PUNE BRANCH OF WIRC OF ICAIPUNE BRANCH OF WIRC OF ICAI

The Institute of Chartered Accountants of India(Set up by an Act of Parliament)

NEWSLETTERNEWSLETTERIssue No. 5 - May 2018

(Subscribers copy not for sale)

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PUNE BRANCH OF WIRC OF ICAIForthcoming Programmes

Notes:-

1) Programme timing includes 1st half an hour Registration.

2) For online registrations & detailed programme structure visit www.puneicai.org

One Day Training Programme for Peer Reviewers

CA. Mukesh Singh Kushwah Chairman, PRB-ICAI

CA. S. B. ZawareCCM, ICAI

CA. Ashok PradhanSpeaker

CA. Dilip SatbhaiSpeaker

CA. Kamal GargSpeaker

CA. Khurshed PastakiaSpeaker

CA. Uday SathayeSpeaker

L To R :- CA. Anand R. Jakhotiya, Chairman, Pune ICAI, CA. Mukesh Singh Kushwah Chairman, PRB-ICAI, CA. S. B. Zaware CCM, ICAI, CA. Abhishek Dhamne, Treasurer,

Pune ICAI, CA. Ruta Chitale, Vice Chairperson, Pune ICIA

“From what we get, we can make a living; what we give, however, makes a life."

SR. NO.

DATE SEMINAR NAME VENUE TIME FEES CPEHRS.

1.

3.

6.

2.

5.

8th & 9th June, 2018DNYANARTH – National Residential

Refresher Course 2018 at Shirdi

Early Bird Fees Rs. 2500/- Plus

GST Till 25th May, 2018 9.00 am To 5.30 pm

“SAI TEERTHA” - The Spiritual Theme

Park, Shirdi12 Hrs.

National Conference on “Direct Taxes”

Rs. 1500/- Plus GST 12 Hrs.

rd th23 & 30 June, 2018 Indirect Tax Refresher Course 2018 ICAI Bhawan, Bibwewadi, Pune 9:00 am To 1:30 pmRs. 800/- Plus GST for Two daysRs. 500/- Plus GST for Per Day

8 Hrs.(4 Hrs. Per Day)

7th & 8th July, 2018Women CA RRC Jointly with

Nashik BranchNashik 2 Days 12 Hrs.Under Finalisation

11th & 12th August,

2018National Conference Shegaon 2 Days 12 Hrs.Under Finalisation

4. Half Day Seminar on Internal Audit 3 Hrs.Rs. 200/- Plus GST (No Fees for

Saturday Series Participants)rd

23 June, 2018 ICAI Bhawan, Bibwewadi, Pune 3:00 pm To 6:00 pm

th th16 & 17 June, 2018 9.00 am To 5.30 pmMIT, Kothrud, Pune

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Chairman CommuniqueChairman Communique

CA. Anand R Jakhotiya

Chairman

Pune Branch of WIRC of ICAI

Respected Colleagues,

Last month, we had organised Gajare, Talekar & Bhide Award Ceremony

Motivational Lecture & distribute of various prizes to toppers from Pune

in CA Final/Intermediate Exams. Shri. Narendra Goidani Sir, Founder of

Life School & CA. Jugal Rathi guided & motivated the students.

We have taken new initiative at Pune Branch by organising Saturday

series in which we have planned 6 full days & 6 half days sessions for the

benefit of members. These sessions will be spread upto January 2019.

In April month for the first time we have organised Training Programme on How to Prepare for

IBBI Limited Insolvency Examination & also organised One Day Training Programme for Peer

Reviewers.

To improve Communication Skills & Personality Development of Pune Branch Staff members we

have organised 3 days training programme. Special thanks to CA. Riddhi Chandak, she had

given her valuable time to staff members for improving their skiils.

Press conference held with CA. Mukesh Singh Kushwah, Convener, Career Counselling Group of

ICAI & CA. S. B. Zaware, CCM, ICAI for Commerce Talent Search Test called as ICAI Commerce

Wizard -2018. The Group emphasizes on holding the career counseling programmes in various

parts of India in the year 2018-19 to advise to students at Secondary school Higher/Senior

Secondary school, Graduation/Post Graduation level & others for connecting them with the

Chartered Accountancy course.

We have planned many events including four National Conferences in coming few months. One th thNational RRC will be held at Shirdi on 8 & 9 June, 2018 at newly developed India's first nd

Spiritual Theme Park called “Saiteerth”. 2 National Conference on Direct Taxes will be held on th th

16 & 17 June, 2018 at MIT, Kothrud, Pune. Members are requested to take maximum benefit rd& learn from national level expert faculties. 3 National Conference will be held at Shegaon in

the month of August. Details will be uploaded shortly on website.

We are requesting all members & students to keep visiting puneicai.org for the all upcoming

events to be held by Pune Branch.

As you are aware, Chartered Accountant Benevolent Fund (CABF) has been created on the

concept of 'For the Peer by the Peer' to help our members or their families at the time of

need. It is our earnest duty to augment the funds for CABF by making regular contributions. I

appeal hereby to All of You to not just become Life Members of CABF but also make voluntary

contributions on regular basis.

Kindly also take benefit of the Grievance Cell. For any query, issue, suggestion members and

students can kindly meet me at branch on every Thursday and Saturday from 3pm to 6pm.

With Warm Regards,

CA. Anand R. Jakhotiya

Chairman Pune Branch of WIRC of ICAI

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“Every truth passes through three stages before it is recognized. In the first, it is ridiculed.

In the second, it is opposed. In the third, it is regarded as self evident."

CA. C. V. Chitale

Co-opted Member on

Direct Taxes Committee of ICAI,

New Delhi F. Y. 2018-19

CA. Dilip Satbhai

Co-opted Member on Committee for

Internal Audit Standard Board of ICAI,

New Delhi F. Y. 2018-19

CA. Suhas Bora

Co-opted Member on

Committee for Capacity Building of

Members in Practice (CCBMP) of ICAI,

New Delhi F. Y. 2018-19

CA. Khushbu Jain

Co-opted Member on

Committee for

of ICAI,

New Delhi F. Y. 2018-19

Capital Markets & Investor's

Protection (CCMIP),

CA. Yashwant Kasar

Co-opted Member on

Committee for Capacity Building of

Members in Practice (CCBMP) of ICAI,

New Delhi F. Y. 2018-19

“Motivational Lecture” Followed by Distribution of Various Prizes to Outstanding Students of CA Final/Intermediate Exams.

Shri. Narendra Goidani, Founder of Life School

Chief Guest & Motivational Speaker

CA. Jugal RathiGuest of Honor & Speaker

Participants

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“Happiness is not something you postpone for the future;

it is something you design for the present."

Seminar on "Practice Management for CA Firms”

ParticipantsCA. Sushrut Chitale

SpeakerFelicitation by Offering Letter for CABF Contribution

Token of Appreciation to CA. Dhiraj Dandgaval

For Supporting in Creating Barrier Free InfrastructureAt ICAI Bhawan, Bibwewadi

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Special Policy for Women Entrepreneurs, 2017Special Policy for Women Entrepreneurs, 2017Contributed by :- CA. Aalhad Deshmukh

Email :- aalhad.deshmukh@drbm.in

Preamble

Government of Maharashtra vide its Industrial Policy of 2013, has implemented incentives schemes for new and expansion units of industries in the state. To boost women entrepreneurship, the state government has come up with a special policy vide its GR dated May 17, 2018

Definition of Women Entrepreneur / Eligibility under the Policy

A. In the case of Proprietary Concern, where woman proprietor is the 100% owner of the business

B. In the case of a Partnership Firm, where women are the 100% owners in the firm

C. In the case of Cooperative Societies registered under cooperative societies act, where women are

holding 100% equity capital

D. In the case of Public or Private Limited Companies, where women are holding 100% equity shares of

such company

E. In the case of Self-help Groups, where such groups are registered with competent authority and have

been established either as Cooperative Society as per (C) above or as a Public / Private Company as per (D)

above

It must be noted that these businesses should employ at least 50% women workforce. In the case of expansion units, total women employed including original and additional employees should be at least 50% of total workforce.

Scope of the Policy

Eligible units as per the above definition who fit in the definition of Micro, Small or Medium Enterprise as per the provisions of the MSMED Act, 2006 shall be able to take benefit of this special policy. For this purpose, a micro enterprise is the one where investment in Plant & Machinery does not exceed Rs. 25 Lakhs; a small enterprise is the one where investment in Plant & Machinery exceeds Rs. 25 Lakhs but does not exceed Rs. 5 Crores and medium enterprise is the one where investment in Plant & Machinery exceeds Rs. 5 Crores but does not exceed Rs. 10 Crores.It has been mentioned in the scheme that definition of Micro, Small and Medium Enterprise as per the Package Scheme of Incentives, 2013 may also be referred. As such, units engaged in the service sector may take shelter of the same and consider investment in equipment to check eligibility under the scheme.

Eligibility of the Unit

Units eligible under Package Scheme of Incentives, 2013 and fitting within the definition of Women Entrepreneurs as above shall be eligible under this scheme. Such units need to complete at least one effective step after December 14, 2017 and should have started commercial manufacturing operations on or after December 14, 2017.

Operative Period of the Scheme

The operative period of the scheme shall be 5 years from December 14, 2017 or till the date of announcement of new scheme by the Government.

Format of the Special Scheme for Women EntrepreneursI. Terms and Conditions

Eligible units under the scheme shall have to follow all the terms and conditions as stated in the Package

Scheme of Incentives, 2013. This scheme shall be applicable for new / expansion MSME units which have

commenced manufacturing operations on or after December 14, 2017.

II. Classification of areas and incentives available

As specified under Package Scheme of Incentives, 2013, similar classification of areas shall be applicable for

this scheme. For units under Group A and B, incentives for Group C as per PSI 2013 shall be applicable. For

units under Group C and D, incentives for Group D+ as per PSI 2013 shall be applicable. For units under Group

D+ and No Industry Area, incentives for Naxalism Affected Areas shall be applicable. Given below is the

summary of this provision:

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III. Classification of units

Units shall be classified as Micro, Small or Medium Enterprise as per paragraph 2.2(i) of the Package Scheme

of Incentives, 2013.

IV. Other Definitions

Other definitions like New Unit, Expansion Unit, Eligibility Certificate, Operational Period, Effective Steps,

Fixed Capital Investment, Eligible Investment, Direct Employment, Eligible Industries, Raw Material, Sick

Unit, Financial Year etc. shall be the same as given under the Package Scheme of Incentives, 2013.

Operational RegulationsOperational Regulations of the scheme shall be as per the Government Resolution of 1979 or amended rules thereafter.

Implementing AgencyThe Implementing Agency shall be the same as mentioned in the Package Scheme of Incentives, 2013 i.e. for MSME units under this scheme; the Implementing Agency shall be the District Industries Centre.

Capital SubsidyThe eligible MSME units under this scheme shall be eligible to capital subsidy ranging from 15% to 35% of Fixed Capital Investment amounting to Rs. 20 Lakhs to Rs. 100 Lakhs. This subsidy shall be disbursed in 5 equal annual instalments from the date of commencement of commercial production. Given below is the summary of Capital Subsidy:

Sl. No.

Type of Unit Ceiling as a percentage of Fixed Capital Investment

1 Units under Group A and B 40%

2 Units under Group C and D 80%

3 Units under Group D+ and No Industry Area 100%

Sl. No.

Area / Group Classification as per

PSI 2013

Capital Subsidy as a percentage of Fixed Capital Investment

Maximum Limit of Capital Subsidy (Rs. in Lakhs)

1 A and B 15% 20

2 C 15% 20

3 D 20% 25

4 D+ 25% 50

5 No Industry Areas and

Naxalism Affected Areas 35% 100

The above capital subsidy will be available even if the said unit is also getting benefits under other scheme of the Central and State Government. However, total incentives shall not exceed 50% of Fixed Capital Investment. The above subsidy shall be paid out of Budgetary Provisions under the Package Scheme of Incentives, 2013.

Electricity Rate Incentive

Under this scheme, eligible MSME units shall be eligible for reduced rate of electricity per unit for a period of 5 years from the date of commencement of commercial production. Applications for Electricity Rate Incentives shall be scrutinised and approved as per the provisions of Package Scheme of Incentives, 2013. This incentive shall be available as follow:

“Success is not final; failure is not fatal: It is the courage to continue that counts."

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Sl. No.

Type of Units Electricity Rate

Incentive

1 Units situated in Vidarbha, Marathwada, Districts in Northern Maharashtra, Ratnagiri and Sindhudurga Districts in Konkan Region

Rs. 2/- per unit of Electricity Consumed

2 Units situated in other districts in the state of Maharashtra

Rs. 1/- per unit of Electricity Consumed

Interest Subsidy

All new and expansion units under this scheme shall be eligible for the interest subsidy from interest paid on Term Loan taken from Banks and Public Financial Institutions for acquisition of Immovable Property to the extent of interest actually paid or 5% per annum whichever is less after deducting concession from any organisation or Central Government and Penal Interest if any.

It must be noted that the interest subsidy in any year shall not exceed twice of electricity bills paid during the year. Needless to mention that interest subsidy claim and other procedure shall be the same as mentioned under the Package Scheme of Incentives, 2013.

Employee Benefit Subsidy

Eligible new and expansion units under this scheme shall be entitled to 50% exemption from the employer's contribution to Employees' Provident Fund and Employees' State Insurance Fund.

Other Important Points

Procedural aspects of Package Scheme of Incentives, 2013 as mentioned in paragraph 7.1, 7.2, 7.3 and 7.4 with respect to application for obtaining EC, submitting annual claim etc. shall be applicable in this Special Policy for Women Entrepreneurs.

-----*****-----

Training Programme on How to Prepare for IBBI Limited Insolvency Examination

“Never limit yourself because of others' limited imagination;

never limit others because of your own limited imagination."

Participants

CA. Snehal KamdarSpeaker

CA. Avil MenezesSpeaker

CA. Pramod JainSpeaker

CA. Rajan AgarwalSpeaker

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IND AS 36- Impairment of AssetsContributed by :- CA. Bhagyashri Kadganchi

Email :- bhagyashrika@gmail.com

IND AS 36- Impairment of Assets

Assets are the resources owned or controlled by the company that are expected to yield future economic benefits.

Accordingly assets should be recognized in the financial statements at a value from which future economic benefits

can be derived either by the way of usage of an asset or by the way of sale of the asset. However, sometimes it may

happen that the carrying value at which assets are recognized in the financial statements may exceed the value from

which future economic benefits can be derived. Impairment accounting ensures that the assets of the entity are

carried at no more than its recoverable amount, i.e. amount to be recovered through use or sale of the assets.

The objective of IND AS 36 is to prescribe the procedures to be applied by an entity in ensuring that whatever assets

are stated in its financial statements, are not carried at an amount more than its recoverable amount. Standard also

enables the users of the entity's financial statements to know the real worth of the assets stated in entity's

financials. Therefore the entities must analyze the whole balance sheet and take necessary actions to align them

with accounting requirements of this IND AS. In this article we will be understanding the concept of impairment and

highlight the changes in their accounting brought by the Ind AS.

Scope of the Standard:

All assets are covered under the preview of Ind AS 36, except Inventories (Ind AS 2), Construction Contracts (Ind AS

11), Deferred tax assets (Ind AS 12), Assets arising from employee benefits (Ind AS 19), Financial assets (Ind AS

39),Biological assets (Ind AS 41), Deferred Acquisition Costs & intangible assets arising from insurance contracts

(Ind AS 104), Non Current Assets classified as held for sale (Ind AS 105)

What is meant by the term impaired?

Dictionary meaning of the word impairment is "the state of being weakened, diminished or damaged" An asset is

considered to be impaired when its carrying amount exceeds its recoverable amount.

Impairment Process:

Let us understand the overall impairment process step by step. We will understand this process simply by answering

few questions mentioned below.

1) What is impairment loss?

It is the amount by which the carrying amount of an asset or a cash generating unit (CGU) exceeds its recoverable

amount.Simply impairment= Carrying amount >Recoverable amount

We all know what is meant by the term asset. Now let us understand the concept of Cash generating unit (CGU).

Simply stating, CGU is the smallest identifiable group of assets that generates cash inflows that are largely

independent of cash inflows from other assets or group of assets of the entity.

*Below are the factors which are to be considered in determining CGU 1) Ability to generate independent cash flows

If active market exists for the output of an asset group- it is a CGU even if the output sold to another

division within the entity

* Focus to be made on cash inflows

2) How management makes the decisions about continuing or disposing of assets/operations

3) How management monitors operations

2) What is meant by Carrying amount of an asset?

It is the amount at which an asset is recognized after deducting any accumulated depreciation

(amortization) and accumulated impairment losses thereon.

3) How to calculate recoverable amount?

The recoverable amount of an asset is the higher of Assets

fair value less cost of disposalAND

Value in use

Now, let us understand the concepts of Fair value less cost of disposal & value in use

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Fair value less cost of disposal:

Fair value of an asset is the amount obtainable from the sale of an asset or CGU in an arm's length transaction

between knowledgeable, willing parties, less cost of disposal.

Cost of disposal are the costs incurred to bring an asset into condition for its sale. Other examples of disposal cost

can include the legal costs, stamp duty and similar transaction costs.

Value in use:

It is the present value of future cash flows expected to be derived from an asset or a CGU. Calculation of Value in use

depends on projections about future cash flows and the discount rate. Below are the factors which should be taken

into consideration for value in use calculation:

Future Cash Flow Projections Discount Rate

Estimates of future cash flows shall include 1.Discount rate should be a pre tax rate that reflects current market assessment of time value of money

1. Projections of cash inflows from continuing use of the asset

2.Risk specific factors to be considered

2.Cash Outflows that are necessarily incurred to prepare the asset for its

continuing use/ready to use

2.i) Country in which operations of the company under review are conducted

3. Net cash flows, if any to be received (or paid) for the disposal of the asset at the end of its useful life

ii) Market risks involved in that country iii) Industry specific risks

iv) Risk free returns

4. Most recent financial budgets/ forecasts 3.The discount rate should be asset specific rate, & if the same is not available then followings can be considered-

5. Greater weight to be given to the external factors

6. Estimation to be based on the asset's current condition (i.e. restructuring, or improving or enhancing assets performance)

3. a) Weighted Average Cost of capital b) Enterprise's incremental borrowing rate c) Other market borrowing rate

4) When to undertake impairment testing? How to identify impaired asset?

All the assets covered by the scope of this standard are required to be assessed by each entity for impairment

testing whenever there are any impairment indicators for an asset/ cash generating units, at each reporting

date.

Circumstances/ events indicating to recognition of impairment loss are mentioned below:

External Sources

Internal Sources

1. Significant decline in market value of an asset

1. Obsolescence or physical damage of assets

2. Changes in technological, market, economic or legal environment

2. Restructuring / discontinuance plans

3. Increase in market interest rates or increase in other rates of return on investments

3. Idle assets

4. Carrying amount of the net assets of the entity is more than its market capitalization

4. Worst economic performance of the asset than the expected performance

However, certain assets mentioned below, annual impairment test is required to be conducted irrespective of

whether any indications of impairment exist or not.

1) Goodwill acquired in business combinations

2) Intangible assets having indefinite useful life

3) Intangible assets not available for use

“Believe in yourself! Have faith in your abilities! Without a humble but

reasonable confidence in your own powers you cannot be successful or happy."

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5) How to account for impairment losses?

Impairment loss to be recognized* As an expense in the statement of profit & loss- in case there is no revaluation

* In case of revalued assets- it is to be treated as a decrease in revaluation reserve

After recognition:

* Adjust depreciation/amortization charge for the assets in future periods

* Allocate the asset's revised carrying amount less residual value, on a systematic basis over its remaining useful

life.

In case of impairment of a larger CGU containing goodwill:

Impairment loss will be first allocated to goodwill and then balance will be allocated to other assets of CGU

on a pro rata basis.

6) When to reverse the impairment?

It is likely to happen that the recoverable amount of an individual asset may increase over a period of time

due to changes in estimates used to determine the assets' recoverable amount, resulting in reversal of

impairment loss recognized earlier. Therefore, an enterprise should, at each balance sheet date, review that

whether previously recognized impairment loss has ceased to exist or decreased. If there are any internal

or external indications to this, the recoverable amount of that asset should be estimated.

If the recoverable amount exceeds the carrying amount, then the impairment loss recognized earlier, can be

reversed.

Below are the indicators of circumstances leading to reversal of impairment :

7) How to account for reversal the impairment losses?

In case of CGUs:

Reversal of impairment loss for a cash generating unit is allocated to other assets of CGUs, except for goodwill, on

a pro rata basis of carrying amounts of those assets.

It is also worth important to note that as per IND AS, impairment of goodwill can never be reversed in subsequent

period.

8) What are the disclosure requirements of the standard?

The disclosures which forms part of the financial statements are more important from the stakeholders' point of

view since they provide additional information about the decisions taken by the management in preparing

financial statements.

Key disclosures as required by IAS 36-

For each class of assets/CGU, the financial statements shall disclose:-

* Amount of impairment loss recognized during the period or reversed during the period

* Events/ Circumstances that led to the recognition or reversal of impairment loss

* Description of cash generating unit

* Basis used for determining recoverable amount

* Key assumptions and discount rate considered for determining value in use

External Sources Internal Sources

1. Significant increase in market value of an asset

1.Changes in way in which asset is used or expected to be used

2.Changes in technological, market, economic or legal environment & Changes in market interest rates or decrease in other rates of return on investments

2. Evidence from internal reporting indicates that economic performance of the asset will be better than expected

On Revalued assets On other assets

If the asset is carried at a revalued amount, the reversal of impairment loss on such revalued asset is to be credited directly to the equity under the heading revaluation surplus.

Reversal of an impairment loss for an asset (other than revalued assets), is to be recognized as an income in the statement of profit and loss.

“Life's like a movie; write your own ending, keep believing, keep pretending."

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9) What are the key differences between AS 28 & IND AS 36?

The key differences between AS 28 & IND AS 36 are tabulated below.

AS 28 IND AS 36

1. It does not require the annual impairment testing for goodwill unless there is an indication of impairment.

1. It requires annual impairment testing for an intangible asset with an indefinite useful life/ not available for use and goodwill acquired in business combination even if there are no indications of impairment.

2. It does not apply to financial assets which include subsidiaries, joint ventures and associates.

2. It applies to financial assets which include subsidiaries, joint ventures and associates.

3. Impairment loss recognized for goodwill can be reversed in subsequent period when it is caused by a specific external event of an exceptional nature.

3. It prohibits the reversal of impairment loss of goodwill.

4. It does not specifically exclude biological assets.

4. It specifically excludes biological assets related to agricultural activity.

-----*****-----

"It takes a great deal of courage to stand up to your enemies,

but even more to stand up to your friends.”

Training Programme on "Auditing Excel File & Introduction to Power Query"

CA. Abhay GadiaSpeaker

Participants

Certificate Course on "Ind AS”

CA. S. B. ZawareCCM, ICAI

Participants

Seminar on "Guilt-Free Parenting"

Ms. Anindita GargSpeaker

Participants

CA. Anand BankaSpeaker

12

Rise and fall of MSMEsContributed by :- CA. Vijay Ashtekar

Email :- office@ashtekarca.com

Rise and fall of MSMEs

Micro, small and medium enterprises (MSMEs) have emerged as a highly vibrant and dynamic sector of the Indian

economy over the years. MSMEs not only play crucial role in providing large employment opportunities, at

comparatively lower capital cost than large industries, but also help in industrialisation of rural and backward areas,

thereby reducing regional imbalances, and assuring more equitable distribution of national income and wealth.

MSMEs are complementary to large industries as ancillary units and contribute enormously to the socio-economic

development of the country. The sector contributes significantly to manufacturing output, employment and exports

of the country. MSMEs, though important, face a number of problems which have resulted in their retarded growth.

Inadequate working capital, lack of information to access national and international markets, shortage of trained

personnel and obsolete technology are the major barriers to the growth of MSMEs in India. In the post-WTO agenda,

domestic markets have been opened up for imports, creating severe competition for the local industries. At the

same time, it has created opportunities for small industries to tap global markets. Globalisation of the economies

across the world has changed the notions of manufacturing, productivity and competitiveness. Flexible production

processes and structures are being increasingly put in place to compete in highly dynamic markets where product

life is short. Moreover, discerning customers -- with higher purchasing power and more differentiated and

international tastes -- are demanding much more product variety, higher quality and greater value for money. The

present volume provides an exhaustive analytical account of the functioning of MSMEs in India. It discusses at

length their role in the Indian economy, policies and programs of the Government to promote them, and the

problems faced by them in the context of globalisation and liberalisation of world economies.

According to me MSMEs i.e. Micro, Small and Medium Enterprises are those with investments in fixed assets up to

Rs. 100 cr and turnover up to Rs. 1000 cr p.a. Some Legislations have defined MSMEs with different values. Usually

first generation enterprises are small enterprises which eventually become or grow to medium level. Micro, Small

and Medium enterprises are being treated as the backbone of industrial economy of our country and to certain

extent of the world also.

Majority of the MSMEs are owned by and also managed by families. However the picture is changing slowly in a way

that few medium size companies are taking steps may be due to legal compliances and also after realization of the

importance to dilute the management by adopting independent professionally qualified persons as directors.

Apart from the legal compliance the need of the time and to sustain in the global competition the professional

management of the company has no alternative.

The MSMEs, large at number are somewhat disorganized as well as have weak strength or capacity to sustain and

stand in competition. Very few of them succeed to transform from small to medium and medium to large level

enterprises.

Many reasons or causes can be illustrated to justify the failure or downfall of MSMEs.

One of the major causes can be described for such failure or down fall is that the owners managers being technical

found to be having more focus on technology, product, business development which is but natural however the

commercial aspects get lesser attention and hence the systems, finance issues, taxation get affected resulting in

interest, penalties and sometimes legal issues too.

Being family owned and managed status the preference is always given to family members, relatives to occupy the

key positions in the business which is obvious. To some extent it's certainly beneficial and convenient from

ownership and control point of view. However sometimes it is observed that the persons so appointed lack proper or

sufficient knowledge of the position they hold resulting into economical losses as well as human relations get

disturbed. Sometimes the internal issues among the members of the family cause the down fall of the performance

of the business, separation, division of the business are the results of such issues.

The history has shown that the first generation of the business ends in establishing and stabilizing the business. The second and further generations has more tough task to maintain and grow. With the study of the

13

failed cases of MSMEs it is observed that the further generations found to be casual about the business or least interest due to careers in different streams.

A very true and meaningful sentence was scripted in a Hindi Serial few years before that if your business is not

growing be sure that it is reducing.

If we take cases of shut down or transferred businesses the only reason which we could derive from those is that

the next generation lacks interest in the business or the entrepreneur has no confidence in the legal heirs.

Another major cause for fall of MSMEs is the stringent laws of the land. Following the provisions of so many laws

discourage the people to start the business or even if some how they start they get fade up with the compliances

and adherence to legal provisions.

Siphon off of funds, mismanagement of funds, over confidence are few more causes for failure of the business.

Lack of vision, forecasting, and over trading, sole dependency are also few reasons for down fall of MSMEs.

Sometimes it is been experienced that the entrepreneurs don't get proper family support and they found to be

reluctant to get outside support due to threat of confidentiality and dilution of control.

Another observation about few MSMEs can be described as they don't have mission and vision beyond five-years,

ten years or beyond that. Sometimes the owners managers enter into or do the diversifications which found to be

irrational or totally unrelated with the existing business. Such ventures where the technical knowledge is absent or

there is dependency for the technology or expertise then probability of failure is much more.

To summarize all causes or reasons of failure or downfall of the MSMEs the majority of them will be the internal

factors than the external like competition, rules, regulations etc. The statement becomes valid because there are

few MSMEs which are properly taken care of.

The absence of plan of continuity is one of the major cause of downfall as the interests of the owners entrepreneurs

get exhausted.

The very basic requisite of a MSME is that it should have clear vision and mission and definite plan for continuity of

the business beyond generations.

Critical self-appraisal of managers and audit of their decisions will certainly help the MSMEs to refrain from failing.

A disciplinary approach and broad outlook will help a lot to stop the down fall of MSMEs.

MSMEs though owned and managed by families could not be run efficiently without the assistance of other factors

i.e. it's a team work and no one can singly handle the entire show. The understanding and realization of the

importance and necessity of other members of the team i.e. employees, suppliers, customers, society and

Government agencies is the first task of the owners managers. One should always treat himself as the trustee of

the business and every team member is the owner.

The owners managers should have long term vision or forecasting for their business to avoid unwarranted and

wrong time failure or shut off.

Last but not the least to have a health in good condition and to live long life one has to follow the diet and do regular

exercise likewise the requisites and essentials of the business have to be followed strictly. By law the company has

perpetual existence at least on the paper to make it true frame a law ourselves and follow it to have existence.

With the intention to give strength to MSMEs the Government has come forward by establishing a SME Stock

Exchange to give platform to SMEs to build the image, brand, encash the hidden value of their businesses.

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“No matter what people tell you, words and ideas can change the world."

14

Benefit of +/- 5% to be Given in Case of Internal CUP Were Various Transactions with Non-AEs are Considered

Contributed by :- CA Suraj R. AgrawalEmail :- asuraj@deloitte.com

Case Law Citation:-

Escorts Ltd. v. Deputy Commissioner of Income Tax, Circle- 11 (1), New Delhi; [2018] 92 taxmann.com 272 (Delhi -

Trib.); Date of pronouncement March 9, 2018; AY 2005-06

Case Summary:-

Facts of the case:

· The appellant manufactures tractors primarily for domestic market and also makes export to its associated

enterprise in Poland and USA and also to non- associated enterprise in several other countries

· Transfer Pricing Officer compared the margin of the sale of tractors sold to unrelated party at Rs. 76526/-

and considered the per unit margin from sale of tractors to USA and Poland to its AE of Rs. 64822/- and

worked out difference of margin per tractor of Rs. 11704/-.

· Above issue was contested by the assessee before the Ld. CIT (A) and submitted that the arm's length price

determined by the Ld. Transfer Pricing Officer is within the safe harbor percentage of _/+5% of the arm's

length margin declared by the appellant and therefore the addition is liable to be deleted on this ground.

· The Ld. CIT (A) has upheld the addition made by the Ld. AO to the arm's length price. Aggrieved with the

order of the Ld. CIT (A) the assessee is in appeal before ITAT.

Contentions:

· The LD AR submitted that Ld CIT (A) has completely misinterpreted the issue by overlooking the fact that the

per tractor margin computed in the case of uncontrolled transactions is an average of several export invoices

raised during the year on exports to uncontrolled parties in various countries.

· He further submitted that Once an average price or average margin is available in the case of comparables,

the assessee becomes entitled to the consequential benefit of the proviso to section 92C (2).

· He submitted that It needs to be highlighted that the law on the question of allowing tolerance limit of ± 5%

is more or less settled with a number of judicial pronouncements on the issue. He submitted compilation of

the judgments relied upon. He mainly relied up on Hi-Lex India (P.) Ltd. v. Asstt. CIT [2017] 79

taxmann.com 246 (Delhi - Trib.) and Asstt. CIT v.Genesys International Corpn. Ltd. [2012] 26 taxmann.com

102/53 SOT 245 (URO) (Mum.).

· Ld DR supported the orders of the lower authorities and submitted that in absences of multiples prices

benefit of 5 % range is correctly denied to the assessee.

Ruling of Honorable ITAT/Court:

· The LD AO/ TPO computed the ALP of the International transaction of sale of Tractors by benchmarked the

international transactions with AEs by comparing 'average per unit tractor margin' earned on exports to AEs

with similar margin on exports to non- AEs

· The LD AO has compared the margin of the Sale of All tractors to AE with margin of sale of Tractors to Non AE

which are various transactions of the sale of tractors to AE and which is not one price but multiple prices of

sale of tractors, therefore, , assessee deserves to be allowed the benefit of 5 % range and therefore we

reverse the finding of the Lower Authorities and direct ld AO to grant benefit of margin of 5 % on the Alp

determined by the ld TPO/AO and recompute the adjustment accordingly.

· In the result, the appeal is allowed accordingly.

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Benefit of +/- 5% to be Given in Case of Internal CUP Were Various Transactions with Non-AEs are Considered

15

Seminar on "E-way Bill”

Staff Orientation Programme - English Communication Skills & Personality Development

CA. Swapnil MunotSpeaker

Participants

Staff MembersCA. Riddhi Chandak

Faculty

Press Conference of the Career Counselling Group of ICAICommerce Talent Search Test called as ICAI Commerce Wizard -2018

L To R :- CA. Mukesh Singh Kushwah, Career Counselling Group, Convener, CCG, ICAI

CA. Anand R. Jakhotiya, Chairman, Pune ICAI, CA. S. B. Zaware CCM, ICAI,

“Life is not easy for any of us. But what of that? We must have perseverance and, above all,

confidence in ourselves. We must believe we are gifted for something and

that this thing must be attained."

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