SOCIETY NEWS

An HRD Study Circle Meeting was held online on 24th November, 2020 on a very unusual topic, ‘Journey to your Mind and Soul’. It was presented by Dr. Devang Shah and Dr. Sunita Gandhi.

The faculty started by explaining how illnesses are caused and how they are treated by studying the history of the patient and ‘visiting the aspects of their mind and soul’. They emphasised that thoughts are the main reason for a variety of illnesses. The presentation focused on the following:

Homoeopathy – A holistic system of medicine
Holism means that a homoeopath considers a patient as a whole. It is not like modern medicine where if you have a toothache you go to a dentist and if you have a joint ache, then you visit an orthopaedician. Homoeopathy considers all the symptoms, such as understanding the exact location of the pain, factors that modify the pain, the past history, family history and understanding the personality of the patient who is suffering from a particular problem (this is done through understanding the patient’s entire life in terms of fears, dreams, nature, stressful situations, saddest and most joyous occasions of life). And only after a thorough investigation is a suitable medicine selected for that particular problem of the patient.

This was illustrated by way of the following example: There are two patients suffering from acidity. Patient A says he feels burning in the stomach when he is hungry and he has to eat something to get better. During the acidity episode he becomes very irritable and does not want people to talk to him, HE desires peace and wants to be left alone. But Patient B when he suffers from acidity, feels better on having cold things like ice cream, cold milk, etc. During the attack of acidity he wants to be with someone, he wants to communicate and seeks assurance that there is nothing serious.

Thus, there is a stark difference between two people suffering from the same condition but the manner in which they cope with it, or rather react to it, is totally different. This difference is what a homoeopath tries to identify and, based on this, a suitable homoeopathic medicine is selected.

Normally, it is believed that only bacteria and viruses are the cause of illnesses. However, homoeopathy also believes that there are mental or emotional causes which have the potential to produce symptoms in the body which allopathic doctors call stress. Each person, depending upon his perception of the situation, tries to cope with these external circumstances.

The human body is capable of fighting its own battle. Only when this coping mechanism falls short of what is actually required, a suitable homoeopathic remedy selected after a detailed study has the potential to heal not only the physical problems but also the mental traumas that a person goes through.

LECTURE ON REVISED ‘CODE OF ETHICS’

The BCAS and the Pune Chartered Accountants’ Society (PCAS) jointly organised a virtual lecture meeting on ‘ICAI Code of Ethics’ on 10th March, 2021. President Suhas Paranjpe began the proceedings by welcoming the speaker, Mangesh Kinare, and the office-bearers of the PCAS. He also briefed the participants about the activities being conducted by the Society. Vice-President Abhay Mehta introduced the speaker.

Mangesh Kinare started by acknowledging the contribution of C.N. Vaze who has been speaking on CAs and Ethics on the BCAS platform for several years. He then explained the reason and the need for the formulation of the revised Code. The ICAI had issued the revised Code of Ethics in 2019 that was made effective with effect from 1st July, 2020. The need to do so had arisen owing to the ICAI becoming a member of the International Federation of Accountants; the revised Code was based on the International Ethics Standard Board of Accountants (IESBA) Code of Ethics, 2018 edition. The earlier 2009 Code with two parts, A and B, had been replaced by a Code spread over three volumes.

Volume I of the new Code deals with the theory of the Code; Volume II gives a practical scenario; and Volume III contains a glossary of cases decided by the ICAI which serves as a guidance to its members. In the course of the lecture, the speaker stressed on the need to understand the importance of the provisions in Volume II which require a CA to observe a certain Code of Ethics. Volume I of the Code states the negative actions in the sense of what should not be done, whereas Volume II suggests what needs to be done and how. He dwelt on the major changes that came in by virtue of Volume I of the Code and noted that the same are applicable both to a member in practice and one in industry. Some of the standards explained by him were as follows:
1. Fundamental principles of the Code, like integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
2. Threats in compliance of fundamental principles and safeguards from such threats.
3. Independence for audit and review engagements.
4. Independence for assurance engagements other than audit and review engagements.
5. Changes in professional appointment (section 320).
6. A new section dealing with ‘Management Responsibilities’ – that the firm shall not assume a management responsibility for an audit client.
7. Fees – Overdue (section 410) with respect to self-interest threats.
8. Regulation 191 of the CA Regulations – Chartered Accountants in practice to render entire range of ‘Management Consultancy and other Services’, under which category the Council has from time to time listed 28 different types of activities / services that a Chartered Accountant in practice can undertake.
9. Regulation 190A and Appendix 9 to CA Regulations, 1988.
10. A member in part-time practice.
11. HUF vis-à-vis member in practice – Position in the revised Code.
12. Sharing or receiving fees from a non-CA is forbidden under the new Code barring the persons who are members of the prescribed professional bodies under regulations 53A and 53B of the CA Regulations Act, 1988.

The speaker requested all CAs to read the ‘Independence Standards’ thoroughly considering the critical implication of the same. He emphasised that there should be no compromise on the independence of a CA. Management responsibilities under the new Code and the auditor’s responsibility were also highlighted.

He also explained the implicit provisions of Volume II. The penalties for misconduct are grave compared to the Volume I misconducts. He also explained the idea of ‘Director Simpliciter’ under the provisions of the CA Regulations Act, 1988, relevant for the new Code of Ethics. He lucidly explained the concept of independence, fees charged, due fees and many more such concepts and their implications on CAs with relevance to different statutes under the framework where a professional needs to discharge his / her responsibilities.

Mangesh Kinare ended the lecture with a quote from Swami Vivekananda: ‘In conflict between your heart and mind, follow your heart’ and related the Code of Ethics with the pandemic situation by stating that our ethics are our face and not masks. A brief question-answer session followed.

PCAS President Dinesh Gandhi proposed the vote of thanks. The entire meeting is available on YouTube @bcasglobal.

INTERNATIONAL WOMEN’S DAY

The International Women’s Day theme this year was ‘ChooseToChallenge’. A challenged world is an alert world and from challenge comes change. While challenges are not unique to women, the challenges faced by them are, in themselves, unique. BCAS this year endeavoured to provide a platform to its woman members to enable them to address their career-related challenges.

The Managing Committee, in association with the Seminar, Public Relations and Membership Development Committee and the Human Resources Development Committee, organised a unique event to celebrate the ‘International Women’s Day’ on 12th March.

The event was the brainchild of a senior member of the BCAS Core Group, Dr. Sangeeta Pandit. The main thrust of the event was to provide a voice and lend an ear to women across all ages and stages of their professional careers. Like all events of this past year, this one, too, was held on a virtual platform with registrations from places as far as Faridabad, Coimbatore and even Muscat. The event witnessed over 100 registrations, including from some erudite gentlemen.

Convener Preeti Cherian welcomed the gathering and briefed it about the events to follow. In his address, President Suhas Paranjpe commented on the significance of the event in the Indian context. The 10th of March marks the death anniversary of Savitribai Phule (1831-1897) who worked relentlessly against many odds for the cause of women’s empowerment. Today, she is recognised as one of the pioneers of women’s education in India. President Suhas also gave voice to a dream that many harbour – to see BCAS helmed by its first woman President.

The gauntlet was picked up by Vanishree Srinivasan, articled student and ‘Tarang’ contest finalist. She read out a Hindi poem, ‘Main adhunik naari hoon’ shared by Govind Goyal and followed it up with an energising song that helped set the tone of the evening.

Committee member Sneh Bhuta then introduced the distinguished panel comprising Bahroze Kamdin, Nandita Parekh, Mansi Jain and moderator Dr. Sangeeta Pandit.

Earlier, during the registration process, the participants had been asked three questions,
1. Your career journey so far
2. Your career aspirations
3. Your plan to achieve your aspirations

From the responses received, seven participants were selected to interact with the panellists. Their aspirations can be summarised as follows: establish their own brand and identity and also partner in the nation-building process; become a Fund Manager and then a Chief Investment Officer and leverage the position to create opportunities for talented women; specialise in financial accounting and reporting; balance commitment as a young mother by shifting to a less-demanding career while also chasing various passions in life; to be recognised as a leading voice in direct tax practice; to build a practice with young, dynamic women CAs as partners; to work for the benefit of the CA community.

The panellists suggested a few strategies and a roadmap that they could consider; this brought immense joy and satisfaction to the participants as was evident from the delighted expressions they wore and the words of gratitude they uttered.

Moderator Sangeeta, along with a Committee Member, Rimple Dedhia, then read out some interesting responses emailed by other participants who were looking to make a comeback after taking a break for family commitments: wanting to create a distinct identity other than the present one as an associate in a Big 4; aspiring to be a partner in one of the Big 4; considering a career in Internal Audit. The panellists deliberated upon these, too.

BCAS ran two poll questions during the event coordinated by Committee member Virag Shah. The first was, how satisfied are you with your present position? Here is a summary of the responses – 41% Extremely Happy; 54% Satisfied; and 4% Dissatisfied. The second question was whether the audience would be interested in a mentor-mentee programme by the BCAS – and this elicited an overwhelming response with 70% indicating their eagerness to sign up for the same!

In their concluding remarks, the panellists spoke with refreshing candour. Nandita Parekh emphasised on the need to enjoy each phase of one’s life and have an open dialogue – be it in personal life or at work; she reminded the audience that life is not a race, and to sit down once in a while and reflect on the journey thus far; she also suggested re-writing one’s CV every six months and if there was nothing exciting to add therein, to reflect on the same. Mansi Jain stressed on the need to find a niche or passion, identify areas to contribute and strengthen the ecosystem and partner in the nation-building process, adopt technology and develop one’s own financial plan. Bahroze Kamdin told the participants to dream big and plan appropriately, that life’s entire concept is doing what makes one happy; she quoted Einstein: ‘Weak people revenge. Strong people forgive. Intelligent people ignore.’

The routine Q&A session was followed by the surprise of the evening, viz., a rapid-fire round by the moderator who asked the panellists some very insightful questions which gave a sneak peek into their minds. Mansi Jain believes that work should also be fun and that social media is a necessary way to communicate; Nandita Parekh feels that emotional maturity and the ability to look at the bigger picture don’t come only with age; she also agrees that doing a relevant course is a good way to delve into technology faster; Bahroze Kamdin favours flexi-hours and remarked that while recruiting, the ability to communicate effectively also matters; she also agrees that office hours can also be used to discuss personal problems.

Virag Shah proposed the vote of thanks and requested everyone to fill the online feedback form.

The feedback from the participants has been extremely encouraging. With the release of the BCAS App, the Society hopes to bring many interesting and relevant woman-centric programmes within easy reach of members.

In the words of the American poet, memoirist and civil rights activist Maya Angelou, ‘Each time a woman stands up for herself, she stands up for all women.’ The distinguished panel and moderator and all the women that participated are indeed a testimony to that.

A MUNIFICENT DONATION

The Office-Bearers and members of the Managing Committee of the BCAS were pleasantly surprised recently by the noble gesture of a senior life member, Anilkumar Desai of Vadodara (BCAS Membership Number LD – 000047), who is aged about 77.

In a letter accompanying a cheque, he stated that he was donating a sum of Rs. 25,11,111 (Rupees twenty five lakhs eleven thousand one hundred and eleven only) towards the corpus fund of the Society. A portion of the said letter is being reproduced below.

Anilkumarji has been associated with the BCAS since 1970 and has been an active participant at the RRCs till the late 1980’s. His letter signifies his affection towards the CA fraternity associated with the BCAS. Apart from attending the RRCs, he has also been an avid reader of the Society’s monthly magazine, ‘The Bombay Chartered Accountant Journal’ (BCAJ), for more than 50 years.

During a brief interaction over a call with the President and the Vice-President who had called him to acknowledge his noble philanthropic gesture, Anilkumarji informed them that he has been a real beneficiary of knowledge-sharing through attending the RRCs and reading the Journal. Therefore, he wanted to give back to the Society that had provided him with such professional acumen.

Reading and understanding can take one to the pinnacle of success once these learnings are applied in performing one’s professional duties. And Anilkumarji is an apt illustration of this.

We express our heartfelt gratitude to Anilkumar Desai for such a noble gesture and the credit for this goes to all the volunteers of the BCAS.

KEY INTERNATIONAL TAX RULINGS

Advocate and Chartered Accountant Dr. Sunil M. Lala, a well-known tax counsel who has delivered many popular talks on international taxation, was the main speaker at the virtual lecture meeting on ‘Important International Tax Rulings (Post-2019)’ organised by the BCAS on 18th March. President Suhas Paranjpe set the ball rolling by welcoming the participants and Vice-President Abhay Mehta introduced the speaker.

Dr. Lala began by acknowledging Dr. Mayur Nayak, Chairman of the BCAS International Taxation Committee, and then went on to discuss ten judgments, five of the Supreme Court and the High Courts and five of various tax Tribunals. The judgments were on issues of permanent establishments, royalty, fees for technical services, capital gains, interest and foreign tax credit.

He started by explaining the intricacies of the ruling of the Supreme Court in Union of India vs. U.A.E. Exchange Centre [2020] 116 taxman.com 379 [SC]. All four liaison offices of the assessee in India were opened by the UAE Exchange Centre with the approval of the RBI to carry out financial transactions for their clients in the UAE for the beneficiaries in India. The Court had observed that the services provided through the liaison offices were auxiliary in nature and that the RBI approvals are not conclusive but persuasive. The verdict was in favour of the UAE Exchange Centre considering the fact that the liaison offices were just facilitating the services of the assessee in India and hence could not be considered as PEs. On the same lines, the speaker took up several other judgments where he applied the principles of international taxation.

Taking up the case of DIT vs. Samsung Heavy Industries Co. Ltd. [2020] 117 taxmann.com 870 (SC), Dr. Lala referred to some provisions of the India-Korea DTAA. The assessee, a tax resident of Korea, was awarded a contract for carrying out survey, design, engineering, procurement, fabrication, installation, modification, start-up and commissioning of facilities covered under the ‘Vasai East Development Project’ (the ‘Project’), by Oil and Natural Gas Corporation [ONGC] for which it had opened a Project Office in Mumbai to act as a communication channel between it and ONGC. The assessee reported a loss of Rs. 23.50 lakhs in the return filed for A.Y. 2007-08.

The A.O., during the course of assessment proceedings, passed a draft assessment order holding that the project was a single indivisible ‘turnkey’ project and therefore the profits arising from the commissioning of the same would arise in India. He further held that the work relating to fabrication and procurement of material was very much part of the turnkey contract and the said work was wholly executed by the PE in India. Not merely this, the A.O., with the help of ‘Capital Line’ software, determined that 25% of the revenue be taxed in India under the Transfer Pricing Guidelines. The Tribunal also held that the assessee is liable to be taxed in India considering several administrative expenses claimed by it.

The Uttarakhand High Court allowed the appeal of the assessee and set aside the Tribunal’s judgment so far as it related to imposition of tax liability on 25% of the gross receipts of the assessee. The Revenue appealed against the order and the matter moved to the Supreme Court. The Supreme Court observed that the finding of the Tribunal, the mere mode of maintaining the accounts alone, could not determine the character of a permanent establishment. The finding of the Tribunal was held to be a perverse finding. Further, the view of the Tribunal that the onus is on the assessee and not on the Revenue to demonstrate that the project office was not a permanent establishment of the assessee was held to be contrary to the decision of the Supreme Court in E-Funds IT Solutions Inc.

Another issue on PE was that of the Dependent Agency Permanent Establishment (DAPE) in the case of CIT vs. Taj TV Limited [2020] 115 taxmann.com 305 (Bombay). The Bombay High Court held that since none of the conditions as mentioned in Article 5(4) of the India-Mauritius DTAA was fulfilled, the DAPE of the assessee was not established in India, i.e., qua the distribution agreement.

On the issue of royalty under international taxation, the speaker gave his insights on the judgment in Majestic Auto Ltd. (Assessee – Ten Sports) vs. CIT [2019] 110 taxmann.com 261 (Punjab & Haryana). In this case, the Court had held that payments for supply of designs, drawings, specifications, etc., were not in the nature of royalty and favoured the assessee. The speaker also explained the provisions of the India-Austria DTAA.

Dr. Lala spoke in detail on the subject of fees for technical services in the judgment given by the Mumbai Tribunal by citing the case of Buro Happold Limited vs. DCIT [2019] 103 taxmann.com 344 (Mum-Trib). The Tribunal held that the supply of project-specific designs / drawings / plans did not make available technical knowledge, experience, skill, know-how or process (since the designs were project-specific and could not be used by Buro India subsequently) and hence the same was not taxable in India.

Another case in which the judgment went in favour of the assessee was when the Mumbai Tribunal in Morgan Stanley Asia (Singapore) Pte. vs. DDIT (IT) [2018] 95 taxmann.com 165 (Mumbai-Trib) allowed the main grounds of the appeal in favour of the assessee and did not adjudicate the balance grounds which became academic in its opinion (once the reimbursement of salaries was not taxable, the corresponding TP adjustment / mark-up could not be taxed). Provisions of the India-Singapore DTAA were also taken up at length.

On capital gains on the transfer of shares, the speaker, Dr. Lala, selected the case of Sofina S.A. vs. ACIT [TS-129 ITAT-2020 (Mum)] ITA No. 7241/Mum/2018. He explained the provisions of section 9 of the IT Act, 1961 along with Article 13 of the India-Belgium DTAA while explaining the verdict. The Tribunal in its decision had said that if a person holds shares outside India which, directly or indirectly, derive their value substantially from assets located in India, the legislation deems such shares located outside India to be located in India for taxation purposes. However, a similar approach is not envisaged in Article 13(5) of the relevant DTAA and hence it cannot be deemed that the mentioned transaction results in the transfer of shares of the Indian company.

As for the taxability of interest income in India, the speaker took up the case of Golden Bella Holdings Ltd. vs. DCIT [2019] 109 taxmann.com 83 (Mumbai-Trib) and made a brief reference to Article 11(2) of the India-Cyprus DTAA to explain the decision of the Tribunal. The Tribunal had held that the assessee would be eligible for the DTAA benefits and shall not be subject to tax in India.

On professional fees received by an Indian firm from its foreign clients, Dr. Lala explained the case of Amarchand & Mangaldas & Suresh A. Shroff & Co. vs. ACIT [2020] 122 taxmann.com 248 (Mumbai-Trib). He elucidated certain Articles of the India-Japan DTAA and stated that the contention of the A.O. while passing the assessment order does not fall in line with the DTAA. The Revenue had denied the TDS credit which the Japanese firm had taken while making payments to the Indian law firm. The Tribunal went with the assessee, thereby allowing the TDS credit to avoid double taxation.

Next, the speaker took up the newest issue in the area of international taxation, that of shrink-wrap computer software in the case of Engineering Analysis Centre of Excellence (P) Ltd. vs. CIT [2021] 125 taxmann.com 42 (SC). The issue was, does the payment made for the purchase of shrink-wrap computer software amount to royalty or not? The speaker explained section 9 of the Act read with Article 12(3) of the India-Singapore DTAA and also explained the implications of applying the provisions of the DTAA at the time of withholding taxes u/s 195. Further, he referred to section 14 of the Copyright Act which the Supreme Court considered while deciding on the case. The Supreme Court had to decide on more than 100 such pending appeals. The speaker, Dr. Lala, dealt with the topic in a quick but detailed manner, making references to the OECD commentary as well.

The meeting ended with a vote of thanks proposed by Siddharth Banawat, Convener of the International Taxation Committee of the BCAS. The above lecture is available on BCAS@bcasglobal on our social media platforms and at https://www.youtube.com/watch?v=3I9XFhBGWos.

IMPACT OF SC DECISION ON SOFTWARE TAXATION

Interestingly, the above case and the decision thereon had been awaited for long as it dealt with one of the most contested issues in international tax.

Mr. Khincha spoke on the importance of the decision and its impact. While clarifying its scope, he pointed out that not all types of transactions related to software have been dealt with by the decision. He also noted how the decision lays down principles on copyright issues related to software by considering other decisions on copyright law. These principles can possibly be referred back on decisions on copyright law.

The speaker expounded on various relevant provisions of the copyright law which form the bedrock for a proper analysis of the decision. He then dealt with the Court’s decision on end-user license agreement in respect of a physical copy of a software sold to an end-user. The decision holds such an agreement to be in the nature of a contractual agreement and not a license of copyright. In that sense, use of a software would be akin to the purchase of a book. The Supreme Court has held, in essence, that sale of software to an end-user would be akin to the sale of a copyrighted article and hence not license of a copyright.

Mr. Khincha then analysed the Court’s decision on the phrase ‘granting of license’ in the definition of royalty u/s 9(1)(vi). It held that the phrase needs to be juxtaposed with the preceding words which necessitates transfer of rights or parting of rights from the copyright holder to the user. Without this, the payments would only become a business income and not a royalty payment. The Court held that even though the language used under the Act is distinct from that used under the treaty, the above reasoning would still hold good even under the treaty. He explained that the Supreme Court had held that mere letting or mere licensing would not be critical unless they related to specific rights under the copyright law, hence not leading to taxation as royalty in the case of software sold to end-users.

The speaker next focussed on the Supreme Court’s decision on transactions between the owner of software and its distributor. Does the distributor have a copyright right of ‘right to reproduce’ or ‘right to issue copies to the public’? While the distributor has a right to reproduce, it does not have an uninhibited right to reproduce but merely a right to reproduce for sale a limited number of copies of the software. Turning to the concepts of ‘principle of exhaustion’ and ‘principle of first sale’ which have been referred to in the Supreme Court decision, he pointed out that the Court had held that such limited right provided to the distributor to reproduce is for mere facilitation to sell those limited number of copies of the software and not an ownership right.

As for the Court’s consideration of the copyright rights of ‘rights to sell’ or ‘offer for sale’ or ‘offer for commercial rental’ of a computer programme, Mr. Khincha also enlightened the gathering about how the relevant notes to clauses for deletion of certain phrase in them were not brought to the notice of the Supreme Court and explained how the Court had relied on underlying decisions to arrive at its decision. The Court had held that ‘exclusivity’ is the distinguishing factor whereby
‘right to use’ can be considered as a transfer of copyright right in favour of a distributor only where the distributor has ousted the owner from these rights and hence has stepped into the shoes of the owner of the copyright. Where this is not the case, there would be no license of a copyright right and hence it would not be royalty. In fact, Paragraph 117 of the decision lays down six important principles of interplay of the copyright law and the Income-tax Act.

Following this masterful dissection of the Supreme Court decision, Mr. Khincha went on to analyse its other implications, starting with Explanation 4 to section 9(1)(vi) and its applicability to transactions done before the said Explanation was brought into law. The Supreme Court held that the Explanation could only be applied prospectively and not retrospectively. Such a decision is important to understand the implications of other explanations similarly having been introduced with retrospective effect. The speaker also analysed the implications of the decision on section 194J and other provisions of the IT act dealing with software taxation as well as equalisation levy. He dealt with the implications of this decision on other Supreme Court decisions and offered his views on the proposed amendments to the UN Model on the Article on Royalty. He ended his exposition with a peep into the Government’s thinking which portended that multiple levies and rates may become applicable to taxation of software royalty as the Government would not like to lose such revenue.

Rutvik Sanghvi proposed the vote of thanks. The archival video of the meeting has, in a short time, garnered a few thousand views.

‘IS THERE A CHANGE IN EXPECTATIONS FROM AUDITORS?’

Whilst the basic principles of conducting an audit have stood the test of time, like many other areas it has to evolve and move with the times whether in terms of increasing technical and reporting responsibilities laid down by the ICAI and other Regulators, including NFRA, technical challenges due to digitisation, increased frauds and irregularities and, last but not least, the new but continuing monster on the block by the name of Covid-19. Further, the expectations of the various stakeholders like managements and the Regulators as well as the society in general have also increased manifold, thereby creating an expectation gap.

With these thoughts in mind, the BCAS organised an interesting virtual panel discussion on 7th April styled ‘Is there a change in expectations from auditors?’ The elite panel consisted of M.P. Shah, Regional Director, Western Region ROC, Nilesh Vikamsey, Past President, ICAI, and Mr. Anil Singhvi, investor activist and former MD of Ambuja Cements Ltd., representing the interests of the Regulator, the practitioners and industry, respectively. The discussion was moderated by Sudhir Soni.

Welcoming the panellists and participants, President Suhas Paranjpe indicated that auditors and audit expectations is a hot topic which keeps on changing and hence he hoped that this discussion would provide a 360-degree view from the perspective of different stakeholders. Vice-President Abhay Mehta briefly introduced the moderator and the participants.

Starting the discussion, Sudhir Soni welcomed the panellists and indicated that whilst financial reporting and auditing give a lot of comfort to the various stakeholders, there have been several corporate failures coupled with frauds and compliance gaps in the recent past, resulting in the audit quality being called into question and also the consequential changes in expectations arising therefrom. He then initiated and very ably moderated the discussion by asking several questions on a wide range of issues impacting the various stakeholders which elicited several responses, concerns and suggestions from the panellists, the principal ones being as under:

•  There have been very few references received from auditors u/s 143(12) of the Companies Act, 2013 despite the fact of too many corporate scams taking place. Further, even in cases where such references are received, there is a perception that no stringent action is initiated but a random scrutiny is undertaken based on complaints by aggrieved stakeholders.

•  The recent amendments to CARO and its linkage with schedule III will put greater onus on managements on various aspects like usage of funds, filing of returns with banks, etc., which will also facilitate the auditors to discharge their reporting obligations in the right spirit.

•  Whilst expectations from auditors to detect frauds on a timely basis have risen, anything which is in the nature of ‘premeditated murder’ is very difficult to detect.

•  Audit no longer retains its glamour and is not considered as remunerative vis-a-vis consultancy. Audit is not an investigative or forensic exercise, though it is expected to raise red flags. However, the time is not far when the face and expectation of audit would change to that of being forensic and investigative due to the increased role of digital tools (including blockchain technology) which would largely do away with sampling. Further, reporting on internal control weaknesses needs to be more focused and widespread.

•  The cushy relationship between auditors and promoters can be mitigated by getting their appointment approved by the majority of the minority.

•  Even though in the past auditors had heavily qualified certain financial statements, banks continued to extend loans and no other regulatory action was immediately forthcoming.

•  On the question of whether any independent analysis of audit qualifications is undertaken, it was indicated that as a part of the initiative to leverage technology, a Central Scrutiny Centre would look at various forms and financial statements which are filed to provide an early warning signal.

•  Auditors should play a greater role in highlighting various corporate governance issues more in spirit rather than as a tick-in-the-box approach. This would also involve a holistic approach towards issues like appointment, remuneration, resignation and prosecution on the part of various stakeholders.

•  The auditors would need to be more vigilant as managements and CFOs are getting smarter and are always a step ahead! There should be more emphasis on software and hardware-related digital skills and greater use of professional scepticism.

•  The time has come for auditors to comply with the SAs in spirit and whilst documentation is important (especially for the Regulators), there should be greater emphasis on judgment and matters involving public interest.

•  Whilst it is always the statutory auditors who are blamed for failures, the time has come for making credit rating agencies, internal audit, audit committees and Independent Directors more accountable.

The meeting concluded with a vote of thanks proposed by Zubin Billimoria.

WEBINAR ON TDS AND TCS PROVISIONS

The BCAS joined hands with the IMC Chamber of Commerce and Industry, the Bombay Chamber of Commerce and Industry, and the Chamber of Tax Consultants to organise a two-day online webinar on ‘TDS and TCS provisions – A 360-degree perspective’ on 7th and 8th April. The webinar was planned as a mix of panel discussion and presentation sessions on relevant TDS and TCS issues with knowledge-sharing by eminent tax experts from the corporate and professional fields, as well as from the Revenue Department. As panellists, they provided a holistic perspective and offered a blend of academic and practical solutions to the questions posed.

The first discussion moderated by Past President Anil Sathe had Mr. Saunak Gupta of Blue Star India and tax expert Daksha Baxi on the panel. It covered practical issues being faced by traders and e-commerce operators in relation to TDS on purchase of goods (section 194Q) to be introduced from July, 2021, TCS on sale of goods [section 206C(1H)], TDS on certain e-commerce transactions (section 194-O) and other provisions with various case studies. The panel dealt with issues like what would be considered as ‘goods’, sales returns, turnover thresholds prescribed for applicability of section 194Q, distinction between professional and technical services for section 194J, etc.

The panel for the second session, moderated by Atul Suraiya, formerly of Tata Chemicals, comprised Mr. Rakesh Gupta from the RPG Group and tax experts Ms Hema Lohiya and Mr. Mahendra Sanghvi. They discussed intricate legal issues arising from TDS mismatch in salary shown in Form 26AS versus actual salary, non-receipt of Form 16, claiming refund of TDS, prosecution for defaults and other important topics.

On the second day, Mr. Avinash Rawani covered the entire gamut of TDS and TCS procedural compliances, including issues in return-filing, rectifications, claiming refund, etc. Mr. Rawani also answered a host of queries from the participants pertaining to a number of issues that professionals face on a day-to-day basis and complying with the same.

The fourth session had the benefit of the experience of Mr. Sanjeev Sharma, Principal Director of Income-tax (Investigation), Bihar and Jharkhand, and tax experts Mr. Sanjiv Chaudhary and Dr. Mayur Nayak on issues related to tax deduction from payments to non-residents. It was ably moderated by Sushil Lakhani, a member of the International Taxation Committee. The panel discussed the recent Supreme Court decision on taxation of software along with TDS on various payments such as cloud computing fees, commission and marketing fees, reimbursement of expenses, the need of TRC, etc.

The last panel comprised of Mr. Hemant Kadel of Grasim Industries and BCAS Direct Tax Committee Member Sonalee Godbole. The moderator, Mr. Ravi Mahajan, led the panel through a host of topics such as TDS on employee contributions to provident funds in excess of the prescribed limits, differentiation between TDS u/s 192 as salary or as professional fees u/s 194J, changes in salary payments towards the end of the year, etc.

All the panels received several queries from the participants which were ably dealt with. On the whole, the clarifications provided by the panellists were quite detailed and proved helpful to the participants in clarifying some very practical questions and issues. A clear need was felt for reducing the tax deductor and collector’s burden by reforming the cumbersome and plentiful set of tax collection provisions.

The paid Webinar was attended by close to 500 participants and proved to be a successful example of conducting joint programmes with sister organisations on important topics.

IMPORTANT DECISIONS IN INDIRECT TAXES

A lecture meeting on ‘Recent Important Decisions in Indirect Taxes’ was held online on 9th April. It was open to all and was addressed by Advocate Mr. J.K. Mittal from New Delhi. He is a Co-Chairman of the National Council on Indirect Taxes, ASSOCHAM, and has been honoured several times by the Supreme Court Bar Association.

Mr. Mittal in his address dealt with several important decisions in the areas of service tax, GST, sales tax as well as customs, including the decision of the Supreme Court in the case of State of West Bengal and Ors. vs Calcutta Club in which the levy of service tax and VAT was held inapplicable on mutual association / members’ club even after the 46th Amendment adding Article 366(29A) to the Constitution of India. He also pointed out that an attempt has been made by the Government to make a retrospective amendment in the GST law to nullify the decision of the Supreme Court and also expressed concern over such frequent retrospective amendments which are not assessee-friendly.

He discussed another decision of the Supreme Court in the case of Canon India (P) Ltd. vs. Commissioner of Customs which dealt with the power of the DRI to issue show cause notice vis a vis the jurisdiction of ‘proper officer’. The decision of Torrent Power Ltd. dealing with the concept of ‘composite supply’ was also discussed. He also respectfully disagreed with the decision of the Calcutta High Court in Srijan Realty (P) Ltd. vs. Commissioner of Service Tax, the decision of the Orissa High Court in Safari Retreats (P) Ltd. vs. CC-CGST and the decision of the Delhi High Court in the case of Aargus Global Logistics Private Ltd. vs. Union of India & Anr. and shared his views thereon. A few other judgments such as South Eastern Coalfields Ltd. vs. CCE&ST (Delhi CESTAT), Sahitya Mudranalaya Private Ltd. vs. Additional Director-General (Gujarat High Court) and JSK Marketing Ltd. vs. UOI (Bombay High Court) were also discussed.

In his 90-minute-long address Mr. Mittal touched upon various legal propositions arising out of several decisions and also enlightened the audience with his views on certain contentious matters, including the power of officers to issue summons and to conduct audit under GST. He also answered queries posed by the participants, during as well as at the end of the session.

The meeting was attended by more than 160 persons on the Zoom platform and is also being watched continuously on the YouTube channel of the BCAS at https://www.youtube.com/watch?v=a7G4h4LNdBY with more than 900 views so far.

‘RECENT IMPORTANT DECISIONS IN IT’

The BCAS organised a lecture meeting on ‘Recent Important Decisions in Income Tax’ on 14th April which was addressed by advocate Hiro Rai. It was held in virtual mode on the Zoom platform with live streaming on YouTube.

President Suhas Paranjpe made the introductory remarks and welcomed the speaker, whereas Joint Secretary Mihir Sheth introduced him.

Hiro started the session by listing a few principles which one should keep in mind while studying judgments of various courts. He explained the intricacies of the judgment given by the Supreme Court in Shree Choudhary Transport Company vs. ITO [2020] 426 ITR 289 [SC] which dealt with various issues relating to disallowance u/s 40(a)(ia). He then took up the important Supreme Court judgment in DCIT vs. Pepsi Foods Ltd. 126 taxmann.com 69 dealing with vacation of a stay under the third proviso to section 254(2A). The Court struck down the proviso as it was offending Article 14 of the Constitution of India and would be arbitrary and discriminatory if the delay was not attributable to the assessee. He then explained how the arguments accepted in this judgment would be important in challenging the constitutional validity of faceless Tribunals whenever they are challenged. He took up various other important Supreme Court judgments reported in the last one year and explained various crucial points and arguments and offered his insights on the said case laws.

Hiro then took up the Bombay High Court decision in Sesa Goa Limited vs. JCIT 423 ITR 426 which dealt with deductibility of education cess. It held that the education cess is allowable u/s 40(a)(ii). He also explained how this case law can help assessees on similar grounds or as an additional ground in their appeals. Further, he emphasised the importance of drafting appeals and submissions before various authorities and explained various legal points arising from these case laws.

He also discussed some of the recent important decisions of the Tribunals and then answered a few queries from the participants on the case laws discussed by him. The session was insightful and helpful for all (400-plus) participants who attended the meeting virtually.

The vote of thanks was proposed by Hardik Mehta, Convener of the Taxation Committee of the BCAS.

The lecture is available on BCAS@bcasglobal on our social media platforms and at https://www.youtube.com/watch?v=UjadD6oNo1Q&t=4676s.

FELICITATION OF NEW CA’s

It was Arthur C. Clarke who wrote, ‘The moon is the first milestone on the way to the stars’. In the case of the successful finalists of the CA exams of November, 2020 and January, 2021, just the cracking of the exams (touted to be among the toughest in the world), is truly the first major milestone in their lives.

The perseverance and grit displayed by these Achievers is particularly noteworthy, given the fact that the year that went by was an extremely challenging one for everyone, more so for those who took the Final CA exam.

Every year, the Seminar, Public Relations & Membership Development Committee (SPR&MD) of the BCAS felicitates the ‘achievers’ of the November and May examinations at the BCAS office. But this year, given the Covid-19 restrictions, the event was held on the virtual platform on 23rd April – this happened for the first time since it was launched. A special discussion on ‘Milestone 2.0 – Building a “CA”reer’ with a distinguished panel comprising Bhavna Doshi, Robin Banerjee and Anand Bathiya was organised to guide and mentor these youngsters.

The mentors can be best described by a line from a poem by Robert Frost:
Two roads diverged in a wood, and I,
I chose the one less travelled by,
And that has made all the difference.

One part of the registration form was designed in such a way that the questions and concerns of the pass-outs were highlighted. That the mentors took their roles very seriously was evidenced by the fact that they sought a mock session a week before the event. The questions and concerns were also shared with the mentors to give them an opportunity to better understand the participants’ minds.

Interestingly, within 24 hours of the announcement of the event it attracted close to 300 registrations – some from states as far away as Jharkhand, Bihar, Orissa, West Bengal and Chhattisgarh. By D-Day, the registrations crossed 500 – including over 70 rankers.

In his opening remarks, President Suhas Paranjpe welcomed the young pass-outs into the fraternity and reminded them that while they strive and focus to achieve success in their professional careers, it is also equally important to devote time and energy to look after their health and well-being.

Vice-President Abhay Mehta also addressed the gathering.

SPR&MD Chairman Narayan Pasari called upon the youth to rise up to their role in building a strong nation. He briefed them about the activities of the Committee, including the programmes where ‘Yuva Shakti’ takes the lead.

He pointed out that one of the important activities of the Committee is the publication of the BCAS Referencer which is now in its 59th year of publication. The Referencer acts as a Bible for every professional, whether in practice or industry.

Managing Committee member and SPR&MD Convener Kinjal Bhuta, who is also the youngest Editor of the Referencer, briefed the audience about the theme behind this year’s publication, ‘Namaste Bharat’, which celebrates the rich tradition and culture of the country. For the past several years, Past President Pranay Marfatia has been guiding the team that puts the Referencer together and this year was no exception. The principal team of writers, Zubin Billimoria and Yatin Desai, was also present.

The flip-book version of the Referencer was officially launched on the occasion by the President, the Vice-President and the three mentors. The exquisitely-crafted Referencer drew praise from the mentors as the pages unfolded on the screen.

The moderator for the event was Committee member Kushal Lodha, himself an all-India rank-holder in the November, 2019 examinations. The first question was the one that vexes every batch of pass-outs – industry or practice? Then there were questions such as ‘What if I realise after a year or so that I do not enjoy the work I am doing? What do I do then?’

Bhavna Doshi advised the pass-outs to not worry too much when it came to choosing between practice, industry and something else; it was never too late to do course-correction and no experience ever went waste. To those intending to start a new practice, she suggested that they think of it as a start-up and plan accordingly.

Another question was whether one should pursue MBA immediately after CA or gain some work experience for a year or two. Robin Banerjee suggested that it is far more important to ensure that the MBA is done from one of the top 20 or 25 institutions; and if becoming a CFO is the ultimate goal, one should look at being a generalist rather than a specialist. He also spoke of the importance of ‘CLEAR’ – C for Communication, L for Learning, E for Ethics, A Attitude and R Relaxation, and emphasised the importance of Intelligence Quotient, Emotional Quotient and Love Quotient.

On the question about industry vs. practice, or generalisation vs. specialisation, Anand Bathiya stated that it is good to have problems and questions at times and such discussions are possible ‘because we Chartered Accountants are so versatile’. He suggested that instead of a top-down approach, one should look at a bottom-up approach, starting with listing one’s preferences, family background, etc., to arrive at the right decision.

So far as the current lockdown was concerned, Bhavna Doshi stated that while the world has changed completely, there is a silver lining, too. Today, CAs are providing more than the traditional services and are able to reach out to a much larger potential client base irrespective of the geographical location. She further emphasised that as suggested by Robin Banerjee, ‘turn-around strategist’ is one of the emerging areas for CAs. The opportunity to help stressed clients must be explored. Anand Bathiya invited the achievers to look up the free courses available on Google Digital Garage on topics as varied as Artificial Intelligence, Blockchain, Cryptocurrency, Digital Marketing, to name a few – these courses take anywhere from three weeks to three months.

While a regular, physical event enables BCAS to felicitate the achievers in front of their peers, this being a virtual event, four achievers were given the opportunity to personally interact with the mentors. The happy faces which appeared on the screen spoke volumes of the effect that the mentors’ talk had had on them.

A rapid-fire round for the mentors at the end of the session gave the audience an opportunity to learn a little more about them, their likes and interests. Virag Shah proposed the vote of thanks. The efforts of Convener Preeti Cherian and Rimple Dedhia in setting up the event were acknowledged.

That the event was well received was evidenced in the feedback that was received after the event and the 2,000 + (and counting) views on YouTube since then.

VIRTUAL FIRE-SIDE CHAT

The BCAS joined hands with the Association for Chartered Accountants, Chennai, to organise a virtual fire-side chat on the ‘New Income Tax Provisions on Charitable Trusts’ on 24th April. It was held by means of the Zoom webinar facility.

The key speaker was Gautam Shah and the discussion was moderated by Divya Jokhakar. The webinar was also broadcast on YouTube and a total of 480 participants attended it.

Speaker Gautam Shah started by giving a brief introduction of the provisions of sections 12AB, 10(23C) and 80G of the Income-tax Act, 1961. He then went on to tackle the questions posed to him by the participants. Most of these were based on the practical and academic difficulties encountered by them while dealing with renewal, registration and re-approval of Income-tax exemption certificates from the Department under the above provisions.

After the chat, Gautam spent some time addressing even more queries from the participants. The two-hour session was helpful in resolving several real-time problems.