IAS-2 (TECHNICAL SUMMARY)

Technical Summary

This extract has been prepared by IASC Foundation staff and has not been approved by the IASB. For the requirements reference must be made to International Financial Reporting Standards. IAS 2 Inventories
The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognised as an asset and carried forward until the related revenues are recognised. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
Inventories shall be measured at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
The cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
The cost of inventories shall be assigned by using the first-in, first-out (FIFO) or weighted average cost formula. An entity shall use the same cost formula for all inventories having a similar nature and use to the entity. For inventories with a different nature or use, different cost formulas may be justified. However, the cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects shall be assigned by using specific identification of their individual costs.
When inventories are sold, the carrying amount of those inventories shall be recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories shall be recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, shall be recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

5 reasons why windfall profits tax is wrong

A day after Reliance Industries [Get Quote] chairman Mukesh Ambani met Prime Minister Manmohan Singh to forestall political attempts to throttle his oil refinery business, the petroleum ministry has come out with a detailed presentation to show that the demand for the windfall profits tax (WPT) on private oil companies is 'short-sighted populism' and 'bad economics.'
The ministry claims that WPT would neither help in reducing prices of petroleum products nor would it lead to any increase in output. WPT could lead to lower investment in the petroleum sector and undermine India's energy security, the presentation cautions.
Concerned that the WPT would make investment and production by the domestic oil companies more expensive, the ministry says these companies should be incentivised to go in for drilling and that any deterrent will slow down any research that could help make future energy in the country less expensive.
In a note, prepared in response to first the Left and now the Samajwadi Party leader Amar Singh's demand for windfall profits tax, the ministry has given five reasons why such a tax defies logic. These are:
* India is neither a major oil producer nor Indian companies have gained much from the rising global prices of oil. * The government is bound by the contract of the production sharing agreement as part of the NELP (New Exploration Licensing Policy). * As part of the profit sharing plan, the government is already a beneficiary of the rise in profits of oil companies, besides 35 per cent corporate tax on such profits. * WPT on the basis of revenues in discovered blocks ignores the huge risks, investments and poor chances of discoveries. * WPT will discourage long-term investments in oil industry.
The ministry points out that all over the world discerning opinion leaders see windfall profits tax as no more than a populist political tool designed to make people feel good.
The ministry's note asserted that the clamour in India for such a tax is based on the misleading logic that the rising prices of oil across the globe has helped the oil companies make profits far in excess of what they legitimately deserve.
What about the profit margins in other businesses during boom periods, the ministry asked, and

Put mobile payment services on hold-RBI

RBI asks banks to put mobile payment services on hold

In a significant decision, the Reserve Bank of India (RBI) has restrained banks in launching their mobile payment services for the time being. In a notification on Tuesday RBI said that all the banks, which have already started their mobile payment services, will have to suspend them till the issuance of final guidelines.
The RBI found that there are a number of attendant issues and therefore, has asked banks to keep on hold their mobile payment services till issuance of the final guidelines.Banks have been told that they may also dissociate themselves from any mobile based money transfer service which has not received explicit approval of RBI or not covered by any of the guidelines issued by the central bank, the central bank said.
The central bank observed that a few banks have already started offering mobile payment services to their customers without waiting for the release of RBI’s guidelines.
Recently, few banks like Standard Chartered, ICICI and Barclays have been seen offering mobile payment services.”While the RBI has no objection for use of mobile channel to provide basic services such as mobile alerts for credit or debit entry, balance enquiry etc, which are in the nature of providing information, due care needs to be taken for permitting the channel for customers to initiate payment instructions,” the RBI said in its statement issued on mobile payments in India - operating guidelines for banks, on Tuesday.
Speaking on this matter, an ICICI Bank spokesperson said, “As far as our mobile banking facility is concerned, the withdrawal of cash happens only through the branch banking and so, we adhere to all RBI regulations. Our mobile banking facilitates the money transfers across bank accounts.”
Meanwhile, the RBI is in the process of finalising the operative guidelines for banks on mobile payments. The draft guidelines were placed on the RBI website and a number of comments have been received.
The comments are being compiled and after evaluation of the comments, the final guidelines would be issued, the RBI said.

IMPORTANT & RECENT CUSTOME CASES

Customs - UNITED TELECOMS LTD. Versus COMMISSIONER OF CUSTOMS, BANGALORE = 2008

Date of Decision: July 14, 2006 - CESTAT, BANGALOREAppellant is seeking condonation of delay of 299 days in filing the appeal - due to various other commercial reasons, appellant didn’t file appeal but decide to pay the duty liability – changed view to file an appeal after a lapse of 299 days cannot be a reason to condone the delay – appellant has filed the appeal only to take advantage of subsequent judgments - no sufficient cause to condone - application suffers from lapse and negligence and hence the application is rejected
Customs - COMMISSIONER OF CUSTOMS, AMRITSAR Versus SHARMAN WOOLLEN MILLS = 2008

Date of Decision: October 11, 2006 - CESTAT, NEW DELHIIn this application, the Revenue has prayed to stay the operation of the impugned order of Commissioner (Appeals) and to pass such order or orders as may be deemed fit and proper in the interest of natural justice Rule 41 of CESTAT (Procedure) Rules, 1982 – held that Rule 41 relates to the orders of the Tribunal and not to those of authorities below - no prima facie case has been made out in Revenue’s favour - application filed by the Revenue merits no consideration

IF YOU NEED MORE CUSTOME CASE LAWS MAIL TO ME AT casatbirgill@gmail.com

SATBIR SINGH

PRESIDENT

JAB WE MET CA

REDEFINING PROFESSIONALISM.......

IMPORTANT & RECENT EXCISE CASES

Central Excise - Godrej Industries Ltd. Vs. D.G. Ahire Assistant Collector Of Central Excise & Another = 2008

Date of Decision: July 9, 2008 - SUPREME COURT Liquid hair dyes – classification - there was no specific entry relating to "hair dyes" under CET however, "hair lotion" is specified under Tariff Item 14F - Demand under Tariff Item 14F of the First Schedule to the Central Excise and Salt Act, 1944 – said product could not be treated as a lotion to be used as a scalp or hair nourisher or for medicinal purposes - appellant's preparation was poisonous and had to be used with great care – demand according to Tariff Item 14F was erroneous

Central Excise - OMEGA CABLES LTD. Versus DEPUTY COMMISSIONER, CHENNAI-II = 2008

Date of Decision: January 31, 2006 - HIGH COURT MADRASThere is an order of Tribunal, fixing the liability on the petitioner to pay the duty and when there is admittedly no stay against that order is passed, the first respondent (Revenue) is entitled to make a demand for payment of the duty - Such a demand is perfectly legal and the first respondent cannot be restrained from making the demand - The petitioner has not made out a case for issuing the writ

Central Excise - COMMISSIONER OF CENTRAL EXCISE, LUDHIANA Versus VALLABH STEEL LTD. = 2008

Date of Decision: August 7, 2006 - HIGH COURT OF PUNJAB & HARYANA Commissioner while accepting the abatement claim of the assessee recovery of demand & penalty was ordered – Tribunal quashed the demand & penalty - contention raised by Revenue that the Tribunal could not go into the issue which was not subject matter of the order appealed against, is totally misconceived & liable to be rejected - CBEC should look into the matter with regard to filing of appeals in the matters involving petty amount, as in the present case
Central Excise - RAYALASEEMA PAPER MILLS LTD. Versus COMMISSIONER OF C. EX., HYDERABAD-II = 2008

Date of Decision: December 7, 2005 - CESTAT, BANGALOREAction of the department of issuing SCN to initiate proceedings of penal provisions after the adjudication, is not sustainable in the eye of law - issue is also decided in a similar matter by the Calcutta (sic) imposition of penalty, once decided as held by the Calcutta High Court - Commissioner was bound by the said judgment yet he has not followed the same, which is not correct – SCN can’t be held legal hence penalty are not imposable

IF YOU NEED MORE SUMMARIES OF CENTRAL EXCISE CASES, MAIL TO ME AT casatbirgill@gmail.com

WITH REGARDS

SATBIR SINGH

PRESIDENT

JAB WE MET CA

REDEFINING PROFESSIONALISM.......

IMPORTANT INCOME TAX RECENT CASES

Income Tax - M/S DELHI INTER EXPORTS PVT LTD. versus THE COMMISSIONER OF INCOME TAX = 2008
Date of Decision: July 9, 2008 - HIGH COURT OF DELHI Tribunal is correct in law in holding that the assessee company, who is procuring export orders from the foreign buyers and passing on to the manufacturers or dealers is not entitled to weighted deductions u/s 35 B of Income Tax Act- in view of sub-section (1A) of 35B which is a non obstante provision, since the assessee is not engaged in the business of export of goods, the deductions cannot be allowed to the assessee – question is answered in favour of the revenue
Income Tax - S.K.BAHADUR versus UNION OF INDIA and OTHERS = 2008
Date of Decision: July 10, 2008 - HIGH COURT OF DELHI Appellant had raised the issue of jurisdiction in the writ petition and had made specific prayers with regard to the assessment proceedings - Tribunal disposed of the appellant’s pending appeals without a reference to the pleas raised by the appellant with regard to jurisdiction pursuant to the liberty granted by this Court – assessee’s submission that he may be permitted to withdraw the present appeals with liberty to approach the Tribunal for rectification u/s 254(2), is accepted
Income Tax - Commissioner of Income Tax, Delhi-VI Versus M/s Oriental Insurance Co. Ltd. = 2008
Date of Decision: July 18, 2008 - SURPEME COURT HC dismissed revenue appeal (against deletion of additions by tribunal) on ground that dept. can’t file appeal without getting clearance from Committee of Disputes (COD) & held that same has to be done within a month - action of dept. can’t be said illegal merely for delay in approaching to COD - order of HC is set aside & directed to consider the question of desirability to proceed in the matter before it on receipt of the report from COD - COD has to consider the matter on merits
Income Tax - C.K. Gangadharan & Anr. Versus Commissioner of Income Tax, Cochin
Decision: July 21, 2008 - SUPREME COURT Assessee takes the stand that the revenue acted mala fide in not preferring appeal in one case and filing the appeal in other case – assessee not established malafides of revenue – revenue contention that because of the small amount of revenue involved & because of revenue neutrality, no appeal is filed, is acceptable – held that merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case

IF YOU NEED MORE SUMMARIES OF INCOME TAX CASE LAW JUST MAIL TO ME AT casatbirgill@gmail.com
WITH REGARDS
SATBIR SINGH
PRESIDENT
JAB WE MET CA

RECENT SERVICE TAX CASE LAWS

Service Tax - R.B. AGENCIES Versus COMMISSIONER OF CENTRAL EXCISE,

Date of Decision: July 3, 2007 - CESTAT, BANGALOREAppellants merely purchase SIM cards and recharge coupons from BSNL and sell the same for a profit - It is also seen that Sales Tax Authorities are proceeding against the similarly situated parties for payment of Sales Tax - Bench had already taken a view that the appellants do not render any service but simply sell the goods - Therefore, they would not be liable to pay Service Tax under the category of “Business Auxiliary Services” – assessee’s appeal allowed

Service Tax - HINDUSTAN CONSTRUCTION CO. LTD. Versus COMMR. OF C. EX., COIMBATORE = 2008

Date of Decision: April 30, 2008 - CESTAT, CHENNAIAgreement involved HCCL undertaking work of engineering design as well as construction of Water Treatment and Distribution Project (TWP) - HCCL did not render engineering consultancy to client - Therefore the impugned amount of service tax paid as Consulting Engineer by assessee (HCCL) was not due to be paid – refund of same is allowed
Service Tax - CCE, COIMBATORE Versus COIMBATORE KANARAGA LORRY URIMAIYALARGAL NALA TRUST

Date of Decision: May 2, 2008 - CESTAT, CHENNAIActivity of sale of petroleum products by appellants on behalf of Bharat Petroleum Corporation Ltd.- respondents claim itself to be a Trust functioning without profit motive – appellate authority held that the Trust was not a commercial concern & hence exempted from tax under Business Auxiliary Service - provisions of Trust Deed require to be examined for the purpose of determining as to whether the respondents can be treated as a commercial concern – matter remanded for de novo adjudication
Service Tax - R. SUKUMAR Versus COMMR. OF C. EX., TRICHY = 2008

Date of Decision: March 11, 2008 - CESTAT, CHENNAIInvestigation report did not indicate mens rea or contumacious conduct on the part of the assessee to evade service tax - appellant paid the tax due along with interest before issue of the Show Cause Notice - penalty can be imposed under Section 78 only if a service provider has evaded payment of duty by fraud, wilful suppression, collusion etc. - instant case is a fit one to grant relief provided under Section 80 – assessee’s appeal allowed
Service Tax - COMMR. OF C. EX., BELGAUM Versus PRATIK AGENCIES = 2008

Date of Decision: April 10, 2008 - CESTAT, BANGALORECommissioner (A) hold reimbursable amounts are not to be included for calculating the service tax - service tax is only on the Commission received for C&F agency services - Comm. (A) remanded the matter to Original Authority to examine the claim of the appellants in the light of the evidences to be produced – order of comm..(A) is correct – since assessee made entire position clear to dept. about paying tax excluding the reimbursable amount, larger period not invocable – dept. appeal dismissed
Service Tax - SANDEEP SOBTI Versus COMMR. OF C. EX., MEERUT = 2008

Date of Decision: April 2, 2008 - CESTAT, NEW DELHISCN issued proposing demand under Rent-a-cab Scheme Operator – Assessee not replied SCN - demand confirmed by original authority vide its ex parte order – assessee contends that running buses on hire shall not come under Rent-a-cab Scheme Operator - orders of the lower authorities is set aside & matter remanded to the Original Authority – Dept. is also directed to check up the factual position from the RTO authorities regarding category/type of the vehicles used by the appellant
Service Tax - SHEWALKAR HOTELS Versus COMMR. OF C. EX., NAGPUR = 2008

Date of Decision: April 28, 2008 - CESTAT, MUMBAIIssue is regarding the amount received by the applicant from the Franchiser as rent – revenue alleged that assessee has sold goods from his premises so duty is payable under Business auxiliary services - It is seen from the records that the agreement is franchisee agreement - application for waiver of pre-deposit of the amounts is allowed and recovery thereof stayed

GOLDEN QUOTES

Ego provides the soul with all the ingredients of unpopularity.

E-PAYMENT FROM ANOTHER PERSON ACCOUNT

The Central Board of Direct Taxes has issued Circular No. 5/2008 dated 14th July 2008 clarifying the following things -
With a view to facilitating electronic payment of taxes by different categories of taxpayers, it is hereby clarified that, an assessee can make electronic payment of taxes also from the account of any other person. However, the challan for making such payment must clearly indicate the Permanent Account Number (PAN) of the assessee on whose behalf the payment is made. It is not necessary for the assessee to make payment of taxes from his own account in an authorized bank.
Further, it is also clarified that payment of any amount by a deductor by way of tax deducted at source (TDS) or tax collected at source (TCS) shall fall within the meaning of `tax' for the purpose of the rule 125 of the Income-tax Rules, 1962.

JAGO GRAHAK JAGO (CONSUMER BEAWARE)

CONSUMER RIGHTS VINDICATED
Railways held responsible for Passenger Safety
While consumers generally tolerate the lack of service in Railways, it causes immense trauma and distress when one's safety is at stake due to inefficiency and abdication of responsibility of Railway and State Police. Mr. S L Bhargava reserved tickets for himself and his companions on Musssourie Express from Delhi to Hardwar in 1997. Barely had the train crossed Ghaziabad that a mob participating in a rally entered the coaches shouting slogans ,making catcalls and making travelling extremely difficult for the passengers with reservations. The passengers had to suffer sheer mental agony and physical pain due to the unruly presence of the mob in the coaches. The passengers had to remain holed up in the coaches without being able to avail the basic amenities till the train reached its last
destination. No Railway police or TTE staff was available on the scene. Mr. Bhargava filed a complaint with a consumer court for deficiency in service by Railways. But in response the
Northern Railways said that the complaint was not maintainable because the complainant was not a consumer, that the District Forum had no territorial jurisdiction and that the compensation claimed was excessive. The Northern Railway denied liability for the situation by claiming that the situation was beyond their control. The Delhi State Commission did not view such reasons sympathetically and said that such an incident demonstrated grossest kind of deficiency in service on the part of a huge organisation like the Railways. Not only the Railway have its
own police, it also has the services of the State Police at its disposal. The Commission further noted that Railways cannot absolve itself and runaway from their responsibility of providing perfect, faultless service, apart from protecting the life and property of the consumer which is very essential. The State Commission awarded a compensation of Rs.25000 for the mental agony, trauma and harassment suffered by the consumer and Rs.5000 as cost of litigation.
S L Bhargava vs Northern Railway, I (2007) CPJ 92 Delhi SCDRC