Society News

The speaker on the subject, Mr. Monish Chatrath gave the audience an overview of the latest developments under Companies Act, which place an onerous responsibility on the auditor. Emphasising their importance, he stressed upon the need to make IFC a powerful and practical tool, in the hands of all the stakeholders – the organisation, the consultant and the auditor.

He shared several practical tips on the process of structuring a framework, which included:

1. Closely work with a client team comprising of not more than 20 members; empathise with their pain points, so as to make the entire exercise more meaningful.
2. Do a walk through to get a better understanding of the challenges on hand.
3. Define materiality, identify significant accounts, disclosures and map significant cycles with subprocesses.
4. Ensure a feedback from the auditor in advance, so as to make necessary changes to the structure, wherever required.

While internal controls are an integral part of the enterprise risk management, some key differences include:

1. EWRM is applied in strategy setting, while IFC operate more at the process level.
2. EWRM is applied across the enterprise and includes taking an entity level portfolio view of risk; on the other hand, IFCs are for the processes which contribute to financial reporting.

He explained the distinction between threats, vulnerabilities and risks and drove home the importance of maintaining a Key Risk Register. The participants also got the benefit of an interactive session with the speaker.

Study Circle on New Annual MCA-21 Filings on 19th October, 2015

The Technology Initiatives Study Circle of the Society organised this meeting at the Society’s office keeping the fast approaching filing deadline in mind. The objective of the meeting was to elaborate on the nuances of various Annual filing requirements and their analysis so as to equip the audience to grasp the recent amendments made by the MCA. The speaker for the session was C. S. Mandar Jog. The program was well received by the members.

Lecture Meeting – “Use of Digital Evidence by Income Tax Department” held on 18th November, 2015.

The speaker Mr. R. Ravichandran, Director of Income Tax (Intelligence & Criminal Investigation) explained in detail, the legal framework, procedures and issues involved in the use of Digital Evidence obtained by the Income Tax Department during various stages of assessments, search and seizures.

The learned speaker explained the importance of section 65 and 65B of the Indian Evidence Act 1872 and the Information Technology Act, 2008 which govern the legal framework on admissibility of digital evidence. He emphasised that the government officials have to be careful during the collection, analysis, preservation and presentation of digital evidence so that the integrity and admissibility of the same is not compromised.

Some of the points which the assessing officers have to be careful of while dealing with digital evidence are as follows:

Take a bit stream image or cloning of the storage device which is suspected to contain relevant data. This ensures that all the deleted files can also be recovered and analysed.

Evidence Collection Form as provided in the department manual is to be completely and carefully filled.

The “Hashing” of all the storage devices being seized is necessary. Hashing involves creation of a unique hash value for the data file which contains data about the creation, modification etc. of that particular data file. The hash values are also to be clearly noted in the Panchnama and also to be produced alongwith the evidences before the Court. The hash value proves the integrity of the digital evidence and that the same has not been tampered with.

A “Chain of Custody” Form has to be maintained to keep a tab on the exchange of digital evidence by the government officials during various stages of investigation.

At the time of search, all the computers and servers which are at switch-on mode are to be kept on and the data residing on the RAM (Temporary Memory) is to be copied. Switching off an active device deletes the data stored on RAM.

At the time of search, the assessee has to “Make Available” all the applications, softwares, licenses, user id and passwords to applications and cloud data to enable the tax officers to access the data and use their analytical tools.

The Income tax department has started forensic labs in Mumbai and few other metro cities and also use sophisticated forensic tools for analysing, data mining and collecting digital evidences.

The speaker also mentioned that the tax department is also analysing the digital footprints, location data, social media accounts, data from other government agencies and third party through AIR, to catch high value transactions and suspected tax evasions.

To conclude, the speaker also advised Chartered Accountants to make extensive use of forensic tools which are freely available while discharging their audit and certification duties. He also urged the Institute of Chartered Accountants of India to include the study of Information technology, forensic tools etc. in the CA curriculum.

The participants benefited immensely from the details and experiences shared by the speaker.

Students Study Circle on “Related Party Transactions and Loans to Directors, Investments and Loans by Companies and Acceptance of Deposits by Companies”

The Students Forum of the Society organised a study circle in two sessions on the topic “Related Party Transactions and Loans to Directors, Investments and Loans by Companies and Acceptance of Deposits by Companies” on Friday, 6th November, 2015 and 20th November, 2015 at the Society office.

The study circle was led by student speaker Mr. Pushkar Adhikari under the guidance of the Chairman CA. Tasnim Tankiwala and CA. Kumar Raisinghani respectively. The motive of organising this study circle was to make the future Chartered Accountants proactive & aware of the fresh piece of legislation. The average attendance in both the study circles was 20 students and it was a great learning experience for the student members.

The chairmen of both the sessions initiated the study circle with their opening remarks and deep knowledge on the subject. The speaker Mr. Pushkar Adhikari gave a deep insight of the topic.

Human Development Study Circle Meeting on “Strategies to enhance ROI on HR Investments” held on 13th October, 2015
At this meeting, Ms. Chhaya Sehgal presented the Various Strategies and Tools leading to Enhanced return on HR Investments.

1. Employee Retention: Most important for an employer in order to receive the employee contribution after recovering the cost of his acquisition, development and maintenance. What makes an employee stay in the organisation is not merely his salary. In addition to his salary it’s a combination of rewards linked to productivity, welfare measures to fulfil his needs as per Maslow’s Hierarchy, Recognition, Developmental Opportunities, an organisation culture conducive for performance and work environment with team spirit. When employees learn Gratitude, they stay longer in the organisation. How to make employees learn Gratitude. Case study of Google.

2. Value Based Management, EVA (Economic Value Added), DELTA EVA as tools for performance measurement and rewards distribution at individual, divisional, functional and organisational level to ensure the three tier goal congruence between the shareholders, management and the employees. Case study of Mayo Clinic in USA; despite being a not for Profit set up, it tops in Financial Performance in the Medical Care Industry because of VBM.

3. What makes an employee productive – K S A H i.e. Knowledge, Skills, Attitude and Habits – eventually productive and service oriented habits also shape up his attitude, knowledge and skills. These enable employees to generate CASH for themselves and the organisation both. Case study of Taj Mahal Hotel where due to customer centric culture, employees served and saved the guests at the cost of their own lives during the 26/11 terrorist attack.

4. What is Human Performance? Performance is equal to Capacity multiplied by commitment.

Capacity is equal to Competencies multiplied by Resources multiplied by opportunity.

Individual performance is equal to ability multiplied by motivation multiplied by organisational support adjusted with environmental factors.

Unlike every other resource in a business whose productivity is measured by dividing the Output by Input; only for HR, Productivity is a sum total of Inputs + Output since a person can alter his Input in terms of his CAPACITY and COMMITMENT to get desired output. The case study of Tata Tea; where Women brew a turnaround story in a tea estate after a successful buy out of company by the employees as an option instead of downsizing.

5. How a culture of innovation creates opportunities for everyone to grow and earn more and improves the financial muscle of the Company/organisation. Innovation catapults an ordinary business into leadership position; example Apple.

 6. Calculation of Return on Capital Employed (ROCE) and its significance in Balance Score Card to see the cause and effect relationship between employee empowerment, improved processed, enhanced customer satisfaction and wealth creation. The case study of Tata steel.

At the end of the meeting, the participants recommended a full day meeting to discuss in more detail since this is a vast subject.

One day Seminar on BEPS in Action held on 7th November, 2015

One day Seminar on BEPS in Action was organised by the International Taxation Committee on 7th November, 2015 at Palladium Hotel in Mumbai.

The Seminar started with CA. Vishal Gada giving an overview of the final deliverables of the OECD on the 15 Action Plans on their Base Erosion and Profit Shifting (BEPS) Project. He gave a detailed summary of the Action Plans. Thereafter, he dealt with the Action Plan on addressing tax challenges in Digital Economy. He informed the audience about the various options that the OECD has suggested to deal with the lack of permanent establishment threshold and indirect taxes issues arising out of e-commerce transactions for source countries. He also summarised some global developments like unilateral actions by countries relating to BEPS during his talk.

In the next session, CA. Paresh Parekh dealt with the BEPS action plans dealing with coherence issues. These included action plans for neutralising the effects of hybrid mismatch arrangements, limiting base erosion via Interest deductions and other financial payments, Strengthen the Controlled Foreign Corporation Rules and countering harmful tax practices more effectively, taking into account transparency and substance.

Thereafter, CA. Himanshu Parekh dealt with acton Plans relating to issues of substance in international tax law. These included action plans on Preventing treaty abuse and artificial Avoidance of PE status which result in base erosion and profit shifting.

All the above three technical sessions were chaired by CA. Gautam Nayak who shared his analysis with the participants.

In the subsequent session, action plans relating to substance issues arising in the transfer pricing field were taken up by CA. Sanjay Tolia. He dealt with value creation in case of intangibles, as regards risks and capital and high risk transactions. He also explained the new documentation requirement for country-by-country reporting with master file and country files.

Mr. S.P. Singh, IRS, dealt with the action plans dealing with the issues of transparency and certainty. These action plans related to establishing methodologies to collect and analyse data on BEPS, requiring taxpayers to disclose their aggressive tax planning arrangements, making Dispute Resolution mechanism more effective and developing a Multilateral Instrument to effectively implement the action plans.

In the final session, CA T. P. Ostwal updated the participants about the current developments like the ‘Google tax’ and reporting on aggressive planning techniques by taxpayers and other related developments in India and globally.

The above three technical sessions were chaired by CA. Rashmin Sanghvi who gave valuable insights on BEPS for the benefit of the participants.

All the speakers dealt with the Indian perspective on the action plans and what is to be expected going forward in India relating to BEPS. The Seminar was well received by the participants who benefited from the high level of discussions and topical analysis of BEPS.

Direct Tax Study Circle Meeting on Transfer Pricing – Recent Issues, Controversies and Jurisprudence held on 2nd November 2015

The speaker, CA. Namrata Dedhia under the guidance of the Chairman, CA. Mayur Nayak commenced the meeting by highlighting the recent amendments in relation to Transfer Pricing – Multiple year data and Range concept. She gave a brief overview of the existing provisions and practices used for benchmarking the data, and then moved to the rationale of using multiple year data for benchmarking. With the help of a diagrammatic representation, she explained the different scenarios where multiple year data and weighted average price is to be used for benchmarking. Thereafter, she commented upon the concepts of arithmetic mean and range concept. With the help of illustrations, she explained the procedure to be followed for determining the range, arriving at the arm’s length price and also the adjustment to be made to the arm’s length price by way of median value. Subsequently, she drew attention to the current issues relating to TP faced by the Industry and a host of recent decisions passed by various judicial authorities.

Direct Tax Study Circle Meeting on Section 195 – Recent Issues, Controversies and Jurisprudence held on 26th October 2015

The speaker, CA. Jhankhana Thakkar, under the guidance of the Chairman, CA. Gautam Nayak, gave a brief introduction of section 195 and the compliance procedures enshrined in Rule 37BB. She commented upon the mismatch between the amended section 195(6) and Rule 37BB and was of the view that the CA Certificate in Form 15CB is not required to be obtained if the sum to be remitted, is not chargeable to tax. She then drew attention to various issues in relation to withholding tax faced while making payments to non-residents such as FTS payments where section 44DA is applicable, payments for obtaining online database, payments for advertising on the websites, remittance to self, payments to companies which have a POEM in India. Thereafter, she discussed three recent decisions at length – Lionbridge Technologies Private Limited vs. ITO(IT–TDS) Mumbai ITAT 42 ITR(T) 413 which deals which TDS on reimbursement of cost of a software, ITO(IT) vs. Heubach Colour (P) Ltd – Ahmd ITAT (54 taxmann.com 377) which deals with payments for trademarks and intangible assets and ITO (IT) vs. Skill Infrastructure Ltd – Mumbai ITAT (62 taxmann.com 33) which is in relation to payments for consultancy services.

FEMA Study Circle held on 6th November

The Study Circle (Second Session) on Overview and Issues – External Commercial Borrowing (ECB) was held on 6th November which was very well led by CA. Mitali Pakle. She took the participants through the basics of the ECB such as statutory framework, key concepts and certain issues such as whether LLP/Partnership Firm are eligible to borrow, what software sector means where ECB is now permitted, whether purchase of business on slump-sale basis is permitted end use and many other relevant issues.She explained at length how to calculate ECB Liability Equity Ratio taking various illustrations and also discussed ambiguity in interpreting certain components therein.

Lecture Meeting –“Transfer Pricing – Recent Developments and Controversies” held on 4th November 2015

The speaker, CA. Rohan Phatarphekar shared with the audience, his views on the recent development and controversies in Transfer Pricing. He gave a brief overview on the application and interpretation of these recent developments. He emphasised on the issues involved and the approach of the revenue for these controversies and discussed the same in details.

He gave a brief overview on the following key controversies:

1) Market Intangibles – Dealing with AMP expenses, was led with the discussion on LG Electronics : Special Bench decision being that deals with legal issues not factual issues.
2) Share Valuation – General contentions of the revenue and the taxpayers, was led with the discussion on Vodafone India Services Pvt. Ltd: Bombay High Court Writ Petition.
3) BPO vs. KPO – Classification of broad range ITes services into BPO and KPO.
4) Contract R&D vs. Entrepreneurial R&D – Calculation of Cost plus mark up, the basis of the cost allocation, safe harbour rules and other parameters.
5) Location savings – Issues relating to location saving advantages and location saving rent, was led with the discussion on Watson Pharma Pvt. Ltd.

Along with the discussion on these controversies, CA. Rohan Phatarphekar also discussed about the disputes that are continuously revolving around Transfer Pricing and the mechanism on how to resolve such disputes. The recent developments of transfer pricing also includes developments in APA and MAP. The key recent developments included the discussion on areas such as:

1) Introduction of Range and Multiple-year analysis

2) Guidance on implementation of Transfer Pricing Provisions

3) OE CD/G20 BEPS Releases – Final reports on various Action Plans.

The learned speaker also showed the way forward in order to deal with such controversies and how effectively should we manage such disputes and what approach should we adopt to arrive on the final solutions.

Human Development Study Circle Meeting on “The Art of Asking Right Questions” on 3th November, 2015 at BCAS Conference Room ‘Gulmohar” by Presenter : Dr. Anil Naik

Anil Naik is an MBA from IIM, Kolkata, with a Phd. in Strategic Management. He is a consultant to large organisations such as Tata, Mahindras, etc. He is also a winner of many prestigious awards.

The subject was discussed in depth by Dr. Anil Naik touching upon various aspects of The Art of Asking Right Questions.

Knowledge is the Fuel for Power. Asking the right questions whether to self, one to one, to a group or in interactions is very important and useful in personal and professional life.

Right questioning with a purpose to collect and gain right information which has clarity of understanding is an Art.

The participants were amazed at the vastness and depth of the subject which was discussed in depth with practical examples of how individuals and companies succeeded due to the art of asking right questions.

Questions are asked with various purposes in mind. To name a few, it could be to motivate, to persuade, to move forward through tough times, to solve a problem, to collect information, etc.

Questions are useful to find specific, relevant or necessary information.

Questions enable communication which is useful in establishing strong relationships.

When a question is asked, we have an impulse to answer. This is answering reflex. A question stimulates the nervous system, gets the brain cells working and creates an impulse to answer.

Exactly what you ask and how you ask can affect the answer you get. The words make the difference. To whom am I asking this question? Is it a known or unknown person?

These are some of the glimpses of what was discussed in this presentation.

At the end, participants questions were duly addressed by the speaker.

The presentation was lively, interesting and humorous and the participants wanted more such interactive meetings.

Seminar on Charitable Trust on 7th November 2015

A full day seminar on “Charitable Trusts” was organised jointly with The Chamber of Tax Consultants. The objective of the seminar was to enlighten the participants with the entire aspects and procedures for formation, running rules, regulations, investments and taxation of Charitable Trusts with special emphasis on the updated laws and CSR provisions.

The participants benefited immensely from the interactive sessions.