TMI BlogClarifications on Income Computation and Disclosure Standards (ICDS) notified under section 145(2) of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... . 892(E) dated 31st March, 2015 with effect from assessment year 2016-17. After notification of ICDS, it has been brought to the notice of the Central Board of Direct Taxes ('the Board') by the stakeholders that certain provisions of ICDS may require amendment/clarification for proper implementation. The matter was referred to an expert committee. The Committee after duly consulting the stakeholders in this regard has recommended a two-fold approach for the smooth implementation of ICDS i,e amendment to the provisions of ICDS in respect of certain issues and issuance of clarifications by way of FAQs for the rest of issues. Accordingly, vide Notification no 87. dated 29th September, 2016 Central Government notified amended ICDS with effect from the assessment year 2017-18. Further, the issues which require further clarification has been considered by Board and following clarifications are issued: Question 1: Preamble of ICDS-I states that this ICDS is applicable for computation of income chargeable under the head Profits and gains of business or profession or Income from other sources and not for the purposes of maintenance of books of accounts. However, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmining the receipts or turnover, as the case may be. Question 4: If there is conflict between ICDS and other specific provisions of the Income-tax rules, 1962 ('the Rules') governing taxation of income like rules 9A , 9B etc. of the Rules , which provisions shall prevail? Answer: ICDS provides general principles for computation of income. In case of conflict, if any, between the provisions of Rules and ICDS, the provisions of Rules, which deal with specific circumstances, shall prevail. Question 5: ICDS is framed on the basis of accounting standards notified by Ministry of Corporate Affairs (MCA) vide Notification No. GSR 739(E) dated 7 December 2006 under section 211(3C) of erstwhile Companies Act 1956 . However, MCA has notified in February 2015 a new set of standards called 'Indian Accounting Standards' (Ind-AS). How will ICDS apply to companies which adopted Ind-AS? Answer: ICDS shall apply for computation of taxable income under the head Profit and gains of business or profession or Income from other sources under the Income Tax Act. This is irrespective of the accounting standards adopted by companies i.e. either Accounting Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other similar contracts. For derivatives, not within the scope of ICDS-VI, provisions of ICDS-I would apply. Question 11: Whether the recognition of retention money, receipt of which is contingent oil the satisfaction of certain performance criterion is to be recognized as revenue on billing? Answer: Retention money, being part of overall contract revenue, shall be recognised as revenue subject to reasonable certainty of its ultimate collection condition contained in para 9 of ICDS-III on Construction contracts. Question 12: Since there is no specific scope exclusion for real estate developers and Build -Operate- Transfer (BOX) projects from ICDS IV on Revenue Recognition, please clarify whether ICDS-III and ICDS-IV should be applied by real estate developers and BOT operators. Also, whether ICDS is applicable for leases. Answer: At present there is no specific ICDS notified for real estate developers, BOT projects and leases. Therefore, relevant provisions of the Act and ICDS shall apply to these transactions as may be applicable. Question 13: The condition of reasonable certainty of ultimate collection is not laid down for taxation of interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides for timing of recognition of government grant. The transitional provision in Para 13 of ICDS-VII provides that a government grant which meets the recognition criteria on or after 1st day of April 2016 shall be recognised in accordance with ICDS-VII. All government grants actually received prior to 1st day of April 2016 shall be deemed to have been recognised on its receipt in accordance with Para 4(2) of ICDS-VII and accordingly will be outside the transitional provision and therefore the government grants received on or after 1st day of April 2016 and for which recognition criteria provided in Para 5 to Para 9 of ICDS-VII is also satisfied thereafter, the same shall be recognised as per the provisions of ICDS-VII. The grants received prior to 1st day of April 2016 shall continue to be recognised as per the law prevailing prior to that date. For example, if out of total subsidy entitlement of 10 Crore an amount of 6 Crore is recognised in the books of accounts till 31st day of March 2016 and recognition of balance 4 Crore is deferred pending satisfaction of related conditions and/or achieving reasonable certainty of receipt. The balance amount of 4 Crore wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 150 120 C Share 140 120 120 D Share 200 190 190 Total 560 535 505 535 E Debt Security 150 160 150 F Debt Security 105 90 90 G Debt Security 125 135 125 H Debt Security 220 230 220 Total 600 615 585 600 Securities Total 1160 1150 1090 1135 Question 20: There are specific provisions in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion already recognised for computation of taxable income in FY 2016-17 or earlier...(D) INR 2 Crores Net provisions as per ICDS in FY 2016-17 to be recognised as per transition provision...(E) = (C) - (D) INR 6 Crores Question 24: Expenditure on most post-retirement benefits like provident fund, gratuity, etc. are covered by specific provisions. There are other post-retirement benefits offered by companies like medical benefits. Such benefits are covered by AS-15 for which no parallel ICDS has been notified. Whether provision for these liabilities are excluded from scope of ICDS X ? Answer: It is clarified that provisioning for employee benefit which are otherwise covered by AS 15 shall continue to be governed by specific provisions of the Act and are not dealt with by ICDS-X . Question 25: ICDS-I requires disclosure of significant accounting policies and other ICDS requires specific disclosures. Where is the taxpayer required to make such disclosures specified in ICDS? Answer: Net effect on the income due to application of ICDS is to be disclosed in the Return of income. The disclosures require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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