FINANCIAL EDUCATION

Sunday, July 20, 2008

ITAT DECISIONS

Issue: Notice U/s 143 (2)
Nulcon India Ltd. V/s ITO (ITAT Delhi Bench “C”)
In this case, Dept has picked up case for scrutiny on the
last day of the month in which notice can be issued. Dept
has sent notice u/s 143 (2) by speed post. The Bench
decided that if notice is sent by the speed post
authorities, the postal authorities act as agent of the AO.
Hence, the notice has to be served to the assessee within
the one year from the end of the month in which return
was filed. Mere issue of notice and dispatch thereto on the
last day will not make the notice legal one. If “A” receives
notice after the 12 month, it will make proceeding null
and void.
Issue: Accrual of Income
Rama Associates Ltd V/s DCIT Circle 15 (1) New Delhi
(ITAT Delhi Bench “G”)
The Bench decided that income can be brought to tax only
on the basis of its accrual or receipt and if income has
neither accrued nor received, the same can not be
brought to tax either on notional basis or on basis of
accounting entry being passed by the assessee.
Issue: Allowability of Interest expenses on share
investment.
Macimtosh Finance Estate Ltd V/s Addl CIT Spl. Range 36
The tribunal decided that interest paid on fund utilized for
the purpose of investment in shares will not be allowed as
revenue expenses. Further “A” can not add the interest
expenses to the cost of investment to claim deduction u/s
48 in the year of sale of investment. If it is allowed it
would defeat the purpose of introduction of provision of
section 14A of the Act.
Issue: Interest on short payment of TDS
SBI V/s ACIT Cir. TDS II (3)
In this case, AO passed order levying interest on short
deduction of TDS u/s 201 (1) & (1A) after the expiry of 4
years from the end of relevant financial years. The Dept
contended that order was passed pursuant to survey
conducted at the premises of “A” and the order was
passed within 4 years from the date of survey. Tribunal
decided that order passed u/s 201 (1) (1A) beyond 4
years will be legal one and date of survey would not alter
the legal position with regard to statutory time limit to
pass the order.

Jago-Grahak-Jago (Consumer Beware)

Consumer Protection Mechanism
A major milestone was achieved in the Jago-Grahak-Jago
(Consumer Beware) movement when the Consumer
Protection Act 1986 was enacted - a vehicle for securing
speedy and in-expensive redressal of consumer
grievances. To give effect to the provisions of the Act, the
Consumer Protection Rules 1987 were made. And finally
for regulating the procedure of the Consumer Courts, the
Consumer Protection Regulations, 2005 have also been
made.
Legal Mechanism
There is a three tier quasi-judicial mechanism for speedy
redressal of the consumer grievances
• at District Forum (upto Rs.20 lacs),
• State Commission (Rs.20 lacs to Rs.1 crore)
• and National Commission (above Rs.1 crore).
There are at present 604 District Forums, 35 State
Commissions with apex body as National Commission
situated at New Delhi.
In these three judicial bodies taken together 27.24 lacs
cases were filed since their inception, out of which 23.83
lacs cases (87%) have been resolved. The percentage of
resolved cases is 90% for District Fora, 72% for State
Commissions and 81% for the National Commission.
Other doors are also open for help
Most of the time consumers, though aggrieved of
violation of their rights, avoid going to consumer courts
owing to perceived cumbersome procedures &
ineffectiveness, time delay and the cost of litigation.
Keeping this in view the procedure of consumer courts
has been made as consumer friendly as possible, at the
same time the Govt. has also created following other
avenues also whereby consumers can resolve their
grievances out of the court.
CORE
The Ministry of Consumer Affairs, Food & Public
Distribution, Govt. of India, on 15th March 2005 (World
Consumer Rights Day) launched the Consumer Online
Resource & Empowerment Center (CORE center), which
is a consumer friendly portal for consumer awareness
and protection. This portal is managed by the Central
Coordination Council (CCC) and supported by the
Ministry.
Anybody can access the portal on www.core.nic.in to
• Utilise the online database for all consumer related
issues.
• Subscribe for regular free e-Newsletters for all the
latest, relevant and up to date consumer news,
events, articles and judgments.
• Most importantly register his complaint online for
mediation. The core center uses its good offices to
resolve the complaint by taking up the same
effectively with the opposite party. It provides
constant support and guidance to the consumers to
resolve their consumer rights related grievances
out of the court as far as possible.
NCH
A National Consumer Helpline (NCH) has also been
started w.e.f. 1st March 2005 on the Toll Free no.1800-
11-4000 (from MTNL & BSNL lines). Anybody can call on
this phone no. between 9.30 AM to 5.30 PM on any
working day for seeking information, advice and
guidance for resolving his problem related to consumer
rights. This Helpline is maintained at University of Delhi
with the support and financial assistance from Deptt. of
Consumer Affairs.
VOICE
With the support of Ministry of Consumer Affairs, a downto-
earth NGO called VOICE (Voluntary Organisation on
the Interest of Consumer Education) is also functioning at
national level. The primary focus of this organisation is to
create informed consumers. It raises awareness in
consumers not only about malpractices perpetuated in
the marketplace, but also about his rights.
It publishes a monthly magazine Consumer Voice (both
English and Hindi edition) that contains articles on
comparative testing of products, finance, health, legal
issues, environment and sustainability, to create
consumer awareness. This magazine has an online
edition also.
Voice is doing remarkable job in the field of product
testing. The purpose of testing is to inform the consumers
about the comparative quality vis-à-vis price to enable
them to make correct choice of product at best price. 16
products have been successfully tested so far, including
TV, ceiling fans, mineral water, CFLs, Banks, and
Insurance etc. Results of 12 more products and 7 services
are in the pipeline.
Anybody can access to their portal www.consumervoice.
org and seek legal counselling, guidance or advice
on consumer related matters and can also air his opinions
and consumer grievances through blogging. Consumer
Voice also maintains a 24X7 helpline on 0124-3989-8080
for counselling or redressal of consumer grievances.

VIEW TAX STATEMENTS ONLINE

One of the most useful but under-utilized facility
available to tax payer to view the consolidated tax
statement online. This facility is available under the tax
information network and accessible thru NSDL web site
www.tin-nsdl.com. This feature will assume significance
once the dematerilisation of TDS process starts.
Consolidated Tax Statement in Form 26AS
Form 26AS is a consolidated tax statement issued under
Rule 31 AB of Income Tax Rules to the PAN holders. This
statement, with respect to a financial year, will include
details of
• tax deducted at source (TDS);
• tax collected at source (TCS); and
• advance tax/self assessment tax/regular
assessment tax etc., deposited in the bank by the
taxpayer
Information in 26AS
The Form 26AS is divided into three parts, Part A, B & C :
Part A displays details of tax which has been deducted
at source (TDS) by various deductors. The following
information will be displayed
Name & TAN of Deductor section under which
deduction made date on which payment was effected
amount paid/credited tax deducted tax deposited
Part B displays details of tax collected at source (TCS) by
the seller of specified goods. Details similar to those
displayed in Part A in respect of the seller and the tax
collected will also be available.
Part C displays details of income tax directly paid by you
(like advance tax, self assessment tax) and details of the
challan through which you have deposited this tax in the
bank.
TDS/TCS Details
• The non government Deductors deposit the tax to the
government account through a bank.
• Banks will upload this payment-related information to
the TIN central system.
• The deductors are also required to file a quarterly
statement to TIN giving the details of their TDS/TCS.
• The TIN central system will match the tax paymentrelated
information in the statement with the tax
receipt information from the banks.
• If both of these match, TIN will create From 26AS for
each PAN holder giving details of the tax
deducted/collected on this basis by every deductor
who has filed the statement.
Currently TDS / TCS details by government Deductor do
not appear in the Form 26AS

Income tax deposited in the banks
• Whenever a tax payer deposit advance tax/self
assessment tax directly to bank, the bank will
upload this information to the TIN central system
three days after the cheque has been cleared.
• This information is posted in Part C.
Usefulness of Form 26AS
The credits available in the tax statement confirm that:
• the tax deducted/collected by the deductor/collector
has been deposited to the account of the
government;
• the deductor/collector has accurately filed the
TDS/TCS statement giving details of the tax
deducted/collected on your behalf
• bank has properly furnished the details of the tax
deposited by you.
In future, you will be able to use this consolidated tax
statement (Form 26AS) as a proof of tax
deducted/collected on your behalf and the tax directly
paid by you along with your income tax return
This will happen only when the need for submission of
TDS/TCS certificates and tax payment challans along
with income tax returns is dispensed with by the Income
Tax Department (ITD). This is scheduled to happen for
the Financial year 2008-2009.
Tax details not appearing in Form 26AS
Under the following circumstances, the information
contained in Form 26AS will be incomplete
• Deductor
- has not paid the tax deducted
- has not submitted electronic tds statement
- has submitted tds statement but the challan details
are not matching with the details uploaded by bank.
- has mentioned incorrect PAN
• Bank
- has not uploaded challan details
- has made error in mentioning PAN
Currently the major problem in correct generation of tax
statement is non-matching of eTDS statements with the
challan details submitted by banks.
Viewing Tax Credit
You can view tax credit statement online by visiting View
Tax Statement link on the web site www.tin-nsdl.com.
For this you need a login and password.
Getting password is a one time activity & can be done by
• Online registration by filling up a simple form on the
web site
• Personally visiting TIN-FC for verification of identity
• After successful verification, the user id and password
will be activated

INFLATION

continued from yestarday..............

Oil fuels inflation to 11.05 per cent

Companies and consumers can expect another round of monetary tightening and administrative measures as headline inflation based on the wholesale price index crossed double digits to touch 11.05 per cent for the week ended June 7, the highest since May 6, 1995.

The inflation numbers spooked the stock markets, with the benchmark Sensitive Index dropping to its lowest in almost 10 months. The Sensex fell 516.70 points, or 3.4 per cent, to 14,571.29, its lowest since August 24. All but one stock in the index fell.

The 13-year high beat all analysts' — and the government's — expectations by almost 100 basis points and reflected the impact of the June 4 increase in auto and cooking fuels.

Petrol prices were raised by Rs 5 per litre, diesel by Rs 3 per litre and LPG by Rs 50 per cylinder after the basket of crude oil that Indian refineries buy touched $125 per barrel.

The inflation rate stood at 8.75 per cent in the previous week and 4.28 per cent in the corresponding week the previous year.

"Ninety-four per cent of the weekly jump is on account of fuel," Finance Minister P Chidambaram said in a brief statement outside his North Block office this afternoon.

"Inflation for the current week also captured rupee depreciation making imports dearer," said Dharmakirti Joshi, principal economist, Crisil.

"This is indeed a very difficult time," Chidambaram said, adding: "We will have to look at stronger measures on the demand side and the monetary side."

The government has already taken several fiscal and administrative measures like banning the export of some food items and cement, cutting import duties, banning futures trading in some items, and reducing customs and excise on petroleum products to curb the price rise.

Analysts and companies expect the inflation rate to stay above 10 per cent in the weeks ahead as the fuel price rise works its way through the system.

"The inflation rate will be around 11.45 per cent next week," said Saugata Bhattacharya, vice-president, economic research, Axis Bank, attributing the rise to an increase in private transport prices that will push up fruit and vegetable rates.

"Even by December the inflation rate will remain close to 10 per cent. It will decline only by January or February, but not below 9 per cent," he added.

"The wholesale price index does not look like coming down unless there is a very sharp correction in crude oil and commodity prices," Joshi added.

Meanwhile, with the inflation rate consistently above the Reserve Bank of India's comfort level of 5 to 5.5 per cent since February (see chart), bankers and economists expect the central bank to raise the cash reserve ratio (CRR), the proportion of deposits the central banks require banks to keep with it, 25 to 50 basis points

THE END

BY BHUVAN

MEMEBER JAB WE MET CA

REDEFINING PROFESSIONALISM.....

WINDFALL TAX

The controversial proposal to introduce windfall tax has left private oil companies in the country a worried lot. Heres all you need to know about that issue - how viable is it and whether companies are actually making windfall profits.
Windfall tax is a tax imposed on profits made by virtue of market conditions rather than companies' own efficiency, operational style or technology.
But the key question is - whether companies are actually making windfall profits?
Analysts say that if private oil companies were well integrated, then there were chances of them profiting. But refineries in India are using crude which is imported at market price.
But upstream companies which explore and produce oil do reap gains. But the quantum of oil produced by private companies is around 10 million tonnes which is insignificant, keeping in mind total consumption.
Besides, oil producing companies, as part of the production sharing contract, do pay the government a royalty which is ad valorem. So then is the government justified in contemplating windfall taxes?
It's argued that the government does not cushion the private oil companies when they make losses, then on what ground really, is it demanding a pie of the profit, if at all!
Also the high risk in the business of oil exploration and production means that without incentives like tax concessions, private players or global investment will keep a safe distance.
Analysts say it is unjustified to compare India with China, Malaysia or Venezuela, who've imposed windfall taxes in the recent past.
The question is whether the government will indulge in bad economics for the sake of political survival as it seeks a windfall in the vote of confidence next week.

VOTE OF CONFIDENCE

VOTE OF CONFIDENCE FOR UPA GOVT GOES DOWN TO WIRE

New Delhi: It is a battle that promises to go down to the wire. The UPA government still has not managed the numbers to prove its majority in Parliament on July 22.
With just five more days to go for the floor test, desperation in the UPA government is now showing. The cabinet approved a proposal to rename Lucknow airport after former Prime Minister Charan Singh. A noble move - though the main reason was to appease the party floated by Charan Singh's son Ajit Singh RLD, which has three MPs. The number crunching game:
UPA + Samajwadi Party = 261
They still need 10 votes
The half way mark = 271
RLD= 3, JMM=5, Janata Dal Secular = 2, JK NC=2
Independents, small parties = 6
Total 279
The ruling coalition has firmed up support of 261 MPs including its new found allies - Samajwadi Party. It now needs 10 more to reach the magical figure of 271 to survive the trust vote.
In comes the likes of Ajit Singh's RLD with three members, Jharkand Mukti Morcha with five MPs, Former PM Deve Gowda's Janata Dal (S) with two MPs and Jammu Kashmir's National Conference with two MPs. Add six independent MPs, and the tally reaches 279. The task of getting their support isn't getting any easy. The former allies of the ruling coalition are also ensuring the government does not sail smoothly. The Left reached out to Ajit Singh to ensure he does not commit his support to the Congress-led formation.

How To analyse a Comapny ?

The Company Analysis

The different issues regarding a company that should be examined are:
The Management

The Company

The Annual Report

Ratios

Cash flow

Management is the single most important factor to consider in a company. Upon its quality rests the future of the company. A good, competent management can make a company grow while a weak, inefficient management can destroy a thriving company. Investors must check on integrity of managers, proven competence, how high is it rated by its peers, how did it perform at times of adversity, the management's depth of knowledge, its innovativeness and professionalism.

A company may have made losses consecutively for two years or more and one may not wish to touch its shares - yet it may be a good company and worth purchasing into. There are several factors one should look at.Another aspect that should be ascertained is whether the company is the market leader in its products or in its segment. When you invest in market leaders, the risk is less. The shares of market leaders do not fall as quickly as those of other companies.The policy a company follows is also of imperative importance. What are its plans for growth? What is its vision? Every company has a life. If it is allowed to live a normal life it will grow upto a point and then begin to level out and eventually die. It is at the point of leveling out that it must be given new life.Labour relations are extremely important. A company that has motivated, industrious work force has high productivity and practically no disruption of work. On the other hand, a company that has bad industrial relations will lose several hundred mandays as a consequence of strikes and go slows.

The Annual report is the primary and most important source of information about a company is its Annual Report. By law, this is prepared every year and distributed to the shareholders. Annual Reports are usually very well presented. A tremendous amount of data is given about the performance of a company over a period of time. The Annual Report is broken down into the following specific parts:

A.The Director's Report,

B.The Auditor's Report,

C.The Financial Statements, and

D.The Schedules and Notes to the Accounts.

E. Management Discussion and Financial Analysis

A Director’s Report is valuable and if read intelligently can give the investor a good grasp of the workings of a company,The problems it faces, the direction it intends taking, dividends proposed and the future prospects of the company. The Director’s Report gives investors insights into the company. and enunciates the opinion of the directors on the economy, the industry and political situation.

The auditor represents the shareholders and it is his duty to report to the shareholders and the general public on the stewardship of the company by its directors. Auditors are required to report whether the financial statements presented do, in fact, present a true and fair view of the state of the company. It is really the only impartial report that a shareholder or investor receives and this alone should spur one to scrutinize the auditor's report minutely. The Auditors in the Auditors report will comment on any changes made in accounting principles and the effect of these changes made in accounting principles and the effect of these changes on the results. They will also comment on any action or method of accounting they do not agree with.Financial statements of a company in an annual report consist of the balance sheet, the profit and loss account and the cash flow statement. These detail the financial health and performance of the company.

The balance sheet details all the assets and liabilities a company has on a particular date. Assets are those that the company owns such as fixed assets (buildings, cars etc.), investments and current assets (stocks, debtors and cash). Liabilities are those that the company owes (trade creditors, loans, etc.) and the shareholders investment in the company (share capital and reserves). Although every bit of information available in the Balance Sheet, one must definitely look into Share capital, Reserves, Loans (both Secured and Unsecured), Working Capital (Current Assets – Current Liabilities) with special emphasis on Inventories and its valuation, and Investments. Cash can be better analysed from the cash Flow Statement. Have we spared anything in the Balance Sheet? Probably not!

The Profit and Loss account summarizes the activities of a company during an accounting period which may be a month, a quarter, six months, a year or longer, and the result achieved by the company. It details the income earned by the company, its cost and the resulting profit or loss. It is, in effect, the performance appraisal not only of the company but also of its management - its competence, foresight and ability to lead. Major items to look for in the profit & Loss Statement are Sales or Primary Income, compared with other income, if any. This helps us compare if the company has earned profit from its core operations that are likely to sustain or from non core operations (like other income, dividend from investments, interest on investments, rent from leased assets or profit from sale of assets) that may not sustain in the future. On the expenses side, operating and other expenses like salaries, selling expenses, administrative expenses and the like are to be analysed including depreciation, Interest and Finance charges. Taxation, Dividends proposed, Interim Dividend, Transfer to Reserves are other important items in the Profit & Loss Statement.The notes to the accounts are even more important than the schedules because it is here that very important information relating to the company is stated. Notes can effectively be divided into:

(a) Accounting Policies All companies follow certain accounting principles and these may differ from those of other entities. As a consequence, the profit earned might differ. Companies have also been known to change (normally increase) their profit by changing the accounting policies. The accounting policies normally detailed in the notes relate to: How sales are accounted? What the research and development costs are? How the gratuity liability is expensed? How fixed assets are valued? How depreciation is calculated? How stock, including finished goods, work in progress, raw materials and consumable goods are valued? How investments are stated in the balance sheet? How has the foreign exchange translated? And so on.

(b) Contingent Liabilities All contingent liabilities are detailed in the notes to the accounts and it would be wise to read these as they give valuable insights. The more common contingent liabilities that one comes across in the financial statements of companies are:Outstanding guarantees. Outstanding letters of credit. Outstanding bills discounted. Claims against the company not acknowledged as debts. Claim for taxes. Cheques discounted. Uncalled liability on partly paid shares and debentures.

(c) Others The more common notes one comes across are: Whether provisions for known or likely losses have been made? Estimated value of contracts outstanding. Interest not provided for. Arrangements agreed by the company with third parties. Agreements with labour.It is to be kept in mind that no investment should be made without analyzing the financial statements of a company and comparing the company's results with that of earlier years.

Ratios express mathematically the relationship between performance figures and/or assets/liabilities in a form that can be easily understood and interpreted. It is in the analysis of financial statements that ratios are most useful because they help an investor to compare the strengths, weaknesses and performance of companies and to also determine whether it is improving or deteriorating in profitability or financial strengthSales of Rs.500 million a year or a profit of Rs.200 million in a year may appear impressive but one cannot be impressed until this is compared with other figures, such as the company's assets or net worth or capital employed. It is also important to focus on ratios that are meaningful and logical . Otherwise, no useful conclusion can be arrived at. A ratio expressing sales as a percentage of trade creditors or investments is meaningless as there is no commonality between the figures. On the other hand, a ratio that expresses the gross profit as a percentage of sales indicates the mark up on cost or the margin earned.Ratios can be broken down into four broad categories:

(A) Profit and Loss Ratios These show the relationship between two items or groups of items in a profit and loss account or income statement. The more common of these ratios are:

1. Sales to cost of goods sold.

2. Selling expenses to sales.

3. Net profit to sales and

4. Gross profit to sales.

(B) Balance Sheet Ratios These deal with the relationship in the balance sheet such as :

1. Shareholders equity to borrowed funds.

2. Current assets to current liabilities.

3. Liabilities to net worth.

4. Debt to assets and

5. Liabilities to assets.

(C) Balance Sheet and Profit and Loss Account Ratios.These relate an item on the balance sheet to another in the profit and loss account such as:

1. Earnings to shareholder's funds.

2. Net income to assets employed.

3. Sales to stock.

4. Sales to debtors and

5. Cost of goods sold to creditors.

(D) Financial Statements and Market Ratios These are normally known as market ratios and are arrived at by relation financial figures to market prices:1. Market value to earnings and2. Book value to market value.Ratios do not provide answers. They suggest possibilities. Investors must examine these possibilities along with general factors that would affect the company such as its management, management policy, government policy, the state of the economy and the industry to arrive at a logical conclusion and he must act on such conclusions. Ratios are a terrific tool for interpreting financial statements but their usefulness depends entirely on their logical and intelligent interpretation.

Golden Quotes

People laugh because I am different
and I laugh because they are all the same...
That's called ATTITUDE

CA PASS OUT PARTY

CA PASS OUT PARTY OF JAB WE MET CA (CHANDIGARH )

DATE :-20TH JULY 2008

VENUE:-THE PARTY CLUB,SCO 215-217,SEC 34,CHANDIGARH

TIMINGS: 10A.M TO 3 P.M

CA’S Who enjoyed the CA pass out party of JAB WE MET CA on 20th july,08 …….

1. MANOJ GARG
2. SOURABH SONI
3. MOHAN
4. SANDEEP SYAL
5. DEEPAK
6. ANKIT GOYAL
7. SOPHIA KHATTAR
8. GURVINDER SINGH SAINI
9. AMAN PREET KAUR
10. RICHA SAINI
11. VIVEK SAHNI
12. ABHISHEK
13. SATBIR
14. ASHUTOSH
15. VIKAS SHARMA
16. DEEKSHA
17. POOJA
18. MANEET KAUR
19. RIDHIMA
20. SUCHETA
21. AKHIL GUPTA
22. BHUVAN
23. RAGHAV
24. ABHASH
25. HEMANT
26. KRISHAN
27. NARESH
28. NIPPUN ARORA
29. PARAS GUPTA
30. RUPESH
31. SUKHWINDER SINGH
32. VIKRAM
33. VIKAS CHANDEL
34. GAURAV MISHRA
35. TAMANNA
36. RAJIV AGGARWAL
37. MANPREET SINGH
38. VIKAS ATTRI
39. SACHIN MEHTA
40. MUNISH SHARMA
41. VARUN SOOD
42. VIKAS KAPAHI
43. AKANKSHU SINGHAL
NEXT PARTY OF JAB WE MET CA IS GOING TO BE ORGANISED SOON……………..