CARO 2003 by CA Nitin Nanda

Companies (Auditor’s Report) Order, 2003 (CARO, 2003)

• All companies including a foreign company as defined u/s 591

• Banking companies, insurance companies and Section 25 companies = Exempt

• Private companies fulfilling certain conditions= Exempt

• Manufacturing company /Finance company / Investment company

• Exemption

Turnover excludes:

• Sales tax collected or excise duty collected if they are credited separately to sales tax account or excise duty account;

• Trade discounts

• Sales return even if the returns are from the sales made in the earlier years.

• Income received by way of rent or dividend/interest

Turnover Includes:

• Commission allowed to third parties;
CARO = applicable to a private limited company if, at any point of time, during the financial year covered by the audit report:

• Paid-up capital and reserves exceed the limit of rupees fifty lakh;

• Loan outstanding exceeding rupees twenty five lakh,

• Turnover exceeds rupees five crore. 

Matters to be Included under CARO, 2003

The CARO, 2003 has also specified the matters to be included in the auditor’s report of various companies. The auditor’s report on the account of a company to which this Order applies shall include a statement on the matters, as specified in paragraphs 4 and of CARO, 2003.
Every audit report u/s 227 shall contain the matters specified in paragraphs 4 and 5.

1.  Inventory:

a)  Did management conduct physical verification at reasonable intervals?

b)  Is procedure = reasonable w.r.t. size of the company and the nature of its business?

c)  If not, what are the inadequacies?

d)  Are Inventory Records= adequate?

e) Any material discrepancies on physical verification? Adjustment in books?

2.  Fixed assets:

a) Did management conduct physical verification at reasonable intervals?

b) Is procedure = reasonable w.r.t. size of the company and the nature of its business?

c) If not, what are the inadequacies?

d) Are Fixed Assets Records= adequate?

e) Any material discrepancies on physical verification? Adjustment in books?

f) If substantial part of fixed assets disposed off during the year, whether Going Concern impacted.

3.  Cost records:

a) Records prescribed by the Central Government u/s 209(1) (d)?

b) If so, whether such accounts and records made and maintained.

4. Chit fund companies:

a) Provisions of any special statute applicable to chit fund complied with?

b) If not, what was the default?

5. Deposits from public:

a) If company accepted deposits from public, whether RBI guidelines and 58A/58AA complied with.

b) If not, what was the default?

c) If order passed by Company Law Board, complied?

6. Internal control:

a) Is Internal Control for the purchase of inventory/fixed assets and sale of goods Any repeated occurrence of major weakness in internal control.

7. Statutory dues:

a) Is the company regular in depositing undisputed statutory dues including PF, Investor Education and Protection Fund, ESIC,  Income tax, Sales-tax, Wealth-tax, Custom Duty, Excise Duty, Cess etc with the appropriate authorities.

b) If not, how much outstanding for > 6 months for due date

c) If dues ≠ deposited but dispute filed at which forum?

8.  Frauds:

a) Any fraud on or by the company noticed or reported during the year?

b) If yes, nature and the amount?

9. Internal Audit:

a) Is Internal audit system = reasonable w.r.t. size of the company and the nature of its business?

a) Applicable for

10. Loans to/from Related Party u/s 301 of Companies Act

11. Loan to /from Related Party u/s 301 of Companies Act?

a)  Who? Amount?

b) Rate of Interest = prima facie prejudicial to the interest of the company?

c) Repayment of principal amount and interest = regular?

d) If Outstanding > Rs 1 lac, whether reasonable step taken by the company for recovery / payment of principal and interest.

12. Loans against Securities (pledge of shares, debentures):

a) Adequate documents and records maintained?

b) If not, deficiencies=?

13. End use of issue proceeds:

a) Short term funds ≠ Long term investment

b) Long term funds ≠Short term investment

c) If yes, the nature and amount?

14. Dealing in Securities (Company):

a) Adequate documents and records maintained?

b) Timely entries made therein?

c) Whether company holds shares, debentures etc in its own name except to the extent of the exemption, if any, granted u/s 49

15. Guarantee Given  for loans:

a) Did company give any guarantee for loans taken by others? Terms and conditions = prejudicial?

16. Repayment of dues:

a) Any default in repayment of dues to financial institution or bank or debenture holders?

b) If yes, the period and amount of default to be reported.

17. Application of IPO funds:

a)  Whether the management has disclosed on the end use of money raised by public issues and the same has been verified?

18. End use of borrowings:

a) Whether term loans were applied for the purpose for which the loans were the loans were obtained.

 19. Securities for debenture issued?

a)  Whether securities have been created in respect of debentures issued?

20. Preferential allotments to Related Party:

a) Any preferential allotment of shares to Section 301 parties?

b) Price =prejudicial to the interest of the company?

21. Loss making company:

a) If company registration ≥ 5 years

b) Accumulated losses at the end of FY > 50% of net worth.

c) Any cash losses in such/preceding financial year?

22.   Transaction covered u/s Section 301:
a) Relevant transactions (Value >Rs 5 lacs) = entered in register u/s 301?

b) Price = reasonable w.r.t. market prices at the relevant time?

 23. NIDHI/ mutual benefit fund/ societies-special aspects:

a) Whether net owned funds/ deposit liability > 1:20 as on the date of balance sheet.

b) Whether the company has complied with the prudential norms on income recognition and provisioning against sub-standard / default / loss assets.

c) Whether the company has adequate procedures for appraisal of credit proposals / requests, assessment of credit needs and repayment capacity of the borrowers.

d) Whether the repayment schedule of various loans granted by the nidhi is based on the repayment capacity of the borrower and would be conducive to recovery of the loan amount.

If auditor response to any clause = unfavourable or qualified, give reason also?
If auditor response to any clause = disclaimer of opinion (unable to express any opinion) give reason also?

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TAKING HOME LOAN?? READ THIS BEFORE GOING AHEAD

Taking a House is once in a life time decision for many of us with the spiraling prices of the property and the high interest rate regime in the market. Thus, selecting the right home loan product in the market becomes much more important for many of us to avoid any surprises later.

Suresh Laxminarayan, a Bangalore-based techie, wanted to build a house in Bangalore. With great difficulty, he bought a 2400 square feet plot and was on a hunting phase for a home loan. It took him a great deal of time to do a survey and finalise on a home loan from State Bank of India (SBI) about ten years ago.
“When I took the home loan I had checked out about 10 different loan products. While I was sanctioned a loan for 20 years, I foreclosed my loan six months ago, that is within ten years,” said Laxminarayan.

What are the right things he did? Read on to learn a few useful tips from him.

1. Good research: Do not go as per what your loan agent says. You do your own research of the best terms available in the market. “While taking my loan, my agent did everything to stop me from going to SBI. I later on realized why, SBI pays less commission to agents, so they earn less. Hence they badmouth the bank,” said Laxminarayan. “But SBI gave me the cheapest rate of interest,” he added.
2. Spend conservatively: keep a tab on your spends during the home loan tenure. The old adage “A penny saved is a penny earned,” holds true in case of home loan too. When you save money, you could actually use it to foreclose the loan.
3. Park your additional funds: A couple of banks have a facility, which allows borrowers to park their additional funds in the loan accounts. “This will reduce the interest proportionately from the principal amount for the time that the amount was parked. This is an interesting option. This was not there when I took a loan,” said Laxminarayan.
4. Learn what is floating or fixed rates: there are two types of interest rates that banks offer: floating and fixed interests. Floating interest rate is linked to market. It moves in tandem with a base rate.  Where as fixed interest remains fixed for a few months defined in the loan agreement. It is important to understand that in most cases floating rates work out cheaper than fixed rates in the long run.
5. CIBIL Score : It is important to have a score of 750 plus to get attractive rate of interest on your Home loan. Cibil data indicate that 80% of the home loan approvals are given to customer who have a credit score of 750 plus. Low Cibil score could possibly reject your Home loan application or you may have to pay a higher interest rate.
6. Understand foreclosure norms: Recently, RBI banned foreclosure penalties. So make sure you do not pay anything extra while foreclosing your loan.
7. Save up to foreclose: if you can save Rs 1 lakh in the current fiscal, do not use it on a dream holiday abroad. Instead use it to foreclose your loan. “My advice to every borrower is that learn to foreclose your loan as soon as possible. The sooner you free the amount you pay for equitable monthly installments (EMI), the earlier can you enjoy the freedom to spend that money on luxuries of life,” added Laxminarayan.
8. Compare processing fees: whether it is for a fresh loan or for a balance transfer. Enquire in all the banks before you finalise.
9. Read the documents: read everything written in the loan agreement before you sign on the dotted line. It is very important to be aware of terms and conditions.
10. Increase the bridge funding: every borrower has to pay some money from his own pocket while buying a house. Try to pay as much as possible as down payment. This will reduce your interest paid on the principal.

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How to convert e-gold into physical

If you have invested in e-gold through NSEL (National Spot Exchange Ltd), then there is a procedure to convert those units into physical gold like gold coin or bars and take delivery of the same. The e-gold units held in demat form need to be transferred to the designated beneficiary account of NSEL. A beneficiary account is a demat account in the name of an individual (single or joint holding). It is similar to a bank account. This account is to be used by the account holder for holding and transacting in demat units in electronic form.

Here are some steps involved in converting e-gold into physical:

Submit DIS & SRF

You first need to surrender the e-gold units to the depository participant (DP). You have to submit a delivery instruction slip to the DP along with the surrender request form (SRF)—which is available on the NSEL website freely.

The DP will hand over the e-gold units to the NSEL based on DIS. The depository participant then attests the signature of the investor on the transfer request form (TRF) and handover the same to the investor along with the DIS acknowledgement. Remember to take an acknowledgement of the delivery instruction slip. The investor then submits DIS and SRF to NSEL specifying the center of his choice from where he intends to take delivery.

Charges to be paid

On receipt of the copy of DIS and SRF, NSEL would compute charges relating to making and packaging charges of coin/ bar, delivery charges, VAT (value added tax) and other dues (if any).

The Exchange will communicate the total amount due to the respective client through the email ID provided in the surrender request form. The investor will be required to deposit a cheque of requisite amount favouring “National Spot Exchange Ltd” with the vault. In case the amount payable on above account will be more than Rs. 50,000, the payment will be acceptable by demand draft.

The minimum quantity e-gold units can be converted into 1gm gold coin, and in denominations of 8gm, 10gm, 100gm and 1kg or in combinations of these multiples. 1 unit of e-gold is equivalent to 1gm of gold. General applicable charges are Rs. 200 for 8gm and 10gm, Rs. 100 for 100gm, and no charges if the weight goes up to 1kg of gold conversion.

When you opt for physical delivery against surrender of demat units, you will be required to pay VAT as per the current rate. However, for buying and selling of e-gold units and taking / giving delivery in demat form, you will not be required to pay any VAT, octroi or other taxes. 

Physical gold is stored in vault

Equivalent physical gold is kept by NSEL in designated vault having purity of 995 and is fully insured. Delivery of physical gold will be offered in specified denominations and at particular locations only, where NSEL has made vaulting and delivery arrangements. Delivery of physical gold will be made at Ahmedabad, Mumbai, Delhi, Kolkata, Indore, Kanpur, Jaipur, Hyderabad, Cochin, Bangalore and Chennai. Investor has to intimate NSEL about his preferred choice of center in the delivery instruction slip from among the said centers.  

The investor can lift the commodity from the designated vault after seven days and within 15 days from date of submission of the request. In case of non-lifting of the delivery within 15 days, the holder shall be liable to pay storage charges for the entire month. You should carry the DIS acknowledgement and original SRF along with the proof of identification.

Procedure for physical delivery of e-gold:

• Submit a delivery instruction slip to DP with the surrender request form
• DP transfers the e-gold units to the NSEL account based on DIS
• DP then attest the signature of the investor on the transfer request form (TRF) and handover the same to the investor along with the acknowledgement of DIS
• Investor then submits DIS & SRF to NSEL specifying the center from where he intends to take delivery
• NSEL computes charges relating to making & packaging charges, delivery charges, VAT and other dues
• NSEL communicates the total amount due to the investor through the Email ID provided in the SRF
• Investor is then required to make such payment through DD/Cheque in favour of “National Spot Exchange Ltd”

 

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7 secrets of investing the Warren Buffett way

Human beings always have a natural tendency to follow the crowd, but when it comes to share market investing, following the crowd can more often result in ending up with losses. Why do you copy the mediocrity of the masses when you can replicate the success of the of one of the world’s greatest investors?

The investment secrets of Warren Buffet have got unveiled here.

1) Look at quality businesses; not just the stocks
Warren Buffett said, “When I buy a stock, I think of it in terms of buying a whole company, just as if I were buying a store down the street.” Most investors don't analyse the businesses they invest in. They simply follow the symbols or brands of successful corporate houses.

If you are buying a shop, you will analyse about the products dealt by the shop, overall sales, consistency of sales, competition for the shop, competition strength of the shop, how the shop will manage the change in customer trends and so on. We need to apply a similar logic before choosing a stock. Don’t think that you are only buying a few shares of that company. Will you buy the whole company if you had enough money?

2) Are you willing to own a stock for 10 years? If no, then don’t own it even for 10 minutes.
Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years. In the short run, the market is like a voting machine—tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine—assessing the substance of a company. Looking at the short term opportunities in the stock market will not be a long term successful strategy. If you don't feel comfortable owning something for 10 years, then don't own it even for 10 minutes.

3) Check thousands of stocks and look for very high bargains
Avoid investing based on the stock tips or recommendation. Do your own research. Analyse thousands of stocks before choosing the right stock to invest. Once you have chosen a right stock, wait till the share is available at a very high bargain price. Buying a right stock at the right price is the key to investment success. Investors have the luxury of waiting for the “fat pitch”.

It is really difficult for an individual investor to analyse thousands of stocks and finding out the right time to buy a stock. If this is the case, you can outsource this portfolio management to a professional financial planner or wealth manager. But you need to be careful in choosing a professional who is capable and at the same time customer centric.

5) Scrutinise how well management is using the resources
Check how efficiently the management is using its resources like money, manpower and material. This management efficiency will in turn reflect in return on equity and return on capital.

6) Always stay away from “the hot stocks”
The hot stocks are those stocks which have some attention catching activity such as severe volatility in share prices, high trading volume or when the stock is in news. Stay away from these hot stocks.

Warren Buffett once said, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”

7) How much money you will make?
Before investing in a stock calculate ‘how much money you will make’ in this investment. Of course, you need to make a few assumptions to do this calculation. But do calculate.

Most often investors tend to ask the share is undervalued or overvalued. Identifying the intrinsic value of the stock is difficult and the various models available to calculate the intrinsic value are faulty.

Warren Buffett wrote in a report “Unless we see a very high probability of at least 10% pre-tax returns, we will sit on the sidelines.”

Get rid of the weeds and water the flowers — not the other way around
People have this tendency of loss-aversion. That is when the share price has fallen down by 50%, they choose to wait. They convince themselves and others by saying “It will definitely come back”.

Also people will rush to book profit when their shares go up just by 10%.

In effect investors tend to keep the loss making shares with themselves and they offload their profitable shares. Actually it needs to be the other way around.

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Value added tax system is more transparent, uniform and less prone to tax evasion.

 

 The value added tax (VAT) in India is a state level multi-point tax on value addition which is collected at different stages of sale with a provision for set-off for tax paid at the previous stage i.e., tax paid on inputs. It is to be levied as a proportion of the value added (i.e. sales minus purchase). VAT system is more transparent, uniform and less prone to tax evasion VAT is a consumption tax because it is borne ultimately by the final consumer. VAT is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain. 

It is collected fractionally, via a system of deductions whereby taxable persons can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities. This mechanism ensures that the tax is neutral regardless of how many transactions are involved.

In other words, it is a multi-stage tax, levied only on value added at each stage in the chain of production of goods and services with the provision of a set-off for the tax paid at earlier stages in the chain. The objective is to avoid 'cascading', which can have a snowballing effect on prices. It is assumed that due to cross-checking in a multi-staged tax, tax evasion will be checked, resulting in higher revenues to the government.

Advantages of VAT

• To encourage and result in a better-administered system;
• To eliminate avenues of tax evasion;
• To avoid under valuation at all stages of production and distribution;
• To claim credit on tax paid on inputs at each stage of value addition;
• Do away with cascading effect resulting in non distortion of the business decisions;
• Permits easy and effective targeting of tax rates as a result of which the exports can be zero-rated;
• Ensures better tax compliance by generating a trail of invoices that supports effective audit and
• Enforcement strategies;
• Contribution to fiscal consolidation for the country. As a steady source of revenue, it shall reduce the
• Debt burden in due course;
• To stop the unhealthy tax-rate war and trade diversion among the States, which had adversely affected
• The interests of all the states in the past.

Methods of computation

VAT can be computed by using any of the three methods:

• Subtraction method: Under this method, the tax rate is applied to the difference between the value of output and the cost of input;
• Addition method: Under this method, value added is computed by adding all the payments that are payable to the factors of production (viz., wages, salaries, interest payments, etc.);
• Tax credit method: Under this method, it entails set-off of the tax paid on inputs from tax collected on sales. Indian states have opted for tax credit method.

VAT is a multi-stage tax on goods that is levied across various stages of production and supply with credit given for tax paid at each stage of value addition. VAT is the most progressive way of taxing consumption rather than business.

Procedure

The VAT is based on the value addition to the goods and the related VAT liability of the dealer is calculated by:

• Deducting input tax credit from tax collected on sales during the payment period.
• This input tax credit is given for both manufacturers and traders for purchase of input/supplies meant for both sales within the state as well as to the other states irrespective of their date of utilization or sale.
• If the tax credit exceeds the tax payable on sales in a month, the excess credit will be carried over to the end of the next financial year.
• If there is any excess unadjusted input tax credit at the end of the second year then the same will be eligible for refund.
• For all exports made out of the country, tax paid within the state will be refunded in full.
• Tax paid on inputs procured from other states through inter-state sale and stock transfer shall not be eligible for credit.
• VAT has been introduced by 30 states / UTs. However, Central Sales Tax will continue to govern inter-state sales and exports.

Rates of tax

• VAT will have four broad type of rates.
• 0% (Exempted) for unprocessed agricultural goods, and goods of social importance.
• 1% for precious and semiprecious metals.
• 4% for inputs used for manufacturing goods, capital goods and other essential items.
• 20% for demerit/luxury goods.
• The rest of the commodities are taxed at a revenue neutral rate of 12.5%.

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COMMON QUESTIONS YOU FACE DURING TAX AUDIT: ANSWERED BY C.A NITIN NANDA

Q1. Will Tax Audit Report u/s 44AD, 44AE, 44AF be counted in the specified limits of 45 Tax Audits? What are the limits on signing of Tax Audit Report?

Ans. As per Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008:

a) A CA can sign up to 45 Tax Audit.

b) In case of Partnership Firm, limit will be 45 / Partner.

c) Audit U/S 44AD, 44AE, 44AF will not be included in the limit. (FROM FY 2012-13, SEC 44AF IS NOT APPLICABLE)

Q2. What are the Tax Audit Reports which are to be compulsorily filed online? Should we sign Tax Audit Report on 30^th September?  Where audit is to be conducted u/s 92E & 44AB, what is the last date of filling online Tax Audit Report?

Ans. As per Notification No. 34/2013 dated 01/05/2013, & Notification No. 42/2013 dated 11/06/2013, Audit reports under Sections 10 (23C) (iv), (v), (vi) or (via), 10A, 12A (1)(b), 44AB, 80-IA, 80-IB, 80-IC, 80-ID, 80JJAA, 80LA, 92E or 115JB are to be filed electronically. (It covers audit report u/s 44AD, 44AE, 44AF also) (FROM FY 2012-13, SEC 44AF ISNOT APPLICABLE). As the word “before” has been used in sec. 44AB, we should not sign Tax Audit Report on 30^th September. You should sign Tax Audit Report before 30^th September, since the assessee is required to “obtain” Tax Audit Report before the due date i.e. 30^th September.  Where audit is to be conducted u/s 92E & 44AB, 3Oth sep. is the last date of filling online.

Q3. Please advice in case of partnership firm can only one partner sign all the reports?

Ans.

a) Clause 12 Of Part I of Schedule I of C. A. Act allow a partner to sign on behalf of (i) Other Partner (ii) Firm

b) Sign can be either digital or physical

c) In my view, one partner can sign form 3CD etc. keeping in view the limit of 45 audits per partner.

Q4. An individual has two businesses audited by two different tax auditors. How to submit Tax Audit Report?

Ans. In my view, you can follow the below mentioned steps:

a) Combine data of two Tax Audit Reports and submit as one

b) If tax audit conducted by two CAs, any CA can submit.

c) It is advised to attach physical copies of both Tax Audit Reports too, for disclosure of the fact.

Q5. Can Income tax Return be e-filed after 30^th September? However we will file Tax Audit Report within 30^th September?

Ans. Yes, Online Tax Audit Report is to be filed by 30^th September to avoid penalty of Rs. 1.5 Lakhs or ½% of Turnover, whichever is lower. However, return may be filed later. However, such return will be treated as belated return.

Q6. What are the steps to be followed for E-filling of Tax Audit Report?

Ans. Step 1- One Time Registration of Chartered Accountant at E-filling website

Step 2 – Login to Assessee account at e-filling website and Add CA

Step 3 – Downloading, Preparing Tax Audit Report Utility & Generating XML file.

Step 4 – Uploading XML file at E-filling website from CA’s Login Id

Step 5 – Approval of form uploaded by CA at E-filling website from Assessee’s Login Id

Step 6 – Do not forget to file Income Tax Return in Relevant ITR separately

Q7. What are operating system and runtime environment requirement for E-filling of Tax Audit Report?

Ans. Operating System – Windows XP with Service Pack 3/ Windows 7/ Windows 8.

Runtime Environment – JRE 1.7 Update 6 and above, 32 Bit is required to run applets for offline forms to work.

Q8. Our system becomes very slow during working on e-utility. What should we do?

Ans. Remove all old versions of Java to improve performance. Better use Google chrome. You can  use Mozilla Firefox.

Q9. I am unable to register as CA as there is difference in name/date of birth as per ICAI and PAN data. What to do?

Ans. It is requested to file form 49 amendment and get data rectified in PAN immediately. Kindly also note that the day you receive a SMS that your pan amendment has been approved, you will be able to register at site whether you actually receive PAN or not. Alternatively, please follow instructions given by ICAI in such case which are available at icai.org.

Q10. What are the documents to be attached to Tax Audit Report?

Ans. B/S, P&L, Annexures, Notes, Cost Audit Report and Excise Audit and Other Report, if any, scanned in pdf format after being duly signed by Assessee and CA, whether digital or physical. Kindly note that word/excel file can also be digitally signed.

Q11. System is not accepting negative figures in brackets i.e. “()”. What should we do?

Ans. Use negative sign. i.e. minus “-“

Q12. Due to nature and complexity of the business of the assessee, we do not have quantitative information about the stock. The software is not accepting any comment and it is accepting only numeric value. What should we do?

Ans. Kindly note that Quantitative details of only principle items is to be given. However, in my opinion, if details are not available, 

a) Write nil in online form 3CD &

b) Report why quantitative details is not provided in the following two places:

i) In paper form 3CD &

ii) Notes to accounts

c) The Following Statement Should Be Written In Paper Form 3CD As Well As Notes: “Due To Nature & Complexity of Business of Assessee, It Is Not Possible To Provide Quantitative Details”

Q13. An assessee had purchased, say 5000 assets. His details of purchase are there in schedule. Online form 3CD again requires filling each purchase. It is a huge task resulting duplicity of work.

Ans. In view of our time constraint, such fixed assets may be grouped into different blocks of assets and each of these groups can be further divided into 2 parts.

i. Assets put to use on or before 2^nd October: For ease of entry in online form 3CD, we will argue that all assets were put to use on 2^nd October, wherever possible.

ii. Assets put to use after 2^nd October (eligible for half of depreciation): For ease of entry in online form 3CD, we will argue that all assets were put to use on 31^st March, wherever possible.

It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961 as a schedule so that breakup of each group is easily visible to the IT department.

The above can be summarized in the following steps:

Step 1 – All fixed assets may be grouped into different blocks of assets.

Step 2 – Each of these groupscan be further divided into 2 parts. (i) Assets put to use on or before 2^nd October (ii) assets put to use after 2^nd October (eligible for half of depreciation)

Step 3 - For assets brought on or before 2^nd October, we can argue that those assets were put to use on 2^nd October and accordingly relevant entries can be made in the online form 3CD.

Step 4 - For assets brought after 2^nd October, we can argue that those assets were put to use on 31^st March and accordingly relevant entries can be made in the online form 3CD.

Step 5 - It is also advised to attach the working of calculation of depreciation under the Income Tax act, 1961, as a schedule, so that breakup of each group is easily visible to the IT department.

Q14. I filled stock details in point 28A. When after validating and saving, I reopen the form; only one stock figure is displayed.

Ans. It is the inherent problem of the software but your xml file contains the correct data. Open the xml file in Internet Explorer and check it. You can edit xml file, however you have to adopt unceremonious way to edit the xml file for the necessary correction for the item in subsequent rows of point 28A. Therefore it is advised to fill up point 28A before filling any other point from point 7 onwards.

Q15. When we reopen draft saved xml file, many fields which we had already entered is showing blank.

Ans. The software has some inherent errors as a result when we reopen draft saved xml file, it shows blank i.e. we have to re-enter the fields again. These fields are 7(B), 8(B), 9(A), 10, 11(D), 12(B), 21(Notes), 22(A), 22 AND 23.

Q16. How we can view data of XML before uploading?

Ans. You can view the xml file of tax audit report prepared in e utility of department. The process is as follows:

Go to Programme → Microsoft Office → Microsoft Office Access 2003/2007 → New blank data base →Click blank data base → A window with file name database1.accdb will appear on the right hand side pane → Click on create →Your new date base is saved by default in my Documents. (You may save the same to your choice folder)

A new data base is opened. Go to and click External data → Click XML file>Browse the xml file for which you want to create/view or save the data → Click OK → Import XML → Click OK → Check the box “Save import steps”→  Close.

Your data base is ready, on the left hand side pane the indexes for “All Tables” do appear. By clicking any Table/ any point you can easily view and save its contents presently appearing in the XML file. Once the xml file is saved and the data base is reopened it will show the updated entries lying in the XML file. If some member finds any error in the tables he can easily make corrections opening the utility.

Q17. There is no provision for saving or printing downloaded Forms 3CB-3CD, or XML file.

Ans.  You can save the work in middle by using “Save Draft” Button. To view the print option opens the xml file in Microsoft Access 2007 using new projects. U can find the Data in tabular form.

Q18. CA has no option to print uploaded xml files. How to print?

Ans. CA has no option to print uploaded xml files. However, it can be printed from assessee’s login id, even before approval by assessee as the said xml file can be downloaded, from assessee’s login id, in the pdf format by default.

Q19. Can online filed Tax Audit Report be revised?

Ans. A Tax Audit Report which has not been approved by assessee can be revised. However after it has been approved by the assessee, it should not be revised. However, there is no restriction by the utility, as of now, to upload revised xml. So we should take due care, so that correct data is uploaded in the first instance itself. However, members may kindly note that, all the xml files uploaded will be there in their domain.

Q20. I have uploaded 5 returns without uploading tax audit as it was required to submit offline at that time. Should we submit these again online?

Ans. No, you are not required to submit IT Return online again. However, kindly ensure that Tax audit Report is duly uploaded within due date.

Q21. Is tax auditor responsible for delay in uploading of Tax Audit Report?

Ans.  Guidance Note on Tax Audit states that normally, it is the professional duty of the CA to ensure that the audit accepted by him is completed before the due date. Hence, yes, if delay is attributable to his part.

Q22. What is the format for maintaining records of Tax Audit Assignments?

Ans. Record of Tax Audit Assignments

1. Name of the Member accepting the assignment

2. Membership No.

3. Financial year of audit acceptance

4. Name and Registration No. of the firm/ firms of which the member is a proprietor or partner.

Sl. No.	Name of the Auditee	AY of the Auditee	Date of Appointment	Date of acceptance	Name of the firm on whose behalf the member has accepted the assignment	Date of communication with the previous auditor (applicable)
1	2	3	4	5	6	7

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FAQs on Investor Education and Protection Fund

Who can apply for financial sanctions?
Any organization/Association/Society which fulfills the criteria/ guidelines for financial assistance under the IEPF can apply.

How to apply?The organizations are required to submit their applications in Form 3 and Form 4.

What is IEPF?
Investor Education and Protection Fund (IEPF) has been established under Section 205C of the Companies Act, 1956 by way Companies (Amendment) Act, 1999 for promotion of investors’ awareness and protection of the interests of investors.

What activities are being undertaken by IEPF?Investor Education and Protection Fund (awareness and protection of investors) Rules, 2001 stipulate the activities related to investors’ education, awareness and protection for which the financial sanction can be provided under IEPF.

1. Activities stipulated under Rules
• Education programme through Media
• Organizing Seminars and Symposia
• Proposals for registration of Voluntary Associations or Institution or other organizations engaged in Investor Education and Protection activities
• Proposals for projects for Investors’ Education and Protection including research activities and proposals for financing such projects
• Coordinating with institutions engaged in Investor Education, awareness and protection activities
    
2. Activities undertaken by IEPF till date
• Educating and creating awareness among investors through Voluntary associations or organizations registered under IEPF. – 65 associations have been registered so far.
• Educating investors through Media, Conducted panel discussions on DD (Delhi, Mumbai, Kolkata, Chennai and Ahmedabad), Telecast of TV Video spots on DD & private channels, print advertisement in national as well as regional newspapers. All these programmes have been undertaken in Hindi, English and regional languages.
• Organizing seminars and workshops through associations registered under IEPF;
• Financing research projects pertaining to investor education, awareness;
• Coordinating with institutions engaged in investor education, awareness – Indian Institute of Capital Markets (IICM) has been engaged for conducting research/study on unclaimed dividend, interest etc. and also conducting “Training of Trainers” programme.
   

What is the procedure for Registration?
Any association or institutions or organizations, engaged in the activities relating to investors awareness, education and protection and proposing for investors programmes; organizing seminar; symposia and undertake projects for investor protection including research activities may register itself under Investor Education and Protection Fund. Such NGOs/Voluntary agencies which fulfill the criteria/guidelines for the purpose of financial assistance from the Investor Education and Protection Fund may apply to the IEPF for such assistance in Form 3 and Form 4.

What is procedure for crediting to IEPF?

1. Any amount required to be credited by the companies to the Fund, as provided in the Act shall be remitted into the concerned specified branches of Punjab National Bank, within a period of thirty days of such amounts becoming due to be credited to the Fund.
    
2. (a) The amount shall be tendered by the companies on behalf of the Central Government in authorized branches of Punjab National Bank along with challan (in triplicate) and the Bank will return two copies duly stamped to the Company as token of having received the amount.
    
   (b) Every Company shall file with the concerned Registrar of Companies one copy of the challan referred to in (a) evidencing deposit of the amount to the Fund. The Company shall fill in the full description and nature of the amount tendered and its Head of Account.
    
   (c) Every Company shall, when effecting a credit to the account of the Fund, will separately furnish to the concerned Registrar of Companies a statement in Form 1 duly certified by a Chartered Accountant or a Company Secretary or a Cost Accountant practicing in India or by the statutory auditors of the company. However, it is mandatory that each Company keep a record relating to folio number, Certificate Number etc. in respect of persons to whom the amount of unpaid or unclaimed dividend, application money, matured deposit or debentures, interest accrued or was payable, for a period of three years and the Committee or Sub-Committee shall have powers to inspect such records of that period.
    

Which amounts are to be credited to IEPF?
The following amounts that remained unpaid and unclaimed for a period of seven years from the date they became due for payment is credited to the fund:

1. amounts in the unpaid dividend accounts of the companies;
    
2. the application moneys received by companies for allotment of any securities and due for refund;
    
3. matured deposits with companies;
    
4. matured debentures with companies;
    
5. the interest accrued on the amounts referred to in clauses (i) to (iv);
    
6. grants and donations given to the fund by the Central Government, State Governments, companies or any other institutions for the purposes of the fund; and
    
7. the interest or other income received out of the investments made from the fund.
    

What are the criteria for the purpose of financial assistance from the IEPF?
Criteria/guidelines for the purpose of financial assistance from the Investor Education and Protection Fund are as follows:

1. Any organization/entity who has a viable project proposal on investors education and protection should be eligible for assistance from the Fund
    
2. The limit for each person/organization for assistance from the Fund should be subject to 5% of the budget of IEPF during that financial year and not exceeding 80% of the amount to be spent on the proposed programme/activity.
    
3. The associations or institutions or organizations already engaged in activities relating to investor awareness, education and protection and proposing to take up investors programmes, organizing seminars, symposia etc. shall undertake projects for investor protection including research activities.
    
4. The associations or institutions or organizations shall be registered under the Societies Registration Act or formed as Trusts or incorporated companies.
    
5. Associations or institutions or organizations, shall unless specific exemption has been made in this regard by the Committee on IEPF, be in existence for a minimum period of 2 years prior to its date of application for registration.
    
6. Associations or institutions or organizations shall have a minimum of 20 Members and a proven record of 2 years.
    
7. The association or institution or organization shall have rules, regulations and or by-laws for the governance and management of the association or institution or organization. These rules, regulations and or by-laws shall be in conformity with the conditions of registration. The association or institution or organization shall be managed by a governing Board/management committee.
    
8. No profit making association or institution or organization shall be eligible for registration for the purposes of financial assistance from the fund.
    
9. Notwithstanding the above the Committee on IEPF can give a project to any organization.
    
10. The amount of grant assistance given from the Fund shall be subject to an audit by the Department of Company Affairs to ensure its proper utilization.
     

While considering the proposals the Committee will take into account the audited accounts and the annual reports of the last three years of the organization seeking assistance from the Fund.

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