INDEX Direct Taxation Indirect Taxation Corporate Laws Accounting & Auditing

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2. INDEX • Direct Taxation • Indirect Taxation • Corporate Laws • Accounting & Auditing • Statutory Due Dates for June 2011 TM Newsletter – June 2011

3. DIRECT TAXATION Index • Government allows tax exemption on 9.5% interest on PF for 2010-11 • Giving relief to the subscribers of EPFO, the government has allowed tax exemption on the 9.5 per cent interest income on PF deposits for 2010-11.The Finance Ministry notification raises the income tax exemption to 9.5 per cent interest income from 8.5 per cent. The decision clears the air for the EPFO subscribers who were given increased interest rate by one percentage point for 2010-11, but the Finance Ministry had not matched the interest hike with a commensurate tax exemption. • Individual taxpayers need not declare high-value transactions • The Central Board of Direct Taxes (CBDT) has given a breather to individual tax payers from declaring high-value transactions with banks, mutual funds, credit cards, etc via the income tax return forms. The newly notified income tax return forms for the Assessment Year 2011-12 – including Sahaj, Sugam, ITR 2, ITR 3 – do not carry the dreaded Annual Information Return (AIR) blocks. • "We have dispensed the individual taxpayers from declaring it in their return," said a CBDT spokesperson when asked about the missing AIR fields in the form. TM Newsletter – June 2011

4. INDIRECT TAXATION Index • FM rules out extension of export-incentive plan beyond June 30 • Finance Minister Pranab Mukherjee has decided against extending a 14-year-old popular export incentive scheme called the duty entitlement passbook, a senior official privy to the development said. The Finance Minister has written to Commerce Minister Anand Sharma saying the scheme will not run beyond June 30. The duty entitlement passbook allows exporters credit for import duty paid on inputs required for export production. • The scheme, meant to originally end in 2007, was extended over the years as the government was keen to encourage exports. But with India's exports in the last fiscal registering a 37.6% jump in dollar terms—the highest year-on-year growth—the finance ministry feels the case for extending the scheme has weakened . "Any further extension to the scheme is ruled out," the official said. "The finance ministry wants exporters to shift to duty drawback in place of duty entitlement passbook." Under the scheme, exporters receive duty-free scrips, or entitlements , which they can use to pay import duties. TM Newsletter – June 2011

5. CORPORATE LAWS Index • LLP can now act as an external auditor of a company • A Limited Liability Partnership (LLP) can now be a statutory auditor of a company, thanks to the Ministry of Corporate Affairs (MCA). The MCA has now clarified that a LLP of chartered accountants will not be treated as ‘body corporate' for the limited purpose of Section 226(3) (a) of the Companies Act. An executive order to this effect has been issued. This provision of Companies Act specifies that a ‘body corporate' is disqualified from appointment as auditor by a company. • The ICAI had represented to the MCA that the Limited Liability Partnership law of 2008 specifies a LLP as a ‘body corporate'. Hence, LLP among chartered accountants will not be qualified for appointment as auditor by a company. By taking LLP out of the purview of ‘body corporate' for the limited purpose of appointment of auditor, the Government has enabled conversion of more CA firms into LLPs, say experts. This clarification by the MCAis a progressive step in institutionalising professional services. It is desirable that other professional regulatory bodies also follow suit thereby paving way for LLP to be an alternate vehicle of professional enterprise. TM Newsletter – June 2011

6. CORPORATE LAWS Contd:Index • Corporates will need to prepare two accounts to avoid tax ambiguity • The Ministry of Corporate Affairs (MCA) and the revenue department have finally decided to clear the confusion over taxation issues after convergence of accounts with the International Financial Reporting Standards (IFRS). • In a meeting held between revenue secretary Sunil Mitra and corporate affairs secretary D K Mittal, it has been decided that corporates in future will have to prepare two set of accounts — one for taxation purpose and the other for common investors and shareholders, thereby partly resolving confusion over the taxation aspect. • This would mean that a company will have to prepare the consolidated accounts as per the IFRS for shareholders while individual accounts of companies as per Indian GAAP (generally accepted accounting principles) for the taxation purpose. • Earlier, the MCA wanted the companies to prepare all books of accounts as per IFRS while the Income Tax department insisted that it would not be possible. For taxation, historical value of assets is taken into consideration while IFRS accounts are prepared at fair value. This had created ambiguity for companies. • However, the issue of clarity in taxation of minimum alternative tax (MAT) under the IFRS regime still remains. MAT is calculated on book profits of a company, which does not pay any tax due to various exemptions enjoyed by it. Under the IFRS, the companies will be required to calculate profits based on fair valuation, different from the way they calculate it currently. The corporate affairs secretary said that a meeting with the revenue secretary would be held soon to sort out the MAT issue as well, thereby paving way for introduction of IFRS. TM Newsletter – June 2011

7. ACCOUNTING AND AUDITING Index • Government to rework Accounting deviations in Indian version of IFRS • The government is exploring options to rework at least two vital accounting deviations adopted in the Indian version of International Financial Reporting Standards, or IFRS, so that financial statements by Indian companies are aligned globally and also to enable local companies to raise capital overseas easily. • The treatment of exchange differences and the accounting for valuation of fixed assets were two big ticket items that were suitably modified for Indian companies, in a stark departure from norms under global IFRS. This was done to smoothen the transition for Indian companies to the global accounting norm of IFRS, by April 1, 2011. • "Now that the deadline of April 2011 has passed, the government is willing to relook at these proposals and make Indian standards more in line with global norms," said one person familiar with the process of preparing the converged Indian Accounting Standards. TM Newsletter – June 2011

8. STATUTORY DUE DATES FOR JUNE 2011 Index • Statutory Due Dates Calendar for June 2011 TM Newsletter – June 2011

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