notification33_2015

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART-II, SECTION 3, SUB-SECTION (ii)]

GOVERNMENT OF INDIA MINISTRY OF FINANCE

(DEPARTMENT OF REVENUE) (CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 31st March, 2015

INCOME-TAX

S.O. 892 (E) In exercise of the powers conferred by sub-section (2) of section 145 of the Income-tax Act, 1961 (43 of 1961) and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue, published in the Gazette of India, Part II, Section 3, Sub-section (ii), vide number S.O 69(E) dated the 25th January, 1996, except as respects things done or omitted to be done before such supersession, the Central Government hereby notifies the income computation and disclosure standards as specified in the Annexure to be followed by all assessees, following the mercantile system of accounting, for the purposes of computation of income chargeable to income-tax under the head Profit and gains of business or profession or Income from other sources. This notification shall come into force with effect from 1st day of April, 2015, and shall accordingly apply to the assessment year 2016-17 and subsequent assessment years.

AnnexureSeenotificationNo.32/2015,F.No.134/48/2010TPL,dated31stMarch,2015

A. Income Computation and Disclosure Standard I relating to accountingpolicies

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope1. ThisIncomeComputationandDisclosureStandarddealswithsignificantaccountingpolicies.FundamentalAccountingAssumptions2. Thefollowingarefundamentalaccountingassumptions,namely:

aGoingConcern

Goingconcernreferstotheassumptionthatthepersonhasneithertheintentionnorthenecessityofliquidationorofcurtailingmateriallythescaleofthebusiness,

professionorvocationandintendstocontinuehisbusiness,professionorvocationfortheforeseeablefuture.bConsistency

Consistencyreferstotheassumptionthataccountingpoliciesareconsistentfromoneperiodtoanother;cAccrual

Accrual refers to the assumption that revenues and costs are accrued, that is,recognisedas theyareearnedor incurredandnotasmoney is receivedorpaidandrecordedinthepreviousyeartowhichtheyrelate.

AccountingPolicies3. Theaccountingpoliciesrefertothespecificaccountingprinciplesandthemethodsofapplyingthoseprinciplesadoptedbyaperson.ConsiderationsintheSelectionandChangeofAccountingPolicies4.Accountingpoliciesadoptedbyapersonshallbesuchsoastorepresentatrueandfairview of the state of affairs and income of the business, profession or vocation. For thispurpose,i the treatmentandpresentationof transactionsandeventsshallbegovernedby theirsubstanceandnotmerelybythelegalform;andii marked to market loss or an expected loss shall not be recognised unless therecognition of such loss is in accordance with the provisions of any other IncomeComputationandDisclosureStandard.

5.Anaccountingpolicyshallnotbechangedwithoutreasonablecause.DisclosureofAccountingPolicies6. Allsignificantaccountingpoliciesadoptedbyapersonshallbedisclosed.7. Anychange inanaccountingpolicywhichhasamaterial effect shallbedisclosed.The amount bywhich any item is affected by such change shall also be disclosed to theextent ascertainable.Where such amount is not ascertainable,wholly or inpart, the factshall be indicated. If a change ismade in the accounting policieswhich has nomaterialeffect for the currentprevious yearbutwhich is reasonably expected tohave amaterialeffectinlaterpreviousyears,thefactofsuchchangeshallbeappropriatelydisclosedinthepreviousyearinwhichthechangeisadoptedandalsointhepreviousyearinwhichsuchchangehasmaterialeffectforthefirsttime.8. Disclosureofaccountingpoliciesorofchanges thereincannotremedyawrongorinappropriatetreatmentoftheitem.9. If the fundamental accounting assumptions of Going Concern, Consistency andAccrual are followed, specific disclosure is not required. If a fundamental accountingassumptionisnotfollowed,thefactshallbedisclosed.

TransitionalProvisions10.Allcontractortransactionexistingonthe1stdayofApril,2015orenteredintoonorafterthe1stdayofApril,2015shallbedealtwithinaccordancewiththeprovisionsofthisstandardaftertakingintoaccounttheincome,expenseorloss,ifany,recognisedinrespectofthesaidcontractortransactionforthepreviousyearendingonorbeforethe31stMarch,2015.

B.IncomeComputationandDisclosureStandardIIrelatingtovaluationofinventoriesPreambleThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableundertheheadProfitsandgainsofBusinessorprofessionorIncomefromothersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.InthecaseofconflictbetweentheprovisionsofIncomeTaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope1. This Income Computation and Disclosure Standard shall be applied for valuation ofinventories,except:

a Workinprogress arising under construction contract including directlyrelatedservicecontractwhichisdealtwithbytheIncomeComputationandDisclosureStandardonconstructioncontracts;

b Workinprogress which is dealt with by other Income Computation and

DisclosureStandard;

c Shares, debentures and other financial instruments held as stockintradewhicharedealtwithbytheIncomeComputationandDisclosureStandardonsecurities;

d Producers inventoriesof livestock,agricultureandforestproducts,mineraloils, ores and gases to the extent that they aremeasured at net realisablevalue;

e Machineryspares,whichcanbeusedonlyinconnectionwithatangiblefixed

asset and their use is expected to be irregular, shall be dealt with inaccordance with the Income Computation and Disclosure Standard ontangiblefixedassets.

Definitions21 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandardwiththemeaningsspecified:

a Inventoriesareassets:

i heldforsaleintheordinarycourseofbusiness;

ii intheprocessofproductionforsuchsale;

iii intheformofmaterialsorsuppliestobeconsumedintheproductionprocessorintherenderingofservices.

b Netrealisablevalueistheestimatedsellingpriceintheordinarycourseof

business less the estimated costs of completion and the estimated costsnecessarytomakethesale.

22 Words and expressions used and not defined in this Income Computation andDisclosureStandardbutdefinedintheActshallhavethemeaningsassignedtotheminthatAct.Measurement

3. Inventoriesshallbevaluedatcost,ornetrealisablevalue,whicheverislower.CostofInventories 4. Cost of inventories shall comprise of all costs of purchase, costs of services, costs ofconversionandother costs incurred inbringing the inventories to theirpresent locationandcondition.CostsofPurchase5.Thecostsofpurchaseshallconsistofpurchasepriceincludingdutiesandtaxes,freightinwards and other expenditure directly attributable to the acquisition. Trade discounts,rebatesandothersimilaritemsshallbedeductedindeterminingthecostsofpurchase.CostsofServices6.Thecostsofservices inthecaseofaserviceprovidershallconsistof labourandothercosts of personnel directly engaged in providing the service including supervisorypersonnelandattributableoverheads.CostsofConversion7.Thecostsofconversionofinventoriesshallincludecostsdirectlyrelatedtotheunitsofproductionandasystematicallocationoffixedandvariableproductionoverheadsthatareincurredinconvertingmaterialsintofinishedgoods.Fixedproductionoverheadsshallbethoseindirectcostsofproductionthatremainrelativelyconstantregardlessofthevolumeof production. Variable production overheads shall be those indirect costs of productionthatvarydirectlyornearlydirectly,withthevolumeofproduction.

8. Theallocationof fixedproductionoverheads for thepurposeof their inclusion inthecosts of conversion shall be based on the normal capacity of the production facilities.Normal capacity shall be the production expected to be achieved on an average over anumberofperiodsorseasonsundernormalcircumstances,takingintoaccountthelossofcapacityresultingfromplannedmaintenance.Theactuallevelofproductionshallbeusedwhen it approximates to normal capacity. The amount of fixed production overheadsallocated to each unit of production shall not be increased as a consequence of lowproductionor idleplant.Unallocatedoverheadsshallbe recognisedasanexpense in theperiodinwhichtheyareincurred.Inperiodsofabnormallyhighproduction,theamountoffixed production overheads allocated to each unit of production is decreased so thatinventories are not measured above the cost. Variable production overheads shall beassigned to each unit of production on the basis of the actual use of the productionfacilities.9. Where a production process results in more than one product being producedsimultaneouslyandthecostsofconversionofeachproductarenotseparatelyidentifiable,thecostsshallbeallocatedbetweentheproductsonarationalandconsistentbasis.Wherebyproducts, scrap or waste material are immaterial, they shall be measured at netrealisablevalueandthisvalueshallbedeductedfromthecostofthemainproduct.OtherCosts10. Othercostsshallbeincludedinthecostofinventoriesonlytotheextentthattheyareincurredinbringingtheinventoriestotheirpresentlocationandcondition.11. Interestandotherborrowingcostsshallnotbeincludedinthecostsofinventories,unless they meet the criteria for recognition of interest as a component of the cost asspecifiedintheIncomeComputationandDisclosureStandardonborrowingcosts.ExclusionsfromtheCostofInventories

12.Indeterminingthecostofinventoriesinaccordancewithparagraphs4toparagraphs11, the following costs shall be excluded and recognised as expenses of the period inwhichtheyareincurred,namely:

a Abnormalamountsofwastedmaterials,labour,orotherproductioncosts;b Storagecosts,unlessthosecostsarenecessaryintheproductionprocesspriorto

afurtherproductionstage;c Administrativeoverheads thatdonot contribute tobringing the inventories to

theirpresentlocationandcondition;d Sellingcosts.

CostFormulae13. TheCostofinventoriesofitems

i thatarenotordinarilyinterchangeable;andii goodsorservicesproducedandsegregatedforspecificprojectsshallbeassignedbyspecificidentificationoftheirindividualcosts.

14.Specificidentificationofcostmeansspecificcostsareattributedtoidentifieditemsofinventory.15. Where there are a large numbers of items of inventory which are ordinarilyinterchangeable,specificidentificationofcostsshallnotbemade.FirstinFirstoutandWeightedAverageCostFormula16. Cost of inventories, other than the inventory dealt with in paragraph 13, shall beassigned by using the Firstin Firstout FIFO, or weighted average cost formula. Theformula used shall reflect the fairest possible approximation to the cost incurred inbringingtheitemsofinventorytotheirpresentlocationandcondition.

17. The FIFO formula assumes that the items of inventory which were purchased orproduced first are consumed or sold first, and consequently the items remaining ininventoryattheendoftheperiodarethosemostrecentlypurchasedorproduced.Undertheweightedaveragecostformula,thecostofeachitemisdeterminedfromtheweightedaverageofthecostofsimilaritemsatthebeginningofaperiodandthecostofsimilaritemspurchased or produced during the period. The average shall be calculated on a periodicbasis,oraseachadditionalshipmentisreceived,dependinguponthecircumstances.RetailMethod18. Where it is impracticable touse the costingmethods referred to inparagraph16,theretailmethodcanbeusedintheretailtradeformeasuringinventoriesoflargenumberof rapidly changing items that have similar margins. The cost of the inventory isdeterminedbyreducingfromthesalesvalueoftheinventory,theappropriatepercentagegrossmargin. The percentage used takes into consideration inventory, which has beenmarkeddowntobelowitsoriginalsellingprice.NetRealisableValue19. Inventories shall bewritten down to net realisable value on an itembyitem basis.Whereitemsofinventory'relatingtothesameproductlinehavingsimilarpurposesorenduses and are produced and marketed in the same geographical area and cannot bepracticably evaluated separately from other items in that product line, such inventoriesshallbegroupedtogetherandwrittendowntonetrealisablevalueonanaggregatebasis.20.Netrealisablevalueshallbebasedonthemostreliableevidenceavailableatthetimeof valuation. The estimates of net realisable value shall also take into consideration thepurpose for which the inventory is held. The estimates shall take into considerationfluctuationsofpriceorcostdirectlyrelatingtoeventsoccurringaftertheendofprevious

year to theextent that sucheventsconfirm theconditionsexistingon the lastdayof thepreviousyear.21. Materialsandothersuppliesheldforuseintheproductionofinventoriesshallnotbe written down below the cost, where the finished products in which they shall beincorporatedareexpectedtobesoldatorabovethecost.Wheretherehasbeenadeclineinthepriceofmaterialsanditisestimatedthatthecostoffinishedproductswillexceedthenet realisable value, the value ofmaterials shall bewritten down to net realisable valuewhichshallbethereplacementcostofsuchmaterials.ValueofOpeningInventory22. Thevalueoftheinventoryasonthebeginningofthepreviousyearshallbe

i the costof inventoryavailable, if any,on thedayof the commencementof

thebusinesswhen thebusinesshascommencedduring thepreviousyear;and

ii the value of the inventory as on the close of the immediately precedingpreviousyear,inanyothercase.

ChangeofMethodofValuationofInventory23. Themethodofvaluationof inventoriesonceadoptedbyaperson inanypreviousyearshallnotbechangedwithoutreasonablecause.ValuationofInventoryinCaseofCertainDissolutions24. In case of dissolution of a partnership firm or association of person or body ofindividuals,notwithstandingwhetherbusinessisdiscontinuedornot,theinventoryonthedateofdissolutionshallbevaluedatthenetrealisablevalue.

TransitionalProvisions25. Interestandotherborrowingcosts,whichdonotmeetthecriteriaforrecognitionofinterestasacomponentofthecostasperpara11,butincludedinthecostoftheopeninginventoryasonthe1stdayofApril,2015,shallbetakenintoaccountfordeterminingcostofsuchinventoryforvaluationasonthecloseofthepreviousyearbeginningonorafter1stdayofApril,2015ifsuchinventorycontinuetoremainpartofinventoryasonthecloseofthepreviousyearbeginningonorafter1stdayofApril,2015.Disclosure26. Thefollowingaspectsshallbedisclosed,namely:

a theaccountingpoliciesadoptedinmeasuring inventories includingthecostformulaeused;and

b thetotalcarryingamountofinventoriesanditsclassificationappropriatetoaperson.

C. Income Computation and Disclosure Standard III relating to constructioncontractsPreambleThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.In the caseof conflictbetween theprovisionsof the IncometaxAct, 1961theAct andthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.

Scope1. This Income Computation and Disclosure Standard should be applied in

determinationofincomeforaconstructioncontractofacontractor.Definitions21 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard

withthemeaningsspecified:

a Constructioncontractisacontractspecificallynegotiatedfortheconstructionof an asset or a combination of assets that are closely interrelated orinterdependent in terms of their design, technology and function or theirultimatepurposeoruseandincludes:

i contractfortherenderingofserviceswhicharedirectlyrelatedtotheconstructionoftheasset,forexample,thosefortheservicesofprojectmanagersandarchitects;

ii contractfordestructionorrestorationofassets,andtherestorationof

theenvironmentfollowingthedemolitionofassets.

b Fixedpricecontractisaconstructioncontractinwhichthecontractoragreestoafixedcontractprice,orafixedrateperunitofoutput,whichmaybesubjecttocostescalationclauses.

c Cost plus contract is a construction contract in which the contractor is

reimbursed forallowableorotherwisedefinedcosts,plusamarkupon thesecostsorafixedfee.

d Retentions are amounts of progress billings which are not paid until thesatisfaction of conditions specified in the contract for the payment of suchamountsoruntildefectshavebeenrectified.

e Progress billings are amounts billed for work performed on a contract

whetherornottheyhavebeenpaidbythecustomer.f Advancesareamountsreceivedby thecontractorbefore therelatedwork is

performed.22 Words and expressions used and not defined in this Income Computation and

Disclosure Standard but defined in the Act shall have the meaning respectivelyassignedtothemintheAct.

3. Aconstructioncontractmaybenegotiatedfortheconstructionofasingleasset.A

construction contractmay also dealwith the construction of a number of assetswhich are closely interrelated or interdependent in terms of their design,technologyandfunctionortheirultimatepurposeoruse.

4. Constructioncontractsareformulatedinanumberofwayswhich,forthepurposesof this IncomeComputationandDisclosureStandard, are classifiedas fixedpricecontracts and cost plus contracts. Some construction contracts may containcharacteristicsofbothafixedpricecontractandacostpluscontract,forexample,inthecaseofacostpluscontractwithanagreedmaximumprice.

CombiningandSegmentingConstructionContracts5. The requirements of this Income Computation and Disclosure Standard shall be

applied separately to each construction contract except as provided for inparagraphs6,7and8herein.Forreflectingthesubstanceofacontractoragroupof contracts, where it is necessary, the Income Computation and Disclosure

Standard should be applied to the separately identifiable components of a singlecontractortoagroupofcontractstogether.

6. Whereacontractcoversanumberofassets,theconstructionofeachassetshould

betreatedasaseparateconstructioncontractwhen:a separateproposalshavebeensubmittedforeachasset;b each assethasbeen subject to separatenegotiation and the contractor and

customerhavebeenabletoacceptorrejectthatpartofthecontractrelatingtoeachasset;and

c thecostsandrevenuesofeachassetcanbeidentified.7. A group of contracts,whetherwith a single customer orwith several customers,

shouldbetreatedasasingleconstructioncontractwhen:a thegroupofcontractsisnegotiatedasasinglepackage;b thecontractsaresocloselyinterrelatedthattheyare,ineffect,partofasingle

projectwithanoverallprofitmargin;andc thecontractsareperformedconcurrentlyorinacontinuoussequence.

8. Whereacontractprovidesfortheconstructionofanadditionalassetattheoption

ofthecustomerorisamendedtoincludetheconstructionofanadditionalasset,theconstruction of the additional asset should be treated as a separate constructioncontractwhen:a theassetdifferssignificantlyindesign,technologyorfunctionfromtheasset

orassetscoveredbytheoriginalcontract;orb the price of the asset is negotiated without having regard to the original

contractprice.ContractRevenue

9. Contract revenue shall be recognised when there is reasonable certainty of its

ultimatecollection.10. Contractrevenueshallcompriseof:

a theinitialamountofrevenueagreedinthecontract,includingretentions;andb variationsincontractwork,claimsandincentivepayments:

i totheextentthatitisprobablethattheywillresultinrevenue;andii theyarecapableofbeingreliablymeasured.

11. Wherecontractrevenuealreadyrecognisedas incomeissubsequentlywrittenoff

in the books of accounts as uncollectible, the same shall be recognised as anexpenseandnotasanadjustmentoftheamountofcontractrevenue.

ContractCosts12. Contractcostsshallcompriseof:

a coststhatrelatedirectlytothespecificcontract;b coststhatareattributabletocontractactivityingeneralandcanbeallocated

tothecontract;c such other costs as are specifically chargeable to the customer under the

termsofthecontract;andd allocatedborrowing costs in accordancewith the IncomeComputation and

DisclosureStandardonBorrowingCosts. Thesecostsshallbereducedbyany incidental income,notbeing in thenatureof

interest,dividendsorcapitalgains,thatisnotincludedincontractrevenue.

13. Coststhatcannotbeattributedtoanycontractactivityorcannotbeallocatedtoacontractshallbeexcludedfromthecostsofaconstructioncontract.

14. Contractcosts include thecostsattributable toacontract for theperiod fromthe

dateofsecuringthecontracttothefinalcompletionofthecontract.Coststhatareincurred in securing the contract are also included as part of the contract costs,provided

a theycanbeseparatelyidentified;andb itisprobablethatthecontractshallbeobtained.

Whencostsincurredinsecuringacontractarerecognisedasanexpenseintheperiodinwhichtheyareincurred,theyarenotincludedincontractcostswhenthecontractisobtainedinasubsequentperiod.

15. Contract costs that relate to future activity on the contract are recognised as an

asset.Suchcostsrepresentanamountduefromthecustomerandareclassifiedascontractworkinprogress.

RecognitionofContractRevenueandExpenses16. Contract revenue and contract costs associated with the construction contract

should be recognised as revenue and expenses respectively by reference to thestageofcompletionofthecontractactivityatthereportingdate.

17. Therecognitionofrevenueandexpensesbyreferencetothestageofcompletionof

a contract is referred to as the percentage of completion method. Under thismethod,contractrevenue ismatchedwiththecontractcosts incurred inreachingthestageofcompletion,resultinginthereportingofrevenue,expensesandprofitwhichcanbeattributedtotheproportionofworkcompleted.

18. Thestageofcompletionofacontractshallbedeterminedwithreferenceto:a the proportion that contract costs incurred for work performed upto the

reportingdatebeartotheestimatedtotalcontractcosts;orb surveysofworkperformed;orc completionofaphysicalproportionofthecontractwork.

Progresspaymentsandadvancesreceivedfromcustomersarenotdeterminativeof

thestageofcompletionofacontract.19. When the stage of completion is determined by reference to the contract costs

incurred upto the reporting date, only those contract costs that reflect workperformed are included in costs incurred upto the reporting date. Contract costswhichareexcludedare:a contractcoststhatrelatetofutureactivityonthecontract;andb paymentsmadetosubcontractors inadvanceofworkperformedunder the

subcontract.20. Duringtheearlystagesofacontract,wheretheoutcomeofthecontractcannotbe

estimated reliably contract revenue is recognised only to the extent of costsincurred.Theearlystageofacontractshallnotextendbeyond25%ofthestageofcompletion.

ChangesinEstimates21. The percentage of completion method is applied on a cumulative basis in each

previous year to the current estimates of contract revenue and contract costs.Where there is change in estimates, the changed estimates shall be used indeterminationof theamountof revenueandexpenses in theperiod inwhich thechangeismadeandinsubsequentperiods.

TransitionalProvisions22.Contract revenueandcontract costsassociatedwith theconstructioncontract,whichcommencedonorbeforethe31stdayofMarch,2015butnotcompletedbythesaiddate,shallberecognisedasrevenueandcostsrespectivelyinaccordancewiththeprovisionsofthis standard. The amount of contract revenue, contract costs or expected loss, if any,recognisedforthesaidcontractforanypreviousyearcommencingonorbeforethe1stdayof April, 2014 shall be taken into account for recognising revenue and costs of the saidcontract for thepreviousyearcommencingon the1stdayofApril,2015andsubsequentpreviousyears.Disclosure23. Apersonshalldisclose:

a theamountofcontractrevenuerecognisedasrevenueintheperiod;andb the methods used to determine the stage of completion of contracts in

progress.24. Apersonshalldisclosethefollowingforcontractsinprogressatthereportingdate,

namely:a amountofcostsincurredandrecognisedprofitslessrecognisedlossesupto

thereportingdate;b theamountofadvancesreceived;andc theamountofretentions.

D. Income Computation and Disclosure Standard IV relating to revenuerecognition

Preamble


In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope11 This Income Computation and Disclosure Standard deals with the bases for

recognition of revenue arising in the course of the ordinary activities of a personfrom

ithesaleofgoods;iitherenderingofservices;iii the use by others of the persons resources yielding interest, royalties ordividends.

12ThisIncomeComputationandDisclosureStandarddoesnotdealwiththeaspectsof

revenue recognition which are dealt with by other Income Computation andDisclosureStandards.

Definitions

21 The following term is used in this Income Computation and Disclosure Standardwiththemeaningsspecified:

a Revenueisthegrossinflowofcash,receivablesorotherconsiderationarising

inthecourseoftheordinaryactivitiesofapersonfromthesaleofgoods,fromthe rendering of services, or from the use by others of the persons resourcesyieldinginterest,royaltiesordividends. Inanagencyrelationship,therevenueis the amount of commission and not the gross inflow of cash, receivables orotherconsideration.

22 Words and expressions used and not defined in this Income Computation and

DisclosureStandardbutdefinedintheActshallhavethemeaningsassignedtotheminthatAct.

SaleofGoods3. Ina transaction involving thesaleofgoods, the revenueshallbe recognisedwhen theseller of goods has transferred to the buyer the property in the goods for a price or allsignificant risks and rewards of ownership have been transferred to the buyer and theseller retainsnoeffectivecontrolof thegoods transferred toadegreeusuallyassociatedwithownership.Inasituation,wheretransferofpropertyingoodsdoesnotcoincidewiththetransferofsignificantrisksandrewardsofownership,revenueinsuchasituationshallberecognisedatthetimeoftransferofsignificantrisksandrewardsofownershiptothebuyer.4.Revenueshallberecognisedwhenthereisreasonablecertaintyofitsultimatecollection.5.Wheretheabilitytoassesstheultimatecollectionwithreasonablecertaintyislackingatthe time of raising any claim for escalation of price and export incentives, revenuerecognition in respect of such claim shall be postponed to the extent of uncertaintyinvolved.

RenderingofServices6. Revenue from service transactions shall be recognised by the percentage completionmethod.Underthismethod,revenuefromservicetransactionsismatchedwiththeservicetransactions costs incurred in reaching the stage of completion, resulting in thedeterminationofrevenue,expensesandprofitwhichcanbeattributedtotheproportionofwork completed. Income Computation andDisclosure Standard on construction contractalsorequirestherecognitionofrevenueonthisbasis.Therequirementsof thatStandardshallmutatismutandisapplytotherecognitionofrevenueandtheassociatedexpensesforaservicetransaction.TheUseofResourcesbyOthersYieldingInterest,RoyaltiesorDividends7. Interestshallaccrueon the timebasisdeterminedby theamountoutstandingand therateapplicable.Discountorpremiumondebtsecuritiesheld istreatedasthoughitwereaccruingovertheperiodtomaturity.8.Royaltiesshallaccrueinaccordancewiththetermsoftherelevantagreementandshallberecognisedonthatbasisunless,havingregardtothesubstanceofthetransaction,itismoreappropriatetorecogniserevenueonsomeothersystematicandrationalbasis.9.DividendsarerecognisedinaccordancewiththeprovisionsoftheAct.TransitionalProvisions10. The transitional provisions of Income Computation and Disclosure Standard onconstructioncontractshallmutatismutandisapply to therecognitionofrevenueandtheassociatedcosts fora service transactionundertakenonorbefore the31stdayofMarch,2015butnotcompletedbythesaiddate.

11. Revenue for a transaction, other than a service transaction referred to in Para 10,undertakenonorbefore the31stdayofMarch,2015butnotcompletedby thesaiddateshallberecognisedinaccordancewiththeprovisionsofthisstandardforthepreviousyearcommencingon the1st dayofApril, 2015 and subsequentprevious year.The amountofrevenue,ifany,recognisedforthesaidtransactionforanypreviousyearcommencingonorbeforethe1stdayofApril,2014shallbetakenintoaccountforrecognisingrevenueforthesaid transaction for the previous year commencing on the 1st day of April, 2015 andsubsequentpreviousyears.Disclosure12.Followingdisclosuresshallbemadeinrespectofrevenuerecognition,namely:

a in a transaction involving sale of good, total amount not recognised asrevenueduring theprevious year due to lack of reasonably certainty of itsultimatecollectionalongwithnatureofuncertainty;

b the amount of revenue from service transactions recognised as revenue

duringthepreviousyear;c themethodusedtodeterminethestageofcompletionofservicetransactions

inprogress;and

d forservicetransactionsinprogressattheendofpreviousyear:

i amount of costs incurred and recognised profits less recognisedlossesuptoendofpreviousyear;

ii theamountofadvancesreceived;and

iii theamountofretentions.E. Income Computation and Disclosure Standard V relating to tangible fixedassetsPreamble


In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.

Scope1. ThisIncomeComputationandDisclosureStandarddealswiththetreatmentoftangible

fixedassets.Definitions21 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard


a Tangible fixed asset is an asset being land, building, machinery, plant orfurniture held with the intention of being used for the purpose of producing orprovidinggoodsorservicesandisnotheldforsaleinthenormalcourseofbusiness.

b Fairvalueofanassetistheamountforwhichthatassetcouldbeexchangedbetweenknowledgeable,willingpartiesinanarmslengthtransaction.

22 Words and expressions used and not defined in this Income Computation

andDisclosureStandardbutdefinedintheActshallhavethemeaningsassignedtotheminthatAct.

IdentificationofTangibleFixedAssets3. Thedefinitioninclauseaofsubparagraph1ofparagraph2providescriteriafor

determiningwhetheranitemistobeclassifiedasatangiblefixedasset.4. Standby equipment and servicing equipment are to be capitalised. Machinery

sparesshallbechargedto therevenueasandwhenconsumed.Whensuchsparescanbeusedonlyinconnectionwithanitemoftangiblefixedassetandtheiruseisexpectedtobeirregular,theyshallbecapitalised.

ComponentsofActualCost

5. Theactualcostofanacquiredtangiblefixedassetshallcompriseitspurchaseprice,importduties andother taxes, excluding those subsequently recoverable, andanydirectlyattributableexpenditureonmakingtheassetreadyforitsintendeduse.Anytradediscountsandrebatesshallbedeductedinarrivingattheactualcost.

6. Thecostofatangiblefixedassetmayundergochangessubsequenttoitsacquisition

orconstructiononaccountofipriceadjustment,changesindutiesorsimilarfactors;orii exchange fluctuation as specified in Income Computation and DisclosureStandardontheeffectsofchangesinforeignexchangerates.

7. Administration andother general overheadexpenses are tobe excluded from thecost of tangible fixed assets if theydonot relate to a specific tangible fixed asset.Expenseswhich are specifically attributable to construction of a project or to theacquisitionofatangiblefixedassetorbringingittoitsworkingcondition,shallbeincludedasapartof thecostof theprojectorasapartof thecostof the tangiblefixedasset.

8. Theexpenditure incurredon startupand commissioningof theproject, including

the expenditure incurred on test runs and experimental production, shall becapitalised. The expenditure incurred after the plant has begun commercialproduction, that is, production intended for sale or captive consumption, shall betreatedasrevenueexpenditure.

SelfconstructedTangibleFixedAssets9. In arriving at the actual cost of selfconstructed tangible fixed assets, the same

principlesshallapplyasthosedescribedinparagraphs5to8.Costofconstructionthatrelatedirectlytothespecifictangiblefixedassetandcoststhatareattributableto theconstructionactivity ingeneralandcanbeallocated to thespecific tangiblefixedassetshallbeincludedinactualcost.Anyinternalprofitsshallbeeliminatedinarrivingatsuchcosts.

NonmonetaryConsideration10. Whenatangiblefixedassetisacquiredinexchangeforanotherasset,thefairvalueofthe tangiblefixedassetsoacquiredshallbeitsactualcost.11. Whena tangible fixedasset isacquired inexchange forsharesorothersecurities,thefairvalueofthetangiblefixedassetsoacquiredshallbeitsactualcost.

ImprovementsandRepairs12. AnExpenditurethatincreasesthefuturebenefitsfromtheexistingassetbeyondits

previouslyassessedstandardofperformanceisaddedtotheactualcost.13. Thecostofanadditionorextensiontoanexistingtangiblefixedassetwhichisofa

capitalnatureandwhichbecomesanintegralpartoftheexistingtangiblefixedassetis to be added to its actual cost. Any addition or extension,which has a separateidentity and is capable of being used after the existing tangible fixed asset isdisposedof,shallbetreatedasseparateasset.

ValuationofTangibleFixedAssetsinSpecialCases14. Whereapersonownstangiblefixedassetsjointlywithothers,theproportioninthe

actualcost,accumulateddepreciationandwrittendownvalue isgroupedtogetherwithsimilarfullyownedtangiblefixedassets.Detailsofsuchjointlyownedtangiblefixedassetsshallbeindicatedseparatelyinthetangiblefixedassetsregister.

15. Whereseveralassetsarepurchasedforaconsolidatedprice,theconsiderationshall

beapportionedtothevariousassetsonafairbasis.

TransitionalProvisions16. The actual cost of tangible fixed assets, acquisition or construction of whichcommencedonorbeforethe31stdayofMarch,2015butnotcompletedbythesaiddate,shall be recognised in accordance with the provisions of this standard. The amount of

actualcost,ifany,recognisedforthesaidassetsforanypreviousyearcommencingonorbeforethe1stdayofApril,2014shallbetakenintoaccountforrecognisingactualcostofthe said assets for the previous year commencing on the 1st day of April, 2015 andsubsequentpreviousyears.

Depreciation

17. Depreciation on a tangible fixed asset shall be computed in accordance with theprovisionsoftheAct.

Transfers

18. IncomearisingontransferofatangiblefixedassetshallbecomputedinaccordancewiththeprovisionsoftheAct.

Disclosures19. Followingdisclosureshallbemadeinrespectoftangiblefixedassets,namely:

a descriptionofassetorblockofassets;

b rateofdepreciation;

c actualcostorwrittendownvalue,asthecasemaybe;

d additions or deductions during the year with dates; in the case of anyadditionofanasset,dateputtouse;includingadjustmentsonaccountof

i Central Value Added Tax credit claimed and allowed under the

CENVATCreditRules,2004;

ii changeinrateofexchangeofcurrency;

iii subsidyorgrantorreimbursement,bywhatevernamecalled;

e depreciationAllowable;and

f writtendownvalueattheendofyear.

F.IncomeComputationandDisclosureStandardVIrelatingtotheeffectsofchangesinforeignexchangeratesPreambleThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope1. ThisIncomeComputationandDisclosureStandarddealswith:

a treatmentoftransactionsinforeigncurrencies;

b translatingthefinancialstatementsofforeignoperations;

c treatmentof foreign currency transactions in thenatureof forward exchangecontracts.

Definitions2.1ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandardwiththemeaningsspecified: aAveragerateisthemeanoftheexchangeratesinforceduringaperiod. bClosingrateistheexchangerateatthelastdayofthepreviousyear.

c Exchange difference is the difference resulting from reporting the samenumber of units of a foreign currency in the reporting currency of a person atdifferentexchangerates.dExchangerateistheratioforexchangeoftwocurrencies.eForeigncurrencyisacurrencyotherthanthereportingcurrencyofaperson.f Foreignoperationsofaperson isabranch,bywhatevernamecalled,of thatperson,theactivitiesofwhicharebasedorconductedinacountryotherthanIndia.g Foreign currency transaction is a transaction which is denominated in orrequires settlement in a foreign currency, including transactions arising when aperson:

i buys or sells goods or services whose price is denominated in a foreign

currency;or

ii borrows or lends funds when the amounts payable or receivable aredenominatedinaforeigncurrency;or

iii becomesapartytoanunperformedforwardexchangecontract;or

iv otherwise acquires or disposes of assets, or incurs or settles liabilities,denominatedinaforeigncurrency.

h Forward exchange contract means an agreement to exchange differentcurrencies at a forward rate, and includes a foreign currency option contract oranotherfinancialinstrumentofasimilarnature;iForwardrateisthespecifiedexchangerateforexchangeoftwoCurrenciesataspecifiedfuturedate;j Indian currency shall have themeaning as assigned to it in section 2 of theForeignExchangeManagementAct,199942of1999;kIntegralforeignoperationisaforeignoperation,theactivitiesofwhichareanintegralpartoftheoperationoftheperson;l Monetary itemsaremoneyheldandassets tobe receivedor liabilities tobepaidinfixedordeterminableamountsofmoney.Cash,receivables,andpayablesareexamplesofmonetaryitems;m Nonintegral foreignoperation is a foreignoperation that isnot an integralforeignoperation;nNonmonetaryitemsareassetsandliabilitiesotherthanmonetaryitems.Fixedassets,inventories,andinvestmentsinequitysharesareexamplesofnonmonetaryitems;

o Reporting currency means Indian currency except for foreign operationswhereitshallmeancurrencyofthecountrywheretheoperationsarecarriedout.

2Words and expressions used and not defined in this Income Computation and

DisclosureStandardbutdefinedintheActshallhavethemeaningassignedtothemintheAct.

ForeignCurrencyTransactionsInitialRecognition31 A foreign currency transaction shall be recorded, on initial recognition in the

reporting currency, by applying to the foreign currency amount the exchange ratebetweenthereportingcurrencyandtheforeigncurrencyatthedateofthetransaction.

2Anaveragerateforaweekoramonththatapproximatestheactualrateatthedateof

the transaction may be used for all transaction in each foreign currency occurringduring thatperiod. If theexchangerate fluctuatessignificantly, theactual rateat thedateofthetransactionshallbeused.

ConversionatLastDateofPreviousYear4. Atlastdayofeachpreviousyear:

a foreign currency monetary items shall be converted into reporting currency byapplyingtheclosingrate;

b where the closing rate does not reflect with reasonable accuracy, the amount inreporting currency that is likely to be realised from or required to disburse, aforeigncurrencymonetary itemowingtorestrictiononremittancesor theclosing

ratebeingunrealisticanditisnotpossibletoeffectanexchangeofcurrenciesatthatrate,thentherelevantmonetaryitemshallbereportedinthereportingcurrencyattheamountwhichislikelytoberealisedfromorrequiredtodisbursesuchitematthelastdateofthepreviousyear;and

c nonmonetary items in a foreign currency shall be converted into reportingcurrencybyusingtheexchangerateatthedateofthetransaction.

RecognitionofExchangeDifferences5. i Inrespectofmonetaryitems,exchangedifferencesarisingonthesettlementthereof

oronconversionthereofatlastdayofthepreviousyearshallberecognisedasincomeorasexpenseinthatpreviousyear.

iiIn respect of nonmonetary items, exchange differences arising on conversion

thereof at the last day of the previous year shall not be recognised as income or asexpenseinthatpreviousyear.

ExceptionstoParagraphs3,4and56. Notwithstanding anything contained in paragraph 3, 4 and 5; initial recognition,

conversion and recognition of exchange difference shall be subject to provisions ofsection43AoftheActorRule115ofIncometaxRules,1962,asthecasemaybe.

FinancialStatementsofForeignOperationsClassificationofForeignOperations

7. 1 The method used to translate the financial statements of a foreign operationdependsonthewayinwhichitisfinancedandoperatesinrelationtoaperson.Forthis purpose, foreign operations are classified as either integral foreignoperationsornonintegralforeignoperations.

2 The following are indications that a foreign operation is a nonintegral foreign

operationratherthananintegralforeignoperation:

a whilethepersonmaycontroltheforeignoperation,theactivitiesoftheforeignoperation are carried out with a significant degree of autonomy from theactivitiesoftheperson;

b transactions with the person are not a high proportion of the foreignoperationsactivities;

c the activities of the foreign operation are financed mainly from its own

operationsorlocalborrowings;

d costs of labour, material and other components of the foreign operationsproductsorservicesareprimarilypaidorsettledinthelocalcurrency;

e the foreign operations sales are mainly in currencies other than Indian

currency;

f cash flows of the person are insulated from the daytoday activities of theforeignoperation;

g salesprices for the foreignoperationsproductsor services arenotprimarily

responsive on a shortterm basis to changes in exchange rates but aredeterminedmorebylocalcompetitionorlocalgovernmentregulation;

h there is an active local sales market for the foreign operations products orservices,althoughtherealsomightbesignificantamountsofexports.

IntegralForeignOperations8. The financialstatementsofan integral foreignoperationshallbe translatedusing the

principles and procedures in paragraphs 3 to 6 as if the transactions of the foreignoperationhadbeenthoseofthepersonhimself.

NonintegralForeignOperations9. 1 In translating the financial statements of a nonintegral foreign operation for a

previousyear,thepersonshallapplythefollowing,namely:

a theassetsand liabilities,bothmonetaryandnonmonetary,of thenonintegralforeignoperationshallbetranslatedattheclosingrate;

b income and expense items of the nonintegral foreign operation shall be

translatedatexchangeratesatthedatesofthetransactions;and

c allresultingexchangedifferencesshallberecognisedasincomeorasexpensesinthatpreviousyear.

2Notwithstandinganythingstatedinsubparagraph1,translationandrecognitionof

exchangedifference in cases referred to in section43Aof theActorRule115ofIncometax Rules, 1962 shall be carried out in accordance with the provisionscontainedinthatsectionorthatRule,asthecasemaybe.

ChangeintheClassificationofaForeignOperation

101 When there isa change in theclassificationofa foreignoperation, the translationproceduresapplicabletotherevisedclassificationshouldbeappliedfromthedateofthechangeintheclassification.

2Theconsistencyprinciplerequiresthatforeignoperationonceclassifiedasintegralor

nonintegraliscontinuedtobesoclassified.However,achangeinthewayinwhichaforeign operation is financed and operates in relation to the person may lead to achangeintheclassificationofthatforeignoperation.

ForwardExchangeContracts11. 1 Anypremiumordiscountarisingattheinceptionofaforwardexchangecontract

shallbeamortisedasexpenseorincomeoverthelifeofthecontract. Exchangedifferencesonsuchacontractshallberecognisedasincomeorasexpenseinthepreviousyearinwhichtheexchangerateschange. Anyprofitorlossarisingoncancellation or renewal shall be recognised as income or as expense for thepreviousyear.

2Theprovisionsofsubpara1shallapplyprovidedthatthecontract:

a isnotintendedfortradingorspeculationpurposes;and

b isenteredintotoestablishtheamountofthereportingcurrencyrequiredoravailableatthesettlementdateofthetransaction.

3 Theprovisionsofsubpara1shallnotapplytothecontractthatisenteredinto to hedge the foreign currency risk of a firm commitment or a highlyprobableforecasttransaction.Forthispurpose,firmcommitment,shallnotincludeassetsandliabilitiesexistingattheendofthepreviousyear.

4 The premium or discount that arises on the contract is measured by thedifference between the exchange rate at the date of the inception of thecontractandtheforwardratespecifiedinthecontract.Exchangedifferenceonthecontractisthedifferencebetween:

a the foreign currency amount of the contract translated at the exchange

rateatthelastdayofthepreviousyear,orthesettlementdatewherethetransactionissettledduringthepreviousyear;and

b thesame foreigncurrencyamount translatedat thedateof inceptionof

thecontractorthe lastdayofthe immediatelyprecedingpreviousyear,whicheverislater.

5 Premium,discountorexchangedifferenceoncontractsthatareintendedfor

tradingorspeculationpurposes,orthatareenteredintotohedgetheforeigncurrencyriskofafirmcommitmentorahighlyprobableforecasttransactionshallberecognisedatthetimeofsettlement.

TransitionalProvisions12.1Allforeigncurrencytransactionsundertakenonorafter1stdayofApril,2015shallberecognisedinaccordancewiththeprovisionsofthisstandard.2Exchangedifferencesarisinginrespectofmonetary itemsornonmonetary items,onthesettlementthereofduringthepreviousyearcommencingonthe1stdayofApril,2015oronconversionthereofatthelastdayofthepreviousyearcommencingonthe1stdayofApril, 2015, shall be recognised in accordancewith the provisions of this standard aftertakingintoaccounttheamountrecognisedonthelastdayofthepreviousyearendingonthe31stMarch,2015foranitem,ifany,whichiscarriedforwardfromsaidpreviousyear.

3Thefinancialstatementsofforeignoperationsforthepreviousyearcommencingonthe1stdayofApril,2015shallbetranslatedusingtheprinciplesandproceduresspecified inthis standard after taking into account the amount recognised on the last day of thepreviousyearendingonthe31stMarch,2015foranitem,ifany,whichiscarriedforwardfromsaidpreviousyear.4Allforwardexchangecontractsexistingonthe1stdayofApril,2015orenteredonorafter 1st day of April, 2015 shall be dealtwith in accordancewith the provisions of thisstandardaftertakingintoaccounttheincomeorexpenses,ifany,recognisedinrespectofsaidcontractsforthepreviousyearendingonorbeforethe31stMarch,2015.G. Income Computation and Disclosure Standard VII relating to governmentgrants PreambleThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccount.IncaseofconflictbetweentheprovisionsoftheIncomeTaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope

1. This Income Computation and Disclosure Standard deals with the treatment ofGovernment grants. The Government grants are sometimes called by other namessuch as subsidies, cash incentives, duty drawbacks, waiver, concessions,reimbursements,etc.

2.ThisIncomeComputationandDisclosureStandarddoesnotdealwith:a GovernmentassistanceotherthanintheformofGovernmentgrants;andb Governmentparticipationintheownershipoftheenterprise.

Definitions31 The following termsareused in the IncomeComputationandDisclosureStandard


a GovernmentreferstotheCentralGovernment,StateGovernments,agenciesandsimilarbodies,whetherlocal,nationalorinternational.

b GovernmentgrantsareassistancebyGovernmentincashorkindtoapersonfor past or future compliance with certain conditions. They exclude thoseformsofGovernmentassistancewhichcannothaveavalueplaceduponthemand the transactionswith Government which cannot be distinguished fromthenormaltradingtransactionsoftheperson.

32 WordsandexpressionsusedandnotdefinedinthisIncomeComputationandDisclosureStandardbutdefinedintheActshallhavethemeaningassignedtothemintheAct.

RecognitionofGovernmentGrants41 Government grants should not be recognised until there is reasonable assurance

thati thepersonshallcomplywith theconditionsattachedto them,andii thegrantsshallbereceived.

42 RecognitionofGovernmentgrantshallnotbepostponedbeyondthedateofactualreceipt.

TreatmentofGovernmentGrants5. Where the Government grant relates to a depreciable fixed asset or assets of a

person, the grant shall be deducted from the actual cost of the asset or assetsconcerned or from thewritten down value of block of assets towhich concernedassetorassetsbelongedto.

6. Where the Government grant relates to a nondepreciable asset or assets of a

personrequiringfulfillmentofcertainobligations,thegrantshallberecognisedasincome over the same period over which the cost of meeting such obligations ischargedtoincome.

7. WheretheGovernmentgrantisofsuchanaturethatitcannotbedirectlyrelatabletotheassetacquired,somuchoftheamountwhichbearstothetotalGovernmentgrant,thesameproportionassuchassetbearstoalltheassetsinrespectoforwithreferencetowhichtheGovernmentgrantissoreceived,shallbedeductedfromtheactualcostoftheassetorshallbereducedfromthewrittendownvalueofblockofassetstowhichtheassetorassetsbelongedto.

8. The Government grant that is receivable as compensation for expenses or lossesincurredinapreviousfinancialyearorforthepurposeofgivingimmediatefinancialsupporttothepersonwithnofurtherrelatedcosts,shallberecognisedasincomeoftheperiodinwhichitisreceivable.

9. The Government grants other than covered by paragraph 5, 6, 7, and 8 shall be

recognised as income over the periods necessary tomatch themwith the relatedcostswhichtheyareintendedtocompensate.

10. TheGovernmentgrantsintheformofnonmonetaryassets,givenataconcessional

rate,shallbeaccountedforonthebasisoftheiracquisitioncost.

RefundofGovernmentGrants11. TheamountrefundableinrespectofaGovernmentgrantreferredtoinparagraphs

6,8and9shallbeappliedfirstagainstanyunamortiseddeferredcreditremainingin respect of the Government grant. To the extent that the amount refundableexceeds any such deferred credit, orwhere no deferred credit exists, the amountshallbechargedtoprofitandlossstatement.

12. Theamount refundable in respectof aGovernmentgrant related toadepreciable

fixedassetorassetsshallberecordedbyincreasingtheactualcostorwrittendownvalueofblockofassetsbytheamountrefundable.Wheretheactualcostoftheassetisincreased,depreciationontherevisedactualcostorwrittendownvalueshallbeprovidedprospectivelyattheprescribedrate.

TransitionalProvisions13. AlltheGovernmentgrantswhichmeettherecognitioncriteriaofpara4onorafter

1stdayofApril,2015shallberecognised for thepreviousyearcommencingonorafter1stdayofApril,2015inaccordancewiththeprovisionsofthisstandardaftertakingintoaccounttheamount,ifany,ofthesaidGovernmentgrantrecognisedforanypreviousyearendingonorbefore31stdayofMarch,2015.

Disclosures14. FollowingdisclosureshallbemadeinrespectofGovernmentgrants,namely:

a natureandextentofGovernmentgrantsrecognisedduringthepreviousyearbywayofdeduction fromtheactualcostof theassetorassetsor fromthewrittendownvalueofblockofassetsduringthepreviousyear;

b natureandextentofGovernmentgrantsrecognisedduringthepreviousyear

asincome;

c natureandextentofGovernmentgrantsnotrecognisedduringthepreviousyearbywayofdeductionfromtheactualcostoftheassetorassetsorfromthewrittendownvalueofblockofassetsandreasonsthereof;and

d natureandextentofGovernmentgrantsnotrecognisedduringthepreviousyearasincomeandreasonsthereof.

H.IncomeComputationandDisclosureStandardVIIIrelatingtosecuritiesPreamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccount.In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.

Scope1. ThisIncomeComputationandDisclosureStandarddealswithsecuritiesheldasstockintrade.

2.ThisIncomeComputationandDisclosureStandarddoesnotdealwith:

a the bases for recognition of interest anddividends on securitieswhich arecovered by the Income Computation and Disclosure Standard on revenuerecognition;

b securitiesheldbyapersonengagedinthebusinessofinsurance;

c securities held by mutual funds, venture capital funds, banks and public

financial institutions formed under a Central or a State Act or so declaredundertheCompaniesAct,19561of1956ortheCompaniesAct,201318of2013.


a Fair value is the amount for which an asset could be exchanged between aknowledgeable, willing buyer and a knowledgeable, willing seller in an armslengthtransaction.

b SecuritiesshallhavethemeaningassignedtoitinclausehofSection2ofthe

SecuritiesContractRegulationAct,195642of1956,otherthanDerivativesreferredtoinsubclause1aofthatclause.

32 Words and expressions used and not defined in this Income Computation andDisclosureStandardbutdefinedintheActshallhavethemeaningrespectivelyassignedtothemintheAct.

RecognitionandInitialMeasurementofSecurities4.Asecurityonacquisitionshallberecognisedatactualcost.5.Theactualcostofasecurityshallcompriseofitspurchasepriceandincludeacquisitionchargessuchasbrokerage,fees,tax,dutyorcess.6. Where a security is acquired in exchange for other securities, the fair value of thesecuritysoacquiredshallbeitsactualcost.7.Whereasecurityisacquiredinexchangeforanotherasset,thefairvalueofthesecuritysoacquiredshallbeitsactualcost.8.Whereunpaidinteresthasaccruedbeforetheacquisitionofaninterestbearingsecurityand is included in the price paid for the security, the subsequent receipt of interest isallocatedbetweenpreacquisitionandpostacquisitionperiods;thepreacquisitionportionoftheinterestisdeductedfromtheactualcost.SubsequentMeasurementofSecurities9. At the endof anyprevious year, securities held as stockintrade shall be valued atactual cost initially recognised or net realisable value at the end of that previous year,whicheverislower.10. Forthepurposeofpara9,thecomparisonofactualcostinitiallyrecognisedandnetrealisablevalueshallbedonecategorywiseandnot foreachindividualsecurity. Forthispurpose,securitiesshallbeclassifiedintothefollowingcategories,namely:

ashares;

bdebtsecurities;

cconvertiblesecurities;and

danyothersecuritiesnotcoveredabove.11.Thevalueofsecuritiesheldasstockintradeofabusinessasonthebeginningofthepreviousyearshallbe:

a thecostofsecuritiesavailable,ifany,onthedayofthecommencementofthebusinesswhenthebusinesshascommencedduringthepreviousyear;and

b thevalueofthesecuritiesofthebusinessasonthecloseoftheimmediately

precedingpreviousyear,inanyothercase.12. Notwithstandinganythingcontainedinpara9,10and11,attheendofanypreviousyear, securities not listed on a recognised stock exchange; or listed but not quoted on arecognisedstockexchangewithregularityfromtimetotime,shallbevaluedatactualcostinitiallyrecognised.13.Forthepurposesofpara9,10and11wheretheactualcostinitiallyrecognisedcannotbe ascertained by reference to specific identification, the cost of such security shall bedeterminedonthebasisoffirstinfirstoutmethod.

I.IncomeComputationandDisclosureStandardIXrelatingtoborrowingcostsPreamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincomechargeableunder theheadProfitsandgainsofbusinessorprofessionor Income fromothersourcesandnotforthepurposeofmaintenanceofbooksofaccount.

In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope1. 1 This Income Computation and Disclosure Standard deals with treatment of

borrowingcosts.

2 ThisIncomeComputationandDisclosureStandarddoesnotdealwiththeactualorimputedcostofownersequityandpreferencesharecapital.

Definitions2. 1 The following terms are used in this Income Computation and Disclosure

Standardwiththemeaningsspecified:

a Borrowing costs are interest and other costs incurred by a person inconnectionwiththeborrowingoffundsandinclude:

i commitmentchargesonborrowings;

ii amortisedamountofdiscountsorpremiumsrelatingtoborrowings;

iii amortised amount of ancillary costs incurred in connection with the

arrangementofborrowings;

iv finance charges in respect of assets acquired under finance leases orunderothersimilararrangements.

b Qualifyingassetmeans:

i land,building,machinery,plantorfurniture,beingtangibleassets;

ii knowhow,patents,copyrights,trademarks,licences,franchisesorany

otherbusinessorcommercialrightsofsimilarnature,beingintangibleassets;

iii inventories that require a period of twelvemonths or more to bring

themtoasaleablecondition.

2 Words and expressions used and not defined in this Income Computation andDisclosure Standard but defined in the Act shall have themeaning assigned tothemintheAct.

Recognition3. Borrowing costs that are directly attributable to the acquisition, construction or

productionofaqualifyingassetshallbecapitalisedaspartofthecostofthatasset.TheamountofborrowingcostseligibleforcapitalisationshallbedeterminedinaccordancewiththisIncomeComputationandDisclosureStandard.OtherborrowingcostsshallberecognisedinaccordancewiththeprovisionsoftheAct.

4. ForthepurposesofthisIncomeComputationandDisclosureStandard,capitalisation

inthecontextofinventoryreferredtoinitemiiiofclausebofsubparagraph1ofparagraph2meansadditionofborrowingcosttothecostofinventory.

BorrowingCostsEligibleforCapitalisation

5. To the extent the funds are borrowed specifically for the purposes of acquisition,

constructionorproductionofaqualifyingasset,theamountofborrowingcoststobecapitalisedonthatassetshallbetheactualborrowingcostsincurredduringtheperiodonthefundssoborrowed.

6. To the extent the funds are borrowed generally and utilised for the purposes of

acquisition,constructionorproductionofaqualifyingasset,theamountofborrowingcosts to be capitalised shall be computed in accordance with the following formulanamely:

AX B C Where A borrowing costs incurred during the previous year except on

borrowingsdirectlyrelatabletospecificpurposes;

B i the average of costs of qualifying asset as appearing in thebalancesheetofapersononthefirstdayandthelastdayofthepreviousyear;ii in case the qualifying asset does not appear in the balancesheetofapersononthefirstdayorbothonthefirstdayandthelastdayofpreviousyear,halfofthecostofqualifyingasset;iii incasethequalifyingassetdoesnotappear inthebalancesheetofapersononthelastdayofpreviousyear,theaverageofthecostsofqualifyingassetasappearinginthebalancesheetofapersonon the firstdayof thepreviousyear andon thedateofputtouseorcompletion,asthecasemaybe,otherthanthosequalifyingassetswhicharedirectlyfundedoutofspecificborrowings; or

C the average of the amount of total assets as appearing in thebalancesheetofapersononthefirstdayandthelastdayofthepreviousyear,otherthanthoseassetswhicharedirectlyfundedoutofspecificborrowings;

CommencementofCapitalisation7. Thecapitalisationofborrowingcostsshallcommence:

a in a case referred to in paragraph 5, from the date on which funds wereborrowed;

b inacasereferredtoinparagraph6,fromthedateonwhichfundswereutilised.

CessationofCapitalisation8. Capitalisationofborrowingcostsshallcease:

a incaseofaqualifyingassetreferredto in itemiandiiofclausebofsubparagraph1ofparagraph2,whensuchassetisfirstputtouse;

b incaseofinventoryreferredtoinitemiiiofclausebofsubparagraph1of

paragraph 2, when substantially all the activities necessary to prepare suchinventoryforitsintendedsalearecomplete.

9. Whentheconstructionofaqualifyingassetiscompletedinpartsandacompletedpart

iscapableofbeingusedwhileconstructioncontinuesfortheotherparts,capitalisationofborrowingcostsinrelationtoapartshallcease:

a incaseofpartofaqualifyingassetreferredtoinitemiandiiofclausebofsubparagraph1ofparagraph2,whensuchpartofaqualifyingassetisfirstputtouse;

b incaseofpartofinventoryreferredtoinitemiiiofclausebofsubparagraph1ofparagraph2,whensubstantiallyalltheactivitiesnecessarytopreparesuchpartofinventoryforitsintendedsalearecomplete.

TransitionalProvisions10. Alltheborrowingcostsincurredonorafter1stdayofApril,2015shallbecapitalised

for thepreviousyearcommencingonorafter1stdayofApril,2015 inaccordancewith the provisions of this standard after taking into account the amount ofborrowing costs capitalised, if any, for the sameborrowing for any previous yearendingonorbefore31stdayofMarch,2015.

Disclosure11. Thefollowingdisclosureshallbemadeinrespectofborrowingcosts,namely:

a theaccountingpolicyadoptedforborrowingcosts;andb theamountofborrowingcostscapitalisedduringthepreviousyear.

J. Income Computation and Disclosure Standard X relating to provisions,contingentliabilitiesandcontingentassets

Preamble


In thecaseofconflictbetweentheprovisionsof the IncometaxAct,1961theActandthisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothatextent.Scope1. This Income Computation and Disclosure Standard deals with provisions,contingentliabilitiesandcontingentassets,exceptthose:

a resultingfromfinancialinstruments;b resultingfromexecutorycontracts;c arisingininsurancebusinessfromcontractswithpolicyholders;andd coveredbyanotherIncomeComputationandDisclosureStandard.

2. This Income Computation and Disclosure Standard does not deal with therecognition of revenue which is dealt with by Income Computation and DisclosureStandardRevenueRecognition.3. The term provision is also used in the context of items such as depreciation,impairmentofassetsanddoubtfuldebtswhichareadjustmentstothecarryingamountsofassetsandarenotaddressedinthisIncomeComputationandDisclosureStandard.


a Provision isa liabilitywhichcanbemeasuredonlybyusingasubstantialdegreeofestimation.

b Liabilityisapresentobligationofthepersonarisingfrompastevents,the

settlement ofwhich is expected to result in an outflow from thepersonofresourcesembodyingeconomicbenefits.

c Obligating event is an event that creates an obligation that results in a

personhavingnorealisticalternativetosettlingthatobligation.

d Contingentliabilityis:

i apossibleobligationthatarisesfrompasteventsandtheexistenceofwhichwillbeconfirmedonlybytheoccurrenceornonoccurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheperson;or

ii apresentobligationthatarisesfrompasteventsbutisnotrecognised

because:

A it is not reasonably certain that an outflow of resourcesembodying economic benefits will be required to settle theobligation;or

B a reliable estimate of the amount of the obligation cannot be

made.

e Contingent asset is a possible asset that arises from past events the

existence of which will be confirmed only by the occurrence ornonoccurrenceofoneormoreuncertainfutureeventsnotwhollywithinthecontroloftheperson.

f Executorycontractsarecontractsunderwhichneitherpartyhasperformed

any of its obligations or both parties have partially performed theirobligationstoanequalextent.

g Presentobligation is an obligation if, based on the evidence available, its

existenceattheendofthepreviousyearisconsideredreasonablycertain.42 Words and expressions used and not defined in this Income Computation andDisclosureStandardbutdefinedintheActshallhavethemeaningrespectivelyassignedtothemintheAct.RecognitionProvisions5. Aprovisionshallberecognisedwhen:

a apersonhasapresentobligationasaresultofapastevent;

b it is reasonably certain that an outflow of resources embodying economicbenefitswillberequiredtosettletheobligation;and

c areliableestimatecanbemadeoftheamountoftheobligation.

Iftheseconditionsarenotmet,noprovisionshallberecognised.

6. Noprovisionshallberecognisedforcoststhatneedtobeincurredtooperateinthefuture.7. It is only those obligations arising from past events existing independently of apersons futureactions, that is the future conductof itsbusiness, that are recognisedasprovisions8. Wheredetailsofaproposednewlawhaveyet tobe finalised,anobligationarisesonlywhenthelegislationisenacted.ContingentLiabilities9. Apersonshallnotrecogniseacontingentliability.ContingentAssets10. Apersonshallnotrecogniseacontingentasset.11. Contingentassetsareassessedcontinuallyandwhenitbecomesreasonablycertainthat inflowofeconomicbenefitwillarise, theassetandrelated incomearerecognised inthepreviousyearinwhichthechangeoccurs.MeasurementBestEstimate12. Theamountrecognisedasaprovisionshallbethebestestimateoftheexpenditurerequiredtosettlethepresentobligationattheendofthepreviousyear.Theamountofaprovisionshallnotbediscountedtoitspresentvalue.

13. Theamountrecognisedasassetandrelatedincomeshallbethebestestimateofthevalueofeconomicbenefitarisingattheendofthepreviousyear.Theamountandrelatedincomeshallnotbediscountedtoitspresentvalue.Reimbursements14. Wheresomeoralloftheexpenditurerequiredtosettleaprovisionisexpectedtobereimbursedbyanotherparty,thereimbursementshallberecognisedwhenitisreasonablycertain that reimbursement will be received if the person settles the obligation. Theamountrecognisedforthereimbursementshallnotexceedtheamountoftheprovision.15. Whereapersonisnotliableforpaymentofcostsincasethethirdpartyfailstopay,noprovisionshallbemadeforthosecosts.16. An obligation, for which a person is jointly and severally liable, is a contingentliability to the extent that it is expected that the obligation will be settled by the otherparties.Review17. Provisionsshallbereviewedattheendofeachpreviousyearandadjustedtoreflectthecurrentbestestimate.Ifitisnolongerreasonablycertainthatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation,theprovisionshouldbereversed.18. Anassetandrelatedincomerecognisedasprovidedinpara11shallbereviewedattheendofeachpreviousyearandadjustedtoreflectthecurrentbestestimate. Ifitisnolonger reasonably certain that an inflow of economic benefits will arise, the asset andrelatedincomeshallbereversed.

UseofProvisions19. A provision shall be used only for expenditures for which the provision wasoriginallyrecognised.TransitionalProvisions20. Alltheprovisionsorassetsandrelatedincomeshallberecognisedfortheprevious

year commencing on or after 1st day of April, 2015 in accordance with theprovisionsofthisstandardaftertakingintoaccounttheamountrecognised,ifany,forthesameforanypreviousyearendingonorbefore31stdayofMarch,2015.

Disclosure211 Followingdisclosureshallbemadeinrespectofeachclassofprovision,namely:

a abriefdescriptionofthenatureoftheobligation;

bthecarryingamountatthebeginningandendofthepreviousyear;cadditionalprovisionsmadeduringthepreviousyear, includingincreasesto

existingprovisions;damountsused,thatisincurredandchargedagainsttheprovision,duringthe

previousyear;

eunusedamountsreversedduringthepreviousyear;and

f theamountofanyexpectedreimbursement,statingtheamountofanyassetthathasbeenrecognisedforthatexpectedreimbursement.

212 Following disclosure shall be made in respect of each class of asset and relatedincomerecognisedasprovidedinpara11,namely:

a abriefdescriptionofthenatureoftheassetandrelatedincome;

b thecarryingamountofassetatthebeginningandendofthepreviousyear;c additional amount of asset and related income recognised during the year,

includingincreasestoassetsandrelatedincomealreadyrecognised;andd amountofassetandrelatedincomereversedduringthepreviousyear.

[Notification No.32/2015, F. No. 134/48/2010-TPL]

(RAJESH KUMAR BHOOT) DIRECTOR (TAX POLICY AND LEGISLATION)

notification33_2015

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