CHAIRMAN WRITES 1 SERVICE TAX ON CHIT FUNDS BY CA S.BHOOPATHIRAJ 2

TIRUPUR BRANCH OF SIRC OF ICAI NEWSLETTER MAY 2015

ARTICLE PAGE CHAIRMAN WRITES 1 SERVICE TAX ON CHIT FUNDS BY CA S.BHOOPATHIRAJ 2 CORPORATE SOCIAL RESPONSIBILITY AN ANALYSIS COVERING THE ACT / RULES BY CA S.SUNDAR RAMAN 3 10 PHOTO GALLERY 11 BRANCH CALENDAR 12 Views expressed herein are the opinion of the respective authors and not that of the branch or the Managing /Newsletter committee. Your views / suggestions / comments are welcome. Kindly send your queries to tirunewsletter@gmail.com Published and Printed Tirupur Branch of SIRC of ICAI Editor CA.S.Harishankar Ph: 9894728463 Newsletter Committee Member CA.N.Tharun Ph: 9994199695 Newsletter Committee Advisor CA. S. Venkataramani

CHAIRMAN WRITES Dear Professional Colleagues, Its vacation time, guess most of the members will be with your family enjoying your vacations. Since, work load will be at the minimum; this is the best time to spend with your family. This month, Plus Two results are round the corner, so we have planned a mega career counselling programme for the students who are interested in pursuing the CA course. This will be held in our branch auditorium. This month we will be hearing from CA R.S.PrabhuSenthil who will be providing inputs on Conversion of Limited Companies into LLP and CA S Sivakumar who will be speaking on the Latest Case Laws from Income Tax. We planned CPE programmes on TNVAT, Depreciation in Companies Act, ICDS and new Audit Report. Eminent Speakers from Chennai and other cities will be presenting on the above topics. Hindi is the national language of the country, but many members of our branch are not equipped to communicate when we travel outside Tamil Nadu and to communicate with our Hindi speaking clients. To resolve this issue, the branch has decided to conduct a 75 hour Hindi spoken programme for members at a reasonable cost. Please make use of this opportunity and add a weapon to your armoury. We can catch the latest happenings at: Like the Facebook Page: https://www.facebook.com/tiruicai Send request for Whats app: 9894082482 Hope the members enjoy this month s events. I finally thank the organising members, who were part of the various branch events in the month of May. With best regards CA S Rajesh Kannan Chairman Tirupur Branch of SIRC of ICAI 1

Service Tax on Chit Funds Position from 1.07.2012 to 13.05.2015 With the change in service tax regime with effect from 1 st July 2012 from taxable services based list to negative list regime, the government intended to collect service tax from foreman of chit by taxing 70% of the commission received at the applicable service tax rate. However the taxability was challenged by the Delhi Chit Fund Association in Delhi High Court, which ruled that chit funds fall under the classification Transaction in Money and hence outside the ambit of service tax. The above judgment was confirmed by the Supreme Court. Position from 14.05.2015 In order to overcome the principles of the above judgement, the definition of service tax was modified in the finance budget 2015 to specifically include chit fund commission. Further NOTIFICATION NO.8/2015 ST, DATED 1 3 2015 omitted the 30% abatement. Hence presently service tax is payable on commission/dividends earned by foreman at the rate of 14%. CA S Bhoopathiraj 2

Sec. 135 of Companies Act, 2013 Corporate Social Responsibility An Analysis Covering the Act / Rules By CA S Sundar Raman, FCA, DISA Chennai Sec.135 of Companies Act and rules there under, dealing with Corporate Social Responsibility is notified on 27 th February, 2014, which shall be effective from 1 st of April, 2014.This article makes an attempt to give a broad picture about its applicability and Compliance. Corporate Social Responsibility (CSR) means and includes, but is not limited to: Projects or programs relating Act; or Projects or programs relati directors of a company (Bo CSR Committee of the Boar subject to the condition tha Schedule VII of the Act. g to activities specified in Schedule VII to the ing to activities undertakenn by the board of ard) in pursuance of recommendations of the rd as per declared CSR Policy of the Company t such policy will cover subjects enumerated in 3

Covered Companies: Every Company (including its Holding or Subsidiary, including a Foreign Company having a Branch or Project office in India) having, any time during the financial year Net worth of Rs.500 Crores or more, or Turnover of Rs.1000 Crores or more, or Net Profit of Rs.5crore or more For a Foreign Company,the Networth, Turnover or Net Profit shall be computed based on the financial statements prepared u/s 381(1)(a) Ceases to Apply: Every Company which ceases to be a covered company for 3 consecutive financial years shall not be required to constitute a CSR Committee and comply with these provisions till such time it meets the criteria specified. CSR Committee: The Covered Company shall constitute a Corporate Social Responsibility Committee of the Board consisting of 3 or more directors, out of which at least 1Director shall be an Independent Director. Type of Company An unlisted public company or a private company A Private company having only 2 directors on its Board Foreign Company CSR Committee Composition Committee can be constituted without Independent director as Section 149 is not applicable. 2 Directors shall themselves constitute the committee At least 2 Persons One u/s 380(1)(d) and the other shall be nominated by Foreign Company. 4

Note: The CSR Committee shall institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities undertaken by the company. Role of CSR Committee: Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII. Recommend the amount of expenditure to be incurred on the activities. Monitor the CSR Policy of the company from time to time. Duty on the Board: Take into account the recommendations made by the CSR Committee. Approve the CSR Policy for the company. Disclose contents of such Policy in the Board report. Publish it on the company's website. Ensure that the activities as are included in CSR Policy of the company are properly undertaken by the company. Minimum Amount of Expenditure: The Board of every company shall ensure that the company spends, in every financial year, in pursuance of its CSR Policy, at least 2% of the average Net Profits(Computed as per Sec.198) of the company made during the 3 immediately preceding financial years. Meaning of Net Profit : It means the Net Profit of a Company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely a) Any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and b) Any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act: c) Net profit in respect of a financial year for which the relevant financial statement were prepared in accordance with the provisions of the Companies 5

Act, 1956 shall not be required to be re calculated in accordance with the provisions of the Act. d) In case of a Foreign Company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of Section 381(1)(a) read with Section 198 of the Act. Local Area Development: Company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for CSR Activities. Subject to the same, CSR projects or programs undertaken in India shall only amount to CSR expenditure. Board s Report: The Board's Report u/s 134(3) shall disclose The composition of the CSR committee and its Responsibility. Contents of the CSR Policy In case the specified amount is not spent, the reasons thereof. Eligible Activities for CSR [Schedule VII]: 1. Eradicating Hunger, Poverty and Malnutrition, Promoting Preventive Health Care and Sanitation and making available Safe Drinking Water; 2. Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently abled and livelihood enhancement projects; 3. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups; 4. Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air and water; 5. Protection of national heritage, art and culture including restoration of buildings and site of historical importance and works of art; setting up public libraries; promotion and development of traditional arts and handicrafts; 6

6. Measures for the benefit of armed forces veterans, war widows and their dependents; 7. Training to promote rural sports, nationally recognised sports, Paralympics sports and Olympic sports; 8. Contribution to the Prime Minister s National Relief Fund or any other fund set up by the Central Government for socio economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; 9. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government; 10. Rural development projects. Guidelines / Conditions for CSR Activities: (Rule 4) CSR activities shall be undertaken as per CSR Policy. It can be executed as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business. It can be executed through a registered trustee or a registered society or a Company established by the Company or its holding or subsidiary or associate company u/s 8 of the Act or otherwise. If the activities carried out through these entities which is not floated by the Company or its holding or subsidiary or associate company, it shall have an established track record of3 years in undertaking similar programs or projects The company has to specify the project or program to be undertaken through these entities, the modalities of utilization of funds on such projects and programs and the monitoring and reporting mechanism. A company may also collaborate with other companies for undertaking projects or programs or CSR activities in such a manner that the CSR Committees of respective companies are in a position to report separately on such projects or programs in accordance with these rules. The CSR projects or programs or activities that benefit only the employees of the company and their families shall not be considered as CSR activities. 7

Companies may build CSR capacities of their own personnel as well as those their Implementing agencies through Institutions with established track records of at least 3 financial years but such expenditure including administrative overheads shall not exceed 5% of total CSR expenditure of the company in 1 financial year. Contribution of any amount directly or indirectly to any political party shall not be considered as CSR activity. CSR Policy: The Board of Directors shall ensure that activities included by a company in its Corporate Social Responsibility Policy are related to the activities included in Schedule VII of the Act. List of CSR Projects or Programs Modalities of execution Monitoring process Should not contain any item which is other than the normal course of business of a company. Surplus arising out of the CSR projects or programs activities shall not form part of the business profit of a company. CSR Expenditure: CSR expenditure shall include all expenditure including contribution to corpus for projects or programs relating to CSR activities approved by the Board on the recommendation of its CSR Committee, but does not include any expenditure on an item not in conformity or not in line with activities given in Schedule VII of the Act. 8

Display of CSR activities on its website: The Board of Directors of the company shall, after taking into account the recommendations of CSR Committee, approve the CSR Policy for the company and disclose contents of such policy in its report and the same shall be displayed on the company s website, if any, as per the particulars specified in the Annexure. CSR Reporting: The Board s Report of a company covered under these rules pertaining to a financial year commencing on or after the 1st day of April, 2014 shall include an Annual Report on CSR. In case of a Foreign Company, the balance sheet filed shall contain an Annexure regarding reporting on CSR. CSR Report (To form part of Board Report) Particulars Brief outline of the company s CSR policy, including overview of projects or programs proposed to be undertaken and reference to the web link to the CSR policy and projects or programs. Composition of the CSR Committee Average net profit of the company for last 3 financial years Prescribed CSR Expenditure (2% percent of the amount as in item 3 above) Details of CSR spent during the financial year. (a) Total amount to be spent for the financial year; (b) Amount unspent, if any; (c) Manner of Spending (Table 2) In case the company has failed to spend the 2%of the average net profit of the last 3 financial years or any part thereof, reasons for not spending the amount Details 9

CSR Responsibility Statement of the CSR Committee that the implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company. Table 2 Manner in which the amount spent during the financial year is detailed below (1) (2) (3) (4) (5) (6) (7) (8) S. No CSR Project or activity identified Sector in which the Project is covered Projects or programs (1) Local area or other (2) Specify the State and district where projects or programs was undertaken Amount outlay (budget) project or programs wise Amount spent on the projects or programs Sub heads: (1) Direct expenditure on projects or programs. (2) Overheads: Cumulative expenditute upto to the reporting period. Amount Spent : Direct or through implementi ng agency 1 2 3 TOTAL Details of implementing agency: Sd/ (Chief Executive Officer or Managing Director or Director) (Chairman CSR Committee) Sd/ Sd/ (Person specified under clause (d) of sub section (1) of section 380 of the Act) (wherever applicable) 10

Vice President's Official Visit to Tirupur Branch on 7 th April 2015 ICAI VICE PRESIDENT CA M DEVARAJ REDDY ALONG WITH CCM G.SEKAR RCM CA CHAIMAN, SENIOR MEMBERS DURING INTERACTION SESSION WITH STUDENTS ALONG WITH ICAI VICE PRESIDENT ADDRESSING MEMBERS CHAIRMAN AND STUDENTS ICAI VICE PRESIDENT AND COUNCIL MEMBERS INTERACTINGWITH AND SENIOR MEMBERS OF BRANCH ACTIVITIES 11

CURTAIN RAISER PROGRAM ON DIRECTORS A PERSPECTIVE UNDER COMPANIES ACT HELD BY BRANCH IN ASSOCIATION WITH INSTITUTE OF DIRECTORS TAMILNADU CHAPTER ON 25 th APRIL 2015 AT VELAN HOTELS TIRUPUR 12

JOKES A chemist, an engineer and an economist A chemist, an engineer and an economist are stranded on a deserted island. They carry with them some canned food but have no ordinary means of opening the cans. The chemist suggests gathering some wood and starting a fire and then holding the cans over the heat, counting on the expanding contents to burst open the cans. The engineer thinks it would be better to try smashing the cans open with some of the rocks lying around. The economist begins, "Assume we had a can opener..." Q & A Q: How to make a million in the stock market? A: Start with two! One Liner A long term investment is a short term investment that failed. CHESS PUZZLE A) White to move and mate in 2 B) White to move and mate in 3 SOLUTIONS IN NEXT MONTH NEWSLETTER 13

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