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SET UP BY AN ACT OF PARLIAMENTTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

THE

J O

U R N A L

CHARTERED

ACCOUNTANT

VOLUME 64 NO. 9 PAGES-148 MARCH 2016 R100

LOOKING FOR

NEW HORIZONS

COUNCIL YEAR2016-2017

CA. M. Devaraja Reddy President, ICAI 2016-17

CA. Nilesh Shivji Vikamsey Vice President, ICAI 2016-17


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Editorial

www.icai.org 3THE CHARTERED ACCOUNTANT

MARCH 2016

healthy banking industry is the backboneof sustainable socio-economic growthof an economy. Te credit policy and

other banking policy decisions can effectively

help economies to channelize credit from areas ofabundant credit to areas of deficit credit and, hence,set the tone of sectoral development in the economy.Te banking industry is also a conduit for theGovernments to ensure social justice and equalitythrough its various social welfare schemes. Tebanking industry is thus an important tool for anycountry to keep its citizens belonging to a diversestrata of the society in the mainstream.

By lending credibility to their financial statements,audits and auditors have an extremely important

role to play in building a resilient banking industry.Further, society now also expects bank auditors tohelp strengthen the governance practices in thebanking industry. Te challenge for the AccountingProfession lies in seamlessly integrating theseexpectations in their role as statutory auditors.

Tus, audit quality, as in any other audit, is ofgreat significance. o help our members carry outstatutory audits in the banking industry, an industrythat deals with large amounts of public monies and ishighly sensitive to reputation risk, the Council of theInstitute recently released the Revised 2016 edition

of Guidance Note on Audit of Banks. Tis GuidanceNote contains comprehensive guidance on the various critical aspects of the banking industry andthe financial statements of a bank that the membersneed to be wary of while conducting bank audits.It also provides guidance on application of variousStandards on Auditing in bank audits. Standards onAuditing (SAs) are a pre-requisite to ensure auditquality. Obtaining adequate understanding aboutthe risks present in the banking system as well as inthe internal and external environments in which a

bank operates is essential. As a corollary, auditors'understanding of the bank’s systems and processesin place to identify and address those risks wouldhelp the auditors to focus on critical areas, designappropriate audit procedures, decide optimum timeand resource allocation, timely execution of workand avoid any last minute surprises.

Importantly, since a banking company wouldalso be governed by the provisions of the CompaniesAct, 2013, (to the extent they are not contrary tothe Banking Regulation Act, 1949), they would alsoneed to report in terms of provisions of section

143 of the Companies Act, 2013. Accordingly,

the 2016 Guidance Note on Audit of Banks alsocontains illustrative formats of the auditor’s reportof a banking company that meets these requirementsin addition to the reporting requirements of the

Banking Regulation Act, 1949.oday, the auditors’ commitment to audit quality

and their close coordination with those chargedwith governance in the banks, particularly, theaudit committees, has assumed added importance.Compliance with the Standards on Auditing not onlyhelps to ensure quality in audits, it also helps auditstransform from a mere statutory compliance into areal value-add function. In fact, they can help builda stronger symbiotic between the statutory auditorsand audit committees and contribute to effective

governance. For example, the information generatedduring the risk assessments and internal controlevaluations carried out by the statutory auditors canbe of use to the Audit Committees in dischargingtheir responsibilities relating to review of risks facingthe entity, including financial statement risks.

Similarly, in addition, the other very importantaspects from the perspective of the Audit Committeesof banks include the ‘statutory auditor’s use ofprofessional skepticism. Te auditor procedures withrespect to audit of disclosures such as compliancewith Accounting Standards, overall presentation

of financial statements, adequacy of disclosures inproviding necessary information to the users havealso special significance.

Effective statutory audits and good governancein banks, therefore, are a collective responsibility/effort of the statutory auditors and those chargedwith governance in the banks, particularly, theaudit committees. A regular and closer interactionbetween them can go a long way in ensuring that.

On a broader front, the ICAI has been persistentlytaking up the cause of branch audits as nationally

important issue related to country’s financial health.Meanwhile, one area of ICAI concern relates to theprocedure of selection of Auditors of Banks. Teautonomy given to Banks in the current procedureof appointment of Central Statutory Auditors andBranch Statutory Auditors of Public Sector Banks(PSBs) can lead to impairment of independence.ICAI has been recommending that appointment ofthese Auditors of Public Sector Banks may be doneby an independent authority such as Reserve Bank ofIndia or C&AG or any independent authority.n

Taking Bank Audit Challenge in Stride

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-Editorial Board ICAI – Partner in Nation Building

"Learn from yesterday, live for today, hope for tomorrow. Te important thing is not to stop questioning" - Albert Einstein


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Contents

www.icai.orgTHE CHARTERED ACCOUNTANT

MARCH 20164

PROFILE

1214 Our New President

1216 Our New Vice President

ICAI NEWS1234 Non-Receipt of Te Chartered Accountant Journal1335 ICAI Awards for Excellence in Financial Reporting for the year 2014-151336 Result: IPC - November 20151337 ICAI Job Portal

1338 Campus Placement Programme1339 DVD of Te Chartered Accountant journal-Volume 1 to Volume 631340 Setting up of Branches of Southern India Chartered Accountants Students’

Association at Anantapur, Kalaburgi, Kurnool and West Godavari Districtwith effect from December 11, 2015

1340 Online Mentoring for CA students1341 Extension of date to complete GMCS-I Course by the students registered for

articleship training on or after 1st May, 20121341 GN(A) 35 Guidance Note on Accounting

MEMBERS1222 23rd Council Photograph1228 Photographs1244 Know Your Ethics1281 Opinion

- Amortisation of SAP Licenseand Accounting for Annual

Renewal Fee1342 Classifieds

UPDATES1248 Legal Update - Circulars and Notifications - Legal Decisions1334 Accountant’s Browser1350 International Update

EVENTS1342 Forthcoming Events

212

VOICE 1211 Editorial

- aking Bank Audit Challengein Stride

1218 From the President

IN THIS ISSUE...

MARCH 2016

.

SET UP BY AN ACT OF PARLIAMENTTHE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

THE

J O U R N A L

CHARTEREDACCOUNTANT


LOOKING FORNEW HORIZONS

COUNCIL YEAR2016-2017

CA. M. DevarajaReddy President, ICAI2016-17

CA. NileshShivji Vikamsey VicePresident, ICAI2016-17

EDITOR CA. M. DEVARAJA REDDYPresident

JOINT EDITOR CA. NILESH SHIVJI VIKAMSEYVice-President

MEMBERS CA. JAY CHHAIRACA. NANDKISHORE CHIDAMBER HEGDE

CA. DHINAL ASHVINBHAI SHAH

CA. SHIWAJI B. ZAWARE CA. G. SEKAR

CA. SRIPRIYA KUMAR CA. SUSHIL KUMAR GOYAL CA. PRAKASH SHARMA CA. KEMISHA SONI CA. SANJAY AGARWAL CA. SANJIV KUMAR CHAUDHARY CA. ATUL KUMAR GUPTA CA. SANJAY VASUDEVA SHRI GURUPRASAD MOHAPATRA SHRI P. K. MISHRA DR. P. C. JAINSECRETARY NADEEM AHMEDICAI EDITORIAL TEAM DR. N. K. RANJAN DHANASHREE DEKA NIMISHA SINGH

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

ICAI Bhawan, Post Box No.7100, Indraprastha Marg,New Delhi-110002, Tel: +91 (11) 39893989.E-mail: [email protected], Website: www.icai.org

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For Overseas Members/Subscribers •Air Mail Surcharge : R2,100 per annum CA Students : R1,400 for 3.5 years

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CLASSIFIEDS: Minimum R1,000/- for the first 25 words or part thereof and R250/-for five words or part thereof over and above first twenty five words.Please contact: The Journal Section at ICAI Bhawan, A-29,

Sector-62, Noida or call at +91(120) 3045955 ore-mail at [email protected]

EDITORIAL SUPPORT, DESIGN, ADVERTISEMENT &

MARKETING SPENTA MULTIMEDIA PVT LTD V. Kalidasan, Sanjay Khurana, Nilesh Juvalekar, Ganesh Waradkar.MUMBAI: Spenta Multimedia Pvt. Ltd., Peninsula Spenta,Mathuradas Mill Compound, N. M. Joshi Marg, Lower Parel.Mumbai-400013.Tel: +91 (22) 24811022/24811025, Telefax: -91(22) 24811021.DELHI: No.7, 1st Floor, Nizamuddin (West) Market.New Delhi-110013. Tel: +91 (11) 4669 9999.BENGALURU: No.606, 1st Floor, Rear Building, 80 Feet Road, 3rd Cross, Opp. Koramangala Police Station, Bengaluru-560 095.Landmark - Behind Boca Grande Restaurant.Tel: +91(80) 4161 8966/77.KOLKATA: 206-Jodhpur Park, Kolkata - 700068. Tel: +91(33) 24735896. Telefax: +91(33) 2413 7973.CHENNAI: 8/4, First Floor, Meridian House, Montieth Lane ( Behind

Westin Park Hotel), Egmore, Chennai 600 008. Tel: +91-44-4218 8984/85ICAI RESERVES THE RIGHT TO REJECT ADVERTISEMENTSPrinted and published by V. Sagar on behalf of The Instituteof Chartered Accountants of India (ICAI)Editor – CA. M. Devaraja ReddyPublished at ICAI Bhawan, P. O. Box No. 7100, Indraprastha Marg,New Delhi - 110 002 and printed at SPENTA MULTIMEDIA PVT LTD.,Plot 15,16 & 21/1, Village Chikhloli, Morivali, MIDC, Ambernath (West),Dist. ThaneThe views and opinions expressed or implied in THE CHARTEREDACCOUNTANT are those of the authors and do not necessarilyreflect those of ICAI. Unsolicited articles and transparencies aresent in at the owner’s risk and the publisher accepts no liability forloss or damage. Material in this publication may not be reproduced,whether in part or in whole, without the consent of ICAI.DISCLAIMER: The ICAI is not in any way responsible for the result ofany action taken on the basis of the advertisement published in theJournal. The members, however, may bear in mind the provision ofthe Code of Ethics while responding to the advertisements.TOTAL CIRCULATION: 2,62,743Total No. of Pages: 148 including CoversInside images and Graphics: www.shutterstock.com

REPORT

1236 66th Annual Function:

CAs’ Role Vital for Nation,

says Jayant Sinha as the ICAI

Celebrates Success

COMMITTEE LIST1343 Composition of ICAI Committees for the Year 2016-17


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Contents


MARCH 2016

BANK AUDIT

BACKPAGE1352 Cross Word 117

Smile Please

1213


TAXATION1328 Power of Income ax Appellate ribunal in Extending Stay

beyond Tree Hundred and Sixty Five Days

– Dr. M. Govindarajan

1308 Suggested List of Relevant RBI Master Circulars for ScheduledCommercial Banks

ACCOUNTING1310 Ind AS ransition Facilitation Group (IFG) Clarification

Bulletin 1

1314 Practical Approach to IndAS 101-“First-ime Adoption of

Indian Accounting Standards”

– CA. Debasis Sahoo

1287 What Every Statutory Branch Auditor of a Bank Should Do

– CA. Ishwar Chandra

1292 Bank Branch Audit in CBS Environment

– CA. Nitant rilokekar

1296 Audit of reasury Operations of a Bank – In Changing imes!

– CA. Manoj Vijai and CA. Vaibhav Shah

1302 Verification of Advances with Special Reference to Income

Recognition and Asset Classification (IRAC) Norms

– CA. Ketan Saiya

INTERNATIONAL TAXATION1323 Harmonious Interpretation of DAA on Principles of PE

– Committee on International axation


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man of great vision, strong integrityand hard discipline with a firm

belief in the inclusive growth ofaccountancy profession, CA. M. DevarajaReddy has taken over as the supremetorch-bearer of Indian accountancyprofession. He has been elected Presidentof Te Institute of Chartered Accountantsof India (ICAI), for the year 2016-2017by the 23rd Council of the Institute on12th February 2016. Being a fellow ICAImember with a prudent professionalforesight and more than 28 years of

immaculate professional standing, CA.Reddy has served the Indian accountancyprofession as Vice President of ICAI forthe Council Year 2015-16.

Born in Cheenepalli village of Chittoordistrict, CA. M. Devaraja Reddy alwayshas a way to dazzle his fellow memberswith his down-to-earth approach towardsprofession, his brilliance to observe and

his humility towards people around him.With an ingrained interest in academic

matters of accountancy profession, CA. Reddyis widely commended and credited for hisprominent and distinguished contribution inthe conceptualisation and formulation of afuturistic CA Curriculum during his tenure

as the Chairman of ICAI Board of Studies in2014-2015.

A resident of Hyderabad, CA. Reddy hasbeen elected by his member colleagues fora straight third term of the Central Councilof ICAI (2016-2019). As President of theICAI, he is now the Chairman of all StandingCommittees of the ICAI, viz. ExaminationCommittee, Finance Committee and ExecutiveCommittee besides being Presiding Officerof the Board of Discipline (Under Section21-A), Disciplinary Committee (UnderSection 21-B) and Chairman DisciplinaryCommittee (under section 21D). He will alsobe the ex-officio Member of all Non-StandingCommittees of the ICAI and Editor of TeChartered Accountant journal. Earlier, as theVice President of the ICAI, he was the Vice-Chairman of all the Standing Committees ofthe ICAI, the Member ex-officio in all Non-

Standing Committees of the ICAI and JointEditor of Te Chartered Accountant journal.He is also Director on the Board of ICAI-ARF as well as XBRL India. In XBRL India, heis also holding membership in importantcommittees namely axonomy Development& Review Committee; and Audit Committee.On the international front, he is holdingpositions of Chairman, Small and MediumPractices Committee of SAFA, and echnicalAdvisor to Small and Medium Practices

(SMP) of IFAC. He is also the technicaladviser to the ICAI immediate past Presidentat the CAPA Board. CAPA Board hasappointed him as member of the ProfessionalAccounting Organisation DevelopmentCommittee (PAODC) of CAPA for the term2016-2019.

Widely known for his pleasant natureand beneficent attitude, an academically

excelling CA. Reddy did his schooling fromAP Residential School, Kodiginahalli of

Our New President

CA. M. Devaraja Reddy

President, ICAI 2016-17

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Anantpur district and later graduated inCommerce from Pragati MahavidyalayaAbids, Hyderabad (affiliated to OsmaniaUniversity, Hyderabad). He gives credit of hisprofessional acumen, aptitude and skills to

his gurus CA. VS Narayana, CA. BN Raju andCA. G Kalyandas among others. He startedhis professional journey in November 1987when he became a Chartered Accountant. Hestarted an independent professional practicein Hyderabad after that. Later, he got electedto the Managing Committee of HyderabadBranch of SIRC (Southern India RegionalCouncil), and became its Secretary in 1994,Vice-Chairman in 1995 and Chairman in 1996.

CA. Reddy’s stint at SIRC started in the year 2004. He served as SICASA Chairmanin 2004, Secretary, SIRC Vice-Chairman in2008 and SIRC Chairman in the year 2009.In 2010, he got elected to the Central Councilof ICAI and since then, he has recorded adynamic professional presence at ICAI whileactively functioning in various capacities, viz.as Chairman, Vice-Chairman, etc., at variousCommittees of the Institute.

CA. Reddy has shown his professionalacumen at all assigned tasks andresponsibilities at national as well asinternational levels. During 2010-2011, he wasa Member of the Executive Committee andVice-Chairman of Direct axes Committee.During 2011-2012, he served as Member onthe Examination Committee and Board ofDisciplinary Committee, as Vice-Chairmanof International axation Committee and

Committee for Members in Entrepreneurship& Public Services. In 2012-13, CA. Reddywas the Chairman of Continuing ProfessionalEducation Committee, Vice-Chairman ofCommittee for Members in Entrepreneurshipand Public Services and Member ofDisciplinary Committee. During 2013-2014, hewas the Chairman of Committee for Membersin Entrepreneurship and Public Services andPeer Review Board, and a member on many

other important Committees of the Institute.During 2014-2015, he significantly contributed

as Chairman of the Board of Studies andmember on the Audit Committee, ContinuingProfessional Education Committee,Committee on Economic, Commercial Lawsand WO, Editorial Board, Ind AS (IFRS)

Implementation Committee, InternationalAffairs Committee, Committee for Membersin Industry, Public Relations Committee andYoung Members Empowerment Committee.

Being an outstanding facilitator of ICAIas an ardent partner in nation-building,CA. Reddy has been nominated on variousGovernment bodies/ regulators, includingon the High Level Steering Committeefor Implementation of XBRL-based DataSubmission by Banks of RBI, XBRL echnicalAdvisory Committee of SEBI, ask force atMinistry of Corporate Affairs with regardto Ministry’s Plan Budget for 12th Five YearPlan, Advisory Group of National Foundationfor Corporate Social Responsibility of IICA(Indian Institute of Corporate Affairs), andCommittee on Accounting Issues constitutedby IRDA.

An ardent devotee of Lord Sri VenkateswaraBalaji, CA. M. Devaraja Reddy has beenactively involved in a number of socialactivities. He has also been an active memberin the Federation of Andhra Pradesh Chamberof Commerce & Industry.

Being an ardent academic, CA. M.Devaraja Reddy has attended and contributedat numerous national and internationalprofessional platforms including seminars,

workshops and conferences, where theprofessional fraternity has had the advantageof attending to his treasured insight on manycore issues including networking, investmentstrategies, e-learning, initiatives on educationfor accountancy.

Having the privilege of representing Indianaccountancy profession at many internationalplatforms on a number of occasions, CA.

Reddy vows to put the Brand Indian CAglobally on a very high pedestal.

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person of professional vigour,

dynamism, high integrity andtechnical expertise, CA. Nilesh

Shivji Vikamsey is the new Vice Presidentof the Institute of Chartered Accountants ofIndia (ICAI) for the term 2016-17. He waselected as the Vice President of the ICAI bythe 23rd Council of the Institute on February12, 2016. Having gained deep insights intothe profession as a fellow member of theICAI with more than 30 years of impeccableprofessional standing, he has served the

ICAI and the profession as a Central CouncilMember since 2010. A member of the ICAIsince 1985 possessing multifarious skills,he is widely commended and credited forhis key role in student uplift activities andconceptualisation and devising of a newfuturistic CA Curriculum.

A selfless hard-worker and down-to-earth personality bestowed with exceptional

professional prudence, organisational,

administrative and leadership skills, he hasbeen elected to the Central Council for threeconsecutive terms (2010-13, 2013-16, 2016-19). As a Council Member, he has exceptionally

served the ICAI and the accountancyprofession as Chairman of Board of Studies,Financial Reporting Review Board, ResearchCommittee and Expert Advisory committee.He has also been noted for his distinguishedcontributions in the capacity of Vice Chairmanof Corporate Laws and Corporate GovernanceCommittee, Committee on AccountingStandards for Local Bodies, Committee onBanking Insurance and pension, Committee

on Information echnology and Board ofStudies in the past.

Besides, he has also effectively servedthe cause of the accountancy profession asa member of 27 ICAI committees duringhis tenure as Council Member so far. Tesecommittees include the Executive Committee,Finance Committee, Accounting StandardsBoard, Auditing and Assurance StandardsBoard, Committee for Cooperatives and

NPO sectors, Corporate Laws and CorporateGovernance Committee, Committee onEconomic, Commercial Laws and WO,Expert Advisory Committee, FinancialReporting Review Board, Committeeon International axation, Committeefor Members in Industry, ProfessionalDevelopment Committee and ManagementCommittee. Other such committees havebeen Disciplinary Committee (UnderSection 21B), Examination Committee,Audit Committee, Internal Audit StandardsBoard, Public Interest Advisory Committee,Peer Review Board, Continuing ProfessionalEducation Committee, echnologyDevelopment Committee, Committee onVision and Restructuring, Ind AS (IFRS)Implementation Committee, ResearchCommittee, International Affairs committee,Indirect axes Committee, Editorial Board,Committee on Government Accounting and

Committee on Management Accounting.

Our New Vice President

CA. Nilesh Shivji Vikamsey

Vice President, ICAI 2016-17

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He has always dazzled his fellow memberswith his humble down-to-earth approachto connect with people, and brilliant anduninterrupted service to the profession.A resident of Mumbai, he has activelypartnered in the growth of the nation and theprofession as member and first Chairmanof the Qualified Audit Report Committee(QARC) of SEBI, and as a member ofCommittee on Disclosures and AccountingStandards (SCODA) of SEBI, LLP Committeeof Ministry of Corporate Affairs (MCA),Committee Constituted by Ministry ofCorporate Affairs pertaining to certain

issues raised regarding applicability offoreign investment in the LLPs, Committeefor Digitization of Balance Sheet & AnnualReports filed with MCA through MCA-21,Working Group for developing Indian SpecificACORD Standards for the Indian InsuranceMarket of IRDA, Committee on Road Map forRisk Based Solvency Approach in Insuranceof IRDA, First Chairman of the then newlyformed Corporate Members Committeeof Te Chamber of ax Consultants (CC)

and also on the Managing Council ofCC in 2007-08, Project ImplementationCommittee to pursue the implementationof ‘Accrual Accounting’ in the Ministry ofRoad ransport & Highways constituted byMinistry of Road ransport & Highways andMinistry of Shipping, Merger & Acquisition(M&A) Council constituted by ASSOCHAMand Chairman of Audit Committee & memberof axonomy Development & Review &

Membership Development Committee ofXBRL India.

A proponent of putting Indian accountancyprofession on the global map, he has alsopassionately represented the profession onthe international front at a number of globalmeetings and conferences. A man with a globaloutlook and vision, CA. Nilesh Vikamsey isnoted for his work as Chairman of Education& CPD Committee of South Asian Federation

of Accountants (SAFA) and as Representative

of ICAI on the Committee for Improvement inransparency, Accountability and Governance(IAG) of SAFA.

As the Vice President of the ICAI, he isnow the Vice-Chairman of all the StandingCommittees of the ICAI, the Member ex-officio in all Non-Standing Committees ofthe ICAI and Joint Editor of Te CharteredAccountant journal.

A propagator of harnessing professionalskills for the growth of the nation andsociety, he has also been closely associated

with and contributed to Indian MerchantsChamber, WIRC of ICAI, Te Chamber of axConsultants, Bombay Chartered AccountantsSociety, Bombay Chamber of Commerce& Industry. He has also been a Member/Convenor of more than 15 Study Groupsformed by the ICAI including the Group forsuggesting Uniform Accounting Policies toRBI for Asset Reconstruction Companies,Group for Suggestions on Companies Act2013 and Electoral Reforms Group and Group

for Review of Examination Process.

A thorough professional, he holds Diplomain Information System Audit (DISA) ofthe ICAI besides having done BusinessConsultancy Studies Course of BombayChartered Accountants Society jointly withJamnalal Bajaj Institute of ManagementStudies (JBIMS).

As an avid academic, CA. Nilesh Vikamseyhas addressed and contributed to numerousnational and international seminars andconferences on the issues of professionalinterest. He has been a Founder Memberand Core Committee Member of ChemburChartered Accountants Study Circle ofWIRC, which had won the Best Study CircleAward consistently for over a decade . He is arustee in Sayagyi U Ba Khin Memorial rust(Vipassana International Academy) & few

educational trusts in Mumbai.

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From the President


MARCH 201610

Dear Friends,

he wise see knowledge and action as one; they see truly … so go the words of wisdom in the

Bhagavad Gita, which are worth emulating byone and all, specifically in the present scenario when anew cohesive team of elected members is commencingits fresh tenure as representatives of the Indian CAfraternity. A beginning is only the start of a journey toconnect another beginning.

Elected as 64th President of the ICAI, this is toacknowledge and aspire that the profession turns a newleaf and makes a robust start with a deep commitmentto reach the pinnacle of global success. A journey of athousand miles begins with a first bold step. ogetherlet’s initiate the first stride to dedicate our energiesto create opportunities and guarantee excellence tothe accountancy profession. And whilst doing so, let’srecall the words of Bhagavad Gita verse: Tou hast power only to act not over the result thereof, act thoutherefore without prospect of the result and without succumbing to inaction.

It is gratifying and a privilege to serve as thePresident of ICAI for the year 2016-17. Te gloriousand illustrious history of Indian accounting professionand the reputation of the ICAI envisioned andaccomplished by its renowned past leaders over past so

many years since its inception, and the responsibilityaccepted by me is indeed an arduous task. I reverentiallyacknowledge the contribution of my predecessors, inparticular of the immediate past president CA. ManojFadnis, for sculpting the profession to its presentstature. I am highly indebted to my colleagues in theCentral Council, other stakeholders, close friends andfraternity for reposing utmost faith in my leadershipabilities for the profession’s forward march.

Being the President of this prestigious Institution,I promise to keep up the traditions of the accountancyprofession predominantly when it comes to upholdingthe objectivity, integrity and excellence to enhance theimage of our profession and to play a significant role inrendering selfless service to the nation.

Greatly honoured by the compliments showeredon the ICAI and on the profession by Hon’ble UnionMinister of State for Finance Shri Jayant Sinha as theChief Guest of ICAI’s 66th Annual Day function inNew Delhi, I promise on behalf of the CA fraternity toensure to play the role as trustee of national interest .I have complete faith in our mutual capacities andprofessional wisdom. Srimad Bhagavad Gita states:

Man is made by his belief. As he believes, so he is.

T

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From the President


MARCH 2016

ICAI Vice-President 2016-17

I congratulate CA. Nilesh Shivji Vikamsey on hiselection as the Vice-President of ICAI for the year2016-17 and I am confident that his rich experience,

professional acumen and tact will greatly benefitthe members, and help me in dealing with criticalresponsibilities. I know CA. Vikamsey as a dedicatedprofessional bestowed with exceptional technical,organisational and networking skills and endowed withinnovative instincts which are the need of the hour.

Oath of Allegiance to CA Act, 1949

You will appreciate that this year marks the beginningof a unique tradition wherein every member of theCouncil has been requested, at their discretion, to takean oath of allegiance to the Chartered AccountantsAct, 1949 and regulations/rules framed thereunder.ogether with the newly-elected Vice-President,we took a solemn oath to mark the beginning of ourprofessional journey and pledged to take our professionto greater heights, ensuring compliance with passionand reliability.

I also heartily welcome the members of the newlyelected 23rd Council of ICAI, 22nd Regional Councils,Branch managing committee members and new foreignchapter office bearers. Many new and young faceshave joined in and I am sure that the Council with its

added wisdom and youthful vigour will go a long wayin supporting and consolidating the ever-expandingprofession. We have also received the seven out of eightGovernment nominee names to represent on the 23 rd ICAI Council from the Ministry of Corporate Affairs,Government of India. I am sure that their eruditepresence will benefit the profession in taking valuabledecisions.

Vision 2016-17

As I carry forward the legacy of the profession as itsleader, I feel proud of the illustrious journey of ourprofession so far. Having ensured financial disciplinein India for decades, the profession has today emergedas one of the most vibrant forces of socio-economicgrowth. We have indeed come a long way. Yet, I feel,there are still miles to go.

I have embarked on my Presidential journey on thatnote of challenge. It is pertinent that even if you are onthe right track, you will get run over if you just remain ataciturn onlooker. I have planned this year’s vision andmission to build bridges keeping the future in mind.

In a nutshell, the objective is to go hand-in-hand

with the Government of India in nation building,

enhancing profession’s technical and research activities,infrastructure and HRD initiatives, recommending vibrant and value-added services to members andstudents, a compact network of reading rooms, rolling

out of revised scheme of CA education and training,consolidation of CA Firms and further building of CAbrand.

Our distinct emphasis will be not only raisingthe contour of ICAI internationally, branding IndianCA, but also crafting our profession as a facilitatingarm of the Government of India with deference to allits flagship programs, particularly the Swachh BharatAbhiyan.

Overall objective will be the inclusive growthof profession encompassing all those in practice orindustry, particularly women and young members, andSMPs in the remotest regions of our country.

Te various standing and non-standing committeesfor the year 2016-17 have been constituted. I ampleased to share with you that we have introduced newCommittees this year onwards — Legal CoordinationCommittee, Economic Affairs Committee and Digitalransformation and Process Reengineering Committee.

I call upon my contemporaries in the Council,Regional Councils, Branches, and all the members,staff of ICAI to work seamlessly, benefitting thelarger interest of the profession and the nation. Let’s

not accentuate but also formulate the ultimate ICAIMission, that is Te Indian Chartered Accountancy Profession will be the valued rustees of World Class Financial Competencies, Good Governance andCompetitiveness.

Meetings with Hon’ble Ministers

Indian accountancy profession is widely regardedand acknowledged as one of the key enablers andfacilitators of Government’s socio-economic visionand policies. Indian polity has vouched for thiscrucial role of our profession for decades. aking thistradition of ‘Partner in Nation Building’ forward,I along with Vice President recently met Hon’bleUnion Finance Minister Shri Arun Jaitley, Hon’bleUnion Railway Minister, CA. Suresh Prabhu andHon’ble Union Minister of Urban Development ShriM. Venkaiah Naidu. In these meetings we discussedissues of professional and national interest and howthe Indian accountancy profession can play a moreproactive role as an enabling arm of the Governmentpolicies and vision. I am sure these meetings willgo a long way in strengthening our ties with the

Government.

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From the President


MARCH 201612

Bank Audit Assignment-Expectations from

Professionals

Bank Audit, which is a vital assignment for most of themembers of the profession, is round the corner. By the

time this issue of the journal reaches you, most of themembers would be planning an effective strategy forexecution of the statutory audit of bank and branches,as the case maybe.

Members are advised to deliver a proficient serviceadhering to the Central banker’s guidelines. ICAI isorganizing a series of CPE programs for the advantageof its members and a revised version of A Guidance Noteon Bank Audit 2016 edition has been made available toassist the members. A word of caution to the membersis not to consider the bank assignment lightly, sincethe stakeholders in the society are closely watching therole of auditors of banks to report any non-conformityimpacting the banks stability and incurring losses ofthe public money. I would also like to share with myfraternity that we have been appropriately representingthat the autonomy given to banks in the currentprocedure of appointment of Central Statutory Auditorsand Branch Statutory Auditors of public-sector banks(PSBs) can lead to the impairment of independence andthus is not in overall interest.

Members Campus Placement – February/

March 2016ICAI regularly hosts Campus Placement events at various locations both for the experienced membersin industry and also for the new and young memberslooking for openings in the industry. Te Institute’splacement programme is a pioneering platform forICAI members as they get a splendid chance to beinterviewed and selected by their dream organizations.At this event, young members get to meet and exploretheir professional potential in a reciprocally positiveenvironment. I wish to inform that the forthcomingCampus Placement Programme is being organised at22 centres across India during February-March 2016.I request all the members to share this informationamong the companies known to them, who maypossibly like to recruit CA professionals.

Empowerment of Government Ofcials

I am happy to share that ICAI is a true partnerin nation-building assisting the Government. otechnically empower the Government officials, theInstitute recently organized a training programme onImplementation of Double Entry, Accrual Accounting

and Accounting Standards for the Local Bodies{ASLB} to the representatives and officials of Jodhpur

Municipal Corporation in Jodhpur, where all key issuesrelated to accounting reforms modules, double entryaccrual based accounting systems, preparing openingbalance sheet, ASLB-1, ASLB-3 and ASLB-17 were

explained in detail, highlighting the importance andusefulness of such accounting process.

Proposals on Companies Law 2013 to

Ministry of Corporate Affairs

Companies Law Committee of the Ministry ofCorporate Affairs (MCA) wherein the ICAI immediatepast President CA. Manoj Fadnis represented theInstitute was constituted in June 2015 to study andrecommend solutions to the complex matters arisingout of Companies Act, 2013. Te Committee receivedover two thousand feedbacks from various stakeholderson varied issues including contentious matters. Groupswere set up to examine those inputs. Based on therecommendations made by the groups, the Committeeevaluated the relevant matters of apprehension, andsubmitted its report to the Government. Many of oursubmissions were favourably considered.

ICAI Awards for Excellence in Finance

Reporting in Kolkata

A grand annual competition was organized in Kolkatato distribute ICAI Awards for Excellence in Financial

Reporting. Hon’ble Auditor General of Bhutan Shrishering Kezang was the Chief Guest and Hon’bleRajya Sabha MP CA. K. Rahman Khan was the Guestof Honour. Te event was directed to recognise andencourage excellence in preparation and presentationof financial information. I compliment CA. Subodh K.Agrawal, the then Chairman, Research Committee andICAI past President for leading to success of the event.

27th Chapter of ICAI in Auckland, New

Zealand

I am delighted to notify the members that the Institutehas recently inaugurated its 27th Chapter in Auckland(New Zealand). Te event was graced by New ZealandMember of Parliament Shri Kanwaljit Singh Bakshiand High Commission of India to New Zealand Chargéd’ Affaires Shri Sandeep Sood, among others.

IASB and IFRS Delegations at ICAI

I am keen to communicate to the members of ICAI thatan important delegation representing InternationalAccounting Standards Board (IASB) of InternationalFinancial Reporting Standards (IFRS) recently visited

the ICAI. Te delegation included IASB Vice-ChairMr. Ian Mackintosh, IFRS Foundation rustees Chair

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Mr. Michel Prada and IASB echnical Director Mr.Kumar Dasgupta. Te consultations focused on various matters of interest and perceptions, specificallythe issue of copyright in Indian Accounting Standards

(IND AS), among other concerns relating to mutualcollaborations.

Guidance Notes and Technical Guide

Released

It has been the resolute effort of ICAI to keep itsmembers’ knowledge in homogeneity with changingtimes in all the professional matters and hence thefundamental capacity building initiative.

ICAI, in keeping with the principle of continuousupdating of professional information, has recently validated and made available to the members the RevisedGuidance Note on Reporting on Fraud under Section143(12) of the Companies Act, 2013 and Guidance Note on Accounting for Depreciation in companies inthe context of Schedule II to the Companies Act, 2013. Meanwhile, the ICAI has likewise issued a echnicalGuide on Internal Audit of Hotel Industry, which aimsto furnish the internal auditors of the said industrywith a comprehensive understanding of the unique andcomplex transactions, thereby helping them to fortifytheir professional abilities.

Effective use of Technology for Convocationof Newly-Enrolled Members

I am delighted to remark that the ICAI successfullyorganized the 2nd round of Convocations for thenewly-enrolled members recently at eleven locationsembedded under five Regional Offices, viz. Ahmedabad,Mumbai, Pune, Bengaluru, Chennai, Hyderabad,Kolkata, Jaipur, Kanpur, Chandigarh and New Delhi.9,040 participants were enrolled for the convocationsand more than 70 per cent of them attended in person.Harnessing the technology, myself and Vice-Presidentused Google Hangout to convey our messages, whichwere broadcast simultaneously live at 10 differentlocations.

Inauguration of ICAI Branches

Branches are important organs linking the institute withthe large base of members and students who are spreadacross the nation. Own infrastructure is importantto maintain continuous service to the membersand students in all locations. As on date, out of 153branches only 89 branches have their own building.Suitable infrastructure is an integral component for the

growth and fortification of academics. I am pleased toinform that recently the buildings of the Ajmer Branch

of CIRC and Rohtak Branch of NIRC were inaugurated.We also inaugurated the auditorium of the PondicherryBranch of SIRC. I am sure this initiative will go a longway in improving the infrastructural and related service

capabilities of the ICAI.

*********Although there is no agreed definition of a

profession, I would like to draw your kind attention tothe definition provided by the Australian Council ofProfessions (Professions Australia): A disciplined groupof individuals who adhere to high ethical standards anduphold themselves to, and are accepted by, the publicas possessing specialized knowledge and skills in awidely recognized, organized body of learning derived from education and training at a high level and who are prepared to exercise this knowledge and these skills inthe interest of others.

Inherent in this definition is the concept thatresponsibility for the welfare, health and safety ofthe community shall take precedence over all otherconsiderations. As professionals of accountancy, wemust rely on and be enthused with Service before Self that draws forte from ICAI motto Ya esa suptesu jagarti (one who is awake among those who sleep). Membersshould get inspiration and imbibe the ICAI mottodefinition because it captures societal expectations from

a profession. Sometimes we fail to focus on moral codeand social responsibility, and accentuate more on ability.I hope that members of the profession reconsider theirpractice towards professional accountability in the lightof the above definition of a profession.

Now let me take this opportunity to extendmy warm wishes to all members on the occasionof Maha Shivaratri, Holi and Good Friday. Maya variety of colours make your life all the morecolourful and happy! May the festivals bring more joyto your life!

Before I conclude, it is proper to observe the wordsof C. S. Lewis: Integrity is doing the right thing, evenwhen no one is watching.

Jai Hind!

Best wishes,

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President , ICAI

New Delhi, 23rd

February 2016

Mahatma Gandhi— First they ignore you, then they laugh at you, then they fight you, then you win.


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Council Photo


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1 s t R o w

( L t o R ) :

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d u r a n g K i n a r e , C A . J a y C h h a i r a , C

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M E M B E R S O F T H E T

W E N T Y - T H I R D C O U N C I L & T H E S E C R E T A R Y [

a s o n 1 2 t h F e b r u a r y , 2

0 1 6 ]

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www.icai.orgHE CHARERED ACCOUNAN MARCH 201620

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ICAI President CA. M. Devaraja Reddy, along with ICAI Vice-President CA. NileshShivji Vikamsey, presents bouquet and welcomes the Union Finance Minister ShriArun Jaitley in New Delhi (22nd February 2016)

ICAI President CA. M. Devaraja Reddy presents bouquet and welcomes the UnionMinister of Urban Development, Housing and Urban Poverty Alleviation andParliamentary Affairs Shri M. Venkaiah Naidu, along with ICAI Vice-President CA.Nilesh Shivji Vikamsey (22nd February 2016)

Te-then ICAI Vice-President (now President) CA. M. Devaraja Reddy presents memento to Rajya Sabha MP CA. K. Rahman Khan, while the then ICAI President CA.Manoj Fadnis and Chief Guest Auditor General of Bhutan Shri shering Kezang along with ICAI Central Council member CA. Sanjiv Kumar Chaudhary share the moments(6th February 2016)

ICAI President CA. M. Devaraja Reddy, along with ICAI Vice-President CA. NileshShivji Vikamsey, presents bouquet and welcomes the Union Railway Minister CA.Suresh Prabhakar Prabhu in New Delhi (22nd February 2016)

ICAI President CA. M. Devaraja Reddy presents bouquet and greets DeputyComptroller & Auditor General of India Shri Prasenjit Mukherjee, along with ICAIVice-President CA. Nilesh Shivji Vikamsey in New Delhi (15 th February 2016)

Meeting with Union Finance Minister

Meeting with Union Minister for Urban Development and

Parliamentary Affairs

ICAI Awards in Financial Reporting in Kolkata

Meeting with Union Railway Minister

Meeting with Deputy C&AG of India


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ICAI President CA. M. Devaraja Reddy takes Oath while ICAI Vice-President CA.Nilesh Shivji Vikamsey shares the dais (12th February 2016)

ICAI Vice-President CA. Nilesh Shivji Vikamsey takes Oath while ICAI PresidentCA. M. Devaraja Reddy shares the dais (12th February 2016)

Oath Taking by CA Act, 1949 Oath Taking by CA Act, 1949

ICAI President

CA. M. Devaraja Reddy, along with

ICAI Vice-President

CA. Nilesh Shivji Vikamsey, presents

bouquet and greets

the MCA Secretary Shri apan Ray

in New Delhi

(15th February 2016)

ICAI President


along with ICAI Vice-President

CA. Nilesh Shivji Vikamsey

discusses matter of professional

concerns with the

MCA Joint Secretary

Shri Manoj Kumar, in

New Delhi (15th February 2016)

Meeting with MCAJoint Secretary

Meeting with MCA Secretary


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Visit to Pondicherry Branch of SIRC

ICAI President CA. M. Devaraja Reddy cuts the ribbons toinaugurate the Auditorium at the Branch in the presence of his

Central Council colleague CA. G. Sekar among others (26th

January 2016)

ICAI President CA. M. Devaraja Reddy along with his Central Council colleague CA . G. Sekar among others, at the Branch (26 th January 2016)

Te-then ICAI Council Member CA. S. Santhanakrishnan shares the dais with MoUD (Ministry ofUrban Development) Director Shri Parmod Kumar, World Bank SFMS (Structured Financial Messaging

System) CA. S. Krishnamurthy and ICAI’s CASLB Co-opted Member CA. . V. Balasubramanian (8th

February 2016)

ICAI President CA. M. Devaraja Reddy along with his Central Council colleague CA. Babu Abraham Kallivayalil among others, at the Branch (15 th February 2016)

Visit to Tirunelveli Branch of SIRC

AII India Conference on Implementing Accrual Accounting and Financial

Management Reforms in New Delhi


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ICAI President CA. M. Devaraja Reddy along with ICAI past President CA. R. Balakrishnan, ICAI Central Council member CA. Babu Abraham Kallivayalil among others, atthe Branch (15th February 2016)

Visit to Tuticorin Branch of SIRC

Non-Receipt of Te Chartered Accountant Journal

Tis is or the inormation o Members/subscribers who ail to receive Te Chartered Accountant journal despatched to them either due to un-intimated change o address or postal problems.

Members and Students are requested to inorm the respective regions immediately afer youchange the address to ensure regular and timely delivery o journals to you as the mailing list isdrawn rom ICAI’s centralised database updated till 15th o every month. Subscribers are requestedto mail their changed address to [email protected].

Members can also update their address online in the ‘Members’ section placed on the top bar oICAI website. Te required link in the ‘Members’ section is titled ‘Members: Update Your Residential

and Proessional Addresses’ (http://www.icai.org/addupdate/). Fill the Membership No and Date oBirth to open the Form. Fill the Form to update your changed address.

Afer updating the address online, the member is also required to download the updated Formand submit the same at their respective regions with their signature. Please note that once updatedin the respective regional head offices’ records, the new address gets automatically updated in thecentralised data base o the Institute, rom where the journal mailing list is prepared.

While updating the address members can opt or their ‘Residential Address’ to receive the copyo the journal by clicking the option “Do you want to get your journal on Residential Address” atthe bottom o the Form. Tereafer you will get your copy o the Journal at your residential address.

Any queries or complaints in this regard can also be sent by email at [email protected] (or members)and [email protected] (or students and Subscribers) or contact at 0120-3045921.


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At the outset, ICAISecretary Shri V. Sagar welcomed the Chief GuestMinister of State forFinance Shri Jayant Sinhabesides other dignitariesincluding the past-Presidents of ICAI,members of ICAI Central

Council and Regional Councils, studentachievers and other members.

Te Institute of Chartered Accountants of Indiacelebrated a year of noteworthy achievements

at its 66 th Annual Function organised on

February 11, 2016, in the convention hall of

Hotel Ashok in New Delhi. Te occasion not only

recalled the success that ICAI achieved in the

year 2015-16 but also set the tone for its future

professional endeavours. Union Minister of

State for Finance Shri Jayant Sinha graced the

occasion as the Chief Guest in the presence of a

large gathering including a host of dignitaries

from the accountancy profession, Government

and other stakeholders. Meritorious CA

students, members and outstanding Regional

Councils, Branches and overseas chapters

were also honoured for their accomplishments

during the event, which also witnessed the

release of various ICAI Publications. Joint

Secretary Ministry of Corporate Affairs Shri

Manoj Kumar also distributed prizes on the

occasion. We present herewith a brief report of

the Annual Function. Read on…

CAs’ Role Vital for Nation, says JayantSinha as the ICAI Celebrates Success

66th Annual Function

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In his presidential address, the then ICAIPresident CA. Manoj Fadnis briefly outlinedthe all-round development in accountancyprofession facilitated by the Institute through various initiatives during the Council Year2015-16. He gave an overview of all nationaland international initiatives of the ICAI andhighlighted how the profession had made asignificant contribution in its role as partner-in-nation-building, particularly in its flagship

programmes. “Spearheading Professional Excellence’ was my mantra. We have workedon upgrading the course curriculum, to bringchanges in regulatory framework of educationand training, introduce new standards andrevise old ones to suit emerging requirements,supporting them with Implementation Guides,providing assistance to the outside world inthe matters related to our domain expertise,”he said.

He said the ICAI has been actively extendingprofessional help to organisations such asIndian Railways, Coal India Limited, EmployeesProvident Fund in the matters related to accrualaccounting, outcome budgeting, creation ofintegrated cost accounting architecture, capexprocurement process, policy compliance,strengthening compliance managementframework and so on. CA. Fadnis said thatin the backdrop of Indian economic revival,the accounting profession will only gain in

importance. Te increased economic activity

will require accounting professionals who aretechnically sound and have expertise in theirchosen domain.

CA. Manoj Fadnis also flagged threeareas of ICAI concern for Shri Jayant Sinha’sconsideration–proposed National FinancialReporting Authority (NFRA), mechanism ofappointing Bank Auditors and relaxation ofVISA restrictions for professionals. “NFRA willcreate overlapping structures that will reduce

efficiencies. Creation of multiple regulatoryauthorities governing the audit profession wouldhinder the growth of the profession,” he said,adding “the other issue relates to the procedureof selection of Auditors of Banks. Te autonomy given to Banks in the current procedure ofappointment of Central Statutory Auditors and Branch Statutory Auditorsof Public Sector Banks (PSBs) can lead toimpairment of independence.” “We havebeen recommending that appointmentof these Auditors of Public Sector Banksmay be done by an independent authority such as Reserve Bank of India or C&AG.”Recommending the creation of a level playingfield for the Indian accounting professionals,he said, “In order to enable the IndianChartered Accountants to grab opportunitiesin the global market, the restrictions onobtaining visas should be relaxed so that itdoes not hamper cross-border movements of the

professionals”.

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accountants too have a responsibility to ensurethat due taxes are collected by the government,he said. Appealing to the CA community to helpcollect taxes and contribute to nation building,

Sinha said the state requires resources to fundinfrastructure, government schemes as well asfor national security.

"You are responsible along with tax officials.We have to get our tax: GDP ratio from 16/17 per cent to well over 20 per cent. Only thenare we going to have the roads, the highways,metro, clean air, the army, the mid day meals,higher educational institutions and India ofour dreams…In that, no institution is going to

be more important than you all as you certifyand assess what the actual profits and revenuesare and you assess what the real taxes shouldbe," Sinha said. When you look at the books of your clients as business advisors and charteredaccountants, your thinking should not beabout tax avoidance," Sinha said at the annualfunction of ICAI.

During the function, Sinha sought to knowfrom CAs whether India was a "highly taxedor lightly taxed country", to which about two-

third of the gathering said that India was alightly taxed country. But the minister said thatthe view of general public was different as 75-80 per cent of the population feels that India isa highly taxed country.

"But you, because you are CAs, experts, you know India is not a highly taxed country.We have very moderate taxes in India...corporate taxes going down to 25 per cent and you all know the tax: GDP ratio is 16/17 percent, when the OECD average is 35 per cent," he said.

alking about the global economic scenario,he expressed great satisfaction for India beinga haven of stability while the global economy islurking in turbulent waters. He mentioned thatIndia has emerged as a model democracy withsignificant fiscal steadiness, while economiesinternationally are clouded in financial stressand economic contractions. Tis, he said, isfurther substantiated by the fact that India’s

GDP growth rate is highest amongst the

India Lightly Taxed; Help Govt Collect

More: Jayant Sinha to CAs

In his address, the Chief Guest Union Ministerof State for Finance Shri Jayant Sinha hailedthe Indian accountancy profession for playingan important role in development of economy.

Complimenting the ICAI for its 66 illustrious years of service to the nation, he said theInstitute has rendered outstanding serviceswith utmost diligence to the Government inmaintaining the nation’s financial health. “Te patriotism, professionalism & sense of dutythat Chartered Accountants possess iscommendable and the CA fraternity can playan important role in building India,” he said.

Stressing the important role of the CAs innation building, he said India is a "lightly taxed"nation and urged CAs to help the governmentcollect due taxes and raise the tax-GDP ratio to20 per cent. Along with tax officers, chartered

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leading economies worldwide and expressedconfidence that the Nation’s GDP shouldrise to 7.5% in this fiscal year. Foreign Directinvestment, he informed, has soared to 40%

which is reflective of the investors’ confidenceon India as a global investment hub. Someother sectors, however, like the steel and thecoal, has plummeted due to impact of thedecline in its global prices. In addition, Indiaalso witnessed 2 deficit monsoons, for the firsttime in the last 3 decades. However, he said,despite these hurdles, India has braced itselfwell and is steadily rising on its GDP growthrate.

He opined that a lot of this could beattributed to the structural bliss that Indiaenjoys, in terms of its student developmentmodel, strong demography and the like. Healso shared his vision and hope that over thenext few decades, India shall emerge as thenew entrepreneurial engine for the top onebillion people on the planet. He also visualisedIndia as the next Innovation-Hub as thenation is backed by a fundamentally sturdydesign model. India’s design-point, he stated,

is based on the 80-20 design model, whichensures availability of high-end products &services in Indian markets with 80% of theirfunctionalities at 20% of their prices. He said:You can find the global products and serviceswith 80 per cent of the functions at 20 per centof the actual cost in my hometown, at JhandaChowk of Hazaribagh.

“As our economy heads for this substantial growth in the ensuing years, the Chartered

Accountant fraternity assumes an extremelyimportant role as a partner of the Nation inmaneuvering the financial growth of the economy,”he said.

He mentioned that for any economy toprogress, what is indispensable is to have asolid grip on the numbers. “India”, he said,“relies heavily on the Accountancy professionalswho are the trusted advisors to the investors aswell as to the policy makers”. Te Governmentplaces heavy reliance on the CA fraternity tokeep it informed on the sound working of itsstrategies. Te risk assessment of the national

policies to be implemented by the Government,is another arena, he said, which is dependent onthe expertise of the Accounting professionals.“Te role of the accounting profession is criticalin lending credibility to financial marketsand for building India’s economy into a global power,” he said.

Earlier, he began with extending the newsabout the sad demise of Lance Nayak ShriHanamanthappa Koppad who died three

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days after he was miraculously rescued frombeneath tonnes of snow at a height of 19,600feet after the February 3, 2016 avalanche hit hispost in Siachen Glacier. Leading the gatheringin paying last respects to the Lance Naik byobserving two-minute silence and recallinghis grit and determination, the Minister urgedthe CA fraternity to also work with the samespirit, complete integrity, dedication andprofessionalism.

Te minister also released several

publications of the ICAI on the occasion. TeMinister also distributed awards to the CAstudents and members for their outstandingacademic achievements.

A vote of thanks was delivered by thethen Vice President (now President) CA. M.Devaraja Reddy. Addressing the conflict sownby globalisation which has resulted in changingthe dynamism of the emerging markets, he saidthat the ICAI has engrossed itself into providingworld-class education, and hands-on-trainingto groom the Accounting professionals astotal business solution providers to compete

with the globalprofessionals.

Briefing onthe constante n d e a v o u rof the ICAIt o w a r d se n s u r i n gq u a l i t yeducation, hesaid that the

CA course,being an economical and professional course,is one of the most sought-after courses in thecountry. He added that the ICAI functionsas a standard-setter so as to make the IndianChartered Accountants a global brand. Heurged the Indian Chartered Accountants tofunction with the utmost trustworthinessand transparency as they are the custodiansof public trust. He assured that ICAI would

continue in its mission to uphold the confidenceof the public and the values of excellence,independence, integrity that the Institute standsfor.

Te ICAI branchesand overseas chapterswhich were adjudgedoutstanding in differentcategories for the year 2015-16 were

also awarded on theoccasion. n

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Q. What are the Fundamental Principles whicha Professional Accountant is required tocomply?

A. A professional accountant is required tocomply with the following fundamentalprinciples:(a) Integrity: A professional accountant

should be straightforward and honest inall professional and business relationships.

(b) Objectivity: A professional accountantshould not allow bias, conflict of interestor undue influence of others to overrideprofessional judgments.

(c) Professional Competence and DueCare: A professional accountant shouldact diligently and in accordance withapplicable technical and professionalstandards while providing professionalservices.

(d) Confidentiality: A professional accountantshould not disclose information acquiredin the course of his professional andemployment relationships to any personwithout proper and specific authorityunless there is a legal or professional rightor duty to disclose.

(e) Professional Behaviour: A professionalaccountant should comply withrelevant laws and regulations and shouldavoid any action that discredits theprofession.

Q. What is the Conceptual FrameworkApproach?

A. It is a framework that requires a professionalaccountant to identify, evaluate and addressthreats to compliance with the fundamentalprinciples, rather than merely comply with a

set of specific rules. Professional accountantsare required to apply this conceptualframework to identify threats to compliancewith the fundamental principles, to evaluatetheir significance and, if such threats areother than clearly insignificant then to applysafeguards to eliminate them or reduce themto an acceptable level such that compliancewith the fundamental principles is notcompromised.

Q. What is the status of a CharteredAccountant who is a salaried employee of aChartered Accountant in practice or a firmof such Chartered Accountants?

A. An associate or a fellow of the Institute who is a

salaried employee of a Chartered Accountantin practice or a firm of such CharteredAccountants shall, notwithstanding suchemployment, be deemed to be in practicefor the limited purpose of the training ofarticled assistants. He may hold Certificateof Practice but he is not entitled to do attestfunctions w.e.f. 1.4.2005.

Q. Can a member holding Certificate ofPractice, entitled to own Agricultural landand continue agricultural activity?

A. Yes, member holding Certificate of Practicecan own and hold agricultural land andcontinue agricultural activity.

Q. Can a member act as a Tax Auditor andInternal Auditor of an entity?

A. No, the Council has decided that axAuditor of an entity cannot act as an InternalAuditor of the same entity, or vice-versa forthe same financial year.

* Contributed by the Ethical Standards Board of the ICAI

Ethical Issues in Question-Answer Form

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246

Q. Can the goodwill of a proprietary firmof Chartered Accountant after his deathbe sold/transferred to another eligiblemember of the Institute?

A. Yes, the Council of the Institute considered

the issue whether the goodwill of a proprietaryfirm of Chartered Accountant can be sold/transferred to another eligible member ofthe Institute, after the death of the proprietorconcerned and came to the view that thesame is permissible. Accordingly, the Councilpassed the following resolution with a view tomitigate the hardship generally faced by thefamilies after the death of such proprietors,subject to following conditions:(a) in respect of cases where the death of

the proprietor concerned occurred onor after 30.8.1998. Provided such a saleis completed/effected in all respects andthe Institute's permission to practicein deceased's proprietary firm name issought within a year of the death of suchproprietor concerned. In respect of thesecases, the name of the proprietary firmconcerned would be kept in abeyance (i.e.not removed on receipt of informationabout the death of the proprietor as is

being done at present) only up to a periodof one year from the death of proprietorconcerned as aforesaid.

(b) in respect of cases where the death of theproprietor concerned occurred on or after30.8.1998 and there existed a dispute as tothe legal heir of the deceased proprietor.

Provided the information as to theexistence of the dispute is received bythe Institute within a year of the death ofthe proprietor concerned. In respect of

these cases, the name of proprietary firmconcerned shall be kept in abeyance tillone year from the date of settlement ofdispute.

(c) in respect of cases where the death of theproprietor concerned had occurred on orbefore 29th August, 1998 (irrespective ofthe time lag between the date of death ofthe proprietor concerned and the date ofsale/transfer of goodwill completed/to becompleted). Provided such a sale/transfer

is completed/effected and the Institute'spermission to practice in the deceased's

proprietary firm name is sought for by 28th August, 1999 and also further providedthat the firm name concerned is stillavailable with the Institute.”

Q. What are the measures available toProfessional Accountants in case conflictof interest arises?

A. A professional accountant in public practiceshould take reasonable steps to identifycircumstances that could pose a conflict ofinterest. Such circumstances may give rise tothreats to compliance with the fundamentalprinciples.

A Professional Accountant should evaluatethe significance of any threats. Depending

upon the circumstances giving rise to theconflict, safeguards should ordinarily includenotifying the client activities that mayrepresent a conflict of interest/notifying allknown relevant parties where the professionalaccountant is acting for two or more partiesin respect of a matter, giving rise to conflictof interest and obtaining their consent in suchcircumstances.

Te additional safeguards e.g. the use ofseparate engagement teams, clear guidelines

for members of the engagement team onissues of security and confidentiality, regularreview of the application of safeguardsby a senior individual not involved withrelevant client engagements should also beconsidered.

Q. What is Independence?A. Independence requires: Independence of Mind-Te state of mind

that permits the expression of a conclusion

without being affected by influences thatcompromise professional judgment, allowingan individual to act with integrity, and exerciseobjectivity and professional skepticism.Independence in Appearance-Te avoidanceof facts and circumstances that are sosignificant that a reasonable and informedthird party, having knowledge of all relevantinformation, including safeguards applied,would reasonably conclude a firm’s, or amember of the assurance team’s, integrity,

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(Matter on Direct Taxes has beencontributed by the Direct TaxesCommittee of the ICAI)

A. INCOME TAX

I. NOTIFICATION

1. Additional Modes for generation of

Electronic Verication Code (EVC) for the purpose ofelectronic verication of the person furnishing the

return of income- Notication No. 1/2016 dated 19-1-

2016

Rule 12(3) details the manner of furnishing returnof income by different categories of persons.ransmitting the data in the return electronicallyunder electronic verification code is one ofpermissible modes of furnishing return of incomeby an individual, HUF, firm, LLP or any otherperson who is required to file return in Form IR-5, whose accounts are not required to be audited

under Section 44AB. Further, a person requiredto furnish the return in Form IR-7 (other than apolitical party) can also furnish return of incomeby transmitting the data in the return electronicallyunder electronic verification code.

Electronic verification code has been defined in Explanation to Rule 12(3) of the Income-tax Rules,1962, to mean a code generated for the purposeof electronic verification of the person furnishingthe return of income as per the data structure andstandards specified by Principal Director General

of Income-tax (Systems) or Director General ofIncome-tax (Systems).

Rule 12(4) of the Income-tax Rules, 1962,empowers the Principal Director-General ofIncome-tax (Systems) or Director-General ofIncome-tax (Systems) to specify the procedures,formats and standards for ensuring secure captureand transmission of data. He shall also be responsiblefor evolving and implementing appropriate security,archival and retrieval policies in relation tofurnishing-

i. the returns in the manners (other than thepaper form) specified in column (iv) of the

able, namely, electronically under digitalsignature and transmitting the data in thereturn electronically and thereafter submittingthe verification of the return in Form IR-V;and

ii. the report of audit or notice referred to in proviso to Rule 12 (2) electronically.

In exercise of the powers delegated by the

CBD under Explanation to Rule 12(3) and Rule12(4) of the Income-tax Rules, 1962, the PrincipalDirector-General of Income-tax (Systems) has laiddown the procedures, data structure and standardsfor additional modes of generation of ElectronicVerification Code in addition to EVC prescribedvide earlier Notification No. 2/2015 dated 13th July2015 as under:

Additional Modes of Generation of EVC

Case (5): Where the EVC (Electronic Verification

Code) is generated by giving bank details to thee-filing website https://incometaxindiaefiling.

gov.in

A facility to pre-validate Bank account details will beprovided to the assessee under Profile Settings menuin e-Filing website i.e., https://incometaxindiaefiling.gov.in. Assessee has to provide the following bankaccount details: 1. Bank account number 2. IFSC3. Email ID and 4. Mobile Number. Tese detailsprovided by the assessee along with PAN and Nameas per e-filing database will be validated against the

details of taxpayer registered with bank. If the pre- validation is successfully completed, assessee canopt for "Generate EVC using bank account details"option while verifying the Income tax return.

Generated EVC will be sent by e-filing portal totaxpayer's Email ID and/or Mobile Number verifiedfrom bank. List of Banks participating in this facilitywill be as provided in https://incometaxindiaefiling.gov.in

Case (6): Where the EVC (Electronic Verification

Code) is generated after Demat accountauthentication using Demat details registered with CDSL/NSDL

Circulars/NotificationsGiven below are the important Circulars and Notifications issued by the CBDT, CBEC, FEMA, MCA, SEBI, RBI during the last month for information and use of members.

Readers are requested to use the citation/website or weblink to access the full text of desiredcircular/notification. You are requested to please submit your feedback and suggestionson the column at [email protected]

DIRECTTAXES

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A facility to pre-validate Demat account details will beprovided to the assessee under Profile Settings menuin e-Filing website i.e. https://incometaxindiaefiling.gov.in. Assessee has to provide the following Demat

account details:1. Demat account number2. Email ID and3. Mobile Number.

Tese details provided by the assessee alongwith PAN and Name as per e-filing database will be validated against the details of taxpayer registeredwith depository (CDSL/NSDL). If the pre-validationis successfully completed, assessee can opt for"Generate EVC using Demat account details" optionwhile verifying the Income tax return.

Generated EVC will be sent by e-filing portalto Email ID and/or Mobile Number verified fromCDSL/NSDL. Te Depositories (CDSL/NSDL)participating in this facility will be as provided inhttps://incometaxindiaefiling.gov.in.

Other Conditions:

Te additional mode of EVC generation will comeinto effect from the date of issue of this notification.

All other condition shall remain same as specified inNotification No. 2/2015 dated 13.07.2015 issued byPr. DGI (Systems), New Delhi.

Te mode and process for generation and

validation of EVC and its use can be modified,deleted or added by the Principal DGI (System)/DGI (System).

Te complete text of the above Notifications canbe downloaded from the link below: http://www.incometaxindia.gov.in/Pages/communications/notifications.aspx

II. CIRCULAR1. Clarication of the term ‘initial assessment year’ inSection 80IA (5) of the Income-tax Act, 1961–Circular

No. 01/2016, Dated 15-2-2016Section 80IA provides for deduction of an amountequal to 100% of the profits and gains derived by anundertaking or enterprise from an eligible business(as referred to in sub-Section (4) of that Section)in accordance with the prescribed provisions.Section 80IA(2) further provides that the aforesaiddeduction can be claimed by the assessee, at hisoption, for any ten consecutive assessment years


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Te detailed circular can be downloaded fromthe link http://www.incometaxindia.gov.in/Pages/communications/circulars.aspx

III. Press Releases/Instructions/Ofce Memorandum1. Signing of 7 unilateral Advance PricingAgreements-Press Release dated January 22, 2016Te APA Scheme was introduced in the Income-tax Act in 2012 and the "Rollback" provisions wereintroduced in 2014. Te scheme endeavours toprovide certainty to taxpayers in the domain oftransfer pricing by specifying the methods of pricingand setting the prices of international transactionsin advance. Since its inception, the APA scheme hasattracted tremendous interest from taxpayers forusing this mechanism to achieve tax certainty upto

nine years.Te Central Board of Direct axes (CBD)

entered into 7 more unilateral Advance PricingAgreements (APAs) with taxpayers on 22nd January,2016. Tis takes the tally of APAs signed sofar to 39 (38 unilateral and one bilateral). In thecurrent fiscal year, which is the third year of APAprogramme, 30 agreements have been signedso far. Before the end of the financial year, moresuch agreements are expected to be signed. Te7 APAs signed pertain to various sectors of the

economy like investment advisory services, softwaredevelopment services and I enabled Services. Teagreement so signed also includes one of the fewagreements to be reached in the manufacturingsector.

2. Signing of Protocol amending the India-ArmeniaDouble Taxation Avoidance Convention)- PressRelease, Dated 27-1-2016A Protocol to amend the existing Doubleaxation Avoidance Convention was signed bythe Government of India and the Government ofArmenia on the 27th day of January, 2016 in NewDelhi.

Te Protocol amends the Double axationAvoidance Convention between India andArmenia that has been in existence since 9th September, 2004. Te Protocol amends the Articleon Exchange of Information for tax purposesto bring it in line with the updated provisions inthe OECD Model. Te Protocol will enable thetwo countries to exchange information relatedto financial and banking transactions under the

Double axation Avoidance Convention, andthereby facilitate them in addressing tax evasion. It

out of fifteen years (twenty years in certain cases)beginning from the year in which the undertakingcommences operation, begins development or startsproviding services etc. as stipulated therein. Section80IA(5) further provides as under–

“Notwithstanding anything contained in anyother provision of this Act, the profits and gains of aneligible business to which the provisions of sub-section(1) apply shall, for the purposes of determining thequantum of deduction under that sub-section for theassessment year immediately succeeding the initialassessment year or any subsequent assessment year,be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and toevery subsequent assessment year up to and including

the assessment year for which the determination is tobe made”.

In the above sub-Section, which prescribesthe manner of determining the quantum ofdeduction, a reference has been made to the term‘initial assessment year’. It has been representedthat some Assessing Officers are interpreting theterm ‘initial assessment year’ as the year in whichthe eligible business/manufacturing activity hadcommenced and are considering such first year ofcommencement/operation etc. itself as the first year

for granting deduction, ignoring the clear mandateprovided under sub-Section (2) which allows a choiceto the assessee for deciding the year from which itdesires to claim deduction out of the applicable slabof fifteen (or twenty) years.

On examining the matter, it is abundantlyclear from sub-Section (2) that an assessee who iseligible to claim deduction u/s 80IA has theoption to choose the initial/first year from which itmay desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, asprescribed under that sub-Section. It is hereby

clarified that once such initial assessment year hasbeen opted for by the assessee, he shall be entitledto claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which hehas exercised such option subject to the fulfillmentof conditions prescribed in the section. Hence,the term ‘initial assessment year’ would mean thefirst year opted for by the assessee for claimingdeduction u/s 80IA. However, the total number of years for claiming deduction should not transgressthe prescribed slab of fifteen or twenty years, as

the case may be and the period of claim should beavailed in continuity.

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is also expected to further strengthen the efforts ofGovernment of India in curbing generation of blackmoney.

3. Resolution of more than 100 cases of TransferPricing disputes with USA Under Mutual AgreementProcedure (MAP)-Press Release, Dated 28-1-2016One of the significant steps taken by CBD toboost investment sentiments among MNCs isthe landmark Framework Agreement signed withthe Revenue Authorities of USA in January, 2015.Tis agreement was finalised under the MutualAgreement Procedure (MAP) provision containedin the India-USA Double axation AvoidanceConvention (DAC). Te agreement seeks toresolve about 200 past transfer pricing disputes

between the two countries in the Informationechnology (Software Development) Services [IS]and Information echnology enabled Services [IeS]segments. More than 100 cases have already beenresolved and some more are expected to be resolvedbefore the end of this fiscal.

Prior to resolution of disputes under theFramework Agreement the US bilateral APA

programme was closed to India. Te success of theframework Agreement in short period of one yearhas led to the US Revenue Authorities openingup their bilateral APA programme to India. TeUSA is expected to begin accepting bilateral APAapplications shortly.

Te MAP programmes with other countries likeJapan and UK are also progressing well with regularmeetings and resolution of past disputes. Te CBDis confident that a combination of a robust APAprogramme and a streamlined MAP programmewould be helpful in creating an environment of taxcertainty and encourage MNCs to do business inIndia.

4. Procedure to be followed in other cases where

notice under Section 245 has been issued forITRs processed in Financial Year 2015-16-OfceMemorandum, Dated 29-1-2016In order to expedite the process of issue of smallrefunds, CBD has directed CPC-Bengaluru andthe field units that refunds up to R5,000/-, andrefunds in cases where outstanding arrears are up toR5,000/- may be issued without any adjustment of

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