The Karnataka High Court held that where one of products of assessee had been got prepared
from a manufacturing company on certain terms and conditions, transaction entered into between
assessee and manufacturing company was a contract for work and not contract for sale.

The Mumbai High Court held that the reasons recorded by Assessing Officer, in fact, merely indicated a reason to believe that income of assessee had escaped assessment and there was no reference whatsoever to formation of an opinion that there was a failure on part of assessee to fully and truly disclose all material facts necessary for assessment, reopening of assessment beyond period of four years was contrary to law.

• The Delhi High Court held that Assessing  Officer could not restrict assessee's claim for depreciation by making changes in costs of various assets on estimated basis.

• The Delhi ITAT bench held that where amount in question was advanced to assessee in pursuance of memorandum of agreement for developing plots of land belonging to assessee into commercial building, such advance could not be treated as deemed dividend.
• The Rajasthan High Court held that where assessee-firm had received an advance from a  company and it was assessee's partners who were shareholders in said company and not assessee-firm, such an advance could not be taxed as deemed dividend in hands of assessee-firm

The Mumbai ITAT bench held that assessment order without signature of Assessing Officer is
invalid.

The Authority for Advance Rulings (Income tax), New Delhi held that payment received by
applicant, an Australian company, from its Indian distributor for sale of applicant‘s software
product in India is Royalty.

The Delhi ITAT bench held that Reliance on CA's opinion which dealt with accounting for expense
(not its deductibility under the Act) will not save assessee from penalty under section 271(1)(c)

The Rajkot ITAT bench held that assessee company having not maintained proper record of its inventory, rejection of its books was justified.

The Hyderabad ITAT bench held that deduction under section 54F not available where assessee
purchased a residential house not from her own fund but from fund borrowed from bank and relatives.

The Kolkata ITAT bench held that no TDS under section 194H required on payment of brokerage paid to an agency for facilitating  derivatives trade.

The Kolkata ITAT bench held that 6 months time-limit for investment in bonds under section  54EC of the Income-tax Act, 1961 to be reckoned from date of receipt of part payments,  not from date of transfer under section 53A of the Transfer of Property Act.

The Delhi ITAT bench held that merely because assessee, a US company, appointed agents in India and also opened liaison offices in India, it could not be said that assessee has a Permanent Establishment in India.

In a major relief to banks, the Supreme Court has held that they can claim deductions for entire bad
debts written off in respect of both rural and urban advances. It reversed the judgment of the full
bench of the Kerala High Court that held that banks can claim deduction of the bad and doubtful debts actually written off only to the extent it exceeds the credit balance created and allowed as deduction, in view of Section 36(1)(vii), which limits the  deduction allowable under the proviso to the excess over credit balance made under Clause (viia) of Section 36(1) of the Income Tax Act 1961.

The Central Board of Direct taxes (CBDT) has notified for salaried persons not filing an income-
tax return despite having taxable income for the upcoming assessment year 2012-13. The conditions are that the total income should not  exceed Rs 5 lakh, including salary and savings bank interest, if any, not exceeding RS 10,000. Such  interest needs to be disclosed to the employer, who would deduct tax on salary as embellished  by savings interest. The rules make it clear that, just as no tax should due either.

Seeking more transparency in the wake of mounting workload, the information and broadcasting (I&B) ministry is planning to hire a  panel of chartered accountancy firms which will scrutinize and evaluate the various financial and technical data provided by the broadcasters, FM  radio companies and DTH operators. The job includes verification of net worth, cases of mergers/demergers, disinvestments, verifi- cation of gross revenue figures of DTH and FM radio operators, determination of interest on delayed payments and cases referred to the foreign investment promotion board (FIPB),
among others.

Seeking more transparency in the wake of mounting workload, the information and broadcasting (I&B) ministry is planning to hire a panel of chartered accountancy firms which will scrutinize and evaluate the various financial and technical data provided by the broadcasters, FM radio companies and DTH operators. The job includes verification of net worth, cases  of mergers/demergers, disinvestments, verifi- cation of gross revenue figures of DTH and FM radio operators, determination of interest on delayed payments and cases referred to the foreign investment promotion board (FIPB),
among others.

The Forward Markets Commission (FMC), the commodity futures market regulator will now put
in place a written guideline, making audits of each of the 2,500 active brokers once every three
years a mandatory affair. The regulator and exchanges will audit around 800-900 members
each year of five national commodity exchanges - MCX, NCDEX, National Multi Commodity
Exchange, Kotak-promoted Ace Exchange and Reliance ADA-anchored Indian Commodity
Exchange. In total, there are nearly 5,100 members who trade in 66 commodities. 

The Maharashtra government has made it mandatory for the co-operative sugar industry to perform cost and energy audits.

In a new twist in the tussle between Lilliput Kids  wear promoter Sanjeev Narula and investors Bain
Capital and TPG, the Delhi High Court-appointed auditor, SS Kothari Mehta & Co, has expressed
inability to complete the court-directed audit. The auditor’s withdrawal could have a significant
bearing on the sale of the business initiated by all shareholders. The auditor has cited the company’s
non-cooperation in the audit as the reason. Last November, the court had mandated SS
Kothari Mehta & Co to probe the company’s books and review an earlier audit carried out by
SR Batliboi. SR Batliboi resigned as external auditor after Lilliput’s board disapproved of the
company’s financial statements by a majority vote at a meeting on September 28 last year amid
questions over the authenticity of the company’s books

Section 433:

• The Karnataka High Court held that where liability of a company was more than its assets  and it was unable to clear debts of creditors, company was to be ordered to wound up.
• The Karnataka High Court held that winding up petition on basis of acknowledgement by company of outstanding consultancy fees after expiry of period of limitation would not be  admissible.

In a major reform initiative, the Delhi government has decided to completely do away with stamp
paper of all denominations and shift to electronic-stamping facility, a move aimed to ensure hassle-
free transactions and prevent fraudulent practices. Currently, e-stamping is applicable to values of
` 501 and above; but, the Government has now decided abolish stamp papers of all  denominations, which will mean people will have to pay stamp duty for sworn affidavits, agreement of tenancy, mortgage deeds, power of attorney and other instruments through e-stamping facility.

In keeping with its trend to move with times in matters economic, the Supreme Court vide its recent order in GRIDCO Ltd v. Sadananda Doloi held that when a person accepts a tenured job (for three years in this case) he cannot demand for application the same sympathetic considerations that apply to regular employees so long as the removal order was not vitiated by mala fides and was as per the contractual agreement. Quashing the order of the Division  Bench of the Orissa High Court which had held  the removal of the respondent illegal, the Supreme Court made among other things the following telling observations: “We need to remind ourselves that in modern commercial world executives are  engaged on account of their expertise in a particular field and those who are so employed are free to leave or be asked to leave by the employer. Contractual employments work only if the same are mutually beneficial to both the contracting parties and not otherwise.” The Court has also observed that those taking up contractual employments do so on their own volition and must be prepared to face the consequences if their contracts are not renewed at the end of each tenure. 

The Securities and exchange board of India (SEBI) has prescribed a standard format for a
letter of offer in a buyback. The circular comes into force with immediate effect. The disclosures include details of the buyback; its necessity; management view on the likely impact of the buyback; basis of offer price and the source of funds for the buy back; change in capital structure and shareholding pattern after the buyback; financial information about the company; procedure for tender/offer and settlement and collection centres; taxation issues; process and methodology for the buyback and  other details required as per the extant regulations.

The Securities and Exchange Board of India (SEBI) shot down a proposal by phrama firm
Strides acrolab to issue warrants worth Rs 260 crores on a preferential basis to its promoters.
The regulator, in an informal guidance to the company, said the rules governing preferential
allotments would be applicable for inter–se transfers within the promoter group.

In a move that will make buybacks more friendly for small shareholders, the Securities and
Exchange Board of India (SEBI) announced that 15% of a buyback offer will have to be reserved
for such investors. A small shareholder has been defined as one who holds shares with market
value not exceeding Rs 2 lakhs.

In a move that will make buybacks more friendly for small shareholders, the Securities and  
Exchange Board of India (SEBI) announced that 15% of a buyback offer will have to be reserved
for such investors. A small shareholder has been defined as one who holds shares with market
value not exceeding Rs 2 lakhs.

The Delhi High Court held that interest at the rate of 6% per annum under Rule 8 could have been
awarded to the respondent on the seized Indian currency only. The learned Single Judge has while
applying the said Rule also awarded interest on the seized foreign currency, which cannot be
sustained.

As per the Reserve Bank of India (RBI) circular dated February 15, 2012, it is clarified that the
extant regulations do not prescribe any reporting requirements for transactions where a person
resident outside India who is a citizen of India or a person of Indian Origin (PIO) as defined in
Regulation 2(C) of Notification No. FEMA 21/ 2000-RB, ibid, acquire/s immovable property in
India in accordance with the said provisions of the aforesaid Notification. Form IPI has been,
accordingly, amended for greater clarity.

The Telecom Regulatory Authority of India (TRAI) has recommended lowering the foreign direct investment (FDI) cap on telecom tower companies to 74%, a move that will adversely impact the Indian operations of Nasdaq-listed American Towers (ATC) as well as stake sale plans of other tower units. At present, 100% foreign direct investment is allowed in tower companies but TRAI wants to lower this limit and bring it on a par with other telecom services, which are subject to a 74% cap.

The Reserve Bank of India (RBI) has upped the limit for release of foreign exchange for imports
by persons, firms and companies without any documentation formalities from $500 or its equivalent to $5,000 or its equivalent, with immediate effect.

The Reserve Bank of India (RBI), which has taken a firm stand against allowing external commercial borrowings (ECBs) in the real estate  sector, now wants to clamp down on overseas investments in the sector through instruments that carry a fixed or variable internal rate of return. The central bank seems to be clear on allowing only pure foreign direct investment (FDI) in real estate where not firms but only specified projects can accept these foreign funds.

The Reserve Bank of India (RBI) has allowed banks to permit exporters to receive advance payment for shipment of goods that would take more than a year to manufacture, a step which would reduce transaction time.

The Reserve Bank of India (RBI) has allowed banks to permit exporters to receive advance payment for shipment of goods that would take more than a year to manufacture, a step which would reduce transaction time.

In a bid to give more options in long-term investments and to hedge interest rate risks for life insurance companies, The Insurance Regulatory and Development Authority (IRDA)  
may allow investments in equity derivatives and credit default swaps (CDS).

Punjab National Bank, the country’s second largest lender, wanted to buy 30 per cent stake in MetLife Insurance for Rs 1, but the deal has run into a regulatory hurdle. The Insurance Regulatory and Development Authority (IRDA) is scanning the contours of the deal as it is not comfortable with the valuation, though the Reserve Bank of India (RBI) has given its approval to PNB.

Armed with duty-free treaty with India, Bangladesh is aiming $1 billion export by this June and has also begun wooing Indian companies to invest in the neighboring country with SEZs targeting only Indian companies. India Bangladesh Chamber of Commerce & Industry President A M Ahmed said that “With duty-free export to India, we are expecting the Bangladeshi export should increase to $1 billion by June 2012 from $500 million last year.”

The foreign investment promotion board (FIPB) has accepted some of the stiff riders proposed
by the health ministry for pharmaceutical companies trying to acquire Indian firms.

To strengthen tie-ups between defence public sector undertakings and their private partners, the Union Cabinet approved guidelines for setting up joint ventures. Government rules only allow 26 per cent foreign direct investment in the defence sector. A European defence company official said that “Public sector companies are not too keen to create new companies holding majority shareholdings. The new guidelines will allow a domestic private sector company to tie up with a foreign private sector company and form a joint venture with the defence Public Sector Undertakings (PSU).”

The Reserve Bank of India (RBI) has asked the banks to display the list of unclaimed deposits/ inoperative accounts which have been inactive /inoperative for ten years or more on their respective Web sites.

The RBI had set up a committee to review various important aspects of audit of public sector banks. The committee, despite serious objections by the Central Council of the Institute of Chartered Accountants of India, gave its interim report recently which inter alia include exemption from audit of branches having Rs. 100 crore advances for large banks and Rs. 50 crore advances for mid size banks. On the basis of the report, RBI has recommended that all the branches of public sector banks
having less than Rs. 20 crore advances should be exempted from audit, except once in 5 years. The Central Council of the ICAI is of the strong view that any such decision may seriously impact the financial discipline of the public sector banks and may result into unprecedented increase of indiscreet lending or even Frauds in banks. The Central council felt that it may be difficult for central statutory auditors to express an opinion about true and fairness of the Financial statements of the respective banks , in the absence of audit of majority of the bank branches except very small branches up to Rs. 3 crore / Rs. 5 crore. The Central Council must express its  concerns to the RBI as well as to the Government well in advance. that any such decision may seriously impact the  financial discipline of the public sector banks and may result into unprecedented increase of  indiscreet lending or even Frauds.in banks.

It is very important that Lakhs of crores advances, deposits and other banking operations do not remain without adequate audit. The Central Council members and various other leading chartered accountants have met the Corporate Affairs Minister, several leaders of Congress and BJP beside top of officials in RBI and Ministry of Finance, to highlight the problem the Indian Banking Sector can face in the absence of adequate in depth audit. It is suggested that an independent organisation such as Accounting Research Foundation may be asked to prepare a report based on audit reports/ LFARs made by statutory auditors of such branches which are likely to be exempted, as to highlight the areas/ quantum which shall get exposed if audits of such branches are not taken up. The claim of some of the banks that they are paying very high audit fee, as compared to private sector banks, is baseless as they have not realized their size, number of borrowers, risk of money laundering and most
importantly fragile internal control system and MIS system in public sector banks. In case of private sector banks most of the loan documents, securities, loan processing, credit authorization are all centralized, whereas to meet the inclusive growth agenda of the Government, public sector banks have delegated large powers in respect of  sanction of loans, documentation, credit monitoring and
loan records at the branch level.

In a recent meeting, with Sh. Pranab Mukherjee, a delegation of ICAI led by Mr. Veerapa Moily, Minister of Corporate Affairs and President of the Institute, the Council of the Institute have elaborately explained the risk which may be faced by the banking sector arising out of reduction of number of audits. Mr. D.K. Mittal, Secretary Department of Financial Services,  Government of India was also present. Shri Mukerjee gave a patient hearing to the matter. We hope that good wisdom would prevail and this matter is at least postponed to enable detailed preparation and examination of all the risk areas on the one hand and means of reduction in cost of audit in banks.

The C A profession is committed to win over any attempt to destabilize India's biggest
 strength a resilient Banking sector. We also strongly oppose the delegation of powers to
appoint auditors in the hands of bank management and the Board. The  independence, integrity and excellence of auditors are very crucial for the banking  sector especially in public sector and for  safeguarding the interest of the society as a whole.