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Organised by
Northern India Regional Council of
The Institute of Chartered Accountants of India
XBRL – An Overview
Introduction to XBRL and the basic concepts of XBRL
Compiled by:
Shri S. Swaminathan
CA. Indrajit Shah
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XBRL – An Overview
Understanding XBRL
Introduction
X BRL stands for eXtensible Business Reporting Language. It is an open standard, and being
developed by XBRL International, a non-profit organization. XBRL is a revolutionary concept in the
world of business and financial information and will have a far reaching impact across the entire
financial reporting chain. Worldwide adoption of XBRL as the information standard for business and
financial reporting has gathered substantial pace in past two years with regulators in US, Japan,
European Union, China and now in India successfully implementing XBRL based reporting systems.
XBRL means bar-coding business information with tags. The business information no longer remains a
block of text but each information element is tagged which makes it computer-readable.
Traditional business reporting is done in various formats viz. printed financials, spreadsheets, PDF
documents, html and so on. All these are human readable and can be interpreted by human beings or
by systems with human intervention. The structure of XBRL makes handling and processing of business
data platform independent. It supports all the standard tasks involved in compiling, storing and using
business data.
All types of entities can experience cost benefits and process efficiencies with the use XBRL.
Extensibility being one of the underlying principles of XBRL, it can be easily adapted to a wide variety of
different requirements. All the stakeholders of the financial information supply chain can benefit.
1.Accurate and Quality Data – XBRL validates the data based on the rules and relationships defined
amongst the data elements, which results in obtaining clean and valid.
2. Automation – With XBRL, the intelligence of understanding and interpreting the data is transferred
to the system and this facilitates automation in data processing and management. By using XBRL,
companies and other producers of financial data and business reports can automate the processes of
data collection.
3. Reduce cost of ownership of data – The XBRL data is interoperable and thus created once can be
used by multiple agencies seamlessly. And as a result of interoperability the overall cost of creating
data and meeting the compliance requirements is reduced dramatically. Moreover, XBRL is a open and
royalty free standard
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XBRL – An Overview
4. Reduce reporting burden – Many of the information requirements of the different agencies is similar
and companies have to submit the same multiple times. As the data is interoperable, the redundant
information elements can be done away with and thus reducing the reporting burden on enterprises
5. Seamless Integration – The XBRL data carries along with it, the additional attributes and facts,
which makes the data self-explanatory. And thus the data remains no longer dependent on any
application or platform for interpretation and processing. The XBRL data can be easily integrated into
any system
6. Efficient Business Processing – As XBRL cuts down the time spent on less efficient process like re-
keying and re-arranging data, the entire business process now becomes more efficient and productive.
XBRL will streamline the preparation of business and financial reports for internal and external decision
making.
7. Easy location of data – All the information is identified with a unique XBRL tag and this makes
locating the data from a vast information repository or from a voluminous report very easy and quick.
Since related information is linked (like facts and relevant footnotes), retrieving information is done in
no time.
8. Consumer oriented reporting - Consumers can collaborate and share the analytical concepts and
are no longer dependent on the reporting concepts embedded in specific software. And consumers can
now dynamically design and share their own business reports.
9. Social Analytics - The existing social media like Wikipedia, Facebook, etc, facilitates collaboration
of a wide range of participants. XBRL enables a similar social collaboration of analytical and modeling
concepts.
10. Real-time data – Because of automation and creation of accurate and valid data, the processing of
data becomes much faster and so does its dissemination. Thus the information seekers can access the
data in real-time.
11. Better Coverage by Analyst community – The time required for analysis is quite high because the
data is first rekeyed, validated and arranged according to the needs. Since all these activities are no
longer required in XBRL based framework and hence the analyst have time to focus on small companies
12. Comparative Analysis – XBRL, being a universal standard, facilitates comparison between
companies across globe
13. Transparent Data – XBRL facilitates better and faster access to information; transparency in the
whole information supply chain is increased.
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XBRL – An Overview
Corporate Community
• Cost savings in preparation, report creation, analysis. High flexibility through the use of
dashboard based business rules. This leads to significant savings in man hours and lead time in
compliance and consolidation
• Faster availability of data into standard reports
• Extracts data from accounting packages and makes it standardized and portable
• Provides a common framework of definitions
• Easy data handling due to standardization and automation, centralization of delivery
• A pioneering status among enterprises in the use of XBRL in India. Image enhancement in the
marketplace through Increase of quality and consistency of data
Auditors
• Automate financial statements handling, cutting out time-consuming and costly collation and
re-entry of information.
• Accurate and Quality Data
• Facilitates audit trail
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XBRL – An Overview
Primitive Data
XML Data Formats XBRL Data Formats
Formats
XBRL combines hierarchical xml data with relationships and references between the data
points
It links the data xml files with various other files containing definitions, presentation,
calculation, references relationships
XBRL data files are a set of XML and XSD files.
XBRL documents
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XBRL – An Overview
Taxonomy
Taxonomy can be referred as electronic dictionary of the reporting concepts. Taxonomy consists of all
the data definitions, the basic XBRL properties and the interrelationships amongst the concepts. It
includes terms such as net income, EPS, cash, etc. Each term has specific attributes that help define it
including label and definition and potentially references. Taxonomies may represent hundreds or even
thousands of individual business reporting concepts, mathematical and definitional relationships
among them, along with text labels in multiple languages, references to authoritative literature, and
information about how to display each concept to a user.
Schema
XBRL Schemas together with linkbases define XBRL taxonomy. The purpose of XBRL schemas is to
define taxonomy elements (concepts) and give each concept a name and define its characteristics. It
can be regarded as a container where elements and references to “linkbase” files are defined.
Element Name: It specifies the name of the concept which is defined. A style guide has to be followed
to define the element name. There are many rules to be followed while defining the element name
which is given the LC3 convention.
Element ID: This attribute makes the concept defined unique. To make it unique, a prefix is attached to
the element name which creates a reference point for the accounting concept, for example, ‘in-
gaap_CashAndCashEquivalents’, which shows that the item ‘CashAndCashEquivalents’ is from the
Indian GAAP.
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XBRL – An Overview
Data Type: This attribute defines the type of the fact that will be reported against the specified
element. The most common data types that appear in financial statements are Monetary Items, String
Items, and Decimal Items.
Abstract: It helps to determine if the element carries any value against it. Abstract = True or False. It is
used as a place holder to bind the elements. Abstract, where Abstract = True, it will not have a value but
will be recognized as the heading for all the elements that fall under the head of ‘CashAndCash
Equivalents’.
Period Type: This helps in determining the nature of the element and defines the flow and stock
concept of accounting with regard to every element in the taxonomy. Here the elements are
distinguished into ‘Instant’ & ‘Duration’ where ‘Instant’ refers to the stock concept (E.g.: Assets &
Liabilities as on a particular date) and ‘Duration’ refers to the flow concept (E.g.: Sales, costs, profits,
etc from reporting period start date to reporting period end date).
Substitution Group: It defines the association of elements with other elements in the schema. For
substitution group set to item, it means that the element is not associated to any other item in the
schema and neither is it grouped with other elements in any way
Balance Type: This attribute states the balance type of the concept that is being defined in the schema.
The elements which are monetary item types are given a balance type of debit or credit depending on
the nature of the concept.
Linkbases
XBRL linkbases and XBRL Schemas define together XBRL taxonomy. Taxonomies with only the core
elements (concepts) defined in an XBRL Schema would be useless. The purpose of XBRL linkbases is to
combine labels and references to the concepts as well as define relationships between those concepts.
There are five different kinds of linkbases. Each has a special purpose.
The label linkbase: The goal of the XBRL Consortium is to create and develop a world-wide standard
for electronic business reporting. This requires the taxonomies to represent business data in multiple
languages. Therefore it is possible to create an element (concept) in the taxonomy with labels in
different languages and or for different purposes e.g. a short label PPE compared to its long label
Property, plant and equipment. Those labels are stored and linked to their respective elements in a
label linkbase.
The reference linkbase: Most of the elements appearing in taxonomies refer to particular concepts
defined by authoritative literature. The reference linkbase stores the relationships between elements
and the references e.g. IAS, Para 68. The layer does not store the regulations themselves but the source
identification names and paragraphs.
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XBRL – An Overview
The presentation linkbase: Business reports are in general organized into identifiable data structures
e.g. a Balance Sheet. The presentation linkbase stores information about relationships between
elements in order to properly organize the taxonomy content. This enables a taxonomy user to view a
one dimensional representation of the elements.
The calculation linkbase: The idea of a calculation linkbase is to improve quality of an XBRL report
(XBRL instance). The calculation linkbase defines basic calculation validation rules
(addition/subtraction), which must apply for all instances of the taxonomy.
The definition linkbase: The definition linkbase stores other pre-defined or self-defined relationships
between elements. For example a relationship can be defined that the occurrence of one concept
within an XBRL instance mandates the occurrence of other concepts.
The formula linkbase: Advanced and user defined mathematical and logical relationships between
concepts
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XBRL – An Overview
Instance Documents
An XBRL instance document is a business report in an electronic format created according to the rules
of XBRL. It contains facts that are defined by the elements in the taxonomy it refers to, together with
their values and an explanation of the context in which they are placed. XBRL Instances contain the
reported data with their values and “contexts”. Instances must be linked to at least one taxonomy
which defines their contexts, labels or references.
An instance document contains the "code" for the tags and the structure that belongs to the tagged
data. Instance documents are built from a combination of XML specs and XBRL, structured to produce
financial statements. The document provides data plus structure for machine recognition, and human
readability.
Business Facts
Contexts define the entity (e.g. company or individual) to which the fact applies, the period of
time the fact is relevant. Date and time information appearing in the period element must
conform to ISO.
Units define the units used by numeric or fractional facts within the document, such as USD,
shares. XBRL allows more complex units to be defined if necessary. Facts of a monetary nature
must use a unit from the ISO namespace.
Footnotes use link to associate one or more facts with some content.
References to XBRL taxonomies
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XBRL – An Overview
To create an XBRL file one need to have Software/Tools, using which each piece of business data is
matched with the XBRL concept describing that data in the Taxonomy. The instance documents
created should be valid as per XBRL specifications. While validating the instance documents following
are considered –
Dimensions in XBRL
Dimensions are each of the different aspects by which a fact may be characterized. The dimensions
specifications released in 2008 enable storing additional attributes about facts.
Taxonomy extensions
The national taxonomies, like Indian GAAP, IFRS Taxonomy, US-GAAP taxonomy etc define elements
and the relationships between them according to particular legislation or standards. However, if
companies need to include in their business reports additional concepts (usually related to the area of
their activity or the reporting purpose), XBRL, as its name indicates, allows for such extensions.
There are several rules to be followed while extending taxonomy, the most important being the
extensions should be as per the base taxonomy style and architecture. Taxonomy is extended to
accommodate items/relationship specific to the owner of the information.
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XBRL – An Overview
XBRL is quickly spreading across the world, by way of increasing participation from individual countries
and international organizations. It is now preferred as a standard for business and financial reporting
worldwide. XBRL is managed and promoted by XBRL International, a not-for-profit consortium. XBRL
International is comprised of jurisdictions, which represent countries, regions or international bodies
and which focus on the progress of XBRL in their area. There are about 28 jurisdictions representing
different countries and regions.
The US Securities and Exchange Commission has played a vital role in accelerating adoption of XBRL in
the US. In December 2008, SEC made it mandatory for companies in a phased manner to file the
returns in XBRL format, starting with companies having above USD 5 billion as global float, to file their
returns from June 2009 quarter onwards in XBRL format. All companies would come under this
mandate by 2011. Japan also is one of the early adopters of XBRL and had started voluntary XBRL
reporting program for financial services institutions gradually expanding the range of reports since
2005. Netherlands Taxonomy Project (NTP) and Standard Business Reporting (SBR) are large scale
projects for developing a single national taxonomy with the aim of decreasing the regulatory reporting
burden on the entities. The IFRS and XBRL also go hand-in-hand.
Many countries around the world are slowly and steadily implementing XBRL in their reporting
frameworks. Taxonomy projects, designing XBRL compliant filing platforms and systems are usually
the initial steps for implementing the XBRL standard in countries.
XBRL in India
The Institute of Chartered Accounts of India (ICAI) is spearheading the XBRL initiative in the country
and India is now a provisional jurisdiction of XBRL International. Members of XBRL India are Reserve
Bank of India (RBI), Insurance Regulatory and Development Authority (IRDA), Securities and Exchange
Board of India (SEBI), Ministry of Corporate Affairs (MCA), stock exchanges like Bombay Stock
Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE) and a few private
companies.
The ICAI has developed the taxonomy based on Indian GAAP for general purpose financial statements
for manufacturing and services sector and banking sector. Both the taxonomies are accredited by XBRL
international. The taxonomy for NBFC is under development.
In order to enhance the quality and reusability of data and to build the flexibility to easily accommodate
future regulatory data needs, the monetary authority of India, RBI, was keen to implement the use of
XBRL services in their reporting framework. IRIS’ XBRL enabled workflow solution, IRIS iFile, was
implemented as the solution for the requirements of the RBI in October 2008, for the capital adequacy
returns. All the scheduled commercial banks which fall under the purview of Basel II use this platform.
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XBRL – An Overview
Returns for fortnightly liquidity position, foreign exchange balances, Form X, and the annual financial
statements are in pipeline
The Securities Exchange Board of India (SEBI) has mandated the top 100 companies listed on the two
major exchanges viz. the Bombay Stock Exchange and the National Stock Exchange, to file their
disclosures through XBRL-based Corpfiling. In addition to the mandated companies, many companies
are filing voluntarily their financial in XBRL.
The Ministry of Company Affairs (MCA) is also looking at mandating XBRL filings for all registered
companies from 2011.
There is no wonder that the XBRL data standard is setting its foothold around the world since XBRL
address the problem of data integrity, timeliness and reusability.
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XBRL – An Overview
Glossary
1. Abstract Elements – Elements with attribute “abstract = TRUE” are called as Abstract
Elements and are used to group a set of elements together.
2. Arc role – The function of the arc which is joining the two locators
3. Dimensions – Structure that allow data to be organized and presented according to different
criteria (such as in a pivot table).
4. Domain – The set of different components or criteria of a dimension.
5. Element – The financial concepts that are defined in the Schema. Elements and concepts can
be used interchangeably
6. Extended link – Logical grouping of elements within a linkbase.
7. Extension taxonomy – Is Addition to the base taxonomy by creating new elements or
customizing content.
8. FRTA – Financial Reporting Taxonomies Architecture
9. FRIS – Financial Reporting Taxonomies Architecture
10. Fact – Usually a value or other information of a financial or a business report, which is mapped
to a taxonomy element
11. Hierarchy – Tree like structure used to express relationships and make navigation within the
taxonomy easier.
12. Hypercube – Header and place holder in the case of dimensions
13. Instance document – XML file containing business reporting information.
14. Label – Human-readable name for an element
15. Linkbase – Relationship defining taxonomy elements which are defined in the schema
16. Locator – Used to point the elements which are to be related.
17. Primary item – A measure which can be broken down into dimensions
18. Schema – Part of the taxonomy that consists of set of XBRL elements and their attributes.
19. Specification – Detailed description of XML syntax, semantics, and structures, etc. that
prescribe how XBRL is constructed.
20. The specifications referred over here are:
a) XBRL 2.1 Specification
b) XBRL Dimensions 1.0
c) Financial Reporting Taxonomy Architecture
d) Financial Reporting Instance Standards
21. Tag – Markup information describing a unit of data i.e. Individual elements within taxonomy,
e.g., net income.
22. Taxonomy – Electronic dictionary of business reporting concepts and is composed of an XML
schema (.xsd file) and linkbase files.
23. Validation – Process of checking and ensuring consistency in the taxonomy documents based
on the XBRL Specifications
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Judicial decisions relating to clauses covered in Tax Audit
Judicial decisions at times throw very interesting propositions of law which are helpful for
assessees and tax professionals alike while dealing with tax matters. Below is an attempt to list
certain propositions of law expounded by the courts’ decisions which may be found useful.
- Assessment year 1998-1999 – Whether for invoking provision of section 40A(2) onus
lies upon Assessing Officer to prove that payment is excessive or unreasonable having
regard to fair market value of goods or legitimate needs of business, there is no
presumption of unreasonableness – Held, Yes – S.K. ENGG V. JT CIT 103 ITD 97
(BANG).
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- --Payment of interest at excessive rate—In view of difficulties involved in obtaining loan
from bank or financial institution, the interest paid by the assessee on unsecured loans
taken from relatives at a rate little higher than the market rate cannot be disallowed under
s. 40A(2).—Som Dutt Goel & Sons vs. ITO 27 DTR 263(Del.)
-
Section 41(1)
Business income – Profits chargeable to tax under section 41(1) – Amounts carried forward
for years – In the absence of any evidence of cessation of liability amount which has been merely
carried forward to years in the books of accounts is not assessable under section 41(1) – CIT VS.
SOUTHERN ROADWAYS LIMITED 202 CTR 279 (MAD).
Deemed profit—Amount received credited in profit and loss account and adjusted in book
profits—Findings by Tribunal that loan liability never claimed or allowed as deduction by way
of loss, expenditure or trading liability—Not to be included as profit chargeable to tax—
Assessment Order not erroneous or prejudicial to interests of Revenue—Proceedings under
section 263 not proper—CIT vs. Goyal M G Gases Ltd. 321 ITR 437 (Delhi)
Liability outstanding for last six years—Assessee having shown the impugned liabilities in its
balance sheet and filed copies of accounts sundry creditors signed by the concerned creditor,
such liabilities cannot be treated to have ceased merely because they are outstanding for six years
and, therefore, the addition made by invoking s. 41(1) cannot be sustained, more so when the AO
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has failed to show that deduction has be allowed in respect of any trading liability or that the
assessee has obtained any benefit concerning such liabilities by way of remission or cessation
thereof in the relevant year.—CIT vs. Smt. Sita Devi Juneja 33 DTR 201(P&H)
SECTION 40(a)(i)/(ia)
Rejection of books vis-à-vis amount paid without TDS—Once estimation of income is made,
further disallowance under s. 40(a)(ia) for non-deduction of TDS is not warranted—That apart, if
the assessee has paid the impugned amount and the amount is not payable at the end of the year
on the date of balance sheet, then the provisions of s. 40(a)(ia) are not applicable—Teja
Constructions vs. Asstt. CIT 129 TTJ 57 (Hyd. ‘A’)(UO)
Reimbursement of expenses to clearing agent—Assessee was not obliged to deduct tax at source
from the payment made by it to the clearing agent towards customs duty and other expenses paid
by the latter while clearing the imported goods on behalf of the assessee as no element of income
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is embedded in reimbursement of expenses and therefore, impugned payments could not be
disallowed under s. 40(a)(ia).—Asstt. CIT vs. Grandprix Fab. (P) Ltd. 34 DTR 248(Del. ‘D’)
Payments for hiring trucks—Assessee utilizing trucks for own use—No agreement for carrying
out any work—Not amounting to a contract for carrying out any work under section 194C—Tax
need no be deducted on amount paid as hire charges—Income-tax Act, 1961, ss. 40(a)(ia),
194C—Deputy CIT vs. Satish Aggarwal And Co. 317 ITR 196(Amritsar)
Disallowance under s. 40(a)(ia)—Payments made to lorry owners for hiring lorries vis-à-vis
sub-contract—Assessee, a transport contractor, having itself executed the whole of the contract
for transportation of bitumen by hiring lorries from other lorry owners who simply placed the
vehicles at the disposal of the assessee without involving themselves in carrying out any part of
the work undertaken by the assessee, it cannot be said that the payments made for hiring of
vehicles fell in the category of payments towards sub-contracts and, therefore, assessee was not
liable to deduct tax at source as per the provisions of s. 194C(2) from the payments made to the
lorry owners and consequently, provisions of s. 194C(2) from the payments made to the lorry
owners and consequently, provisions of s. 40(a)(ia) were not applicable to such payments.—
Mythir Transport Corporation vs. Asstt. CIT 28 DTR 129(Visakha) 9th January, 2009
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Disallowance under s. 40(a)(ia)—Payment of consultation fees and rent by hospital—Income
derived by assessee doctor from the running of a multi-facility hospital is to be treated as
business income and not professional income and since the total receipts of the assessee did not
exceed Rs.40 lacs in the relevant assessment year, he is not liable to get his accounts audited
under s. 44AB and, therefore, the provisions of s. 40(a)(ia) are not applicable to the consultation
fees paid to the visiting doctors and the rent paid for the hospital premises.—Dr. Deepak
Assudant vs. ITO 26 DTR 454(Del.’E’)
Section 43B/2(24)(x)/36(1)(va)
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- Disallowance under s. 43B—Service-tax billed but not received- Service-tax though
billed but not received not having become payable to the credit of the Central
Government by virtue of s. 68 of the Finance Act, 1994, r/w.r. 6 of the Service-tax Rules,
1994, same could not be disallowed under s. 43B-Further, assessee service provider is
merely acting as an agent of the Government and is not entitled to claim deduction on
account of service-tax and therefore no disallowance can be made on the analogy of
sales-tax, excise duty, ect. ----Asstt. CIT vs. Real Image Media Technologies (P) Ltd.
116 TTJ, 964(Chennai)
Penalty under ss. 271D and 271E---Contravention of ss. 269SS and 269T-----Reasonable
cause----Family transaction between two independent assessees, based on an act of
casualness, specially in a case where the disclosure thereof is contained in the compilation of
accounts, and which has no tax effect, establishes “reasonable cause” under s. 273B for not
invoking the penal provisions of ss. 271D and 271E.---CIT vs. Sunil Kumar Goel 21 DTR
43(P&H)
--------Deposits and loans in cash in excess of prescribed limit---Finding that amounts were
mere book entries and transactions on behalf of family members---No violation of sections
269SS and 269T------Penalty could not be imposed---Income-tax Act, 1961, ss. 269SS,
269T,271D, 271E----CIT v. NATVARLAL PURSHOTTAMDAS PAREKH 303 ITR
5(Guj)
- Validity-Limitation-Penalty under s.271D was invalid as, it was not initiated during any
proceedings under the Act and was also initiated after a lapse of 7years.—SHARDA
EDUCATIONAL TRUST V/S ASSTT. CIT-VOL.99-TTJ-212(AGRA).
- S.271D – Penalty – Deposit or loan in cash exceeding prescribed limit – Amount received by
private company from director – Not a deposit or loan – Penalty cannot be imposed – CIT
VS. IDHAYAM PUBLICATIONS LTD. 285 ITR 221 (MAD)
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not be regarded as a loan or deposit within the meaning of ss. 269SS and 269T more so in view
of the fact that there was no provision for payment of any interest on the said amount and,
therefore penalty levied under ss. 271D and 271E was not sustainable.—Bhikabhai Dhanjibhai
Patel vs. Asstt. CIT 127 TTJ 479 (Ahd ‘A’)
Deposits and loans in cash in excess of prescribed limit---Finding that amounts were mere
book entries and transactions on behalf of family members---No violation of sections 269SS
and 269T------Penalty could not be imposed---Income-tax Act, 1961, ss. 269SS, 269T,271D,
271E----CIT v. NATVARLAL PURSHOTTAMDAS PAREKH 303 ITR 5(Guj)
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addresses of the suppliers with date, value, quantity etc, and where the purchases are not
found bogus, they cannot be disallowed.—CIT v. Interseas 40 DTR 143 (Ker.)
- Whether when income of assessee was computed nu applying gross profit rate, provisions
of section 40A(3) could not be invoked – Held, yes – CIT VS. SMT. SANTOSH JAIN
159 TAXMAN 392 (PUNJ. & HAR)
- Business expenditure – Disallowance under section 40A(3) – Direct payment into bank
account of payee – payment made by depositing cash directly into the bank account of
the payee is not in violation of provisions of section 40A(3) and, therefore, cannot be
disallowed – There was no violation of section 40A(3) also for the reason that the
payment was made for purchase of agricultural produce to the agent operating in the
market yard set up under the State RMC Act, and accordingly fell within the scope of
exclusionary cls.(f) and (1) of 6DD – SRI RENUKESWARA RICE MILLS VS. ITO
93 TTJ 912 (BANG `B’).
CONTINGENT LIABILITY
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Business expenditure – Allowability – Provision for warranty claims – Liability towards
future warranty claim based on past experience not an unascertained liability, deduction of
adhoc provision could not be disallowed –ROTORK CONTROLS INDIA LTD vs CIT
314 ITR 62 (SC)
SECTION 32
- Non-furnishing of audit report—Non-furnishing of Form No. 3AA i.e. audit report along
with original return cannot be a ground for disallowing the claim of additional
depreciation under s. 32(1)(iia) made by assessee in the revised return.—CIT vs. Sharda
Motor Industrial Ltd. 30 DTR 260(Del.)
- Assessment year 2002-03 – Whether, goodwill does not all in category of intangible
assets as prescribed by section 32(1)(ii) and, therefore, acquisition cost of goodwill is not
entitled for depreciation – Held, yes – R.G. Keswani v. Asstt. CIT 116 ITD 133(Mum.)
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60 per cent as applicable to a computer.----Expeditors International (India)(P) Ltd. vs.
Addl. CIT 13 DTR 435(Del)
- Depreciation – Use for business – Active or passive user – Where the machinery is kept
ready for use but could not be put to use for non-receipt of orders, the assessee would be
entitled to depreciation – CIT VS. NAHAR EXPORTS LTD. 213 CTR 20 (P&H)
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SECTION 37
11
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- Capital or revenue expenditure—Expenditure on upgrading computers—Revenue
expenditure—Income-tax Act, 1961—CIT v. Sundaram Clayton Ltd. 321 ITR
69(Mad.)
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FROM:
CA RASHMI KHETRAPAL
NICASA CHAIRPERSON
1291-92, C BLOCK
SUSHANT LOK-1, GURGAON
carashmmi@gmail.com
9810101449
VERIFICATION OF VAT : 6. Vat Output should be calculated on rate wise. Vat should be
calculated inclusive of Excise Duty and exclusive of trade discount
y 1. First of all, it must be necessary to understand relevant VAT Act normally in practice of business.
applicable in the state .
7. Net vat amount should be examined and it vat output over vat input.
y 2. It should verify list of goods mentioned in the Registration Treasury challan should be verified for payment VAT.
Certificate.
8. There is proper record for Central Sales Tax. There is different
y 3. Examine Registration certificate for liability of assessee under State treasury challan for Vat payment and CST payment.
VAT Act and CST Act.
9. Sales and purchases records need to be reconciled with books of
y 4. Goods on which input credit is taken is covered under the definition accounts and VAT Returns.
of Input under VAT Act.
10. There is proper record for C-Form, E-Form, F-Form, H-Form, I-Form
y 5. VAT input is availed only if assessee has bill showing ownership in issued under CST Act and Local Form issued under VAT Act.
property of goods. There is proper record of Purchase which specify
the name of dealer, TIN of dealer, rate of Vat, Taxable amount and Vat
11. Periodic returns to be verified with books of accounts and annual
input. Input credit can be availed only on Tax invoice and purchase
return submitted under VAT Act.
from registered dealer within the state.
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12. Generally assessee covered under Work Contract Scheme then
input is not allowed to assessee because assessee has the benefit of lower
REPORTING UNDER COMPANIES
tax payment under WCT Scheme. Therefore it is important to examine
that work contractor has not taken input credit. (AUDITOR’S REPORT) ORDER, 2003
AS PER PARA 4 (ix) (a)
13. Some VAT Act has provision of entry tax (eg. Karnataka and y Is the company regular in depositing undisputed
Tamilnadu etc.) on central purchase from outside the state and statutory dues including Provident fund, Investor
this entry tax is allowed as input credit and adjusted against vat payable. Education and Protection Fund, Employees’ State
Therefore in such case treasury challan for entry tax payment need to be Insurance, Income-Tax, Sales Tax, VAT, Service Tax,
verified.
Wealth Tax, Custom Duty, Excise Duty, Cess and any
other statutory dues with appropriate authorities and
14. Each state VAT act has its own interest and penalty provisions for
late deposit of taxes and returns but it is important that assessee should
if not, the extent of the arrears of outstanding
comply all statutory provisions within time limit prescribed under VAT statutory dues as at the last day of the financial year
Act concerned for a period of more than six months from
the date they became payable, shall be indicated by
the auditor :
VERIFICATION OF TDS :
1. If TDS is not deducted by client then it is necessary to check first that
payment to a person is within threshold limit prescribed under relevant
y This clause requires the auditor to report upon the regularity of the section.
company in depositing undisputed statutory dues.
2. It should be examine that rate used for deduction of TDS is as per
y The intention of the Government, in this clause is to ascertain how relevant section and covered under the definition of relevant section.
regular the company is in depositing statutory dues with the
appropriate authorities.
3. TDS should be deducted against a valid PAN and TDS is credited to Valid
y Since the emphasis of the clause is one the regularity, the scope of PAN.
auditor’s inquiry is restricted to only those statutory dues which the
company is required to deposit regularly to an authority.
4. TDS should be deducted as per latest amendments, rules, notification
and circulars.
y For the purpose of this clause, the auditor should consider a matter as
“disputed” where there is positive evidence or action on the part of the
company to show that it has not accepted the demand for payment of 5. If TDS is not deducted or short deposited then it must be reported in
tax or duty, e.g., where it has gone into appeal. Audit Report by Auditor as per CARO, 2003. But before reporting it is
necessary to check that client has valid certificate of non-deduction or short
y It may be noted that penalty and/or interest levied under respective deduction of TDS under section 197 of Income Tax Act.
laws would be covered within the term “amounts payable”.
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6. All foreign remittances are made under CA Certificate in
Some Specific points needs to given due
prescribed form 15CB. Relevant provisions of DTAA is given due consideration :
consideration in case of Foreign Remittances.
1. TDS deducted in time, but not deposited on time – Interest
for late deposit of TDS will be Applicable.
7. Client should furnish the return of TDS within due date
prescribed under Income Tax Act otherwise penalty will be levied @
2. TDS not deducted, but deposited – TDS become expenditure
Rs.100 per day from next to due date till the date of return filed.
under Companies Act, but it is disallowed under Income Tax Act.
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An employee in the following cases is entitled to bonus:
(i) Temporary workman
(ii) Part time employee as a sweeper engaged on a regular basis
Bonus which shall be
(iii) Retrenched employee
⇒ 8.33% of the salary or wage or
(iv) Probationer
⇒Rs. 100, whichever is higher.
(v) Dismissed employee reinstated with back wages
(vi) Piece-rated worker
PAYMENT OF MAXIMUM BONUS (SEC.11)
Maximum 20% of such salary or wages.
An employee in the following cases is not entitled to bonus:
1. An apprentice is not entitled to bonus.
2. An employee employed through contractors on building operation
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y SCOPE:
y It extends to the whole of India except the State of Jammu &
Kashmir. RATE OF CONTRIBUTION
y APPLICABILITY: SCHEME EMPLOYEE’S EMPLOYER’S CENTRAL
GOVT.
PROVIDENT 12% AMOUNT>8.33% (IN NIL
y Establishment which is factory engaged in any industry FUND SCHEME CASE WHERE
specified in Schedule 1 and in which 20 or more persons are CONTRIBUTION IS 12%
employed. OF 10%)
INSURANCE NIL 0.5% NIL
y Any other establishment employing 20 or more persons SCHEME
which Central Government may, by notification, specify in
this behalf. PENSION NIL 8.33% (DIVERTED OUT 1.16%
SCHEME OF PROVIDENT FUND)
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THE EMPLOYEES' STATE y Applicability of the Act & Scheme:
y Is extended in area-wise to factories using power and
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DUE DATES REPORTING
FOR DEPOSIT : y Reporting is to be made by the auditor under CARO,
Due date is 21st of each month for cheque deposit. 2003 of:
y Non payment of undisputed PF and ESI dues, only if more than 6
48 hrs grace time for collection. months old
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LABOUR WELFARE FUND
Shop & commercial Establishment Act 1961
Applicability:
Applicability & Coverage:
Every employee, including employee through
It applies to all contractor, but not a managerial capacity or
supervisor capacity.
Rates:
Every employee contributes Re 1/- per month and employer
makes a contribution of Rs 2/- per month
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WAGES: Means all emoluments which are earned by an
employee while on duty or on leave in accordance with the
terms and conditions of his employments and which are paid
CALCULATION OF GRATUITY AMOUNT: (SEC. 4(2))
or are payable to him in cash and includes D.A.
but does not include any bonus, commission, HRA, overtime
wages and any other allowances.
As prescribed under Accounting Standard 15 ,”
EMPLOYEE: means any person (other than an apprentice)
PAYMENT OF GRATUITY”
employed on wages, in any establishment, factory, mine,
oilfield, plantation, port railway company or shop to do any
skilled, semi-skilled or u skilled, manual, supervisory,
technical or clerical work.
but does not include any such person who holds a post
under the Central Government or a State Government and is
governed by any other Act or by any rules providing for
payment of gratuity
Gratuity expenses will be allowed only on cash basis. However if it is paid till
the due date of filling of return i.e. 31st July or 30th September it will be
allowed as expenses.
If it is not paid till the due date of filling of return, and paid after that, then
this Gratuity will be allowed in the financial year in which it is actually paid.
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WHAT IS THE CEILING?
y In case the auditor is an individual – the ceiling is MEANING OF ‘SPECIFIED NUMBER’
‘specified number’
y ‘Specified number’ means –
y In case of a firm of auditors – the ceiling is ‘specified
number’ for every partner of the firm. y Not more than 20 companies (public)
AUDITS EXCLUDED:
y Following audits shall not be included while AUDITS INCLUDED:
computing ‘specified number’: y Following audits shall be included while computing
y Audit of a private company ‘specified number’:
y An audit of a guarantee company having no share
capital y A joint audit
y An audit of a foreign company
y Audit of cooperative societies, trusts and corporations
y An audit of a company licensed u/s 25
y An internal audit
y Tax audits under Income tax act, 1961
y A branch audit
y Special audit and investigations
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