Tax exemption limit should be Rs 2 lakh

Tax exemption limit should be Rs 2 lakh

This time around, the Budget will be presented amid heady inflationary winds and much jostling over the bills which are long pending before Parliament. The initiatives will be seen in the backdrop of the government making a desperate attempt to provide succour to the ululating common man. But apart from this, there are some banking-related issues waiting for some signals. These include a stand on domestic bank licences, capital gain tax on transition from a branch to a wholly-owned subsidiary of a foreign bank, besides a rollout of specific measures for mortgage and MFI sectors. As per RBI figures, aggregate deposits of scheduled commercial banks (SCBs) have increased from Rs 4,49,000 crore as of March 31, 2010, to Rs 4,97,000 crore as of December 10, 2010 —a growth of 10.6%. Also, bank loans have grown from Rs 3,24,000 crore to Rs 3,76,000 crore as of December 10, 2010 — a growth of 16% in the said period. This shows significant credit growth vis-a-vis deposit growth. In fact, it was in the third quarter of the current fiscal that the difference between deposit and credit growth peaked, thus putting pressure on liquidity. On the bright side, strong domestic demand and government capex in the financial year has provided a big boost to GDP growth, which has been more than 8.5% till date for the fiscal. The International Monetary Fund (IMF) projects India's GDP growth for FY11 at 8.8%, while the government has projected it at 8.6%. However, firmer crude oil prices and sectoral imbalances, particularly the supply-demand mismatch for non-cereal food items, has led to a consistently high inflation rate. Steps taken by the Reserve Rank of India (RBI) to maintain a balance between growth and inflation have produced muted results indicating that monetary measures to control inflation have their limitations.

Some of the key steps taken since the last budget impacting the banking sector are as follows:

1.) Statutory liquidity ratio (SLR) reduced to 24% from 25%.

2.) Repo rate increased by 175 bps (100 basis points is 1%), from 4.75% to 6.5% and reverse repo rate by 225 bps, from 3.25% to 5.5%. Also, cash reserve ratio (CRR) also increased by 50 bps from 5.5% to 6%.

3.) Base rate for banks introduced for lending purposes.

In view of the above-mentioned facts, some fiscal measures to help banks participate more substantially in infra-related sectors and continue their support to retail mortgages would be welcome. Also, giving infrastructure status to townships, providing tax breaks for housing development will act as growth catalysts. Further, extending tax holiday benefits for export-oriented units by another three years will be well received. Besides, tax-free status for fixed deposits up to three years and more would also be a welcome move. This will help banks manage their asset liability management (ALM) mismatches better. In addition, enhancing the tax exemption limit to Rs 2,00,000 in line with the proposed Direct Tax Code Bill (DTC) from April 2012,would provide immediate relief to the salaried class going by the present inflationary scenario. – www.financialexpress.com

READING [Art of reading]

 

READING

INTRODUCTION:

Reading is inevitable for knowledge gaining. The main purpose behind our reading is to make connections between what we have already known and what we need to know. Knowledge is wide. Gaining knowledge or updating in particular subject is highly required for the present business world. There may be many reasons for reading-

Practical application;

To get an overview;
To locate specific information;
To identify the central idea of theme;
For pleasure and enjoyment.
FAST AND SLOW READING:

How to read. The style of reading may be of two types – fast reading and slow reading. Fast reading may be used for the following:

To gain an overview of the material;
To separate relevant from irrelevant material;
To locate specific information;
To identify the central theme or idea;
There are three effective fast reading styles which are scanning, key words spotting and skimming. The speed reading aims to improve reading skills by-

Increasing the number of words read in each block;
Reducing the length of time spent reading each block; and
Reducing the number of times your eyes skip back to a previous sentence.
Slow reading helps to gain a detailed understanding of the material and maintain your connection. A slow reading is useful to-

Evaluate what you have read;
Remember exactly what you have read;
Follow instructions or directions;
Understand difficult terms or ideas.
TECHNIQUES:

The following are the techniques of reading-

Reading for enjoyment – like reading a novel or magazine – it is involves light reading;
Exploratory reading – skimming through the book to get the gist of the topic. Skimming involves finding out what something is all about. In order to skim one is to formulate questions before begin to read. E.g., What is this all about. Does this article deal with the subject one is researching. Etc.,
Revision reading – skimming through a book which is familiar in order to confirm knowledge;
Search reading – scanning for a specific piece of information or to answer a specific question;
Proof reading – carefully focusing on spelling, punctuation and sentence structure and checking accuracy;
Reading for mastery – to get detailed information or understanding the topic; For this careful, slow and repeated reading is adopted;
Critical reading – reading for stimulus, for challenge, to assess values and ideas an in reading a book for review or critically analyzing a novel. The most important skill in critical reading is asking questions. Skim through the passage first read the passage more slowly keeping in mind certain questions like why does the author make this statement; how do you feel about this information; what opinions, feelings and attitudes are being expressed; are they facts or opinions; is the information logical; examine the choice of words used – what connotations are suggested; then re read silently and aloud for a number of times and finally form the opinion as derived from critical reading.
READING PURPOSE:

Reading is essential for success. It also means taking some risks. One cannot read everything. One cannot read everything in the same way. One has to decide why he is reading and he what he wants to get out of it and this means of selecting what to read and how much attention to give certain parts of his reading. Deciding the purpose of reading one is to decide the approach and the depth of reading-

For a set text or wider reading.
For a lecture
For a tutorial/seminar.
For an assignment
For an exam.
Before reading one has to look-

at the title, details about the author and work out how the work fits in with other texts in the subject;
scan the contents page and the index to gain an overview of the are covered by the work;
skim through the work, picking up key paragraphs and sentences, particularly the opening and closing sections of chapters or articles
and then read the whole carefully, nothing major points and ideas in one's one words as well as sections to which one may wish to return later.

For assignment or for research one may try the following steps:

start with a book from the reading list which gives an overview of the topic;
as you read, keep asking yourself exactly what you are looking for and write down those questions as a guide to reading;
keep doing the look, scan and skim procedure to make sure the material is both relevant to your needs, and that you are not duplicating information you have already found;
record the details of author, title, place of publication, publisher and date as you select each work so that you don't have the frustration of trying to find it again and preparing your reference list/bibliography. Record page numbers with any notes you take;
take notes from your reading as you would if you were reading for research purposes.
DIFFICULT READING:

When you find reading is difficult there are several strategies that you can try-

Be an active reader by asking yourself questions about what you are reading and how it relates to your research;
Prepare for reading by consulting your lecture, notes beforehand for guidance and an overview;
Turn section headings in the book or article into questions and answer them in your own words after you have read the section;
Break the reading into smaller sections and note one section at a time;
If the language or style used make the work too difficult to grasp, seek help from your tutor or lecture, who may be able to suggest a more straightforward introduction to the topic.
STRATEGIC READER:

Strategic readers actively construct meaning as they read, interacting with the text. They set purposes for reading, select method of accomplishing these purposes, monitor and repair their comprehension as they read and evaluate the completed task. A strategic reader constructs, examines and extends meaning before, during and after reading for a variety of texts. There are a number of differences between strategic readers and poor readers during all phases of the reading process.

By: Mr. M. GOVINDARAJAN

Avoiding litigation under Section 11 of the Arbitration Act

 

January 4, 2012
Avoiding litigation under Section 11 of the Arbitration Act

There is much litigation in courts under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter, "A&C Act"), on appointment of arbitrators. Often, the party resisting the arbitration exploits all its might to stall the appointment of arbitrator, which can easily last a few years. A real threat of rising litigation costs is used to politely arm-twist a weaker party into a settlement, even if the latter has a genuine claim.

This post is aimed at attempting to propose a solution, in order to expedite the actual arbitration proceedings. The solution is Section 11 of the A&C Act, which is the cause of the entire problem as well.

Section 11(2) of the A&C Act provides that the parties are free to agree to the procedure for appointment of arbitrators. It is only in the absence of an agreement between the parties over a procedure, or failure to act according to the agreed procedure, that one of the parties can approach the court for appointment of the arbitrator.

Therefore, the parties are free to agree that if upon expiry of a definite time period, from receiving a request for appointment of an arbitrator, the other party does not appoint its own arbitrator, the former's arbitrator shall act as a sole arbitrator. This procedure obviates a situation where one party will have to approach the court for appointment of arbitrator. It is a very practical provision, which seems to have been completely ignored in India.

A similar provision, although more clear and elaborate, exists in Section 17 of the English Arbitration Act, 1996.

Relevant portion of the model arbitration clause under London Maritime Arbitrators Association Terms, incorporating the essence of this provision, reads as follows:

"The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that ithas done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement."

This is a useful provision, which could be used while drafting an arbitration clause, in order to avoid a situation where a genuine arbitration claim is stalled under Section 11 of A&C Act.

I am uncertain whether this provision for default appointment of arbitrator has ever been tested in courts in India (I would be grateful if someone could bring to my attention a decision where it has been tested). It would be interesting to see whether our courts adopt a non-interventionist approach or indulge in some ingenuous attempts to exercise jurisdiction.

Income Tax Arrear Letter from CPC Bangalore just a communication of demand not a

 

Income Tax Arrear Letter from CPC Bangalore just a communication of demand not a demand notice, No need to respond to tax notices for below Rs 100

It has been reported in some sections of the press that the Central Processing Centre , Bangalore is sending notices for payment of taxes which are as small as Rs. 1/- , 4/- , 6/-, causing unnecessary hardship to assesses .

It has been stated that when the refunds for amounts less than Rs. 100/- are not issued by the Income Tax Department, then the demand for less than Rs. 100/- should also not be collected .

Clarification in this regard is as follows:

Arrear Demand Communication

The Income Tax Department has created a central repository of all demands for better demand management as required by Standing Committee of Parliament and C&AG. To achieve this, all officers were asked to collate demand lying at various places viz. IRLA, TMS and manual registers and upload onto CPC portal. This was also part of the annual action plan. Consequently AOs have uploaded the same. During a meeting with Bangalore Chartered Accountants association, it was suggested that taxpayers should also be informed about the same so as to enable them to take necessary action if the outstanding demands were incorrect. This measure was aimed at providing greater transparency. Therefore, a communication has been sent to taxpayers informing them about existing arrears. It may be clarified that this communication is not a demand notice. This measure is, in fact, an assessee -friendly exercise. The Department has also written to all chief commissioners to amend such entries, if found incorrect, when approached by taxpayers. This would correct the database if a taxpayer has proof of payment etc. As per extant procedure, demand of less than Rs. 100 is not enforced but is liable for adjustment against future refunds.

AUDIT OVERSIGHT KEY TO AUDIT INDEPENDENCE

 

AUDIT OVERSIGHT KEY TO AUDIT INDEPENDENCE

One of the important rights that shareholders enjoy is the right to receive financial information periodically. It is widely perceived that managers have a temptation to `cook' account books and provide favourable financial information to the investing public. Therefore, there is a need to have an independent third party, with adequate competency, to review those financial statements to assess whether they provide a `true and fair view'. The statutory auditor plays that important role. The auditor provides a reasonable assurance that the financial disclosures are fair and complete, and thus, enhances the investors' confidence, which is essential to the promote liquidity and efficiency of the capital market. A developed capital market ensures flow of capital to the corporate sector and efficient allocation of capital. Thus, the auditing profession plays a critical role in the economic development of a country. It is a well-established view that the statutory auditor is the watchdog of the public interest. Yet, the auditee (the company) pays the fees. Neither the government nor the public pays the audit fees. Although shareholders enjoy the right to appoint the auditor, in practice, the management appoints the auditor. Consequently, a fundamental tension exists for the auditor whereby the party to whom he technically owes primary allegiance is not the party who pays for his services. Thus, auditor's independence is potentially compromised simply by accepting the audit engagement. Audit firms, like any other professional firms, strive for growth and intend to retain the client. Therefore, while engaged in the audit of financial statements of a particular year, it expects to get appointment for the next year. Moreover, like any other professional firm, bottom line is important for audit firms. Therefore, they have a temptation to cut cost. As was revealed in the case of Enron, the audit techniques and procedures follo wed by the auditor (Arthur and Anderson, one of the then big Five audit firms) remained unchanged even when the audit risk enhanced significantly. This inherent tension and temptation to compromise on audit quality cannot be glossed over. Therefore, search for mechanisms to enhance auditor's independence and audit quality continues. It is imperative that effective oversight of the accounting profession and of independent audits is critical to the reliability and integrity of the financial reporting process. Various mechanisms exist for auditor oversight. About three decades back, auditor oversight through `self regulation' was prevalent in most countries. In this regard, auditing profession was no different from many other professions (e.g., medical and legal). `Peer review' and `disciplinary mechanism' were some of the systems being used by the accounting and auditing profession to ensure independence and quality. With large-scale audit failures, the credibility of `self-regulatory measures' is being questioned. Audit oversight mechanisms, which are not predominantly based on self-regulation, are being introduced as a part of the audit reform. One such system is the review of statuary audit by the audit committee of the board of directors. In USA, the Sarbanes-Oxley Act (2002) created the Public Company Accounting and Oversight Board (PCAOB). One of the PCAOB's responsibilities is to conduct independent inspections of public company audit firms. In India, in 2007, the government has constituted a `Quality Review Board'. It is generally believed that rotation of auditors or lead audit partner periodically will be mandatory on the promulgation of the new Companies Act. There is no consensus that this system will strengthen the auditor's independence and audit quality. There is a concern that, in absence of adequate number of large audit firms, Big Four will enter into a tacit arrangement to rotate audit among them. Luckily, in India, share of the BIG Four is around 50 per cent. Therefore, most companies should be able to appoint auditor of their choice. However, they might also prefer to restrict the rotation among two or three firms of their choice. International Organization of Securities Commissions (IOSCO) has recommended establishment of an independent regulator to oversee the auditing profession. India should not jump to accept the recommendation of the IOSCO. Some research findings observe that PCAOB's inspections have not yielded better results than those from the peer review system. It is not a great idea to introduce all the systems at a time without evaluating the experience of other countries. Rather, the accounting profession and the government should work together to strengthen the existing `audit oversight' systems. - www.business-standard.com

Merely because appeal memo is not signed by all legal representatives, it c

Merely because appeal memo is not signed by all legal representatives, it cannot be rejected on that ground

Income-tax : As per section 159, every legal representative is personally liable to the extent of interest in the estate inherited by him and he being deemed assessee under section 159(3), is to be treated as an assessee aggrieved as contemplated under section 246A, and, therefore, entitled to file appeal subject to fulfillment of other conditions [Section 159 of the Income-tax Act, 1961 - Legal representatives] - [2011] 10 taxmann.com 101 (Mum. - ITAT)

Bank cannot be compelled to give loan: consumer court

..Bank cannot be compelled to give loan: consumer court
A bank cannot be compelled to provide loan "under any law or procedure" to a consumer and the latter cannot demand compensation for expenses incurred in applying for the process, the Delhi State Consumer Forum has ruled.

"Under no law and procedure, a bank can be compelled to give loan, and that is what the complainant wants. If in the process of furnishing documents, some expenses have been incurred by him, as argued, he can not be entitled to the compensation," Justice Barkat Ali Zaidi said.

The State Consumer Commission gave the order while dismissing an appeal by three Delhi residents against ING Vysya Bank at the admission stage in an ex-parte order.

Applicants Muni Lala Goel, Veenu Mangla and Suresh Mangla had approached the state consumer commission to appeal against a Delhi district consumer forum ruling, which had dismissed their pleas for compensation from the bank for rejecting their loan applications.

Alternatively, they had sought consumer forum''s direction to the bank to advance loan to them.

However, the Delhi State Consumer Commission dismissed their appeal saying that neither a bank can be compelled to give loan nor the consumer can demand compensation incurred in the process.

Earlier, the matter was also adjudicated by the Banking Ombudsman under the Banking Ombudsman Scheme and then by its appellate authority.

The state consumer forum also observed that it cannot reopen the same proceedings now.

"The State Consumer Forum cannot reopen the proceedings and pass another judgment on the dispute. There is no question of deficiency in service involved," it said.
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