SBS-DIGEST-EJournal-July-2017

VVoolulummee-1-107 DecemJbuelry-2-2001167 PPaaggeess11-1-243SBS Interns’ For Private circulation only Digest An attempt to share knowledge By Interns of SBS and Company LLP

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SBS Interns' Digest www.sbsandco.com/digestCONTENTSDIRECT TAXES....................................................................................................................................1ADDVANCE TAX........................................................................................................................................1AUDIT................................................................................................................................................8BLACK BOX VS. WHITE BOX APPROACH...............................................................................................................8KEY PROFESSIONAL STANDARDS OF AUDITOR DURING FIELD WORK..............................................................................11DEBT AND QUITY ADVISORY............................................................................................................14CAPITAL STRUCTURING - DEBT AND EQUITY ADVISORY............................................................................................14UPDATESCOMPANIES ACT, 2013.....................................................................................................................17RULES, CIRCULARS AND NOTIFICATIONS ISSUED DURING THE MONTH OF JUNE, 2017...........................................................17INCOME TAX....................................................................................................................................20INCOME TAX UPDATES...............................................................................................................................20

SBS Interns' Digest www.sbsandco.com/digestDIRECT TAXES Contributed by Harini & Vetted by CA Ramprasad TADDVANCE TAXINTRODUCTION:Advance tax is paying part of your taxes in advance instead of lump sum payment at year end. It shall bepaid in the year in which the income is earned. Hence it is also known as PAY AS YOU EARN tax.Liability to pay advance tax:• As per section 208 of the Income Tax Act, 1961, every person (including those opting for presumptive taxation) whose tax liability is Rs. 10,000 or more in a financial year is liable to pay tax in advance, in the form of “advance tax”.• However, a resident senior citizen (i.e. 60years or more) not having any income from business or profession is not liable to pay advance tax.• Any person opting for the presumptive taxation scheme u/s 44ADor u/s 44ADA is liable to pay whole amount of advance tax on or before 15thMarch of the financial year.• For instance, Individuals who receive only salary income need not pay advance tax as the employer deducts TDS. However they might have to pay advance tax on their other income(other than salary income).Due date for payment of advance tax:(as per sec 211 of Income tax Act,1961)Advance tax is to be paid in different instalments. The due dates for payment of advance tax: Instalments payable Due dates For corporate tax and For individuals coveredOn or before15th JuneOn or before 15th September non-corporate tax payers u/s 44AD& 44ADAOn or before 15th DecemberOn or before 15th March 15% of advance tax. - 45% of advance tax as reduced by amount paid earlier - 75% of advance tax as reduced by amount paid earlier - 100% of advance tax as 100% of advance tax as reduced by amount paid earlier reduced by amount paid earlier1 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActMode of payment of advance tax: (as per rule 125 of Income tax rules, 1962)vA Corporate tax payer and Persons who are required to get their accounts audited u/s 44AB are required to pay tax electronically using internet banking facility.vA Non Corporate tax payer can pay advance tax either electronically using internet banking facility or by physical mode i.e., by depositing the challan at the receiving bank.vChallan 280 is to be used for making payment of Income tax. The following codes are provided with challan 280 : • Code 0020 is for income-tax paid bycorporate tax payers. • Code 0021 is for income-tax paid by Non Corporate tax payers.vTaxpayer should make correct selection of applicable type of payment (i.e. Code 100 is for payment of Advance tax).2 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActInterest Applicability on Late Payment of Advance Tax: The interest payable under advance tax falls under2 sections:vInterest u/s 234 B : If the assesse has failed to paid advance tax for the assessment year, OR tax paid by him is less than 90% of the assessed tax then he is liable to pay • Simple interest @ 1% every month or part of the month • On Assessed tax* less Advance tax paid (if any) • From the first day of the assessment year, i.e., from 1st April till the date of determination of income under section 143(1) or when a regular assessment is made till date of such regular assessment.*Assessed tax = Tax determined u/s 143(1) or under regular assessment, as the case may be as reduced byTDS/TCS, Relief and Tax credit (if any).vInterest u/s 234 C: Interest for deferred payment of advance taxAdvance tax paid Rate of interest Period of interest Amount on which on or before interest is to be paid15th June is less than Simple interest @1% 3 months 15% of the amount*15% of the amount* per month less advance tax already deposited15th September is less Simple interest @1% 3 months before 15th June, if anyt h a n 4 5 % o f t h e per monthamount* 45% of the amount* less advance tax15th December is less Simple interest @1% 3 months already depositedt h a n 7 5 % o f t h e per month before 15th September,amount* if any15th March is less than 15th March is less than only upto 31st March 75% of the amount*100% of the amount* 100% of the amount* less advance tax already deposited before 15th December, if any 100% of the amount* less advance tax already deposited before 15th March, if any*amount = Total tax payable less TDS (if any)3 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActNote : Provided that if the advance tax paid by the assesse, on or before the 15th June or the 15thSeptember, is not less than 12% or36% of the amount* respectively the assesse shall not be liable to payany interest on the amount of the shortfall on those dates.Exceptions:However if the shortfall in payment of taxes is on account of under estimation or failure to estimate• Capital Gains• Winnings from lotteries, crossword puzzles, races(including horse races) card games & any other activity in nature of gambling, betting etc.,And if the assesse had paid the amount of advance tax payable in respect of above mentioned income aspart of remaining instalments of advance tax which are due or where no instalments are due, by 31stMarch of the financial year, no interest shall be liveable in respect of such short fall.Interest Applicability for persons covered u/s 44AD& 44ADA:vFor individuals covered u/s 44AD & 44ADA who is liable to pay advance tax • has failed to pay such tax OR • the advance tax paid by the assesse on or before the 15th March is less than the tax due on the total income.vThen, the assesse is liable to pay simple interest @ 1% on the amount of the shortfall from the tax due on the returned income.Other Points to be noted:vAny amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid during financial year.vDue care should be taken with respect to PAN, Assessment Year and Tax Code before depositing advance tax.vReturn of Income is to be accompanied by proof of payment of advance taxelse the return is declared as defective u/s 139(9).vAfter paying advance tax, assesse can verify challan using CIN online through • Form 26AS or • Through Challan Status Enquiry https://tin.tin.nsdl.com/oltas/servlet/QueryTaxpayer.The assesse then has to choose for Tax payers CIN Base view. The following page opens and details are tobe filled by the assesse to know the payment status of advance tax4 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActCONCLUSION:Advance Tax helps the government to receive a regular flow of income throughout the year so that itdoesn’t have to wait till assessment. It also reduces the burden of the assesse for lump sum payment oftaxes at the year end. So pay your advance taxes and reduce your burden.ILLUSTRATION:Mr.X (55years) pays the following instalments of advance tax: Rs 10,000On June 15th, 2017 20,000On September 15th, 2017On December 15th, 2017 5,000On March 15th, 2018 15,000Mr.X files return of Rs.12,00,000 (date of regular assessment is 30th June 2018).X is entitled to tax credit of12,500 on account of tax deducted at source. The interest under 234B & 234C is computed as under:5 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActInterest U/S 234B:S.No PARTICULARS Amount in Rsa. Income 12,00 ,000b. Tax on (a)(including education cess @3%) 1,77,675c. Less : TDS 12,500d. Assessed tax (b-c) 1,65,175e. 90% of assessed tax (d*90%) 1,48,658f. Advance tax paid during the year (i.e,Rs.10,000 + Rs.20,000 + Rs.5,000+ Rs.15,000) 50,000g. Shortfall (d-f) 1,15,175h. Total Interest to be payable U/S 234B 3,455Since Advance tax paid during the year is less than 90% of the Assessed tax,Mr.X is liable to pay interest onshortfall amount for period of 3months(Rs. 1,15,175*1%* 3)Interest U/S 234C:S.No PARTICULARS Amount in Rsa. Income as per return of income 12,00,000b. Tax on (a)(including education cess @3%) 1,77,675c. Less : TDS 12,500d. Assessed Tax (b-c) 1,65,175e. Total interest to be payable U/S 234C (refer w.n 1) 5,591Working Note 1:Short fall in Advance Tax PARTICULARS Amount in Rs. Shortfall in Rs. Interest (w.n-2)15% of Assessed tax (d) 24,776 14,776Less: Tax deposited on or before 15th June 10,000 44,329 443 88,881 1,33045% of Assessed tax (d) 74,329 1,15,175 2,666Less: Tax deposited on or before 15thSeptember 30,000 1,15275% of Assessed tax(d) 1,23,881Less : Tax deposited on or before 15th December 35,000100% of Assessed tax(d) 1,65,175Less : Tax deposited on or before 15th March 50,0006 |Page

SBS Interns' Digest www.sbsandco.com/digest AdvanCcomepTaanixes ActSince advance tax paid by Mr. Xas on 15th June and 15th September is less than 12% and 36% of theamount (i.e., total tax payable minus TDS), he is liable to pay interest u/s 234C @ 1% p.m.Working Note 2: Calculation of InterestShortfall of Advance Tax ( in Rs.) Rate of Interest Period of default Interest14,776 1% 3 months 44344,329 1% 3 months 1,33088,881 1% 3 months 2,6661,15,175 1% - 1,152 5,591 TOTAL INTERESTThis article is contributed by Harini, Intern of SBS and Company LLP. The author can be reachedat [email protected] 7 |Page

SBS Interns' Digest www.sbsandco.com/digestAUDIT Contributed by Venkata Krishna & Vetted by CA Sandeep DasBLACK BOX VS. WHITE BOX APPROACHIntroduction:Information Technology (“IT”)all over the world has revolutionized and drastically changed the manner ofconducting business today. Computerization has a significant effect on the manner of providing Inputsand obtaining Outputs, electronic flow of data and its storage. With the advancement in the IT field suchas cloud computing (private, public, and community clouds) and mobile computing (transformation fromGeneral Packet Radio Service transmission to Long Term Evolution transmission) has raised the bar of theauditing. Hence performing audit in a CIS environment even though has not changed the method ofauditing but caused substantial changes in the method of evidence collection and evaluation.Based on the Knowledge and expertise of Auditors in handling computerised data, the audit approach in aCIS environment could be either:vBlack-box approach (Auditing around the system)vWhite-box approach (Auditing through the system)Black-box approach:In general, a black box is a device, system or object which can be viewed in terms of its inputs and outputs,without any knowledge of its internal workings. To analyse something, as an open system with a black boxapproach, only the behaviour of the stimulus/response will be accounted for.In the Black-box approach, the auditor concentrates on Input and Output but ignores the way ofprocessing the data or transactions by the system which could be relevant in certain situations. If thegenerated Output matches the Pre-determined Output, the auditor assumes that the processing oftransaction/data is correct.Auditing around the system has the advantage, as comparing Input to output does not require in-depthstudy of the application. As a result of non-testing the controls, the auditor cannot make assertions aboutthe process. Moreover, in some of the complex computer systems intermediate results also may not beavailable for making the needed comparisons. Most often, this method is used when-1) processing done by the computer is too simple.2) auditor is already aware of the software’s reliability. This is the case with most of off-the-shelf software used by client without any in-house alteration and thus need not to be checked. (ex: Gnu Cash, Quick Books Pro, Quicken Home & Business, Sage 50 Pro etc)3) auditor has not left with any possibility to understand the computer system and thus resorts with this approach. This situation can arise out of circumstances including: a) lack of appropriate system documentation b) auditor lacks expertise or skills to understand or use the computer system for auditing purposes. c) auditor is not given access to computer system at the level required.8 |Page

SBS Interns' Digest Processing www.sbsandco.com/digest Black BCoomxpVansi.esWAcht ite Box Approach Input Real Output Auditor pre- determined outputAuditing: Auditor pre-determined output = Real Output, then confirmWhite-box approach:White-box approach (also known as clear box testing, glass box testing, and transparent box testing andstructural testing) is a method of auditing the testing the internal structures or workings of an applicationwith the help of the generated output. White-box approach is generally applied at the unit level,integration and system levels of the system process. Though auditors tend to think of white-box approachas being done at the unit level, it can be used for integration of data and testing process controls. It isfrequently used in testing the processes within the units, integration between the units, and betweensubsystems.The processes and controls surrounding are not only subject to audit but also the processing controlsoperating over this processes are investigated. It is obvious, that to follow this approach the auditorneeds to have sufficient knowledge of systems to plan, direct-supervise and review the work performed.Input Processing Real Output Predetermined output from the processAuditing: Auditor pre-determined output from the process = Real Output, then confirm.For instance, entering the stock details received from the supplier in the accounting software andverifying whether posting of the same is made in Inventories under Current Assets and credit the same toSuppliers under Trade Payables in Statement of Affairs is Black-Box Approach. Whereas verifying theJournals and then Ledger posting from journals and then Trail Balance to Statement of Affairs is known asWhite-Box Approach. 9 |Page

SBS Interns' Digest www.sbsandco.com/digest Black BCoomxpVansi.esWAcht ite Box ApproachNature Black-box approach White-box approach Black-box approach is a method in which White-box approach is a method inDefinition t h e i n t e r n a l s t r u c t u r e / d e s i g n / which the internal structure/ design/Usage implementation of the system being tested implementation of the item being is NOT known. tested is known. higher levels of testing like System Testing lower levels of testing like Unit Testing and Integration TestingT y p e s o f Off-the-shelf-software Custom softwareAccountingSoftwareIn-depth system Not Required Requiredknowledge More reliableReliability Not RequiredTime required Less More MoreE x p e n d i t u r e LessInvolved Can rely on samplesSampling Cannot rely on samplesComplexity in No effect on Auditing Effect the time and method of auditingProcessingT e s t i n g o f Less MoreInternal ControlsThis article is contributed by Venkata Krishna, Intern of SBS and Company LLP. The author can be reachedat [email protected] 10 | P a g e

SBS Interns' Digest www.sbsandco.com/digestAUDITKEY PROFESSIONAL STANDARDS OF AUDITOR DURING FIELD WORK Contributed by Chandra Shekar& Vetted by CA Sandeep DasIntroduction:Professional standards constitute a minimum acceptable level of performance by an auditor. It meansethical or legal duty of a professional to exercise the level of care, diligence, and skill prescribed in the codeof practice of the profession. The key standards that serve as guidelines for appropriate professionalconduct of an auditor are described below.Key Standards:Personnel at every level of client's organization have an expectation of auditors’ appearance. If theprofession or the individual professional fails to meet the standards expected by the client, the results canbe very damaging, especially with respect to self-regulation of the profession. If an auditor is notdiplomatic in approaching audits or does not exercise due care, it is impossible for the profession tocontinue to allow that auditor to represent the profession. Auditors are professionals and aredistinguished by four characteristics:i. Having a specialized body of technical skills,ii. Meeting standards of admission to the profession,iii. Self-regulation, andiv. Acceptance by the personnelThese characteristics are being discussed in detail as belowi. Having a specialized body of technical skills:a. Understanding business: Knowledge and understanding of business information can help an auditor better assess the impact of any identified risks and findings and communicate these in terms that are relevant and understandable to the management. For ease of discussion, eight categories of business knowledge that audit and assurance professionals need to understand are defined: • How is the enterprise organized? • How is the enterprise governed? • Under what laws/regulations does the enterprise operate? • What are the enterprise’s business processes? • How does the enterprise operate? • How does the enterprise use technology? • How does the enterprise finance itself? • How does the enterprise measure business success?11 | P a g e

SBS Interns' Digest www.sbsandco.com/digest Key proCfoemsspiaoninesaAl csttandards of auditor during field work b. Data collection and analysis tools and techniques:• The auditor must be able to understand the information/ the raw data provided by the Client.• The auditor should be able to analyse the raw data by the use of accounting and audit tools• Auditor should be able to develop clear goals of what is required within the data/ information obtained, as well as the expertise to fulfil his obligations.c. A thirst for knowledge: By possessing knowledge of allied subjects and understanding the legislative and regulatory requirements and their impact on the business processes, the auditor is better able to appreciate the boundaries placed around the enterprise’s operations and the requirements to comply with various rules and regulations.d. Innovation: Using audit techniques and continually up skilling auditor data analysis experience will ensure that auditor is able to solve business problems within the organisation.ii. Meeting standards of admission to the profession: It means auditor shall meet the code of conduct and professional ethics governed by the profession such as: a. Independence: Auditors are independent when they can carry out their work freely and objectively. Independence permits auditors to render the impartial and unbiased judgments essential to the proper conduct of audits. For instance: i. involving in personal or other discussions with employees of the client which leading to be having a close or immediate relationship ii. accepting gifts or preferential treatment of the client iii. accepting/ requesting anything for personal benefitb. Confidentiality: The client entrusts the auditor with sensitive information. A good auditor would never betray that confidence nor allow sensitive information to be revealed at any time. Any breach of confidentiality would be unforgivable. It is conceivable that during your audit, you may discover information that could cause some level of damage to the client if disclosed.For instance: Mr. A a member of audit engagement who has been assigned to audit labour lawscompliances of a manufacturing company ABC Limited. During the audit, Mr. A came across asituation where he need to obtain confirmation from the labour contractors of the client. Mr. Awhile discussing with a contractor revealed that the client is in default complying the provisions oflabour laws, which resulted in breach of contract between the contractor and the client.c. Due professional care: Due professional care means application of the care and skill expected of a reasonably prudent and competent auditor.For instance: the responsibility to act in accordance with the requirements of an assignment,carefully, thoroughly and on a timely basis.d. Professional behaviour: It is the responsibility of the auditors to adhere to and promote standards of professional behavior that support an effective learning environment that prepares graduates for careers as professionals. Acts of professional behavior includes: Listening carefully, Integrity, Objectivity, Honesty, Reliability.12 | P a g e

SBS Interns' Digest www.sbsandco.com/digest Key proCfoemsspiaoninesaAl csttandards of auditor during field workiii. Self-regulation: Self-regulation means the auditor must be able to justify his or her actions to management. It applies to all the activities of an auditor. Whether through written correspondence, phone conversations, or face-to-face interactions, the auditor has a responsibility to make sure his or her actions reflect favourably on the Client’s consideration and courtesy should also be practiced. This can be achieved by always acting in accordance with professional standards, being well prepared for the job, and treating the public with respect and courtesy.For instance:a. It is critical that the auditor and the personnel/ employee of the client understand each other’s position. Many times the parties will disagree on the application of matter under discussion. In such instances the auditor should argue for a reasonable extent. If the employee refuses to discuss his or her position without arguing, the auditor should close the discussion and search for the available remedies.b. When an auditor has been asked by the management what he actually wanted to achieve towards his questions to them, the auditor must be in a position to explain them what his objective to achieve.c. When an auditor has audit related questions that need consideration or answers from employee of the client, the auditor should ask/ assess himself that what are the questions to be raised makes worth able to achieve his objective.d. The auditor must avoid questions at frequent intervals, by way of listing such questions and asking the same based on the availability of the personnel concerned.iv. Acceptance by the personnel: If auditors strive for professional appearance, then public acceptance is increased, which in turn contributes to the self being better able to meet his objectives. Auditors are going to be judged by their speech, mannerisms, clothing, and grooming.a. Auditors should always wear professional attire to a level more formal than the attire of their client.b. Auditor neat and pressed appearance in stills respect and confidence.c. Auditor courtesy of manner and speech dictates that auditor should use reassuring words.d. Any humour by the auditor should always be restrained and professional.The auditor should avoid any of the below mentioned activities to achieve acceptance by the personnel atthe field work:a. Rude and loud comments.b. Offensive and abusive language with colleagues or employees of the client.c. Persistent lateness in joining activities and attending meetings without valid and reasonable cause.d. A lack of hygiene – including but not limited to bad breath and body odoure. Showing disrespect to anyonef. Misutilisation of client resources, for example: using internet for personal purposes like Facebook, mishandling of the vouchers, invoices, and other documents etc.,This article is contributed by Chandra Shekar, Intern of SBS and Company LLP. The author can be reachedat [email protected] 13 | P a g e

SBS Interns' Digest www.sbsandco.com/digestDEBT AND QUITY ADVISORYCAPITAL STRUCTURING - DEBT AND EQUITY ADVISORY Contributed by Hemanth & Vetted by CA Rajesh DMeaning of Capital StructureCapital Structure is the combination of capitals from different sources of finance. The source andquantum of capital is decided on the basis of need of the Company and the cost of capital(CoC) arising forrising that Capital. Capital Structure decision refers to deciding the forms of financing 1) The actualrequirement 2) And their respective proportions in total capitalisation. Whenever funds are to be raisedto finance investments, capital structure decision is involved. A demand for raising funds generates anewcapital structure since a decision has to be made as to the quantity and forms of financing. The capital of acompany consists of equity shareholders fund, preference share capital and long term external debts.However, the objective of a company is to maximize the value of the company and it is the primaryobjective while deciding the optimal capital structure.Comparison for Arriving towards our decision Desired mix of Debt – Equity Existing capital structureA. What sources of funds it comprises off? A. What are the actual requirement of DebtB. What its Cost of Capital(CoC)? Equity proportion?C. Whether it satisfies the future needs by just B. Why that particular proportion of the Debtraising the components of the capital in their Equity is required?existing respective proportions? C. What is the effect on Risk, Return and CoC with the above proportions?Designing capital structureA firm can choose the different mix of capital sources for financing its investment proposals. The differentcombinations are:(i) Only Equity(ii) Only Debt(iii) Only Preference share capital(iv) Mix of Equity and Debt(v) Mix of Preference share capital and Debt(vi) Mix of Equity, Preference share capital and DebtNote: The above combinations of (i), (ii) and (v) can be possible in case of existing companies only as newcompanies need to contribute equity in their capital structure.14 | P a g e

SBS Interns' Digest www.sbsandco.com/digest CapitalCoSmtrpuancietsuArcitng - Debt and Equity AdvisorySignificance in financing decisiona) The capital structure decisions are very important in financial management as they influence debt – equity mix which ultimately affects shareholders return and risk.b) These decisions help in deciding the forms of financing of business. Therefore, such a pattern of capital structure must be chosen which minimizes cost of capital and maximizes owners’ return.Major considerations in capital structure planningThere are three major considerations, i.e., risk, cost of capital and control which help the finance managerin determining the proportion in which he can raise funds from various sources at a given point of time.1. Risk/risk principle:a) The finance manager attempts to design the capital structure in much a manner, so that risk and cost are the least and the control of the existing management is diluted to the least extent.b) Risk is of two kinds, i.e., financial risk and business risk. Here, we are concerned primarily with the financial risk.c) Financial risk also is of two types: i) Risk of cash insolvency, ii) Risk of variation in the expected earnings available to equity share – holders.2. Cost of capital / cost principle:a) Cost is an important consideration in capital structure decisions. It is obvious that a business should be at least capable of earning enough revenue to meet its cost of capital and finance its growth.b) Hence, along with a risk as a factor, the manager has a consider the cost aspect carefully while determining the capital structure.3. Control / control principle:a) Along with cost and risk factors, the control aspect is also an important consideration in planning the capital structure.b) When a company issues further equity shares, it automatically diluted the controlling interest of the present owners.c) Similarly, preference shareholders can have voting rights and thereby affect the composition of the Board of Directors. Hence, when the management agrees to raise loans from financial institutions, by implication it agrees to forgo a part of its control over the company.4. Other considerations:Besides above considerations, other factors such as nature of industry, timing of issue andcompetition in the industry should also be considered.15 | P a g e

SBS Interns' Digest www.sbsandco.com/digest CapitalCoSmtrpuancietsuArcitng - Debt and Equity AdvisoryOptimal capital structureThe Optimal Capital Structure deals with issue of the right mix of Debt and Equity in the long-term CapitalStructure of the firm. If the company takes on Debt, the value of the firm increases up to a point. Beyondthat point if debt continues to increase then the value of the firm starts to decrease. Similarly, if thecompany is unable to repay the debt within the specified time period then it will affect the Goodwill of theCompany. Therefore, the company should select its appropriate Capital Structure with due considerationto the factors mentioned earlier.This article is contributed by Hemanth, Intern of SBS and Company LLP. The author can be reachedat [email protected] 16 | P a g e

SBS Interns' Digest www.sbsandco.com/digestCOMPANIES ACT, 2013RULES, CIRCULARS AND NOTIFICATIONS ISSUED DURING THE MONTH OF JUNE, 2017RULESvThe Companies (Audit and Auditors) Second Amendment Rules, 2017, Dt:22.06.2017:Vide the said amendment rules, the Ministry has amended the proviso to Rule 5, Clause (b) in theCompanies (Audit and Auditors) Rules, 2014 [principal rules],by substituting/increased the thresholdlimits as to Paid-up Share Capital, for Rotation of Auditors by Private limited companies from the existingRs.20 Crores or more to Rs.50,Crores or more.http://mca.gov.in/Ministry/pdf/CompaniesAuditandAuditorsSecondAmendmentRules2017.pdfvThe Companies (Transfer of Pending Proceedings) Second Amendment Rules, 2017, Dt:29.06.2017:Vide the said amendment rules, the Ministry has substituted Rule-4 [Pending proceeding relating tovoluntary winding up]; and Rule-5[Transfer of pending proceedings of winding up on the ground ofinability to pay the debts] of the Companies (Transfer of Pending Proceedings) Rules, 2016 [Principalrules] with the new rules as below:17 | P a g e

SBS Interns' Digest www.sbsandco.com/digest CircularsCoamnpdaNnioestiAfcict ations Issued During the Month of June, 2017Rule Gist of the Existing Rule Gist of the Amendment/New RuleNo. All applications and petitions relating to All proceedings relating to voluntary winding voluntary winding up of companies pending up of a company where notice of the resolution before a High Court on the date of by advertisement has been given under section commencement of this rule, shall continue 485(1) of the Act but the company has not with and dealt with by the High Court in been dissolved before 01.04.2017, shall accordance with provisions of the Act. continue to be dealt with in accordance with provisions of the Act. [Act means Companies Act, 1956] All petitions relating to winding up under New Rule 5 effective from 15.07.2017: clause (e) of section 433 of the Act [1956 Action All petitions relating to winding up under the ground of inability to pay its debts pending clause (e) of section 433 of the Act [1956 Action before a High Court, and where the petition has the ground of inability to pay its debts pending not been served on the respondent as required before a High Court, and where the petition has under rule 26 of the Companies (Court) Rules, not been served on the respondent as required 1959 shall be transferred to the Bench of the under rule 26 of the Companies (Court) Rules, Tribunal exercising territorial jurisdiction and 1959 shall be transferred to the Bench of the such petitions shall be dealt with in accordance Tribunal, exercising territorial jurisdiction to be with Part II of the Code. dealt with in accordance with Part II of the Code. The Petitioner shall be required to submit additional information as required by the The Petitioner shall be required to submit Tribunal within 6 Months from 15.12.2016, additional information as required by the failing which the petition shall stand abated. Tribunal on or before 15.07.2017, failing which the petition shall stand abated. Provided that any party or parties to the Petition may file a fresh application with the Tribunal, under the IBC. Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under rule 5 and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15.12.2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent.http://www.mca.gov.in/Ministry/pdf/CompaniesTransferofPendingProceedingsSecondAmdtRules.pdf18 | P a g e

SBS Interns' Digest www.sbsandco.com/digest CircularsCoamnpdaNnioestiAfcict ations Issued During the Month of June, 2017CIRCULARSvClarification regarding transmission of Securities by operation of Law, Dt:05.06.2017:Ministry vide the above circular, has clarified that, in cases where securities are held in Physical form, theprocedure followed for transmission of shares may be followed by companies while transferring shares toIEPF Authority pursuant to section 124 (6) read with the applicable rules, and accordingly, DuplicateShare Certificates need not be issued, as prescribed under Rule 6 (3) (d) of the Investor Education andProtection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016.http://www.mca.gov.in/Ministry/pdf/IEPFGcircular07_05062017.pdfNOTIFICATIONSvThree Notifications Dt:13.06.17, making alterations/inclusions to the Principal Exemption notifications issued by the Ministry in relation to Government Companies, Private Companies and Section 8 Companies:Vide these 3 amendment notifications, the ministry has provided certain amendments/inclusions to thePrincipal Exemption notifications, Dt: 05.06.2015 issued by the Ministry in relation to GovernmentCompanies, Private Companies and Section 8 Companies.http://www.mca.gov.in/Ministry/pdf/ExemptionGovernmentCompanies_14062017.pdfhttp://www.mca.gov.in/Ministry/pdf/ExemptionPrivateCompanies.pdfhttp://www.mca.gov.in/Ministry/pdf/ExemptionSection8Companies_14062017.pdfThese updates are contributed by Arun Kumar T and vetted by CS D V K Phanindra of SBS and Company LLP,Chartered Accountants. For any queries, please reach at [email protected] 19 | P a g e

SBS Interns' Digest www.sbsandco.com/digestINCOME TAXINCOME TAX UPDATES Contributed by Harini & Vetted by CA Ramprasad T1. CBDT has issued a Circular vide No. 22/2017 dated 03rd July, 2017 which clarifies that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.2. CBDT has issued a Circular vide No. 19/2017 dated 12th June 2017 which clarifies thatany trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word 'advance' under section 2(22)( e) of the Act.3. CBDT has issued a Circular vide No. 20/2017 dated 12th June 2017 which settles the dispute regarding applicability of Explanation 2 to Section 132B of the I. T. Act stating that the above explanation shall have prospective effect.Explanation 2 to Section 132B of the Act was inserted by the Finance Act, 2013 w.e.f. 01-06-2013,clarifying that \"existing liability\" does not include advance tax payable in accordance with theprovisions of Part C of Chapter XVII of the Act. Section 132B of the Income Tax Act 1961, provides foradjustment of seized assets/requisitioned assets against the amount of any existing liability underthe Income Tax Act.4. CBDT has issued a Circular vide No.21/2017 dated 12th June 2017 which states that section 194-I of the I.T. Act, 1961 is not applicable on remittance of Passenger Service Fees (PSF) by an Airline to an Airport Operator.It was held that though the normal meaning of the word 'rent' stood expanded in the section,however, the primary requirement is that the payment must be for the use of land and building andmere incidental/minor /insignificant use of the same while providing other facilities and servicewould not make it a payment for use of land and buildings.5. CBDT has issued a notification vide No. 48/2017 dated 8th June 2017 with regard to introduction of challan cum statement under section 194IB.it was inserted thatany sum deducted under section 194-IB shall be paid to the credit of the CentralGovernment within a period of thirty days from the end of the month in which the deduction is madeand shall be accompanied by a challan-cum-statement in Form No.26QC.The tax deducted at source shall be deposited to the credit of the Central Government by remitting itelectronically within the time specified into the R.B.I or the S.B.I or any other authorized bank.20 | P a g e

SBS Interns' Digest www.sbsandco.com/digest INCOMComEpTaAniXes AUctpdates6. CBDT has issued a notification vide No. 45/2017 dated 5th June 2017 enabling PAN holders to file form 26B Rule 31A, sub-rule (3A) of Income Tax Rules ,1962inserts the words “or verified through an electronic process”. The rule is read as follows “A claim for refund, for sum paid to the credit of the Central Government under section 194 IA shall be furnished by the deductor in Form 26B electronically under digital signature”The above notification shall also inserts the following points:(a) PAN may be furnished in place of Tax Deduction and Collection Account Number(b) In column II, in sub-column (5) relating to the ‘period’, may be left blank;(c) In column II, in sub-column (7) relating to the ‘Receipt number of relevant statement’, furnishacknowledgement number of Form No. 26QB.7. CBDT has issued a notification vide No. 44/2017 dated 5th June 2017which specifies the Cost Inflation Index as mentioned in column (3) of the Table for the Financial Years mentioned in the corresponding entry in column (2) of the said table namely :S.No Financial Year Cost of Inflation Index1. (2) (3)2. 2001-02 1003. 2002-03 1054. 2003-04 1095. 2004-05 1136. 2005-06 1177. 2006-07 1228. 2007-08 1299. 2008-09 13710. 2009-10 14811. 2010-11 16712 2011-12 18413. 2012-13 20014. 2013-14 22015. 2014-15 24016. 2015-16 25417. 2016-17 264 2017-18 27221 | P a g e

SBS Interns' Digest www.sbsandco.com/digest INCOMComEpTaAniXes AUctpdatesThis notification shall come into force with effect from 1st day of April, 2018 and shall accordingly to theassessment year 2018-19 and subsequent years.8. CBDT has issued a notification vide No. 56/2017 dated 27th June 2017 stating that in rule 114, for sub-rule (5), Every person who has been allotted Permanent Account Number as on the 1st day of July, 2017 and who in accordance with the provisions of sub-section (2) of section 139AA is required to intimate his Aadhaar number to the Principal Director General of Income-tax (Systems) or Director- General of Income-tax (Systems) or the person authorised by the said authorities.The procedure for Intimating Aadhaar number to Income Tax department:Mode Manner through which Aadhaar has to be informedSMS By sending SMS to either 567678 or 56161 in specified format as mentioned below UIDPAN<Space><12 digit Aadhaar><Space><10 digit PAN>e-filing system of • Just go to www.incometaxindiaefiling.gov.in and click on the link on the left pane – Link AadhaarIncome tax • Provide details such as PAN, Aadhaar no. and ENTER NAME EXACTLY AS GIVEN IN AADHAAR CARD (avoid spelling mistakes) and submit the same.departmentNote: Please ensure that the date of birth & name in PAN and Aadhaar are exactly the same. If your detailsmatch,a pop-up message will inform you that your Aadhaar card has been successfully linked to your PANcard.These updates are contributed by Harini and vetted by CA Ram Prasad of SBS and Company LLP,Chartered Accountants. For any queries, please reach at [email protected] | P a g e

SBS Interns' Digest www.sbsandco.com/digestSATURDAY SESSIONSS.No. Event Date Speaker Venue 15/07/2017 Sairam & Bhavani SBS - Hyd 1 Levy and Collection of GST 22/07/2017 Sairam & Bhavani 2 Time and Value of Supply 29/07/2017 Sairam & Bhavani SBS - Hyd 3 Registration under GST 05/08/2017 Sairam & Bhavani SBS - Hyd 4 Input Tax Credit under GST SBS - Hyd 5 Payment of Tax under GST 6 Returns under GST Regime 7 Refunds under GST 8 Liability to pay in certain cases 9 Tax invoice, Debit & Credit Invoices 10 Accounts and RecordsSESSIONTIMINGS: 2:30 to 4:30 PM Capital Structuring - Hemanth Section 54 & 54F of Income Tax Act, 1961 - Priya23 | P a g e

SBS Interns' Digest www.sbsandco.com/digest By Team SBS© All Rights Reserved with SBS and Company LLPHyderabad: 6-3-900/6-9, #103 & 104, Veeru Castle, Durganagar Colony, Panjagutta, Hyderabad, TelanganaKurnool: No. 302, 3rd Floor, V V Complex, 40/838, R.S. Road, Near SBI Main Branch, Kurnool, Andhra PradeshNellore: 16-6-259, 1st Floor, Near Santi Sweets Opp: SBI ATM, Vijayamahal Centre, SPSR Nellore, Andhra PradeshTada: 8-3-425/2, Flat No. 202, 2nd Floor, Bigsun Avenue, Near SRICITY, TADA, SPSR Nellore Dist, Andhra PradeshVisakhapatnam: # 39-20-40/6, Flat No.7, Sai Yasoda Apartments, Madhavadhara,Visakhapatnam (Urban),Vizag, Andhra PradeshBengaluru: B104,RIRCO, Santosh Apartments, Wind Tunnel Road, Murugeshpalya, Old Airport Road, Bengaluru , Karnataka.Disclaimer:The articles contained in SBS Interns’ digest, are contributed by the respective resource persons and any opinion mentioned thereinis his/their personal opinion. SBS Interns’ digest is intended to be circulated among fellow professional and clients of the Firm, toprovide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). Theinformation provided is not for solicitation of any kind of work and the Firm does not intend to advertise its services or solicit workthrough SBS Interns’ digest. The information is not intended to be relied upon as the sole basis for any decision. Before making anydecision or taking any action that might affect your personal finances or business, you should consult a qualified professionaladviser.SBS AND COMPANY LLP [Firm]does not endorse any of the content/opinion containedin any of the articles in SBS Interns’ digest,and shall not be responsible for any loss whatsoever sustained by any person who relies on the same.To unsubscribe, kindly drop us a mail at [email protected] with subject ‘unsubscribe’.