Issue of taxability of surplus on sale of listed shares and securities - Capital Gains or Business Income

Circular No. 6/2016 : Income Tax Department

                           Instructions in order to reduce litigation
Sub-section (14) of Section 2 of the Income-tax Act, 1961 ('Act') defines the term "capital asset" to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets subject to certain exceptions. As regards shares and other securities, the same can be held either as capital assets or stock-in-trade/ trading assets or both. Determination of the character of a particular investment in shares or other securities, whether the same is in the nature of a capital asset or stock-in-trade, is essentially a fact-specific determination and has led to a lot of uncertainty and litigation in the past.

2. Over the years, the courts have laid down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. The Central Board of Direct Taxes ('CBDT) has also, through Instruction No. 1827, dated August 31, 1989 and Circular No.4 of 2007 dated June 15, 2007, summarized the said principles for guidance of the field formations.

Clarification on Applicability of the Companies Act, 2013 to Auditor's Report to FY 2014-15 and Onwards. - (08-04-2014)

Applicability of the Companies Act, 2013 to Auditor’s Report to FY 2014-15 and Onwards1

The Ministry of Corporate Affairs, on 26th March 2014 notified a majority of the remaining sections of the Companies Act, 2013, including sections 139 to 148, relating to audits and auditors. The Act was stated to be effective from 1st April, 2014. Accordingly, queries are being raised by a number of members as to whether any auditor’s report of a company being signed on or after 01st April, 2014 would be in accordance with the requirements of section 143 of the Companies Act, 2013. In this context, it may be noted that the Ministry of Corporate Affairs (MCA) has, on 04th April 2014, vide its General Circular No. 08/2014, clarified that the financial statements (and documents required to be attached thereto), auditor’s report and Board’s report in respect of financial years that commenced earlier than 01st April, 2014 shall be governed by the relevant provisions/Schedules/rules of the Companies Act 1956. This MCA Circular can be seen at URL http://www.mca.gov.in/Ministry/pdf/General_Circular_8_2014.pdf. Therefore, it is clear from MCA’s aforesaid General Circular that the auditor’s report of a company pertaining to any financial year commencing on or before 31st march 2014, would be in accordance with the requirements of the Companies Act, 1956 even if that financial year ends after 01st April 2014. For example, where the financial year of a company is 01st January 2014 to 31st December 2014, the statutory auditor’s report signed therefor would be in accordance with the requirements of the Companies Act, 1956. As a corollary to MCA’s General Circular, it appears that the provisions of the 2013 Act would apply only to the financial years commencing on or after 01st April 2014. Thus, for example, the statutory auditor’s report signed in respect of the financial year of the company ended 31st March 2015would need to be issued in accordance with the provisions of the Companies Act, 2013.

1    Issued by Auditing & Assurance Standards Board of ICAI

Success rate in CA final exam dips to 3.1%

MUMBAI: The final chartered accountancy (CA) results released on Wednesday showed that success rate in the exams held in November last year has dipped to 3.11% -- the lowest in the last five exams. In all, 32,536 students appeared for both the group I & group II exams across the country. The success rate of students who appeared in either group I or group II exams is also the lowest in recent years.

The final CA exam is held twice in a year. In the first exam of 2013 held in May, the success rate of students who took the exam in both groups was 10.03%. In November 2012, the pass rate was 12.97% while in May 2012 16.38% students passed in both the groups.

Subodh Agrawal, the president of Institute of Chartered Accountants of India (ICAI), which conducts the exam, claimed that there is no particular reason for the decline. "One cannot attribute the lower success rate to any one reason. The CA exam reflects the performance of students," he said. The low success rate could not be blamed on any recent changes in curriculum or pattern as the curriculum was changed at least five years ago, he added. He said that the content in the question paper was totally from the study material provided to the students. Students have scored on what they have written, he said.

Kirti Agrawal, secretary of the Nagpur branch of the western region of ICAI, said, "CA is one of the toughest exams. The dummy article-ship, sheer reading without understanding to get through the exams, over dependence on private coaching with lack of practical approach to solutions, have scaled down the results. Students need to focus on how to learn and acquire knowledge rather than just clearing the exam."
She also claimed that the results have not gone down, but the members have increased manifold in every field.

In the November 2013 exam, Gaurav Shrawagi, from Akot, a town in Akola district, has topped in the country. Shrawagi scored 66.75%, while the second highest scorer Mridu Garg from Delhi got 66.25%. Kolkata boy Akshay Losalka stood third with 65.50%. Even the highest score, has gone down, claim many. The topper in May 2012 exam had scored 76%.
Shrawagi was elated to receive the call from the ICAI president on Wednesday morning, he said. "I was shivering and I thanked God when he mentioned that I am the first in the country. When passing with grace marks in CA exam is a big deal, getting the first rank was much more than what I had expected," said Shrawagi. He claimed that months of hard work and hours of revision has helped him achieve the feat.

President Agrawal added that it is not the first time that the results are below 10%. In the 1980s and 1990s, the success rate was on the lower side. However, he could not recollect a low success rate in the recent years. He added that he is hoping for a better results in the next exam.

 Source: Times of India