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The Central Board of Direct Taxes (CBDT) plans to intensify
discussions with the ICAI to examine the direct tax issues arising out of the
proposed convergence of the Indian Generally Accepted Accounting Principles (GAAP)
with the IFRS. “We have not addressed the issue of IFRS so far. But we intend to
do that and talks will begin in right earnest in this regard with the Institute
of Chartered Accountants of India (ICAI),” Mr. S. S. N. Moorthy, Chairman of the
Central Board of Direct Taxes (CBDT), told Business Line here. The convergence
with IFRS is expected to happen in three phases beginning April 1, 2011.
The draft Direct Taxes Code, in the present form, is very
averse to IFRS and does not recognise fair value measurements or the concept of
present values for taxation purposes. It could however benefit Indian companies
with international presence or even multinationals here as they would be able to
support their transfer pricing claims in a better manner through the common IFRS
platform now available in many countries. Another important issue is that IFRS-based
financial statements are consolidated financial statements and there is concept
of group tax. But in India, there is no concept of group tax and the Indian
Income-tax Department looks at each entity separately. Meanwhile, ICAI
Vice-President, Mr. G. Ramaswamy, said that the CA institute had recently set up
a joint study group comprising CBDT and Income-tax Department officials and that
the discussions are expected to intensify in coming days.
(Source : The Hindu Business Line Newspaper, dated 5-3-2010)
