This chapter comprises of Financial Decisions: Capital Structure Decisions; Dividend Policy; Bonus Shares and Capital Gains; Bond Washing Transactions; Own or Lease of an Asset, Installment or Hire Purchase, Make or Buy Decisions, Buying an Asset with Own Fund or Borrowed Fund and Repair, Replace, Renewal or Renovation; Shutdown or Continue: Tax Planning in respect of Amalgamation or De-Merger of Companies, Conversion of a Firm into a Company; Conversion of Sole Proprietorship into Company, Conversion of Company into Limited Liability Partnership.
Cost of Capital and also expenditure incurred in raising of such capital. Expectation of shareholders by way of dividend, growth etc. Expansion need of the business i.e. the rate by which profits of the business shall be again ploughed back in the business.
If the return on investment > rate of interest , maximum debt funds may be used, since is shall increase the rate of return on equity . However, cost of raising debt fund should be kept in mind.
if rate of return on investment < rate of interest, minimum debt funds should be used.
Where assessee enjoys tax holidays under various provisions of Income-Tax in such case minimum debt fund should be used, since the profit arising from business is fully exempt from tax which increase the rate of return of equity capital. But the borrowed funds reduces the profits ( profits less interest) before tax and to the extent exemption is reduce.
bond washing transaction can be defined as a transaction where some securities are sold sometime before the due date of Interest and reacquired after the due date is over. In order to discourage such transactions section 94 was introduced.
Where the owner of any securities (in this sub- section and in subsection (2) referred to as" the owner") sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise.
Bond washing is the practice of selling a bond just before it pays a coupon payment and then buying it back once the coupon has been paid. Bond washing previously could result in apparently tax-free capital gains because after the coupon has been paid, the bond will often sell for less. However, the practice has been banned in most major jurisdictions.
Unit II Tax Planning and Company PromotionDayanand Huded
The chapter comprises of Meaning of Tax Planning, Tax Avoidance, Tax Evasion and Tax Management; Features and Scope for Tax Planning; Business Location and Tax Planning; Nature of Business and Tax Planning: FTZ, Units in SEZ, 100% EOU and Infrastructure Development.
Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept of tax planning is to save money and mitigate one's tax burden.
Tax Planning is the arrangement of financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws. It entitles the assessee to avail certain exemptions, deductions, rebates and reliefs, so as to minimise its tax liability.
(i) Reduction of tax liability: One of the supreme objectives of tax planning is the reduction of the tax liability of the payer and the resultant saving of the earnings for a better enjoyment of the fruits of hard labour.
(ii) Minimization of litigation and the tax payer may be saved from the hardships and inconveniences caused by unnecessary litigations.
(iii) Productive investment: Tax planning is a measure of awareness of the taxpayer to the intricacies of the taxation laws and it is the economic consciousness of the income earner to find out the ways and means of productive investment of the earnings which would go a long way to minimize its tax burden.
(iv) Healthy growth of economy: The saving of earnings is the only basement upon which the economic structure of human life is founded.
(v) Economic stability: Productive investment increase contours of the national economy embracing in itself the economic prosperity of not only the tax payers but also of those who earn the income not chargeable to tax. The planning thus creates economic stability of the nation and its people by even distribution of economic resources.
(i) Residential status and citizenship of the assessee: We know that a non-resident in India is not liable to pay income-tax on incomes which accrue or arise and are also received outside India, whereas a resident in India is liable to pay income-tax on such incomes.
(ii) Heads of income/assets to be included in computing net wealth: Before the Tax-planner goes in for his task; he has to have a full picture of the sources of Income of the tax payer and the members of his family
Tax Planning Concept and tax planning with specific managerial decisionsSundar B N
In this ppt most of the tax planning concepts are covered. Tax planning, Tax evasion, tax avoidance, tax planning with inter corporate dividend and Bonus share. Tax Planning with specific managerial decisions are covered.
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Unit II Tax Planning and Company PromotionDayanand Huded
The chapter comprises of Meaning of Tax Planning, Tax Avoidance, Tax Evasion and Tax Management; Features and Scope for Tax Planning; Business Location and Tax Planning; Nature of Business and Tax Planning: FTZ, Units in SEZ, 100% EOU and Infrastructure Development.
Tax planning is a focal part of financial planning. It ensures savings on taxes while simultaneously conforming to the legal obligations and requirements of the Income Tax Act, 1961. The primary concept of tax planning is to save money and mitigate one's tax burden.
Tax Planning is the arrangement of financial activities in such a way that maximum tax benefits are enjoyed by making use of all beneficial provisions in the tax laws. It entitles the assessee to avail certain exemptions, deductions, rebates and reliefs, so as to minimise its tax liability.
(i) Reduction of tax liability: One of the supreme objectives of tax planning is the reduction of the tax liability of the payer and the resultant saving of the earnings for a better enjoyment of the fruits of hard labour.
(ii) Minimization of litigation and the tax payer may be saved from the hardships and inconveniences caused by unnecessary litigations.
(iii) Productive investment: Tax planning is a measure of awareness of the taxpayer to the intricacies of the taxation laws and it is the economic consciousness of the income earner to find out the ways and means of productive investment of the earnings which would go a long way to minimize its tax burden.
(iv) Healthy growth of economy: The saving of earnings is the only basement upon which the economic structure of human life is founded.
(v) Economic stability: Productive investment increase contours of the national economy embracing in itself the economic prosperity of not only the tax payers but also of those who earn the income not chargeable to tax. The planning thus creates economic stability of the nation and its people by even distribution of economic resources.
(i) Residential status and citizenship of the assessee: We know that a non-resident in India is not liable to pay income-tax on incomes which accrue or arise and are also received outside India, whereas a resident in India is liable to pay income-tax on such incomes.
(ii) Heads of income/assets to be included in computing net wealth: Before the Tax-planner goes in for his task; he has to have a full picture of the sources of Income of the tax payer and the members of his family
Tax Planning Concept and tax planning with specific managerial decisionsSundar B N
In this ppt most of the tax planning concepts are covered. Tax planning, Tax evasion, tax avoidance, tax planning with inter corporate dividend and Bonus share. Tax Planning with specific managerial decisions are covered.
Subscribe to Vision Academy for Video assistance
https://www.youtube.com/channel/UCjzpit_cXjdnzER_165mIiw
OBJECTIVE
Goods and Services Tax (GST) is the Indirect Tax levied in India introduced in July 2017 which was one of the most important reforms in the Indian Economy. GST subsumed various indirect laws in the country and the led to the formation of a common national market. In this webinar, we shall examine and understand the various registrations under the GST Law.
OBJECTIVE
Goods and Services Tax (GST) is the Indirect Tax levied in India introduced in July 2017 which was one of the most important reforms in the Indian Economy. GST subsumed various indirect laws in the country and the led to the formation of a common national market. In this webinar, we shall examine and understand the various registrations under the GST Law.
This ppt is all about the long term finance for the business. From which sources a business firm used to get their long term finance to run the business. So i hope it will help you to give your presentation . Thanks for the download. And if you find any mistake, please feel free to comment and inform.
or send me a mail in tatinpisa@outlook.com
Discover:
- What is asset finance & why use it?
- What assets can be financed?
- Understand the different types of asset finance
- Choosing the right type of asset finance for you
Non-Qualified Deferred Compensation Programs for Private CompaniesSkoda Minotti
Paying annual bonuses may not keep the executives around after the bonus is paid. Should executives be rewarded if the employer is not doing well? How can employers attract and retain key executives while creating a system that will reward them if the company is profitable?
Sources of long term finance, Corporate governance AND Financial engineeringMohammed Jasir PV
Sources of long term finance — conventional and innovative sources — Leasing — Factoring — securitization
Dividend theories — Walter’s model — Gordens model — MM approach — legal aspects of dividend — formulation of dividend policy.
Corporate governance
Financial engineering
The chapter consists of Tax Deducted at Source and Collection of Tax at source.
Tax Deducted at Source (TDS) is one of the ways to collect tax based on certain percentages on the amount payable by the receiver on goods/services. The collected tax is a revenue for the government.
Who is liable to deduct TDS under GST law?
A. A department or an establishment of the Central Government or State Government; or
B. Local authority; or
C. Governmental agencies; or
D. Such persons or category of persons as may be notified by the Government.
As per the latest Notification dated 13th September 2018, the following entities also need to deduct TDS-
An authority or a board or any other body which has been set up by Parliament or a State Legislature or by a government, with 51% equity ( control) owned by the government.
A society established by the Central or any State Government or a Local Authority and the society is registered under the Societies Registration Act, 1860.
Public sector undertakings.
What is TCS under GST
Tax Collected at Source (TCS) under GST means the tax collected by an e-commerce operator from the consideration received by it on behalf of the supplier of goods, or services who makes supplies through the operator’s online platform. TCS will be charged as a percentage on the net taxable supplies. The provision of TCS under GST is dealt under Section 52 of the CGST Act.
Who is liable to collect TCS under GST
Certain operators who own, operate and manage e-commerce platforms are liable to collect TCS. TCS applies only if the operators collect the consideration from the customers on behalf of vendors or suppliers. In other words, when the e-commerce operators pay the consideration collected to the vendors they have to deduct an amount as TCS and pay the net amount.
Here are few exceptions to the TCS provisions for the services provided by an e-commerce platform:
Hotel accommodation/clubs (unregistered suppliers)
Transportation of passengers – radio taxi, motor cab or motorcycle
Housekeeping services like plumbing, carpentry etc. (unregistered suppliers)
For example – M/s.XYZ stores (a proprietorship) is selling garments through Flipkart. Flipkart, being an e-commerce operator, before it makes the payment of consideration collected on behalf of XYZ, will be liable to deduct TCS.
What is the rate applicable under TCS
The dealers or traders supplying goods and/or services through e-commerce operators will receive payment after deduction of TCS @ 1%. The rate is notified by the CBIC in Notification no. 52/2018 under CGST Act and 02/2018 under IGST Act.
This means for an intra-state supply TCS at 1% will be collected, i.e 0.5 % under CGST and 0.5% under SGST. Similarly, for a transaction between the states, the TCS rate will be 1%, i.e under the IGST Act.
The chapter consists of Computation of Tax Liability and Payment of Tax; Interest on Delayed Payment of Tax; Refund of Tax; Tax Deduction at Source (TDS); Collection of Tax at Source (TCS); Computation of Interest on Delayed Payment of Tax. Composition scheme, eligible tax payers, turn over limit in case of composition scheme. Eligibility for composition scheme, person not eligible to opt composition scheme, conditions for availing composition scheme, advantages and disadvantages of composition scheme, computation of tax liability, Interest on delayed payment of tax,
Refund of Tax: Usually when the GST paid is more than the GST liability a situation of claiming GST refund arises. Under GST the process of claiming a refund is standardized to avoid confusion. The process is online and time limits have also been set for the same.
When can the refund be claimed?
There are many cases where refund can be claimed. Here are some of them – Excess payment of tax is made due to mistake or omission.
Dealer Exports (including deemed export) goods/services under claim of rebate or Refund
ITC accumulation due to output being tax exempt or nil-rated
Refund of tax paid on purchases made by Embassies or UN bodies
Tax Refund for International Tourists
Finalization of provisional assessment
How to calculate GST refund?
Let’s take a simple case of excess tax payment made. Mr. B’s GST liability for the month of September is Rs 50000. But due to mistake, Mr. B made a GST payment of Rs 5 lakh. Now Mr. B has made an excess GST payment of Rs 4.5 lakh which can be claimed as a refund by him. The time limit for claiming the refund is 2 years from the date of payment.
The chapter consists of basics of Goods and Service Tax, Tax Invoice; Credit and Debit Notes; E-Way Bill, Procedure for Generation of E-Way Bill; Accounts and Records; Electronic Cash Ledger, Manner of Utilization of Amount in Electronic Cash Ledger, Electronic Credit Ledger-Manner of Utilization of ITC, Electronic Liability Ledger-Order of Discharge of Tax and Other Dues.
An invoice is a commercial instrument issued by a supplier of goods/services to a recipient.
In GST, all invoices issued between the date of implementation of GST and the date of issuance of GST registration certificate will have to be reissued in the form of a revised invoice and have to be raised within a month of issuance of the registration certificate.
A supplementary tax invoice is an invoice that a taxable person issues if any deficiency is found in a tax invoice already issued by the said taxable person. A supplementary invoice is also known as a debit note.
The recipient who is registered under GST has to issue a payment voucher for the transactions(goods or services) on which reverse charge is applicable to the supplier. For example Ajay cashew house registered in Delhi had purchased cashew nuts from Vikram an agriculturist for Rs 100000 in Karnataka.
Rule 55 specifies the cases where at the time of removal of goods, goods may be removed on delivery challan and invoice may be issued after delivery. Issuance of Credit Note – Section 34(1)
Issuance of Debit Note – Section 34(3)
Details of Credit Note to be furnished in return – Section 34(2)
Details of Debit Note to be furnished in return – Section 34(4)
EWay Bill is an Electronic Way bill for movement of goods to be generated on the eWay Bill Portal. A GST registered person cannot transport goods in a vehicle whose value exceeds Rs. 50,000 (Single Invoice/bill/delivery challan) without an e-way bill that is generated on ewaybillgst.gov.in.
Registered Person – E-way bill must be generated when there is a movement of goods of more than Rs 50,000 in value to or from a registered person. A Registered person or the transporter may choose to generate and carry eway bill even if the value of goods is less than Rs 50,000.
e-Cash ledger indicates the amount that has been paid by the taxpayer to the government. The amount in this ledger can be used to make payment of tax, interest, liability, fees and so forth.
e-Credit ledger or electronic credit ledger is maintained in the form GST PMT-02 on the GST Portal.
This ledger helps in tracking all the Input Tax Credit (ITC) claims made by the taxpayer. However, it shall be noted that any remaining amount in the e-Credit ledger can be used in making the payment of output tax liability only. E-Liability Register will reflect the total tax liability of a taxpayer for a particular tax period.
Debit to Electronic Credit Ledger and Credit to Electronic Liability Register
Unit 5 CSM: Strategic Evaluation and ComtrolDayanand Huded
The chapter comprises of Overview of Strategic Evaluation; Strategic Control; Techniques of Strategic Evaluation and Control. Evaluation of Strategic Alternatives - Product Portfolio Models, BCG Matrix, GE Matrix, Gap Analysis; Strategic Control System.
Strategic evaluation and control is the final phase in the process of strategic management. Its basic purpose is to ensure that the strategy is achieving the goals and objectives set for the strategy. It compares performance with the desired results and provides the feedback necessary for management to take corrective action.
According to Fred R. David, strategy evaluation includes three basic activities
(1) examining the underlying bases of a firm’s strategy,
(2) comparing expected results with actual results, and
(3) taking corrective action to ensure that performance conforms to plans. Sometime, the best formulated strategies become obsolete (outdated) as a firm’s external and internal environments change.
Strategic control is a type of “steering control”. We have to track the strategy as it is being implemented, detect any problems or changes in the predictions made, and make necessary adjustments. This is especially important because the implementation process itself takes a long time before we can achieve the results.
Strategic control is like an alarm long before the calamity can happen.
Operational control is the process of ensuring that specific tasks are carried out effectively and efficiently. The operational control aims at evaluating the performance of the organization. Most of the control system in organization are operational in nature. Some examples of operational control are : Budgetary control, Quality control, Inventory control, Production Control, Cost control etc.
Portfolio Model is a technique used to analyse organisations in relation to their environments
Portfolio (set, collection, assortment, range, group)
A business Portfolio may be any collection of brands/products, markets, branches /divisions, income generating assets, etc.
PA is usually applied to firms with multiple SBUs (more than one product/services, customer categories, markets , divisions)
Helps managers in taking decisions regarding which SBUs to allocate more or less resources to at a given strategic point in time
After portfolio analysis firm makes an informed strategic choice e.g.
To have a balanced portfolio (minimize risk and maximize return) of all portfolios
To actively deploy a retrenchment strategy
Unit V AMM Green Marketing, CRM & Rural MarketingDayanand Huded
The Presentation comprises of Green marketing, Customer relationship management and rural marketing.
Green marketing is the marketing of products that are presumed to be environmentally safe. It incorporates a broad range of activities, including product modification, changes to the production process, sustainable packaging, as well as modifying advertising.
The term ‘green’ is indicative of purity. Green means pure in quality and fair or just in dealing. For example, green advertising means advertising without adverse impact on society. Green message means matured and neutral facts, free from exaggeration or ambiguity.
CRM: Customer Relationship Management is a comprehensive approach for creating, maintaining and expanding customer relationships.
CRM “is a business strategy that aims to understand, anticipate and manage the needs of an organisation’s current and potential customers”
It is a “comprehensive approach which provides seamless integration of every area of business that touches the customer- namely marketing, sales, customer services and field support through the integration of people, process and technology”
CRM is a shift from traditional marketing as it focuses on the retention of customers in addition to the acquisition of new customers
“The expression Customer Relationship Management (CRM) is becoming standard terminology, replacing what is widely perceived to be a misleadingly narrow term, relationship marketing (RM)”
CRM (Customer Relationship Management) is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.
The basic objective of CRM is to increase marketing efficiency and effectiveness.
Rural Marketing:
Rural marketing is a practise of assessing, persuading and converting the needs, wants, purchasing power of the customers into effective demand for products and service out for sale which would help in sufficing the requirements of people in the rural areas and thus increase the satisfaction levels as well as standard of living.
There are 600,000 villages in India. 25% of all villages account for 65% of the total rural population. So we can contact 65% of 680 million or 700 million population by simply contacting 150000 villages – which shows the huge potential of this market.
Rural marketing involves the process of developing, pricing, promoting, distributing rural specific product and a service leading to exchange between rural and urban market which satisfies consumer demand and also achieves organizational objectives.
The chapter comprises of Service Marketing, E-Marketing, Green Marketing, Customer Relationship Management, Rural Marketing; Other Emerging Trends- Ethical Issues in Marketing.
Service is an act or performance that one party can offer to another that is essentially intangible and does not result in any ownership of anything. Its production may or may not be tied to physical products.(Philip Kotler)
It is based on relationship and value.
It may be used to market a service or product.
What is Service Marketing?
The American Marketing Association defines services marketing as “an organizational function and a set of processes for identifying or creating, communicating, and delivering value to customers and for managing customer relationship in a way that benefit the organization and stake-holders”.
Service marketing is involved in designing, delivering, and doing post-delivery analysis of services for optimizing reach, measuring customer satisfaction, and standing-out from identical services offered by other market players.
Intangibility: A service is not a physical product that you can touch or see. A service can be experienced by the buyer or the receiver. Also, you can not judge the quality of the service before consumption.
Heterogeneous: There can be no perfect standardization of services. Even if the service provider remains the same, the quality of the service may differ from time to time.
Inseparability: One unique characteristic of services is that the service and the service provider cannot be separated. Unlike with goods/products the manufacturing and the consumption of services cannot be separated by storage.
No Stock Maintenance: The production and consumption of services are not inseparable because storage of services is not possible. Being an intangible transaction there can never be an inventory of services.
The potential customers form an impression about the service on the basis of service environment. The service environment represents the physical back drop that surrounds the service.
For example, providing hygienic food is the core service in a hotel or restaurant. Customers expect the restaurants to be maintained clean, offer flexible dining hours prompt service, soft music, décor, exotic menu etc.
Advantages of Service Marketing: 1, Repeat business
When you build a plan of service to reach your customers, you can expect a reward of repeat business from them. The goal of effectively marketing your brand is to capture the attention of your target market.
2. referrals
The next best thing to having your clients come back is to have them tell others about their experience and recommend your products or services to them. You must consider that if your customers have a bad experience, it is likely they will tell 10 people about that negative experiences also.
3. publicity
Other benefits from your good service are through publicity. As the buzz flows about your outstanding service, from following through on what you’ve promised.
The chapter comprises of Meaning and Characteristics, Importance, Factors Influencing Consumer Behaviour, Consumer Purchase Decision Process, Buying Roles, Buying Motives, Buyer Behaviour Models.
Consumer behaviour is the study of how individual customers, groups or organizations select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants.
It refers to the. actions of the consumers in the marketplace and the underlying motives for those actions.
Consumer behaviour is the study of how people make decisions about what they buy, want, need, or act in regards to a product, service or company.
It is a study of the actions of the consumers that drive them to buy and use certain products. Understanding consumer buying behavior is most important for marketers as it helps them to relate better to the expectation of the consumers.
a) Consumer behavior is the part of human behavior: This cannot be separated. Human behavior decides what to buy, when to buy etc. This is unpredictable in nature. Based on the past behavioral pattern one can at least estimate like the past he might behave.
b) Learning the consumer is difficult and complex as it involves the study of hum beings: Each Individual behaves differently when he is placed at different situations. Every day is a lesson from each and every individual while we learn the consumer behavior. Today one may purchase a product because of its smell, tomorrow it may vary and he will purchase another due to some another reason.
c) Consumer behavior is dynamic: A consumer's behavior is always changing in nature: The taste and preference of the people vary. According to that consumers behave differently. As the modern world changes the consumer's behaving pattern also changes.
d) Consumer behavior is influenced by psychological, social and physical factors: A consumer may be loyal with a product due to its status values. Another may stick with a product due to its economy in price. Understanding these factors by a marketer is crucial before placing the product to the consumers.
1. To design production policies: This is the first importance of consumer behaviour and it means that all the production policies have designed taking into consideration the consumer preference so that product can be successful in the market.
2. Know the effect of price on buying: This is the second consumer behaviour importance and it means that consumer behavior can help in understanding the effect of price on buying. Whenever the price is moderate on cheap more and more customer will buy the product.
After the time of production, there comes a time in which the company has to decide what the price of our product will be because it helps to divide the categories of the customer and also helps to attain more sales.
3. Exploit the market opportunities: This is the third importance or significance of consumer behaviour and it means that the change in consumer preference can be a good opportunity for the marketing
The chapter comprises of Meaning, Environment, Raising of Finance in International Markets, Euro Issues, GDRs and ADRs Guidelines for Raising Funds in International Markets through various Instruments; Working of International Stock Exchanges with respect to their Size - Listing Requirements, Membership, Clearing and Settlement of New York Stock Exchange, NASDAQ, London Stock Exchange, Tokyo Stock Exchange, Luxembourg Stock Exchange, German and France Stock Exchanges.
The international stock market refers to all the international markets that negotiate stocks from their domestic companies. For example, you can buy stocks from Apple at the local American market, but to get stocks from the Japanese Sapporo, you need to go the international (Japanese) market. Most countries have their own stock exchange.
Part of the financial system concerned with raising long-term capital through shares, bonds, and other long-term investments.
EURO ISSUE:
The term `euro' denotes that the issue is listed on a European Stock Exchange.
A euro issue is a issue where the securities are issued in a currency different from the currency of the country of issue and the securities are sold in international market to individual and institutional investors.
Euro securities are negotiable and transferable securities distributed by a syndicate of market intermediaries and underwriters, By an euro issue, a company is able to raise funds at a cheaper rate, Euro bond is an international bond issued to investors from throughout the world.
A global depositary receipt (GDR) is a certificate issued by a bank that represents shares in a foreign stock on two or more global markets. GDRs typically trade on American stock exchanges as well as Eurozone or Asian exchanges.
GDRs represent ownership of an underlying number of shares of a foreign company and are commonly used to invest in companies from developing or emerging markets by investors in developed markets.
Prices of global depositary receipt are based on the values of related shares, but they are traded and settled independently of the underlying share.
ADR's are depository receipts issued in United States of America (USA) in accordance with the provisions of Securities and Exchange Commission.
American Depository Receipts (ADRs) offer US investors a means to gain investment exposure to non-US stocks without the complexities of dealing in foreign stock markets.
It refers to a negotiable certificate issued by a U.S. depositary bank representing a specified number of shares usually one share of a foreign company's stock.
The ADR trades on U.S. stock markets as any domestic shares would. ADRs offer U.S. investors a way to purchase stock in overseas companies that would not otherwise be available.
It is denominated in US $
INFOSYS Technologies was the First Indian Company to issue ADR.
The chapter comprises of The Depositories Act, 1996; SEBI Depositories and Participants Regulations 1996 and 2012; Types of Depositories - NSDL, CDSL and Depository Participant; Dematerialization - International Securities Identification Number (ISIN) - Procedure for Dematerialization and Rematerialization; Settlement of Off- Market Transactions: Insider Trading - Legal Framework for Investor Protection in India; Internet Initiatives at Depository services; Credit Rating- Meaning and Necessity, Methodology of Credit Rating, Credit Rating Agencies in India.
What is Depository?
An organization where the securities of an investor are held in electronic form at the request of the investor and which carries out the securities transactions by book entry through the medium of a depository participant.
What is a Depository System?
A system whereby transfer of securities takes place by means of book entry on the ledgers of the Depository without physical movement of scripts.
Problems Resulted in Formation of Depository
Before introduction of Depository system, the problems faced by investors and corporates in handling large volume of paper were as follows:
1)Bad deliveries, 2) Fake certificates, 3) Loss of certificates in transit
4) Mutilation of certificates, 5) Delays in transfer Long settlement cycles, 6), Mismatch of signatures, 7) Delay in refund and remission of dividend etc.
Code of Conduct for Participants
1. A participant shall make all efforts to protect the interests of investors.
2. A participant shall always endeavour to—
(a) render the best possible advice to the clients having regard to the clients needs and the environments and his own professional skills;
grievances of investors are redressed without any delay
3. A participant shall maintain high standards of integrity in all its dealings with its clients and other intermediaries, in the conduct of its business.
4. A participant shall be prompt and diligent in opening of a beneficial owner account, dispatch of the dematerialisation request form, rematerialisation request form and execution of debit instruction slip and in all the other activities undertaken by him on behalf of the beneficial owners.
5. A participant shall endeavour to resolve all the complaints against it or in respect of the activities carried out by it as quickly as possible, and not later than one month of receipt.
6. A participant shall not increase charges/fees for the services rendered without proper advance notice to the beneficial owners.
7. A participant shall not indulge in any unfair competition, which is likely to harm the interests of other participants or investors or is likely to place such other participants in a disadvantageous position while competing for or executing any assignment.
8. A participant shall not make any exaggerated statement whether oral or written to the clients either about its qualifications or capability to render certain services or about its achievements in regard to SE.
The chapter comprises of Importance and Functions, Listing of Securities in Stock Exchanges; Players in Stock Exchange - Investors, Speculators, Market Makers, Stock Brokers; Eligibility Criteria; Trading in Stock Exchange, Stock Exchanges - Bombay Stock Exchange, National Stock Exchange, Over-the-Counter Exchange of India; The SEBI Trading Mechanism - BOLT, NEAT System and Screen Based System.
Listing refers to the admission of the securities of a company on a recognised stock exchange for trading. Listing of securities is undertaken with the primary objective of providing marketability, liquidity and transferability of shares.
To be submitted along with the application for listing:-
1. Memorandum of Associations, Articles of Association, Prospectus, Directors’ report, Annual Accounts, Agreement with Underwriters, etc.
2. Company’s activities, capital structure, distribution of shares, dividends and bonus shares issued, etc.
Listing Requirements:
For this purpose companies have been classified into 2 groups:-
1. Large Cap Companies (minimum issue size of Rs.10 crores and market capitalization of not less than Rs.25 crores)
2. Small Cap Companies (minimum issue size of Rs.3 crores and market capitalization of not less than Rs.5 crores)
Trading in Stock Exchange
The system of trading in stock exchanges for many years was known as floor trading.
In the new electronic stock exchanges which have fully automated computerized mode of trading, floor trading is replaced with a new system of trading known as screen-based trading.
Screen-based trading are two types
1. Quote driven system 2. Order driven system
Under the quote driven system the market- maker, who is a dealer in particular security, input two way quotes into the system that is bid price and offer price .
Under the order driven system clients place their buy and sell orders with the brokers.
Types of Orders
An investor may place two type of orders
1. Market order-In market order the broker is instructed by the investor to buy or sell a stated number of share immediately at the best price in the market.
2. Limit order- It is an order for the purchase or sale of securities at a fixed price specified by the client. “ buy at Rs. 50 or less” “ sell at Rs. 60 or more” No guarantee that limit order will be executed
National Stock Exchange
Established in 1992
Girish Chandra Chaturvedi, Chairperson
Ashishkumar Chauhan, MD and CEO
NSE is ranked 4th in the world in cash equities by number of trades as per the statistics maintained by the World Federation of Exchanges (WFE) for the calendar year 2021
First dematerialized electronic exchange in the country.
Number of Lists 2002 (As of October 2021)
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao was the Prime Minister of India and Manmohan Singh was the Finance Minister.
The chapter comprises of Primary Market - Its Role and Functions; Issue of Capital - Methods of Issuing Securities in Primary Market, Intermediaries in New Issue Market - Merchant Bankers, Underwriters, Brokers, Registrars and Managers Bankers; Pricing of Issue - Book Building, Green Shoe Option, Procedure for New Issues and SEBI Guidelines for Issue in Primary Market.
The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. An initial public offering, or IPO, is an example of a primary market.
These trades provide an opportunity for investors to buy securities from the bank that did the initial underwriting for a particular stock.
An IPO occurs when a private company issues stock to the public for the first time.
Companies and government entities sell new issues of common and preferred stock, corporate bonds and government bonds, notes, and bills on the primary market to fund business improvements or expand operations. Although an investment bank may set the securities' initial price and receive a fee for facilitating sales, most of the funding goes to the issuer. Investors typically pay less for securities on the primary market than on the secondary market.
A rights offering (issue) permits companies to raise additional equity through the primary market after already having securities enter the secondary market. Current investors are offered prorated rights based on the shares they currently own, and others can invest anew in newly minted shares.
Companies can raise capital at relatively low cost, and the securities so issued in the primary market provide high liquidity as the same can be sold in the secondary market almost immediately.
The primary market is an important source for mobilisation of savings in an economy. Funds are mobilised from commoners for investing in other channels. It leads to monetary resources being put into investment options.
Chances of price manipulation in the primary market are considerably less when compared to the secondary market. Such manipulation usually occurs by deflating or inflating a security price, thereby deliberately interfering with fair and free operations of the market.
The primary market acts as a potential avenue for diversification to cut down on risk. It enables an investor to allocate his/her investment across different categories involving multiple financial instruments and industries.
It is not subject to any market fluctuations. The prices of stocks are determined before an initial public offering, and investors know the actual amount they will have to invest.
This chapter consists of E-commerce Transaction and Liability in Special Cases; Tonnage Taxation, TDS; Advance Payment of Tax with reference to Corporate Assessee; TCS; Administrative Procedure; Assessment- Procedures and Types of Assessment; Return on Income; Statement of Financial Transaction (SFT). E-Filing: Appeal and Revision; Penalties.
Electronic contracts are governed by the basic principles elucidated in the Indian Contract Act, 1872, which mandates that a valid contract should have been entered with a free consent and for a lawful consideration between two adults.
Investments in the E-Commerce Space in India Foreign direct investment (“FDI”) in India is regulated under the Foreign Exchange Management Act 1999 (“FEMA”). The Department of Industrial Policy and Promotion (“DIPP”), Ministry of Commerce and Industry, Government of India makes policy pronouncements on FDI through Press Notes and Press Releases which are notified by the Reserve Bank of India (“RBI”) as amendments to Foreign Exchange Management Regulations, 2000
Tonnage Tax is a way for qualifying shipping companies to calculate their shipping related profits for Corporation Tax (CT) purposes. The shipping related profits are calculated based on the tonnage of the ships used in the company's shipping trade.
A tonnage tax is a taxation mechanism that can be applied to shipping companies instead of ordinary corporate taxation. The tax is determined by the net tonnage of the entire fleet of vessels under operation or use by a company. It is on the basis of this variable that taxation is applied.
Tonnage Tax is a way for qualifying shipping companies to calculate their shipping related profits for Corporation Tax (CT) purposes. The shipping related profits are calculated based on the tonnage of the ships used in the company’s shipping trade.
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government. The deductee from whose income tax has been deducted at source would be entitled to get credit of the amount so deducted on the basis of Form 26AS or TDS certificate issued by the deductor.
The Chapter comprises of Carry Forward and Set Off of Losses in the case of Companies, Computation of Taxable Income of Companies; Computation of Corporate Tax Liability; Minimum Alternate Tax; and Tax on Distributed Profits of Domestic Companies. Surcharge, Minimum Alternate Tax, Problems on MAT.
The Finance Act, 2022 has inserted a new section 79A to the Income-tax Act to restrict set off of losses consequent to search, requisition and survey. It has been provided that in case the total income of any previous year of an assessee includes any undisclosed income detected as a result of:
(a) Search initiated under section 132; or
(b) A requisition made under section 132A; or
(c) A survey conducted under section 133A other than under section 133A(2A).
Then, no set-off of any loss, whether brought forward or otherwise, or unabsorbed depreciation, shall be allowed against such undisclosed income while computing the total income of the assessee for such previous year.
The total income of accompany is also computed in the manner in which income of any assessee is computed. A company is assessed in its own name; i.e. a company pays tax on its income as a distinct unit. A tax paid by a company is not deemed to have been paid on behalf of its shareholders. It is determined as follows:
1. First ascertain income under the different heads of income.
2. Income of other persons may be included in the income of the company under sections 60 and 61( para 206 and 207)
3. Current and brought forward losses should be adjusted according to the provisions of sections 70 to 80 (as per para 226 to 233).Para 335 of section 79 provides all the provisions regarding set off and carry forward of losses of closely held companies.
4. The total income so derived under computation of different heads of income is “Gross Total Income”.
5. Following deductions are allowed from the Gross total income so computed, under section 80C to 80 U
The chapter consists of organizational structure of financial system, Components of financial system, Functions of securities of market, securities market and economic growth, profile of Indian securities market, structure of stock exchange, OTCEI, SEBI Act-1992, Role of SEBI in capital market, powers and functions of SEBI, Securities contract regulation act 1956, Reforms to promote investor confidence, and Role of International Organisation of Securities COmmissions.
Substance of Emotion, Theories of Emotion, Types and Dimensions of Emotions, Emotional Styles; Fairness, Reciprocity and Trust; Conformity; Bayesian Decision Making, Heuristics and Cognitive Biases; Neuro Finance and Trader’s Brain.
The concept of emotion may seem simple, but scientists often have trouble agreeing on what it really means. Most scientists believe that emotions involve things other than just feelings
The way that someone experiences an emotion. A feeling is something that you experience internally, in your own mind, and that other people can understand based on your behavior. You can help other people understand how you feel using emotion terms, like “anger” or “sadness”—the subject of this study—or by using analogies, like “I feel the way a kid would feel if her dad took away her Halloween candy.”
They involve bodily reactions, like when your heart races because you feel excited. They also involve expressive movements, including facial expressions and sounds—for example, when you say “woah” because you are fascinated by something. And emotions involve behaviors, like yelling at someone when you are angry.
People use many different words to describe the emotions that they feel.
The patterns of emotion that we found corresponded to 25 different categories of emotion: admiration, adoration, appreciation of beauty, amusement, anger, anxiety, awe, awkwardness, boredom, calmness, confusion, craving, disgust, empathic pain, entrancement, excitement, fear, horror, interest, joy, nostalgia, relief, sadness, satisfaction, and surprise.
According to the Cannon-Bard theory of emotion, we feel emotions and experience physiological reactions such as sweating, trembling, and muscle tension simultaneously.
Another well-known physiological theory is the Cannon-Bard theory of emotion. Walter Cannon disagreed with the James-Lange theory of emotion on several different grounds. First, he suggested, people can experience physiological reactions linked to emotions without actually feeling those emotions. For example, your heart might race because you have been exercising, not because you are afraid.
Cannon also suggested that emotional responses occur much too quickly to be simply products of physical states. When you encounter a danger in the environment, you will often feel afraid before you start to experience the physical symptoms associated with fear, such as shaking hands, rapid breathing, and a racing heart.
Cannon and Bard’s theory suggests that the physical and psychological experience of emotion happens at the same time and that one does not cause the other.
Study of how owners and managers of publicly-traded companies make decisions that affect the values of those companies.
Examines effects of manager’s and investor’s psychological biases on firms corporate finance decisions.
Main psychological traps met are: confirmation bias, hindsight bias, herding behavior conservatism, the role of affects, wishful thinking, opaque framing, representativeness bias and overconfidence.
“Real-world” view- Managers and investors may be irrational (Psychological Biases) (“homo sapiens” view).
Behavioural Corporate Finance: considers managerial irrationality/biases. Focus on corporate finance decisions (investment appraisal, capital structure/dividend policy.
How the personal traits of managers affect the decisions made in the firm, especially financial decisions. We will see that the psychological qualities of individuals holding management positions have a decisive effect on.
For instance, their financing and capital budgeting decisions or their dividend policy. It will also become clear that the psychological profile of each manager will provide an explanation for the financial decisions made beyond the scope of the company and its business sector.
Assumptions of Behavioural Corporate Finance
Assumes irrational entrepreneurs or managers
Postulates irrational investors and limited arbitrage.
The Rational Managers with Irrational Investors Approach
This approach assumes that securities market arbitrage is imperfect, and thus that prices can be too high or too low. Rational managers are assumed to perceive mispricings, and to make decisions that may encourage respond to mispricing.
Rational manager objectives in irrational market:
1. Fundamental value - Maximizing fundamental value has the usual ingredients.
2. Catering - Catering refers to decisions that aim at boosting stock price above the level of intrinsic value.
3. Market timing - Market timing relates to the decision that aims at exploiting temporary mispricing.
Two Key Building Blocks:
1. Limits on arbitrage - Irrational investors impact prices because arbitrage is limited.
2. Smart managers - Managers have the ability to detect when valuations are wrong and they act on mispricing.
The chapter consists of Expected Utility Theory [EUT] and Rational Thought: Decision Making under Risk and Uncertainty - Expected Utility as a basis for Decision-Making – Theories Based on Expected Utility Concept – Investor Rationality and Market Efficiency. Self Deception – Forms of Over Confidence, Causes of Over Confidence, and other Forms of Self-Deception. Prospect Theory, Difference between EUT and Prospect Theory; Agency Theory; SP/A Theory; Framing, Mental Accounting; Error in Bernoulli’s Theory.
Expected utility theory and its examples. Making decisions under certainty is easy. The cause and effect are known, and the risk involved is minimal. What’s tough is making decisions under risk and uncertainty. The outcome is unpredictable because you don’t have all the information about the alternatives. Before we learn deeper about decision-making under risk and uncertainty, let’s look at each of these situations such as certainty, risk and uncertainty. Despite all the data crunching and predictive technology, businesses these days have to deal with a lot of uncertainty and the ‘what if’ scenarios.
The recent pandemic outbreak has dramatically altered the business landscape globally. Today, decision-making has become more complicated due to the uncertainty all around us.
Quantitative management is not a modern business idea but a management theory that came into existence after World War II. Business owners initially used it in Japan to pick up the pieces of the devastation caused by the war and started taking baby steps toward reconstruction. It focuses on the following elements of business operations:
Customer satisfaction
Business value enhancement
Empowerment of employees
Creating synergy among teams
Creating quality products
Preventing defects
Being responsible for quality
Focusing on continuous improvement
Leveraging statistical measurement
Remaining focused on the processes
Commitment to refinement and learning
Quantitative techniques in management as a collection of mathematical and statistical tools. They’re known by different names, such as management science or operation research. In modern business methods, statistical techniques are also viewed as a part of quantitative management techniques.
When appropriately used, quantitative approaches to management can become a powerful means of analysis, leading to effective decision-making. These techniques help resolve complex business problems by leveraging systematic and scientific methods.
The chapter consists of several aspects of behavioural finance and its foundations such as;
Overconfidence is the tendency for people to overestimate their knowledge, abilities, and the precision of their information, or to be overly sanguine (optimistic) of the future and their ability to control it. It is found that most people most of the time are overconfident is well documented by researchers in the psychology literature.
Overconfidence comes in different forms one of them is miscalibration, the tendency to believe that your knowledge is more precise (accuracy) than it really is.
Prospect theory assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. Also known as the "loss-aversion" theory, the general concept is that if two choices are put before an individual, both equal, with one presented in terms of potential gains and the other in terms of possible losses, the former option will be chosen.
Emotion is a complex, subjective experience accompanied by biological and behavioral changes. Emotion involves feeling, thinking, activation of the nervous system, physiological changes, and behavioral changes such as facial expressions.
There are many different types of emotions that have an influence on how we live and interact with others. At times, it may seem like we are ruled by these emotions. The choices we make, the actions we take, and the perceptions we have are all influenced by the emotions we are experiencing at any given moment.
The adaptive market hypothesis (AMH) is an alternative economic theory that combines principles of the well-known and often controversial efficient market hypothesis (EMH) with behavioral finance. It was introduced to the world in 2004 by Massachusetts Institute of Technology (MIT) professor Andrew Lo.
The Chapter consists of evolutionary aspects of behavioural finance. Discussed Hyperbolic discounting, familiarity bias, heuristics, self-deception, overconfidence, success equation, and EMH. Further, the chapter discussed the emotion and theories of emotions, dimensions of emotions, and social influence on investment and consumption. In psychology, a heuristic is an easy-to-compute procedure or "rule of thumb" that people use when forming beliefs, judgments or decisions. The familiarity heuristic was developed based on the discovery of the availability heuristic by psychologists Amos Tversky and Daniel Kahneman; it happens when the familiar is favored over novel places, people, or things.
The familiarity heuristic can be applied to various situations that individuals experience in day-to-day life. When these situations appear similar to previous situations, especially if the individuals are experiencing a high cognitive load, they may regress to the state of mind in which they have felt or behaved before. The familiarity heuristic stems from the availability heuristic, which was studied by Tversky and Kahneman. The availability heuristic suggests that the likelihood of events is estimated based on how many examples of such events come to mind. Thus the familiarity heuristic shows how "bias of availability is related to the ease of recall.
Individuals automatically assume that their previous behaviour will yield the same results when a similar situation arises. Emotion is a complex, subjective experience accompanied by biological and behavioral changes. Emotion involves feeling, thinking, activation of the nervous system, physiological changes, and behavioural changes such as facial expressions.
In psychology, emotion is often defined as a complex state of feeling that results in physical and psychological changes that influence thought and behavior. Emotionality is associated with a range of psychological phenomena, including temperament, personality, mood, and motivation.
According to author David G. Myers, human emotion involves “ physiological arousal, expressive behaviours, and conscious experience."
Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
In this webinar you will learn how your organization can access TechSoup's wide variety of product discount and donation programs. From hardware to software, we'll give you a tour of the tools available to help your nonprofit with productivity, collaboration, financial management, donor tracking, security, and more.
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Ethnobotany and Ethnopharmacology:
Ethnobotany in herbal drug evaluation,
Impact of Ethnobotany in traditional medicine,
New development in herbals,
Bio-prospecting tools for drug discovery,
Role of Ethnopharmacology in drug evaluation,
Reverse Pharmacology.
Model Attribute Check Company Auto PropertyCeline George
In Odoo, the multi-company feature allows you to manage multiple companies within a single Odoo database instance. Each company can have its own configurations while still sharing common resources such as products, customers, and suppliers.
The Indian economy is classified into different sectors to simplify the analysis and understanding of economic activities. For Class 10, it's essential to grasp the sectors of the Indian economy, understand their characteristics, and recognize their importance. This guide will provide detailed notes on the Sectors of the Indian Economy Class 10, using specific long-tail keywords to enhance comprehension.
For more information, visit-www.vavaclasses.com
The Art Pastor's Guide to Sabbath | Steve ThomasonSteve Thomason
What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Read| The latest issue of The Challenger is here! We are thrilled to announce that our school paper has qualified for the NATIONAL SCHOOLS PRESS CONFERENCE (NSPC) 2024. Thank you for your unwavering support and trust. Dive into the stories that made us stand out!
Home assignment II on Spectroscopy 2024 Answers.pdf
Tax Planning with Reference to Managerial Decisions_NC.pdf
1. Corporate Tax Planning
• Unit-IV: Tax Planning with Reference to Managerial Decisions
• Financial Decisions: Capital Structure Decisions; Dividend Policy; Bonus
Shares and Capital Gains; Bond Washing Transactions; Own or Lease of
an Asset, Installment or Hire Purchase, Make or Buy Decisions, Buying
an Asset with Own Fund or Borrowed Fund and Repair, Replace,
Renewal or Renovation; Shutdown or Continue: Tax Planning in respect
of Amalgamation or De-Merger of Companies, Conversion of a Firm into
a Company; Conversion of Sole Proprietorship into Company,
Conversion of Company into Limited Liability Partnership.
Conversion of Company into Limited Liability Partnership.
Prepared by
Mr. Dayananda Huded M.Com NET, KSET
Teaching Assistant,
Rani Channamma University, P. G. Centre, Jamkhandi
E-Mail: dayanandcg65@gmail.com
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2. TP with Reference to Capital Structure Decisions
• Cost of Capital and also expenditure incurred in raising of such
capital. Expectation of shareholders by way of dividend, growth etc.
Expansion need of the business i.e. the rate by which profits of the
business shall be again ploughed back in the business.
• If the return on investment > rate of interest , maximum debt funds may
be used, since is shall increase the rate of return on equity . However, cost
of raising debt fund should be kept in mind.
• if rate of return on investment < rate of interest, minimum debt funds
• if rate of return on investment < rate of interest, minimum debt funds
should be used.
• Where assessee enjoys tax holidays under various provisions of Income-
Tax in such case minimum debt fund should be used, since the profit
arising from business is fully exempt from tax which increase the rate of
return of equity capital. But the borrowed funds reduces the profits (
profits less interest) before tax and to the extent exemption is reduce.
• https://incometaxmanagement.com/Pages/Tax-Management-Managerial-
Financial-Decisions/7-Tax-Management-Capital-Structure.html
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3. TP with Reference to Dividend Policy
• No Dividend Distribution Tax (Amendment to Sections 115O,
115R, 10(34),10(35).
• The decision to remove the concept of dividend distribution tax
under section 115O ( For companies and 115R (From Mutual
Funds). The amendment applies to the dividend that is received
after 01/04/2020. Now the dividend is taxable in the hands of the
recipients. The dividend is not exempt in the hands of the recipient
u/s 10(34) & 10(35). The initial ceiling was Rs. 10 lakh, Deduction
u/s 10(34) & 10(35). The initial ceiling was Rs. 10 lakh, Deduction
u/s 57 can be claimed maximum of up to 20% of such dividend.
• TDS u/s 194
• TDS u/s 194 to be deducted by the companies on the dividend that
is exceeding the limit of Rs.5000 per payee. The TDS needs to be
deducted from the amount of such dividend, income tax, at 10%.
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4. TP with Reference to Bonus Shares and Capital Gains
• When Bonus Shares are issued to the equity shareholders, the value
of the shares is not taxed as dividend distributed. However, where
redeemable preference shares are issued as Bonus shares, on their
redemption, the amount shall be taxed as dividend distributed.
• Where Bonus Shares are issued to the Preference Shareholders, on
their issue it is deemed to be dividend and liable to tax.
• Expenses on issue of Bonus Shares is not allowed as deduction
• Expenses on issue of Bonus Shares is not allowed as deduction
since capital expenditure.
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5. TP with Reference to Bonus Shares and Capital Gains
• Dividends received are an exempted income in the hands of the
customer
• Sec 115 BBDA of the Income-tax Act 1961, If the person resident in India
is receiving the dividends in aggregate exceeding ten lakh rupees from a
domestic company or companies then he will be liable to the taxes as
follows:
• 10% on exceeding ten lakh rupees plus surcharge
• 4 % as health and education cess.
• Bonus shares
• Issuance of bonus shares to the equity shareholders, companies can avoid
the tax under section 115-O on the dividend distributed.
• When redeemable preference shares are issued as a bonus on the
redemption the amount shall be taxed as dividend distributed.
• When bonus shares are issued to the preference shareholders on their
issue it is deemed to be a dividend and liable to tax when the shareholder
sells the bonus shares, the cost of bonus share is taken as nil
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6. Bond Washing Transactions
• bond washing transaction can be defined as a transaction where
some securities are sold sometime before the due date of
Interest and reacquired after the due date is over. In order to
discourage such transactions section 94 was introduced.
• Where the owner of any securities (in this sub- section and in
subsection (2) referred to as" the owner") sells or transfers those
securities, and buys back or reacquires the securities, then, if the
result of the transaction is that any interest becoming payable in
result of the transaction is that any interest becoming payable in
respect of the securities is receivable otherwise.
• Bond washing is the practice of selling a bond just before it pays a
coupon payment and then buying it back once the coupon has been
paid. Bond washing previously could result in apparently tax-free
capital gains because after the coupon has been paid, the bond will
often sell for less. However, the practice has been banned in most
major jurisdictions.
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7. Own or Lease of an Asset
• Assets may purchased or taken on lease. Apart from tax
angle other factors also are important in taking lease or buy
decisions like rate of change in technology.
• Advantages when Assets are taken on Lease: Lease Rental
can be claimed as deduction as revenue expenditure.
However Depreciation cannot be claimed since assets are
not owned by the assessee.
• Advantage when Assets are Purchased: Depreciation on
• Advantage when Assets are Purchased: Depreciation on
specified assets can be claimed as deduction u/s 32. the
Assets may be purchased outrightly or may be taken on
loan. Where the asset is taken on loan interest amount can
either be claimed as revenue expenditure or can be
capitalized. But where interest is paid after the asset is first
put us use, the deduction on account of interest shall be
claimed as revenue expenditure, i.e. such interest cannot
be capitalized.
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8. • Where the Asset is Purchased on Loan:
• 1. Compute Repayment of Loan spread over a number of years.
• 2. Compute Interest on Loan spread over a number of years.
• 3. Compute each Outflow ( Interest + repayment of Loan) spread over a
number of years.
• 4. Compute Depreciation on Assets spread over a number of years.
• 5. Compute Tax saved on deduction claimed ( Interest + depreciation)
spread over a number of years.
• 6. Compute adjusted cash outflow which is ( 3 – 5 )
• 7. Compute present value of adjusted cash outflow.
• Where the Asset is Leased:
• Where the Asset is Leased:
• 1. Compute the time processing fees in zero year.
• 2. Computer Lease Rental spread over a number of years.
• 3. Compute Cash Outflow (processing fees + lease rental) spread over a
number of years.
• 4. Compute Tax saved on deduction claimed ( processing fees + lease
rental) spread over a number of years.
• 5. Compute adjusted cash Outflow which is ( 3 – 4 )
• 6. Compute present value of adjusted cash outflow.
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9. Installment or Hire Purchase
• Under hire purchase system, the seller agrees to sell the article on the
condition that the buyer shall pay the purchase price through
installments.The article is not legally sold to the buyer in hire purchase
system.
• The buyer/hirer makes an initial payment called ‘down payment‘ and the
balance amount due to the vendor (seller) in installments together with
interest. Ownership in the goods is transferred from seller to the buyer
only on the payment of last installment. So, if the buyer defaults to pay
the installment amount, the goods will be repossessed by the seller.
• Installment System
• Installment System
• The Installment system is almost similar to the hire purchase system. The
main difference between the two is that in installment system, the buyer
gets the ownership rights as soon as the contract is signed with the seller.
If he makes any default in payment of any installment, the seller can
repossess the article only with the help of the Court.
• Hire purchase and installment systems facilitate brisk sale of consumer
durable. Commodities like two wheeler, television sets, radios,
refrigerators, cycle, furniture etc., are sold in large volumes under hire
purchase and installment system.
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10. Advantages of Hire Purchase and Installments systems
• 1. The hire purchase and installment schemes enable the buyers to buy
goods which are beyond their reach.
• 2.It also enables the business to find buyers for their products. A business
cannot always look for cash parties for products that are expensive in
nature.
• 3. It widens the market.
• 4. Middlemen are eliminated
• 5. It has helped the finance companies to develop their business. Now-a-
days finance companies finance several articles widely under hire
purchase and installment system.
purchase and installment system.
• 6. Price is stabilized.
• 7. As convenience and luxury goods are sold under hire purchase and
installment system, the standard of living of the people increases.
• 8. Sellers can increase their sales. Moreover, sales under the hire purchase
and installment system are more profitable.
• 9. These days, most business houses come out with a number of offers,
like free gifts, exclusively for hire-purchase customers.
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11. Disadvantages of Hire Purchase and Installment systems
• 1. Hire purchase and installment system tempt the buyers to buy goods which are
beyond their means. So, it becomes extravagant.
• 2. The buyer pays a very high price fro the article under such schemes. This is
because, he has to pay interest on the outstanding balance.
• 3. The need of the hour is savings. Schemes like hire-purchase make the people
spendthrifts.
• 4. Hire purchase price is higher than the cash price. Buyers under hire purchase
system are charged interest. The rate of interest is often higher.
• 5. If buyers default in payment, goods sold under hire purchase system are
repossessed by the hire vendor. The purchaser suffers a huge loss on repossessed
goods.
goods.
• 6. Hire purchase and installment transactions are cumbersome. An agreement has
to be entered into and guarantee is to be given. More legal formalities are to be
gone through.
• 7. The rate of default under hire purchase and installment system is higher. It is
because only people with inadequate means buy under this system.
• 8. A number of legal formalities will have to be fulfilled by the buyer. He may
have to find a guarantor. The agreement must be prepared and signed by both the
seller and the buyer and it must be witnessed. The document of title will vest with
the vendor/financier till the dues are cleared by the hirer.
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12. Make or Buy Decisions
• This applies to industries where assembly of products takes place to make a
finished product. Like a manufacturing of car, where thousands of different
parts or components are assembled to make a car.
• It is quite natural every components or part of a car cannot be manufactured by
one company. Since part manufacture involves cost, time, energy, and different
kinds of technology and expertise. Therefore, in such cases company purchases
parts from outside agencies. But where the cost involved in purchasing from
outside market is high, then the company might go in for in house production.
• Apart from costing consideration following factors also go in decision-making
• Apart from costing consideration following factors also go in decision-making
process :
– Utilizations of Capacity
– Inadequacy Fund
– Latest Technology
– Dependence of supplier
– Labor problem in the factory
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13. • What are the cost involved in making of a Pat.
– Fixed Cost : Purchased of Plant etc.
– Variable Cost : Raw Materials, Labour, Electricity etc.
• What are the cost involved in buying of a part from outside agency :
– Buying Cost
– Inventory Cost
• Tax Consideration:
• 1. Establishing a new Unit: If the decision to manufacture a part or
component involves a setting up a separate industrial unit than tax
incentives available u/s 10A, 10B, 32, 80IA and 80IB should be
considered.
considered.
• 2. Export: If‘Make or Buy’ decision is taken for exporting goods then tax
incentives available u/s 80HHC depends upon whether goods
manufactured by taxpayer himself are exported or goods manufactured by
others are exported by the taxpayers.
• 3. Sale of Plant & Machinery: If buying is cheaper than manufacturing
and the assessee decides to buy parts or components for along period of
time, he may like to sell the existing plant and machinery. Tax implication
as specified by Sec. 50 has to considered.
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14. Buying an Asset with Own Fund or Borrowed Fund
• Owner’s Funds
• The Owner’s Funds are the total amount invested by the owner of an enterprise and the accumulated
profits that they have reinvested in the business. This money remains invested in the business till the
company winds up its operations. It is the primary source of funds, without which it is difficult for
any organisation to survive in the market. The owner may be an individual, a group of partners or
shareholders in the business. The capital invested by the owner/s allows them control over their
business. Some entrepreneurs may prefer to keep the control of the company to themselves, while
others may opt for sharing the control and risk of a business by bringing in other investors.
• Borrowed Funds
• The Borrowed Funds are the funds that a business raises through loans or borrowings from other
parties. They are the most common sources of capital for any enterprise. Some of the methods of
parties. They are the most common sources of capital for any enterprise. Some of the methods of
raising Borrowed Funds are as follows:
– Raising loans from commercial banks or other financial institutions
– Issuing of debentures and bonds
– Public deposits
– Trade Credit
• The creditors provide these funds only for a specified period of time, and they have to return after the
expiry of that period. A business can avail these funds only under certain terms and conditions, which
they need to fulfil at all costs. The borrowers must also pay a fixed amount of interest on these funds
to the lenders, irrespective of whether the firm is making a profit or not. The creditors give these
funds on the security of assets of the firm in most cases.
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15. Repair, Replace, Renewal or Renovation
• “Repair” implies the existence of a thing has malfunctioned and can be set right
by effecting repairs which may involve replacement of some parts, thereby
making the thing as efficient as it was before or close to it as possible. After
repair the thing to which the repair was carried out continues to be available for
use. Replacement is different from repair.
• “Replacement” implies the removal or discarding of the things that was in use,
by a different or new thing capable of performing the same function with the
same or greater efficiency. The replacement of a section in a series of machines
which are interconnected , in a segment of the production process which together
which are interconnected , in a segment of the production process which together
form an integrated whole may in some circumstances , be regarded as amounting
to repair when without such replacement that unit in that segment will not
function. That logic cannot be extended to the entire manufacturing facility from
the stage of Raw Material to the delivery of the final finished product.
• “Current Repair” implies the expenditure must have been incurred to ‘preserve
and maintain’ an already existing asset and the object of the expenditure must not
be to bring a new asset into existence of for obtaining a new advantage.
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16. • Replacement of Assets as a whole is not ‘Repair’ : Where substantial repairs are carried out in order
to put to use an existing asset, the same could be termed as Revenue Expenditure. But where there is
replacement ‘As a Whole’, it amounts to reconstruction and not repairs. It is pertinent that the asset in
its old form must continue to exist to say that the expenditure involved in improving the assets is
Revenue Expenditure. Where effacement takes place and a new asset comes into being, then
expenditure involved would become a Capital Expenditure.
Difference Between Capital and Revenue Expenditure
Capital Expenditure Revenue Expenditure
Cost of acquisition and installment charges
of a fixed asset is a capital expenditure.
Purchase price of a current asset for resale
or manufacture is a revenue expenditure.
Expenditure incurred to free oneself from a Expenditure incurred to free oneself from a
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Expenditure incurred to free oneself from a
capital liability is a capital expenditure.
Expenditure incurred to free oneself from a
revenue liability is a revenue expenditure.
Expenditure incurred towards acquisition of
a source of income is a capital expenditure.
Expenditure incurred towards an income is
a revenue expenditure.
Expenditure incurred to increase the
operating capacity of fixed assets is capital
expenditure.
Expenditure incurred to maintain the fixed
assets is a revenue expenditure
Expenditure incurred for obtaining capital
by issue of shares is a capital expenditure
Expenditure incurred towards raising loans
or issue of debentures is a revenue
expenditure.
17. Shut Down or Continue
• A shut-down decision means that the company is stopping
production for a short period. It means that the firm will resume
its production in future.
• The shutdown decision depends on Shut Down Point. The
shutdown point denotes the exact moment when a company’s
revenue is equal to its variable costs.
• What is Shut Down Point?
• A Shutdown point is a position of operation at which a company
• A Shutdown point is a position of operation at which a company
is receiving no advantage for continuing operations Thus,
decides to shut down temporarily or in some cases permanently.
• The shutdown point denotes the exact moment when a
company’s revenue is equal to its variable costs. Variable costs
such as wages, production supplies, etc.
• It results from the combination of output and price where the
company earns just enough revenue to cover its total variable
costs.
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18. Reasons of shut down production as well Business
• Loss co- exist with profit in a business. A business may suffer loss due to
one or more of the following reasons:
• 1. Fall in demand :- the demand of product may fall due to availability of
new products in the market , change in fashion, or increase in the number
of producers /competitors.
• 2. Financial problems :- A firm may not have sufficient finance of its own
nor further credit is available from bank or financial institutions due to
government restrictions.
• 3. Change in technology:- Where the growth of technology is rapid and if
it is not possible to keep pace with it the net result may be a loss of profit.
it is not possible to keep pace with it the net result may be a loss of profit.
• 4. High rate of taxes :-high rate of taxes – import duty , excise , sales tax ,
octroi etc. ; increase the price of the product . Due to this demand of the
product may fall and business may suffer losses.
• 5. Mismanagement
• 6. Inadequate availability of raw material
• 7. Recession in market
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19. • 1. Short run rule for shutdown or continue decision with example
• In the short-run shutdown, we only consider the variable cost. Short-run is
for a limited period of time like quarterly, half-yearly, or yearly depending
upon the company.
• It means we check whether the company is able to cover or not the
variable cost for the short period of its sales. If not, the Firm needs to shut
down.
• For example: If the revenue of a company is Rs. 100 and its variable cost
is Rs. 80. then the contribution will be Rs 20. In this, there is no need to
shut down the product. but if the variable cost is greater than the sales,
then the company has to shut down that product.
• 2. Long-run rule for Shutdown with example
• The Long Run period is basically the future of the company. The long run
can be yearly or more than yearly depending upon the type of company.
• In the long run shutdown, we consider total cost i.e. fixed cost and
variable cost. For example: If the sale of a company is Rs. 100 and its
variable cost is Rs. 80 and fixed cost is Rs. 40. Then there is a loss of Rs.
20.
• It means that the company will not survive in the long run but still can
survive in the short run.
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20. Continue of Part of Business
• 1.Where a part of business (unit, department, or activity) is discontinued
or the business is continued with the reduced level of activity it is not a
discontinuation of business.
• 2. Where the business of the assessee has been shifted from one premises
to another or from one market to another or from one city to another.
• 3. Where one or the other department of the business had been closed
down.
• 4. Where the business of an industrial undertaking carried on in india is
• 4. Where the business of an industrial undertaking carried on in india is
discontinued in the previous year by reason of extensive damage to , or
destruction of any building , plant , machinery or furniture owned by the
assessee and used for the purpose of such business is re- established , re
constructed or revived by the assessee within three years from the end of
previous year in which the business was discontinued , the losses of such
a business shall be carried forward or set off against the profits and gains
of business or any other business carried on by him.
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21. Tax Planning in Respect of Amalgamation
• Under Income Tax Act, 1961 Section 2(1B) of Income Tax Act defines
‘amalgamation’ as merger of one or more companies with another company or
merger of two or more companies to from one company in such a manner that:-
• 1. All the property of the amalgamating company or companies immediately
before the amalgamation becomes the property of the amalgamated company by
virtue of the amalgamation.
• 2. All the liabilities of the amalgamating company or companies immediately
before the amalgamation becomes the liabilities of the amalgamated company by
virtue of the amalgamation.
• 3. Shareholders holding at least three-fourths in value of the shares in the
amalgamating company or companies (other than shares already held therein
amalgamating company or companies (other than shares already held therein
immediately before the amalgamated company or its nominee) becomes the
shareholders of the amalgamated company by virtue of the amalgamation.
• (Example: Say, X Ltd merges with Y Ltd in a scheme of amalgamation and
immediately before the amalgamation, Y Ltd held 20% of shares in X Ltd, the
above mentioned condition will be satisfied if shareholders holding not less than
75% in the value of remaining 80% of shares in X Ltd i.e. 60% thereof, become
shareholders in Y Ltd by virtue of amalgamation)
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22. Tax Relief’s and Benefits in case of Amalgamation
• 1. Tax Relief to the Amalgamating Company:
• A. Exemption from Capital Gains Tax [Sec. 47(vi)]: Under section 47(vi)
of the Income-tax Act, capital gain arising from the transfer of assets by
the amalgamating companies to the Indian Amalgamated Company is
exempt from tax as such transfer will not be regarded as a transfer for the
purpose of Capital Gain.
• B. Exemption from Capital Gains Tax in case of International
Restructuring [Sec. 47(via)]: Under Section 47(via), in case of
Restructuring [Sec. 47(via)]: Under Section 47(via), in case of
amalgamation of foreign companies, transfer of shares held in Indian
company by amalgamating foreign company to amalgamated foreign
company is exempt from tax, if the following two conditions are satisfied:
– At least twenty-five per cent of the shareholders of the amalgamating foreign
company continue to remain shareholders of the amalgamated foreign company, and
– Such transfer does not attract tax on capital gains in the country, in which the
amalgamating company is incorporated.
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23. • 2. Tax Relief to the shareholders of an Amalgamating
Company:
• Exemption from Capital Gains Tax [Sec 47(vii)]: Under
section 47(vii) of the Income-tax Act, capital gains arising
from the transfer of shares by a shareholder of the
amalgamating companies are exempt from tax as such
transactions will not be regarded as a transfer for capital gain
purpose, if:
purpose, if:
– The transfer is made in consideration of the allotment to
him of shares in the amalgamated company; and
– Amalgamated company is an Indian company.
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24. • 3. Tax Relief to the Amalgamated Company:
• Carry Forward and Set Off of Accumulated loss and unabsorbed
depreciation of the amalgamating company [Sec. 72A]: Section
72A of the Income Tax Act, 1961 deals with the mergers of the sick
companies with healthy companies and to take advantage of the
carry forward of accumulated losses and unabsorbed depreciation
of the amalgamating company. But the benefits under this section
with respect to unabsorbed depreciation and carry forward losses
are available only if the followings conditions are fulfilled:-
• There should be an amalgamation of –
• There should be an amalgamation of –
– (a) a company owning an industrial undertaking (Note 1) or ship or a hotel
with another company, or
– (b) a banking company referred in section 5(c) of the Banking Regulation
Act, 1949 with a specified bank (Note 2), or
– (c) one or more public sector company or companies engaged in the business
of operation of aircraft with one or more public sector company or companies
engaged in similar business.
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25. • Amortization of expenditure in case of Amalgamation [Sec.
35DD]: Under Sec 35DD for expenditure incurred in connection
with the amalgamation the assessee shall be allowed a deduction of
an amount equal to one-fifth of such expenditure for each of the
five successive previous years beginning with the previous year in
which the amalgamation takes place.
• Treatment of preliminary expenses [Sec. 35D(5)]: When and
amalgamating company merges with an amalgamated company
amalgamating company merges with an amalgamated company
under a scheme of amalgamation, the amount of preliminary
expenses of the amalgamating company to the extend not yet
written off shall be allowed as deduction to the amalgamated
company in the same manner as would have been allowed to the
amalgamating company.
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26. Tax Planning in Respect of Demerger
• Demerger (Section 2(19AA)): means the transfer of one or
more undertakings to any resulting company pursuant to a
scheme of arrangement under Sections 391 to 394 of the
Companies Act, 1956 in such a manner that :
– All the property/liability of the undertaking becomes the
property/liability of the resulting company.
– All the property/liabilities are transferred at book value (excluding
increase in value due to revaluation).
– The resulting company issues shares to the share holders of demerged
– The resulting company issues shares to the share holders of demerged
company on a proportionate basis, except where resulting company is
a share holder of the demerged company.
– Share holders holding minimum 75% of the value of shares become
share holders of the resulting company (other than shares already held
therein immediately before the demerger by, or by a nominee for, the
resulting company or its subsidiary).
– The transfer of an undertaking is on a going concern basis.
– The demerger is in accordance with the conditions notified under
Section 72A(5) of IT Act, 1961.
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27. • Undertaking : includes any part of an undertaking or a unit or
division of an undertaking or a business activity taken as a whole,
but excludes individual assets or liabilities or combination of both
not constituting a business activity.
• Demerged Company : means the company whose undertaking is
transferred to a resulting company pursuant to a demerger.
• Resulting Company : means one or more companies (including
• Resulting Company : means one or more companies (including
wholly owned subsidiary thereof) to which the undertaking of the
demerged company is transferred in a demerger and the resulting
company in consideration of such transfer of undertaking, issues
shares to the share holders of the demerged company and includes
any authority or body or local authority or public sector company or
a company established, constituted or formed as a result of
demerger.
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28. Provisions applicable to company
• Capital Gains (Sections 47(vi) and 47(vid))
• Gains arising on transfer of a capital asset in a scheme of amalgamation/demerger to the
amalgamated/resulting company being an Indian Company is exempt.
• Carry forward of accumulated loss and/or unabsorbed depreciation (Section 72A)
• Accumulated loss and unabsorbed depreciation of an amalgamating company can be
carried forward by the amalgamated company for set off against its profits; in case of;
– Amalgamation of company owning an industrial undertaking or a ship or a hotel with another
company; or
– Amalgamation of a public sector company or a company engaged in the business of operating aircraft
with another public sector company or company engaged in similar business; or
– Amalgamation of a banking company with a specified bank
1. Amalgamated company has to fulfill the following conditions to avail the benefit:
1. Amalgamated company has to fulfill the following conditions to avail the benefit:
– It continuously holds 3/4th of the book value of the fixed assets acquired in a scheme of amalgamation
for at least five years from the date of amalgamation
– It continues to carry on business of amalgamating company for at least five years from the date of
amalgamation
– It achieves at least the level of 50% of the installed capacity before the end of 4 years from the date of
amalgamation and maintains that level till the 5th year
• 2. Amalgamating company has to fulfill the following conditions:
– It was engaged in the business in which the accumulated loss has occurred or the unabsorbed
depreciation remains unabsorbed for three or more years.
– It has continuously held 3/4th of the book value of fixed assets held by it two years prior to
amalgamation.
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29. Conversion of Firm into Company [Section 47 (iii)]
• Transfer of a capital asset or intangible asset on conversion of Firm into a
Company is not treated as Transfer if following conditions are satisfied and hence
not Capital Gain arises. Conditions are:
• (a) all the assets and liabilities of the firm [or of the association of persons or
body of individuals] relating to the business immediately before the succession
become the assets and liabilities of the company;
• (b) all the partners of the firm immediately before the succession become the
shareholders of the company in the same proportion in which their capital
accounts stood in the books of the firm on the date of succession;
accounts stood in the books of the firm on the date of succession;
• (c) the partners of the firm do not receive any consideration or benefit, directly or
indirectly, in any form or manner, other than by way of allotment of shares in the
company; and
• (d) the aggregate of the shareholding in the company of the partners of the firm is
not less than 50% , of the total voting power in the company and their
shareholding continues to be as such for a period of 5 years from the date of the
succession;
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31. Procedure of Conversion of a Firm into a Company
• Step 1-Conducting a meeting of the partners for the Conversion of the
Firm into a Company
• Step -2 Obtain name Approval in the RUN form.
• Step -3 File Form URC-1 (Uniform Rules for Collections)
• Step - 4 Publish an advertisement in Two Newspaper
• Step – 5 Draft MOA and AOA
• Step -6 Issue of Certificate of Incorporation
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32. Conversion of Sole Proprietorship into Company
• Transfer of a capital asset or intangible asset on conversion of sole
Proprietorship Concern into a Company is not treated as Transfer if
following conditions are satisfied and hence not Capital Gain arises.
Conditions are:
• (a) all the assets and liabilities of the sole proprietary concern relating to the
business immediately before the succession become the assets and liabilities
of the company;
• (b) the shareholding of the sole proprietor in the company is not less than
50% of the total voting power in the company and his shareholding continues
to so remain as such for a period of 5 years from the date of the succession;
and
• (c) the sole proprietor does not receive any consideration or benefit, directly
or indirectly, in any form or manner, other than by way of allotment of shares
in the company;
• (d) all the partners of the firm immediately before the succession become the
shareholders of the company in the same proportion in which their capital
accounts stood in the books of the firm on the date of succession;
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33. Conversion of Company into LLP
• The LLP is a separate legal entity, is liable to the full
extent of its assets but liability of the partners is limited to
their agreed contribution in the LLP. The LLP can
continue its existence irrespective of changes in partners.
It is capable of entering into contracts and holding
property in its own name.
• Need of Conversion from Company into LLP?
• Need of Conversion from Company into LLP?
– LLP will have more flexibility as compared to a company.
– LLP will have lesser compliance requirements as compared to a
company.
– LLP does not have to have its accounts audited if the annual
turnover of the LLP is less than Rs. 40 lakhs and the capital
contribution is less than Rs. 25 lakhs.
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34. Pursuant to Income Tax Act
• The finance Act, 2010 has inserted a new Clause (xiiib) in
section-47 and a new sub-section (4) in section 47A of the Act
with effect from assessment year-2011-12.
• If the following conditions are satisfied, then the transfer of
capital asset or intangible asset to LLP or any transfer of share or
shares held in Company by a share-holder on conversion of
Company into LLP shall not be regarded as transfer:
– If All The Above Conditions (I) To (Vi) Are Complied With, The
Conversion Shall Not Attract capital gains tax either for the Company
Conversion Shall Not Attract capital gains tax either for the Company
or the Successor LLP or for the shareholders of the Company, who
became partner in the successor LLP and get share of profits and
capital in the LLP in lieu of their shares in the Company.
– If any of the above conditions (i) to (vi) is not complied with, then as
per provisions of Section 47 A (4) such transfer of Capital Assets &
Intangible assets deemed to be liable to Capital gains of the successor
LLP or the Shareholders of the predecessor Company in the previous
year in which such non-compliance took place.
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35. • Benefits under Income Tax Act:
• > Saving of Dividend Distribution Tax. (There is no provision of
Dividend Distribution Tax in LLP)
• > Saving of MAT. (Because LLP don’t give credit of MAT)
• > Saving of Income Tax due to Interest and remuneration
payable to partners as salary payable to directors.
• Detail Provisions:
• The Finance Act, 2009 amended the Income-tax Act, 1961 to
clarify that LLPs will be taxed on the same lines as general/
traditional partnership firms. However, the Tax implications
traditional partnership firms. However, the Tax implications
upon the conversion of a Private Company or an unlisted
Company into LLP were not clear by The Finance Act, 2009 and
leaves doubts;
• > The levy of Capital Gain Tax on Transfer of assets to LLP on
conversion.
• > Availability of carry forward of losses and of unabsorbed
depreciation to the successor LLP.
• > Availability of MAT credit to the successor LLP.
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36. Procedure for Conversion of Company into LLP
• Step 1: Meeting of Board of Directors of Company
> Call a meeting of the Board of Directors.
> Pass requisite Board Resolution for Conversion of Company into LLP.
> Requisite resolution to authorize any director to file all the necessary
forms with MCA.
• Step 2: Application for Name Availability
> The company will have to apply for reservation of name in form RUN-
LLP of LLP and Get Name Approval Certificate from ROC.
• Step 3: Filing of Incorporation Form with Required Documents
• Step 3: Filing of Incorporation Form with Required Documents
> File e-Form FiLLiP with ROC along with following Attachments:
> Address proof of the registered office of LLP. (for eg.: utility bill, NOC
and proof of ownership)
> The subscription sheets.
> Consent to act as a designated partners and partners
> Identity and Resident proofs of designated partners and partners
> Detail of LLP(s) and/ or company(s) in which partner/ designated
partner is a director/ designated partner.
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37. • Step 4: Filing of Application for Conversion into LLP
File E-FORM- 18 with ROC along with following ATTACHMENTS:
> Statement of the consent of shareholders (Mandatory)
> Statement of accounts of the company certified as true and correct by
the independent auditor
> List of all the secured creditors along with their consent
> Copy of acknowledgement of latest income tax return (Mandatory)
• Step 5: Certificate of Incorporation as LLP from ROC:
> After complying to all the formalities by the company and approved by
the Ministry, ROC to issues a COI as to the conversion of LLP.
• Step 6: Drafting of Limited Liability Partnership Agreement
• Step 6: Drafting of Limited Liability Partnership Agreement
– 1. Filing of E-Form-3
– > This form provides information about the LLP Agreement entered into
between the partners. This form is to be filed in 30 days from the date of
conversion of the company into an LLP.
– > Attachment Required: LLP Agreement
– 2. Filing of E-Form -14 (Intimation to ROC)
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