ITAT, HYDERABAD BENCH ‘A’ Determination of true character of a receipt in hands of assessee

Determination of true character of a receipt in hands of assessee 

It is absurd to say that an amount can be a capital receipt only if it is reduced from the cost of the assets; it is only a form of accounting which may be relevant in certain situations.

ITAT, HYDERABAD BENCH ‘A’, HYDERABAD

ACIT

v.

Sanghi Textiles Ltd.

ITA No. 346/Hyd/04

June 19,2009

RELEVANT EXTRACTS:

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13. We have duly considered the rival contentions and the material on record. The crux of the matter is to determine the true character of the receipt in the hands of the assessee and not the utilization thereof. The utilization will not determine the nature of the receipt. The assessee may mis-utilise the funds but that will not either determine or change the character of the receipt. The foremost thing to be appreciated is that the assessee has taken upon itself to resuscitate a body which is in a comatose situation. The amount of Rs.4.60 crores is given to help the assessee resuscitate the body. It is not an amount which the assessee has received in the course of its operation of business. The assessee has not earned any income in the form of Rs.4.60 crores but it is for taking over a potential source of income which may prove to be profitable in future. It is only a milch cow which is taken over. Actual milk has not flowed to the assessee. It is absurd to say that an amount can be a capital receipt only if it is reduced from the cost of the assets. It is only a form of accounting which may be relevant in certain situations. Thirdly, though it is not exactly a loan, yet, as per clause 35 of the lease deed, the assessee is bound to return the full amount received by it if it fails to revive the unit within one year from the date of take over. In fact, the assessee failed in its endeavor and was called upon to refund the amount. Fourthly, so far as working capital is concerned, the assessee is expected to finance the same partly from its own resources and partly to raise the funds from financial institutions. Therefore, the assessee is granted Rs.2.30 crores separately as margin money for working capital and Rs. 10.04 crores towards cash loss in the first two years. Therefore, in our considered opinion, there is not a specter of revenue nature in the receipt of Rs.4.60 crores received by the assessee as promoters' contribution. The funds had to be transferred to Jogighopha because the unit was located there. Further, the funds had to be transferred to the account of the assessee because the assessee was given the responsibility to revive the unit. Thus, on all counts, the receipt is of capital nature and cannot be added to the total income of the assessee. If the department can hold the margin money for working capital to be a capital receipt in assessment year 1996-97, we see no reason why the impugned receipt cannot be so held particularly when the latter is on a stronger footing than the former. Accordingly, we uphold the order of the CIT (A) deleting the addition of Rs.4.60 crores.



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Important Announcement - Standards on Auditing (SAs) - (13-10-2009)

The following list contains the details of the Standards on Auditing (SAs).  For the purpose of November, 2009 examinations the students are advised to refer to the Standards on Auditing (SAs).

The details of the Standards on Auditing (SAs) with full text are being hosted for the guidance of the students.

(For PCC & IPCC)

S.No.               Standards on Auditing and Number

1.             Basic Principles Governing an Audit (SA 200)

2.             Objectives and Scope of the Audit of Financial Statements (SA 200A)

3.             Terms of Audit Engagement (SA 210)

4.             Quality Control for Audit Work (SA 220)

5.             Audit Documentation (230)   (Revised)              

6.             The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements (SA 240) (Revised)              

7.             Consideration of Laws and Regulations in an Audit of Financial Statements (SA 250) (Revised)

8.             Communication of Audit Matters with Those Charged with Governance (SA 260) (Revised)

9.             Responsibility of Joint Auditors (SA 299)

10.          Planning an Audit of Financial Statements (300) (Revised)

11.         Identifying and Assessing the Risk of Material Misstatement Through Understanding the

             Entity and its Environment (SA 315) (Newly issued)*

12.          Audit Materiality (SA  320)

13.          The Auditor’s Responses to Assessed Risks (SA 330) (Newly issued)*

14.          Audit Considerations Relating to Entities Using Service Organisations (SA 402)    

15.          Audit Evidence (SA 500) (Revised)

16.          Audit Evidence - Additional Considerations for Specific Items (SA 501)

17.          External Confirmations (SA 505)

18.          Initial Engagements – Opening Balances (SA 510)

19.          Analytical Procedures (SA 520)

20.          Audit Sampling (SA 530) (Revised)

21.          Auditing of Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures (SA 540) (Revised)

22.          Related Parties (SA 550)

23.          Subsequent Events (SA 560) (Revised)

24.          Going Concern (SA 570) (Revised)

25.          Written Representations (SA 580) (Revised)

26.          Using the Work of Another Auditor (SA 600)

27.          Relying Upon the Work of an Internal Auditor (SA 610)

28.          Using the Work of an Expert (SA 620)

29.          The Auditor's Report on Financial Statements (SA 700)

30.          Comparatives (SA 710)

(For PE – II)

S.No.               Standards on Auditing and Number

1.             Basic Principles Governing an Audit (SA 200)

2.             Objectives and Scope of the Audit of Financial Statements (SA 200A)

3.             Terms of Audit Engagement (SA 210)

4.             Quality Control for Audit Work (SA 220)

5.             Audit Documentation (230)   (Revised)              

6.             The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements (SA 240) (Revised)              

7.             Consideration of Laws and Regulations in an Audit of Financial Statements (SA 250) (Revised)

8.             Communication of Audit Matters with Those Charged with Governance (SA 260) (Revised)

9.             Responsibility of Joint Auditors (SA 299)

10.          Planning an Audit of Financial Statements (300) (Revised)

11.         Identifying and Assessing the Risk of Material Misstatement Through Understanding the

             Entity and its Environment (SA 315) (Newly issued)*

12.          Audit Materiality (SA  320)

13.          The Auditor’s Responses to Assessed Risks (SA 330) (Newly issued)*

14.          Audit Considerations Relating to Entities Using Service Organisations (SA 402)    

15.          Audit Evidence (SA 500) (Revised)

16.          Audit Evidence - Additional Considerations for Specific Items (SA 501)

17.          External Confirmations (SA 505)

18.          Initial Engagements – Opening Balances (SA 510)

19.          Analytical Procedures (SA 520)

20.          Audit Sampling (SA 530) (Revised)

21.          Auditing of Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures (SA 540) (Revised)

22.          Related Parties (SA 550)

23.          Subsequent Events (SA 560) (Revised)

24.          Going Concern (SA 570) (Revised)

25.          Written Representations (SA 580) (Revised)

26.          Using the Work of Another Auditor (SA 600)

27.          Relying Upon the Work of an Internal Auditor (SA 610)

28.          Using the Work of an Expert (SA 620)

29.          The Auditor's Report on Financial Statements (SA 700)

( For Final – Old  and Final – New )

S.No.               Standards on Auditing and Number

1.             Basic Principles Governing an Audit (SA 200)

2.             Objectives and Scope of the Audit of Financial Statements (SA 200A)

3.             Terms of Audit Engagement (SA 210)

4.             Quality Control for Audit Work (SA 220)

5.             Audit Documentation (230)   (Revised)              

6.             The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements (SA 240) (Revised)              

7.             Consideration of Laws and Regulations in an Audit of Financial Statements (SA 250) (Revised)

8.             Communication of Audit Matters with Those Charged with Governance (SA 260) (Revised)

9.             Responsibility of Joint Auditors (SA 299)

10.          Planning an Audit of Financial Statements (300) (Revised)

11.         Identifying and Assessing the Risk of Material Misstatement Through Understanding the

             Entity and its Environment (SA 315) (Newly issued)*

12.          Audit Materiality (SA  320)

13.          The Auditor’s Responses to Assessed Risks (SA 330) (Newly issued)*

14.          Audit Considerations Relating to Entities Using Service Organisations (SA 402)    

15.          Audit Evidence (SA 500) (Revised)

16.          Audit Evidence - Additional Considerations for Specific Items (SA 501)

17.          External Confirmations (SA 505)

18.          Initial Engagements – Opening Balances (SA 510)

19.          Analytical Procedures (SA 520)

20.          Audit Sampling (SA 530) (Revised)

21.          Auditing of Accounting Estimates, Including Fair Value Accounting Estimates and Related Disclosures (SA 540) (Revised)

22.          Related Parties (SA 550)

23.          Subsequent Events (SA 560) (Revised)

24.          Going Concern (SA 570) (Revised)

25.          Written Representations (SA 580) (Revised)

26.          Using the Work of Another Auditor (SA 600)

27.          Relying Upon the Work of an Internal Auditor (SA 610)

28.          Using the Work of an Expert (SA 620)

29.          The Auditor's Report on Financial Statements (SA 700)

30.          Comparatives (SA 710)

31.          Engagements to Compile Financial Information (SRS 4410)

32.          Engagements to Perform Agreed- upon Procedures Regarding Financial Information (SRS 4400)

33.          Engagements to Review Financial Statements (SRE 2400)

34.          The Examination of Prospective Financial Information (SRE 3400)

*    SA 315 & SA 330 – become effective in April, 2008. For November 2009 Final (Old) Examination  34 standards on Auditing as given in the Annexure – I. The  Standard on Auditing (SA) 400, “Risk Assessments and Internal Control”, SA 310, “Knowledge of the Business”, and SA 401, “Auditing in a Computer Information Systems Environment”, issued in June 2002, April 2000 and January 2003, respectively, would  stand withdrawn.

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If u want 2 download it jus click here:http://www.icai.org/post.html?post_id=5066&c_id=219 
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Mock Test Papers for CA Students - (13-10-2009)

October 12, 2009



In order to enable the students to have practice in working out
practical problems and also in answering theoretical questions on various
subjects of CA examinations, the Board of Studies has planned to bring out a
series of test papers relating to various examinations. Accordingly, the first
series of test papers are being put on the website for being practised by the
students. The students are free to send their answer for these questions for
evaluation to the Director, BOS, A-94/4, Sector-58, Noida-201 301. The papers
would be evaluated by the appropriate faculty members.



The first series of test papers are for the following examinations:

• Professional Competence Course (PCC) – one series
  
  
• Integrated Professional Competence Course (IPCC) – one series
  
  
• Final (Old) – two series
  
  
• Final (New) – one series
  

Subsequent series of test papers would be released
gradually.



(CA.R.Devarajan)
Director, Board of
Studies


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Help Line Desk - Admit Card - Do you have any query about NOVEMBER, 2009 examination? - (16-10-2009)

Help Line Desk - Admit Card
Do you have any query about NOVEMBER, 2009 examination?





The Help Line Desk will be functional from 16th October to 15th November, 2009 for 24 hours on all days (inclusive of holidays and Sundays) to attend to any query relating to the ensuing Chartered Accountant Examinations to be held from 5th to 20th November, 2009. However, on 17th October, 2009, the helpline will functioning only up to 3.00 P. M on account of Diwali. The telephone Numbers of Help Line Desk are:






3054851
3054852
3054853
(0120) 3054843 (FAX)
STD Code 0120






Students having any query with regard to their appearance in the ensuing examination are welcome to contact the Help Line Desk on the above telephone numbers. The query could be non-receipt of Admit Card or any other matter related thereto.






Students who have not received their admit cards can download it from website www.icai.nic.in






Separate e-mail IDs have been created to cater to the needs of the students. The student can contact at:






pce_examhelpline@icai.in for Professional Competence Examination






Ipce_examhelpline@icai.in for Integrated Professional Competence examination/Accounting Technician Examination






pe2_examhelpline@icai.in for Professional Education Examination – II






final_examhelpline@icai.in for Final Examination






Students who have not received their Admit Cards or could not download the same from the Website and desirous of getting information regarding appearance in the examinations may utilise this facility for prompt response from 'help-line desk' of Examination Department of ICAI.





(G. Somasekhar)
Additional Secretary (Exams)



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Important Announcement - Chartered Accountants Examinations – November, 2009 - (16-10-2009)

IMPORTANT ANNOUNCEMENT





CHARTERED ACCOUNTANTS EXAMINATIONS – NOVEMBER, 2009





16th October, 2009





The admit card details of the candidates admitted to Professional Education II, Professional Competence, Integrated Professional Competence, Final and Final (New Course) Examinations to be held in November, 2009 will be hosted on the site icai.nic.in positively by the evening of 19th October, 2009.






The delay in the matter is regretted.

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Chartered Accountants Examinations, November, 2009 - (14-10-2009)

Many queries from students/public about change in the schedule of Chartered Accountants Examinations, November, 2009 are being received.

It is hereby clarified for information of all the Chartered Accountants Students, their parents and general public that there is no change in the schedule of Chartered Accountants Examinations, November, 2009 and the said examinations shall be held as per the schedule already notified i.e. from 5th November, 2009 to 19th November, 2009.

(G. SOMASEKHAR)
ADDITIONAL SECRETARY (EXAM.)

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Announcement regarding service tax for November, 2009 Examinations - (15-10-2009)

Rate of service tax reduced from 12% to 10%






In addition to the Notifications and Circulars given in the Appendix to the RTPs for November, 2009, students may note that rate of service tax has been reduced from 12% to 10% with effect from 24.02.2009 vide Notification No. 8/2009-S.T. dated 24-2-2009. The said notification is relevant for the following mentioned papers in November, 2009 examinations:-

• Part –II : Service tax and VAT of Paper 5 : Taxation of Professional Competence Examination
  
  
  
• Part –II : Service tax and VAT of Paper 4 : Taxation of Integrated Professional Competence Examination
  
  
  
• Paper 8 : Indirect taxes/ Paper 8 : Indirect Tax Laws of Final Existing/New Examination

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