CVV & Co., a Chartered Accountant firm, has been into practice since 2005 in Chandigarh. CA. Harsh Aggarwal and CA. Sandeep Jain started their…

CVV & Co., a Chartered Accountant firm, has been into practice since 2005 in Chandigarh. CA. Harsh Aggarwal and CA. Sandeep Jain started their firm after practicing individually for almost 10 years, CA. Anirudh joined the firm in 2010 and now the firm has grown into big firm of six partners. Over the years, the firm has flourished its practice in the areas of auditing, Direct and Indirect Taxation, FEMA consultancy and other related matters. Firm has some renowned clients and in order to ensure quality of services delivered, proper discussions take place between audit team members and audit manager. Currently Kamal, Mukesh, Rajesh and Kunal being articles of the firm are working with CA. Mayank Gupta, CA. Rahul Jain, CA. Sandeep Jain and CA. Ashish Gupta respectively for prestigious clients of the firm. Mukesh assisting CA. Rahul Jain Mr. Karan, the director of HCP Limited has called a meeting with CA. Rahul Jain who is handling all GST related works of clients for past 5 years to discuss some issues faced by the Accounts Department relating to GST. Meeting was joined by the General Manager-Accounts, who provided the following information: (i) Company purchased three machines namely Machine X, Y and Z in March 2024. Necessary details of three machines are as follows : Particulars Machine X Machine Y Machine Z Date of Purchase and installation 01.03.2024 01.03.2024 01.03.2024 Purchase price 50,00,000 60,00,000 75,00,000 IGST@ 18% 9,00,000 10,80,000 13,50,000 Invoice Value 59,00,000 70,80,000 88,50,000 Usage Exclusively for taxable supply For exempt as well as taxable supply For exempt supply As due date of GSTR 3B for the month of March 2024 is approaching, General Manager - Accounts wants to enquire about the eligible input tax credit on three machines. Value of taxable supplies and exempt supplies for the month of March 2024 is 1,500 lakhs and 300 lakh respectively. (ii) Company has supplied goods on delivery challan for 5,00,000 on approval for sale or return basis to DEF & Co. on 01.03.2024 with the option of returning within 60 days. DEF & Co. signifies his approval for the whole of the above-mentioned goods on 15.05.2024. (iii) Company sent 600 units of goods outside India for exhibition on 01.09.2023 accompanied with a delivery challan issued in accordance with the provisions contained in the CGST Rules. 400 units of goods were brought back on 20.02.2024 and remaining goods were not returned till 31.03.2024. Company has not raised any invoice in respect of goods not brought back till the end of the year. CA. Rahul Jain delegated the said work to Mukesh to start initial working and then revert to him with his opinion. Kamal assisting CA. Mayank Gupta CA. Mayank Gupta is working on the applicability of Ind AS for various clients. VCM Limited is one of the prestigious clients of the firm. The accounts team of the company wants clarity on the treatment of the following transactions in the books of the accounts of the company as per the relevant Ind AS : (i) A customer has instituted a lawsuit against VCM Limited with personal injury using the company's product. The company's lawyers estimate from the experience that as on 31.03.2024, the company has 35% chance of being ordered to pay the customer compensation of 16,00,000 and a 65% chance of being ordered to pay compensation of 5,00,000. The ruling is expected to take place by 31.03.2026. The risk-free rate on three years Government Bonds is 6%. Management estimates that 7% is an appropriate discount rate that reflects the risk specific to the liability. (ii) To encourage entities to expand their operations in a specified development zone, Local government has offered entities, loan at concessional rate of interest of 6%. On 1st April 2023, Company has received a loan of 75,00,000 payable at the end of the 5th year. The prevailing market rate of interest is 10%. Interest is payable at the end of each year. CA. Mayank Gupta delegated the said work to Kamal to start initial working and then revert to him with his opinion. WECARE Educational and Medical Trust WECARE Educational and Medical Trust (WCEMT) is registered under FCRA Act, 2010. Mr. Kamal Grover, Secretary of the trust visited the office to meet CA. Anirudh who is handling all FEMA related works of clients for past 6 years. He shared a notice received from Central Government regarding enquiry before cancellation of registration and suspension of certificate till the enquiry is completed. He informed that amount of 66,00,000 is lying in the bank account out of the total foreign contribution received as on date of receipt of notice. He wanted to enquire whether trust can continue to receive foreign contributions and how much of the amount they can spend for meeting the objectives of the trust. Rajesh assisting CA. Sandeep Jain Rajesh discussed the audit findings of two clients with CA. Sandeep Jain and provided him the audit files prepared during the course of audit. On reviewing each file, it is noticed as under : (i) Moon Ltd.'s net profit is 250 lakhs on a turnover of 750 lakhs. There is a trade receivable of 120 lakhs outstanding in financial statement for which there is no chance of recovery as party has gone bankrupt and is absconding as on date. Debt has been not written off by Moon Ltd. despite being communicated. (ii) Management of Prime Ltd. has not undertaken the physical verification of inventories at regular intervals. Inventories constitutes 30% of the total assets of the company. Due to non-maintenance of adequate inventory records at the factory, audit team could not undertake the physical verification of inventory. Hence value of inventory as on 31st March, 2024 could not be verified. Kunal assisting CA. Ashish Gupta CA. Ashish Gupta handles work relating to direct tax matters of its various clients and has a vast experience of 8 years. Mr. Karanveer, a non-resident visited CA. Ashish Gupta to discuss all the details of his income for the financial year 2023-24. He arrived in India on 25.02.2024. He has provided the following information: Equity shares of X Ltd. (Listed Indian Co.) Equity shares of Y Ltd. (Listed Indian Co.) GDRs of Z Ltd. GDRs of A Ltd. Date of purchase 01.07.2020 01.08.2023 01.07.2020 01.07.2020 Cost of acquisition 90,00,000 50,00,000 20,00,000 12,00,000 Sale consideration 1,30,00,000 65,00,000 26,00,000 15,00,000 Date of transfer 28.02.2024 28.02.2024 15.03.2024 15.03.2024 Expenditure on transfer 26,000 13,000 5,000 3,000 He acquired shares in both the companies by remitting US dollars on 15.06.2020. GDRs of Z Ltd. were sold to Mr. Sanjay, a non-resident outside India. Security transaction tax is paid at the time of transfer as well as at the time of acquisition of shares of X Ltd. and Y Ltd. Exchange rates on various dates were as under: Date TT Buying (1 US$) TT Selling (1 US$) 15.06.2020 73.50 74.10 01.07.2020 75.50 76.20 01.08.2023 80.60 81.30 28.02.2024 82.80 83.50 15.03.2024 84.00 84.80 On 1st March, 2024, Mr. Karanveer purchased a shop for 60,00,000 (Stamp duty value was - 65,00,000). He also got a small plot of land by way of gift from his wife's cousin (Stamp duty value was - 2,48,000). On 5th March, 2024, he purchased 1,000 shares in Bright Limited from his friend at 125 (outside stock exchange). The lowest market quotation in the Bombay Stock Exchange and the National Stock Exchange on the date of purchase was 210and 218respectively. He received - 1,25,000 as interest on Non-Resident External Account maintained with bank in India and - 1,75,000 as interest on Debentures of X Ltd. (Subscribed in convertible foreign exchange). 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