Happy Birthday Rakesh Sir :)

Firstly Wish You Many Many Happy Returns of the Day Rakesh Sir :)

Sir you have always motivated & encouraged to try new things irrespective of positive or negative outcome as at least we would learn something from our experience

Sir has been always approachable, friendly and nurturing all of us to grow in Personal & Professional life

Hope all your dreams come true

Have a Great Day

20 Powerful Beliefs That Will Push You Toward Success - by Dumb Little Man

20 Powerful Beliefs That Will Push You Toward Success - by Dumb Little Man

Preliminary Expenses - An Analysis - Mayur Mundra

An Analysis on Preliminary Expenses :

These are incurred for the incorporation of a company. They may be paid by the promoters before the company is incorporated or by the company after it is incorporated. And they include the following:

a) professional charges paid for drafting of memorandum of association
and articles of association;

b) professional charges for consultation in incorporating the company;

c) cost of printing of the initial copies of MoA and AoA;

d) stamp duty for the documents;

e) registration fee paid to the Registrar of Companies (RoC) for
incorporation; f) bank charges incurred on the above; and

g) incidental expenses such as stationary, conveyance, and so on.

Preliminary expenses are those incurred in connection with the incorporation of the company. Shares are issued after the company is incorporated. Share issue expenses are not a part of preliminary expenses. Therefore, it is a wrong to disclose share issue expense as part of preliminary expenses. No accounting entry would be permissible under this head once the company is incorporated.

These are to be recorded under a separate head of account. Section 78 of the Companies Act, dealing with utilisation of securities premium, states defraying of preliminary expense under a clause different from the clause defraying expenditure incurred on issue of shares and/or debentures. It also indicates that share issue expenses are different from preliminary expenses.

Recognising preliminary expenses: Since the expenditure is incurred and paid by the promoters even before the company is incorporated, there is normally a clause that the promoters are reimbursed of all the expenditure. It would not be proper to treat these expenses as accrued as on the date of incorporation of the company and to show them as outstanding expenditure. There cannot be any transactions entered into by the company before it is incorporated.

Accounting treatment of preliminary expenses: Preliminary expenses are capitalised and amortised over a reasonable period of time. Format of balance-sheet of a company provides for disclosure of un-amortised preliminary expenses under the head "Miscellaneous items".

Accounting Standard on preliminary expenses: AS 26 dealing with intangible assets covers preliminary expenses as well. The period over which these preliminary expenses are to be amortised is best left to the judgment of the directors of the company. AS 26 suggests writing off intangible assets over a period of 10 years, though a different period is permissible if it is justified in the opinion of the management. It is a common practice to write off these preliminary expenses in a period of five years, though there is no legal provision to this effect. A company can as well write off its preliminary expenses in the same year as it incurs.

Audit of preliminary expenses: Audit of a company in the first year of its incorporation involves audit of preliminary expenses. Over the next few years, the only matter to be concerned with is write off of
preliminary expenses. At the planning stage, the auditor should enquire of the company about the details of preliminary expenses. Reference to the minutes of the first meeting of board of directors
indicates the quantum of preliminary expenses and the period over which it is proposed to be written off. The auditor would do well to retain a copy of the minutes for his documentation.
It is common practice that the chartered accountant associated with the incorporation of a company is appointed as first auditor of the company; this is not essential, though. Incorporation of a company can as well be made with the help of other professionals such as company secretaries, advocates, and so on. During the course of audit, the auditor should vouch the expenditure with reference to the bills and vouchers of expenditure. There would be certain expenses, such as stamp duty affixed on the memorandum and articles of association, which is filed with the Registrar for incorporation. Therefore, the audit evidence in support of stamp duty paid is less conclusive. Under these circumstances, the auditor can verify the receipt issued by the Registrar of Stamps for
stamps issued by him. Additionally, he may require the company to produce a photocopy of the memorandum and articles of association, duly attested by a director of the company.
Audit of preliminary expenses is a peculiar situation since these are incurred even before the company is incorporated. The auditor should read the memorandum and articles of Association to see if the clause of reimbursing the preliminary expenditure is contained therein. Possibly, preliminary expenditure could have been incurred by more than one person. Each one of the promoters who incurs the expenditure in connection with the incorporation of the company has to produce a statement of expenditure to seek reimbursement. Such a statement should be supported by the details of expenditure and the relevant bills and receipts. The minutes of the board of directors would be helpful to quantify the expenditure. The board should adopt the preliminary expenditure and also decide the period over which it has to be written off.

Another area of concern to the auditor would be the mode of reimbursement of preliminary expenditure. It can be by way of reimbursement in cash or allotment of shares. If shares are allotted through reimbursement of preliminary expenditure, it amounts to allotment of shares in consideration other than cash, and the disclosure norms as per Schedule VI would apply.
Section 227(1A) requires an auditor to satisfy that transactions represented merely by way of book entries are not prejudicial to the interests of the company and its shareholders. Write-off of
preliminary expenditure being one such, the auditor should use his diligence to satisfy himself about both the quantum of preliminary expenditure as well as the period over which it is to be written off.
Auditor and preliminary expenses: When the chartered accountant engaged by the company for its incorporation is also the first auditor, the auditor should be cautious about the restrictions of
Section 226(3). He would be disqualified to be the auditor of the company if he accepts shares in consideration of his professional services.

Audit and Assurance Standard 26, on letters of engagement, suggests separate letters of engagement for separate assignments. Therefore, the auditor should issue separate letters of engagements for incorporation of the company and or its audit. After all, his engagement for incorporation is by the promoters and his appointment as an auditor is by the company.
Preliminary expenses under the Income-Tax Act: The I-T Act provides for amortisation of preliminary expenses. Section 35 D specifies the expenditure to be included in preliminary expenditure, which under the I-T Act is allowable for all types of assesses. Conceptually, this is different from preliminary expenses under company law.

Allowability of share issue expenses under the I-T Act: Share issue expenses are not normally allowable as business expenditure. The only possibility of claiming share issue expenses under the I-T Act is provided in Section 35 D. Preliminary expenses under this section covers expenditure incurred for raising funds for the project. As a result, if shares are issued to fund the project, such expenditure can be included under preliminary expenses and claimed for amortisation
under Section 35 D.

SUCCESS COMES FROM BELIEF

I WOULD LIKE YOU GUYS TO SHARE SOME OF THE GOOD EXAMPLES ON THIS TOPIC.
THESE EXAMPLES MAY BE FROM YOUR PERSONAL LIFE OR FROM YOUR SURROUNDINGS ETC.

From 50 paise, she now earns Rs 200,000 a day

ONE MUST READ HER ABOUT HER DETERMINATION AND FIGHTING SPIRIT .

http://business.rediff.com/slide-show/2010/jun/08/slide-show-1-from-50-paise-to-rs-2-lakh-a-day-success-story.htm

Do not ever compromise on quality. This is a big thought from this ,apart from self belief and hard work .

MORNING TWEET

LIFE IS NOT ABOUT THE PEOPLE WHO ACT TRUE TO YOUR FACE......... ITS ABOUT THE PEOPLE WHO REMAINS TRUE BEHIND YOUR BACK

MANY..... HAPPY RETURN OF THE DAY - ROHIT

Dear Rohit,
Many ...... Happy returns of the day.
Hope your Birthday blossom into lots of dreams come true.

What to say about Rohit, we all know that he is great motivator, hard working and of course Soft Hearted. I am with him since last 20 years and enjoyed & shares his each and every mood. So in all great personality.

Manoj

A guide to certification - 15CB

Following are the suggested guide for the certification of remmittance

1) Name & Address of the Recipient & Beneficiary

2) Obtain Tax Residency Certificate issued by Tax Authorities of the country where the payee is located. If payee is a Branch, Tax Residency Certificate in respect of the Parent company

3) Status of the Recipient: Whether Individual, Partnership Firm, Incorporated Company, Trust, Association of Persons (Society etc), Bank or Government or a Government Body or any other status [Taxability and Rate of tax depends upon the Status of the payee]

4) Nature of Remittance as per agreement/document: Whether Royalty, Fees for Technical Services, Professional Fees, Business Income, Interest, Dividend, Management Fees, Reimbursement of Expenses or Other Income etc.

5) Ascertain applicable rate of TDS under applicable DTAA as well as under Domestic law.

6) In case the remittance is for “Net of Net of taxes” agreements: Whether tax payable has been grossed up? Provide computation.

7) Ascertain the correct classification of income: To do so, following details & documents are required-

a) Contract with the payee and other supporting documents, correspondence/emails, broachers etc.
b) Invoices and supporting vouchers. c) In case of Reimbursement of Expenses, supporting invoices /voucher
and other documentary proof

d) Any other document which may help in determining the nature of payment/ quantum of income.

8) In case the remittances is towards Royalty, FTS, Interest, Dividend, etc.:

Please Indicate-
a) Clause of DTAA under which remittance is covered with reasons
b) Rate of TDS under DTAA
c) If rate applied is lower than rate prescribed under DTAA, reasons
thereof
If the payment is in the nature of Fees for Technical Services, obtain
a Self Declaration of the Payee to the effect that its presence/
activities in India would not constitute a PE in India in terms of
Article 5 of the applicable Tax Treaty.

9) In case the remittances is for supply of articles or things (e.g. plant, machinery, equipment, etc.):

a) Whether recipient has any PE in India?
b) Whether, directly or indirectly, such activities of supply of
articles or things done through the PE?
c) Whether the sale of such articles or things has happened “in
India”?
If the payee has a PE in India, obtain Payee’s Self Declaration to the
effect that the transaction in respect of which the payment is being
made, is not directly or indirectly connected with the activities of
its PE in India.
d) If yes, the amount of income comprised in such remittance which is
liable to tax in India? Please provide basis/ computation of taxable
amount.
e) If no, give reasons
Obtain a Self Declaration from the Payee to the effect that it does
not have a Permanent Establishment (PE) in India in terms of Article 5
of the applicable Tax Treaty.

10) In case the remittance is on account of business income :
Pleaseindicate-

a. Whether such income is liable to tax in India?
b. If yes, the basis of arriving at the rate of TDS
c. If no, reasons thereof.

11) Date of Deduction of TDS, amount of TDS deducted, Exchange Rate on
the date of deduction of TDS to ascertain the correctness of amount of
TDS.

12) Photocopy of the receipted TDS Challan.

13) Particulars of the Bank (Name, Branch, Address, Account No.) thru
which the remittance is to be made