All About XBRL
 By: Mr. Gurvinder Sing

INTRODUCTION

XML stands for extensible markup language. Extensible means language that can be extended by anyone who wants to create additional ways to use it. Markup means that XML’s primary task is to give definition to text and symbols. Language means that XML is a method of presenting information in understandable formats.

XBRL was created with a view to develop a consistent method of reporting business event information. The initial goal of XBRL is to provide an XML-based framework that the global business information supply chain will use to create, exchange, and analyze financial reporting information.

HOW DATA DISPLAY IN XML FORMAT

XML-Coded data:

New England
02312000
Wal-Mart
XBRL in INDIA
A separate company, under section 25 has been created, to manage the operations of XBRL India. The main objectives of XBRL India are:

• To create awareness about XBRL in India
• To develop and maintain Indian Taxonomies
• To help companies, adopt and implement XBRL.

XBRL in MCA

Ministry of Corporate Affairs vide its General Circular No. 09/2011 dated 31.03.2011 mandated certain class of Companies who are covered under Phase I. Following class of companies are required to file their Balance Sheet and Profit and Loss Account in XBRL Format:-

• Listed Companies and their subsidiaries;
• Companies having paid up capital of Rs. 5 Crores and above;
• Companies having turnover of Rs. 100 Crores and above.

However, banking, insurance, power Companies and NBFCs are exempt for XBRL Filing in Phase I.

Time Limit :-

To provide adequate time and flexibility to become familiar with the new Format, time limit has been extended to 30^th December, 2011.

All the above entities are allowed to file their balance sheet upto 30/12/2011 or within 60 days of due date of Filling.

Steps for Creation and filling of Instance Documents

Companies covered under First Phase are required to file their Instance Document created according to the xbrl Rules after converting the same in .xml file. MCA has declared Taxonomy for the purpose of XBRL. Taxonomies for Indian companies are developed based on the requirements of:

• Schedule VI of Companies Act,
• Accounting Standards, issued by ICAI
• SEBI Listing requirements.

Taxonomy can be referred as an 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.

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”. Instance document must be linked to at least one taxonomy, which defines the contexts, labels or references.

Creation of Instance Document is nothing but mapping of company’s data into XBRL Taxonomy. The Process used for mapping the Data into Taxonomy is known as Tagging. Tagging is just a task to convert the language used in Financial Statement into the language used in Taxonomy. Once the tagging of financial statement elements with the published taxonomy elements is done, the next step is to create the instance document.

Separate instance documents need to be created for the following:

1. Stand Alone Balance sheet of the company
2. Stand Alone Profit and Loss Account of the company
3. Consolidated Balance sheet of the company
4. Consolidated Profit and Loss Account of the company

The instance document should contain the financial information for both the current as well as the previous financial year. Consolidated balance sheet and Profit and Loss instance documents to be created only in case the same is applicable to the company.

VALIDATION OF FILE USING MCA VALIDATION TOOL

After successfully generating .xml file, the next step is to validate the file using MCA Validation Tool provided on MCA website. If errors occur then rectify the same in instance Document and try to validate the same again.

PRESCRUTINY OF FILE

After validating, the File is need to be Prescrutinize with the help of MCA Validation Tool. If no error occurs then Message displayed “No Prescrutiny errors occurred”. The File is ready to be uploaded.

E Forms

The Prescrutinized .XML file can be uploaded to the MCA site as an attachment with the eForm 23ACXBRL and eForm 23ACAXBRL after filling the same.

Authentication of XBRL Document:-

Earlier it was decided that only Statutory Auditors will certify the XBRL document. However, it was further clarified that CA / CS/ CWA in whole time practice can certify XBRL documents.

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Do's & Don'ts in the Stock Market
 By Ramalingam K

Let’s introduce do’s and don’ts of investing:

Most of us have our own perception of investment based on our experiences, but also tend to be confused with the opinions given by others. Knowing the do’s and don’ts of the stock market would help us turn really as a smart investor.

The do’s and don’ts in the stock market are:

Slow, steady, and boring wins the race:

It is best not to panic over information about stocks on the media. Being slow and steady with looking at the activities that your money is to be used for would ensure that you invest in ventures that are good, useful and profitable.

Reading good books on personal finance will help you in taking right financial and investment decision. In addition, finding good financial advisors would help you get advice regarding stocks and mutual funds, along with entrusting the custody and management of your funds to them.

All this may seem too boring and time consuming, but it is better to be cautious than bitten too hard. 

Don’t give any weight to market forecasts. All opinion pro and con is already built into the price of equities today:

Market forecasts on the media has got good entertainment value but doesn’t have any investment value. It is just enough for long-term investors to invest in good stocks, and mutual funds that would appreciate in the long run.

It is best to understand that market forecasts only show you the expected direction in which the market is heading based on the available information. This forecast is only a forecast and need not become reality.

In addition, market fluctuations are the very nature of share markets and should mean nothing to long tem investors. Making accurate market forecasts is tough, as they are influenced by various factors like the outcome of political elections, the direction of the economy, interest rates and world events. It is also wise to know that these fluctuations are incorporated in the price of the share, stock or mutual fund.

Do make your own analysis of the stocks, shares and mutual funds:

It is unadvisable to place your full faith on analysis of others regarding stock, shares and mutual funds. No wise man would always tell you all about his market beating strategy. Making ones own analysis keeping your financial goals in view and framing a strategy would help.

This involves studying the performance of top performing stocks and mutual funds over 5 years and existing mutual funds over a period of 3 months to decide on which stock to maintain and which to dispose off. All this would ensure that you are investment smart.

Don’t think you can successfully engage in short-term market timing:

As a long- term investor you should never contemplate taking advantage of short-term market dealings and speculations. Playing with shares and mutual funds in the short-term market may give you a profit in a few transactions but will not give you profits forever. So you can’t have an investment strategy which gives profit inconsistently. We need a strategy which can bring profits consistently so as to be a successful investor in the long run.

It is true that playing in the share market is neither entertainment nor fun. It is also futile to borrow or work on short-term margins to make money.

Don’t assume that if anyone were genius enough to devise a market-beating strategy he would be stupid enough to share it with anyone:

Stock tips are good to learn, but not to act on for speculations. It could prove dangerous to act on speculation tips given by one and all, as they may not be correct.  In addition, everyone has his or her own perception of investment, with other not having full knowledge or skills. 

You need to take time to think over each tip and analyze if it contributes to your long-term objective of capital appreciation. Similarly it is not advisable to subject your money to risk with investing in investment fads that may or may not earn you huge profits.

The final advice:

You need to make a calculated decision considering the pros and cons whenever you make an investment. In addition abstain from trading often in the stock and mutual funds market. Always think in terms of long term investing.

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DTC Not Tabled - Indian Slowdown

By : Indranil Sen Gupta

The much awaited Direct tax code is being delayed further as the chances of Parliament’s standing committee on finance submitting its report on the Bill in the ongoing Winter Session, which concludes on December 23, are bleak. With barely a couple of days in this week of the winter session of Parliament, the report may not be tabled in the current session and DTC would miss the April 2012 deadline.

This will be one of the biggest sets back in terms of reform of policies in Indian economy is going to witness. We all know that if the DTC comes into play it will not only replace the old primitive Income Tax Act, 1961 but will also bring growth internally for the Indian economy. The new tax slabs will increase the surplus of the consumers of India and this surplus will lead to increase in consumption of products and services finally leading to growth of Indian economy.

With a young population breeding in India followed with a change in cultural of living life we find substantial growth in consumption of products and services which will lead to increase in demand and production. Household consumption expenditure currently stands (3% of GDP which is the largest component of India’s GDP. Households are also the biggest contributors to India’s savings rate; their savings equal 23% of India’s GDP. Hence the new DTC will further increase the consumption and will make a paradigm shift of India’s fiscal growth model from export to domestic consumption. An economic prosperity of a country is left on the hands of its own people and its resources.

With global turmoil’s and drying up of overseas buyers (export) economic growth can only be achieved through proper utilization of ones own resources. India is well poised to exploit such a growth which will strengthen its pillars of economic growth. Further India will able to reduce the gap of poor and rich which has widened after independence. DTC will leave higher percentage of savings resulting increase in domestic demand which will lead to economic growth of Indian economy. This delay will increase the time frame of India’s development. DTC plays a pivotal role in Indian economic growth in coming days. If DTC was placed in this winter session then in the upcoming budget India should have been able to wither out the dark clouds of global slump on Indian economy. DTC will replace and reduce the dependency of export to meet the fiscal targets as well as companies will find growth from internal sources and will not be affected by global slowdown in shipments. Indian companies will be able to produce more as the demand capacity will grow substantially and resulting proper equilibrium of price. 

United States IRS Amnesty  Program

IRS Announces Severe Actions for Undisclosed Foreign Bank and Financial Accounts.
Filing requirements - The filing requirements apply to any “United States person”, which is defined as those who fit into one of the following categories:

A Citizen of the United States / Green Card holders / Foreign persons residing in the US for extended periods of time (ie. H-1B, L-1, TN and other Visa holders)
Domestic Partnerships / Domestic Corporations / Domestic Trusts /Individuals that have signing authority over a non-US account (if such person can control the disposition of money or other property). Filing requirements also apply to those with direct or indirect control over a foreign or domestic entity with foreign financial accounts, even if the taxpayer does not have foreign financial accounts of its own.

Foreign Financial Accounts - Foreign “financial accounts” include a wide variety of items, such as:

Bank accounts (savings, demand, checking, deposit or any other account maintained with a financial institution). / Securities or brokerage accounts.

Mutual funds / Debit and Prepaid Credit Cards maintained with a financial institution / Certain types of Annuities or pension accounts / Retirement Plans.

Interests in partnerships, trusts or other pass-through entities having foreign accounts.

Background. - The IRS is currently conducting a highly-publicized, large-scale audit program targeting taxpayers who have avoided or evaded U.S. income taxes through the use of undisclosed Swiss and other foreign bank and financial accounts. The deadline for submissions under the amnesty program is August 31st 2011.

Foreign Bank and Financial Account Reporting Requirements. - FBAR Reports. Treasury Regulations under the Federal Bank Secrecy Act require any “U.S. person” who has a “financial interest” in, or signature or other comparable authority over, one or more “financial accounts” maintained in a foreign country to file an annual report identifying their foreign accounts if the aggregate account value exceeds $10,000 during the calendar year. Those annual reports, commonly referred to as “FBAR Reports,” must be filed with the Department of Treasury on Form TD F 90-22.1 separate and apart from income tax returns. FBAR Reports for a particular calendar year normally are due on June 30th of the succeeding year.

For purposes of the FBAR reporting rules: A “U.S. person” is a citizen or resident of the U.S. or a domestic partnership, corporation, LLC, estate or trust. The term “financial account” is defined broadly and includes any bank, securities, securities derivatives, or other financial instrument account. Typically, this would include, but is not confined to, offshore savings, deposit or checking accounts at a bank or offshore brokerage accounts. A U.S. person has a “financial interest” in a foreign “financial account” if the account is owned by the U.S. person. A U.S. person also has a “financial interest” in any foreign “financial account” that is owned by: (i) a corporation, partnership, trust or other entity in which the U.S. person has a greater than 50% ownership or beneficial interest; or (ii) a trust established or otherwise controlled by the U.S. person.

Even if a U.S. person does not have a “financial interest” in a foreign “financial account,” FBAR reporting is required if the U.S. person has signature or comparable authority over the account and the $10,000 threshold is exceeded.

Foreign financial accounts aggregating over $10,000 at any time during a year are subject to the FBAR annual reporting requirement even if the accounts are owned by tax-exempt U.S. persons or are non-income-producing.

Foreign financial accounts do not include, however, accounts maintained at a U.S. branch or other U.S. office of a foreign financial institution.

Notice 2009-62 Relief from FBAR Reporting Requirements. In late 2008, the IRS indicated that foreign “financial accounts” subject to FBAR Reporting include interests in commingled funds maintained outside the U.S. (e.g., foreign mutual funds, foreign private equity funds, foreign hedge funds, etc.). The IRS’s expansive interpretation of “financial account” to include foreign commingled funds was roundly criticized as an unwarranted deviation from prior practice. In response to that criticism and to extend the FBAR filing deadline for certain U.S. persons, on August 10, 2009 the IRS issued Notice 2009-62. That Notice extends to June 30, 2010 the deadline for submitting required FBAR Reports for 2008 and earlier years by: (i) persons with mere signature or other comparable authority over, but no ownership or other financial interest in, a foreign financial account; and (ii) persons with an ownership or other financial interest in, or signatory authority over, a foreign financial account in which the assets are held in a commingled fund.

U.S. persons who qualify for the extended FBAR return due date may wish to avail themselves of the extension to catch up on delinquent FBAR filings. The extended FBAR due date is not available, however, for taxpayers who own or otherwise have a financial interest in foreign financial accounts other than foreign commingled funds. Nor does the extended due date for some FBAR filings provide relief from the civil and potential criminal penalties associated with failures to properly report and pay taxes on income earned in foreign financial accounts.

Income Tax Return Reporting of Foreign Accounts. In addition to the FBAR reporting rules, U.S. Federal tax law requires U.S. taxpayers to properly report on their U.S. Federal income tax returns, and timely pay applicable income taxes on, any interest, dividends, gains or other income earned on their offshore bank and financial accounts, whether or not such foreign accounts are subject to FBAR reporting. In connection with that requirement, and as an adjunct to FBAR reporting, U.S. persons must specifically disclose annually on their U.S. Federal income tax returns, under penalty of perjury, whether they own or have other financial interests in, or have signature or other authority over, any foreign bank and other foreign financial accounts during the tax year in question. The requirement to disclose ownership of foreign financial accounts aggregating over $10,000 on income tax returns applies to individuals (Form 1040, Schedule B), corporations (Form 1120, Schedule N), partnerships (Form 1065, Schedule B) and trusts and estates (Form 1041, Schedule G).

Use of foreign financial accounts may also trigger or effect the need to file special IRS information returns reporting transactions with offshore trusts, foreign gifts, and transfers to certain foreign corporations and foreign partnerships.
  

Penalties for Non-Compliance with Reporting Requirements - Civil penalties for failure to timely file a FBAR Report can be severe - up to $10,000 for each unintentional violation or, in the case of willful violations, the greater of $100,000 or 50% of the account balance at the time of the violation. Under certain conditions, the IRS may abate FBAR failure to file penalties in whole in part for “reasonable cause.” Criminal penalties may also be imposed for willful violations of the FBAR reporting requirements. In addition to the FBAR failure to file penalties, various Federal tax penalties can apply if a taxpayer fails to properly report taxable income on its undisclosed foreign accounts. Those tax-related penalties can include: (i) additional accuracy-related tax penalties of up to 20% of the underpaid tax; (ii) delinquent return penalties of up to 25% of the unpaid tax if no return is filed; (iii) civil fraud penalties of 75% of the tax understatement in the case of fraud; and (iv) in the case of willful violations, prosecution for criminal tax evasion.

IRS Voluntary Disclosure Practice - As part of the IRS crack-down on undisclosed foreign financial accounts, the IRS has announced that it intends to: (i) fully enforce civil penalties for FBAR Report non-compliance as far back as 2003; (ii) impose all applicable civil tax penalties on non-compliant taxpayers who fail to report income on foreign financial accounts for all open years; and (iii) in cases of willful disregard of the applicable reporting requirements, bring criminal prosecutions.

As an adjunct to its audit program, the IRS has also implemented and publicized an internal “Voluntary Disclosure Practice” (i.e., an amnesty policy) under which taxpayers who have failed to comply with the FBAR and related income tax reporting rules and who are not currently under IRS audit may voluntarily come into compliance with those rules with reduced, or in some cases no, penalty exposure. U.S. taxpayers who only recently became aware of the FBAR filing requirements should consider whether they failed to comply with FBAR reporting requirements for prior years and, if so, whether they should participate in the amnesty program. Taxpayers currently subject to any IRS audit may not participate in the amnesty program.

Under the amnesty program, if a U.S. person failed to timely file required FBAR reports for any year between 2003 and 2009, the taxpayer can take advantage of the amnesty program by filing the delinquent FBARs by August 31st 2011, together with copies of the filer’s income tax returns for the years in question and an explanation of the reason for failure to timely file (e.g., the taxpayer was unaware of the FBAR filing requirements). The IRS has stated that otherwise applicable FBAR late filing penalties will not be imposed for late filings of FBAR Reports under the amnesty program so long as the taxpayer properly and timely reported and paid all income taxes due on any income earned on the foreign accounts in question.

If a taxpayer also failed to timely report and pay income taxes due with respect to income earned from its undisclosed foreign accounts, the taxpayer can still participate in the amnesty program, but the taxpayer must pay: (i) all taxes and statutory interest due with respect to the unreported foreign account income; (ii) an accuracy-related penalty of 20% of the tax underpayment or, if no return was filed, a delinquent return penalty up to 25% of the tax underpayment; and (iii) an additional FBAR penalty of 20% of the highest account balance during the year of the FBAR violation in which the account balance was greatest.

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Tax Audit - A glance

By : Karan Teli

These days we all are busy with our tax audits schedules and many of the small firms have their most earnings and survival on tax audits itself.

An attempt is made here in my series “TAX AUDITS” about what exactly is this and what are its importance in today’s world.

To start with basically, what is the guiding section or legislatives which require a person/business to undergo a tax audit?

It’s section 44AB which is the general section and there are few more sections which, by nature and influence, make a business come under tax audit net. It’s the presumptive taxation sections i.e. 44AD, 44AE, 44AF.

Once the audit of such person/business is done then what are its reporting requirements? Form 3CA/3CB and 3CD is given by the person who performs the audit and this are generally called tax audit reports.

Now, how is eligible to do these audits? Unlike the internal audits wherein, the audit can be performed by a CA in practice or a specialised team of management, the tax audits are ONLY to be performed by a practicing Chartered Accountant.

Are there any limits prescribed to the CA's for undertaking the number of tax audits during a year? Yes, a practicing CA can only undertake 45 Tax audits in a year.

It is more evident by ICAI president's statement as "The ceiling on tax audit has been increased from 30 to 45 per chartered accountant/per partner. Each partner can undertake 45 tax audits," Mr Sunil Talati, President of ICAI. (During 2007-08 I believe). 

Let’s go deep into provisions now,

First comes the general section on tax audits which are governed by Section 44AB. What do these provisions say all about?

It provides some figures called Rs.6000, 000/- and 1500, 000/-.

This first figure of Rs. 6000,000/- is applicable to a person who has achieved and crossed it as business turnover and second figure of Rs.1500,000/- is applicable to a person who has rendered services for more than the above said figure. Here it should be clearly understood that the turnover needs to exceed to the specified above mentioned limits. For businesses, not only the turnover is counted, but also the total sales and gross receipts and in case of professions it is gross receipts only.

Now, the word turnover has come into picture. What does turnover means? Does it mean Gross turnover or Net turnover? Does it include VAT, CST, Excise Duty?

A summarized meaning of turnover after considering the guidance note of ICAI says that, the aggregate value for which the sales are effected or services are rendered is to be taken. It includes all the types of taxes applicable on such goods.

But, doesn’t the above two figures sound funny? A newly set up iron trading business would easily achieve this turnover in a year or two. Then what is the intention behind these figures? The governing authorities want almost all the business to come under this tax audit net to avoid all such violations of other taxes and diverting of income.

Are there any time limits to comply with these provisions i.e. to get the books audited and submit and audit report? 30^th September, of every year (unless this date is not officially changed) a golden day.

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How RBI Hike In Repo Rates Affects Common People?

By Mr. Anup Mishra

Keep an eye on RBI, says investors, experts and traders. Should we be prepared to pay more every month on your home, auto and other loans? Since RBI has increased the repo rates 12 times in the last 18 months. Before discussion on this, I would like to be very clear on some basics.

What is a basis point?

A basis point is nothing but one-hundredth of a percentage point.

People who took home loans and car loans in the last 18 months would have been impacted much. The reason is Commercial banks Indusind Bank, Hdfc Bank, ICICI Bank, Axis Bank & Kotak Mahindra Bank will have to pay more if they want to borrow from RBI, but individual borrowers as well as corporations may not feel the impact of the rate hike immediately as banks are not in a hurry to raise their loan and deposit rates.

Over the last one and a half year, the RBI has raised the Cash Reserve Ratio (CRR) by over 100 basis points and the Policy rate by over 275 basis points. This in effect means that banks have to face a net effect pressure of around 425 basis points.

Take a scenario, a person took a home loan for 25 lakhs in EMI with commercial banks like Indusind Bank, Hdfc Bank, ICICI Bank, Axis Bank & Kotak Mahindra Bank on May 2011. The rate of interest when he took a loan is 10.25%. If RBI continues to increase the repo rates by 12 times in the next 18 months it will highly impact the person who took the loan. Same case would reflect, if a person buys a car worth Rs 5.2 Lakhs before a month.

Over 95% percentage of home loans is floating interest rate. The RBI appointed bankingombudsman has been receiving a number of complaints from borrowers on the mounting credit risks as a result of increasing interest rates.

Home loans are 2-3% are fixed rate loans today. Even though interest risk is managed by banks, the risk is ultimately forced on the customer in a rising interest rate scenario.

Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and thus banks only substitute interest rate risk with potential credit risk.

If a decision on this comes through it will be for both own source funds and borrowed source funds of banks.

I took few surveys related to RBI Actions. Here Kannan (Manager- Accounts) in a Pvt Ltd Concern shared his views.

Continuous increase in inflation forced the RBI to continuously increase the lending rate/the repo rate as one of the anti-inflationary actions to be taken.

Consequently, the commercial banks and other money lenders will increase their rate of interest for the various types of common man loans.

At the end of the day the long tenure loan enjoyers particularly the people who taken housing will be affected.

Due to the inconsistent and soaring rate of interest the fixed income people will be the most affected.
The indirect decrease in their monthly income will result in their standard of living down-fall.

Taking effective measures to control the inflation and success of the same may result in decreased interest rates in future.

The RBI rate hike comes despite increasing criticism of RBI's hawkish policy. Analysts and experts have started questioning if this hike will have any bearing on inflation because of the upward revision in petrol prices. Many have also started questioning the efficacy of the series of the rate hikes for 12th time in 18 months.

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Why Is The Rupee Falling
By : Subhanshu Gupta

The roller coaster ride of rupee was witnessed in the last month when it touched an all time low of Rs 46.07. All the while Reserve Bank of India kept assuring us that the fundamentals of the economy are intact. It was only a few days back when it pushed the panic button and asked all corporate sector borrowers in the markets abroad (external commercial borrowings), exporters and holders of American Depository Receipts to repatriate their dollars. RBI hopes to garner $2 billion in this way.

But the falling rupee has to be seen against a broader perspective, against the news of a fall in business confidence index, fall in industrial growth, a rise in trade deficit and a rise in inflation. The volatile political climate and its repercussions on the stock market, which has been on the decline since February, should not be forgotten either. There is news of millions of dollars being withdrawn ($545.7 million in June and July alone) from the market by the Foreign Financial Institutional Investors (FIIs). With America being India’s biggest trading partner, the rupee fall against the dollar is serious even if the rupee does not fall as much against other currencies. The average person on the street may not be directly affected by it (unless he is planning foreign travel or sending a child abroad to study), but because the fall in the value of rupee is going to result in inflation, everyone, sooner or later will feel the impact, specially the elderly and the poor. The fear of inflation usually triggers central banks into action and it did so in India also recently when the rupee’s value breached the psychological barrier of Rs. 46.

However, the fall in rupee may be a blessing for some sections of the society. They are the exporters. They have been able to sell their products cheaper in markets abroad. They are happy because a lower rupee value for dollar will enable them to compete with China and South East Asia. In fact, ever since the rupee started to slide, the export performance started to improve dramatically. A low rupee will also prevent “dumping” of goods by neighboring countries, which has been creating problems for some major domestic industries. Others who will be happy with the rupee’s fall are those receiving money from relatives abroad. Each dollar will give them more rupees.

The question that haunts our mind is that why is the rupee depreciating against the dollar? Well...like any other price, the price of the dollar is determined by its demand and supply. If the demand goes up, then the price of the dollar also goes up. Recently, the demand for the dollar went up mainly because of the government’s own demand on account of its heavy oil and defense import bill. The corporate sector’s demand also went up because it wanted dollars for imports already in the pipeline. The supply of dollars at the same time, dwindled as the FIIs started withdrawing money from the Indian stock market. Many returned to America since the interest rate hike by the Federal Reserve recently. Foreign direct investment inflows too have been meager and a mismatch between the demand and supply occurred and consequently the rupee fell.

The RBI intervened promptly in its usual manner by raising the bank rate and the cash reserve ratio of banks. It also raised the rates of bank refinance. It believed that people were borrowing rupees in order to speculate in the Forex market. The RBI, however, did not intervene in a big way by selling dollars from its reserves though most central banks would have done so.

The rise in the bank rate, meanwhile prompted commercial banks to hike their own lending rates, sending adverse signals to the corporate sector, namely a higher borrowing cost. Surprisingly, despite RBI’s recent intervention, the rupee kept falling and it reached Rs. 46 on August 11.

Earlier, the RBI stopped its attempts to arrest the fall realizing its futility and instead issued a long explanatory note. It declared that there was to be no more targeting of the rupee to any specific value and the market was going to decide where the rupee would stabilize though monitoring was promised. Seeing it cross Rs. 46 however made it panic.

The rupee will pick up in value once the market has calmed down and more dollars come into the market. While this drama was being enacted, exporters who had been doing brisk business on account of the rupee’s depreciation, stopped bringing back their dollars earned abroad and further exacerbated the shortage of dollars. Once exporters start bringing back the dollars especially after the RBI’s edict, the market would come back to normal. For the rupee to stabilize, inflation has to be brought under control.

RBI is reviewing the Export Earner Foreign Currency (EEFC) scheme to ensure more dollar remittances from abroad. The current reserves of $2 bn in the EEFC account is sizable, which will help it to stand off a further fall in the rupee.

As per the scheme, exporters are allowed to park 50%-70% of their foreign exchange earnings abroad for a period of 180 days under the Foreign Exchange Regulation Act. This is to help them in meeting their day-to-day overseas expenditure. However some exporters are parking their funds beyond this limit. RBI is expected to ask for repatriation of the proceeds of ADRs and ECBs from abroad if they have been parked there for a long time.

Since several corporates have raised over a billion dollars through the ADR route, repatriation of the proceeds could help stabilize the rupee, which has lost over 5% during the current financial year.

The other positive news for the rupee is that during the month of August, Foreign Institutional Investors have turned to net buyers with their current net purchases of Rs 1.4 bn. They were net sellers in the equity market to the tune of Rs 14.1 bn in the month of July. Further the RBI has cleared foreign direct investment (FDI) worth Rs 9.5 bn. With the increasing FII investment, although at a slower pace, clearance of FDI and repatriation of proceeds of ADRs will lead to an increase in the supply of dollars and one can expect it to bring some relief to the falling rupee.

A lower rupee will enable exporters to rake in more dollars in the future. But as oil imports and other essential inputs used in export production will cost more, there will be an escalation of costs for exporters too. Unless they raise their efficiency and productivity, they may wish that the rupee would depreciate further. But what a way to go! From Rs 4.765 to a dollar, the rate before 1966 to Rs. 46 today, all in a matter of a few decades. Yet we are lucky as there were worse cases in South East Asia, when the same amount of depreciation took place within a few weeks.

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Rupee's Next Destination
By : K Venu Babu

Volatility continues in the currency market with the rupee losing heavily or gaining handsomely every day for the past few days. This fluctuation has sparked a debate on the government’s intentions, the RBI’s role and the likely impact on the economy at large. After dipping close to Rs 47 to a dollar, the Indian currency recovered smartly for the past few weeks. The recent escalation in international crude prices leading to a heavy pressure on Balance of Payments had battered the Indian currency. Meanwhile, a study conducted recently by Institute of Economic Growth (IEG) has revealed that the rupee-dollar exchange rate is expected to break yet another psychological level of Rs 47 in four months' time. And the Indian government has predicted the rupee to cross 50 level by 2002. What are the various factors that affect the rupee movement?

After crossing the barrier of 40 mark against a dollar during the nuclear tests in 1998, the rupee gradually depreciated to 45 level in 2000 and had touched a low of around 47 in the same year, though recovered later. However, RBI did not enter the market, and it had asked nationalised banks to sell more than $500 million this financial year to steady the rupee which plunged by over 1.5 per cent. This year it has shed more than 5 per cent of its value in terms of the dollar.

 The recent international crude price has crossed $32 per barrel resulting in the increase in the oil pool deficit at Rs.85 billion ($1.88 billion). Other economic indicators, barring agriculture, look bleak and the country might be in for difficult times in future. Had the same prices continued, the deficit would have stood at Rs.120 billions ($2.66 billion) by March 2001. The subsidy bill on kerosene, diesel and LPG had been rising. A fall in the rupee against the dollar has made the entire fiscal calculation awry.

Is the fall of a rupee good for anyone? Economists are a divided lot. Some favour a cheaper rupee to spur exports and to make imports costly and thus discourage the flow of consumer goods under the WTO rules. That and higher import duty should partly shield small scale industries from fierce competition from Chinese and South Korean manufacturers. Others fret that costly imports will add to the inflationary pressure and make nonsense of industrial growth revival and lower interest regime.

The debate of rupee depreciation and appreciation continues as it is not easy to determine the equilibrium real exchange rate of the rupee. Ideally this is defined as the value that equates the current account and the capital account of the balance of payment, over the time. That is, current account deficits must be financed by sustainable capital account deficits. Since future periods are involved, market expectations enter the fray. Before the eighties the determination of the exchange rate was simpler. It was dominated largely by trade flows. But now capital transactions dominate. The exchange rate behaves more like an asset price; expectations of market traders and bandwagon effects, as they learn from each other, can lead to large price movements.

Sustaining the nominal exchange rate above the value expected by the market requires high interest rates to prevent capital from flowing out of the country. Over the time this harms domestic investment, output and productivity and therefore causes a depreciation in the equilibrium real exchange rate. To maintain the level of the nominal exchange rate will then require even higher interest rates; it is not a sustainable strategy. South East Asian countries made this mistake: nominal exchange rates were fixed in the nineties and did not vary sufficiently while their interest rates exceeded world interest rates.

A rupee on a roller-coaster dampens inflow of capital; this year foreign exchange reserve has come down by 7 per cent — from $38.34 billion to $ 35.67 billion. NRIs have deposited over $10 billion and could take it out any time. Foreign funds dealing in the stock market brought in another $10 billion. Then there is trade deficit. A wary RBI has asked exporters to bring back half of the balance in foreign banks. This meant an addition of $1 billion to the reserve. But its psychological effect in market nervousness would be strong. It is plain that the usual lag and lead factors are behind the value swings and not speculative activities. Once this works itself out, the rupee is expected to remain stable around the present level.

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Highlights of the New Company Bill tabled in Lok Sabha
By: CA Dhiraj Satnalika

Corporate Social Responsibility

• 2% of average profit of last three years.
• Only disclosure mandatory.
• Mandatory CSR committee.

Auditors

• Rotation in four years.

Independent Directors

• Five-year fixed term.
• No stock options.
• Board to have one woman director.

Serious Fraud Investigations Office

• To get power to arrest.
• No suo moto powers.

Investor protection

• Mandatory “Unpaid Dividend” account to be opened by companies in scheduled banks.

Unpaid/Unclaimed

• 30 days dividends to get transferred under Investor Education Protector Fund.

Benefit to Minority Shareholders

• Majority Shareholders shall deposit equal value of shares obtained from minority in a separate bank account.

Others Observations of the new Bill:

1. The Bill enhances the accountability for those incorporating a company, and directors on the board, by framing additional disclosure norms.

2. At the time of incorporation, it is now mandatory to file the consent of directors associating with the company. The director will also have to give particulars of other firms which they are associated with. This will make promoters and directors more accountable. It will also address the problem of bogus directors on company boards.

3. In case of fraud, the defaulter can get an imprisonment of anywhere between six months to 10 years along with a fine.

4. The new Bill also proposes that persons signing the memorandum of association—document that regulates a company’s activities—will have to state upfront that they have not been associated with any fraud or mismanagement or breach of duty under the companies law.

5. With scams such as companies vanishing after raising public monies as also opting for liquidation, the new Bill was designed with the aim of sensing frauds early and, therefore, these provisions have been incorporated. These will ensure that maximum responsibility is put on the companies when they register.

6. The Bill also proposes to strengthen the Serious Fraud Investigation Office, a multi disciplinary body constituted by chartered accountants, company secretaries, revenue and corporate law officials.

7. It will also introduce concepts that are new to India, including the one-person company and class-action suits. The proposed regulation will also make it easier to start and shut companies.

8. The new regulations, if cleared by both houses of parliament, will apply to more than 800,000 companies registered in India.

9. The structure of the Bill is contemporary, sound and visionary rather than just an attempt to address shortcomings.

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FAMILY PARTITION OF HINDU UNDIVIDED FAMILY

BY CA A. K. JAIN

Family partition of Hindu Undivided Family which is as per amended provisions of Hindu Succession Act, 1989 is recognised u/s 171 of I-T Act - Revenue cannot deny recognition : ITAT.

CHENNAI, JULY 01, 2007 : BRIEFLY stated facts of the case are that the Assessee is a Hindu Undivided Family consisting of Shri P.C. Ramakrishna, his wife and his two daughters. There was an oral total partition of H.U.F. on 16.9.1994 between Sri P.C. Ramakrishna, his wife and two daughters. Under this oral partition, the two daughters were allotted Rs.12,50,000/- each and these amounts were adjusted against a sum of Rs. 12,50,000/- advanced to each of them earlier as loan by H.U.F. In the said partition, all other properties of H.U.F. were allotted to Sri P.C. Ramakrishna. This oral partition took place on 16.9.1994 which was subsequently confirmed by a Deed of Declaration confirming the partition.

This partition was filed before the AO under sec. 171 of the Act seeking recognition of the partition as provided under the Act. The petition was proceeded by the AO who vide his order dated 17.3.1998 held that partition is a sham one and the mere contrivance to divest the family funds to reduce the incidence of tax and accordingly he declined to grant recognition to the partition in exercise of his powers u/s. 171 of the Act.

Aggrieved, the Assessee preferred an appeal before the C.I.T(Appeals). The C.I.T.(Appeals) held that the provisions of sec.171 of the Act cannot confer any right to a partition which is not available to any person under the Hindu Law; that according under the Hindu Law, there should be a partition between two or more coparceners and therefore, it cannot be a partition where the H.U.F. consists of only one coparcener. Finally, he held that even after introduction of amendment in Tamil Nadu in 1989, the daughters cannot claim partition in the joint family property of the HUF and accordingly, he confirmed the action of the AO. Aggrieved, the assessee moved Tribunal in second appeal.

The Tribunal summarized its detailed observations as follows :-

Considering the provisions of Hindu Succession Act, 1956 as amended by Hindu Succession (A.P.Amendment) Act, 1986, introduction of sec.29A which was confirmed by the Hon'ble Apex Court in the case of S. Sai Reddy ([1991] 3 SCC 647) and also the amendment of Hindu Succession 1956 by the Hindu Succession (T.N.Amendment) Act 1989, which are the provisions similar to the Hindu Succession ( A.P.Amendment) Act, we are of the considered opinion that the difference between daughter and son of the Mitakshara Hindu Family is removed and the daughter is conferred the coparcenary rights in the joint family property by birth in the same manner and to the same extent as the son.

Daughter is entitled to claim partition and her share in the joint family property i.e. H.U.F. property, is without dispute. In the present case, Sri P.C. Ramakrishna, H.U.F. apart from P.C. Ramakrishna, Karta, two daughters along with his wife are the members of H.U.F. After the amendment of Hindu Succession (T.N.Amendment) Act, 1989 vide clause (i) and (ii), the daughter in H.U.F. shall by birth become a coparcener in her own right in the same manners as the son and have the same rights in the coparcenary property as she would have had if she had been a son, inclusive of the right to claim by survivorship and shall be subject to liabilities and disabilities in respect thereto as the son. She is entitled to partition of a Joint Hindu Family coparcenary property and in such partition, Hindu Family coparcenary property shall be so divided to a daughter so as to allot the same share as is allottable to a son.

The amendment brought out w.e.f. 25th March, 1989 has removed the distinction as regards to a son or a daughter in respect thereto coparcenary property of Joint Hindu family as governed by Mitakshara law and daughters are clearly treated as coparceners. In the present case, there are two daughters to the Karta. Hence, there are three coparceners in the Joint Hindu Family and the daughters have been allotted a sum of Rs. 12,50,000/- each.

Hence, we find no infirmity in the partition of the Joint Hindu Family which is in accordance with the Hindu Succession (T.N.Amendment) Act, 1989. In view of this, we hold that the partition is as per the amended provisions of Hindu Succession ( T.N.Amendment) Act, 1989. Hence, there is no reason to refuse Registration to family partition of Joint Hindu Family property.

Accordingly, the partition of H.U.F. is recognized under sec.171 of the Act and the AO is directed to pass a consequential order recognizing the partition of the H.U.F.

And the final word : The assessee's appeal was allowed.

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UPDATES

FAMILY SETTLEMENT

 BOMBAY HIGH COURT

Daughters are entitled to Ancestral Property 

A Full Bench of the Bombay High Court comprising Mohit Shah C.J, M. S. Sanklecha  and M. S. Sonak, JJ,  delivered a noteworthy judgment on daughter’s right to  ancestral property in a joint HUF on 14th August, 2014. The Bench was constituted on a reference by Single Judge R.G. Ketkar J. who doubted the correctness of the decision of the Division Bench in the case of Vaishali S. Ganorkar & others v. Satish Keshavrao Ganorkar & others,. Prior to the enactment of the Hindu Succession (Amendment) Act, 2005 (hereinafter the Amendment Act), the Hindu Succession Act, 1956 (hereinafter the Principal Act) did not provide any rights to daughters in respect of partition of property or the right to demand partition or claim shares in the coparcenary property. 

A coparcener is a person who has equal rights in the undivided property of a HUF. The Amendment Act now entitles women to an interest in the HUF property by amending Section 6 of the Principal Act and makes a daughter a coparcener in her own right, thereby upholding the fundamental right to equality and non discrimination on the basis of gender enshrined in the Constitution. In the current case the point of contention was not, therefore, whether daughters are also entitled to an interest in the HUF property like their male counterparts, which has been duly settled, but whether the Amendment Act has a prospective or retrospective effect, the determination of which will have a direct bearing on the controversial issue of whether daughters born before 2005 are also entitled to be coparceners in their own right in the same way that daughters born on or after 9 September 2005 are now entitled. A Division Bench upheld the prospective operation of the Amendment Act in Vaishali S. Ganorkar v. Satish Keshavrao Ganorkar, which in effect disentitles all daughters born before 9 September 2005 to claim their equal interest in the Joint HUF governed under the Mitakshara law. Further, the Bench interpreted the amended section to mean that daughters born before 2005 would get rights in the coparcenary property only on the death of the father-coparcener on or after 9 September, 2005.

This provision effectively leaves the daughters remediless if a male coparcener, in the interim, decides to dispose of the property by testament/will. Disagreeing with the decision of the Division Bench, Single Judge R.G Ketkar J. held that the amended section has retrospective effect from the date of the enactment of the Principal Act and is applicable to all daughters who are born before or after 2005 as a daughter becomes a coparcener in her own right by virtue of her birth. The matter was thus referred by the Single Judge to the Full Bench in order to reconcile the differing opinions and reach a reasoned decision bound to impact the lives of millions in the country. Although Hindu women were considered a part of the HUF under the Shastric/Customary Law for the purpose of maintenance, they did not have a right in the property and it transmitted only to male coparceners by way of survivorship. Today, modern thinking has slowly shaped society to accept equality of the genders which has thankfully seeped into the laws of intestate succession resulting in the Amending Act, 2005. .However, the amended Section 6 has left ample scope to the courts for interpretation and this is precisely the critical space where equality needs to be reasoned and upheld. More than just seeing this issue through the lens of feminist movements for equality, the case throws light on the current trend of the courts in application of the rules of interpretation.

The Full Bench concurring with the opinion of the Single Judge stated “We agree with the Respondents that normally a statute should be construed on its plain meaning. However, when the plain reading of the provision is not very clear then, in that case, one has to apply an appropriate tool of interpretation to unearth the intent, object and purpose of the enactment. In such cases, particularly, in cases of socio-economic legislations like the one we are concerned with, we must apply the Mischief or Purposive Rule of interpretation to find out the true meaning of the Statute”. The Mischief Rule propounded in 1584 from Heydon’s case, essentially seeks to rectify the existing defect in the common law and thus allows interpretation to keep in tune with the changing social philosophies of the time. Applying the Purposive Rule to this case, the Full Bench has determined the prospective v. retrospective operation of the Amendment Act. As is well established, the interpretation of statutes raises a presumption against retrospective operation of statues unless expressly or impliedly specified by the legislation itself, as it would result in the dire and chaotic consequence of unsettling already vested rights. However, the courts must not be restrained by the black letter of the law which subverts the justice and equality due to millions of daughters born before 9 September 2005.

The Court, to mete out justice, resorted to the application of an intermediary category known as ‘Retroactive Statute’ which does not operate backwards and does not take away vested rights, but successfully provides rights to those daughters who are alive at the time of the Amendment Act, irrespective of whether they were born before or after 2005. In case the coparcener has died before 2005, then the pre-amended law is applicable but by passing of the Amendment Act, all daughters who are alive ipso facto become coparceners, thus settling the interpretation of the amended Section 6. “The only requirement is that when an Act is being sought to be applied, the person concerned must be in existence/living. The Parliament has specifically used the word ‘on and from the commencement of Hindu Succession (Amendment) Act, 2005’ so as to ensure that rights which are already settled are not disturbed by virtue of person claiming as an heir to a daughter who had passed away before the Amendment Act came into force.”, the Court said.

SUPREME COURT JUDGEMENT- HUF

SC says daughters whose fathers died before amendment in Hindu Succession Act have no right to inheritance

A bench of Justices Anil R Dave and Adarsh K Goel held that the date of a daughter becoming coparcener (having equal right in an ancestral property) is "on and from the commencement of the Act".

The Supreme Court has said that a daughter's right to ancestral property does not arise if the father died before the amendment to Hindu law came into force in 2005.

According to an Indian Express report, the apex court held that amended provisions of the Hindu Succession (Amendment) Act, 2005, do not have retrospective effect. The father would have to be alive on September 9, 2005, if the daughter were to become a co-sharer with her male siblings.

A bench of Justices Anil R Dave and Adarsh K Goel held that the date of a daughter becoming coparcener (having equal right in an ancestral property) is "on and from the commencement of the Act".

The Hindu Succession Act, 1956 did not give daughters inheritance rights in ancestral property. However, the Congress-led UPA government modified this Act on September 9, 2005. Earlier, women could only ask for sustenance from a joint Hindu family.

The only restriction in force after the passage of this amendment was that women could not ask for a share if the property had been alienated or partitioned before December 20, 2004, the date the Bill was introduced. But now the Supreme Court has added this new restriction.

Indian Express says that the apex court ruling overrules some high court judgements which say that the amendment being in the form of a gender legislation, should apply retrospectively for the sake of removing discrimination.

The top court shot down the argument that a daughter acquires right by birth, and even if her father had died prior to the amendment, the shares of the parties were required to be redefined. "The text of the amendment itself clearly provides that the right conferred on a 'daughter of a coparcener' is 'on and from the commencement' of the amendment Act. In view of plain language of the statute, there is no scope for a different interpretation than the one suggested by the text," it said. 

Further, there is neither any express provision for giving retrospective effect to the amended provision nor necessary intent, noted the court, adding "even a social legislation cannot be given retrospective effect unless so provided for or so intended by the legislature".

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.