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Category: News And Views

Taxation, not litigation – Penalise tax dept for orders struck down by courts.

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Tax reform need not focus merely on tax slabs and the nature of the laws governing taxation. It can, indeed it must, also look at the decision-making processes and the incentives governing those in charge of tax assessment. One good indication of the maladministration at work in this branch of the government is the overall number of tax orders that are eventually taken to be adjudicated to the tax appellate tribunals, and thenceforth to the high courts and the Supreme Court. Sukumar Mukhopadhyay, writing in his column in this newspaper earlier in the week, has quoted numbers that the minister of state for finance told Parliament in a written reply to a question. Over the past four years, the revenue department’s success rate at the tribunal level varied between 10 and 20 per cent. In other words, over 80 per cent of the revenue department’s claims were thrown out by the tribunal. The tax officials did a little better at the high court level, winning around 30 per cent of the time; but at the Supreme Court, they did much worse, losing about 90 per cent of their cases. (emphasis supplied)

These numbers make clear that India’s tax administration is frequently pressing taxpayers to pay money that is not required under law, and which will not stand up to judicial scrutiny or review. Yet recovery norms are being tightened, often forcing taxpayers to pay arbitrarily demanded amounts in a month, even while a stay application is being disposed of in the courts. This penalises taxpayers for legal delays, allowing the government to take their money and sit on it even when it is unjustified in law — and given the dilatory nature of legal proceedings, for many it will seem like it has vanished forever. More, appeal is nearautomatic even if the government loses at one level; taxpayers are forced to fight cases all the way up the judicial ladder. And once they win their case, companies litigating for indirect taxes frequently discover that the government refuses to refund the money anyway, claiming it would unjustly enrich the companies’ coffers, when the company was merely indirectly collecting taxes from consumers of their products for the government.

Reform of this dysfunctional process is overdue. The judiciary, of course, must move to speed up tax cases and the tax department should initiate efforts to bring down the number of legally untenable orders its appellate officers are handing out. This can, perhaps, happen through direct penalties being levied on officers who hand out a disproportionate number of subsequently overturned orders. But, as importantly, the tradition of automatic appeal and confiscation of money in the interim needs to end — which will in and of itself alter the incentives for the revenue department. There are many ways to do this. One possibility is that, if the tax department wishes to appeal once it has lost at a particular judicial level, it should pay a punitive interest rate on the money it holds.

The government has discovered that broadening the tax net is not easy. The reason that there continues to be widespread evasion and distrust is rooted in the unreformed and red-tapist nature of the tax administration. The time has come to change that, and ensuring that delayed justice does not incentivise arbitrary confiscation is a good place to start.

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An Analysis of Poverty

Scarcity is not just a physical constraint. It is also a mindset. When scarcity captures our attention, it changes how we think — whether it is at the level of milliseconds, hours, or days and weeks. By staying top of mind,     it    affects what we notice, how we weigh our choices, how we deliberate and, ultimately, what we decide and how we behave…

Because we are preoccupied by scarcity, because our minds constantly return to it, we have less mind to give to the rest of life. This is more than a metaphor. We can directly measure mental capacity or, as we call it, bandwidth…

We can measure executive control, a key resource that affects how impulsively we behave. And we find that scarcity reduces all these components of bandwidth — it makes us less insightful, less forward-thinking, less controlled. And the effects are large. Being poor, for example, reduces a person’s cognitive capacity more than going one full night without sleep. It is not that the poor have less bandwidth as individuals. Rather, it is that the experience of poverty reduces anyone’s bandwidth.

When we think of the poor, we naturally think of a shortage of money. When we think of the busy, or the lonely, we think of a shortage of time, or of friends. But our results suggest that scarcity of all varieties also leads to a shortage of bandwidth. And     because     bandwidth affects all aspects of behaviour, this shortage has consequences.

(Source: Extracts from “Scarcity: Why Having too Little Means so Much” by Sendhil Mullainathan   in the Economic Times dated 06.11.2013)

Fictione Legis

‘Fictio’ in old Roman Law was a term of pleading and signified a false averment on the part of the plaintiff which the defendant was not allowed to traverse e.g. an averment that the plaintiff was a Roman citizen, when he was a foreigner, if the object was to give jurisdiction over him [Maine’s Anc. Law Ch. II]. The term, meaning ‘fiction’, therefore, came to be used for those things that have no real essence in their own body but are so accepted in law for a special purpose. In the words of Viscount Dunedin in CfT v. Bombay Trust Corporation, AIR 1930 PC 54, “Where a person is deemed to be something, the only meaning possible is that whereas he is not in reality that something, the Act of Parliament requires him to be treated as if he were”.

2. Fictions in law are created for definite purposes to result in a situation which would not otherwise have resulted and to treat an imaginary state of affairs as real. It is introduced for necessity, generally to avoid inequity caused by mischief made possible under general provisions and concepts of law. In tax laws the object is mainly ‘to prevent mischief arising out of circumvention of normal legal provisions resulting in tax avoidance while remaining within the confines of the law, as also to remove unintended consequences. The introduction of legal fictions thus introduces equity in legislation which is expressed in the maxim, “In fictione legis acquitas exist it” i.e. the legal fiction is consistent with equity. Beyond the purpose for which they are created legal fictions must injure no one as expressed in the maxim ‘fictio legis neminem ladit’.

3. The English law has always abounded in fictions, so are taxation laws in India. The unrestricted operation of treating the imaginary as real has the potentiality of upsetting the whole scheme of legislation and the basic fundamentals of law causing injury to untargeted subjects and areas and thus violating equity. Courts have, therefore, in keeping with the maxim, been cautioning against extending them beyond their legitimate field. The Apex court has repeatedly observed that legal fictions are created only for a definite purpose. They are limited to the purposes for which they are created and should not be extended beyond their legitimate field. [CfT v. Elphinstone Spg. & Wvg. Mills Co. Ltd., 40 ITR 124].

4. In CfT v. Amarchand N. Shroff, 48 ITR 59, the court was to interpret the fiction contained in S. 24B(1) of 1922 Act making a legal representative an assessee in respect of the income which the deceased would have earned had he not died. Attempt was made to extend the fiction to post-death income as well. The court disapproved extending the fiction, the legitimates purpose of which was to tax income earned upto the year in which death took place. As a result, the 1961 Act made a specific provision in S. 168 to cover income upto the date of complete distribution of assets.

5. Commenting on Rule 8 of the Income-tax Rules which apportions the business income of the growers and manufacturers of tea, between agricultural and business income in the context of deduction u/s.80 HHC, the Calcutta High Court in Warren Tea Ltd v. UOf, 236 ITR 492 held that the applicability of the fiction is limited to computation of taxable income from business by apportioning the total business income computed after all deductions and, accordingly, held that since the stage of grant of deduction u/s.80HHC would be at the time before applying Rule 8 and not after apportionment is made, the Rule cannot be extended to computation of deduction u/s.80HHC. On that basis it struck down the CBDT Circular No. 600 dated May 23, 1991.

6. Fictions are suppositions and, unless it is clearly and expressly provided, it is not permissible to impose a supposition on a supposition of law. In Executors and Trustees of Sir Cawasji Jehangir v. CFT, 35 ITR 537, the Bombay High Court was to consider the scope of the jictio juris’ in S. 23A of the 1922 Act under which the undistributed income of the company, as computed in accordance with that provision, was deemed to have been distributed as dividend amongst the shareholders and included in their total income as such. The issue arose that if such income of the company constituted partly of capital gains, should the dividend which is deemed as distributed also be apportioned between capital gains and dividend in the hands of the shareholder. While accepting  that  full effect has to ‘fictio juris’ the court ruled out sub-joining or tacking a fiction upon fiction and observed that there is nothing even remotely suggesting the assessee to identify himself with the company or to assert an equivalence between his income and the income of the company. The argument, if accepted, would amount to imposing supposition upon the supposition of law.

7. Within its legitimate area of application, the fictione legis has to have its full effect. The question of chargeability of interest u/s.234B and u/s.234C came for consideration before the Gauhati High Court in Assam Bengal Carriers Ltd v. CIT, 239 ITR 862. Brushing aside all the arguments based on the impracticability of estimation of income before the book profit is arrived at, the Court directed full effect to be given to the fiction contained in the provision with its obvious fall out. Observing that, where fall out of the fiction leads to an obvious inference, there can be no half way house, the court held S. 234B & S. 234C applicable even in case where income is determined u/s.115JB. They quoted with approval the following observations of Lord Asquith in East End Dwellings Co. Ltd v. Finsbury Borough Council, (1951) 2 All ER 587 (HL) which was also relied upon by the Bombay High Court in the case of Executors and Trustees of Sir Cawasji Jehangir (supra).

“If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real, the conse-quences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it”.

The Supreme Court, however, in CIT v. Kwality Biscuits Ltd., 284 ITR 434 disapproved the judgment of the Gauhati High Court on a different ground of the impracticability of arriving at the total income before arriving at the ‘book profit’.

8. In a recent judgement delivered by the Special Bench of the Ahmedabad Tribunal in Assistant Commissioner of Income-tax v. Goldmine Shares and Finance P. Ldt 302 ITR (AT) 208, the Tribunal  considered the fiction contained in S. 80IA(5) which bids one to treat the eligible business as the only source of income of an undertaking. Applying the observations of Lord Asquith (supra), the Tribunal took note of the consequences and incidents flowing from it and held that the profit from the eligible business for the purpose of deduction u/s.80IA has to be computed after deduction of the notional brought forward losses and depreciation of eligible business even though they have been allowed set off against other income in earlier years.

9. Fictions are generally by way of deeming provisions where imaginary or unreal state of affairs is deemed to exist in the presence of certain facts. Income-tax Act abounds in deemed provisions in which, all are not restricted to imaginary state only. Deemed provisions are sometimes used to give an artificial construction to a word or phrase that would otherwise not prevail. A clear example is to be found in the provisions of S. 2(22)(e) of the Act deeming advances to specified persons as dividend to shareholders. The Act defines ‘Income’ in an inclusive manner including receipts of the nature which would not otherwise be taken as such. They are also used to put beyond doubt a particular construction that might otherwise be capable of different interpretation. One may refer to the provisions of S. 9 which deems certain income as accruing or arising in India to keep them outside the pale of uncertainly. We have fiction in S. 45(3) and S. 45(4) to avoid unintended situation legalised by courts decisions and S. 115 JB to partly neutralise the impact of various tax incentives and thus introduce horizontal equity. All these provisions involve some digression from the normal provisions and the concepts in tax law. The peculiar sense in which the provision is employed has to be judged in the light of the scheme of the section and the context in which deeming is made.

10. Fictions in law, therefore, give completeness to the scheme of law and the intention of the legislature.

The Professional

Title:    The Professional
Author:    Subroto Bagchi, Gardener and Vice-Chairperson, MindTree Limited
Price:    Rs.399
Publisher:  Penguin (Portfolio)
Author’s official website : http://www.mindtree.com/subrotobagchi

The Satyam episode led to some uncomfortable situations for us CA-professionals. The general public did tend to paint us all with the same brush. It may have led to some uncomfortable encounters at networking events when people came up to us during the tea-break and questioned us about ‘our profession’. Hopefully we will never have to face such a scenario again.

This incident brought to the forefront the moot question. Does having a professional qualification (say: the much coveted CA tag), make one a professional?

The answer is no. Anyone can with the right amount of hard work (and luck, as most of us CAs would like to add) can acquire a professional degree. However, it is the ability to stay true to ourselves and our vocation that makes us a true professional.

Subroto Bagchi, Gardener and Vice-Chairperson to the Board, MindTree Limited in his latest book ‘The Professional’ answers this important question: What does it take to be considered a true professional in any field?

‘The Professional’ comprises of seven distinct parts and the author does tell us to read each part sequentially in the order it is presented in the book, so as to get the maximum benefit from it. Each part comprises of short narratives drawn from real-life – both positive and negative examples – covering various professions and work-life scenarios. These narratives comprise situations which you and I have encountered/witnessed or are most likely to encounter or witness as we move up in our professional careers.

Part 1, explains the concept of integrity and how and why it is the key stone of professionalism, In fact, during the c.ourse of writing this book, Subroto Bagchi reached out to a group of people whom he admired for their professionalism and asked them to share the qualities of a professional. Integrity was a quality that topped. Little wonder then, that integrity is also the key stone of this book.

In Part 2, we move on to read about self-awareness and learn some valuable lessons, which include the power to say NO, which can be daunting when we have not yet risen in our career and the need to be generous, gracious and courteous to others when we are at the pinnacle of our professional career. Part 3 deals with basic qualities that make one a well rounded professional. Subroto Bagchi calls the first three parts, the foundational pillars.

As people become more experienced they have to deal with a larger volume of work, responsibilities and complexity. Yes, Part 4 and 5 provide us tools to cope with this. Integrity also makes good business sense and Subroto Bagchi describes this with ample illustrations, those of his own and those which he witnessed. The Abilene Paradox, where people agree to do strange things, when they suppress their own voice and simply go along with what everyone else is saying has been well described in the back drop of the Satyam episode. Yes, the voice of dissent plays a very important role and this is not the same as unconstructive criticism or plain whining.

All of us increasingly have to operate in global market-place. Part 6 guides us on how best to do so. Based on his experiences, Subroto Bagchi touches upon important facets of : Inclusion and Gender, Cross Cultural Sensitivity, Governance, Intellectual Property and Sustainability. Towards the end of the book is a chapter titled ‘The Unprofessional,’ with a list of ten markers of unprofessional conduct, such as: Missing a deadline, Non-escalation of issues on time, Non-disclosure, Not respecting privacy of information, Not respecting ‘need to know’, Plagiarism, Passing on the blame, Overstating qualifica-tions and experience, Mindless job-hopping and Unsuitable appearance.

There is no beginning or end in being a professional it is a life-long learning curve. Yet, this book provides a handy, well illustrated, tool-kit to be a better professional. Ultimately Professionalism boils down to individual choice, and indeed it is for you and me to continue on the path towards becoming a better professional.

A paragraph in the book aptly states this: ‘A doctor becomes part of an insurance fraud. A policeman colludes with a criminal. A lawyer bribes a judge. In each instance, the professional breach is justified as the price to be paid to be part of a system. The truth is, it is an individual choice”.

Subroto Bagchi in his book adds : ” … Society on the while may not always put a premium on the practice of professional values and hence most people do not incorporate it into their lives. But practising professional values is about who you are and what you want to be known as – a professional or merely professionally qualified. And, in the end, even the most corrupt society hails the ones that choose to be different.”

This itself, gives me hope.  Amen.

Subroto Bagchi speaks to BCAS members:

No one can become a professional just by acquiring a so-called professional degree or diploma. Some practising individuals who have a professional education behind them and a few years of experience, think that they are professionals. Neither qualification nor just the skill makes you worthy of being called ‘a professional’. In reality, it requires much more than that. That capacity, to build a professional reputation, which only a few can, comes from building ‘affective regard’ for your profession, it comes from conscious practice of unique tenets of a profession, it is about sustained self-regulation.

In the end, professionalism is about personal choices we must make, prices we have to be willing to pay and sometimes, choosing the right over the convenient is a difficult thing, even a risky thing. But it is that quality which separates the legends from the ordinary mortals.

Integrity is one of the key attributes of a good professional. It is here that organisations such as the Bombay Chartered Accountants Society (BCAS) have a huge role to play. Integrity can be taught. It is because the idea is based on the principles of natural justice. It is our natural state. Most people, most of the times are reasonable, they want to live in harmony and that means they have a natural affinity for fairness. When people are given an understanding of the concept of integrity and the power of self-regulation, most people can lead a life without contradictions. I have also seen people change for the better when they are given the right environment and the knowledge. The seeds of integrity can be sown in the minds of young CA students and CAs through collective efforts, such as by the BCAS.

44TH RESIDENTIAL REFRESHER COURSE (RRC) OF BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY (BCAS)

44th RRC of BCAS was held at Matheran during 22nd to 25th January 2011 at Hotel Usha Askots and Hotel Byke.

Participants reached Matheran by lunch time on 22nd January 2011, after having fun of travelling through mountains upto Dasturi and then walking through enjoyable & cool forest. Some of them took narrow-gauge train to reach Matheran avoiding the walk.

DAY 1:  INAUGURAL SESSION

Mr. Mayur Nayak President of the Society welcomed the members. He explained the need to think in different way in the present situation and for that purpose chartered accountants need to know importance of Group Leading and Group Discussion. He mentioned how this is helpful in career path. For the benefit of the outstation members attending the RRC, he narrated Society’s activities which are conducted through out the year.

Mr. Uday Sathaye Chairman of the Seminar Committee in his opening remarks, highlighted other activities of the Seminar Committee which are gaining popularity and success like study tours in the form of interactive meetings with Industry in various parts of the Country. He mentioned about the subjects chosen for the RRC and thanked all the Paper Writers for giving justice to the subjects. He reitirated the need of having many Group Leaders and not only listeners.
RRC was inaugurated by Mr. K. C. Narang, Past President of the Society, by lighting of the traditional lamp. He expressed his views in regard to various issues which have arisen on account of the current trend of giving importance to material aspects of life. He felt that even though change is an accepted part of life, departure from certain age old principles is unnecessary. In his opinion, while one should welcome good things from the Western part of the world, one should not follow them blindly without considering the Indian Ethos.
In the inaugural session Mr. Mukund Chitale, Past President of ICAI was felicitated for his appointment as the Chairman of National Advisory Committee on Accounting Standards (NACAS). It is indeed a great acheivement and honour.
Mr. Pradip Thanawala Vice President of the Society proposed Vote of Thanks.After the inaugural session Mr. Sourabh Soparkar, advocate in his presentation covered various issues relating to Mergers, Demergers and Acquisitions. His clinical analysis on the controversies in relation to business restructuring was unique. He also dealt with some aspects of individual taxation with respect to agricultural land. His presentation was very well received by the participants.

This session was chaired by Mr. Kishor Karia, Past President of the Society.

The day ended with tasty dinner.

Day : 2

After the breakfast, participants discussed the paper written by Mr. K.C. Devdas, chartered accountant on Recent Judgments in Direct Taxes. The Group Discussion was followed by a presentation paper.

Mr. Mukund Chitale Past President of ICAI presented his views on Opportunities and Concerns in Bank Audit. He explained about the wide range of opportunities available to the Chartered Accountants in the Banking Industry. He pointed out that the regulators, the stake holders and general public expect level of comfort and for that purpose they look at audit reports. He explained how risk factors should be considered while carrying out various assignments. His command over the subject and presentation skills made the session very lively.This session was chaired by Mr. Uday Sathaye, Past President of the Society.

Thereafter the Mr. K. C. Devdas, chartered accountant analyzed the implications and rationale of various Tribunal, High Court, and Supreme Court Judgments. He explained that every decision of the judgment forum is with respect to a set of facts and it is important for readers to appreciate these facts before using the judgment for any purpose. He also felt that retrospective amendments, to unsettle the settled position of law, should be avoided as it causes hardship to innocent tax payers.

This session was chaired by Mr. Anil Sathe, Past President of the Society.

In the evening participants enjoyed an entertainment program before the dinner.

Day 3:

After the breakfast, some of the participants discussed the paper written by Mr. Sunil Gabhawalla, chartered accountant on Case Studies in Service Tax and others discussed paper written by chartered accountant Mrs. Geeta Jani ,on Case Studies in International Taxation. For the first time two papers were discussed simultaneously considering the era of specialisation and requirement of focused study. After the Group Discussion, both the Paper Writers dealt with their respective subjects simultaneously at different locations.

Mrs. Geeta Jani dealt with various cases on International Taxation which are of relevance to participants in their day to day practice. She also dwelt upon the possible scenario, once the Direct Taxes Code became a law. She also discussed possible impact of Controlled Finance Corporations (CFC) Regulations, a concept which is new India.

This session was chaired by Mr. Rajesh Kothari, Past President of the Society.

Mr. Sunil Gabhawala dealt with Case Studies in Service Tax making his presentation very interesting and satisfied the participants by resolving issues raised during the Group Discussion. Service Tax today is gaining importance with more services being added to the Service Tax net. Issues raised by him are of significance to all. His depth of knowledge in Service Tax and masterly analysis was indeed a treat for the participants.This session was chaired by Mr. Govind Goyal, Past President of the Society.

Thereafter Mr. Khurshed Pastakia, chartered accountant presented paper on IFRS – Recent Developments. He informed the participants about the impact of IFRS on

Indian Economy. He was of the view that though there would be a number of issues in implementation of certain standards, given the fact that India is committed for convergence of IFRS, these should be overcome by continuous dialogue between the Industry, the Profession and the Regulators.

This session was chaired by Mr. Ashok Dhere, Past President of the Society.

In the evening an unique and innovative programme — RRC Nostalgia was held for the first time in the history of RRC. In this program views of three Past Presidents of the Society, were presented namely Mr. Pradyumnabhai Shah, Mr. Hemendra Shah and Mr. C. C. Dalal, as recorded through video. They had attended the First RRC of the Society at Matheran. Other Past Presidents present at the 44th RRC also presented their views and shared some memories of RRCs in the past. Almost all Past Presidents were of

the opinion that Group Discussion with active participation by all participants is the foundation of RRC. This is the Motto of RRC right from the beginning which should not be forgotten in the current times of presentation of papers on screen. This message is very important for the mutual benefit of all professionals irrespective of their age. Few participants from the audience added glory to the programme by sharing their thoughts.

This programme was ably anchored by Mr. Ameet Patel, Past President of the Society.

The day ended with Gala Dinner and Musical Evening.

Day 4:

After the breakfast the participants discussed the paper written by Mr. Pradip Kapasi, chartered accountant on Capital Gains – Some Current Issues. The Group Discussion was followed by his presentation on the subject. He dealt with some burning issues affecting the general tax paying assesses. He analysed in great detail vigours of section 50C of the Income-tax Act. He explained various precautions that are necessary to be taken to mitigate the problems caused by the deeming fictions contained in section 45 (2), 45 (3) and 45 (4). His command over the topic and flawless analysis resulted in participants giving him a very patient hearing.

This session was chaired by Mr. Pradeep Shah, Past President of the Society.

In concluding session Mr. Uday Sathaye, Chairman Seminar Committee took an overview of the RRC and recognised the contribution made by everybody in general and Mr. Nayan Parikh, Past President of the Society in particular for his innovative idea of design of Paper Book which was appreciated by all the participants. Mr. Mayur Nayak, President of the Society thanked everybody for making the RRC memorable in the history of Society. Participants departed after lunch to their respective destinations with a commitment to meet again next year at 45th RRC.

RBI governor issues warning on loan waivers

Reserve Bank of  India governor  Raghuram  Rajan has cautioned finance secretaries of state governments against debt waiver schemes as banks are already starved of capital. the warning came during a conference of the    state finance secretaries.

In the meeting, Rajan said that the debt waiver schemes announced by state governments have an adverse impact     on the financial health of banks. He added     that the banking sector’s capital needs have gone up due to enhanced prudential requirements and rise in bad loans due to the slowdown in the economy.

The RBI governor highlighted the challenges faced by the country last year in tackling the serious issues relating to    current    account    deficit    (CAD),    growth    slowdown, fiscal consolidation    and inflation management and steps taken to restore confidence in the macro economy of the country.    

He referred to the decline in financial savings and consequential challenges to debt management when growth and private sector credit would pick up.

Earlier,  RBI deputy governor  harun Khan focused on channelising financial savings with the formal financial    system — like bank deposits,     equity, fixed income    securities    and insurance products — for    efficient    financial    intermediation.  he stressed that more concerted and coordinated measures would be needed by the state government along with the national regulators to prevent flow     of  peoples’ savings     into unauthorized,     illegal     and unviable schemes by dubious entities.

Besides     Rajan, SEBI Chairman U. K. Sinha also addressed the conference. Sinha said that  recent changes in the SEBI Act enable it to control unauthorised deposit schemes.  he sought cooperation of the state governments in this initiative by conducting concerted investor awareness programmes and imparting training  to the officials. He suggested that States should enact depositors’ investor protection act and strengthen  the enforcement mechanism. he further sought co-operation of the State Governments in curbing “dabba trading.”

(Source: Times of India dated 26-08-2014)

Arvind Kejriwal, A Messiah Against Crony Capitalists.

“Society does not go down because of the activities of the criminals but because of the inactivities of the good people”- Swami Vivekananda

In a country which was used to the traditional parties coming back to power again and again with no intention to change the status quo, Aam Aadmi Party’ s (AAP) ascent to power in Delhi was a breathe of fresh air.

This is almost the first time in the history of this country an infant political party formed with the sole aim of providing clean and honest governance had captured the imagination of the people in such a short time. They ran an honest and clean campaign with full disclosure of their funding, which is, quite alien to the current political system in the country. They got enough seats but still not enough to form the government on their own.

The Congress party gave its support, without even it being sought for, as the mandate of the people became very clear. The main agenda of AAP was to bring in the Jan Lokpal Bill and the Swaraj Bill which is core to its agenda of clean and honest governance while empowering the citizens.

One needs to understand that AAP is not a traditional political party. AAP from day one made its intentions very clear that it is not going to play by the status-quo and would resort to unconventional means, if required, to achieve its goals. They were fearless to take on any system or individuals to prove their point. Some call it anarchy while many call it revolution.

There are divergent views on the constitutional powers of the Delhi assembly to pass Jan Lokpal bill without the consent of the Central Government. Without getting into the merits of such arguments, they are two things, which I think are important.

First, what is the use of the power if you can’t bring the change you want to bring in? AAP’s core agenda is to pass the Jan Lokpal Bill and Swaraj Bill in the Delhi Assembly. If the existing system does not allow them to pass such laws, for whatever reasons, without falling into the trap of the traditional status quoits compromises which the system demands, what is the use of such power?

Second, with the dependency on Congress and BJP being very high to pass the bill, waiting for some more time is not going to help. If both Congress and BJP wanted a strong Lokpal Bill as requested by Anna and his team including Arvind Kejriwal, they could have passed astrong Lokpal Bill in the Parliament itself. The diluted Lokpal Bill passed in the Parliament is a testimony to their intentions. Going to courts is not an option as the timelines are long.

One can hate him, ignore him or term him as an anarchist. But, majority will see him as a crusader who had questioned the current system and asked the most difficult questions which the mainstream parties are scared to ask. He will be seen as a messiah who had sacrificed the power just to fight against the crony capitalism and corruption in this country. His focus on providing clean governance where honest enterprises can do business and flourish, will resonate well with majority of the corporate that are honest.

By resigning, Arvind Kejriwal had clearly made Corruption, Clean governance and Crony capitalism (three “C”s) as the main issues for the 2014 parliamentary elections. It will clearly resonate well with larger sections of the electorate who are honest. I strongly believe that it is very important for the idea of AAP to succeed, as its failure will only take the Crony capitalism and Corruption to disproportionate levels.

(Source: Extract from an article by V. Balakrishnan in The Economic Times of India, dated 17-02-2014)

47th Residential Refresher Course (RRC) of Bombay Chartered Accountants Society (BCAS)

47th RRC of BCAS was held at Hotel Dreamland, Mahabaleshwar from 9th January to 12th January, 2014. The total number of participants enrolled for the RRC was 203.

Most of the RRC Participants reached Mahabaleshwar by lunch time on 9th January 2014. Around 50 of them used the travel arrangements made by BCAS from Mumbai to Mahabaleshwar. This time the Seminar Committee made special arrangements to welcome all the participants with a personalised pen and a gift hamper which was well appreciated.

DAY 1:  

The RRC began with the Group Discussion on the paper written by CA Vishal Gada on Case Studies in Taxation.

In the Inaugural function which was held in the evening, CA Naushad Panjwani, President of the Society welcomed the members and gave an overview of the activities which are conducted by the Society.

CA Rajesh Shah, Chairman of Seminar Committee gave a bird’s eye view of the selection of the subjects for the RRC, the entire process of arrangements for organising the RRC and thanked all the managing committee and seminar committee members for their support and the paper writers and brain trustees for sparing their time and sharing their knowledge with the participants.
The RRC was inaugurated by the Chief Guest CA V. C. Darak, by lighting the traditional lamp. Vice President CA Nitin Singhala introduced the Chief Guest of the RRC. CA V C Darak, in his address, spoke about the values and principles in our professional life.

CA Narayan Pasari, Convenor of the Seminar Committee proposed a hearty Vote of Thanks to the Chief Guest.

After the inaugural session, CA Amarjit Chopra, Past President of ICAI gave his presentation on “Companies Act, 2013 – Challenges in Accounting and Auditing” in his own humorous style covering all the issues related to the topic including some very serious and harsh provisions of the Act. He was concerned about the impact of some stray incidences like “Satyam” on the important enactments like the Companies Act, 2013. His underlying message to be vigilant while performing any professional duty was well received by all the participants.

This session was ably chaired by CA Uday Sathaye, Past President of the Society. The Vote of Thanks was proposed by CA K. K. Jhunjhunwala, a managing committee member .

The day ended with a sumptuous dinner in the huge dining hall of the Hotel.

DAY 2:

After breakfast, the participants discussed the paper written by Adv. K. Vaitheeswaran on Issues in Service Tax.

The Group Discussion on Service Tax paper was followed by an excellent presentation by CA Vishal Gada who dealt with his paper on Case Studies in Taxation, with great depth explaining relevant provisions of the Act also taking support from various cross references and the case laws on the issues. He also suggested to the participants not to rely too much on the decisions of lower courts unless they are strong on the technical aspects of an issue. He covered all the issues raised by the group leaders in his presentation cohesively and made the session very lively.

This session was ably chaired by CA Dr. Rakesh Gupta, an Ex-ITAT member, a participant from Delhi, who also raised few fundamental questions to the paper writer CA Vishal Gada, which were addressed by him during his presentation. CA Mulesh Savla, member Seminar Committee proposed the Vote of Thanks to the Paper Writer as well as the Chairman of the Session.

Thereafter, CA Ameet Patel, Past President of the BCAS made a thought-provoking presentation on “i for Technology”, a subject which is very close to his heart. He informed all the participants on various tools and apps which can be effectively used by a professional to improve efficiency and effectiveness of his work. He also suggested the use of services offered by various servers on the cloud. His masterly analysis of the subject made participants aware of the latest technological tools available to the professionals.
This session was chaired by CA Rajesh Muni, Past President of the Society. CA Bharat Oza, a Managing Committee member proposed the Vote of Thanks to the Paper Writer and the Chairman.

In the afternoon, all the participants got together for a group photograph.

The evening was free to the participants for some outings, refreshment and study for the subsequent papers. Some of the participants enjoyed playing cricket in the Hotel campus.

The day ended with a hot soup in the chilling atmosphere and a sumptuous dinner.

Unfortunately, a sad incident happened at night on the second day. One of our very senior members and a regular participant of the BCAS RRCs, CA Vinod S. Kothari expired due to severe heart attack. The committee members, along with a few other participants tried their level best to give him immediate medical assistance. However, he could not recover from the fatal heart attack.

DAY 3:

After breakfast, the participants discussed the paper written by CA Karishma R. Phaterphaker on “Domestic Transfer Pricing – Law, Issues & Documentation”.

Before the Brain Trust Session, all the participants prayed for the eternal peace for the departed soul of CA V. S. Kothari by observing silence for two minutes. The Brain Trust Session was conducted with CA Pinakin D. Desai and CA Dilip V. Lakhani as the Trustees for Income Tax and CA Sunil Gabhawalla as the Trustee for Service Tax. The participants had the benefit of the expert views of CA Pinakin D. Desai on several contentious issues of Direct Tax after a long time and CA Dilip Lakhani also analysed all the issues allotted to him in great detail. CA Sunil Gabhawalla excelled in his analysis of the issues raised in Service Tax area. Their command over the subject coupled with their crisp and flawless analysis was of great benefit to all the participants.

This session was ably chaired by CA Anil J. Sathe, Past President of the Society and CA Raman Jokhakar, Jt. Secretary proposed a very well deserved Vote of Thanks to all the Brain Trustees.

The Entertainment Programme to be held in the evening was cancelled and the Presentation of the discussion paper by Adv. K. Vaitheeswaran was taken up in the evening session. Adv. K. Vaitheeswaran dealt with all the case studies of his paper in a very lucid and humorous way. He gave different dimensions to the controversial issues. With the increasing importance of the Service Tax practice, his guidance on the issues will go a long way and help participants in their day to day practice.

This session was chaired by CA Pranay Marfatia, Past President of the Society. CA Saurabh Shah, Seminar Committee Member, proposed the Vote of Thanks.

The day ended with tempting dinner followed by a variety of desserts.

DAY 4:

After breakfast, CA Karishma Phatarphekar and her colleague CA Jigna Talati dealt with their paper on Domestic Transfer Pricing – Law, Issues & Documentation. Both of them made their presentation very interesting and satisfied the participants by resolving issues raised during the Group Discussions. There were challenges on the issues as the Domestic Transfer Pricing Law is still evolving and a lot more is required to be clarified from practical view point. Issues raised in their paper were of great significance to all.

The session was chaired by CA Nitin Shingala, vice president of the Society and the Vote of thanks was proposed by CA Ravi Shah.

In the concluding session, CA Nayan C. Parikh, Past President of the BCAS and a senior member of the Seminar Committee took an overview of the 47th RRC and recognised the contribution made by everybody expressing his gratitude for the efforts put in by them. He specially thanked the President for his whole hearted support and lead in organising the Residential Refresher Course. One of the participants CA Keyur R. Thakkar presented a very nice poem composed by him covering each and every event of the RRC. CA Naushad Panjwani, President of the Society, thanked everybody for making the RRC memorable. Participants departed after lunch to their respective destinations by cherishing the memories of 47th RRC and with a promise to meet again next year at the 48th RRC.

RBI Governors: The Czars of Monetary Policy

Author: GOKUL RATHI – Chartered Accountant
Reviewer: RIDDHI LALAN – Chartered Accountant

 

RBI plays a significant role in the country’s economic development and financial system. In addition to its crucial role in the country’s monetary policy, RBI regulates the banking sector and manages foreign exchange reserves. “RBI Governor” is the person who helms this all-important and formidable institution, burdened with onerous responsibilities.

In the 86 years of its existence, RBI has been led by 25 eminent scholars, each influencing the economic and monetary policy with a distinct style. For a long time, the Governors have contributed tirelessly behind the scenes and only recently, have stepped into the spotlight. “RBI Governors: The Czars of Monetary Policy” highlights the importance of these eminent men and their contribution to moulding the country’s financial system.

CA Gokul Rathi has been closely associated with the banking sector as an auditor, consultant and board member. Based on his observation of the banking sector during the last three decades, Mr. Rathi, a Chartered Accountant, has conducted elaborate research while penning down this book on men whose signatures appear on the country’s currency. Gokul traces back the origin of this book to 2007-08 when he was impressed with the deft handling of the Indian economy before the global financial crisis by Dr Y. V. Reddy.

The book introduces the 25 Governors that have led this powerful institution and their academic and professional background. Without presenting an analysis, Gokul sets forth an account of the events that occurred during the tenure of each Governor in terms of the key decisions taken and their impact, their achievements and disappointments. It reflects on the country’s banking and financial journey through important phases and events – nationalisation of the banks, priority sector lending, foreign exchange regulations, liberalisation, banking sector reforms and demonetisation, and changing political scenarios – from a different perspective.

The book expounds on the Governors’ role in managing the balance of payments, assuring price stability in the country, promoting rural banking, encouraging foreign investment and various other schemes and reforms. Gokul narrates instances highlighting the crucial role that the Governors have played in navigating the county’s economy through choppy waters on the route to development. Steering the economy through foreign exchange crisis, stock market and financial scams, inflation, unorganised banking sector and global financial crisis, the growth story modelled by each Governor makes for an engaging read. The context in which crucial decisions that forever changed the course of the country’s financial policy were made has been appropriately emphasised.

The book also throws light on the relationship and exchanges between the RBI and the Government (i.e., the Governor and the Ministry of Finance) and its impact on the institution’s autonomy. The manner in which each Governor balanced the equation with the Government, handled the times of political uncertainty and its impact on the autonomy and powers of RBI make for an interesting read. While some have clashed with the political leadership at various times, others have maintained diplomacy and cordially managed it. However, true to his word, Gokul does not venture into an analysis but only mentions instances of differences and, therefore, refrains from any bias.

Gokul has sourced the historical facts and accounts from the official History of the Reserve Bank of India, Vols. 1 – 4 (1970 to 2013), as well as memoirs and autobiographies of the former Governors. The lucid language in which an account of the RBI Governors is presented makes it easy to read and comprehend even for persons with limited financial knowledge. The anecdotes and trivia on the history of RBI and the Governors at the end of some chapters make the book more engaging.

This book is of value for anyone who wishes to understand the history of the banking sector and the financial journey of the country at an introductory level as well as to students of economics. Gokul has done justice in coherently cataloguing the events that occurred during the tenure of each Governor. Sources cited for the information contained in the book act as a guide to anyone who wishes to delve into the subject more deeply. While the professional achievements are briefly mentioned, a more detailed account of each Governor’s personal life could have added inspirational value to the book for me. Nevertheless, numerous interesting facts and stories about RBI and Governors have been brought to light in the book. Gokul’s endeavour to succinctly place before the public, the contributions of the Governors pivotal role in the country’s economic journey is truly commendable.