Saturday, September 20, 2014

TAXATION - CAPITAL V Revenue - Unending , Inconclusive BATTLE OF WITS ?


Accounting x Taxation x sebi ET AL
TG
Jan 12
CGT





Accountant >
TG

http://taxguru.in/income-tax/icai-mooted-ind-sharing-thoughts.html


>>>
Full Text of Exposure Draft of Indian Accounting Standard (Ind AS) 113 Fair Value Measurement -Download
Full Text of Exposure Draft of Indian Accounting Standard (Ind AS) 113 Fair Value Measurement -Download - See more at: http://taxguru.in/chartered-accountant/exposure-draft-indian-accounting-standard-ind-113-fair-measurement.html#sthash.JaQOdYE2.dpuf



BL

Prime Minister Narendra Modi has rightly pointed to the need to clear the “jungle of archaic laws... »

Ind AS
ca Journal issue 2014 sept.

ICAI e-Journal (September 2014 - PDF Download) - The ...

The application of the acquisition method requires that the identifiable net assets of the acquired company would be recorded in the acquirer’s books at fair values as on the acquisition date. Consideration paid for the business combination is also measured at fair value and any excess consideration paid over the fair value of the identifiable net assets is recorded as goodwill. Where the fair value of the identifiable net assets is greater than the fair value of the consideration, the gain is recorded as capital reserve.


Jottings-

(FAIR VALUE ? - CAN IT BE MORE THAN THE AGREED CONSIDERATION, ESPECIALLY IF..IN CASH NOT IN KIND, WHOLLY OR PARTLY, a nebulous, common thread of controversy, taken its poisonous root, spread its tentacles
what started off, kick-started as an experiment, testing fresh waters- carried too far to offend not legal sense alone but common sense itself/as well in one go/sweep 
TANGIBLE X INTANGIBLE - WHY SHOULD MAKE A DIFFERENCE 
WHY GLOBAL - WHAT HAPPENS TO THE PRECINCTS OF THE CONTRACT ACT- does it anywhere talk of
actual consideration - over or understated , may be yes, but not if stated, accrued and receivable/ received, is actual nothing but actual
vires the constitution, should not the contract act be the deciding touch stone 



Indian contract act- defn- action to do, inaction not to do , consideration
Form v substance < Vodafone (tax case, subject matter of transfer share x controlling interest) , hill properties (property law, debt recovery),
It is the concept  of contract, right of any two parties to agree, decide on the terms and conditions
Sale x purchase- one of deemed service, so as to levy tax on service (deemed)
Agreed price x transfer pricing
Sebi – a mere regulatory authority- power to rewrite
Accounting – AS 7
In the process – even the basic charter has come to be tampered with
Updating construction- what that means- does that mean rewriting the concept itself- if so to what extent and with what result, consequence
NAP, VODAFONE - FORM V SUBSTANCE

historical cost v fair market value (reaI ISATION VALUE ?)

IS NOT THE WHOLE EXERCISE, EXPERIMENTS, WITH CONTINUING RESEARCH BY EXPERTS (mostly in the field of ACCOUNTING ) A FARCE / WITH NO ULTIMATE PURPOSE TO BE SERVED / SUB-SERVED, IN REAL TERMS, TO ANYONE OR MORE CONCERNED- even assuming there be any?

While on the one hand  an increasingly loud noise is being made / deafeningly heard from many well informed circles, clamoring  for 'simplification' of all and sundry- not barring in the most vital field of 'legislation', why the largely perceived perpetration and perpetuation of complexity, verging , nay is tantamount to complicity, should be regarded as for the common good of all being consequently impacted. IN short, life is being made more and more complicated and convoluted, instead of being rendered simpler and simpler as honestly desired.

Should not, in the interests of the humanity/society, the direction be changed sooner than later, and switched over to the age-old idea of  time-honored/- tested , by any thinking a far afar better, if not the best, accounting principle- "historical cost or market value, which ever is less". In one's clear impartial perspective, that may have the result of slowing down in a great measure, if not put a 'hand break', to the largely  prevalent, alarmingly accelerated "commercialization" of every action or inaction, to which the social evil of 'corruption"  engulfing the whole of humanity is , in the ultimate analysis, inexcusably traceable. 


< Ind AS requires all business combinations (..) ... to be accounted as per the acquisition method of accounting, irrespective of the legal form ....?

art. (amit somani)

asomani.personal@gmail.com

On IFRS >

Rumblings <<<<<



ACCOUNTING and AUDIT (A/C Standards, et al)







Tax



Will it be possible for one group to pay cash to a dissenting....
S. 4 : Income - Capital Receipt - Affirmative Voting Rights – [S. 2(14)]


Amount received by assessee for affirmative voting on a resolution was not a business receipt, but received as bounty or wind fall for voting affirmatively and supporting a resolution and was a capital receipt. Amount received by Assessee as casual receipt in the nature of windfall and not repetitive in character would not amount to income and therefore, not liable to tax.

CIT vs. David Lopes Menezes (2010) 195 Taxman 131 / (2010) Vol. 112 (10) Bom. L. R. 4655 

TAX BY MANISH: Case Laws Update - June 2013


SEBI
ICL


< SEE COMMENTS



The SC decision can also be looked at from a different angle. The SEBI‘s view has been scoffed at by impliedly holding that any action of a businessman taken wholly and exclusively for commercial reasons /considerations ought not to be disregarded or varied but be honored. This, in essence,  is nothing but  akin to the long accepted and followed as settled law in tax cases on the proposition that it is not open to the department  (the Revenue authorities) to adopt a subjective standard of ‘reasonableness’.  Further, according to a view, SEBI cannot be regarded to have acted within its vested powers; for, it has no power to ignore , for whatever reason, the “legal form” of the transaction.


By the way, another instance that has surfaced seeking to give precedence to “substance” over “legal form” that has provoked  likewise  an anxious consideration in one’s mind but requires an in-depth deliberation is this:
In an attempt to explain in somewhat great details what the proposed new accounting standard  Ind S 7  the write-up published in ......

(<to complete)

KEY Note:

The common thread  passing through each of the three fabrics- LAW (court litigation and Rulings), Accounting and SEBI , if critically viewed, may be realized to be that woven out of the grey area of controversy, - Form v Substance.

1. Vodafone (HC)-

Xtract >
< In terms of the applicable provisions in the case of a non-resident, only a transfer of shares held in an Indian company can give rise to taxation in India. Accordingly, Vodafone’s basic contention was that the transfer made in its favour was factually and actually only of the shareholding of HTIL (both directly and indirectly) in another foreign company, and therefore, not liable for taxation in India. Further that, therefore, section 195 was not attracted and, accordingly, no action can be taken under section 201. However, the revenue had not accepted but proceeded against Vodafone for the reasons/on the grounds already noted.

In essence/effect, what the revenue was really seeking to do was not to go by the ‘form’ of the transaction, instead, go behind it with a view to, ascertaining the ‘substance’ (the true nature) of the transaction. As such, the point of controversy basically is, - as to whether at all it is permissible for the revenue to do so under the law, whatever be the compulsions or extraneous reasons for the revenue for doing so. It calls for a special noting that, prima facie, on this aspect, the opinion of courts in a number of decided cases do not go to support the revenue. (Refer the commentary in the Book on Income-tax by Kanga, Palkhivala, and Vyas, Ninth Edition, Vol. I. at Page 61 - Head - 61. Disposition of Property so as not to Attract Tax: ‘Form’ and ‘Substance’).>



2. SEBI


Supreme Court on Non-Compete Fee Under the Takeover Regulations

xtract>

Although SEBI is mandated to protect the interest of all investors and can question the payment of a non-compete fee or for that matter, even has the ability to intervene and question the merits of the decision taken by the parties involved in a transaction, following are some of the key takeaways from the Supreme Court ruling:
(a) commercial decisions of the parties should be respected, unless there are good reasons not to do so;
(b)  it is imperative to give sufficient elbow room to commercial entities for entering into a business transaction and host of considerations go into business relations; and
(c)   threat perception cannot be decided on the basis of hindsight, but must be left to the commercial wisdom of the players on the field.
- 

3. Ind AS (s!)

As summed up :

ICAI e-Journal (September 2014 - PDF Download) - The ...


Law is an ass; most certainly, AS cannot afford to be so. For the simple reason, it is not left to an accountant or auditor, whether in accounting for financial implications of any business transaction, not barring those falling under the enumerated categories,  client must follow and go not by the "legal form" but by the "substance".
Consider, - ...


However much you try not to and steer away from the whirlpool of ..., unwittingly obliged and helplessly veer round to the centre of  ...gravitated to ..
With the utmost care taken to blend all apiece,  one integrated , with no frills, then alone scope for eschewing disputes and ard off litigation ...

Quote NAP on ..

KNown Method of Accounting 3- Cash, Mercantile, Mixed

mixed certainly not to such an extent as to render or defeat the very purpose of or ojects/objective of accounting
not to get into more and more insurmountable s but try and obviate, if not avoid, the pitfalls, hardships, to be faced or confronted with

RBI
(on its part, adds own contribution >)

RBI Allows FDI against “Legitimate Dues”
By way of a notification issued on September 17, 2014, the Reserve Bank of India (RBI) has now allowed......
However, this is subject to compliance with the terms and conditions of the FDI policy, including sectoral caps, pricing guidelines, etc., and also applicable tax laws.
“........remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 or any rules/regulations framed or directions issued there under”
“.....However, this is SUBJECT TO COMPLIANCE WITH THE TERMS AND CONDITIONS OF FDI policy, including sectoral caps, pricing guidelines, etc., and also applicable tax laws."
<> NO(ooo) doubt, this is prima facie a liberalization measure, which is tantamount to the lately repeated gimmick of roll back to  certain extent, of the erstwhile rigid requirements. However, going by one’s own understanding, the so-permitted issue of shares through the so-called “automatic route”, and that too limited to/ against “legitimate dues”, if perceptively viewed , is noted to have mindlessly, and with no purpose to be served, is tagged on to certain requirements, in fine print. The not-so-obvious imponderables, in the “form of terms and conditions”, are left to be gathered from the rider:

  “.....However, this is SUBJECT TO COMPLIANCE WITH THE TERMS AND CONDITIONS OF FDI policy, INCLUDING sectoral caps, pricing guidelines, etc., and also applicable tax laws.

The point in mind is this: Despite such shares issue being allowed via the “automatic” route, it is nonetheless kept open to be gone into/questioned, in hind sight, on anyone or more of the indicated grounds. For that matter, whether or not a given case falls squarely within the parameters of so-said “legitimate dues”,  by itself, is an area fraught with obvious impracticalities; may be, requiring a detailed probe/investigation by an authority adequately equipped i.e. for no less than CBI or SFIO


BL

NPPA guideline withdrawal: Sending the ‘right signals’ or ‘course correction’?

The drug price regulator’s move to withdraw internal guidelines that it had issued in May ha... »

<BS
 Xtract :

".....had sought the Law Ministry’s opinion on the regulator’s capping of prices of drugs that were otherwise outside price control. NPPA had invoked Paragraph 19 in the (DPCO), 2013 — this empowered it to order a reduction in the price of medicines in “extraordinary” circumstances in the public interest."

 What is "Public Interest" - Perceptions and Perspective, same way as "subjective" and  "objective", depending on the viewer, could differ ?!


<> Having been provoked by certain developments to altruistically canvass, in the larger public interests, in one's conviction, , similar right signals and course correction  are required to be taken on and diligently pursued with regard to the other regulators as well; and, on a war footing. For instance, for one such case on point , attention may be invited to , -


As viewed, the SC decision can also be looked at from a different angle. The SEBI‘s view has been scoffed at by impliedly holding that any action of a businessman taken wholly and exclusively for commercial reasons /considerations ought not to be disregarded or varied but be honoured. This, in essence,  is nothing but  akin to the long accepted and followed as settled law in tax cases on the proposition that it is not open to the department  (the Revenue authorities) to adopt a subjective standard of ‘reasonableness’.  Further, according to a view, SEBI cannot be regarded to have acted within its vested powers; for, it has no power to ignore, for whatever reason, the “legal form” of the transaction.

By the way, another instance that has surfaced seeking to give precedence to “substance” over “legal form” that has provoked likewise an anxious consideration in one’s mind but requires an in-depth deliberation is the new accounting standard , Ind S 7 .

To be brief, for sampling, in one’s understanding of the aspect of major concern in the  Ind- As is its requirement, in essence to the effect that, that all business combinations, to be recorded as per the “acquisition method” of accounting, has to be irrespective of the “legal form”. Does this not bring to surface once again the ongoing tug of war, and the enduring inconclusive controversy, between, - “Form” and “Substance”? Should that be so, the point is, why and how, the accounting person could conceivably be ordained to, rightly so, and the auditor be empowered to insist, ‘substance’ be the deciding criterion for the purpose.

The above are thrown up mainly with a view to have own thoughts clarified; albeit, it is for the accounting and other experts at large, duly equipped, to consider independently, and come out with a contrary but well-reasoned view , if any.


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