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The ministry of Corporate Affairs is looking into the statement sent by Ramlinga Raju to stock exchanges admitting fraud in Satyam’s accounts. “If the message was true and a fraud has happened in Satyam it is very shameful. It should not have happened,” Corporate Affairs inister Premchand Gupta told reporters on Wednesday . The corporate affairs ministry [...]

The chairman of India’s Satyam Computer Services Ltd. quit Wednesday after admitting the company’s profits had been inflated for several years, sending shares of the software services provider plunging by more than 70 percent. The news dragged down the benchmark Sensex stock index 7.3 percent to 9,594.47. The company’s balance sheet was loaded with “fictitious” assets and [...]

From B. Ramalinga Raju
Chairman, Satyam Computer Servcies Ltd.

Dear Board Members,

It is with deep regret, and tremendous burden that I am carrying on my conscience, that I would like to bring the following facts to your notice:

1. The balance sheet carries as of September 30, 2008

a) Inflated (non-existent) cash and bank balance of Rs 5,040 crore (as against Rs 5361 crore reflected in the books)

b) An accured interest of Rs 376 crore which is non-existent

c) An understated liability of Rs 1,230 crore on account of funds arranged by me

d) An over stated debtor position of Rs 490 crore (as against Rs 2651 reflected in the books)

2. For the September quarter (Q2) we reported a revenue of Rs 2,700 crore and an operating margin of Rs 649 crore (24 per cent of revenues) as against the actual revenues of Rs 2,112 crore and an actual operating margin of Rs 61 crore (3 per cent of revenue). This has resulted in artificial cash and bank balances going up by Rs 588 crore in Q2 alone.

The gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions as the size of the company operations grew significantly (annualized revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of Rs 8.392 crore). The differential in the real profits and the one reflected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher level of operations – thereby significantly increasing the costs.

Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was the poor performance would result in a takeover, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten.

The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam’s problem was solved, it was hoped that Maytas payments can be delayed. But that was not to be. What followed in the last several days is common knowledge

I would like the board to know:

1. That neither myself, not the Managing Director(including our spouses) sold any shares in the last eight years-excepting for a small proportion declared and sold for philanthropic purposes.

2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to keep the operations going by resorting to pledging all the promoter shares and raising funds from know sources by giving all kinds of assurances (Statement enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital expenditure to provide for growth did not help matters. Every attempt was made to keep the wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the selling of most of the pledged share by the lenders on account of margin triggers.

3. That neither me, nor the Managing Director took even one rupee/dollar from the company and have not benefitted in financial terms on account of the inflated results.

4. None of the board members, past or present, had any knowledge of the situation in which the company is placed. Even business leaders and senior executives in the company, such as Ram Mynampati, Subu D T R Anand, Kesab Panda, Virender Agarwal, A S Murthy, Hari T, S V Krishnan, Vijay Prasad, Manish Mehta, Murali V, Sriram Papani, Kiran Kavale, Joe Lagioia. Ravindra Penu Metsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the books of accounts. None of my or managing directors immediate or extended family members has any ideas about these issues.

Having put the facts before you, I leave it to the wisdom of the board to take the matters forward. However, I am also taking the liberty to recommend the following steps:

1) A task force has been formed in the last few days to address the situation arising out of the failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of Satyam: Subu D, T R Anand, Keshab Panda and Virender Aggarwal, representing business functions, and A.S.Murthy, Hari T and Murali V representing support functions. I suggest that Ram Mynampati be made the Chairman of this task force to immediately address some of the operational matters on hand. Ram can also act as an interim CEO reporting to the board.

2) Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities.

3) You may have a ‘restatement of accounts’ prepared by auditors in light of the facts that I have placed before you.

I have promoted and have been associated with Satyam for well over twenty years now. I have seen it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis.

in light of the above, I fervently appeal to the board to hold together to take some important steps. Mr. T R Prasad is well placed to mobalize support from the government at this crucial time. With the hope that members of the Task Force and the financila advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well.

Under the circumustances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My contribution is just to ensure enhancement of the board over the next several days or as early as possible.

I am now prepared to subject myself to the laws of the land and face the consequences thereof.

(B. Ramalinga Raju)

 

(Source: Allindiantaxes)

Posted in PWC      

NEW DELHI, Jan 7 (Reuters) - India’s government will examine the role of Satyam’s auditors and directors, after its chairman resigned and said the company profits had been inflated, the federal company affairs minister said on Wednesday. “Anybody found guilty will be dealt with accordingly,” Prem Chand Gupta told reporters. A spokeswoman for Satyam’s auditor, PricewaterhouseCoopers, could [...]

LOOK AT FREE/PREFERENTIAL TRADE AGREEMENTS India has entered into trade agreements with neighbouring countries, Thailand, Singapore, China, Korea, Chile, and Afghanistan besides being part of Global System of Trade Preferences that covers 52 developing countries. The agreements cover select items that attract concessional rate of import duties provided origin criterion is met. USE EXIM BANK [...]

To curb the misuse of tax exemption given to charitable organisations, the government will now closely scrutinise accounts of large entities, which include NGOs and trade bodies, after it was found that some of them were allegedly indulging in commercial activities. More than 60,000 assessees in seven metropolitan cities are claiming tax exemption under the [...]

Please provide me the provisions of LTA and documents required in respect of it. Is it possible to allow an employee to avail the benefit of it in the first year of their service.
Further I want to know as a employer what are my responsibilities as employer while allowing exemption u/s 10(5) and what type of documents I have to demand from employee claiming LTC.

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Ans:Leave Travel concession is exempted u/s 10(5) as per detail given below

1. Leave Travel Concession (LTC)/Leave Travel assistance (LTA) received from employer to proceed on leave to any place on India for himself and his family is exempted.
2. LTC/LTA received from employer or former employer received in connection with proceeding to any place in India after retirement/termination for himself and his family is also exempted
3. The exemption is allowed only if actual expenses has been incurred.

Family Meaning :

1. The spouse and children of Individual.
2. Parents,Brothers,sister of individual who are wholly or mainly dependent on Him.
   

Two Journey in a Block of Four Years is exempted:Exemption is allowed on two journey in block of four years.present block is running from 2006-09 .The block of four year is taken on the basis of Calender year.

Carry forward of LTC In next block:if assessee has not availed LTC exemption in Last block of four years than he can carry forward the exemption in first year of next four year block and can perform journey in first year of the next four year block.(single/both the journey of the old block period can be carry forward and exception can be availed in next block of four year .It is also clarified here that two journey actually belongs to next /new block of four years have no impact of carry forward of the old Journey performed in new block period of four years.


Amount Exempted.

A) Journey performed by Air

amount exempted:Economy Air fair of National carrier by the shortest route or the amount spent which ever is less.

B) Journey performed by Rail

Amount exempted: A.C. first class rail fare by shortest route.or amount spent which ever is less.

C) Place of origin and destination place of journey connected by rail but journey performed by other mode of transport.

Amount exempted :A.C. first class rail fare by shortest route.or amount spent which ever is less.

D) Place of origin& destination not connected by rail(partly/fully) but connected by other recognised Public transport system.

Amount exempted:First class or deluxe class fare by shortest route or amount spent which ever is less.

E) Place of origin& destination not connected by rail(partly/fully) and not connected by other recognised Public transport system also.

Amount exempted:AC first class rail fare by shortest route (as the journey had been performerd by rail) or the amount actually spent ,which ever is less.

Exemption On actual Expenses Only:The amount of exemption is Limited to actual expenses only .Means allowed only if actual journey is performed.

Exemption Of Fare Only:Exemption is allowed only for fare Only as explained above .Other expenses like Local conveyance charge ,taxi charges,lodging ,boarding charges is not exempted.

Exemption is allowed only for Two children if born after October 1,1998: This restriction does not apply to multiple birth after birth of first child and birth before October 1,1998.

On the basic of above answer to your quires is that a employee can perform jouncy in first year of employment as far as Income Tax act is concerned ,no bar on it .Moreover if he satisfy above condition of block period than he can claim exemption on amount actual spent and allowed as stated above which ever is less.

Secondly as DDO(drawing and disbursing Officer) /employer we should collect enough evidence /reasonable evidence to establish that the journey has actually been performed and amount offered for exemption has actually been spent by the employee.Mere certificate ,received from the employee that he has spent so much amount on LTC is not enough to allow exemption u/s 10(5) while calculating salary income for TDS(tax deducted at source) u/s 192.So we should collect Ticket photocopy where ever practicable or Ticket Number or agent bill etc as a proof that journey has actually performed to avoid complication at later stage.

WE have an ESOP scheme under which employees opt for shares which is given at 20% on the prevailing rates of Oct each year. The employee then contributes a fixed amount each month over a period of 3 years in a recurring deposit account. At the end of 3 years, the employee gets the shares at the rate when the offer was made 3 years back. He can either sell the shares on the date of maturity of the RD or opt to hold it. What are the taxation exposure for the employer and the employee? Radha , Banglore

Taxation exposure for Employees first

There is no perquisite value despite the fact that the allotment of shares is a kind of monetary gains for employee as it is given at 1/5th of the market price. This is due to the fact that the ESOP is now covered under FBT.

Liability to pay tax arise on account of sale of shares allotted under ESOP. An employee becomes the owner of the shares from the date on which shares are actually allotted by the company i.e in the shareholders list , his name is enrolled  as member of the company.

• 1. The price  at which he is allotted shares ( as per scheme 20 % of prevailing rate in October in your case) is the cost of the shares.
• 2. The sale price is the sales consideration.
• 3. The difference between sale price and cost shall be capital gains in the hand of employee.

If the shares are sold within one hear of holding i.e the date on which the shares were allotted , it will create short term capital gains taxed at normal rate. If the shares are held for more than one year, the gains are Long Term Gains taxed @ 20 %.

However , if the share in question is listed in any recognised stock exchange and the shares are sold through stock exchange , in that case short term is taxed @ 10 %  whereas the long term gains are TAX FREE u/s 10(38) of the I T Act.

Taxation exposure for Employer

Now the Fringe Benefit Tax is imposed on the value of ESOP under section 115WC(1)(ba) which states as under

(ba) the fair market value of the specified security or sweat equity shares referred to in clause (d) of sub-section (1) of section 115WB, on the date on which the option vests with the employee as reduced by the amount actually paid by, or recovered from, the employee in respect of such security or shares.

The effective date on which the value of the shares of ESOP for FBT purpose is the VESTING date and not the date of allotment.

The fair market value has to be determined as per Rule 40 C . In simplest form ,Rule 40C  lays down different rule for valuing shares of listed and unlisted shares.

value of Listed Shares

In a case where on the date of the vesting of the option, the share in the company is listed on a recognized stock exchange, the fair market value shall be the average of the opening price and closing price of the share on that date on the said stock exchange :

value of Unlisted Shares

In a case where, on the date of vesting of the option, the share in the company is not listed on a recognized stock exchange, the fair market value shall be determined by a merchant banker on the  the date of vesting of the option; or  any date earlier than the date of the vesting of the option, not being a date which is more than 180 days earlier than the date of the vesting;

The value on which FBT is applied is

Value determined                                                                                                      XXXXX

minus

amount actually paid by employee or recovered from him                                XXXXXX

         FBT to be paid on                                                                                             xxxxxxxxx

Bank Branch Auditors Panel for the year 2008-09 is now available as under: NORTH SOUTH EAST WEST

I am a salaried employee with self occupied house. I am availing tax benefit out of loan for purchase of the house. Apart from this, can I show following expenses as a loss towards the property and deduct it from my income?1. Expenses against house renovation e.g. furniture, painting2. Monthly maintenance charges paid to the Housing Society. Property tax paid to corporation. Amit , Mumbai

Following are the three types of expense allowed to be deducted while computing income from house property

1. Municpal tax paid

2. Standard deduction 30 % of (Rent - Municipal tax)

3. Interest paid or payable on the loan used for house purchase or construction.

No expense of any kind whatsoever can be deducted from house property income.

That answers your question.

I had lost vision of my one eye completely by an accident in childhood. Am I eligible for deduction under section 80U (Permanent Physical disability). Simi , BangloreSection 80U provides that a resident individual who is certified by the medical authority to be a person with disability, claim deduction of fifty thousand rupees( seventy five thousand in case of severe disability) from his/her income. Section 2(i) of Persons with Disabilities (Equal opportunities, Protection of Rights & Full Participation) Act, 1995 defines “disability”as—
(i) blindness;
(ii) low vision;
(iii) leprosy-cured;
(iv) hearing impairment;
(v) locomotor disability;
(vi) mental retardation;
(vii) mental illness;Person with disability means at least suffering should of 40 % as per medical certificate. Severe disability , if the disability is certified to be 80% . In your case , one eye has been lost , there fore the case will certainly covered under "low vision" which is also a disability. Get a certificate from District Medical Officer or appropriate authority and keep it for record. Claim the deduction the return as no document has to be attached. In case ever the document is required by the I T Authority, furnish the same as proof.

Rano Jain CA A number of trusts, societies and other organization avail exemption under Section 11 or Section 10(23C) by virtue of having income derived from property held under trust wholly for charitable or religious purposes, to the extent of the application of such income. Background of amendment Section 2(15) of the Act defines the term ‘Charitable Purpose’, [...]

The Institute of Chartered Accountants of India (ICAI) has undertaken various initiatives to create a communication link between its members who are practising and those who are employed in the corporate sector. This is to meet the current challenge of finance functions becoming crucial and a chief finance officer developing into a chief strategy officer [...]

Ques:whether a Pensioner who attains the age of 65 years on 28 Feb 2009 ,will be treated as Senior Citizen for the 2008-9 tax calculation?

Can a pensioner claim rebate for House Rent paid?
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Senior citizen under income Tax act

As per income Tax act Senior citizen means a person who is 65 years at any time during the previous year .Means if your age is 65 years on any date fall between 01.04.2008 to 31.03.2009
,you will treated as senior citizen under income tax act.As you are 65 on 28 Feb ,2009 so you are a senior citizen for previous year 2008-09 and in coming years.


Your second question is very interesting and I am just giving my opinion on it .

Can a pensioner claim rebate for House rent paid ?

To claim HRA rebate first a major condition is assessee should have received House Rent allowance from employer and he should have paid rent for House taken on rent.The amount of HRA exempted under section 10(13A) read with rule 2A is least of the following.

1. HRA received.
2. House rent paid in excess of 10% of salary
3. 50 % of salary if rented house is situated in Bombay,Madras,Culcutta,Delhi in any other city 40 % of salary

Salary here means:salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.plus fixed % commission on sale .

This is general condition,now take your condition .

• As Pension is covered under the definition of salary and taxable in the Head salary hence there is no separate treatment given for HRA paid to pensioners .
• As per section 10(13A) ,HRA should be paid by employer to the employee ,Pension is also covered under this, as the relation of employer and employee is existed between pensioners and employer also.
• other condition as applicable to employee also applicable to pensioners

so in my opinion HRA exemption is available to pensioners also .

1. if House rent allowance is received by the pensioner from employer. and
   
2. House rent is being paid by the pensioner actually.

but generally no hra is being paid in case of pensioner so no question of exemption arises at all even house rent is being paid .but in this case also Deduction u/s 80GG can be claimed detail is given hereunder

Deduction under section 80GG for house rent paid:Deduction u/s 80GG is available if following condition are satisfied

• Deduction is available to Individual Assessee only.
• He has not received HRA(house rent allownace ) from his employer if he is a salaried person otherwise he should be self employed.
• He has paid house rent for his own residence.
• He or his spouse or his minor child or HUF(of which he has a member) should not have a residential house where he ordinarily resides or performs duties of his office or employment or carries on his business or profession;
  
• He should not have a house owned by him, which is under his occupation and value of that is not being taken as nil under section 23(2)(a) or 23(4).
• A declaration on Form 10BA should be submitted .
  

so if conditions are satisfied then he can claim deduction u/s 80GG for house rent paid

Amount of deduction:Least of the following is deductible u/s 80GG

1. Rs 2000 per month for the Assessment year 1987-88 onwards.
2. 25 % of total income
   
3. the excess of actual rent paid over 10 % of total income
   

Total Income means income excluding long term and short term gain under section 111A and income referred to in section 115A or 115D but before making any deduction under section 80C to 80U.

Sir, if you are not receiving the HRA like other pensioner then you can claim deduction under section 80GG details as given above .
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