Bihari B. Shah            
Chartered Accountant

ICAI Proposes Consolidated Statement by Company Heads.

The Institute of Chartered Accountants of India (ICAI) proposes to make mandatory compilation of a consolidated financial statement by a parent company - containing financial details of group companies under its control.

Increased information regarding group companies would make the disclosure more stringent and elaborate and will be in the line with the international accounting standards.

Making the accounting standard mandatory, aims to provide the financial information of group companies comprising of parent and its subsidiaries as a single economic entity and to allow the economic resources controlled by the group. The obligations of the group and results that the group achieves with the resources.

The Chartered Accountants of India has sought comments on the exposure draft from its members and various organisations like Securities and Exchange Board of India, Reserve Bank of India, Department of Company affairs and various industry chambers for individual comments before February 1, 2001, before the accounting standard is made mandatory in nature for Indian corporate.

The exposure draft prepared by the institute prescribes that a parent company (known as holding) should present consolidated financial statements in addition to its set of financial statements.

The accounting standard aims to eliminate intra-group balances and intra-group transactions and resulting unrealised profits.

The institute claims that the people who are interested in the financial results of a holding company are also interested to know the financial health of the subsidiary as well.

However the accounting standard will not apply to methods of accounting for amalgamation and their effects on consolidation, including goodwill arising on amalgamations, accounting for investments on associates and, accounting for investments in joint venture.

The exposure draft calls for consolidated financial statements for all subsidiaries, domestic as well as foreign, but will not include where the control by the holding company is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future or the subsidiary operates under severe long term restrictions, which significantly impair the ability to transfer funds to its parent.

The accounting standard calls for disclosing by corporates, a list of all subsidiaries including the name, country of incorporation, proportion of ownership interest, nature of relationship between parent and subsidiary and the effect of acquisition and disposal of subsidiaries on the financial position, on the reporting date.

(SOURCE : FINANCIAL EXPRESS)

Frame Long Term Taxation Policy to Boost Growth : Assocham

The ASSOCHAM has called for a long term taxation policy highlighting the direct and indirect tax rates, fiscal deficit as also the inflation rate for the next five years.

In a pre-budget memorandum released at Delhi, ASSOCHAM President Shekhar Bajaj said to help the domestic industry to plan their projects as also to facilitate foreign investments inflows, frequent tinkering with the tax laws and provisions had to be avoided, adding though tax reforms should continue after prior announcement, the mystery which surrounded the budget-making process needed to be dispelled and that the budget must also be devoid of surprise elements.

According to the Chamber, to facilitate reorganisation of business for meeting challenges of future competitive business environment the benefit of carry forward and set-off losses/depreciation of the amalgamating company should be extended to an amalgamated company, which was in non-manufacturing sector. So also, the provisions relating to carry forward and set-off accumulated losses to the amalgamated company should cover the losses under other heads such as capital gains and house property. The condition of holding assets of the amalgamating company, by an amalgamated company, should be confined to 50 per cent of the value of the fixed assets in lieu of the present 75 per cent so that the amalgamated company got better scope for rehabilitation/modernisation/rationalisation of the old business so acquired.

The condition of continuance of the businesses of the amalgamating companies for 5 years should be dropped to facilitate business re-organisation so as to increase business returns as also to maximise the shareholders value.

It has further suggested that the amount received by domestic companies as consideration for the use of any research based IPRs such as invention, patent design and trade mark, must be exempt from tax, provided the same was utilised only for in-house R & D activities within five years. In view of the long term adverse implications of higher dividend tax, it strongly recommended that the hike in the dividend tax must be considered as a temporary phase and be withdrawn the next year.

(SOURCE : FINANCIAL EXPRESS)

Companies Act Should be Future Amended : FICCI

Federation of Indian Chambers of Commerce and Industry (FICCI) wants the Government to put on hold phasing out of incentives for exporters, provide a five year tax holiday for e-commerce companies and introduce further changes in Companies Act provisions relating to amalgamations and de-merger.

In its pre-budget memorandum to Finance Minister Yashwant Sinha, FICCI has called for continuance of full incentives to exporters till 2003.

In a bid to create a conductive environment for e-commerce to flourish FICCI has said that a five year tax holiday be provided to enable the industry to plough back its resources adequately for further development and the phasing out of the tax incentive under section 80 HHE should also be deferred for some time.

Further, the provisions of capital gains tax should be done away with especially on items like transfer of domain and transfer of other e-commerce applications, FICCI has said.

FICCI has called for reduction of stamp duties and uniform stamp duties for all states, which have been a stumbling block for corporate restructuring. On the direct tax front, FICCI has urged the Government to bring down the corporate tax from the current level of 38.5 per cent and being it at par with other tax level in countries Argentina, Brazil, Finland, Norway, Singapore and Sweden where the tax rates vary from 25 - 30 per cent.

FICCI  has suggested that the benefit of 10 per cent tax on long term capital gains should be made applicable to all securities whether they are listed on stock exchanges or not.

The chamber has called for reviving development rebate/ investment allowance or introduction of technology upgradation allowance whereby a certain percentage of profit be allowed to be set apart for exclusive utilisation in evolving new technologies. To overcome obsolescence, accelerated depreciation be provided and the rate of depreciation should rise from 25 per cent to 33 per cent to be computed with reference to current market value of assets which would mean revaluation of such assets on a continuous basis. 

There is a need to fine tune the export incentive schemes and their nomenclature tailored to make them WTO compatible, FICCI has said.

It has further asked to treat deemed exports at par with physical exports and profits arising from deemed exports should be brought within the ambit of section 80HHC. In respect of mergers and amalgamations, FICCI  has said that where financial institutions (FIs) approve any amalgamation/recontruction, Central Board of Direct Taxes (CBDT) should not impose further stipulations so long as the term set out by the FIs are adhered to.

The profits or loss of subsidiary companies should not be allowed to be added or deducted from the holding company on the basis of proportionate holding, if the total holding exceeds 51 per cent.

Further FICCI says in order to fructify the measures initiated last year for corporate restructuring certain further changes are required. These include removing the stipulation of continuing the same business of the amalgamating company for a limited period of five years, allowing demergers under section 293(1)(a) of the Companies Act.

(SOURCE : FINANCIAL EXPRESS)

Reduce IT to 30% Corp. Tax to 25% says FICCI :

FICCI today asked Government to limit the effective personal income tax to 30 per cent, reduce corporate tax to 25% in three years, abolish Minimum Alternate Tax (MAT) and dividend distribution tax.

In the pre-budget memorandum, the chamber has also asked for introduction of value added tax at the earliest, amend the central vat (Cenvat) credit norms and service tax.

The chamber also called for tax concessions to the life insurance, e-commerce and housing sectors to ensure faster growth in those segments, lowering of income and wealth tax, while bringing in commercial agriculture under the tax net.

FICCI said effective marginal personal income tax rate should not exceed 30 per cent from the current 34.5 per cent and that the surcharge imposed last year should be removed.

On corporate tax, FICCI said the rate should be brought down from 35 per cent to 30 per cent immediately and then to 25 per cent in next 2-3 years while the surcharge imposed last year should be withdrawn. Tax on dividend paid over and above the corporate tax rate penalises companies and should also be withdrawn, it said.

(SOURCE : ECONOMIC TIMES )

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