ICDS - 2 CHANGES IN ITR FOR AY COMPANIES (AMENDMENT) ACT 2017 CA. PRAMOD JAIN B. COM (H), FCA, FCS, FCMA, LL.B, MIMA, DISA

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1 ICDS - 2 CHANGES IN ITR FOR AY COMPANIES (AMENDMENT) ACT 2017 CA. PRAMOD JAIN B. COM (H), FCA, FCS, FCMA, LL.B, MIMA, DISA Shared at Sonepat Branch of NIRC of ICAI 3 rd June 2018

2 CRITICAL ISSUES CA. Pramod Jain Companies (Amendment) Act 2017

3 SUMMARY CA. Pramod Jain 93 Amendments in all This ppt contains major amendments 3 Provisions applicable from 3 rd January 2018 related to IBC 43 Provisions applicable from 9 th February Provisions applicable from 7 th May 2018 Compliances emphasized Penalties rationalized

4 AMENDMENTS IMPORTANT DEFINITIONS 2(51) KMP to include 1 level below director who is in whole time employment, designated as KMP by Board 2(57) Net worth to include debit / credit balance of Profit Loss Account 2(76) Related party to include Investing co. or Venturer of the company i.e., a body corporate whose investment in company would result in the company becoming an associate company of the body corporate

5 AMENDMENTS IMPORTANT DEFINITIONS 2(85) - Small co- upper limit of capital 5 Cr to 10 Cr & turnover 20 Cr to 100 Cr 2(87) Subsidiary voting power now 2(91) Turnover realization confusion removed - means the gross amount of revenue recognised in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year

6 AMENDMENTS PRIVATE PLACEMENT S. 42 to be substituted PP offer not to contain right of renunciation Can have more than one offer at one time, however offer to no. of persons to be within limit of 50 identified persons Amount cannot be utilized unless shares allotted and Form PAS-3 is filed PAS-3 is to be filed within 15 days of allotment Late filing of PAS 3 Penalty on company, promoters & directors for each default - Rs. 1k p. d. Max 25L

7 AMENDMENTS PRIVATE PLACEMENT Penalty for contravention changed to amount involved or Rs. 2 Cr whichever is lower. Amount to be refunded within 30 days of imposing penalty along with interest If offer not as per ss.(2) 50 limit public offer SEBI Act would also apply

8 AMENDMENTS SHARES CA. Pramod Jain S Preferential issue Chapter III (s. 42) also to be complied -( ) S Right Issue Offer letter allowed to be given by courier or any other mode of having proof of delivery. Earlier only speed post or electronic mode -( )

9 AMENDMENTS DEPOSITS S. 73(2) From members: CA. Pramod Jain Amount to be deposited 20 20% (E-15%) by 30th April Deposit insurance not required now In case of default in repayment of deposits which is made good later and 5 years has elapsed can raise deposits Existing deposits period increased from 1 yr to 3 years. Renewal to be done as per Chapter V Penalty u/s 76A - lower limit changed 1 Cr or twice the amount of deposit whichever is lower. Officer in default Imp. 7 yrs & fine (earlier or) 25 L to 2 Cr -( )

10 AMENDMENTS CHARGES S Section may not apply to such charges as prescribed by RBI -( ) S Registrar may allow on application reporting of satisfaction of charge within 300 days with additional fee -( )

11 AMENDMENTS MANAGEMENT Beneficial interest defined in S. 89(10) - ( ) CA. Pramod Jain Beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to Exercise or cause to be exercised any or all of the rights attached to such share; or Receive or participate in any dividend or other distribution in respect of such share. S. 90 substituted to provide for Register of significant beneficial owners in a company

12 AMENDMENTS MANAGEMENT S Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than 25% or such other % as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in s. 2(27), over the company (herein referred to as "significant beneficial owner"), shall make a declaration to the company, specifying the nature of his interest and other particulars.

13 AMENDMENTS MANAGEMENT S. 90 Register of beneficial ownership to be maintained by co file return. Penalty: On person not making declaration Min. 1 L to 10 L continuing 1k p.d. On Co. for not maintaining register and filing return Min. 10 L to 50 L continuing 1k p.d. Willfully False or incorrect information or suppress s. 447 S Abridged Annual Return for OPC & small Co. to exclude indebtness and details of name address, etc of FIIs -( ( )

14 AMENDMENTS MANAGEMENT S AR on website, if any - link in B. Report Listed Co. change in shareholding by top 10 shareholders reporting omitted (S. 93) S. 94 Place to keep registers & AR if to be kept at other than R.O. i.e. where more than 1/10 members no need to give copy of the proposed special resolution in advance to RoC now. AOC-5 for separate place. Certain particulars of register or index or return as may be prescribed not to be available for inspection u/s 94(2)

15 AMENDMENTS ACCOUNTS S. 129(3) CFS substituted -( ( ): To specifically include associate companies CFS to be in accordance with applicable AS CA. Pramod Jain S. 130 Reopening on Court or NCLT order - ( ) : NCLT to give notice to any other person concerned also No reopening for period earlier than 8 FYs immediately preceding the current FYs unless direction issued u/s 128(5) Proviso to keep books of accounts for more than 8 years

16 AMENDMENTS NFRA S ( ) Firm minimum penalty reduced from Rs. 10L to 5 L Appellate authority not to be constituted now ss. 6,7,8 7 9 omitted Appeal now to Appellate Tribunal

17 AMENDMENT FILING OF FS S. 137 ( ) While filing AOC-4 accounts of foreign subsidiary(s) is also to be attached in case of unaudited attached unaudited. If in other language, translate in English and attach

18 AMENDMENTS AUDIT CA. Pramod Jain S. 139(1) 1 st Proviso - Annual Ratification of auditors not required -( ) S ADT 3 Auditor resignation minimum penalty reduced to 50k or the audit fee whichever is less -( ) S. 143(1) - Auditor to have access to records of associate companies also as it relates to CFS -( ) S. 143(3)(i) - Auditor to report on Internal Financial Controls with reference to Financial Statements -( ( )

19 AMENDMENTS AUDIT CA. Pramod Jain 141(3)(i) ) disqualification changed from - ( ) any person whose subsidiary or associate company or other form of entity is engaged on the date of appointment in consulting and specialized services u/s 144 to a person who, directly or indirectly, renders any service referred to in s.144 to the company or its holding company or its subsidiary company. Directly, Indirectly same as in s. 144

20 AMENDMENTS AUDIT -( ( ) 147(2) maximum penalty reduced to 5 L or 4 times the audit fee whichever is less Where default with intention to deceive penalty reduced from 1 L - 25L to 50k - 25L or 8 times the audit fee whichever is less 147(3) - For damages (class action) any other person substituted (restricted to) - members or creditors of company 147 (5) - Criminal liability restricted to the concerned partner who acted in fraudulent manner or abetted or colluded..

21 AMENDMENTS DIRECTORS ( ) S. 149 (3) - Resident director (182 days) requirement changed from calendar year to FY. In case of co. incorporated during year proportionate. S. 149 (6) - Pecuniary relationship for independent director to exclude director remuneration or transactions > 10% of his total income or prescribed amount. Relatives pecuniary limits also specified holding, indebtness & gaurantee-wise

22 AMENDMENTS DIRECTORS In case of relative who is an employee, the restriction shall not apply for his employment during preceding 3 Fys ( ) S. 152 / CG may prescribe any other identification no. which shall be treated as DIN - ( ) S Requirement of deposit Rs. 1 L for standing for directorship shall not apply in case of independent director or dir. recommended by Nomination & Remuneration Comm. or by Board, in case of No Nomn. /Rem. Comm. -( )

23 AMENDMENTS DIRECTORS S. 161 (2) A person holding directorship in company cannot be appointed as alternate director in same company -( ) S. 161 (4) Casual vacancy in office of director may be filled by Board to be approved in next GM in case of all companies (earlier only Public companies) -( ) S. 164(2) - Disqualification not applicable for 6 months of new appointment in defaulting co. Existing director disqualified in all Cos except said Co. [S. 167(1)] -( ( )

24 AMENDMENTS DIRECTORS S. 164(3) - Disqualification related to conviction, by tribunal or not paid calls (6 months) shall continue to apply even if the appeal or petition has been filed against order of conviction or disqualification -( ) S limit to exclude D Cos -( ) S. 167(1) Vacation due to conviction not applicable for 30 days from conviction, if appeal preferred until 7 days appeal or further appeal is disposed off -( ) S DIR 11 made optional -( )

25 AMENDMENTS BOARD MEETINGS S. 173(2) In case where certain matters cannot be dealt in Board meeting through video conferencing - If directors physical present form quorum then other director can attend by video conference or other audio video means too. -( ) S. 177(1) - Audit committee for listed public company and others prescribed -( ) S. 177(4)(iv) - AC to recommend transaction with related party other than 188 to Board if AC does not approve -( )

26 AMENDMENTS BOARD MEETINGS S. 177(4)(iv) - If transaction > 1Cr with related party without AC approval or ratification within 3 months, voidable at option of AC, director to indemnify. Such provisions shall not apply to a transaction, other than a transaction referred to in s. 188, between a holding & WOS -( ) S. 180(1)(c) to include sec. premium -( ) Non-compliance penalty of s. 184(1)/(2) [MBP1, etc] minimum penalty 50k removed max remains at 1 L S.184-For 2 % limit body corp. included

27 AMENDMENTS LOAN TO DIRECTORS -( ( ) S. 185 substituted. Following restriction on giving loan etc. continues: Director of Company Director of holding Company Partner or relative of Director Firm in which director or relative is partner CA. Pramod Jain Others including to Private Co. in which director is director or member allowed, subject to: SR, with complete details in Explanatory statement and proposed utilization by recipient Loans to be utilized for principal business activities

28 AMENDMENTS LOAN TO DIRECTORS -( ) Exemption to a company which in the ordinary course of business gives loans or guarantees or securities in respect of loan if interest is charged not less than bank rate --- changed to 1,3, 5 or 10 year govt. securities prevailing yield (similar to s. 186) All other conditions same Penalty same on giver and receiver Officer in default added Imprisonment upto six months or fine min Rs. 5 L & Max 25 L or both

29 AMENDMENTS LOAN BY COMPANY -( ( ) S. 186(2) - Loan to employees excluded S. 186(3) Limits - aggregating past loans, investments, etc and proposed loans investments, etc. No requirement of SR if loan, guarantee or security is given to WOS or JV Co or investment in WOS. Disclosure u/s 186(4) in FS required S. 186 not applicable to investment made by Invt nvt. co. Investment Co. means whose asset in investments is not less than 50% of total assets or income therefrom is not less than 50% of total income Not applicable on loan etc given by Cos, established with object of and engaged in business of financing Industrial enterprises (earlier Cos)

30 AMENDMENTS FEE S ( ) If not filed within the due period of section: Annual Return CA. Pramod Jain Financial Statements to be filed with ROC Additional Fee not less than Rs. 100 p.d Others additional fee (12 times) other than s. 92, 137 & increase in nominal capital Fee payable - at actual time of filing applicable Higher additional fee not less than twice the additional fee in case of default on 2 or more occasions

31 S. 403 AMENDMENT & IMPACT Within the time specified u/s 403 omitted S. 89 MGT 6 declaration by beneficial owner within 30 days of declaration received S. 92 MGT 7 - Annual return S. 117 MGT 14 - Filing of resolutions S. 121 MGT 15 Report on AGM by listed Cos S. 137 AOC-4 Filing of FS S. 157 Furnishing of DIN

32 AMENDMENTS FEE S. 403 Shall without prejudice to the liability for the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default Declaration by beneficial owner (89): Rs. 500 p.d.. if continuing Rs p.d. AR (92) : Co Rs. 50 K to Rs. 5 L OID Imp upto 6 Months or fine 50K to 5 L or both FS (137) Rs p.d.. max 10 L CA. Pramod Jain

33 AMENDMENTS FEE S. 403 Filing of resolution amended (117): Co - 1 L to 25 L OID 50K to 5 L Report on AGM by listed Cos (121): Co 1 L to 5 L OID 25k to 1 L Furnishing of DIN (157) Co 25k to 1 L OID 25k to 1 L CA. Pramod Jain

34 AMENDMENTS OTHERS S. 247 Registered valuer not to undertake valuation if has direct / indirect interest 3 years prior or 3 years post valuation -( ) S Conversion of firm, LLP etc into company allowed if having 2 or more members (earlier 7). Such co to be registered as Pvt Co S. 374 LLP converted into Co. LLP deemed to be dissolved under LLP Act without further act S CSR applicable to Foreign Cos

35 AMENDMENT - OTHERS CA. Pramod Jain S Compounding allowed if imprisonment not mandatory or punishable with imprisonment and also with fine New S. 446A Due regard to be given for imposing fine or imprisonment -( ) : Size of the company; Nature of business carried on by the company; Injury to public interest; Nature of the default; and Repetition of the default.

36 AMENDMENT - OTHERS CA. Pramod Jain New S. 446B - OPC & SC only ½ of fine/imp. -s. 92, 117& 137 -( ) S If amount involved in fraud is less than Rs. 10L or 1% of turnover imprisonment upto 5 years or fine upto Rs. 25 Lacs or with both. No minimum term or amount -( )

37 RATIONALIZATION OF PENALTIES CA. Pramod Jain Sec. Particulars Old Penalty New Penalty 42 Filing of PAS 3 after 15 days Nil Min - Rs p. d. Max Rs. 25 L 42 Contravention of s. 42 Higher of Rs. 2 Crores or Lower of Rs. 2 Crores or Amount involved Amt involved 76A Deposits Co 1 Cr to 10 Cr OID Imp upto 7 Yrs or fine 25L to 2 Cr Co Lower of 1 Cr or twice amount of deposit to 10 Cr OID Imp upto 7 Yrs AND fine 25L to 2 Cr 117 Filing of Resolutions C- 5 L to 25 L OID 1 L to 5 L C- 1 L to 25 L OID 50K L to 5 L 132 NRFA for Firms Rs. 10 L to 10 times of fee Rs. 5 L to 10 times of fee

38 RATIONALIZATION OF PENALTIES CA. Pramod Jain Sec. Particulars 140 Auditor non filing of ADT-3 on resignation 147(2) Auditor contravention of ss. 139 / 143 / 144 / 145 Provis Auditor knowingly or o to wilfully to deceive by 147(2) contravention of ss. 139 /143 / 144 / Non-compliance of s. 184 (1) / (2) Old Penalty Min - Rs. 50 K Max - Rs. 5 Lakhs Min - Rs. 25 K Max - Rs. 5 Lakhs Imp. Upto 1 year & Min - Rs. 1 L Max - Rs. 25 L Min Rs. 50K Max Rs. 1 L New Penalty Min - Rs. 50 K or remuneration of auditor whichever is less Max - Rs. 5 Lakhs Min - Rs. 50 K Max - Rs. 5 Lakhs or 4 times the audit fee whichever is less Imp upto 1 Yr & Min - Rs. 50 K Max Lower of Rs. 25 L or 8 times the audit fee Min Nil Max Rs. 1 L

39 II VALUATION OF INVENTORIES

40 ICDS II VALUATION OF INVENTORIES Inventory to be valued at cost or NRV whichever is lower. By-products, scrap or waste material are immaterial, they shall be measured at NRV and this value shall be deducted from the cost of the main product. Cost of inventories to include: Cost of purchases; Includes all duties & taxes. AS 2 excludes refundable from taxing authorities

41 ICDS II VALUATION OF INVENTORIES Costs of services - Includes labour and other costs of personnel directly engaged in providing the service including supervisory personnel and attributable overheads Costs of conversion; and Other costs incurred in bringing the inventories to their present location and condition Cost Formulae Specific identification of cost FIFO Weighted Average CA. Pramod Jain

42 ICDS II VALUATION OF INVENTORIES Techniques for measurement of cost: CA. Pramod Jain Standard Cost Retail method (An average percentage for each retail department is to be used ) ICDS - Machinery spares, which can be used only in connection with a tangible fixed asset and their use is expected to be irregular, to be dealt with in accordance with the ICDS V (Tangible fixed assets) The New AS 10 PPE read with new AS 2 FA if expected to be used for more than 12 months

43 ICDS II TAX DUTIES CA. Pramod Jain AS: The costs of purchase shall consist of purchase price including duties & taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards & other expenditure directly attributable to the acquisition. (Exclusive method). ICDS: The costs of purchase shall consist of purchase price including duties and taxes, freight inwards & other expenditure directly attributable to the acquisition. (Inclusive method) Already u/s. 145A since amended now

44 ICDS II TAX DUTIES CA. Pramod Jain Assuming that the assessee has opening stock of Rs.3,30,000/- on which input tax rebate of Rs.30,000/- is available. During the year three items Rs.3,00,000/- per item. VAT on 10%. There is no opening stock. Two items are Rs.4,50,000/- per item. VAT on 10%

45 ICDS II TAX DUTIES

46 Sl. No. ADJUSTMENT U/S 145A Particulars CA. Pramod Jain Increase Decrease in profit in profit (Rs Rs) (Rs Rs) 1 Increase in Opening Stock on inclusion of VAT 2 Increase in Purchases on inclusion of VAT Increase in Sales on inclusion of VAT Increase in Closing Stock on inclusion of VAT VAT paid on sales VAT credit availed on cost of goods sold

47 COMPUTATION OF INCOME CA. Pramod Jain

48 ICDS II PARTNERSHIP FIRMS In case of dissolution of a partnership firm or AOP / BOI, notwithstanding whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the NRV. Judicial Precedents: At prevailing market price while preparing a/cs if the business of firm is discontinued- A.L.A. Firm v. CIT [1991] 55 Taxman 497(SC) Business continued without any interruption after death - closing stock was to be valued at cost or MP, whichever was lower, & not at market value -Sakthi Trading Co. v. CIT [2001] 118 Taxman 301 (SC)

49 DHC CA. Pramod Jain ICDS Contrary to DHC Finance Act 2018 Stock-in in-trade in case of dissolution of firm to be valued at market price irrespective of whether the business discontinues. Shakti Trading Co. 250 ITR 871 (SC) Section 145A of the IT Act providing valuation of inventory in accordance with the method of accounting regularly employed by the taxpayer is independent and irrespective of section 145(2) (ICDS). Section 145A amended

50 FINANCE ACT 2018 S. 145A Valuation of inventory shall be made at lower of actual cost or NRV in accordance with ICDS notified u/s 145(2) Valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation.

51 ICDS II VALUATION OF INVENTORIES No Interest /borrowing cost unless as per ICDS IX Where inventories require a period of 12 months or more to bring them to a saleable condition Value of the inventory as on beginning of PY shall be: Cost of inventory available, if any, on day of commencement of business when the business has commenced during the PY; Value of the inventory as on the close of the immediately preceding PY, in any other case.

52 ICDS II DISCLOSURES CA. Pramod Jain Accounting policies adopted in measuring inventories including the cost formulae used. Where Standard Costing has been used as a measurement of cost, details of such inventories and a confirmation of the fact that standard cost approximates the actual cost; The total carrying amount of inventories and its classification appropriate to a person. AS same as above except underlined content

53 ICDS II PRACTICAL IMPLICATION Disclosures Same as per AS 2, but if standard cost used.. State whether it approximates the actual cost Carrying amount?? If there is change in method of valuation of inventory its change in accounting policy follow AS 1 disclosure Take care at time of dissolution of partnership firm

54 ICDS II PRACTICAL IMPLICATION Disclosure for not following inclusive method of valuation of inventory non-compliance of s. 145A Already reporting at Para 14(b) of Form 3CD refer Para 23 of ICAI Tax Audit Guidance Note (After GST refer Paras to 23.24) ITR for AY says to disclose other than 145A?? Form 3CD?? Borrowing costs for inventories only if they require a period of 12 months or more to bring them to a saleable condition

55 FORM 3CD CLAUSE 13(E) ICD S II Name of ICDS Valuation of Inventories Increase Decrease Net (Rs ( Rs.) Description in Profit in Profit Difference over cost to NRV in case of dissolution of firm. Valued at lower in books Total 10000

56 FORM 3CD CLAUSE 13(F) ICDS II Name of ICDS Valuation of Inventories Disclosures Refer to Note No. _ to Financial Statements For carrying amount & classification refer Note No. _ to Balance Sheet Inventories are not inclusive of duties and taxes, yet there is no effect on profits, refer to clause 14(b) of Form 3CD Assessee is following Standard Costing as a measurement of cost, and that approximates the actual cost

57

58 WHICH ITR CA. Pramod Jain No major change except ITR 1, 2 & 3 Form AY AY ITR- 1 For Individuals having Income from Salaries, one house property, other sources (Interest etc.) having total income up to Rs.50 lakh For individuals being a resident other than not ordinarily resident having Income from Salaries, one house property, other sources (Interest etc.) having total income up to Rs.50 lakh ITR-2 For Individuals and HUFs not carrying out business or profession Being a partner received Salary, bonus, interest, commission or remuneration from the firm treats as business Income For Individuals and HUFs not carrying out business or profession

59 S. 234F FEE CA. Pramod Jain

60 DETAILS INCREASED SALARY & HP DETAILS

61 GENDER EQUALITY CA. Pramod Jain

62 CREDIT TRANSFER OF TDS CREDIT

63 GSTR DETAILS ITR 4

64 PRESUMPTIVE NO BOOKS???

65 PRESUMPTIVE NO BOOKS???

66 GSTR DETAILS ITR 3, 5 &

67 RESIDENTS REFUND BANK NON-RESIDENTS

68 RELIEF NON-RESIDENTS LTCG DTAA RELIEF

69 MORE DETAILS FOR CG DEDUCTIONS 2017

70 MORE DETAILS FOR CG DEDUCTIONS 2018

71 SHARES TRANSFER OF UNQUOTED SHARES

72 SHARES TRANSFER OF UNQUOTED SHARES

73 ADDITIONAL DETAILS FOR S. 56(2)

74 S. 58 & S. 59 CA. Pramod Jain

75 S. 115BBG TRANSFER OF CARBON CREDITS

76 ICDS IMPACT CA. Pramod Jain

77 ICDS IMPACT CA. Pramod Jain

78 REVISED DEPRECIATION CA. Pramod Jain

79 ITR-6 SPECIFIC CHANGES CA. Pramod Jain Separate Format for Balance Sheet and Profit & Loss Account has provided for companies on which Ind-AS is applicable in ITR-6 CSR appropriation

80 GST ITR-6 SPECIFIC CHANGES - GST

81 ITR-6 FOREIGN CURRENCY

82 ITR-6 OWNERSHIP UNLISTED CO

83 ITR 7 CHANGES CHANGE IN OBJECTS 2017

84 ITR 7 CHANGES CHANGE IN OBJECTS 2018

85 ITR 7 CHANGES CORPUS DONATION 2017

86 ITR 7 CHANGES CORPUS DONATION 2018

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89 Together we shall make it. CA. Pramod Jain CA. Pramod Jain