ICDS DisclosuresDisclosuresDisclosuresDisclosures
IIII Accounting PoliciesAccounting PoliciesAccounting PoliciesAccounting Policies • Refer to theRefer to theRefer to theRefer to the
significantsignificantsignificantsignificant
accounting policiesaccounting policiesaccounting policiesaccounting policies
mentioned at Notementioned at Notementioned at Notementioned at Note
No. _ toNo. _ toNo. _ toNo. _ to the Financialthe Financialthe Financialthe Financial
StatementsStatementsStatementsStatements
CA. Pramod Jain

IIIIIIII –––– VALUATION OF INVENTORIESVALUATION OF INVENTORIESVALUATION OF INVENTORIESVALUATION OF INVENTORIES
CA. Pramod Jain

ICDS IIICDS IIICDS IIICDS II –––– VALUATION OF INVENTORIESVALUATION OF INVENTORIESVALUATION OF INVENTORIESVALUATION OF INVENTORIES
Inventory to be valued at cost or NRV whicheverInventory to be valued at cost or NRV whicheverInventory to be valued at cost or NRV whicheverInventory to be valued at cost or NRV whichever
is lower.is lower.is lower.is lower.
ByByByBy----products, scrap or waste material areproducts, scrap or waste material areproducts, scrap or waste material areproducts, scrap or waste material are
immaterial, they shall be measured atimmaterial, they shall be measured atimmaterial, they shall be measured atimmaterial, they shall be measured at NRV andNRV andNRV andNRV and
this value shall be deducted from the cost of thethis value shall be deducted from the cost of thethis value shall be deducted from the cost of thethis value shall be deducted from the cost of the
main product.main product.main product.main product.
Cost of inventories to include:Cost of inventories to include:Cost of inventories to include:Cost of inventories to include:
Cost of purchases;Cost of purchases;Cost of purchases;Cost of purchases;
Includes all duties & taxes . AS 2 excludes refundableIncludes all duties & taxes . AS 2 excludes refundableIncludes all duties & taxes . AS 2 excludes refundableIncludes all duties & taxes . AS 2 excludes refundable
from taxing authoritiesfrom taxing authoritiesfrom taxing authoritiesfrom taxing authorities
CA. Pramod Jain

Costs of servicesCosts of servicesCosts of servicesCosts of services; (earlier for service provider, now; (earlier for service provider, now; (earlier for service provider, now; (earlier for service provider, now
deleted)deleted)deleted)deleted)
Includes labour and other costs of personnelIncludes labour and other costs of personnelIncludes labour and other costs of personnelIncludes labour and other costs of personnel
directly engaged in providing the service includingdirectly engaged in providing the service includingdirectly engaged in providing the service includingdirectly engaged in providing the service including
supervisory personnel and attributable overheadssupervisory personnel and attributable overheadssupervisory personnel and attributable overheadssupervisory personnel and attributable overheads
Costs of conversion; andCosts of conversion; andCosts of conversion; andCosts of conversion; and
OOOOtherthertherther costs incurred in bringing the inventories tocosts incurred in bringing the inventories tocosts incurred in bringing the inventories tocosts incurred in bringing the inventories to
their present location and conditiontheir present location and conditiontheir present location and conditiontheir present location and condition
Cost FormulaeCost FormulaeCost FormulaeCost Formulae
Specific identification of costSpecific identification of costSpecific identification of costSpecific identification of cost
FIFOFIFOFIFOFIFO
Weighted AverageWeighted AverageWeighted AverageWeighted Average
CA. Pramod Jain

Techniques for measurement of cost:Techniques for measurement of cost:Techniques for measurement of cost:Techniques for measurement of cost:
Standard CostStandard CostStandard CostStandard Cost
Retail methodRetail methodRetail methodRetail method ((((An average percentage for eachAn average percentage for eachAn average percentage for eachAn average percentage for each
retail department is to be used )retail department is to be used )retail department is to be used )retail department is to be used )
ICDSICDSICDSICDS ---- MachineryMachineryMachineryMachinery spares, which can be used onlyspares, which can be used onlyspares, which can be used onlyspares, which can be used only
in connection with a tangible fixed asset and theirin connection with a tangible fixed asset and theirin connection with a tangible fixed asset and theirin connection with a tangible fixed asset and their
use is expected to be irregular,use is expected to be irregular,use is expected to be irregular,use is expected to be irregular, totototo be dealt with inbe dealt with inbe dealt with inbe dealt with in
accordance with theaccordance with theaccordance with theaccordance with the ICDS V (TangibleICDS V (TangibleICDS V (TangibleICDS V (Tangible fixedfixedfixedfixed
assets)assets)assets)assets)
The New AS 10 PPE read with new AS 2The New AS 10 PPE read with new AS 2The New AS 10 PPE read with new AS 2The New AS 10 PPE read with new AS 2 –––– FA ifFA ifFA ifFA if
expected to be used for more than 12 monthsexpected to be used for more than 12 monthsexpected to be used for more than 12 monthsexpected to be used for more than 12 months
CA. Pramod Jain

ICDS IIICDS IIICDS IIICDS II –––– TAX DUTIESTAX DUTIESTAX DUTIESTAX DUTIES
ASASASAS: The costs of purchase shall consist ofThe costs of purchase shall consist ofThe costs of purchase shall consist ofThe costs of purchase shall consist of
purchase price including dutiespurchase price including dutiespurchase price including dutiespurchase price including duties &&&& taxestaxestaxestaxes (other(other(other(other
than those subsequently recoverable by thethan those subsequently recoverable by thethan those subsequently recoverable by thethan those subsequently recoverable by the
enterprise from the taxing authorities),enterprise from the taxing authorities),enterprise from the taxing authorities),enterprise from the taxing authorities), freightfreightfreightfreight
inwardsinwardsinwardsinwards &&&& other expenditure directly attributableother expenditure directly attributableother expenditure directly attributableother expenditure directly attributable
to the acquisition. (Exclusive method).to the acquisition. (Exclusive method).to the acquisition. (Exclusive method).to the acquisition. (Exclusive method).
ICDSICDSICDSICDS: The costs of purchase shall consist of: The costs of purchase shall consist of: The costs of purchase shall consist of: The costs of purchase shall consist of
purchase price including duties and taxes, freightpurchase price including duties and taxes, freightpurchase price including duties and taxes, freightpurchase price including duties and taxes, freight
inwardsinwardsinwardsinwards & other& other& other& other expenditure directly attributableexpenditure directly attributableexpenditure directly attributableexpenditure directly attributable
to the acquisition. (Inclusive method)to the acquisition. (Inclusive method)to the acquisition. (Inclusive method)to the acquisition. (Inclusive method)
Already under SAlready under SAlready under SAlready under S.... 145A since 1.4.1999145A since 1.4.1999145A since 1.4.1999145A since 1.4.1999
CA. Pramod Jain

CA. Pramod Jain
Sl.Sl.Sl.Sl.
No.No.No.No.
ParticularsParticularsParticularsParticulars IncreaseIncreaseIncreaseIncrease
in profitin profitin profitin profit
((((RsRsRsRs))))
in profitin profitin profitin profit
((((RsRsRsRs))))
1111 Increase in cost of opening stock onIncrease in cost of opening stock onIncrease in cost of opening stock onIncrease in cost of opening stock on
inclusion of excise duty on which CEN VATinclusion of excise duty on which CEN VATinclusion of excise duty on which CEN VATinclusion of excise duty on which CEN VAT
credit iscredit iscredit iscredit is available/availedavailable/availedavailable/availedavailable/availed
20202020
2222 Increase in purchase cost of raw materialIncrease in purchase cost of raw materialIncrease in purchase cost of raw materialIncrease in purchase cost of raw material
onononon inclusion of excise duty on which CENinclusion of excise duty on which CENinclusion of excise duty on which CENinclusion of excise duty on which CEN
VAT credit isVAT credit isVAT credit isVAT credit is available/availedavailable/availedavailable/availedavailable/availed
180180180180
3333 Increase in sales of finished goods onIncrease in sales of finished goods onIncrease in sales of finished goods onIncrease in sales of finished goods on
inclusioninclusioninclusioninclusion of excise dutyof excise dutyof excise dutyof excise duty
180180180180
4444 Excise duty paid on saleExcise duty paid on saleExcise duty paid on saleExcise duty paid on sale of finished goodsof finished goodsof finished goodsof finished goods
as a result of its inclusion in salesas a result of its inclusion in salesas a result of its inclusion in salesas a result of its inclusion in sales
---- 180180180180

CA. Pramod Jain
5555 IncreaseIncreaseIncreaseIncrease inininin closingclosingclosingclosing stockstockstockstock ofofofof rawrawrawraw materialmaterialmaterialmaterial onononon
inclusioninclusioninclusioninclusion ofofofof exciseexciseexciseexcise dutydutydutyduty
40404040 ----
6666 IncreaseIncreaseIncreaseIncrease inininin closingclosingclosingclosing stockstockstockstock ofofofof finishedfinishedfinishedfinished goodsgoodsgoodsgoods
onononon inclusioninclusioninclusioninclusion ofofofof exciseexciseexciseexcise dutydutydutyduty
60606060 ----
7777 IncreaseIncreaseIncreaseIncrease inininin exciseexciseexciseexcise dutydutydutyduty onononon closingclosingclosingclosing stockstockstockstock ofofofof
finishedfinishedfinishedfinished goodsgoodsgoodsgoods asasasas aaaa resultresultresultresult ofofofof itsitsitsits inclusioninclusioninclusioninclusion inininin
closingclosingclosingclosing stockstockstockstock ofofofof finishedfinishedfinishedfinished goodsgoodsgoodsgoods
---- 60606060
8888 AccountingAccountingAccountingAccounting ofofofof CENVTCENVTCENVTCENVT creditcreditcreditcredit availedavailedavailedavailed andandandand
utilisedutilisedutilisedutilised onononon rawrawrawraw materialsmaterialsmaterialsmaterials consumedconsumedconsumedconsumed inininin
paymentpaymentpaymentpayment ofofofof exciseexciseexciseexcise dutydutydutyduty onononon finishedfinishedfinishedfinished goodsgoodsgoodsgoods
accountedaccountedaccountedaccounted onononon thethethethe basisbasisbasisbasis ofofofof rawrawrawraw materialmaterialmaterialmaterial
consumedconsumedconsumedconsumed
160160160160 ----
TotalTotalTotalTotal 440440440440 440440440440

ICDS IIICDS IIICDS IIICDS II –––– PARTNERSHIP FIRMSPARTNERSHIP FIRMSPARTNERSHIP FIRMSPARTNERSHIP FIRMS
InInInIn case of dissolution of a partnership firm or AOP / BOI,case of dissolution of a partnership firm or AOP / BOI,case of dissolution of a partnership firm or AOP / BOI,case of dissolution of a partnership firm or AOP / BOI,
notwithstanding whether business is discontinued ornotwithstanding whether business is discontinued ornotwithstanding whether business is discontinued ornotwithstanding whether business is discontinued or
not, the inventory on the date of dissolution shall benot, the inventory on the date of dissolution shall benot, the inventory on the date of dissolution shall benot, the inventory on the date of dissolution shall be
valued at thevalued at thevalued at thevalued at the NRV.NRV.NRV.NRV.
Judicial Precedents:Judicial Precedents:Judicial Precedents:Judicial Precedents:
In cases of dissolution of firm, the stockIn cases of dissolution of firm, the stockIn cases of dissolution of firm, the stockIn cases of dissolution of firm, the stock‐‐‐‐inininin----trade will have to betrade will have to betrade will have to betrade will have to be
valued at the prevailing market price while preparing a/valued at the prevailing market price while preparing a/valued at the prevailing market price while preparing a/valued at the prevailing market price while preparing a/cscscscs ifififif
the business of firm is discontinuedthe business of firm is discontinuedthe business of firm is discontinuedthe business of firm is discontinued---- A.L.A. Firm v. CIT [1991] 55A.L.A. Firm v. CIT [1991] 55A.L.A. Firm v. CIT [1991] 55A.L.A. Firm v. CIT [1991] 55
Taxman 497(SC)Taxman 497(SC)Taxman 497(SC)Taxman 497(SC)
WhereWhereWhereWhere firm got dissolved due to death of a partnerfirm got dissolved due to death of a partnerfirm got dissolved due to death of a partnerfirm got dissolved due to death of a partner &business&business&business&business
was reconstituted withwas reconstituted withwas reconstituted withwas reconstituted with remaining partners &remaining partners &remaining partners &remaining partners & businessbusinessbusinessbusiness
continued without any interruption,continued without any interruption,continued without any interruption,continued without any interruption, closingclosingclosingclosing stock was to bestock was to bestock was to bestock was to be
valued atvalued atvalued atvalued at costcostcostcost orororor MP,MP,MP,MP, whichever was lower,whichever was lower,whichever was lower,whichever was lower, &&&& not at marketnot at marketnot at marketnot at market
valuevaluevaluevalue ----SakthiSakthiSakthiSakthi Trading Co. v. CIT [2001] 118 Taxman 301 (SC)Trading Co. v. CIT [2001] 118 Taxman 301 (SC)Trading Co. v. CIT [2001] 118 Taxman 301 (SC)Trading Co. v. CIT [2001] 118 Taxman 301 (SC)
CA. Pramod Jain

NoNoNoNo Interest /borrowing cost unless as per ICDSInterest /borrowing cost unless as per ICDSInterest /borrowing cost unless as per ICDSInterest /borrowing cost unless as per ICDS IXIXIXIX
Where inventories require a period of 12 months orWhere inventories require a period of 12 months orWhere inventories require a period of 12 months orWhere inventories require a period of 12 months or
more to bring them to a saleable conditionmore to bring them to a saleable conditionmore to bring them to a saleable conditionmore to bring them to a saleable condition
ValueValueValueValue of the inventory asof the inventory asof the inventory asof the inventory as onononon beginning ofbeginning ofbeginning ofbeginning of PYPYPYPY shallshallshallshall
be:be:be:be:
CCCCostostostost of inventoryof inventoryof inventoryof inventory available, if any,available, if any,available, if any,available, if any, onononon day ofday ofday ofday of
commencement ofcommencement ofcommencement ofcommencement of business when the business hasbusiness when the business hasbusiness when the business hasbusiness when the business has
commenced during thecommenced during thecommenced during thecommenced during the PY;PY;PY;PY;
ValueValueValueValue of the inventory as on the close of theof the inventory as on the close of theof the inventory as on the close of theof the inventory as on the close of the
immediately precedingimmediately precedingimmediately precedingimmediately preceding PY,PY,PY,PY, in any other case.in any other case.in any other case.in any other case.
CA. Pramod Jain

ICDS IIICDS IIICDS IIICDS II –––– DISCLOSURESDISCLOSURESDISCLOSURESDISCLOSURES
AccountingAccountingAccountingAccounting policies adopted in measuringpolicies adopted in measuringpolicies adopted in measuringpolicies adopted in measuring
inventories including the cost formulae used.inventories including the cost formulae used.inventories including the cost formulae used.inventories including the cost formulae used.
Where Standard Costing has been used as aWhere Standard Costing has been used as aWhere Standard Costing has been used as aWhere Standard Costing has been used as a
measurement of cost, details of such inventoriesmeasurement of cost, details of such inventoriesmeasurement of cost, details of such inventoriesmeasurement of cost, details of such inventories
and a confirmation of the fact that standardand a confirmation of the fact that standardand a confirmation of the fact that standardand a confirmation of the fact that standard
cost approximates the actual costcost approximates the actual costcost approximates the actual costcost approximates the actual cost;;;;
TheTheTheThe total carrying amount of inventories and itstotal carrying amount of inventories and itstotal carrying amount of inventories and itstotal carrying amount of inventories and its
classification appropriate to a person.classification appropriate to a person.classification appropriate to a person.classification appropriate to a person.
ASASASAS –––– same as above except underlined contentsame as above except underlined contentsame as above except underlined contentsame as above except underlined content
CA. Pramod Jain

ICDS IIICDS IIICDS IIICDS II –––– PRACTICAL IMPLICATIONPRACTICAL IMPLICATIONPRACTICAL IMPLICATIONPRACTICAL IMPLICATION
DisclosuresDisclosuresDisclosuresDisclosures
Same as per AS 2, but if standard cost used..Same as per AS 2, but if standard cost used..Same as per AS 2, but if standard cost used..Same as per AS 2, but if standard cost used..
State whether it approximates the actual costState whether it approximates the actual costState whether it approximates the actual costState whether it approximates the actual cost
Carrying amount??Carrying amount??Carrying amount??Carrying amount??
If there is change in method of valuation ofIf there is change in method of valuation ofIf there is change in method of valuation ofIf there is change in method of valuation of
inventory its change in accounting policy…inventory its change in accounting policy…inventory its change in accounting policy…inventory its change in accounting policy…
follow AS 1 disclosurefollow AS 1 disclosurefollow AS 1 disclosurefollow AS 1 disclosure
Take care at time of dissolution of partnershipTake care at time of dissolution of partnershipTake care at time of dissolution of partnershipTake care at time of dissolution of partnership
firmfirmfirmfirm
CA. Pramod Jain

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