Important Announcement - November 2009 Examination

Important Announcement - November 2009 Examination

The Examination Committee has taken the following important decisions for the November, 2009 examinations. Students are advised to note them carefully.

A. CA course being a professional course, practical training is an essential part of it and accordingly all papers of Professional Competence Examination as well as Final should be practical oriented questions as also of the level of knowledge should be expert and not working knowledge. All questions should be compulsory at both Professional Competence Examination / Integrated Professional Competence Examination and Final examinations.

B. Students appearing for the Professional Competence Examination (PCE) for November, 2009 are advised to carefully note the following important decisions taken in relation to the syllabus and pattern of questions to be set in the examinations.

1. Paper 2 – Auditing and Assurance

Students may note that a detailed announcement regarding applicable Standards on Auditing and the publications of the ICAI relevant for the examination has already been published in the September, 2009 issue of the Newsletter. They may further note that since the fringe benefit tax has been abolished w.e.f. April 1, 2010 no question would be asked on tax audit relating to FBT. Further the provisions of CARO, 2003 would be applicable.

2. Paper 5 – Taxation

The question paper would be of practical nature. Students may note that the coverage of sections for the PCE syllabus is as follows:

PART – I: INCOME–TAX (75 MARKS)

Contents:

* Important definitions in the Income-tax Act, 1961 [Section 2].
* Basis of charge; Rates of taxes applicable for different types of assessees [Sections 4, 111A, 112 & 115BB].
* Concepts of previous year and assessment year [Sections 2, 3, 68 to 69D, 172 to 176].
* Residential status and scope of total income; Income deemed to be received/deemed to accrue or arise in India [Sections 5 to 9].
* Incomes which do not form part of total income [Sections 10 to 13A, 14A, 115BBC].
* Heads of income and the provisions governing computation of income under different heads [Sections 14 to 59, Sections 89, 111A, 112, 115BB, 145].
* Income of other persons included in assessee’s total income [Sections 60 to 65].
* Aggregation of income; Set-off or carry forward and Set-off losses [Sections 70 to 80].
* Deductions from gross total income [Sections 80A to 80U].
* Computation of total income and tax payable; Rebates and relief’s (Comprehensively covers all sections mentioned above).
* Provisions concerning advance tax and tax deducted at source [Sections 190 to 219, 234B & 234C].
* Provisions for filing of return of income [Sections 139 to 140, 234A].

PART – II: SERVICE TAX AND VAT (25 MARKS)

Contents:

* Service tax – Concepts and general principles [Section 64].
* Charge of service tax and taxable services [Sections 65 and 66].
* Valuation of taxable service [Section 67].
* Payment of service tax and filing of returns [Sections 68, 70,71,73A, 73B and 75].
* VAT – Concepts and general principles.

Note: If new legislations are enacted in place of the existing legislations the syllabus will accordingly include the corresponding provisions of such new legislations in the place of the existing legislations with effect from the date to be notified by the Institute. Students shall not be examined with reference to any particular State VAT Law.

3. Further students should clearly note that working notes should form part of the answers.

Note: Students may note that the first paragraph of this announcement is in addition to the announcement already published in the October, 2009 issue of the students’ newsletter – The Chartered Accountant Student.

Changes in Taxation in Union Budget 2009

1. Tax slab raised
2. MAT hiked to 15 per cent of book profit
3. Commodity transaction tax abolished
4. New pension scheme
5. Tax holiday for exporters extended untill 2012
6. Personal income tax exemption hiked by Rs 10,000
7. Abolish fringe benefit tax
8. Goods and services tax from April 1, 2010
9. Share of direct taxes has increased to 56 per cent in 2008-09
10. Federal Tax/GDP ratio is 11.5 per cent
11. No surcharge of 10 per cent on personal income tax
12. Increase in exemption slab for senior citizen
13. No change in corporate taxes
14. Hike in IT exemption for women to Rs 1,90,000
15. Govt committed to tax reforms
16. Increase automation in direct tax collection
17. New tax code in 45 days
18. Centralised processing center at Bengalooru to streamline taxation
19. Income tax forms should be user friendly
20. Tax system should be such that it shold encourage voluntary compliance
21. Saral form 2 will be introduced

Highlights of Union Budget!!!

1. Fringe Benefit Tax and Commodity Transaction Tax abolished.
2. Personal income tax exemption hiked by Rs 10,000. No surcharge of 10% on personal income tax.
3. Centralised processing center at Bengalooru to streamline taxation.
4. No change in corporate tax.
5. Increase in exemption slab for senior citizens by Rs 15,000.
6. Fiscal deficit at 6.8% of GDP.
7. Proposes Rs 500 cr for rehabilation of displaced persons of northern and eastern areas of Sri Lanka.
8. Aila Relief proposed at Rs 1,000 crore.
9. Increased allocation for higher education. New IITs to be set up. Rs 2,113 cr for IITs and NITs.
10. Rs 25 cr each for AMU campuses in Murshidabad and Mallapuram.
11. Defence outlay goes up. One lakh dwelling units for paramilitary forces personnel to be constructed.
12. Allowances to para-military forces at par with defence forces. One rank, one pension for ex-servicemen.
13. One rank, one pension for ex-servicemen.
14. Allocation for Commonwealth Games to be raised to Rs 3472 crore
15. Online job exchange to be started with private partnership.
16. Unique ID plan to roll out in 12-18 months.
17. Top people from private sector to be given responsibility of vital national projects.
18. Interest subsidy for home loans up to Rs 1 lakh.
19. All BPL families to be bought under one smart card program.
20. 50% of all rural women to be brought into self-help group programmes.
21. Rural mega clusters in Bengal and Rajasthan.
22. To add handloom clusters in West Bengal and Tamil Nadu.
23. 75% hike in irrigation projects.
24. Rural Housing: Allocation to Indira Awaas Yojna hiked by 63% to Rs 8,883 cr. Rs 7000 crores for rural electrification scheme.
25. Rs 31,100 crore allocation for NREGA. NREGA gave employment opportunities to more than 4.479 cr households.
26. Rs 100 cr one-time grant to expand banks in non-banking areas.
27. Banks, insurance to stay with Govt. Banking network to be expanded.
28. Expert panel to look into petroleum product pricing. Domestic oil prices must be in sync with global prices.
29. 'Aam Admi' is the focus of all our programmes and schemes: Pranab
30. Tax system should be such that it shold encourage voluntary compliance.
31. Income Tax forms to be made user-friendly. Saral-II forms to simplify taxation process.
32. Export Credit Guarantee scheme extended till March 2010.
33. Stimulus package to print media extended till December 31.
34. Farmers loan interest to come down to 6%. Interest subvention scheme for farm loans to be manitained.
35. Additional budget allocation for farmers.
36. IIFCL will refinance 60% of commercial bank loans in PPP. IIFCL to look at infrastructure needs.
37. Mumbai flood management allocation hiked to Rs 500 cr.
38. 87% rise in urban renewal mission. Housing allocation hiked.
39. Fiscal stimulus at 3.5% of GDP
40. Allocation for NHAI up 23%
41. Trade in goods and services doubled in 2008
42. Job creation hit due to economic slowdown: Pranab
43. Govt took 3 stimulus packages so far. Two worst quarters of the global economic crisis is now behind us: Pranab
44. One budget can not solve all problems: Pranab
45. Foreign capital inflow is important
46. Increased focus on growth and encourage nation's development
47. Sustain growth rate of 9% for a longer period. Farm sector growth at 4%
48. Union Finance Minsiter begins his speech. This is Pranab Mukherjee's 4th budget.
49. Cabinet approves Union Budget.

CBDT defers UTN for the time being.

The CBDT has finally come out with a much awaited Press Release relating to the new TDS rules. .

Today, the CBDT has issued a Press Release in which it has been stated that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being. The deferral probably was made as the platform for implementation of UTN was not ready.

The text of the Press Release is reproduced below for ready reference.

New Delhi dated 30th June 2009

PRESS RELEASE
The Central Board of Direct Taxes have further decided that the Notification No. 31 of 2009 dated 25.3.2009 amending or substituting Rules 30, 31, 31A and 31AA of the Income Tax Rules, 1962 shall be kept in abeyance for the time being.

Taxpayers filing their income tax returns for assessment year (AY) 2009-10, or any other earlier AY, may continue to file their returns without mentioning the Unique Transaction Number (UTN) as required under the said Notification. The filing of such returns shall be treated as valid and in compliance to the requirements under section 139 of the Income Tax Act, 1961.

Further, the date from which the Notification No. 31 / 2009 shall become applicable on tax deducted at source (TDS) or tax collected at source (TCS) and deposited during the current financial year shall be notified by the Central Board of Direct Taxes subsequently.

All deductors / collectors of TDS / TCS may continue to deposit their TDS / TCS and file their quarterly TDS / TCS returns as per procedure existing prior to issuance of Notification No.31 / 2009 dated 25.3.2009.

Students Matters

The following decisions taken by the Council of the Institute are brought into force immediately for compliance by the Students / Members concerned. It is advised that required compliance be made by the concerned students / members. It may please be noted that non-compliance will be viewed seriously and proceeded against accordingly.

a) The coaching classes shall not continue after 9.30 a. m. or start before 5.30 p.m. so as to enable the articled/audit assistants to concentrate wholly on practical training.

b) Members of the Institute who are engaged in coaching be advised not to undertake coaching between 9.30 a.m. to 5.30 p.m.

c) An articled assistant should undergo practical training in accordance with the guidelines of the Institute between 10:30 a.m. and 5:30 p.m. During the period an articled assistant shall not be permitted to attend colleges/other institutions for graduation or any other course.

d) Every articled/audit assistant shall submit once in a year a specific declaration duly counter-signed by the Principal to the effect that the he is regularly attending training and his college hours do not clash with his articles timings and that no coaching is undertaken by him between 9.30 am and 5.30 pm on any working day. In the event of breach of this guidelines and not taking permission as required, the articles already undergone shall be de-recognised for such period as the Institute may decide.

e) Every articled/audit assistant shall be required to maintain mandatorily the Work Diary in the Form to be prescribed by the Board of Studies.

f) The Institute to call for at random training report alongwith attendance record and stipend details and also Work Diary maintained by articled/audit assistant from any member/firm in respect of any articled assistant at any point of time during the period of practical training for verification.

g) In case an articled assistant is found not undergoing articles in the manner prescribed he shall be debarred from appearing in the exam upto 3 consecutive exams besides cancellation of such period of articles. The concerned member who allowed such an articled assistant be subject to punitive action besides withdrawing either partly or fully his eligibility to train articled assistant. In Peer Review the Reviewer be required to verify whether training is imparted to the articled assistant in the manner prescribed.

h) No request for termination of articles is entertained from any articled assistant in general and more particularly during the first six months and also during the last twelve months of articles except as provided in the Regulations. In the event of termination, his articles shall not be registered in the same city.

i) No request of an articled assistant for termination (transfer) of articleship shall be considered unless his/her working parent(s) is/are transferred from the city/place where the articled assistant is receiving training to another city and a copy of transfer order / proof is submitted to the principal in proof thereof. On such termination the articled assistant concerned shall join articles training in and around the place of posting of his/her parent(s) and shall not re-register articles in the same city or within 50 Kms radius of the city where he/she has undergone articles prior to such termination.

j) If the articled assistant is not able to serve the articleship for specified genuine medical reasons thereby opting to discontinue the CA course for a period of at least three months, the termination of articles be permitted, provided that the medical grounds are such that warrant termination of Articleship.

k) In the event of misconduct involving moral turpitude, gross negligence or unsatisfactory performance of the articled assistant, his articles shall be liable to be terminated by his principal besides being cancelled or extended for such period as may be decided by the Institute. Board of Studies to decide and enumerate the acts constituting misconduct.

l) Termination of articles be permitted on such other justified circumstances as may be deemed genuine by the Council.

m) While forwarding the form no. 109 the principal shall state specifically the clause (the relevant clause mentioned above) under which the articles have been terminated.

AS 11 : The burning Issue.

The economies of the globe are feeling the pinch of Recession and given the magnitude of meltdown, there is no surprise that India Inc. is trying its best to save its financials ( Profit and Loss Account and Balance Sheets) from bleeding. The Export service has already dived enough and the future appears to be no better. Many Indian Companies have exposure in foreign markets and Financial instruments denominated in Foreign currencies.

The accounting regulator requires that the foreign currency liabilities to be marked to market (to be simply put the amount of resource outflow that would be required to settle the liability as on the balance sheet date).(AS 11 requires foreign currency monetary assets and liabilities to be measured at the exchange rate on each balance sheet date. Any change in a monetary asset or liability that arises because of exchange rate variation is to be taken to the P&L account).

The rupee has depreciated sharply in the recent past. The companies having foreign currency liabilities need to mark the liabilities to market which means that the loss on MTM has to be charged to the profit and loss account. A simple example: ABC ltd borrowed $ 1,00,000/-( $1= INR 40). On the balance sheet date USD 1 is at Rs 52.This would mean that the equivalent INR liability would increase by Rs 12,00,000/- and the entire amount has to be charged to Profit and Loss account as a foreign currency loss. This would obviously change the face of Profit and Loss account.

However the Schedule VI of Companies Act 1956 allows companies to add the increase in Liability to the coressponding asset which was financed by the loan. In the above case if the loan was taken to purchase a Machinery, the company can add Rs. 12,00,000/- to the cost of the asset. This would mean that the company can show profits higher by Rs.12,00,000/-(less depreciation).

Though the Accounting Standards issued by the ICAI are mandatory in nature, in case of any difference between an AS and any provisions of Act, the Act would supercede the Accounting Standard. This means that companies are free to follow Schedule VI of the companies Act. Earlier when Rupee had appreciated, companies had no problems whatsoever in following the Accounting Standard 11.

The revised AS 11 is one of those standards that is almost fully in conformity with IAS 21, the corresponding international standard. Abandoning AS 11 would raise serious questions about the commitment of Indian companies to follow IFRS.

So India Inc. should not look at the volatility resulting from AS 11 from a narrow perspective. If financial performance is volatile, the function of accounting is to report that volatility. As Indian standards converge with IFRS, there will be a lot more volatility in the reported profit. A good accounting system should bring out the underlying volatility of a business, and not seek to hide it from investors and other users of financial statements. Volatility in the foreign exchange markets can be managed by hedging. Let us not fiddle with accounting to fix that problem.

The Importance of reference books.

The Study of Chartered Accountancy Course is quite different from other professional degrees like Doctors, Layers, MBAs etc. Unlike these courses, CA course is a distant education course. ICAI prescribes the syllabus and also provides the basic study material to the students. The students suppliment it with private tuitions and reference books to cover the syllabus comprehensively.

The Study Material provided by ICAI is best in quality. The material is prepared by Board of Studies and is second to none. The material covers the entire syllabus in a comprehensive manner. Many students do believe that if a student prepares from the study material only then also he can pass the CA exams.

But it is not just about passing and today's competitive world demands more. The changes are fast and the study material gets updated a little later. In case of final students the material is provided to them before two years of their attempt. Reference books play a dual role :
1. To keep students updated and
2.To help the students understand concepts with better clarity.

The study material may not be able to cover all kinds of problems or questions. So it is always better to have a good reference book handy to fill the gap. Reference books also help understand topics from diverse perspectives. The number of problems and questions which a student can prepare from increases. Reference books ,unlike the study material, have problems which are very simple and are needed to understand basics.

The list of reference books is available at www.icai.org and are updated from time to time.

I followed the following books for my PE II examination and were really good.

#Accounts- Shukla and Grewal
#Auditing- S material
#B.Law - ND Kapoor
#Costing - MAheshwari( Compilation of Costing is a bible)
#FM - Maheshwari but TRastugi is far better
#Income Tax- VK Singhania, Girish Ahuja, Bandana Bangar. If u want to learn advance concepts gp for singhania and others may refer Ahuja
#Info tech- S Material


Apart from reference books students must also purchase compilations and sugested answers published by ICAI. These publications help students to understand the manner in which they should attempt exams. The summary of examiners comments given at the end of suggested answers are a must read. Revision Test Papers published by ICAI also help in preparation for exams.

Accounting Technician Course

To become an Accounting Technician………

>>Enrol for Common Proficiency Test (CPT) after passing Class 10 examination

>>Pass 10+2 examination and CPT Enrol for Accounting Technician Course (ATC)

>>Successfully complete 9 months of Study Course

>>Successfully complete Orientation Course of one week spanning over 35hours and covering topics, such as, personality development, communicationskills, office procedures, business environment, general commercialknowledge, etc

>>Successfully complete Information Technology Training (ITT) or ComputerTraining Programme

>>Pass Group I of Integrated Professional Competence Examination (IPCE)
Group I is composed of four papers

>>Successfully complete one year work experience under a chartered accountant in practice or in industry

>>Get ATC Certificate Designate as Accounting Technician

Scope for acquiring CA qualification, even after becoming Accounting Technician
>>Enrol in Group II of Integrated Professional Competence Course (IPCC)

>>Register as Articled Assistant for a period of 3 years

>>Pass Group II of IPCE Appear in IPCC Final Examination during last 6 months of 3 years of articled training

>>Pass both the Groups of IPCC Final examination Complete remaining period of articled training, if applicable

>>Successfully complete the Course on General Management andCommunication Skills Get

>>IPCC Final Examination Certificate Enrol as a member of ICAI and designate as “Chartered Accountant”

Integrated Professional Competence Course

To qualify as a Chartered Accountant………

>>Enrol for Common Proficiency Test (CPT), after passing Class 10 examination

>>Pass 10+2 examination and CPT

>>Enrol for Group I or Group II or for both Group I and Group II

>>Successfully complete 9 months of Study Course

>>Successfully complete Orientation Course of one week spanning over 35hours and covering topics, such as, personality development, communicationskills, office procedures, business environment, general commercial knowledge et.

>>Successfully complete Information Technology Training (ITT) or ComputerTraining Programme Appear and pass Group I as well as Group II of Integrated ProfessionalCompetence Examination (IPCE)

>>Group I is composed of four papers and Group II is composed of three papers

>>Register as Articled Assistant for a period of 3 years, on passing either GroupI or both the Groups of IPCE

>>Get IPCE Certificate, on passing both the Groups of IPCE

>>Appear in IPCC Final Examination during last 6 months of 3 years of articled training

>>Pass Group I as well as Group II of IPCC Final Examination

>>Complete remaining period of articled training, if applicable

>.Successfully complete the Course on General Management andCommunication Skills

>>Get IPCC Final Examination Certificate

>>Enrol as a member of ICAI and designate as “Chartered Accountant”


>>Students already passed CPT but not yet registered as articled assistant till 31st January, 2009, and students who would be passing CPTexamination(s) being held in the month of December, 2008 can enrol themselves for IPCC upto 31st January, 2009, so as to be eligible to appear in the first IPC Examination to be held in November, 2009

TRANSITION PROVISIONS FOR EXISTING STUDENTS OF PE-II/PCE

FOR CONVERSION TO INTEGRATED PROFESSIONAL COMPETENCECOURSE/ACCOUNTING TECHNICIAN LEVEL FOR EXISTING PE-II STUDENTS

>>Existing PE-II students registered by virtue of having passed Graduate Degree shall continue to appear in PE-II examination till May, 2009.

>>Existing PE-II students registered by virtue of having passed PE-I Examination cancontinue, at their discretion to appear in PE-II examination till May, 2009 or switchover immediately to existing Professional Competence Course upto 30th June, 2009 and thereafter shall be com pulsorily required to switch over to Integrated Professional Competence Course Examination [IPCC].

>>Candidates who have passed one of the groups of PE-II or PCE shall be eligible forpaper wise exemption in IPCC/ATC

>>Students of PE-II will continue to get paper wise exemption [ secured on the basis of 60% and above marks] upon conv ersion in the corresponding paper(s) of PCE/IPCC for the remaining un-expired chance(s).

>>Eligible to grant of Accounting Technician Level Certificate after passing theremaining papers of Group I of IPCC and upon completion of three years of Articlesh ip or one year work experience after passing Group I of IPCC

>>Eligible to appear in Final Examinatio n after passing remaining pa pers of Group I andGroup II of IPCC and while in last six months of Articleship
Last PE-II Examination will be held in May, 2009

>>After passing Final Examination, completion of prescribed period of Articleship andGMCS Course, students will be eligible for membership of the Institute


FOR EXISTING STUDENTS OF PCE


>>Registration to Professional Competence Course will be upto 30th June, 2009

>>Last PCE Examination will be held in November, 2012. Thereafter, all students of

>>PCE will be compulsorily required to appear in Integrated Professional CompetenceCourse Examination [IPCC] effective from May, 2013

>>Students of PCE will continue to get paper wise exemption [secured on the basis of60% and above marks] upon conversion in the corresponding paper(s) of IPCC forthe remaining un-expired chance(s)

>>Students of PCE who have passed one of the Groups will be eligible for
grant of paper wise exemption in IPCC Examination

>>Students of PCE will continue to do Articleship as per deed of Articleship already executed

>>Students of PCE after passing Group I and Group II of IPCC will be allowed to appearin Final Examination during the last six months of Articleship

>>After passing Final Examination, completion of prescribed period of Articleship and GMCS Course, students will be eligible for membership of the Institute

IPCC -The way ahead!!!

The new course-IPCC (Integrated Professional Compentency Course) is being considered a welcome change my most of those related to this profession. It almost resembles to the PE I regime where in there was a ten months study gap between PE I and PE II. However a candidate needs to pass only group I of IPCC to register and commence articleship as against the requirement of passing both the groups. These announcements were made just before a batch took up exams on 14th December. So to reduce hardship for those students, ICAI has given option of either PCC or IPCC to these students.

Group I of IPCC consists of following subjects
1.Accounting
2.Law, ethics and communication
3.Income Tax.
4.Cost Accounting and Financial Management.

Group II of IPCC consists of following Subjects
5.Accounting.
6.Auditing.
7.Information Technology and Strategic Management.

Articleship period under the new scheme is 3 years and students would be allowed to take up final examination in the last 6 months of their training.(Akin to the Old final syllabus).

The most important difference in the new IPCC scheme is that a candidate can register for articleship after passing Group I on IPCC. This is especially beneficial for students who generally attempt one group at a time. The four subjects included in first group of IPCC will equip students better for audits. Also the study period of nine months will give students enough time to prepare for their audits. The most common problem in the current CPT-PCC scheme which the students faced was lack of maturity for audit and paucity of time to prepare for exams. IPCC seeks to address both the problems.

What should current batch of CPT do??
This dilemma can be found among most of the students who gave CPT this December. Whether to choose for PCC or IPCC has led to lots of confusion among students. I personally feel that IPCC is better for CPT students. Firstly, the study period of nine months ( it may extend to a year) will give time to the students to prepare for IPCC exams. In the current PCC regime, students have to immediately jump into audits for which they may not be prepared and/or matured. Also students find it difficult to manage audits and study side by side in PCC.

The completion period will almost coincide in both cases(i.e PCC or IPCC).So there may not me much loss of time. Instead of starting articleship immediately after 10+2, it would be better to gain some basic knowledge in audit and accounting domain and then start articleship.