* Mr. Vinod Jain, FCA, FCS, FICWA, LL.B., DISA (ICA), Chairman, INMACS Management Services Limited and Convenor, National Economic Forum (NEF). vinodjain@inmascindia.com, vinodjainca@gmail.com, 9811040004

CA VINOD JAIN*

SATYAM FRAUD – WAY FORWARD

Startling revelation of financialfraud committed by SatyamManagement defrauding morethan Rs. 7000 crores by the 4thlargest Information TechnologyCompany in India has severelyimpacted the image of corporateIndia, besides raising questionsof creditability of auditors.

The Institute of CharteredAccountants of India (ICAI)

has taken immediate steps to issue a show-cause notice tothe auditors besides appointing a high power committee todeeply investigate into the matter in coordination with otherinvestigating agencies. ICAI has committed itself to a timebound investigation and exemplary punishment to those whoare guilty, so as to ensure creditability of the entireprofession. The Government of India, SEBI and local policeshould aggressively work and provide all real facts to public.The email of Satyam chairman could be motivated andcannot be relied.

The following matters are being considered to furtherstrengthen the regulatory mechanism so as to ensure thatsuch frauds do not happen or at least they are detected andprevented:

� Peer Review of auditors of top 100 Companies by ICAIpeer review trained Chartered Accountants. The reviewmechanism could be a hot review. SEBI has alreadyannounced such a review through a panel to bemaintained by them. ICAI peer review process need toextend to all large entity auditors.

� Joint Auditors - ICAI Council has recommended tothe Government that one of the joint auditors may beappointed by the regulator in case of all large publiclimited listed companies.

INTERNATIONAL FINANCIALREPORTING STANDARD -

EMERGING CHALLENGES &OPPORTUNITIES

ICAI has decided that Indian Accounting Standards shallconverge with International Financial Reporting Standardsincluding international standards commencing from 1st April,2011. In view of IAS-,1 requirement of providing comparablefinancial statement for the last 2 accounting periods, thedeadline for conversion practically shifts to accounting yearcommencing 1st April, 2009.The corporate accountantsneed to quickly finalise the strategy in this regard.

ICAI has issued a detailed concept paper on convergencewith IFRS, indicating that IFRS will be mandatory for allcorporate beyond a particular size including all listedcompanies, banks and insurance companies. Full details areavailable on ICAI website i.e. www.icai.in.

The Institute has further decided to align most of the IndianAccounting Standards even for small and mid size corporatein confirmity with international accounting standardsincluding IFRS and about 70 to 80% requirements of IFRSwill also apply to small and medium size corporate and otherbusiness enterprises.

IFRS and International Accounting Standards are beingpronounced from time to time by International AccountingBoard (IASB) which has support of more than 135 countries,who have agreed to comply with IFRS requirements.

Even US Securities and Exchange Commission (SEC) haspermitted foreign companies listed in US market to not tore-state their account in terms of US GAAP, in case theyhave adopted IFRS. This is a significant move. US GAAPand IFRS are likely to converge with each other in next 3 -4 years, to achieve the target of uniform accountingstandards worldwide.

Indian and international communities are debating theconcept of “how fair is the fair value” and how far it is

contd. ... pg 3contd. ... pg 3

EDITORIAL

LATEST IN FINANCE

2

LATEST IN FINANCE1.0 EXTERNAL COMMER-

CIAL BORROWINGS(ECB) POLICY -LIBERALISATION

It has been decided to modifysome aspects of the ECBpolicy as indicated below :

� All-in-cost ceilings

Average Maturity All-in-CostPeriod ceilings over

6 Months LIBOR*

Three years and 300 bpsup to five years

More than five years 500 bps

* for the respective currency of borrowing orapplicable benchmark.

It has now been decided todispense with the requirementof all-in-cost ceilings onECB until June 30,2009. Accordingly, eligibleborrowers, proposing to availof ECB beyond thepermissible all-in-costceilings specified above mayapproach the Reserve Bankunder the Approval Route.This relaxation in all-in-costceiling will be reviewed inJune 2009.

� Integrated Township-permissible end-use

It has now been decided topermit corporates, engaged inthe development of integratedtownship, as defined in PressNote 3 (2002 Series) datedJanuary 04, 2002, issued byDIPP, Ministry of Commerce& Industry, Government ofIndia to avail of ECB under theApproval Route. Integratedtownship, as defined, includeshousing, commercialpremises, hotels, resorts, cityand regional level urban

- JANUARY 2009

infrastructure facilities such asroads and bridges, mass rapidtransit systems andmanufacture of buildingmaterials. Development ofland and providing alliedinfrastructure forms anintegrated part of township'sdevelopment. The minimumarea to be developed should be100 acres for which normsand standards are to befollowed as per local bye-laws/ rules. In the absence of suchbye-laws/rules, a minimum oftwo thousand dwelling unitsfor about ten thousandpopulation will need to bedeveloped. The policy will bereviewed in June 2009.

� NBFC- Infrastructurefinancing

It has now been decided toallow NBFCs, which areexclusively involved infinancing of the infrastructuresector, to avail of ECBs frommultilateral / regional financialinstitutions and Governmentowned development financialinstitutions for on-lending tothe borrowers in theinfrastructure sector underthe Approval route.

� Hotels, Hospitals andSoftware sector

It has now been decided topermit the corporates in theHotels, Hospitals andSoftware sectors to avail ofECB up to USD 100 million perfinancial year, under theAutomatic Route, for foreigncurrency and / or Rupeecapital expenditure forpermissible end-use. Theproceeds of the ECBs should

not be used for acquisitionof land.

RBI/2008-09/343 A.P. (DIR SERIES)CIRCULAR NO. 46, 2/1/2009

2.0 BUYBACK / PREPAYMENTOF FOREIGN CURRENCYCONVERTIBLE BONDS(FCCBs)

The existing policy on thepremature buyback of FCCBshas been reviewed and it hasbeen decided to liberalise theprocedure and considerapplications for buyback ofFCCBs by Indian companies,both under the automatic andapproval routes, as detailedhereunder:

� Automatic Route:

i) the buyback value of theFCCB shall be at a minimumdiscount of 15 per cent onthe book value;

ii) the funds used for thebuyback shall be out ofexisting foreign currencyfunds held either in India(including funds held inEEFC account) or abroadand / or out of fresh ECBraised in conformity withthe current ECB norms; and

iii) where the fresh ECB is co-terminus with theoutstanding maturity of theoriginal FCCB and is for lessthan three years, the all-in-cost ceiling should notexceed 6 months Libor plus200 bps, as applicable toshort term borrowings. Inother cases, the all-in-costfor the relevant maturity ofthe ECB, as laid down in A.P. (DIR Series) No.26dated October 22, 2008shall apply.

LATEST IN FINANCE / EDITORIAL

A JOURNAL OF 3

� Approval Route:

i) the buyback value of theFCCB shall be at a minimumdiscount of 25 per cent onthe book value;

ii) the funds used for thebuyback shall be out ofinternal accruals, to beevidenced by StatutoryAuditor and designated ADCategory - I bank'scertificate; and

iii) the total amount of buybackshall not exceed USD 50million of the redemptionvalue, per company.

In addition to the conditions setout above, additional generalconditions shall be applicablefor the proposals both under theautomatic and approval routes.RBI/2008-09/317 A. P. (DIR Series)Circular No. 39, 8/12/2008

should furnish a writtenundertaking along with allannual and quarterly disclosuresthat no ficitious assets orliabilities are included in thefinancial statements, to the bestof their knowledge, informationand belief failing which, to theextent of wrong disclosure,they would be made personallyliable to pay the difference tothe company and also tocompensate various stakeholders. The CEO and CFOdeclaration do not have anymajor utility in the Indianperspective.

� ICAI may consider detailedaccounting, disclosure andauditing guidelines to furtherstrengthen the weaker areasincluding -

� verification of cash andbank balances

� Un billed debtors

� mandatory provision fornon-performing debtors onthe lines of bank NPA

� intellectual property rightsand software capitalization ,

� Projects under progress,R&D expenses - detaileddisclosure of projectspending completion beyond6 months and mandatoryprovisioning after one yearand write-off after 2 yearsof all capitalization notproducing a benchmarkrevenue.

� Mandatory provision forunsecured loans andadvances extended bycorporate outstandingbeyond 182 days.

� Mandatory physicalverification of inventory bythe management and itsreconciliation with a stock

record in all cases ofturnover beyond Rs.50crores. A-category items tobe 100 % physically verifiedevery 6 months / 1 year.Similar norms for othercategories.

� Rotation of audit partnersevery 3 years is alreadyaccepted norm.

The Indian corporate are facing agreat challenge from corruption inhigh public offices and it may beimportant for the nation to addressthis issue most effectively to breakthe backbone of all major financialfrauds.

Investment bankers, financialanalysts, economic media and themerchant bankers and otherparticipants in the capital marketneed to adopt a self-regulatory codeof conduct and code of ethics soas to minimize the manipulativevaluations, IPOs, merger andacquisition and other financialtransactions purely on the basis oftop-line and bottom-linemovements. The ethical practicehas to be on the center-stage andmost significant determinant ofvalue.

� Appointment of independentauditors - In all those caseswhere large public funds aremanaged by a corporate onbehalf of several investors /depositors, for example, in caseof banks, mutual funds, venturecapital / private equity fund - thegovernment may consider thatthe auditors are not appointed bythe management / promoter butare actually appointed byan independent regulatorymechanism.

It is suggested that a 6 membercommittee consisting of SEBI,Ministry of Corporate Affairs(MCA) and ICAI may be constitutedto take responsibility of appoint-ment and monitoring such audit.

� Promoter’s Personal Liability- The promoters of Company

contd. from pg. 1

SATYAM FRAUD........

proper to shift to fair valueaccounting as compared tohistorical cost accounting. Thechecks and balances in case of fairvalue accounting needs to be deeperand stronger. The charteredaccountants community needs tovery carefully study all internationalfinancial reporting standards as amatter of great priority to enablesuccessful implementation of thetarget of convergence by1st April,2011 and transition to new set upof accounting standards with effectfrom 1st April, 2009.

contd. from pg. 1

IFRS - EMERGING........

LATEST IN FINANCE

4

LATEST IN FINANCE3.0 RUPEE EXPORT CREDIT

INTEREST RATES -INTEREST ON OVERDUEEXPORT BILLS

It has now been decided thatthe prescribed interest rate asapplicable to post shipmentrupee export credit (notexceeding BPLR minus 2.5percentage points) may alsobe extended to overdue billsup to 180 days from thedate of advance till furthernotice.

RBI/2008-09/314 DBOD.Dir.(Exp).BC.No.95/04.02.01/08-09, 8/12/08

4.0 COs CAN NOW ISSUENCDs WITH WARRANTSTO QIBs

SEBI allowed companies toissue non-convertibledebentures (NCDs) along withwarrants - which can beconverted into shares - toqualified institutional buyers(QIB), a step to encourageparticipation of institutionalbuyers in the capital market.QIBs can subscribe to thecombined offering of NCDswith warrants or to individualinstruments issued by alisted company. Institutionalbuyers like mutual funds,banks and insurancecompanies can subscribe tocombined offerings ofcompanies. SEBI addedthat NCDs and warrantscan be separately listedon stock exchanges andtraded. It has fixed theminimum contract value fortrading of NCDs warrants atRs. 1 lakh.

- JANUARY 2009

5.0 PENSION REFORMSOFF THE BLOCKS,PROPOSALS CALLEDFOR SIX FUNDS

The pension regulator set thestage for opening the businessfor non-government employeesfrom April by seekingproposals for setting up sixpension funds.

Eligibility Criteria for FundManagers

� A new company has to befloated, which will get a'certificate of commence-ment of business" fromPFRDA.

� At least 5 years experienceof fund management.

� Monthly average assetsunder management not lessthan Rs. 8,000 crore for thelast 12 months.

� Direct and indirect foreigninvestment not more than26%

� Net worth of Rs. 10 crore

� Sponsor will not hold morethan 10% of equity in anyother pension fund

� Sponsor will not hold morethan 10% of equity incentral record keepingagency under NPS

� Sponsor will not hold morethan 5% of equity stake inNPS Custodian

� 50% independent directors.

6.0 MEASURES FOR BANKS

� Recapitalisation of thepublic sector banks to thevalue of Rs. 200 billionproposed over the next twoyears.

� Credit targets of PublicSector Banks are beingrevised upward to reflectthe needs of the economyin the present, difficultsituation.

� In order to enhance flow ofcredit to micro enterprises,it has been decided toincrease the guaranteecover extended by CreditGuarantee Fund Trust to 85percent for credit facility upto Rs. 500,000.

� EXIM Bank has obtainedfrom RBI a line of credit ofRs. 50 billion and willprovide pre-shipment andpost-shipment credit, inrupees or dollars, to Indianexporters at competitiverates.

7.0 RBI LIBERALISES NPANORMS

Further liberalising theprudential norms for thetreatment of non-performingassets in the context of ongoingslowdown in the Indianeconomy, the Reserve Bank ofIndia said all accounts whichwere standard accounts onSeptember 1, 2008 would betreated as standard accountson restructuring provided therestructuring is taken up on orbefore January 31, 2009 andthe restructuring package is putin place within a period of 120days from the date of takingup the restructuring package.

The period for implementingthe restructuring package hasalso been extended from 90days to 120 days in respect ofthose accounts. The special

LATEST IN FINANCE / LIMITED LIABILITY PARTNERSHIP BILL, 2008

A JOURNAL OF 5

regulatory treatment will alsobe available to ' standard' and'sub-standard accounts'. Theseprovisions would be in additionto the usual provisions as perthe current regulation.

Certain modifications arenecessary as the spillovereffects of the global downturnhad started affecting the Indianeconomy particularly fromSeptember 2008 creating stressfor the otherwise viable units,said RBI.

LIMITED LIABILITYPARTNERSHIP BILL, 2008The Parliament of India has givenits nod to the Limited LiabilityPartnership Bill, 2008. The Billwould now be placed for thePresidential assent and would comeinto force on such date as theCentral Government may notify. Itis expected that the first LLP in thecountry would be registered by thefirst day of the next financial Yeari.e. 1.4.2009.

� Legal FrameworkConceptually, an LLP is ahybrid corporate form entitycombining features of theexisting partnership firms andlimited liability companies.LLP combines the benefits oflimited liability for partnerswith flexibility to organizeinternal management based onmutual agreement among thepartners. India ’s 1932Partnership law permittedpartnership firms withunlimited liability.

Following are the salientfeatures of the LLP Bill, 2008:

� LLP shall be a bodycorporate and a legal entityseparate from its partners.It will have perpetualsuccession; like acorporation;

� Provisions of the IndianPartnership Act, 1932 shallnot be applicable to LLPsand there shall not be anyupper limit on number ofpartners in an LLP unlike anordinary partnership firmwhere the maximumnumber of partners can notexceed 20; (10 in case ofbanking);

� While the LLP will be aseparate legal entity, liableto the full extent of itsassets, the liability of thepartners would be limited totheir agreed contribution tothe LLP. Further, no partnerwould be liable on accountof independent or un-authorized actions of otherpartners, thus allowingindividual partners tobe shielded from jointliability created by anotherpartner’s wrongful businessdecisions or misconduct;

� The framework of LLPis not restricted toprofessional services alone.Several business activitiescan be undertaken using theLLP structure;

� Any individual or bodycorporate may be a partnerin a LLP;

� An LLP shall be underobligation to maintainannual accounts reflectingtrue and fair view of its stateof affairs; and

� The Bill contains proce-dures for corporate actionslike mergers, amalgama-tions, liquidation etc.

The LLP Act will be administeredby Ministry of Corporate Affairs.LLPs would need to be necessarilyregistered with Registrar ofCompanies by submittingnecessary documents. Theregistration of LLPs will be a timebound (approx 2 weeks) andpaperless affair and would becovered under MCA-21 e-governance Programme of theMinistry of Corporate Affairs.

� Conversion of existing setups into LLPs

The Bill contains provisions forconversion of a partnershipfirm or a private limitedcompany or an unlisted publiccompany into an LLP.

� Foreign limited liabilitypartnerships

The Bill permits foreignresidents (whether individualsor body corporate) to becomepartners in LLPs in India . Itallows foreign limited liabilitypartnerships to establish aplace of business in India , inaccordance with rules whichare to be separately framedand notified by thegovernment. This was adebatable issue under India ’sFDI guidelines.

For more information, please contact

CA Jasveen Kohli at: TEL: 91-11-26223712, Mob.: 9811350608 or e-mail at – jasveenkohli@inmacsindia.com

� Preparation of Project Reports� Syndication of Loan from Banks, Institutions & NBFCs

MANAGEMENT SERVICES LIMITED

TAXATION

- JANUARY 20096

TAXATION1.0 TAX RELIEF FOR CINE

FILM PRODUCERS

Supreme Court has set asidethe ruling of the Madras HighCourt which had deniedincome tax benefits in termsof Section 32AB, Section80HH and Section 80I of theIncome Tax Act to cine filmmanufacturers. In this case,India Cine Agencies vs.Commissioner of Income Tax,the court dealt with theprocess of conversion ofjumbo rolls of photographicfilms into small rolls of desiredsizes. The cine traders arguedthat they were entitled to thebenefits as they weremanufacturing or producing anew product. The high courthad denied the benefits andtherefore the traders appealedto the Supreme Court. Itreversed the high court ruling.

2.0 ALLOTMENT OF SHARESCANNOT BE TREATED ASGIFT

The Supreme Court has ruledthat Khoday Distilleries Ltd.was not liable to pay gift taxon the allotment of rights issueto its shareholders following aboard resolution. The decisionof the Karnataka High Court tothe contrary was set aside onthe appeal of the company. Theallotment, said the SupremeCourt, meant creation ofshares and did not amount totransfer. The judgment alsoremarked that the taxdepartment has "messed upthe entire case", and had noclear focus on the invocationof income tax, gift tax,wealth tax.

3.0 FOREIGN LAW FIRMSGET TAX REPRIEVEFROM BOMBAY HCForeign law firms havereceived a shot in the armfollowing a judgement fromthe Bombay High Court whichclearly states that their incomewill be taxable in India only tothe extent of their operationsin India. Clifford Chance'scontention was that under theprovisions of the Income-taxAct and the Double TaxationAvoidance Agreement betweenIndia and UK, only that portionof its income from the clientswhich was attributable to theservices performed by it inIndia could be subjected toIndian taxation. The Income-Tax Tribunal as well as theAppellate Authority ruled infavour of the department. Thiswas on the grounds that eventhough services rendered byClifford Chance outside Indiahad to be excluded whilecomputing tax, the advicegiven by the legal firm was forprojects that were to beexecuted in the country.Senior counsel Harish Salveargued before the BombayHigh Court that the tax onprofessionals who have beenin the country for over 90 dayswould be taxable under theIncome Tax Act. In order tobe taxed here, the income mustaccrue or arise in India.Applying this to a legalprofessional renderingadvisory services, his presenceat the time of rendering advicewould be the basis fordetermining where income istaxable, he contended. Hefurther submitted that theincome of an individual from

professional services,therefore, is taxable in the stateof residence. It is additionallytaxable in the other contractingstate if the services areperformed in that other state.

4.0 I-T DEPT PUTS FOREIGNBANK HQ EXPENSESUNDER SCANNERIndian branches of foreignbanks have come under thescanner of the Income-taxDepartment. The Central Boardof Direct Taxes has instructedits field forces to carefullyexamine their claims of headoffice expenses to ensure theywere in conformity withtransfer pricing provisions andrelevant tax treaty. As per theprovisions of the I-T Act, incase of a non-resident, headoffice expenditure is allowed tobe deducted from total incomeat the rate of 5% of theadjusted total income orexpenditure actually incurredby the taxpayer, whicheveris less.

5.0 SC REFERS ISSUE OFINTEREST TAX ONINVESTMENTS TOTRIBUNAL

The Supreme Court hasreferred a bunch of petitions,raising a similar questionwhether interest earned bybanking companies oninvestments, which are in theform of securities, bonds anddebentures, is liable to beassessed for tax, to a sectoraltribunal. Both the Income TaxAppellate Tribunal and theBombay High Court had heldthat such banking institutionsare not liable to pay interest taxunder the Interest Tax Act,1974.

7A JOURNAL OF

TAXATION / SERVICE TAX / CAPITAL MARKET

6.0 INDUSTRY BODIES TORETAIN I-T BENEFITS

The Income Tax Departmenthas come out with a circularthat redefines the term"charitable purpose'. Thecircular, which was publishedon December 19, now saysany entity that does businessor trade in exchange for a feeor income cannot claimexemption from paying incometax. Many organizations avoidpaying taxes by takingadvantage of the definitionunder Section 2(15) of theIncome Tax Act, which defined"the advancement of any otherobject of general public utility"as a "charitable purpose". Asper the circular, industryassociations' income frommembership fee would notcome under tax net. "Under theprinciple of mutuality, if tradingtakes place between personswho are associated togetherand contribute to a commonfund for the financing of someventure or object and, in thisrespect, have no dealings orrelations with any outside body,then any surplus returned to thepersons forming suchassociations is not chargeableto tax", the circular said. Butthere would have be completecategorization of contributorsand participants.

Circular no.11/2008, dated 19/12/2008

7.0 DUTIES AND INFRA-STRUCTURE

� Accelerated depreciation of50 percent to be providedfor commercial vehicles tobe purchased on or afterJan. 1, 2009 up to March31, 2009

� India Infrastructure FinanceCompany (IIFCL) is beingenabled to access intranches an additional 300billion rupees by way of taxfree bonds once fundsraised in the current year areeffectively utilised.

SERVICE TAX1.0 WHEN COURIER SERVICE

BECOMES AN EXPORT

The Tribunal has held thatdelivery of articles anddocuments outside India by acourier agency in India shallqualify as export of services,since such internationalcourier service was partlyperformed in India and partlyoutside India. In this case, theassessee was engaged inproviding international courierservices and did not chargeservice tax on the basis thatthe services qualified asexports not subject to servicetax. It was contended by theassessee that under the Exportof Service Rules, 2005,courier services, if performedpartly in India and partlyoutside, qualified as exportsand consequently the assesseedid not charge service taxon provision of suchinternational courier services.The Department howevercontended that transport anddelivery of articles anddocuments abroad could notbe held to be service partlyrendered in India andpartly abroad and on thatbasis rejected assessee'scontentions. The Tribunal,accepting assessee'scontentions, held that theassessee was not liable to pay

service tax on the internationalcourier service, part ofwhich, in each transaction,was performed in India andthe rest outside India.

2.0 TAX ON TAXI IS INPUTCREDIT

The service tax tribunal hasheld that service tax paid inrent-a-cab services availed bythe employees working in afactory is eligible as inputcredit. It was held since rent-a-cab service is used forbringing employees to work inthe factory for manufacture ofgoods; it has to be consideredas being used indirectly inrelation to the manufacture oras part of business activity forpromoting the business.

CAPITAL MARKET1.0 NSE CUTS MARGIN

IN STOCK LENDINGBORROWING SCHEME

The NSE clearing corporationwill not levy the value at risk(VaR) and extreme lossmargin (ELM) on the lender.Stock lenders would continueto pay the marked-to-marketmargin as well as 25 per centof the lending price. In caseof early pay-in- of securities,the lender will not be leviedany margins. In the case ofreverse leg transaction(borrower returns shares tolender), the lender would notbe charged any margin at all.The NSE clearing corporationwill continue to charge VaR,ELM, mark to market andfixed percentage of lendingprice as margin from theborrower. The changes havebeen applicable from Dec. 22,2008.

� Contact details : Dharampal (9350597662) / Chhaya (9873230416) All India Chartered Accountants’ Society - CFO World 422, Okhla Industrial Estate, Phase-III,New Delhi-110020. Ph: 26223712, 41000043, 32478997 E-mail:cfoworld@gmail.com / aicas.cfo@gmail.com �EDITOR: Pankaj Gupta, LLB, FCSE-mail: pankajguptafcs@gmail.com �PUBLISHED & PRINTED: At New Delhi by Satish Chandra, Administrative Officer, on behalf of All India Chartered Accountants’Society, 4696, Brij Bhawan, 21A, Ansari Road, Darya Ganj, New Delhi-110 002 Phone 23265320, 23288101 E-mail : aicas.cfo@gmail.com Printed at: EIH Ltd.,Unit : Printing Press, No. 7, Sham Nath Marg, Delhi-110054. Views expressed by contributors are their own and the Society does not accept any responsibility.

If undelivered, please return to :All India Chartered Accountants’ Society4696, Brij Bhawan 21A, Ansari Road,Darya Ganj, New Delhi-110 002

Date of Publishing : 19th January, 2009

R.N.I. No. 50796/90

Posting Date 21/22 January, 2009

Registration No. DL(c)-01/1268/2009-11

Licenced to post without prepayment No. U-(C)-82/2006-08

- JANUARY 20098

CORPORATE LAWS1.0 NO BACK WAGES FOR PROMOTION WITH

RETROSPECTIVE EFFECT : HIGH COURTThe Delhi High Court has held that till the time apromoted employee starts working at a new post, thereis no scope for drawing a higher salary even if thepromotion takes effect from a back date.

2.0 MEDIA ORGANIZATIONS NOT RESPONSIBLEFOR CLAIMS MADE IN ADs: HC

The Delhi High Court has held that newspapers andperiodicals cannot be held responsible if there is a defectin a consumer product whose advertisements areprinted in their pages.

3.0 RELIEF TO EXPORTERS

� Duty Entitlement Passbook scheme for exportersto be extended until Dec. 31, 2009.

� Duty drawback benefits on certain items includingknitted fabrics, bicycles, agricultural hand tools andspecified categories of yarn to be enhanced. Changesto take effect retrospectively from Sept.1, 2008.

NBFCs1.0 LIQUIDITY SUPPORT TO NBFCs

� A special purpose vehicle (financing entity) will bedesignated shortly to provide liquidity support againstinvestment grade paper to NBFCs fulfilling certainconditions.

� The scale of liquidity potentially available throughthis window is Rs. 250 billion.

� An arrangement will be worked out with leading publicsector banks to provide a line of credit to NBFCsspecifically for purchase of commercial vehicles.

AUDITING1.0 INTERNAL ASSIGNMENTS IN BANKS BY

STATUTORY AUDITORSAudit firms should not undertake statutory auditassignment while they are associated with internalassignments in the bank during the same year. In casethe firms are associated with internal assignment itshould be ensured that they relinquish the internalassignment before accepting the statutory auditassignment during the year.RBI/2008-09/ 335 Ref.DBS.ARS.No.BC. 02/ 08.91.001/ 2008-09, December 31, 2008

COMMODITY1.0 FMC WARNS AGAINST PMS PRACTICE

Forward Markets Commission (FMC) has directed themembers of the national commodity exchanges not toindulge in any portfolio management services, portfolioadvisory services and such other services either directlyor indirectly to its clients for investment in commoditiesfutures contracts. The commission has not formulatedany guidelines for investment advisory services by anyentity.

INSURANCE1.0 INSURER LIABLE TO PAY INTEREST IN

WORKER'S INJURY CASEAn insurance company would be liable to pay intereston the amount insured if there was no contract to thecontrary in the context of the Workmen's CompensationAct. The Supreme Court thus set aside the ruling ofthe Madhya Pradesh High Court in the case of KamlaChaturvedi vs. National Insurance Company.

� IFRS conversion � US GAAP conversionFor more information, please contact

CA Deepti at: TEL: 91-11-26223712, Mob.: 9811192162 or e-mail at – ifrs@inmacsindia.com, deeptikheror@inmacsindia.com

MANAGEMENT SERVICES LIMITED