SURAT BRANCH E-NEWSLETTER JUNE 2022

SURAT BRANCH OF WIRC OF ICAI

51CCeelleebbrraattiioonn ooffsstt yyeeaarr ooff tthhee

E - Newsletter SURAT BRANCH June 2022

Office Bearers LET'S BE THE HANDS THAT
WILL SAVE OUR PLANET
Chairperson :
World Environment Day
93760 36646
Vice Chairperson :

93270 79369
Secretary :

99797 64643
Treasurer :

93762 72725

Committee Members :

97251 90123

99049 54005

90670 03989
CA. Chimpu Lapsiwala

90042 88880
CA. Joni Jain

99092 74436

Ex. Officio Member

96248 67495

Newsletter Committee :

Chairperson :
CA Shailesh Lakhankiya

Members :
CA. Rajiv Shah
CA. Ronak Parekh
CA. Kalpesh Lakhani
CA. Viral Shah
CA. Atit Shah
CA. Jinendra Mehta
CA. Kanchan Agarwal
CA. Rahul Agarwal
CA. Mihir Modi
CA. Manoj Mishra
CA. Kajal Deora
CA. Shweta Panelia

01. Gyan Ganga INDEX 17
02. From Chairman’s Desk 25
03. From Editorial Desk 02 08. Current Account and Capital Account 27
04. ONDC - Another Blow to Companies... 03 09. Share Analysis 32
05. Know Your Forms in GST – Part 3 04 10. IND AS 115 - Revenue from Contracts 35
06. Crypto Currency – An Overview 06 11. Make Data a Strategic Advantage... 40
07. Assessment Under Income Tax 09 12. Event Snap Shot
11 13. Upcoming Events
13

SURAT BRANCH OF WIRC OF ICAI

02

SURAT BRANCH OF WIRC OF ICAI

From Chairman’s Desk:

Dear Professional Colleagues,
With every communication I see time ticking by and feel that there are so many things to do in the
limited time. However, I am sure that with relentless pursuit Surat Branch enthusiastic and United Team
Members will be able to carry out the task effectively this year. I would also amply draw on your
encouragement and active participation which would be my source of inspiration and strength.
This month monsoons will finally be here and let us welcome bounteous rains with open hearts. Since
ages, in India, monsoon is looked upon as the month of creativity and new beginnings.
Surat Branch Team are continuously organizing series of lectures and seminars on various topics. So
that members can be benefited with full knowledge of the topic. All the members of GYAN GANGA
program can also get benefit in the forthcoming programs throuout the year. So my request to all
member of Surat Branch to become a member of Gyan Ganga 2022-23.
I firmly believe that we should always welcome challenges and updates in a positive manner so my
humble request you to post only positive messages about our profession and country. there are so many
emerging opportunities in the profession around us to grab and grow.
So please be careful and avoid to support any negative messages for the profession or for the country.
Members , in this new era so many experts survey on accountancy states that accountants role is likely or
very likely to change due to technology. So kindly keep yourself updated with the new tools of
technology to grab the upcoming challenges with the spirit of “Learn, unlearn and relearn” in tune with
time and be capable in converting all challenges into opportunities.
Surat branch has planned so many forthcoming programmes/seminars
My humble request to be present at branch to celebrate 1st July ,CA Day.
We also planned the National Conference-2022 on 13 & 14th of August 2022. It is a great opportunity to
listen to experts on variety of subjects and also meet more than 1500 CA at one place. Not to miss!! All the
members are requested to make registration in this NC-2022.
The 'distinctive wonderful smell' of rain when it first hits the ground. And hope that fragrance of first rain
will come in your life .
I expect the overwhelming wholeheartedly support in the form of active participation and co-operation
from all the members of our Surat Branch.
Thanking you,
Kindly reach out to us on official Branch:-

k Suratbranchgroup1@gmail.com
# +91 95105 82383
Best wishes and regards
CA. Nikesh Kothari
Chairperson

03

SURAT BRANCH OF WIRC OF ICAI

TEAM SURAT (2022 - 2025)

From Editorial Desk:

“A STEP TOWARDS A CLEANER AND GREENER TOMORROW”
Dear Members of Surat Branch,
As we all have experienced and faced heat waves in the month of May, across the world
temperature was very high compared to earlier years. These severe and unwarranted changes in
Global Temperature is a clear indication that it is high time now to focus on the ENVIRONMENT
and Preserve the natural resources not only for us but for our future generation as well. And the
whole concept of building today while keeping future in mind is Sustainability.
Sustainability is merely not a word that we should use in context with debates on sustainabilty of
Natural Resources but also with the concept of Co-existing with Nature and Building something of
greater good. And our contribution as a professional towards both can be through venturing out
in Sustainability Audits and Reporting and evolve from traditional ways.
The theme for the month of June is Sustainability. So, let's celebrate the whole June month keeping
Environment at the center and find a way to use natural resources in most effective and efficient
manner.
Nothing is permanent in this world; hence, whatever we preserve and leave for our future
generations will be there Permanent provided they in turn preserve it.
As witnessed in Start-up Ecosystem, few years back merely 3-4 Startups were from India in the
Global Race but in recent times India has become hub for Unicorn Startups and innovations have
brewed and the startups are making peoples life easier.
Our role as professionals does not ends with guidance and compliance but is also to act as
facilitators for Startups to become Unicorns and contribute to the Economy of the Country in a
positive way.
In today's world, knowledge is more powerful than Money, Surat Branch has always been at the
forefront of building capacity and competency with requisite skills and knowledge of its
members, with this Surat Branch under the leadership of our chairman plans to organize 14 CPE
hour Lecture Series on GST, 6 CPE Hours full day seminar related to FRRB, IND-AS and CARO-
2020, full day seminar on MSME segment on MSME day,
The month of June is going to be a knowledge claver month so I urge to all the member of Surat
Branch to take maximum benefit of it and enhance your knowledge to cope up with global talents.
This Newsletter includes insights on ONDC - Another Blow to Companies..., Know Your Forms in
GST, Crypto Currency – An Overview, Assessment Under Income Tax, Current Account and Capital

041

SURAT BRANCH OF WIRC OF ICAI

Account, Share Analysis, IND AS 115 - Revenue from Contracts, Make Data a Strategic Advantage...,
Upcoming CPE Programme by Surat Branch.
Let's learn together, Grow together, Shine together and Succeed together and take a pledge to
make Surat branch reach newer heights in alignment with our theme of this year “United WE
CAN”.
I urge all the Members of Surat Branch who are willing to contribute for E-newsletter, kindly share
your insights on topics of your choice with us on surat@icai.org.
Happy & safe Learning!! Enjoy Learning!!
CA Shailesh Lakhankiya
Chairperson
Editorial Committee

015

SURAT BRANCH OF WIRC OF ICAI

ONDC - Another Blow to Companies Betting on Network Effects?

Is it feasible to picture a life without Whatsapp? No, right. Have you ever pondered why we've grown so
hooked to the system?
I know what you're thinking: who wouldn't be captivated by WhatsApp? It is, after all, WhatsApp. But, as the
saying goes, everything exists for a reason.
So, let's figure out why we're so hooked by delving into what lead us to become a part of the Whatsapp
ecosystem.
This is due to Network Effects. How do we fit within this network effect? So, in a nutshell, we are the network's
nodes, and the links are the connections that we, as nodes, create either individually or collectively as group
nodes.
The network effects system operates in a logical fashion. Assume you've joined Whatsapp. You and four of your
friends are connected via Whatsapp in the way depicted.

Assume you've added one additional buddy to your group. That one friend is now Whatsapp friends with all
four of you. Now, this is how the network looks like.

06

SURAT BRANCH OF WIRC OF ICAI

As you can see, even when only one person is added to the network, the number of linkages increases
substantially (from 6 to 10). So, in essence, a network effect arises when one user increases the value of a
service for other users. When new users join the network, they boost the network's value by connecting with
current members. It is tough to leave the network after you have become a part of it and formed strong
relationships with the nodes.

Each time a user utilises the company's product, it increases the stickiness to the network and also the value of
the network. Further, as the number of users grows, both new and current users do not find much value in
joining the competitor's smaller network.

Not just Whatsapp, but also Instagram, Google, and Amazon have created virtual networks. Each entity's
network works in a different way, but they all end up building highly defensible ones that are tough to quit.
There are a few physical networks as well, such as roadways. Roads constitute a network in which the
individuals who use them are nodes and the roads through which they connect the destinations are links.
There are a myriad of benefits for which firms develop these networks.

How Companies Benefit From Network Effects?

Let's take Amazon as an example to understand. It created a marketplace for buyers and sellers to interact in.
Initially, Amazon offered enormous discounts on its platforms to entice people to buy from it, with the
convenience of having the things delivered without stepping out of the door. It organises events such as 'The
Big Billion Day' and 'Independence Day Sales' to draw the attention of users. It lured sellers by providing a
platform for them to offer their products to buyers located far from their region of operations, thereby
extending their customer base. Sellers were also given logistical support, so they were expected to continue
selling their products as they had been selling to local buyers, while simultaneously reaping the benefits of a
larger consumer base. These benefits had a propensity to swiftly expand the number of sellers on the site. Now
when a large number of sellers have entered, the number of buyers would increase as they would receive more
options in the network. This chicken egg problem is the reason that the entire loop of network effects are
created by companies.

Individual nodes, such as buyers and sellers, do not have the choice to join another network once a company
has developed a giant network of nodes because they will not be able to find a big enough pool of sellers and
buyers respectively for their products. As a result, both customers and providers are now stuck. If new users
who have never used the network wish to trade with existing users of the network, they must first join the
network.

Furthermore, the network owner may readily imitate an entrant's incrementally enticing innovation and
induct it into the company's network. The reel feature, for example, was introduced by Instagram to protect its
network from the competition created by Tiktok.

Also, a broad observation can be made by analysing the profits of all internet companies that came since early
1990. Majority of the cumulative profits earned by internet companies has been captured by the companies
whose business model is based on networks. The more dense the network, the higher the durability of the
competitive advantage. Therefore, the new age internet companies are trying to build networks.

What is Open Network For Digital Commerce (ONDC)?

In order to better grasp ONDC, we must first examine UPI technology.

Before the launch of Unified Payment Interface (UPI) in 2016, there were a handful of wallets in the payment
network business. Paytm was a dominant player among them. In the pre-UPI era, users of one wallet were not
able to transfer money to another wallet, just like you cannot send a message from Whatsapp to Telegram.

UPI is an open source protocol using which wallet companies can facilitate money transfers. UPI enabled the

07

SURAT BRANCH OF WIRC OF ICAI

transfer of money from one wallet to another at almost zero cost. This laid the foundation for an expanded,
efficient, and low cost network for payments.

ONDC, like UPI, will be an open network that provides protocols to allow free flow of digital commerce across
various categories such as groceries, electronics, books, food, etc. It will establish standards for all network
participants, including merchants, e-commerce platforms, and delivery partners.

ONDC is expected to democratise e-commerce in India. Currently, anytime a seller joins an e-commerce site,
he/she must go through a separate KYC procedure. For onboarding sellers, each platform has its own
paperwork and procedures. Once the ONDC provides the protocols, a seller will only need to go through the
onboarding process once and will be able to sell items on all e-commerce platforms, such as Flipkart, Amazon
and Zomato. Even the smallest mom-and-pop Kirana stores will be able to sell things digitally owing to ONDC.

Why do I think existing e-commerce companies will face the heat?

Let's take a look at what the government has to say about ONDC. After listening to a few senior bureaucrats, it
appears that the government is dissatisfied with certain policies and practices of the existing platforms. For
example, E-commerce aggregator companies are selling their own products on the platforms they manage.
They are suspected of manipulating product display on the platform by prioritizing their own products or
products of their affiliates. Another source of dissatisfaction is the hefty fees that these sites charge vendors.

The Indian government claims that ONDC would only broaden the market and that it does not wish to compete
with existing firms. However, a careful scrutiny of the remarks made by some of the top bureaucrats, R S
Sharma, CEO of National Health Authority and Anil Agrawal, Additional secretary, DPIIT, at a panel discussion
organised by Economic Times on 12th March 2022 reveals that the Indian government wants to end the
monopoly (current or even a potential monopoly). So it's hardly rocket science to see how this action may be a
death blow to firms dreaming of being a monopoly. One of the most significant effects will be on startup
valuations, which are dependent on the value that these firms will capture once they have successfully built a
network.

The network effects that these firms have developed might be jeopardised since ONDC will offer a common
platform for buyers and sellers, and buyers and sellers will no longer be restricted to a single platform. A
simpler way to describe this is that, owing to ONDC, an Amazon seller may now sell their items to a Flipkart
buyer. Also, a new seller is discoverable to buyers across platforms.

In the End…..

We witnessed in the case of Payments that the open source nature of UPI was the reason for entry of
significant players like PhonePe and GooglePay, which ended the monopoly of the first mover, Paytm. ONDC
has a good potential of disrupting the moat of the powerful ecommerce companies in the same way that UPI
did for payments. Thus, ONDC will have a significant detrimental influence on the future profitability and
values of these existing e-commerce platforms. Existing e-commerce platforms will obviously grow, but their
share of the total pie will not be as big as they hoped earlier.

# +91 98248 48247

k bkrvaghasia@gmail.com

Authored By : Balkrushna Vaghasia

CA Balkrushna Vaghasia

048

SURAT BRANCH OF WIRC OF ICAI

Know Your Forms in GST – Part 3

Dear professional colleagues,

June 2022 marks the last month in the completion of 5 years of GST in India. The law, which came with lot of hopes for the trade and industry, investors
and the professionals, has a long way to go in the journey of tax rationalisation and simplification of the processes. While audits, assessments, scrutiny
etc. have been started by the revenue, many people including revenue, professionals etc. are not cleared with the basics of GST. This series called “Know
Your Forms in GST” is an initiative to make everyone aware about the basic functionality of the GST law. In the 3rd part of this series, we are going to
learn about “payment” forms in GST.

Associated Section Associated Rule
Chapter X Chapter IX
S. 49 to 53A R. 85 to 88A

Form Number Form Name

GST PMT - 01 Electronic Liability Register of Registered Person

Ø It contains 2 parts viz., return related liability and other than return related liability

Ø Basically this is the summary of all sort of liability, which is required to be discharged by the registered person such as tax, interest,
penalty, fees or other amount, which can be discharged by debiting Electronic Credit ledger and / or Electronic Cash ledger, as the
case may be.

GST PMT - 02 Electronic Credit Ledger of Registered Person [ECr.L]

Ø Everyone knows ECr.L, but barely someone knows its legal name, which is GST PMT-02;

Ø This form contains details of all the incomings and outgoings from the ECr.L;

Ø Any credit therein represents the incoming, which can be on account of accrual of Input Tax Credit, re-credit of the rejected amount of
refund, unblocking of ITC etc.;

Ø Any debit therein represents the outgoing, which can be on account of utilisation of ITC towards outward liability, claiming of GST
refund, blocking of ITC etc.

GST PMT - 03 Order for re-credit of the amount to cash or credit ledger on rejection of refund claim

Ø This form is to be used for making re-credit in the ECr.L or Electronic Cash Ledger (“ECL”) on account of following reasons:

- Re-credit of full or partial rejection of GST refund claimed by way of debiting ECr.L;

- Re-credit of full or partial rejection of GST refund claimed by way of debiting ECL;

- In case of refund claim on account of “excess or wrong payment of tax”, wherein the excess or wrong debit has been made from
ECr.L, the proper officer shall make re-credit of such amount in ECr.L through this form;
Ø Therefore, the basic purpose of this form is to do “UNDO” of what has been done incorrectly or inadvertently by the registered
person.

GST PMT - 04 Application for intimation of discrepancy in Electronic Credit Ledger/Cash Ledger/ Liability Register

Ø In case there is any discrepancy in the ECr.L or ECL or ELL, then the registered person can file this form to correct the discrepancy;
Ø In the electronic environment of GSTN, when all the entries in these ledgers are automated, there is no scope of discrepancy or

arithmetic error. In any case, this form is not available on GSTN portal as on today.

09

SURAT BRANCH OF WIRC OF ICAI

GST PMT - 05 Electronic Cash Ledger

Ø This is basically a wallet balance of GST, which can be loaded by way of making payment through challan;
Ø The balance can be loaded through following modes:

-Internet Banking through authorised banks;
-Credit card or Debit card through the authorised bank [option not yet made operational by GSTN];
-NEFT or RTGS from any bank;
-Over the Counter payment through authorised banks for deposits up to ten thousand rupees per challan per tax period, by cash,
cheque or DD
Ø In case of TDS or TCS u/s 51 or 52, the amount deducted or collected shall be credited to ECL, upon acceptance of such entry by the
deductee or by the collected;

GST PMT - 06 Challan for deposit of goods and services tax

Ø As elaborated above, in order to load the money in the ECL, registered person is required to pay the amount through challan. In legal
terms, that challan is called PMT-06;

Ø Challan once generated shall be valid for 15 days;

Ø After submission of the information in the challan, 14 digit CPIN (i.e. Common Portal Identification Number) will be generated and
after making payment against such challan, 17 digit CIN (i.e. Challan Identification Number) will be generated.

GST PMT - 07 Application for intimating discrepancy relating to payment

Ø Upon payment through challan, if there is any discrepancy such as the amount has been debited, but challan is not generated or
challan is generated but not communicated over common portal, the concerned person can file an intimation in this form;

Ø Although the law does not specify any time limit for filing the same, the explanatory note below this form provides that “the form may
be filed if CIN is not conveyed after 24 hours of debit”. Therefore, if someone makes payment on the very due date, then it is much
difficult for him to raise the complaint or intimation through this form.

GST PMT - 09 Transfer of amount from one account head to another in electronic cash ledger

Ø This form was not originally a part of the law, but later on due to constant demand from the stakeholders on account of payment of
amount under incorrect major or minor head, the government introduced this form to transfer the balance of cash ledger inter-head or
intra-head;

Ø Balance lying in tax head can be transferred to interest or penalty or fees or other head and vice versa;

Ø Balance lying in CGST head can be transferred to SGST or IGST and vice versa;

Conclusion:

So, this was the detailed analysis of the GST PMT forms. We might be using these forms knowingly or unknowingly, but many might not be aware about
the intricacies of the underlying provisions. I trust that this article will surely be able to clear your doubts about payment process in GST. See you all next
month with another exciting part of this series called “Know Your Forms in GST”.

Happy learning!!!

# +91 88665 72011 CA Mihir Modi
k mihir.s.modi@gmail.com

10

SURAT BRANCH OF WIRC OF ICAI

Crypto Currency – An Overview

INTRODUCTION:
Crypto 1st introduce by America in 1983, name with “ecash” than after in 1995 name change with “Digicash”.
Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central
authority.
The IFRS Interpretation Committee defined a crypto currency as a crypto-asset with all of the following
characteristics:
a) a digital or virtual currency recorded on a distributed ledger that uses cryptography for security,
b) not issued by a jurisdictional authority or other party, and
c) does not give rise to a contract between the holder and another party.
Cryptocurrency, sometimes called Crypto-currency or crypto, is a digital or virtual currency that is secured by
cryptography, which makes it nearly impossible to counterfeit. Many cryptocurrencies are decentralized
networks based on block chain technology. In most of the cases cryptocurrencies might be classified as an
intangible asset. Crypto makes it possible to transfer value online without the need for a middleman like a bank
or payment processor, allowing value to transfer globally, near instantly, 24/7, at low charges. All transaction
are vetted by a technology called a Blockchain, hence makes its secure, each currency has its own blockchain,
which is an ongoing, constantly, re-verified record of every single transaction ever made using that currency. In
simple words:
“Cryptocurrencies are digital assets and decentralized systems that allow for secure online payments”
The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum and Litecoin. Other likes
Tezos, EOS, Zcash etc.
TYPES OF CRYPTOCURRENCY & THEIR SPECIFICATIONS:
There are more than 18,465 cryptocurrencies till date. Each Cryptocurrency claims to have a different function
and specifications and based on utility that can be broadly categorised in to 4 types: (1) DeFi (Decentralized
Finance), (2) Utility Token - NFT (i.e. Non Fungible Token- like Digital Art), (3) Value Token (i.e. Bitcoin and
Litecoin) and (4) Yield Farming Token (i.e. Aave).
Different coin different functions: Example
Ripple's XRP is used by banks to facilitate transfers between different geographies,
Ethereum's ether markets itself as gas for the underlying smart contract platforms.
Bitcoin is the most popular and valuable Cryptocurrency by way of capitalization.
Siacoin (SIA) aims to solve the problem of expensive cloud storage.
HOW DOSE CRYPTOCURRENCY WORK?
Cryptocurrency run on a distributed public ledger called blockchain, a record of all transactions updated and
held by currency holders. Units of cryptocurrency are created though a process called mining, which involves
using computer power to solve complicated mathematical problems that generate coins. User can also buy the
currencies from brockers, then store and spend them using cryptographic wallets.

11

SURAT BRANCH OF WIRC OF ICAI

HOW TO BUY CRYPTOCURRENCY?
An initial coin offering (ICO) is a controversial means of raising funds for a new cryptocurrency venture. An ICO
may be used by startups with the intention of avoiding regulation. In an ICO campaign, a percentage of the
cryptocurrency (usually in the form of "tokens") is sold to early backers of the project in exchange for legal
tender or other cryptocurrencies, often Bitcoin or Ether.
There are some ways to buy cryptocurrency are as under:

- Traditional Brocker/ Crypto Exchange (Robinhood and SoFi are two of the most well-known crypto
brokers.)

- Crypto Exchange – Traded Funds (ETFs)
- Companies connected to cryptocurrencies (Like Nvidia, PayPal, Sqaure etc.)
The Advantages of Cryptocurrencies:

It is a cheaper alternative compared to other online transactions,
Payments are safe and secured and offer an unprecedented level of anonymity,
Modern cryptocurrency systems come with a user “wallet” or account address which is accessible
only by a public key and pirate key. The private key is only know to the owner of the wallet,
Funds transfer are completed with minimal processing fees,
Allow individuals to take complete control over their assets.
The Disadvantages of Cryptocurrencies:

activities such as money laundering, tax-evasion and possibly even terror-financing,
Payments are not irreversible
Cryptocurrencies are not accepted everywhere and have limited value elsewhere
There is concern that cryptocurrencies like Bitcoin are not rooted in any material goods. Some
research, however, has identified that the cost of producing a Bitcoin, which requires an increasingly
large amount of energy, is directly related to its market price.
Cryptocurrencies traded in public markets suffer from price volatility and are also without any
regulators.
LALIT DUDHAT AND CO.
PROPRIETOR
k 97142 49409
# calalitdudhat@gmail.com

CA LALIT L DUDHAT

12

SURAT BRANCH OF WIRC OF ICAI

Assessment Under Income Tax

In series of article we discussed about what is assessment under Income Tax Act and started to discuss various
type of assessment, wherein self-assessment and summary assessment are covered. In last article we started
to discuss scrutiny assessment under section 143(3), which we are continue to discuss into this article.
Is assessment procedure u/s. 143(3) is quasi-judicial?
Assessment proceedings under section 143(3) is quasi-judicial proceeding, because AO made an inquiry and
made assessment under this section is not a court and proceeding before him is not judicial proceedings to the
extent and for the purpose of section 136 and certain powers under section 131. Section 136 speak about
proceeding under income tax is deemed to be judicial proceedings under section 193 and 228 and for the
purpose of 196 of the Indian Penal Code and every income tax authority shall be deemed to be a Civil Court for
the purpose of section 195 but not for the purpose of Chapter XXVI of the Code of Criminal Procedure.
Relevant section of Indian Penal Code
193 : Whoever intentionally gives false evidence in any of a judicial proceeding, or fabricates false evidence for
the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either
description for a term which may extend to seven years, and shall also be liable to fine;
and whoever intentionally gives or fabricates false evidence in any other case, shall be punished with
imprisonment of either description for a term which may extend to three years, and shall also be liable to fine.
Subject to the extent of both section, procedure of assessment are quasi-judicial because they have certain,
though not all the attributes of judicial proceedings and the conclusions or decisions taken by the officer have
some attributes of judicial decisions.
196: Whoever corruptly uses or attempts to use as true or genuine evidence any evidence which he knows to
be false or fabricated, shall be punished in the same manner as if he gave or fabricated false evidence.
228: Whoever intentionally offers any insult, or causes any interruption to any public servant, while such
public servant is sitting in any stage of a judicial proceeding, shall be punished with simple imprisonment for a
term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
Why quasi-judicial?
AO should not exercise his powers only in a manner beneficial to the revenue and adverse to the assessee but
act in judicial manner, proceed with a judicial spirit, and come to a judicial conclusion. Therefore he has to
follow principle of natural justice, he must proceed without bias and give sufficient opportunity to the assesse
and he must conduct himself and should act independently and arrive at its own conclusions.
In very old case of Gangarm v CIT 5 ITR 464, where in court observed that assessment is to some extent a
private inquisition, it is confidential, it is not supposed to be disclosed to the public, and it is not open to review,
especially because frequently the Income-tax Officer is compelled to draw inferences and to consider
evidence which might not be justified by the Evidence Act. The learned Chief Justice no doubt remarked that
the Income-tax Officer was not entitled to make a guess without evidence but the evidence that was

13

SURAT BRANCH OF WIRC OF ICAI

considered sufficient in that connection was the state of affairs in the previous years coupled with the fact that
the assessee had a large mortgage loan business. No doubt, the Income-tax Officer must proceed in a judicial
spirit and come to a judicial conclusion upon properly ascertained facts though I would point out that the
Income-tax Officer is not a Court, he has not the procedure of a court, and he is to some extent a party or Judge
in his own case… It is idle and absurd for a person who has books of account and deliberately withholds, them
to complain of not being treated in a judicial manner.
In land mark judgement of Dhakeshwari v CIT 26 ITR 775, Hon.SC held that the Income-tax Officer is not
fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not
be accepted as evidence in a Court of law, but there the agreement ends; because it is equally clear that in
making the assessment under I.T.Act, the Income-tax Officer is not entitled to make a pure guess and make an
assessment without reference to any evidence or any material at all. There must be something more than bare
suspicion to support the assessment under I.T.Act.
In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its
conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the
departmental representative. Next, it did not give any opportunity to the company to rebut the material
furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in
support of its case. The result is that the assessee had not had a fair hearing. The estimate of the gross rate of
profit on sales, both by the Income-tax Officer and the Tribunal, seems to be based on surmises, suspicions and
conjectures. It is somewhat surprising that the Tribunal took from the representative of the department a
statement of gross profit rates of other cotton mills without showing that statement to the assessee and
without giving him an opportunity to show that that statement had no relevancy whatsoever to the case of the
mill in question. We think that both the Income-tax Officer and the Tribunal in estimating the gross profit rate
on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of
our power under article 136.
The assessment has to be made on all relevant materials and on evidence and the assesse ordinarily has the
fullest right to inspect the records and all documents and materials that are to be used against him.
Proceedings before the AO are judicial proceedings and all the incidents of such judicial proceedings have to be
obsereved before the result is arrived at. Right to inspect the record and all relevant documents is very well
established by hon. SC in case of Kishinchand Chellaram v CIT 125 ITR 713 and reaffirmed by various court in
many judgement.
It is well settled law that AO is entitled to make such inquiry and collect information as he consider necessary
for completion of assessment, but it is also very well established law on the other side that assesse should be
given an opportunity of being heard in respect of any material or information proposed to be utilised for the
purpose of making assessment under this section.
In case of Amrutlal Gangaji Choudhari vis D.C.I.T., ITAT- PUNE (2021), the appellant had filed the full details of

14

SURAT BRANCH OF WIRC OF ICAI

sundry creditors from whom he had received loans during the year under consideration. The ld.CIT(A) without
adverting to the evidence filed before him, had simply concluded that the creditworthiness of the creditors
and genuineness of the credit transactions was not proved and confirmed the addition. From the material filed
before ld.CIT(A), it is clear that the appellant had filed the details of each and every receipt of loan received.
The ld.CIT(A) without adverting to the evidence filed before him, without discussing the evidence in respect of
each credit and assigning reasons, confirmed the addition by holding that the appellant had failed to prove the
creditworthiness of creditors. It is further hold that, the order of the ld.CIT(A) is devoid of any reasons.
Needless to say that the ld.CIT(A) is a quasi-judicial authority. An order passed by the quasi-judicial authority
should be in conformity with the principles of natural justice. Recording of reasons for the conclusions reached
by an authority is a part and parcel of the principles of natural justice.
Hon. SC in case of in M/s Kranti Associates Pvt. Ltd. and another v. Sh. Masood Ahmed Khan and others,
(2010) 9 SCC 496 while dealing with the requirement of passing a reasoned order by an authority whether
administrative, quasi judicial or judicial, had laid down procedure as under:-

a. In India the judicial trend has always been to record reasons, even in administrative decisions, if such
decisions affect anyone prejudicially.

b. A quasi-judicial authority must record reasons in support of its conclusions.
c. Insistence on recording of reasons is meant to serve the wider principle of justice that justice must

not only be done it must also appear to be done as well.
d. Recording of reasons also operates as a valid restraint on any possible arbitrary exercise of judicial

and quasi-judicial or even administrative power.
e. Reasons reassure that discretion has been exercised by the decision maker on relevant grounds and

by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable component of a decision making process as

observing principles of natural justice by judicial, quasi5 judicial and even by administrative bodies.
g. Reasons facilitate the process of judicial review by superior Courts.
h. The ongoing judicial trend in all countries committed to rule of law and constitutional governance is

in favour of reasoned decisions based on relevant facts. This is virtually the life blood of judicial
decision making justifying the principle that reason is the soul of justice.
I. Judicial or even quasi-judicial opinions these days can be as different as the judges and authorities
who deliver them. All these decisions serve one common purpose which is to demonstrate by reason
that the relevant factors have been objectively considered. This is important for sustaining the
litigants' faith in the justice delivery system.
j. Insistence on reason is a requirement for both judicial accountability and transparency.

15

SURAT BRANCH OF WIRC OF ICAI

k. If a Judge or a quasi-judicial authority is not candid enough about his/her decision making process
then it is impossible to know whether the person deciding is faithful to the doctrine of precedent or
to principles of instrumentalism.

l. Reasons in support of decisions must be cogent, clear and succinct. A pretence of reasons or 'rubber-
stamp reasons' is not to be equated with a valid decision making process.

m. It cannot be doubted that transparency is the sine qua non of restraint on abuse of judicial powers.
Transparency in decision making not only makes the judges and decision makers less prone to errors
but also makes them subject to broader scrutiny. (See David Shapiro in Defence of Judicial Candor
(1987) 100 Harward Law Review 731-737).

n. Since the requirement to record reasons emanates from the broad doctrine of fairness in decision
making, the said requirement is now virtually a component of human rights and was considered part
of Strasbourg Jurisprudence. See (1994) 19EHRR 553, at 562 para 29 and Anya vs. University of
Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European Convention of
Human Rights which requires, "adequate and intelligent reasons must be given for judicial
decisions".

o. In all common law jurisdictions judgments play a vital role in setting up precedents for the future.
Therefore, for development of law, requirement of giving reasons for the decision is of the essence
and is virtually a part of "Due Process".

.Above ruling of hon. Supreme Court also help full to friends for drafting reply of notices issued recently in
procedure of re-opening to respective assesse due to direction of apex court in case of Ashish Agrawal.

Further aspects of assessment discuss in next article.

# 97142 49409
k ca.kamleshpandya@gmail.com

CA KAMLESH PANDYA

16

SURAT BRANCH OF WIRC OF ICAI

Current Account and Capital Account Transactions

The differentiation between Current and Capital account transactions makes the total foundation under
FEMA. This gives a solution to the question “How to approach a transaction” under FEMA. First of all, we
have to understand the nature of transaction and then it will be categorized as either capital or current
account transaction.

All the foreign exchange transactions are divided into two categories:

(a) Current Account Transactions

(b) Capital Account Transactions

The concept of differentiation is not from accounting prospective but it is from economic prospective. We
have to check whether the transaction is affecting 'The Balance of Payment' of the country as such and not
of the company or any person.

We can differentiate both the transactions as under.

Sr. No. Particulars Current Account Transactions Capital Account Transactions

1 Recording of Current Account records trading in Capital Account records the movement

transaction goods in services in the current period. of capital in and out of the economy.

2 Show Current account shows the net income Capital Account shows change in the

of the country. ownership of nation's assets.

3 Concerned Current Account is mainly concerned C a p i ta l A c co u nt i s t h o ro u g h l y

with with receipt and payment of cash and considered the source and application

non-capital items. of capital.

4 Key The key components of current account The key components of capital account

components are export and import of goods and are Foreign Direct Investment (FDI),

services, income on investment and Portfolio Investment, Loans etc.

current transfer.

Current Account Transaction:
It is defined under section 2(j) of the FEMA Act, 1999 as under:
“current account transaction” means a transaction other than a capital account transaction and
without prejudice to the generality of the foregoing such transaction includes, —
(i) payments due in connection with foreign trade, other current business, services, and short-
term banking and credit facilities in the ordinary course of business,
(ii) payments due as interest on loans and as net income from investments,
(iii) remittances for living expenses of parents, spouse and children residing abroad, and
(iv) expenses in connection with foreign travel, education and medical care of parents, spouse and

17

SURAT BRANCH OF WIRC OF ICAI

children;

So, first of all, we have to check whether the transaction is a capital account transaction or not. If it is
not falling in the definition of capital account transactions, then it is a current account transaction.

One thing more to note here is, the words “without prejudice to the generality of the foregoing such
transaction includes” means even if it is falling in the definition (passing the test) of capital account
transactions, these four transactions, mentioned above will still be construed as current account
transactions.

If we divide the above transactions into two parts, it can be as under.

1. Payment due in connection with

a) Foreign trade

b) Other current business

c) Services

d) Short term banking facilities Business

e) Credit facilities in the ordinary course of business

2. Payment due as –

a) Interest on loans; and

b) Net income from Investment (Dividend & Capital Gain)

3. Remittance for living expenses of parents, spouse and children residing abroad;

4. Expenses in connection with – Individual
a) Foreign Travel Resident
b) Education

c) Medical care of parents, spouse and children

Let's take one example of current account transaction.

For an example, ABC Private Ltd. obtained Technical Know How from XYZ LLC USA and against that, ABC
Pvt. Ltd. made payment to XYZ LLC, USA in the nature of Fees for Technical Services (FTS).

18

SURAT BRANCH OF WIRC OF ICAI

Capital Account Transactions

2(e) “capital account transaction” means a transaction which alters the assets or liabilities, including
contingent liabilities, outside India of persons resident in India or assets or liabilities in India of persons
resident outside India, and includes transactions referred to in sub-section (3) of section 6;

This can be understood with the help of the following diagram.

Asset or Liability Person Resident
OUTSIDE India OUTSIDE India (PRO)

Outside India
India

Person Resident IN Asset or Liability IN
India (PRI) India

Example-1:

Example-2

Example-3

19

SURAT BRANCH OF WIRC OF ICAI

Example-4

Allowability of Transactions

If it is categorized as “Current Account” transaction, the thumb rule is that, it is allowed to be undertaken
unless it is prohibited or restricted by way of Foreign Exchange Management (Current Account
Transactions Rules), 2000 or any other related rules.

If it is categorized as “Capital Account” transaction, the thumb rule is that, it is prohibited to be undertaken
unless it is allowed by way of Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000 - FEMA 1 /2000-RB or other related rules.

Transac ons Generally (Primarily) Unless it is specifically
Current Account
Capital Account Allowed Prohibited or restricted

Prohibited Allowed

Section 5. Current Account Transactions. —

Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a
current account transaction:

Provided that the Central Government may, in public interest and in consultation with the Reserve Bank,
impose such reasonable restrictions for current account transactions as may be prescribed.

So, for the purpose of imposing reasonable restrictions, the Central Government has issued Foreign

Exchange Management (Current Account Transactions Rules), 2000. It is better explained as under.

Rule Particulars
1 Short title and commencement
2 Definitions
3 Prohibition on drawl of Foreign Exchange (FX)
4 Prior approval of Government of India (CG)
5 Prior approval of Reserve Bank of India (RBI)
6 Proviso to Rule 4 and Rule 5
7 Use of International Credit Card while outside India

20

SURAT BRANCH OF WIRC OF ICAI

Rule 3: Schedule-I (Prohibited transactions)

Sr. No. Transaction

1 Remittance out of lottery winnings.

2 Remittance of income from racing/riding etc. or any other hobby

3 Remittance for purchase of lottery tickets, banned/proscribed magazines, football pools,

sweepstakes, etc.

4 Payment of commission on exports made towards equity investment in Joint Ventures/ Wholly

Owned Subsidiaries abroad of Indian companies.

5 Remittance of dividend by any company to which the requirement of dividend balancing is

applicable.

6 Payment of commission on exports under Rupee State Credit Route, except commission up to

10% of invoice value of exports of tea and tobacco.

7 Payment related to "Call Back Services" of telephones.
8 Remittance of interest income on funds held in Non-Resident Special Rupee (Account) Scheme.

Rule-4: Schedule-II (Transactions which require prior approval of the Central Government)

S r . Purpose of Remittance Ministry/Department of Govt. of India
No. whose approval is required

1 Cultural Tours Ministry of Human Resources Development,
(Department of Education and Culture)

Advertisement in foreign print media for the Ministry of Finance, (Department of Economic
2 purposes other than promotion of tourism, Affairs)

foreign investments and international bidding

(exceeding USD 10,000) by a State Government
and its Public Sector Undertakings

21

SURAT BRANCH OF WIRC OF ICAI

3 Remittance of freight of vessel chartered Ministry of Surface Transport,

by a PSU (Chartering Wing)

4 Payment of import by a Govt. Department or Ministry of Surface Transport,

a PSU on c.i.f. basis (Chartering Wing)

(i.e. other than f.o.b. and f.a.s. basis)

5 Multi-modal transport operators making Registration Certificate from the Director

remittance to their agents abroad General of Shipping

6 Remittance of hiring charges of transponders by Ministry of Information and Broadcasting

(a) TV Channels Ministry of Communication and Information

(b) Internet Service providers

7 Remittance of container detention charges Ministry of Surface Transport

exceeding the rate prescribed by Director (Director General of Shipping)

General of Shipping

8 Remittances under technical collaboration Ministry of Commerce and Industry

agreements where payment of royalty exceeds

5% on local sales and 8% on exports and

lumpsum payment exceeds USD 2 million

9 Remittance of prize money/sponsorship of Ministry of Human Resources Development

sports activity abroad by a person other than (Department of Youth Affairs and Sports)

International / National / State Level sports

bodies, if the amount involved exceeds

USD 100,000.

10 Omitted

11 Remittance for membership of P& I Club Ministry of Finance, (Insurance Division)

Rule 5: Schedule III (Payment/Withdrawal of FX which requires prior approval of RBI)

Sr. No. Particulars Remarks
Refer Note-1
Facilities for an Individuals
A Individuals can avail of foreign exchange facility for the following purposes

within the limit of USD 2,50,000 only. Any additional remittance in excess of

the said limit for the following purposes shall require prior approval of the

Reserve Bank of India.
(i) Private visits to any country (except Nepal and Bhutan)

(ii) Gift or donation

(iii) Going abroad for employment

(iv) Emigration

(v) Maintenance of close relatives abroad
(vi) Travel for business, or attending a conference or specialised training or for meeting

expenses for meeting medical expenses, or check-up abroad, or for accompanying

as attendant to a patient going abroad for medical treatment / check-up.

22

SURAT BRANCH OF WIRC OF ICAI

(vii) Expenses in connection with medical treatment abroad Refer Note-1

(viii) Studies abroad Refer Note-1

(ix) Any other current account transaction Refer Note-2

Provided further that if an individual remits any amount under the said Liberalized

Remittance Scheme in a financial year, then the applicable limit for such individual

would be reduced from USD 250,000 (US Dollars Two Hundred and Fifty Thousand

Only) by the amount so remitted.

Provided also that for a person who is resident but not permanently resident in India

and

(a)is a citizen of a foreign State other than Pakistan; or

(b)is a citizen of India, who is on deputation to the office or branch of a foreign

company or subsidiary or joint venture in India of such foreign company,

may make remittance up to his net salary (after deduction of taxes, contribution to

provident fund and other deductions).

Explanation: For the purpose of this item, a person resident in India on account of

his employment or deputation of a specified duration (irrespective of length thereof)

or for a specific job or assignments, the duration of which does not exceed three

years, is a resident but not permanently resident.

provided also that a person other than an individual may also avail of foreign

exchangefacility, mutatis mutandis, within the limit prescribed under the said

Liberalised Remittance Scheme for the purposes mentioned herein above.

B Facilities for persons other than individual -
The following remittances by persons other than individuals shall require prior
approval of the Reserve Bank of India.

(i) Donations exceeding one per cent. of their foreign exchange earnings during the
previous three financial years or USD 5,000,000, whichever is less, for-
(a) creation of Chairs in reputed educational institutes,
(b) contribution to funds (not being an investment fund) promoted by educational
institutes; and
(c) contribution to a technical institution or body or association in the field of
activity of the donor Company.

(ii) Commission, per transaction, to agents abroad for sale of residential flats or
commercial plots in India exceeding USD 25,000 or five percent of the inward
remittance whichever is more.

(iii) Remittances exceeding USD 10,000,000 per project for any consultancy services in
respect of infrastructure projects and USD 1,000,000 per project, for other
consultancy services procured from outside India.
Explanation: -For the purposes of this sub-paragraph, the expression "infrastructure'
shall mean as defined in explanation to para 1(iv)(A)(a) of Schedule I of FEMA
Notification 3/2000-RB, dated the May 3, 2000.

23

SURAT BRANCH OF WIRC OF ICAI

(vi) Remittances exceeding five per cent of investment brought into India or Refer Note-1
USD 100,000 whichever is higher, by an entity in India by way of reimbursement
of pre-incorporation expenses.

Note-1

The individual may avail of exchange facility for an amount in excess of the limit prescribed under the
Liberalised Remittance Scheme (LRS) as provided in regulation 4 to FEMA Notification 1/2000-RB, dated
the 3rd May, 2000 if it is so required by a country of emigration, medical institute offering treatment or the
university, respectively. It must be proved by ways of documentary evidences if it is asked for by the
authorities.

Note-2

As per FAQ on Forex Facilities, “ Any other current account transaction” as given in item no. (ix) of rules, is
to cover any other current account transactions which were available to individuals in the erstwhile
Schedule III to FEM (CAT) Rules, 2000 dated May 3, 2000, and which do not appear in Para 1 to Schedule III
to FEM (CAT) Amendment Rules, 2015

Note-3

Under Foreign Exchange Management (Non-Debt Instrument) Rules, 2019, equity instruments up to 5%
of authorized capital or UDS 500000, whichever is less can be issued against Pre-incorporation
/preoperative expenses for expenditure relating to incorporation or necessary for commencement of
operation.

Section 6. Capital Account Transactions. —

We will discuss the allowability of Capital Account Transactions in the next month.

k fema@kamleshgajera.com
# 9909700197

CA. Kamlesh Gajera

24

SURAT BRANCH OF WIRC OF ICAI

Share Analysis

Few Years Back when pandemic took over, I have started little bit of share trading and eventually that little
bit lead to too many and then to daily trading . Somehow and other I have done fair bit of gain while trading.
But That was the time where I believe everyone has made profit, because market was going only one way.
It was a rocket speed recovery in one year after Covid. However, I decided to share my thought process with
clients on how share trading can give them additional income and accordingly started sharing suggestions
on which script to trade and when to exit and when to enter. After few decent recommendations, I have
received fine feedback from the target audience. To take this one step ahead, I have decided to share how I
pick particular script. This is just for knowledge sharing only.

1) At Particular point of time see which sector is on boom or will boom in short period of time. Like
nowadays buzz is created about shortage of coal, poor electricity etc . If we observe this news closely,
we can conclude that, corporate which deals in renewable resource or one who is working on
alternative of coal may get good response from market and can hit the bullish button in no time

2) Once you decide which news to follow, short out best company in that particular area.

3) While Short listing, one need to consider following :

Promotors of that company- Get an idea of educational background of promoters and their industry
expertise, their previous experience with this sector and also search about their family background- All this
will help us in understanding who is handling business and their potential to drive company to success.

Vintage of the company – Take a scenario where bank funds us a loan, they do generally ask three-year
income tax return and asks us about how long we have been in particular sector. All this exercise is done by
them to get better understanding of borrower and to compare our business performance over the period
of time. Same goes with us when we decide to invest in company. More the vintage easier it would be to
decide. However, by no means we need to underestimate fresh business ideas. If we believe in business
then even if company does not have long vintage, we may invest in it.

Auditors of the Company- Generally reputed audit firm helps us in building confidence in financial
statement and creates less confusion.

Promotor's holding- I firmly believe, company with more promoters holding has lesser chance of fraud
and more the closely held it is , greater the chance that promoter will give every ounce for growth.
However few times for capacity expansion and future growth and due to shortage of funds it becomes
necessary to dilute certain holding and it helps company in long run too and there is no principle as such
that “greater the promoter holding better the company or lesser the promoter holding weaker the
company”. But one need to see purpose for which ownership is diluted and utilization of fund

We may use other indicators too like peer's performance, recent results, media coverage etc

4) Once you are ready with company see its price movement for few days. Conclude on it's trends like
which way it is moving frequently. I strongly believe ( Though it may be illogical) that share generally
reaches to its market pre-opening price in very very short period of time.

25

SURAT BRANCH OF WIRC OF ICAI

5) See 52 week's high – low and life high and low. I generally avoid buying share on 52 weeks high or near
to high.

6) Compare it's pe ratio with other company operating in same segment. If suppose it is trading at too
high pe in compare to other peers then you need to further dive in to find reason and vice versa.

7) See Upcoming plans of company and media buzz about that plans.
8) See dividend history. I always prefer dividend paying company, as it at least ensures some pay back in

case script do not perform.
9) See bonus history and split history. I prefer company with frequent bonus history and company which

has not split shares in long while.
10) Read management commentary on latest financials.
11) Avoid panic buying. i.e if you decide on particular share and before you put order for purchase if script

soars with huge percentage then wait for correction . Seven out of Ten times script corrects if it has
gained a lot
12) Put Strict Stop loss if you are planning for Trading and if you are long term investor you may wait for
some more time before exiting.

Thanks, and Regards

k camehtaas@gmail.com
# 8866343591

CA RAJIV MEHTA

26

SURAT BRANCH OF WIRC OF ICAI

IND AS 115 - Revenue from Contracts with Customers

Objective of the IND AS:
The objective of this Standard is to establish the principles that an entity shall apply to report useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and
cash flows arising from a contract with a customer.
Scope:
Ind AS 115 applies to all contracts with customers to provide goods or services that are outputs of the entity's
ordinary course of business in exchange for consideration, unless specifically excluded from the scope of the
new guidance, as described below.
An entity shall apply this Standard to all contracts with customers, except the following:

(a) lease contracts within the scope of Ind AS 116, Leases;
(b) insurance contracts within the scope of Ind AS 104, Insurance Contracts
(c) financial instruments and other contractual rights or obligations within the scope of Ind AS 109,

Financial Instruments, Ind AS 110, Consolidated Financial Statements, Ind AS 111, Joint
Arrangements, Ind AS 27, Separate Financial Statements and Ind AS 28, Investments in
Associates and Joint Ventures; and
(d) non-monetary exchanges between entities in the same line of business to facilitate sales to
customers or potential customers. For example, this Standard would not apply to a contract
between two oil companies that agree to an exchange of oil to fulfil demand from their
customers in different specified locations on a timely basis.
Note: This Std would apply only if the Counter-party is a Customer.
Contracts which are Partially within the scope:
A contract with a customer may be partially within the scope of Ind AS 115 and partially within the scope of
other Ind AS.
In such cases, the following steps should be followed to identify how it should be split between Ind AS 115 and
other Ind AS:
(i) If the other Ind AS specify how to separate and/or measure a portion of the contract, then that
guidance should be applied first. The amounts measured under other Ind AS should be
excluded from the transaction price that is allocated to performance obligations under Ind AS
115.
(ii) If the other Ind AS do not stipulate how to separate and/or measure a portion of the contract,
then Ind AS 115 would be used to separate and/or measure that portion of the contract.

27

SURAT BRANCH OF WIRC OF ICAI

Five Step Model:
To achieve the core principle, an entity should apply the following five-step model:

Step 1: Identify the contract with the customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies its performance obligations.

1. Identify the Contract with the customer.

2. Identify the Performance Obligations

3. Determine the Transac on Price .

4. Allocate the Transac on Price to the
Performance Obliga ons.

5. Recognize Revenue when (or as) the en ty
sa sfies its Performance Obliga ons.

Step 1: Identify the contract with the customer.

A contract is an agreement between two or more parties that creates enforceable rights and obligations.

Enforceability of the rights and obligations in a contract is a matter of law, so an entity needs to consider
the local relevant legal environment to make that determination.

Contracts can be written, oral, or implied by an entity's customary business practices. The practices and
processes for establishing contracts with customers vary across legal jurisdictions, industries, and entities.
In addition, they may vary within an entity (for example, they may depend on the class of customer or the
nature of the promised goods or services).

An entity shall consider those practices and processes in determining whether and when an agreement
with a customer creates enforceable rights and obligations.

28

SURAT BRANCH OF WIRC OF ICAI

The rights and obligations in a contract must be “enforceable” in order for an entity to apply the five-step
revenue model.

Step 1 serves as a 'gateway' through which an entity must pass before proceeding to the later steps of the
model. In other words, if at the inception of an arrangement, an entity concludes that the criteria below are
not met, it should not apply Steps 2 through 5 of the model.
But if Step 1 is subsequently met then the remaining steps can be applied.
Entity will not reassess the Step 1 criteria unless there is an indication of a significant change in facts and
circumstances.
An accounting contract exists only when an arrangement with a customer meets each of the following five
criteria:
(a) The parties have approved (in writing, orally or in accordance with other customary business practices)
the contract and are committed to perform their contractual obligations.
(b) The entity can identify each party's rights regarding the goods or services to be transferred.
(c) The entity can identify the payment terms for the goods or services to be transferred.
(d) The contract has commercial substance (i.e. the risk, timing or amount of the entity's future cash flows
is expected to change as a result of the contract), and
(e) It is probable that the entity will collect substantially all of the consideration to which it expects to be
entitled. In evaluating whether collectability of an amount of consideration is probable, an entity shall
consider only the customer's ability and intention to pay that amount of consideration when it is due. The
amount of consideration to which the entity will be entitled may be less than the price stated in the contract if
the consideration is variable because the entity may offer the customer a price concession.
Imp: If the arrangement does not meet the five criteria at inception, the entity should continue to reassess
whether the five criteria are subsequently met.

29

SURAT BRANCH OF WIRC OF ICAI

Receipt of Non- Refundable Consideration and contract does not pass step 1
A contract may not pass Step 1, but the entity may still transfer goods or services to the customer and receive
non-refundable consideration in exchange for those goods or services. In that circumstance, the entity cannot
recognise revenue for the non-refundable consideration received until either the Step 1 criteria are
subsequently met, or one of the events outlined below has occurred:

(a) The entity has no remaining obligations to transfer goods or services to the customer, and all, or
substantially all, of the consideration promised by the customer has been received by the entity
and is non-refundable, or

(b) The contract has been terminated, and the consideration received from the customer is non-
refundable.

Practical Questions:
Revenue Identification:

Q.1. A Company is registered as an Export Oriented Unit (EOU) and exports all its manufactured
products. As per the Foreign Trade Policy in India, Merchandise Exports from India Scheme
(“MEIS”), the Company is eligible to claim 2% of its FOB value of exports as export incentives in
the form of scrips w.e.f 1st April, 2015 which could be used for payment of custom duty against
imports or could be sold in open market. Can the MEIS Incentive be treated as revenue?

Ans: Appendix A of Ind AS 115, Revenue from Contracts with Customers, defines 'Revenue' as
income arising in the course of an entity's ordinary activities.
It may be noted that as per Ind AS 20, Accounting for Government Grants and Disclosure of
Government Assistance, 'government grants' are assistance by government in the form of
transfers of resources to an entity in return for past or future compliance with certain
conditions relating to the operating activities of the entity. They exclude those forms of
government assistance which cannot reasonably have a value placed upon them and
transactions with government which cannot be distinguished from the normal trading
transactions of the entity.
In the given case, the export incentive is in the nature of government grant and does not fall
within the scope of Ind AS 115, as it is not revenue arising from contract with customer. Such
export incentives are benefits given by the government to incentivise companies to export
more products.
In accordance with above, while recognising the income arising from MEIS scheme, the
Company should apply the provisions of Ind AS 20 and not Ind AS 115.
The presentation of such incentives shall be made in accordance with the relevant provisions of
Ind AS 20 and Schedule III to the Companies Act, 2013.

30

SURAT BRANCH OF WIRC OF ICAI

Identification of Customer:
Q. 2. Cyber net Ltd. provides internet-based advertising services to publishing companies. It
purchases advertisement space on various websites from a selection of publishers as per the
following scenarios:
(i) It pre-purchases the advertisement space from the publishers before it finds advertisers for
that space.
(ii) It provides the service of matching the advertisers with the publishers.
In each of the above cases, which party will be identified as the customer?
Ans. Ind AS 115 states that, “an entity shall apply this Standard to a contract, only if the
counterparty to the contract is a customer. A customer is a party that has contracted with an
entity to obtain goods or services that are an output of the entity's ordinary activities in
exchange for consideration. A counterparty to the contract would not be a customer if, for
example, the counterparty has contracted with the entity to participate in an activity or process
in which the parties to the contract share in the risks and benefits that result from the activity or
process (such as developing an asset in a collaboration arrangement) rather than to obtain the
output of the entity's ordinary activities”.
In transactions involving multiple parties, it requires judgement to identify which
counterparties are customers of the entity as it depends on specific terms and conditions of the
underlying contracts. An entity is required to consider all relevant facts and circumstances, to
determine whether the counterparty is a customer. The identification of the performance
obligations in a contract can also have a significant effect on the determination of which party is
the entity's customer.
(i) In Scenario 1, Cybernet Ltd. is acting as a principal in accordance with Ind AS 115, where
Cybernet Ltd. pre-purchases advertisement space on various websites from a selection of
publishers, the companies (i.e., advertiser) to whom it will provide the advertising space will be
identified as its customers.
(ii) In Scenario 2, Cybernet Ltd. is acting as an agent of the publisher in accordance with Ind AS 115,
Cybernet Ltd. does not provide any ad-targeting services or purchase the advertising space
from the publishers before it finds advertisers for that space. It only provides the service of
matching the ad placement for advertisers with the publishers. Accordingly, the publisher to
whom Cybernet Ltd. is providing services will be identified as its customer.

k adicps@gmail.com
# 9898512702

CA. ADITYA CHHAWCHHARIA

31

SURAT BRANCH OF WIRC OF ICAI

Make Data a Strategic Advantage for Future Business Needs

There are plenty of resources that promise the one true path to creating a data strategy. “Do these 5 things and
you'll become a data-driven company” or “These are the 5 steps to monetizing your data” and so on.

Here's the painful truth that I've learned from running countless data analysis projects: There's no one path to
creating a right data strategy. Every company is unique, every business is unique, every industry, every
promoter and organization culture is unique, and so every company's path is going to be unique. Rather than
looking at what other companies have done, the key is examining your own needs and prioritizing the best
data investments for your company
How can you actually know what you should prioritize? Many resources talk about focusing on projects with
the highest ROI (i.e. the return that these initiatives will bring your company).
However, I believe that this is the wrong way to look at your data strategy. Because let's face it, every data
person knows that your inputs and assumptions drive the final output of your ROI calculation. I believe that
companies shouldn't prioritize data projects from an ROI lens, but instead an “advantage” lens.
Which data investments will help you build sustainable competitive advantages to outperform your
competitors?

The Data Benefit Matrix
The Data Benefit Matrix can help you figure out what types of data process you want to build and how far you
want to advance them.
Here's how it works — the rows represent the type of data advantages that companies can create, and the
columns are the three stages for each of those advantages.

32

SURAT BRANCH OF WIRC OF ICAI

Next, we've got the three stages of each data advantage:
Stage 1 (Basic): This is a quick-and-dirty MVP that uses basic tools (e.g. SAAS products, Google Sheets,
Zapier) and no data specialists. I almost always recommend that companies start new initiatives in the
“Basic” tier to quickly deploy and assess a solution.
Stage 2 (Intermediate): This tier includes investments in data platform tooling and data specialists or
teams.
Stage 3 (Advanced): These are best-in-class data initiatives with specialized teams for each use case or
project. When you get to this tier, you're basically a case study for what it means to be a data-driven
company.

Example #1: Using the Matrix to prioritize data analytics Set up for Retail Fashion Brand

33

SURAT BRANCH OF WIRC OF ICAI

Conclusion

Remember that your business is unique, and so the data moats and advantages that you create for yourself will
be unique from every other company in the world.

When you think about finding your data strategy, start at the basics. Consider the different types and levels of
advantages that you could build, start with the lowest hanging fruit that can create a meaningful impact, and
just keep iterating from there.

Then, as you embark on creating these data initiatives, remember to build the right foundation. Don't forget to
invest in the data tools you need,

k ca.abhimittal@gmail.com
# 97245 99993

CA ABHISHEK MITTAL

34

SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Surat Branch visit by CCM CA. Vishal Doshi Sir CCM CA. Susilkumar Goyal Sir, Chairman BOS(Operations) with
CA Jay Chhaira Sir visited Surat Branch

Chairman CA. Nikesh Kothari Falicitate Speaker CA Rasesh Shah Secretory CA Dushyant Vithlani Falicitate speaker CA Viresh Rudalal

MCM CA. Preetesh Shah Falicitate Speaker CA Pragnesh Jagasheth Vice Chairman CA Arun Narang Falicitate
Speaker CA Manan Doshi - RERA lecture series

35

SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Secretary CA Dushyant Vithlani Falicitate speaker Member of Surat Branch Attending RERA Lecture Series
Shri Chirag Kachhia - RERA lecture series

Chairman CA. Nikesh Kothari Falicitate Speaker Chairman CA. Nikesh Kothari, Secretary CA. Dushyant Vithlani,
Adv. Nipun Singhvi - RERA lecture series MCM CA. Shailesh Lakhankiya with

Speaker Adv. Nipun Singhvi & CA. Mahadev Birla

Treasurer CA. Ashvin Bhauwala Falicitate Secretary CA Dushyant Vithlani Falicitate
Speaker CA. Vijay Ramnani - RERA lecture series Speaker CA Sarthak Bhanshali - RERA lecture series

36

SURAT BRANCH OF WIRC OF ICAI

Event Snap Shot

Secretary CA Dushyant Vithlani Falicitate Secretary CA Dushyant Vithlani Falicitate
Speaker CA Mahadev Birla - RERA lecture series Speaker CA. Ankit Danawala - RERA lecture series

Vice Chairman CA. Arun Narang Falicitate Speaker CA Naveen Jain MCM CA. Joni Jain Falicitate
Past Chairman Surat Branch - RERA lecture series Speaker CA Krishnakant Jhujunwala - RERA lecture series

FAFD Batch with Surat Branch MCM

37

SURAT BRANCH OF WIRC OF ICAI

Library & Reading Room Facility at Branch

Dear Professional Colleague,
The Surat Branch of WIRC of ICAI with great pleasure announces the opening of Reading Room/Library at our Branch
Premises for our CA Students to enable them for studying in a Positive and Healthy environment and stay connected
to the Branch as well. The Reading Room/Library is fully Air Conditioned and provides a Hygienic and positive
environment to our Students of Surat City and will facilitate them in their learning journey.
Library Fees :

With Best wishes from : CA Shailesh Lakhankiya
CA Manthan Chawat Co - Chairman

Chairman (Library & Reading Room Committee)

(Library & Reading Room Committee)

38

SURAT BRANCH OF WIRC OF ICAI

Heartfelt Condolences

CA. Sneha Patel

Surat Branch of WIRC of ICAI deeply mourns the unexpected &
untimely demise of our young member
CA Sneha Kishorbhai Patel.

We express our heartfelt condolences to the bereaved family.
May her Soul Rest in Peace...

01-04-2022 21-04-2022 11-05-2022 31-05-2022

LOA

39

SURAT BRANCH OF WIRC OF ICAI

Upcoming Sessions for the month of June

Date & Day Event Name Time CPE
Hours
27th June Celebration of World MSME Day Half Day
Monday —

Vishal Madhavani Sameer Madhavani

# 98254 94919 # 98252 88968

ENTERPRISE

`

601, Valen na Business Hub, `
B.s. Shell Petrol Pump,
L. P. Savani Road, Adajan, Surat.
Ph.: 0261-461 7161
k om_enterprise83@yahoo.in

EXCLUSIVE CHANNEL PARTNER

`

40

SURAT BRANCH OF WIRC OF ICAI

41

SURAT BRANCH OF WIRC OF ICAI

42

SURAT BRANCH OF WIRC OF ICAI

43

SURAT BRANCH OF WIRC OF ICAI

44

SURAT BRANCH OF WIRC OF ICAI

45

SURAT BRANCH OF WIRC OF ICAI

46

SURAT BRANCH OF WIRC OF ICAI

47