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Monday, December 15, 2014
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ICAI terminates membership of Satyam auditors

The Institute of Chartered Accountants of India (ICAI) has terminated the membership of the auditors, internal auditors & accountants of Satyam Computer Services for whole life. The institute has also imposed a fine of Rs 5 lakh on each of them. This is maximum punishment the ICAI can award for such misconducts.
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SEBI tightens Delisting and Insider Trading Regulations


  • Delisting and buyback offer should be done through exchanges
  • At least 25% of the total number of public shareholders will have to be sought by Cos
  • Offer price will be based on an average of promoters' offer price and investors' tender price with a threshold of 90% of equity
  • Promoter cannot make a delisting offer if group entity has sold shares within 6 months of the board meeting to decide delisting
  • Option to the acquirer to delist directly through Delisting Regulations pursuant to triggering takeover regulations provided.
Insider Trading

  • All persons and their immediate relatives with a contractual, fiduciary or employment relationship with the company, with access to unpublished price sensitive-information, included as insider
  • Insider have to disclose trading plan on stock exchanges
  • Directors and management prohibited from F&O trading
  • The onus of proving that they were not in possession of the price-sensitive information has been put on them.
Mutual Funds
  • AMCs, yet to meet with net-worth norm of Rs 50 crores, can launch only two schemes a year.
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NSE launches online complaint window

The NSE (National Stock Exchange) has put in place a system to register a complaint on its website. Investors/public has the option to provide details on the matter either anonymously or otherwise on violations/manipulations by market participants that may adversely affect the market quality and integrity.
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Company Secretary to act as Compliance Officer: SEBI

Market regulator SEBI has mandated the appointment of Company Secretary as compliance officer for the purpose of the newly- framed listing regulations. The latest SEBI requirement widens the area of responsibilities of a Company Secretary and makes him solely responsible for compliance of listing regulations, according to capital market observers.
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BIFR sole authority to move companies out of its supervision: Supreme Court

The Supreme Court has held that the Board for Industrial and Financial Reconstruction (BIFR) will continue to have jurisdiction over any sick company referred to the agency even if its net worth becomes positive. The board is also the sole authority to decide whether or not such a company can be moved out of its supervision, the court observed.
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Ministry offers clarity on issuance of Foreign Currency Bonds

It is clarified by Minstry of Corporate Affairs (MCA) that the provisions related to prospectus and allotment of securities under the new companies law will not be applicable to foreign currency bonds that are issued exclusively to persons residing outside India. New FCCBs guidelines are being worked out by the ministry.
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Revival of a sick company to take precedence over recovery proceedings, SC rules

The Supreme Court has said that the revival of a sick company will take precedence over recovery proceedings. The provisions of the Sick Industrial Companies Act (SICA), 1985, will prevail over the Recovery of Debts Due to Banks and Financial Institutions (RDBB) Act, 1993, said a three-judge bench, headed by chief justice of India HL Dattu.
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Land acquisition will lapse for non-payments

The new land acquisition law has given a severe blow to governments which issue notifications of take-over, but do nothing for years and even deny payments to the land owners. If the delay is more than five years, even if caused by stay orders from courts, the acquisition will lapse.
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Companies (Amendment) Bill, 2014

The Government has tabled the Companies (Amendment) Bill before the Parliament. The bill proposes punishment for illegal money pooling activities, amid rising instances of people getting duped by such fraudulent schemes. Besides, the changes pertain to related party transactions, fraud reporting by auditors, public inspection of board resolutions, responsibilities of audit committee, requirement of minimum paid-up share capital and strengthening of benches for hearing winding up cases. Amendments have been proposed with regard to restrictions on bail, making common seal optional and jurisdiction of special courts to try offences.
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Telecom service providers won't get credit for taxes on towers

Mobile phone operators like Vodafone, Reliance Communications and Idea will not be able to claim credit for the excise duty paid on the items used in their towers to meet the final service charge liability with the Central Board of Excise and Customs (CBEC) asking all field officers to deny the facility.
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Clarification regarding availment of CENVAT credit after six months

It is clarified that in each of the below mentioned three situations, the limitation of six months would apply when the credit is taken for the first time. It would not apply for taking re-credit of amount reversed in case of the following:

  • If the payment of value of input service and service tax payable is not made within three months of date of invoice, bill or challan, then the CENVAT Credit availed is required to be paid back by the manufacturer or service provider. Subsequently, when such payment of value of input service and service tax is made, the amount so paid back can be re-credited.
  • According to Rule 3(5B) of CCR, 2004, if the value of any input or capital goods before being put to use on which CENVAT Credit has been taken, is written off or such provisions made in Books of Account, the manufacturer or service provider is required to pay an amount equal to credit so taken. However, when the inputs or capital goods are subsequently used, the amount so paid can be re-credited in the account.
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Money paid under consent settlement can be treated as business expense

Section 40A(2) - Excessive or unreasonable payments of Salary to director 
The High Court of Delhi has held that where due to efforts of director of assessee-company, business of assessee had increased substantially and he was assisting assessee in its new hotel project, excessive salary payment to him was reasonable.
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Shell wins transfer-pricing tax dispute in Bombay HC

What the case is all about: It relates to the issue of 8.7 crore shares by Shell India Markets Pvt Ltd to its overseas parent company Shell Gas BV in March 2009. The shares were issued at RS 10 a share, which the income-tax authorities contested and pegged higher at Rs180 a share. The I-T Department charged Shell India of under-pricing a share transfer within the group by Rs 15,220 crore, and consequently evading taxes.

How the case evolved: Shell India moved the Bombay High Court contesting that the issue of shares was capital transaction and out of the transfer pricing bracket.

The High Court ruled in favour of Shell. The order will have an impact on other multinationals fighting the tax department on similar grounds. The government is not likely to appeal further, in line with its decision to reduce tax litigation. Vodafone case was also decided in favour of tax payer, which had similar facts.
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SEBI takes first step to 'Single Record' for all Financial Assets

A single consolidated view of all investments made by a person in mutual funds and other securities held in demat form would be provided from March 2015. AMCs/MF-RTAs (Asset Management Companies/ Mutual Fund-Registrar & Transfer Agents) would have to provide the data with respect to the common PANs to the depositories within three days from month end.
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Advance Pricing-becoming reality

Mitsui, Toyota and Marubeni are likely to be among Japanese companies that would sign the first set of bilateral advance-pricing agreements (APA) with India shortly. These agreements will provide certainty to Japanese multinational firms operating in India and avoid conflicts over sharing of taxes between India and that country.

What is an APA?

An agreement between a taxpayer and the tax authority over the methodology to be used for computing the arm's-length price of transactions carried out among group firms

What are bilateral APAs?

Those involving a taxpayer, the Indian tax authority and a foreign tax authority

Which are the big firms locked in transfer-pricing disputes?

Vodafone, Shell, Microsoft, IBM, Maruti, Gillette, Bharti Airtel, Essar, Standard Chartered, HSBC
Securities & Capital Markets, Havells, Nokia.
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SEBI allows Foreign VCs to Finance Core Investment Firms

SEBI plans to allow foreign venture capital investors (FVCI) to invest in core investment companies (CIC) which fund the infrastructure sector. CICs are companies which have their assets predominantly as investments in shares for holding stake in group companies which is neither for trading nor for carrying on any other financial activity.
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Power Projects - Revival being worked out

According to Association of Power Producers, a grouping of private power companies, projects of 136,000 MW involving a capital outlay of over Rs 620,000 crores have been affected due to
various factors. A Panel headed by India Infra-structure Finance Company Chairman Santosh B Nayar has looked into their demands on ways to rescue the stressed assets and has submitted its recommendations to the finance ministry:

  • For projects stuck in court cases, the account may be allowed to continue as "standard" till a final settlement is reached.
  • For existing projects, delayed beyond two years, the provisioning by banks should be kept at 0.4 per cent instead of 5 per cent that is required at present. The panel also said that all viable projects may be allowed a one-time dispensation for refinancing with an extension in the repayment tenure.
  • In order to tackle the issue of funding of cost overruns, the lenders may be allowed to decide on the quantum of funding and revise the repayment schedule.
  • The power ministry should come out with a policy on long-term fuel linkage for projects whose coal blocks have been cancelled.
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RBI cautions firms on raising money abroad

Noting some companies are routing funds raised abroad to India by flouting the norms in this regard, RBI has asked banks not to give guarantees to companies for such borrowing and non compliance will lead to penal action. Some companies are accessing the markets abroad for debt funds through foreign arms - holding company, associate, subsidiary or group companies. This money is routed to the Indian company which accounts for the sole or major operations of the group, RBI said in a communication to banks. Such funds are raised at rates exceeding the ceiling applicable under the foreign exchange management regulations. These companies use different methods and structures for channeling such funds for Indian operations, including investment in rupee bonds floated by Indian company.
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Major Ports to form Company for last-mile connectivity

To put port connectivity works on a fast track, 12 Indian ports will pool the resources to set up a new company. The Union government is set to clear a proposal for creation of a Port Infrastructure Vikas Nigam Ltd. The company will construct, operate and maintain rail and road infrastructure to facilitate connectivity for transportation of goods from ports in India or abroad.
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Railways opens Rs12,000-crore worth projects for Private, Foreign Investment

The Railways is opening up for investment by foreign and domestic players sanctioned projects worth Rs 12,000 crore. This amount would go up if one were to add the high-speed rail link projects costing almost Rs 77,000 crore which are yet to be sanctioned and some projects - such as the North-South freight corridor and passenger terminal development of several stations - whose costs are yet to be worked
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NPV of Coal Blocks may be set at twice the domestic price

The government is likely to set the benchmark for determining net present value of coal blocks earmarked for auction at double the price of domestic coal, according to a senior official. This assumes importance as 90% of net present value (NPV) of a tonne of coal will be the floor price for auctioning the blocks and 10% of the total NPV of the block will have to be paid up- front by the highest bidder. NPV is the current valuation of future earnings from a coal block.
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Easier Exit Rules for highway developers

To relax exit policy rules for road projects, the Govt. has decided to allow Road developers to sell their completed or stuck project, which will free them up to invest in other projects. Currently, developers have to hold at least 26% stake in highway projects.The proposed change will be applicable for highway projects signed up before 2009 as well.
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Indian CA Firms: Gaining Momentum

The Indian profession of Chartered Accountants has in recent past faced a large number of challenges including aspersions on their integrity and independence arising out of certain large scale financial frauds and manipulation of financial statements by banks, investment banks and large companies outside India including companies like Satyam in India. The Institute of Chartered Accountants
of India have severely punished those who were found guilty in various financial frauds and even removed certain chartered accountants found guilty for Satyam scam for their life from the membership of the Institute. Most of these corporate failures did not had any Indian origin CA firm as their Auditors. 

Indian origin chartered accountant firms, barring certain insignificant exceptions, have proved that they had been sincerely following the basic principles of code of conduct, code of ethics and tough professional standards with independence, integrity and excellence. It has been noticed during last 3 decades a number of public sector companies, the government, large public sector banks appoint their consultants and international GAAP Auditors from among large multinational brands on the basis of their size or international experience. Even large private sector companies and institutions have an apprehension in mind that Private equity funds, venture capital fund, large investing institutions, high net worth individuals and foreign institutional investors may not give adequate weightage to Indian origin CA Firms. 

It is a matter of great satisfaction that all the Indian origin Chartered Accountant Firms have gained tremendous momentum during last 10 years not only in delivery infrastructure, size, geographical spread and have gained very deep expertise, experience and technology in all professional areas. The Indian origin chartered accountant firms are fully geared up to take on any challenging consulting, taxation and audit assignment to meet to the expectations of all kind of investors & other stake holders. The Indian chartered accountant firms have very good infrastructure, library and research material in addition to very deep professional aptitude to deliver professional service in an excellent manner. 

The major difference, the Indian origin chartered accountant firms are making is in their commitments to their clients' interest with complete client ownership. The clients of Indian CA firms consult them on all strategic, professional, structural, personal and even family matters. The sustained growth of the clients with full justice to all stake holders in a transparent and independent manner is the biggest asset of the Indian origin chartered accountant firms. 

The Indian industrial and service sector are making large investments worldwide and in spite of their compulsion to take service from local chartered accountants/CPA, Indian origin clients are invariably taking the strategic support and professional services from an Indian origin Chartered Accountant firm. Even the large multinational corporations working in India have developed great confidence in Indian origin chartered accountant firms not only because of their professional commitment, professional capability and expertise but also because of special skill and highly efficient and effective professional technology, which Indian origin chartered accountant firms have been able to apply as an expert. The Indian origin chartered accountant firms have a special expertise in the area of audit and once a senior Indian chartered accountant reviews the financial statement, undertakes ledger scrutiny and examine relevant evidence, their professional excellence always provide a 100% guarantee against fraud, manipulation and mis-statement.

The international auditing practice and standards has been further fine- tuned by the Indian chartered Accountant firms based on complex ancient Indian accounting and Auditing techniques, technical skills inherited from thousands of years. They are able to ensure that there are no cases of fraud or manipulation which went unnoticed by them. The major difference that the Indian origin chartered accountant firms do not undertake any assignment only in a standard technical manner and actually review sampling, knowledge of business, applicable laws, internal control, delegation of powers, business processes, business acumen and dealing with highly confidential areas with unmatchable knowledge and skill of Indian origin chartered accountant.

Indian Prime Minister Honourable Shri. Narendra Modi has recently observed 
"Indian Government as well as Indian Companies and all other businesses have complete faith in Indian Chartered accountants because of their professional approach and commitment to serve efficiently and effectively."

The Indian origin chartered accountant firms need to come together and communicate their tremendous strength and advantages, as a class to not only international investors and multinational companies but also among Indian entrepreneurs, banks and institutions providing equity fund, venture capital fund and alternative investment fund, media, government and thinkers with various intellectual forum about deep expertise and capability of Indian origin chartered accountant firms as well as Indian chartered accountants.  

The Chartered Accountant in Industry and CFOs have a special role in having confidence on Indian CA firms and to effectively communicate this without hesitation as they will gain the maximum respect and support from Indian CA firms as a team to efficiently and effectively resolve all their issues.