Newsletter Issue No 7-15th July 2012 - PKF Sridhar & Santhanam

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<strong>PKF</strong> SRIDHAR & SANTHANAM Chartered Accountants Other Operating Income and Other Income ICAI FAQ states that whether an item should be classified as “other operating revenue” or “other income” is a matter of judgment and requires consideration of specific facts. In a number of cases, the dividing line between these two items may be very blurred. It requires an exercise of significant judgment. Hence, at the time of audit, decision on classification of income should be taken based on the nature of business undertaken by the client and past business practices. Interest paid towards shortfall in advance tax payments & Wealth tax As per revised schedule VI, all such interest liabilities need to be classified under finance costs and not under current-tax or other expenses. Also wealth tax payable by the company has to be included now only under rates & taxes and not under current tax or any other head. Exceptional and Extra-ordinary items Also under revised schedule VI, one has to bifurcate and present exceptional and extra-ordinary items separately. Exceptional items are those items of income and expense within profit or loss from ordinary activities, are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period. (Example: Huge Profit on Sale of fixed assets) Extra-ordinary items are income or expenses that arise from events or transactions that are clearly distinct from the ordinary activities of the enterprise and, therefore, are not expected to recur frequently or regularly. (Example: loss by earthquake /tsunami etc) One has to classify the items, at the time of audit, in the lines of the above definitions, and present accordingly in the financials. Disclaimer This article brings out only the major features of revised schedule VI which need to be taken care at the time of audit of small and medium enterprises. One should always refer to revised schedule VI issued by MCA and the guidance note & FAQ issued by ICAI at the time of audit to ensure compliance with all presentation requirements of revised schedule VI. Happy Auditing ☺ 4 www.pkfindia.in
<strong>PKF</strong> SRIDHAR & SANTHANAM Chartered Accountants GAAR: Indian Perspective Ms.Mahera Chauhan A constant debate has been raging over the issue of tax avoidance. Over the years, the term ‘tax avoidance’ has come to be understood as arranging affairs with the main object or purpose of obtaining tax advantage while prima facie fully intending to comply with the law in such respect Globally, tax avoidance has been recognized as an area of concern and several countries have expressed concern over tax evasion and avoidance. This is evident from the fact that either nations are legislating the doctrine of General Anti- Avoidance Regulations in their tax code or strengthening their existing code. The GAAR Mechanics: In India, the proposed Direct Tax Code 2010 (DTC 2010 or Code) seeks to address the issues relating to tax avoidance and evasion by bringing in General Anti-Avoidance Rules (GAAR) in addition to various transaction-specific Special Anti-Avoidance provisions. In a nutshell the whole GAAR scheme revolves around the 5 www.pkfindia.in
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Newsletter Issue No 7-15th July 2012 - PKF Sridhar & Santhanam

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