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GUIDANCE NOTE ON MAINTENANCE OF COST ACCOUNTING RECORDS FOR CONSTRUCTION INDUSTRY INCLUDING REAL ESTATE AND PROPERTY DEVELOPMENT ACTIVITY

G Note - Rule - Companies Law - G Note - CHAPTER 1 Introduction GSR 429 (E) dated 3rd June, 2011 notified by the Ministry of Corporate Affairs introduced Companies (Cost Accounting Records) Rules, 2011. Rule 3 states that: "Application - (1) These rules shall apply to every company, including a foreign company as defined under section 591 of the Act, which is engaged in the production, processing, manufacturing, or mining activities and wherein, the aggregate value of net worth as on the la .....

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s a body corporate governed by any special Act; Provided further that these rules shall not apply to the activities or products covered in any of the following rules,- (a) Cost Accounting Records (Bulk Drugs) Rules, 1974 (b) Cost Accounting Records (Formulations) Rules, 1988 (c) Cost Accounting Records (Fertilizers) Rules, 1993 (d) Cost Accounting Records (Sugar) Rules, 1997 (e) Cost Accounting Records (Industrial Alcohol) Rules, 1997 (f) Cost Accounting Records (Electricity Industry) Rules, 200 .....

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g Records) Rules, 2011 shall be required to maintain cost accounting records and file compliance report with the Central Government in accordance with the provisions of these Rules. This includes companies undertaking construction jobs with the use of own materials (whether self manufactured/produced or procured from outside) and/or development of residential, commercial or industrial estates i.e. development of township, residential units, commercial complex, office blocks, industrial parks (in .....

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actors wherein they are paid only the conversion charges are exempted from the applicability of companies (Cost Accounting Records) Rules, 2011. (c) Companies (Cost Accounting Records) Rules, 2011 do not apply to such Joint Ventures that are non-corporate entities [i.e. not companies registered under the companies Act] or to unlisted companies that are below the specified threshold limits or to a body corporate governed by any special Act. CHAPTER 2 Background of the Construction Industry 2.1 Th .....

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Execution of projects as a contractor/sub-contractor or as a developer. • Projects involving design, detailed engineering, procurement, manufacturing/fabrication, installation, commissioning. • The contracts/projects are finalised normally through a bidding process and the projects are executed as per client's requirements at client's project site. • The client normally makes payment based on the progress of work as per the contract. • Contracts also normally stipula .....

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. Normally the projects are of long duration (more than 12 months) and revenue is recognised generally based on Accounting Standard (AS-7) notified by Government of India, Ministry of Corporate Affairs. 2.2 The categories under which the Constructions Industry may be operating are: • Construction involving civil and heavy engineering • Real estate and Property development • Construction projects involving specialty trades Few examples of above categories are as under: Construction .....

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, schools, hospitals, Land and Township Infrastructure Development, Construction projects involving specialty trades • Refineries, Chemical plants, Fertilizer plants including complex and heavy process plant equipment • Oil and Gas projects including fabrication of Process Platforms, construction of sub-sea and other pipelines • Floating systems • Power projects • Nuclear Power Plant Construction • Transmission and distribution lines • Electrical construction 2 .....

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ransport, water supply, sewerage, solid waste management and other physical infrastructure in urban areas; • Infrastructure projects in Special Economic Zones PPP Projects normally operate on the following basis: • BOO-Build Own Operate • BOLT-Build Own Lease Transfer • BOOST - Build Own Operate Share Transfer • BOT- Build, Operate and Transfer • BOOT- Build, Own, Operate and Transfer • BOLT-Build Own Lease Transfer • BLOT- Build, Lease, Operate and Transf .....

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ch as plumbing, heating and lighting appliances. Real estate development is the act of purchasing land, real estate, making improvements to the land and/or existing buildings on it and/or new construction - either by themselves or by contractors and selling the property after development. Developers purchase the land/real estate from Government/existing owner. Some commonly used models of Real estate development are: • Green field development (Traditional model) • Redevelopment model E .....

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ally through a technical and commercial bidding process and the projects are executed as per client's requirements at the project site. Examples of commonly used models of EPC contracts are: • LSTK- Lump sum turnkey contracts • Cost plus contracts • Item Rate Contract • A Combination of above The EPC Contracting model is normally used for executing a construction contract awarded either by Govt. or Private Player 2.3.4 Construction involving in-house fabrication or manufa .....

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t. The business model generally involves engineering, procurement, manufacturing/fabrication, transportation to project site and installation/commissioning in the main construction project. Examples of in-house fabrication or manufacturing used for construction projects are: • Cement concrete slabs, beams, columns etc. for infrastructure projects • Reactors for Chemical Plants • Heat exchangers for Fertilizer Plants • Process platforms for Oil & Gas exploration projects & .....

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he company is free to adopt a system suitable to provide cost information. 3.2 There cannot be any exhaustive list of cost records that are required to be maintained. This would depend on the particular situation, structure of the company and the activities that the company is engaged in. What is intended is to ensure maintenance of such records and details in a structured manner on a regular basis so that the accumulation is possible on a periodical basis to arrive at the cost of a particular c .....

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the "cost object" in relation to which the costs are required to be accumulated and reported. 3.4 Reference is also drawn to the product group classification notified by the Ministry of Corporate Affairs where the construction industry has been classified under the following service groups: (a) Construction of residential buildings (b) Construction of non-residential buildings (c) Construction of highways, road, bridges etc. (d) Construction of industrial and non industrial plants, str .....

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rsion charges (MCA Circular No. F. No. 52/1/CAB-2012, dated 25th May 2012); 3.5.2 Joint Ventures that are non-corporate entities [i.e. not companies registered under the Companies Act] or to unlisted companies that are below the specified threshold limits or to a body corporate governed by any special Act. (MCA Circular No F. No. 52/1/CAB-2012, dated 25th May 2012); 3.6 Companies which have not commenced their business are exempt for maintenance of cost records till their business operations com .....

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d Transfer. CARR will be applicable from the time the Company starts building or constructing the project (either by themselves or through contractor) after getting necessary approvals for commencement of work from appropriate government/local authorities. • EPC Contracting Model The business model is primarily Engineering, Procurement and Construction. CARR will be applicable from the initial stage of Engineering or Procurement or construction activity, as applicable. • Real Estate De .....

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e initial stage of Engineering or Procurement or Construction activity, as applicable. 3.7 These rules will not apply to construction activity which is not meant for sale or for commercial use. For example, a company not engaged in construction business, but constructing staff quarters for its employees or erecting manufacturing plant, will not be covered under the maintenance of CARR relating to Construction activity. 3.8 Nature of cost accounting records for construction activity Companies are .....

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Rules, 2000 read with CAS-4 (Cost Accounting Standard on Cost of Production for Captive Consumption), wherein valuation is to be based on cost of production plus 10% for determining the assessable value under the above rules. (b) For determining the value of inter-unit transfer of items for captive consumption whether excisable or not, the value shall be only at cost of production. (c) Detailed records for other elements like research and development cost, quality control cost, pollution control .....

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eloper to keep a control on the work done by contractor/work yet to be done/quality of work done etc." 3.9 Cost Object 3.9.1 The Companies (Cost Accounting Records) Rules, 2011 requires records to be kept on regular basis in such manner so as to make it possible to calculate per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities for every financial year on monthly/quarterly/half-yearly/annual basis. Hence, it is necessary to defin .....

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may have different types of flats in the same building, and in blocks of flats, the buildings containing those flats may be different in structure and construction. The Project in the context of construction activity is to be considered as the cost object. (B) A company is constructing 3 residential projects A, B & C in 3 different places. Project A consists of 3 buildings, Project B consists of 5 buildings and Project C consists of 2 buildings each of such building containing different typ .....

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ual cost objects. 3.9.2 Detailed cost records are also to be maintained for each sub cost centre/sub project. These records are also used for internal reporting (MIS) , cost control and decision making process as these are useful for determining the cost of project/activity separately. 3.10 Methodology 3.10.1 Project Costing Methodology Once a project is awarded based on Technical/Commercial/Price evaluation, a distinct project number is allotted for each project. As per the requirement of manag .....

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sts are to be absorbed by the projects by use of appropriate recovery mechanism by following the Generally Accepted Cost Accounting Principles (GACAP), applicable Cost Accounting Standards (CAS). 3.10.2 Usage cost of common pool of Plant & Machinery: Construction companies typically use fixed assets like cranes, crushing equipments, etc. which are used over multiple projects. All such common assets can be under the control of a separate department with the objective of improving the utilizat .....

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of such assets. Projects using such assets are to be charged based on utilization at the agreed internal hire rate. Any under/over recovery of cost of this department is to be periodically reviewed and necessary corrective actions/adjustments are to be carried out. 3.11 Construction industry maintains its accounts and recognises revenue on the basis of Accounting Standard - 7. The revenue recognition for cost accounting records would follow the same principle. 3.12 Cost statements would be prepa .....

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nting standards should not be considered as a part of cost and should be considered as a charge in the costing profit and loss account (reconciliation statement between cost accounts and financial accounts). 3.14 In respect of large companies engaged in various different construction projects, the administrative overheads and corporate expenses are not allocated to individual project accounts. However, for cost accounting records and to arrive at the true project costs, such overheads should be .....

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tute; to the extent these are found to be relevant and applicable. The variations, if any, shall be clearly indicated and explained. 4.2 The Institute has notified the Generally Accepted Cost Accounting Principles (GACAP) in November 2011. GACAP is compilation of Cost Accounting Principles currently being followed in India. It has also incorporated the principles contained in the Cost Accounting Standards (CAS) issued by the Cost Accounting Standards Board (CASB) of the Institute. The applicabil .....

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ered in detail in these chapters are: (a) Material cost (b) Employee cost (c) Direct expenses (d) Cost of utilities (e) Repairs and Maintenance (f) Production overheads (g) Administrative overheads (h) Selling & Distribution Overheads (i) Interest and Finance charges Treatment of above elements in cost of cost object has been discussed in these chapters. 4.4 It is clarified that GACAP and CAS are not only for manufacturing industry but also for construction industry. Cost is to be determined .....

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countants of India, recognizing the need for structured approach to the measurement of cost in manufacture or service sector and to provide guidance to the user organizations, government bodies, regulators, research agencies and academic institutions to achieve uniformity and consistency in classification, measurement and assignment of cost to product and services, constituted Cost Accounting Standards Board (CASB) with the objective of formulating the Cost Accounting Standards. 5.2 The Board ha .....

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in India. CASB also gives due consideration to the Cost Accounting Standards, principles and practices being followed by the other countries in the world. If due to subsequent changes in the law, a particular standard or any part thereof becomes inconsistent with such a law, the provisions of the said law shall prevail. 5.4 Applicability of CAS: 14 Cost Accounting Standards have been issued and their applicability is discussed as under: CAS No Title Applicability CAS 1 Classification of Cost Ap .....

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o be classified as Fixed, Variable or Semi Variable, keeping in mind the nature and purpose of the cost. Absorption of overheads is to be done on suitable/rationale basis viz. estimate of efforts involved etc. CAS 4 Cost of Production for Captive Consumption Applicable to the extent relevant CAS 5 Average (equalized) Cost of Transportation Applicable to the extent relevant CAS 6 Material Cost Applicable for measurement/assignment of material cost. Quantitative details to be kept as practice in t .....

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Cost Applicable to the extent relevant CHAPTER 6 Cost Accounting Policies To have uniformity and consistency in the treatment of various elements of cost, it is desirable that companies shall lay down a cost accounting policy which shall be adopted for determining the cost of the project. The policy shall cover the following areas: (a) Identification of cost centres/cost objects (projects) and cost drivers. (b) Accounting for material cost, stores at store yards, employee cost, and other releva .....

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ated as reconciliation items:- • Compensations on account of damage/loss of life etc. • Insurance claims received (pertaining to previous years) • Idle cost on the project (example: waiting for the ROW, etc. on NHAI contracts) • Demurrage charges, • Contract Cancellation Expenses, • Warranty/Defect Liability cost (in excess of normal provision for such items) • Liquidated damages (adjusted against contract value in financial accounts), • Encashment of BG c .....

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ll; Provisions No Longer Required written back • Unclaimed credit balances • Assets scrapped/obsolete • Penal recoveries from Sub-Contractors CHAPTER 7 Preliminary Steps for the CARR Compliance The following steps may be taken by the companies engaged in construction activity w.r.t. compliance of the Companies (Cost Accounting Record) Rules 2011: A. Steps required for maintenance of Cost Records: (i) Prepare check list for compliance with the provisions of CAS and GACAP in regard .....

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ed cost statements are to be prepared for internal use giving relevant details of quantity and value. Suggested format for the preparation of the same is given at Annexure V. (iii) Ensure that inter unit transfers are at cost in the cost records. (iv) All the cost statements are to be consolidated at 'product group' level and Costing Profit to be reconciled with the audited financial profit. (v) Prepare the relevant annexure to the Compliance Report. B. Steps required for compliance of C .....

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e Annexure to the compliance report. (iv) Compliance Report is to be filed in Form B as per the notification dated 3rd June, 2011, and no other details of cost records are required to be filed with the Government. A template of the annexure to the Compliance Report is annexed at annexure IV. Necessary guidance for filling the annexure is given in paragraph C. (v) Form A of the Compliance Report along with Annexure is required to be e-filed with the Central Government within 180 days from the clo .....

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manufactured/services rendered and trading activities Column 2 Indicate the nomenclature of each product code as indicated in column 1. Column 3 Unit of measurement is to be indicated in this column for produced/manufactured/fabricated products. Column 4 Annual production quantity is to be indicated for produced/manufactured/fabricated products. The total production quantity should match with the excise records. For service and trading activities, quantity need not be indicated, if not relevant. .....

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ounts).Details to be furnished in column 2:A: Net margin (profit or loss) produced or manufactured group is to be indicated as per audited cost report relating to products covered under cost audit and for others as per cost statements. B: The above applies for services also. C: Trading activities: If any trading activities are carried, net margin (profit or loss) of trading activities may be determined taking into consideration cost of merchandise purchased and share of common services. Summatio .....

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may be furnished in value as per cost accounts. For Real Estate business, any difference in valuation of inventory between financial books and cost accounting records needs to be disclosed. D. Filing of the Compliance Report in XBRL Mode The Ministry of Corporate Affairs vide General Circular No. 8/2012, dated 10th May, 2012 has mandated the filing of Cost Audit Report and Compliance Report in the extensible Business Reporting Language (XBRL) mode from the financial year 2011-12. The Ministry of .....

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nistry/pdf/Costing_taxonomy_2012-09-12.zip Business Rules - http://mca.gov.in/Ministry/pdf/Business_Rules_XBRL_Cost_Audit_taxonomy_2012_21_Sep_2012.zip The Existing Form A of Compliance Report is not to be used for filing the same in XBRL mode. For filing of Compliance Report in XBRL mode Form 23CR-XBRL is to be used, which can be downloaded from the website of Ministry of Corporate Affairs. The e-form 23CR-XBRL needs to be digitally signed by the Cost Accountant. The process of uploading the fi .....

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nstance Document with the Validation Tool of MCA. 5. Use available tool to convert the Instance document to a human readable format and check correctness of data. 6. Attaching the Instance Document to the e-Form and filing on MCA Portal. The Institute is in the process of issuing a guidance note on filing of Cost Audit Report and Compliance report in XBRL mode, which may be referred to. ANNEXURE I [TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY PART-II, SECTION-3, SUB- SECTION (i)] MINIS .....

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dated 16th September, 1967, (iv) G.S.R. 1448 dated 18th September, 1967, (v) G.S.R. 1467 dated 20th September, 1967, (vi) G.S.R. 1503 dated 27th September, 1967, (vii) G.S.R. 2298 dated 15th September, 1969, (viii) G.S.R. 2574 dated 24th October, 1969, (ix) G.S.R. 334 dated 25th February, 1972, (x) G.S.R. 1529 dated 27th November, 1972, (xi) G.S.R. 590(E) dated 29th December, 1975, (xii) G.S.R. 601(E) dated 31st December, 1975, (xiii) G.S.R. 606 dated 20th April, 1976, (xiv) G.S.R. 605 dated 22 .....

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78(E) dated 29th October, 1993, (xxvii) G.S.R. 186(E) dated 12th April, 1996, (xxviii) G.S.R. 202(E) dated 6th May, 1996, (xxix) G.S.R. 271(E) dated 9th July, 1996, (xxx) G.S.R. 537(E) dated 11th September, 1997, (xxxi) G.S.R. 536(E) dated 11th September, 1997, (xxxii) G.S.R. 704(E) dated 28th September, 2001, (xxxiii) G.S.R. 276(E) dated 24th April, 2001, (xxxiv) G.S.R. 277(E) dated 24th April, 2001, (xxxv) G.S.R. 685(E) dated 8th October, 2002, and (xxxvi) G.S.R. 562(E) dated 2nd September, 20 .....

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; (b) "Compliance Report" means compliance report duly authenticated and signed by a cost accountant in the prescribed form of compliance report; (c) "Cost Accountant" for the purpose of these rules means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who is either a permanent employee of the company or holds a valid certificate of practice under sub-section (1) of section 6 and who is de .....

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or filing compliance report and other documents with the Central Government in the electronic mode; (g) "Form-B" means the form of the compliance report and includes Annexure to the compliance report; (h) "Generally Accepted Cost Accounting Principles" means the principles of cost accounting issued by the Institute; (i) "Institute" means the Institute of Cost and Works Accountants of India constituted under the Cost and Works Accountants Act, 1959 (23 of 1959); (j) .....

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al; or (iii) constructing, reconstructing, reconditioning, servicing, refitting, repairing, finishing or breaking up of any products. (k) "Mining Activity" includes any act, process or method employed in relation to the extraction of ores, minerals, oils, gases or other geological materials from the earth's crust, including sea bed or river bed. (l) "Processing Activity" includes any act, process, procedure, function, operation, technique, treatment or method employed in .....

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vi) transforming or transmitting, distributing power or electricity; or (vii) harboring, berthing, docking, elevating, lading, stripping, stuffing, towing, handling, or warehousing products; or (viii) preserving or storing any product in cold storage; or (ix) constructing, reconstructing, reconditioning, repairing, servicing, refitting, finishing or demolishing of buildings or structures; or (x) farming, feeding, rearing, treating, nursing, caring, and stocking of living organisms; or (xi) telec .....

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ormation, object, service, etc. that is the result of human, mechanical, industrial, chemical, or natural act, process, procedure, function, operation, technique, or treatment and is intended for use, consumption, sale, transport, store, delivery or disposal. (n) "Product Group" in relation to tangible products means a group of homogenous and alike products, produced from same raw materials and by using similar or same production process, having similar physical or chemical characteris .....

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s, semi-finished goods, or sub-assemblies) and intangible inputs (ideas, information, know how) into goods or services; or (ii) manufacturing or processing or mining or growing a product for use, consumption, sale, transport, delivery or disposal; or (iii) creation of value or wealth by producing goods or services. (p) "Turnover" means gross turnover made by the company from the sale or supply of all products or services during the financial year. It includes any turnover from job work .....

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ction, processing, manufacturing, or mining activities and wherein, the aggregate value of net worth as on the last date of the immediately preceding financial year exceeds five crores of rupees; or wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty crores of rupees; or wherein the company's equity or debt securities are listed or are in the process of listing on any .....

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Accounting Records (Industrial Alcohol) Rules, 1997 (n) Cost Accounting Records (Electricity Industry) Rules, 2001 (o) Cost Accounting Records (Petroleum Industry) Rules, 2002 (p) Cost Accounting Records (Telecommunications) Rules, 2002. 4. Maintenance of records- (1) Every company to which these rules apply, including all units and branches thereof shall, in respect of each of its financial year commencing on or after the 1st day of April, 2011, keep cost records. (2) The cost records referred .....

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t and applicable. The variations, if any, shall be clearly indicated and explained. (4) The cost records shall be maintained in such manner so as to enable the company to exercise, as far as possible, control over the various operations and costs with a view to achieve optimum economies in utilization of resources. These records shall also provide necessary data which is required to be furnished under these rules. (5) All such cost records and cost statements, maintained under these rules shall .....

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ancial years immediately preceding a financial year or where the company had been in existence for a period less than eight years, in respect of all the preceding years shall be kept in good order. (7) It shall be the duty of every person, referred to in sub-section (6) and (7) of section 209 of the Companies Act, 1956 (1 of 1956), to take all reasonable steps to secure compliance by the company with the provisions of these rules in the same manner as he is liable to maintain accounts required u .....

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tral Government within one hundred and eighty days from the close of the company's financial year to which the compliance report relates. 7. Authentication of Annexure to the Compliance Report - The Annexure prescribed with the compliance report, as certified by the cost accountant, shall be approved by the Board of Directors before submitting the same to the Central Government by the company. 8. Penalties - (1) If default is made by the cost accountant in complying with the provisions of th .....

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Rules, shall not in any way affect- (a) any right, obligation or liabilities acquired, accrued or incurred thereunder; (b) any penalty, forfeiture or punishment incurred in respect of any contravention committed thereunder; and (c) any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and; any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such .....

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eign company registration number of the company Pre-Fill (b) Global location number (GLN) of company 2 (a) *Name of the company (b) *Address of the registered office or of the principal place of business in India of the company (c) *E-mail Address of the company 3 (a) *Financial year covered by the compliance report From (DD/MM/YYYY) To (DD/MM/YYYY) (b) *Date of Board of directors' meeting in which annexure to the compliance report was approved (DD/MM/YYYY) 4. Details of the cost accountant .....

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t or cost accountant's firm's registration number (f) Address of the cost accountant or cost accountant's firm (i) Line I Line II (ii) City (iii) State (iv) Country (v) Pin Code (g) *E-mail ID of the cost accountant or cost accountant's firm 5. *Quantitative Information S. No. Name of the Product or Service Group Unit Annual Production (Quantity) Net Sales (Quantity) (Value in Rupees) A Produced or Manufactured Product Groups 1. 2. 3. etc. B Services Groups 1. 2. 3. etc. C Tradin .....

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d (DD/MM/YYYY) To sign and submit this form. I am authorized to sign and submit this form. To be digitally signed by: Managing Director or director or manager or secretary (in case of an Indian company) or an authorized representative (in case of a foreign company) Digital Signatures *Designation *Director identification number of the director or Managing Director; or Income-tax PAN of the manager or of authorized representative; or Membership number, if applicable or income-tax PAN of the secre .....

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nent employment of the company/in practice, and having been appointed as cost accountant under Rule 5 of the Companies (Cost Accounting Records) Rules, 2011 of ………..… (mention name of the company) having its registered office at …………………………. (mention registered office address of the company) (hereinafter referred to as the company), have examined the books of account prescribed under clause (d) of su .....

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) of sub-section (1) of section 209 of the Companies Act, 1956, have/have not been maintained by the company so as to give a true and fair view of the cost of production/operation, cost of sales and margin of all the products/activities of the company. 3 Detailed unit-wise and product/activity-wise cost statements and schedules thereto in respect of the product groups/activities are/are not kept in the company. 4 In my/our opinion, the said books and records give/do not give the information requ .....

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NUMBER (S) NOTES: (i) Delete words not applicable. (ii) If as a result of the examination of the books of account, the cost accountant desires to point out any material deficiency or give a qualified report, he shall indicate the same against the relevant para. (iii) Briefly give your observations and suggestions, if any, relevant to the maintenance of cost accounting records by the company. (iv) Cost accountant may use separate sheet(s) for (ii) and (iii) above, if required. ANNEXURE TO THE CO .....

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s 3. RECONCILIATION STATEMENT: Net Margin (Profit or Loss) as per Cost Accounts (In Rupees) A. From Produced or Manufactured Product Groups B. From Services Groups C. From Trading Activities Total as per Cost Accounts Add: Incomes not considered in Cost Accounts (if any) Less: Expenses not considered in Cost Accounts (if any) Add/Less: Difference in Stock Valuation Profit or (Loss) as per Financial Accounts NOTES: (i) For produced or manufactured product groups, use the nomenclature as used in t .....

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, Antriksh Bhawan, 22, K.G. Marg, New Delhi - 110 001 Subject: Exemption from applicability of Cost Accounting Records Rules to the Construction Industry. Sir, Please refer your letter dated 23rd March, 2012 on the subject cited. CFI had earlier made a similar reference on 19th December, 2011 and the matter was discussed in MCA on 11th January, 2012 with the representatives of CFI and of few leading construction/development companies wherein it was observed that all such companies are already ma .....

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d that existence of structured & verified cost accounting records would enable the companies to fulfill regulatory requirements; comply with the Tax Accounting Standards; and assist is their tax assessments. 2. Based on the discussions held, detailed clarifications were issued on 16th January, 2012 that were duly acknowledged by the CFI vide their letter dated 27th January, 2012 and also conveyed to all their member companies for implementation. 3. However, the matter has been once again exa .....

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in Rule 3 of the Companies (Cost Accounting Records) Rules, 2011 shall be required to maintain cost accounting records and file compliance report with the Central Government in accordance with the provisions of these Rules. This includes companies undertaking construction jobs with the use of own materials [whether self manufactured/produced or procured from outside] and/or development of residential, commercial or industrial estates i.e. development of township, residential units, commercial co .....

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tors or sub-contractors wherein they are paid only the conversion charges are exempted from the applicability of Companies (Cost Accounting Records) Rules, 2011. (c) Companies (Cost Accounting Records) Rules, 2011 do not apply to such Joint Ventures that are non-corporate entities [i.e. not companies registered under the Companies Act] or to unlisted companies that are below the specified threshold limits or to a body corporate governed by any special Act. (d) As on date, no cost audit is applic .....

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Associations of India, 703, Ansal Bhavan, 16, Kasturba Gandhi Marg, New Delhi - 110 001 with reference to their letter no. 59/MCA/2012 dated 3rd April, 2012. You are requested to bring this to the notice of all your member companies & associations for due compliance. 2. The President, Institute of Cost Accountants of India, 12, Sudder Street, Kolkata - 700 016 with a request to circulate this for the information of all concerned. Annexure III MCA general circular No 67/2011 dated 30th Novemb .....

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or professionals in connection with the recently issued circulars/notifications concerning cost accounting records and coverage of cost audit. To remove doubts and ambiguities, the following clarifications are issued: (a) That the Companies (Cost Accounting Records) Rules, 2011 are not applicable to: I. Wholesale or retail trading activities. II. Banking, Financial, leasing, investment, insurance, education, healthcare, tourism, travel, hospitality, recreation, transport services, business/profe .....

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manufacturing or mining activities till such time they commences their commercial operations. V. Ancillary products/activities of companies incidental to their main operations (i.e. Products/activities that do not constitute their main line of business) and wherein the total turnover from the sale of each ancillary products/activities do not exceed 2% of the total turnover of the company or ₹ 20 crores, whichever is lower, however, required details of all such ancillary products/activitie .....

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of production, processing, manufacturing, or mining of its other products or activities that are subject to cost audit. III. Hundred percent Export Oriented Units. (c) That only such items falling under the relevant chapter(s) of the Central Excise Tariff Act, 1985 as constitute intermediate or final or allied products of the Industry mentioned in the Cost Audit Order dated 30th June, 2011 shall be covered under cost audit and all other items not related to the industry shall be outside the purv .....

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0% by weight or volume) by using the listed products as their primary inputs. To explain this aspect further, the following clarifications are given as illustrations: (i) for Paints & Varnish Industry, all other items such as tanning or dyeing extracts, tanning & their derivatives, dyes, pigments & other colouring matters, putty & other mastics, printing inks, etc. mentioned in Chapter 32 of the Central Excise Tariff Act, 1985 are not covered unless such items are used as interme .....

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ied products. (iii) Examples of intermediate products include clinker for cement, pulp for paper, sponge iron & pig iron for steel, etc. Examples of articles or allied products of cement include cement bricks, sleepers, pipes; of paper include cartons, boxes, bags, registers; and of steel include ingots, blooms, billets, slabs, beams, angles, tees, channels, pilings, rails, bars, wire, nails, paltes, pipes, tubes, coils, sheets, etc. 2. In case of any doubt, companies are requested to refer .....

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tary(a)/ Joint Secretary(R)/ Joint Secretary (M) 6. PS to DII (DR)/DII (policy) 7. PS to Economic Adviser. Annexure IV ANNEXURE TO THE COMPLIANCE REPORT [See rule 2 and rule 5] 1. GENERAL: (a) Name of the company: M/s XYZ Company Limited (b) Registered office address: 35, ABC, New Delhi (c) Financial year to which the Compliance Report relates: 2011-12 2. QUANTITATIVE INFORMATION: S. no. Name of the Product or Service Group Unit Annual Production (Qty.) Net Sales (Qty.) (Value in Rupees in Lakhs .....

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Article: MISTAKES IN DRAFTING

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Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Forum: GST Invoice

Notification: The Customs and Central Excise Duties Drawback Rules, 2017

Circular: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg.

News: GST implementation smoother than expected: Jaitley

Forum: GST - TRAN1 - filed - Data uploaded with Remarks Processed with Error - Not coming in Electronic credit ledger - need suggession guidance

Forum: 3B mistake

Forum: Input tax credit

Forum: Excise duty credit on finished stock at additional place of business.

Forum: Due date of Filing TRAN-1

Highlight: Diversion of income at source - Joint venture agreement - 97% of the receipt transfer to M/s TRG Industries (P) Ltd. - scope of the agreement - it is diversion by overriding title - not taxable in the hands of assessee - HC

Highlight: Expenditure on eligible projects or schemes u/s 35AC - After 01.04.2017 the legislature desired to withdraw such deduction. - The Union legislature was competent to introduce such amendment - HC

Highlight: Transfer of trading assets at cost price, the profit component also stood transferred to the outgoing Directors, which otherwise belonged to the Company - the fact that AO has made the addition in the hands of the Directors would not make any difference - additions confirmed - HC

Highlight: The interest u/s 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission - HC

Highlight: Galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture - Deduction u/s 80-IB allowed - HC

Highlight: Penalty u/s 271C - non deduction of TDS on interest paid to sister concerns in terms of Section 194A - Levy of penalty confirmed - HC

Highlight: Disallowance of interest - reference to section 179 - The legislature has also recognised, that the doctrine of lifting of veil in the matter of tax dues is to be applied to prevent fraud etc. and not where the company has suffered despite its normal bona fide function. - HC

News: RBI Reference Rate for US $

Notification: Amendment in Notification No. S.O. 3118(E), dated the 3rd October, 2016

Highlight: Discount on ESOP to be allowed as business expenditure u/s 37(1), during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option.

Notification: Central Government appoints the 20th September, 2017 as the date on which proviso to clause (87) of section 2 of the Companies Act 2013, shall come into force

Notification: Companies (Restriction on number of layers) Rules, 2017

Highlight: Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - he disclosure made by the assessee is voluntary in nature, in the revised return - no penalty

Highlight: Reopening of assessment - notice u/s 148 issued on the directions of JCIT / CIT - a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions u/s 147

Highlight: MAT - Adjustment to book profit - computation u/clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules.

Highlight: Addition on account of alleged suppression of service value received - the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained

Notification: Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL

Notification: Seeks to amend notification No. 12/2017-UTT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017

Notification: Seeks to amend notification No. 11/2017- UTT(R) to reduce CGST rate on specified supplies of Works Contract Services

Highlight: Liability to pay duty on import of software - Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL - the appellant is to be considered as the importer



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