[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.

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

A. Income Computation and Disclosure Standard I relating to accounting

policies

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.

ThisIncomeComputationandDisclosureStandarddealswithsignificantaccounting

policies.

FundamentalAccountingAssumptions

2.

Thefollowingarefundamentalaccountingassumptions,namely:

a GoingConcern

Goingconcernreferstotheassumptionthatthepersonhasneithertheintention
northenecessityofliquidationorofcurtailingmateriallythescaleofthebusiness,

professionorvocationandintendstocontinuehisbusiness,professionorvocation
fortheforeseeablefuture.

b Consistency

Consistencyreferstotheassumptionthataccountingpoliciesareconsistentfrom
oneperiodtoanother;

c Accrual

Accrual refers to the assumption that revenues and costs are accrued, that is,
recognised as they are earned or incurred and not as money is received or paid
andrecordedinthepreviousyeartowhichtheyrelate.

AccountingPolicies

3.

Theaccountingpoliciesrefertothespecificaccountingprinciplesandthemethods

ofapplyingthoseprinciplesadoptedbyaperson.

ConsiderationsintheSelectionandChangeofAccountingPolicies

4.Accountingpoliciesadoptedbyapersonshallbesuchsoastorepresentatrueandfair
view of the state of affairs and income of the business, profession or vocation. For this
purpose,
i the treatmentandpresentation of transactions andevents shall be governed by their
substanceandnotmerelybythelegalform;and
ii marked to market loss or an expected loss shall not be recognised unless the
recognition of such loss is in accordance with the provisions of any other Income
ComputationandDisclosureStandard.

5.Anaccountingpolicyshallnotbechangedwithoutreasonablecause.

DisclosureofAccountingPolicies

6.

Allsignificantaccountingpoliciesadoptedbyapersonshallbedisclosed.

7.

Any change in an accounting policy which has a material effect shall be disclosed.

The amount by which any item is affected by such change shall also be disclosed to the
extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact
shall be indicated. If a change is made in the accounting policies which has no material
effect for the current previous year but which is reasonably expected to have a material
effectinlaterpreviousyears,thefactofsuchchangeshallbeappropriatelydisclosedinthe
previousyearinwhichthechangeisadoptedandalsointhepreviousyearinwhichsuch
changehasmaterialeffectforthefirsttime.

8.

Disclosure of accounting policies or of changes therein cannot remedy a wrong or

inappropriatetreatmentoftheitem.

9.

If the fundamental accounting assumptions of Going Concern, Consistency and

Accrual are followed, specific disclosure is not required. If a fundamental accounting

assumptionisnotfollowed,thefactshallbedisclosed.

TransitionalProvisions

10.Allcontractortransactionexistingonthe1stdayofApril,2015orenteredintoonor
afterthe1stdayofApril,2015shallbedealtwithinaccordancewiththeprovisionsofthis
standardaftertakingintoaccounttheincome,expenseorloss,ifany,recognisedinrespect
ofthesaidcontractortransactionforthepreviousyearendingonorbeforethe31stMarch,
2015.

B.IncomeComputationandDisclosureStandardIIrelatingtovaluationof
inventories

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeableundertheheadProfitsandgainsofBusinessorprofessionorIncomefrom
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsofIncomeTaxAct,1961 theAct andthis

IncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothat
extent.

Scope

1. This Income Computation and Disclosure Standard shall be applied for valuation of
inventories,except:

Workinprogress arising under construction contract including directly

relatedservicecontractwhichisdealtwithbytheIncomeComputationand
DisclosureStandardonconstructioncontracts;

Workinprogress which is dealt with by other Income Computation and

DisclosureStandard;

Shares, debentures and other financial instruments held as stockintrade

whicharedealtwithbytheIncomeComputationandDisclosureStandardon
securities;

Producersinventoriesoflivestock,agricultureandforestproducts,mineral
oils, ores and gases to the extent that they are measured at net realisable
value;

Machineryspares,whichcanbeusedonlyinconnectionwithatangiblefixed
asset and their use is expected to be irregular, shall be dealt with in
accordance with the Income Computation and Disclosure Standard on
tangiblefixedassets.

Definitions

2 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosure Standard
withthemeaningsspecified:

Inventoriesareassets:

heldforsaleintheordinarycourseofbusiness;

ii

intheprocessofproductionforsuchsale;

iii

intheformofmaterialsorsuppliestobeconsumedintheproduction

processorintherenderingofservices.

Netrealisablevalueistheestimatedsellingpriceintheordinarycourseof
business less the estimated costs of completion and the estimated costs
necessarytomakethesale.

2 2 Words and expressions used and not defined in this Income Computation and
DisclosureStandardbutdefinedintheActshallhavethemeaningsassignedtotheminthat
Act.

Measurement


3.

Inventoriesshallbevaluedatcost,ornetrealisablevalue,whicheverislower.

CostofInventories

4. Cost of inventories shall comprise of all costs of purchase, costs of services, costs of
conversion and other costs incurred in bringing the inventories to their present location
andcondition.

CostsofPurchase

5.Thecostsofpurchaseshallconsistofpurchasepriceincludingdutiesandtaxes,freight
inwards and other expenditure directly attributable to the acquisition. Trade discounts,
rebatesandothersimilaritemsshallbedeductedindeterminingthecostsofpurchase.

CostsofServices

6.Thecostsofservicesinthecaseofaserviceprovidershallconsistoflabourandother
costs of personnel directly engaged in providing the service including supervisory
personnelandattributableoverheads.

CostsofConversion

7.Thecostsofconversionofinventoriesshallincludecostsdirectlyrelatedtotheunitsof
productionandasystematicallocationoffixedandvariableproductionoverheadsthatare
incurredinconvertingmaterialsintofinishedgoods.Fixedproductionoverheadsshallbe
thoseindirectcostsofproductionthatremainrelativelyconstantregardlessofthevolume
of production. Variable production overheads shall be those indirect costs of production
thatvarydirectlyornearlydirectly,withthevolumeofproduction.

8.Theallocationoffixedproductionoverheadsforthepurposeoftheirinclusioninthe
costs 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 a
numberofperiodsorseasonsundernormalcircumstances,takingintoaccountthelossof
capacityresultingfromplannedmaintenance.Theactuallevelofproductionshallbeused
when it approximates to normal capacity. The amount of fixed production overheads
allocated to each unit of production shall not be increased as a consequence of low
production or idle plant. Unallocated overheads shall be recognised as an expense in the
periodinwhichtheyareincurred.Inperiodsofabnormallyhighproduction,theamountof
fixed production overheads allocated to each unit of production is decreased so that
inventories are not measured above the cost. Variable production overheads shall be
assigned to each unit of production on the basis of the actual use of the production
facilities.

9.

Where a production process results in more than one product being produced

simultaneouslyandthecostsofconversionofeachproductarenotseparatelyidentifiable,
thecostsshallbeallocatedbetweentheproductsonarationalandconsistentbasis.Where
byproducts, scrap or waste material are immaterial, they shall be measured at net
realisablevalueandthisvalueshallbedeductedfromthecostofthemainproduct.

OtherCosts

10.

Othercostsshallbeincludedinthecostofinventoriesonlytotheextentthatthey

areincurredinbringingtheinventoriestotheirpresentlocationandcondition.

11.

Interestandotherborrowingcostsshallnotbeincludedinthecostsofinventories,

unless they meet the criteria for recognition of interest as a component of the cost as
specifiedintheIncomeComputationandDisclosureStandardonborrowingcosts.

ExclusionsfromtheCostofInventories

12.Indeterminingthecostofinventoriesinaccordancewithparagraphs4toparagraphs
11, the following costs shall be excluded and recognised as expenses of the period in
whichtheyareincurred,namely:

a Abnormalamountsofwastedmaterials,labour,orotherproductioncosts;
b Storagecosts,unlessthosecostsarenecessaryintheproductionprocesspriorto
afurtherproductionstage;
c Administrative overheads that do not contribute to bringing the inventories to
theirpresentlocationandcondition;
d Sellingcosts.

CostFormulae

13.

TheCostofinventoriesofitems

thatarenotordinarilyinterchangeable;and

ii

goodsorservicesproducedandsegregatedforspecificprojects

shallbeassignedbyspecificidentificationoftheirindividualcosts.

14.Specificidentificationofcostmeansspecificcostsareattributedtoidentifieditemsof
inventory.

15. Where there are a large numbers of items of inventory which are ordinarily
interchangeable,specificidentificationofcostsshallnotbemade.

FirstinFirstoutandWeightedAverageCostFormula

16. Cost of inventories, other than the inventory dealt with in paragraph 13, shall be
assigned by using the Firstin Firstout FIFO , or weighted average cost formula. The
formula used shall reflect the fairest possible approximation to the cost incurred in
bringingtheitemsofinventorytotheirpresentlocationandcondition.


17. The FIFO formula assumes that the items of inventory which were purchased or
produced first are consumed or sold first, and consequently the items remaining in
inventoryattheendoftheperiodarethosemostrecentlypurchasedorproduced.Under
theweightedaveragecostformula,thecostofeachitemisdeterminedfromtheweighted
averageofthecostofsimilaritemsatthebeginningofaperiodandthecostofsimilaritems
purchased or produced during the period. The average shall be calculated on a periodic
basis,oraseachadditionalshipmentisreceived,dependinguponthecircumstances.

RetailMethod

18.

Where it is impracticable to use the costing methods referred to in paragraph 16,

theretailmethodcanbeusedintheretailtradeformeasuringinventoriesoflargenumber
of rapidly changing items that have similar margins. The cost of the inventory is
determinedbyreducingfromthesalesvalueoftheinventory,theappropriatepercentage
gross margin. The percentage used takes into consideration inventory, which has been
markeddowntobelowitsoriginalsellingprice.

NetRealisableValue

19. Inventories shall be written down to net realisable value on an itembyitem basis.
Whereitemsofinventory'relatingtothesameproductlinehavingsimilarpurposesorend
uses and are produced and marketed in the same geographical area and cannot be
practicably evaluated separately from other items in that product line, such inventories
shallbegroupedtogetherandwrittendowntonetrealisablevalueonanaggregatebasis.

20.Netrealisablevalueshallbebasedonthemostreliableevidenceavailableatthetime
of valuation. The estimates of net realisable value shall also take into consideration the
purpose for which the inventory is held. The estimates shall take into consideration
fluctuationsofpriceorcostdirectlyrelatingtoeventsoccurringaftertheendofprevious

year to the extent that such events confirm the conditions existing on the last day of the
previousyear.

21.

Materialsandothersuppliesheldforuseintheproductionofinventoriesshallnot

be written down below the cost, where the finished products in which they shall be
incorporatedareexpectedtobesoldatorabovethecost.Wheretherehasbeenadecline
inthepriceofmaterialsanditisestimatedthatthecostoffinishedproductswillexceedthe
net realisable value, the value of materials shall be written down to net realisable value
whichshallbethereplacementcostofsuchmaterials.

ValueofOpeningInventory

22.

Thevalueoftheinventoryasonthebeginningofthepreviousyearshallbe

the cost of inventory available, if any, on the day of the commencement of

the business when the business has commenced during the previous year;
and

ii

the value of the inventory as on the close of the immediately preceding

previousyear,inanyothercase.

ChangeofMethodofValuationofInventory

23.

The method of valuation of inventories once adopted by a person in any previous

yearshallnotbechangedwithoutreasonablecause.

ValuationofInventoryinCaseofCertainDissolutions

24.

In case of dissolution of a partnership firm or association of person or body of

individuals,notwithstandingwhetherbusinessisdiscontinuedornot,theinventoryonthe
dateofdissolutionshallbevaluedatthenetrealisablevalue.

TransitionalProvisions

25.

Interestandotherborrowingcosts,whichdonotmeetthecriteriaforrecognitionof

interestasacomponentofthecostasperpara11,butincludedinthecostoftheopening
inventoryasonthe1stdayofApril,2015,shallbetakenintoaccountfordeterminingcost
ofsuchinventoryforvaluationasonthecloseofthepreviousyearbeginningonorafter1st
dayofApril,2015ifsuchinventorycontinuetoremainpartofinventoryasonthecloseof
thepreviousyearbeginningonorafter1stdayofApril,2015.

Disclosure

26.

Thefollowingaspectsshallbedisclosed,namely:

theaccountingpoliciesadoptedinmeasuringinventoriesincludingthecost
formulaeused;and

thetotalcarryingamountofinventoriesanditsclassificationappropriateto
aperson.

C. Income Computation and Disclosure Standard III relating to construction

contracts

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

In the case of conflict between the provisions of the Incometax Act, 1961 the Act and
thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.

This Income Computation and Disclosure Standard should be applied in

determinationofincomeforaconstructioncontractofacontractor.

Definitions

2 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard
withthemeaningsspecified:

a Constructioncontractisacontractspecificallynegotiatedfortheconstruction
of an asset or a combination of assets that are closely interrelated or
interdependent in terms of their design, technology and function or their
ultimatepurposeoruseandincludes:

contractfortherenderingofserviceswhicharedirectlyrelatedtothe
constructionoftheasset,forexample,thosefortheservicesofproject
managersandarchitects;

ii

contractfordestructionorrestorationofassets,andtherestorationof
theenvironmentfollowingthedemolitionofassets.

b Fixedpricecontractisaconstructioncontractinwhichthecontractoragrees
toafixedcontractprice,orafixedrateperunitofoutput,whichmaybesubject
tocostescalationclauses.

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

reimbursed for allowable or otherwise defined costs, plus a mark up on these
costsorafixedfee.

d Retentions are amounts of progress billings which are not paid until the
satisfaction of conditions specified in the contract for the payment of such
amountsoruntildefectshavebeenrectified.

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

whetherornottheyhavebeenpaidbythecustomer.

f Advances are amounts received by the contractor before the related work is
performed.

2 2

Words and expressions used and not defined in this Income Computation and
Disclosure Standard but defined in the Act shall have the meaning respectively
assignedtothemintheAct.

3.

Aconstructioncontractmaybenegotiatedfortheconstructionofasingleasset.A
construction contract may also deal with the construction of a number of assets
which are closely interrelated or interdependent in terms of their design,
technologyandfunctionortheirultimatepurposeoruse.

4.

Constructioncontractsareformulatedinanumberofwayswhich,forthepurposes
of this Income Computation and Disclosure Standard, are classified as fixed price
contracts and cost plus contracts. Some construction contracts may contain
characteristicsofbothafixedpricecontractandacostpluscontract,forexample,
inthecaseofacostpluscontractwithanagreedmaximumprice.

CombiningandSegmentingConstructionContracts

5.

The requirements of this Income Computation and Disclosure Standard shall be

applied separately to each construction contract except as provided for in
paragraphs6,7and8herein.Forreflectingthesubstanceofacontractoragroup
of contracts, where it is necessary, the Income Computation and Disclosure

Standard should be applied to the separately identifiable components of a single

contractortoagroupofcontractstogether.

6.

Whereacontractcoversanumberofassets,theconstructionofeachassetshould
betreatedasaseparateconstructioncontractwhen:

a separateproposalshavebeensubmittedforeachasset;
b each asset has been subject to separate negotiation and the contractor and
customerhavebeenabletoacceptorrejectthatpartofthecontractrelating
toeachasset;and
c thecostsandrevenuesofeachassetcanbeidentified.

7.

A group of contracts, whether with a single customer or with several customers,

shouldbetreatedasasingleconstructioncontractwhen:

a thegroupofcontractsisnegotiatedasasinglepackage;
b thecontractsaresocloselyinterrelatedthattheyare,ineffect,partofasingle
projectwithanoverallprofitmargin;and
c thecontractsareperformedconcurrentlyorinacontinuoussequence.

8.

Whereacontractprovidesfortheconstructionofanadditionalassetattheoption
ofthecustomerorisamendedtoincludetheconstructionofanadditionalasset,the
construction of the additional asset should be treated as a separate construction
contractwhen:

a theassetdifferssignificantlyindesign,technologyorfunctionfromtheasset
orassetscoveredbytheoriginalcontract;or
b 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;and
b variationsincontractwork,claimsandincentivepayments:

totheextentthatitisprobablethattheywillresultinrevenue;and

ii

theyarecapableofbeingreliablymeasured.

11.

Wherecontractrevenuealreadyrecognisedasincomeissubsequentlywrittenoff
in the books of accounts as uncollectible, the same shall be recognised as an
expenseandnotasanadjustmentoftheamountofcontractrevenue.

ContractCosts

12.

Contractcostsshallcompriseof:

a coststhatrelatedirectlytothespecificcontract;
b coststhatareattributabletocontractactivityingeneralandcanbeallocated
tothecontract;
c such other costs as are specifically chargeable to the customer under the
termsofthecontract;and
d allocated borrowing costs in accordance with the Income Computation and
DisclosureStandardonBorrowingCosts.

These costs shall be reduced by any incidental income, not being in the nature of
interest,dividendsorcapitalgains,thatisnotincludedincontractrevenue.

13.

Coststhatcannotbeattributedtoanycontractactivityorcannotbeallocatedtoa
contractshallbeexcludedfromthecostsofaconstructioncontract.

14.

Contract costs include the costs attributable to a contract for the period from the
dateofsecuringthecontracttothefinalcompletionofthecontract.Coststhatare
incurred in securing the contract are also included as part of the contract costs,
provided

a theycanbeseparatelyidentified;and
b itisprobablethatthecontractshallbeobtained.

Whencostsincurredinsecuringacontractarerecognisedasanexpenseinthe
periodinwhichtheyareincurred,theyarenotincludedincontractcostswhen
thecontractisobtainedinasubsequentperiod.

15.

Contract costs that relate to future activity on the contract are recognised as an
asset.Suchcostsrepresentanamountduefromthecustomerandareclassifiedas
contractworkinprogress.

RecognitionofContractRevenueandExpenses

16.

Contract revenue and contract costs associated with the construction contract
should be recognised as revenue and expenses respectively by reference to the
stageofcompletionofthecontractactivityatthereportingdate.

17.

Therecognitionofrevenueandexpensesbyreferencetothestageofcompletionof
a contract is referred to as the percentage of completion method. Under this
method,contractrevenueismatchedwiththecontractcostsincurredinreaching
thestageofcompletion,resultinginthereportingofrevenue,expensesandprofit
whichcanbeattributedtotheproportionofworkcompleted.

18.

Thestageofcompletionofacontractshallbedeterminedwithreferenceto:

a the proportion that contract costs incurred for work performed upto the
reportingdatebeartotheestimatedtotalcontractcosts;or
b surveysofworkperformed;or
c 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 work
performed are included in costs incurred upto the reporting date. Contract costs
whichareexcludedare:

a contractcoststhatrelatetofutureactivityonthecontract;and
b paymentsmade to subcontractors in advance of work performed under the
subcontract.

20.

Duringtheearlystagesofacontract,wheretheoutcomeofthecontractcannotbe
estimated reliably contract revenue is recognised only to the extent of costs
incurred.Theearlystageofacontractshallnotextendbeyond25%ofthestageof
completion.

ChangesinEstimates

21.

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 in
determination of the amount of revenue and expenses in the period in which the
changeismadeandinsubsequentperiods.

TransitionalProvisions

22. Contract revenue and contract costs associated with the construction contract, which
commencedonorbeforethe31stdayofMarch,2015butnotcompletedbythesaiddate,
shallberecognisedasrevenueandcostsrespectivelyinaccordancewiththeprovisionsof
this standard. The amount of contract revenue, contract costs or expected loss, if any,
recognisedforthesaidcontractforanypreviousyearcommencingonorbeforethe1stday
of April, 2014 shall be taken into account for recognising revenue and costs of the said
contract for the previous year commencing on the 1st day of April, 2015 and subsequent
previousyears.

Disclosure

23.

Apersonshalldisclose:

a theamountofcontractrevenuerecognisedasrevenueintheperiod;and
b the methods used to determine the stage of completion of contracts in
progress.

24.

Apersonshalldisclosethefollowingforcontractsinprogressatthereportingdate,
namely:

a amountofcostsincurredandrecognisedprofits lessrecognisedlosses upto

thereportingdate;
b theamountofadvancesreceived;and
c theamountofretentions.

D. Income Computation and Disclosure Standard IV relating to revenue

recognition


Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1 1 This Income Computation and Disclosure Standard deals with the bases for
recognition of revenue arising in the course of the ordinary activities of a person
from

i thesaleofgoods;

ii therenderingofservices;

iii the use by others of the persons resources yielding interest, royalties or
dividends.

1 2 ThisIncomeComputationandDisclosureStandarddoesnotdealwiththeaspectsof
revenue recognition which are dealt with by other Income Computation and
DisclosureStandards.

Definitions

2 1 The following term is used in this Income Computation and Disclosure Standard
withthemeaningsspecified:

a Revenueisthegrossinflowofcash,receivablesorotherconsiderationarising
inthecourseoftheordinaryactivitiesofapersonfromthesaleofgoods,from
the rendering of services, or from the use by others of the persons resources
yieldinginterest,royaltiesordividends.Inanagencyrelationship,therevenue
is the amount of commission and not the gross inflow of cash, receivables or
otherconsideration.

2 2 Words and expressions used and not defined in this Income Computation and
DisclosureStandardbutdefinedintheActshallhavethemeaningsassignedtothem
inthatAct.

SaleofGoods

3. In a transaction involving the sale of goods, the revenue shall be recognised when the
seller of goods has transferred to the buyer the property in the goods for a price or all
significant risks and rewards of ownership have been transferred to the buyer and the
seller retains no effective control of the goods transferred to a degree usually associated
withownership.Inasituation,wheretransferofpropertyingoodsdoesnotcoincidewith
thetransferofsignificantrisksandrewardsofownership,revenueinsuchasituationshall
berecognisedatthetimeoftransferofsignificantrisksandrewardsofownershiptothe
buyer.

4.Revenueshallberecognisedwhenthereisreasonablecertaintyofitsultimatecollection.

5.Wheretheabilitytoassesstheultimatecollectionwithreasonablecertaintyislackingat
the time of raising any claim for escalation of price and export incentives, revenue
recognition in respect of such claim shall be postponed to the extent of uncertainty
involved.


RenderingofServices

6. Revenue from service transactions shall be recognised by the percentage completion

method.Underthismethod,revenuefromservicetransactionsismatchedwiththeservice
transactions costs incurred in reaching the stage of completion, resulting in the
determinationofrevenue,expensesandprofitwhichcanbeattributedtotheproportionof
work completed. Income Computation and Disclosure Standard on construction contract
alsorequirestherecognitionofrevenueonthisbasis.TherequirementsofthatStandard
shall mutatismutandisapplytotherecognitionofrevenueandtheassociatedexpensesfor
aservicetransaction.

TheUseofResourcesbyOthersYieldingInterest,RoyaltiesorDividends

7. Interest shall accrue on the time basis determined by the amount outstanding and the
rateapplicable.Discountorpremiumondebtsecuritiesheldistreatedasthoughitwere
accruingovertheperiodtomaturity.

8.Royaltiesshallaccrueinaccordancewiththetermsoftherelevantagreementandshall
berecognisedonthatbasisunless,havingregardtothesubstanceofthetransaction,itis
moreappropriatetorecogniserevenueonsomeothersystematicandrationalbasis.

9.DividendsarerecognisedinaccordancewiththeprovisionsoftheAct.

TransitionalProvisions

10. The transitional provisions of Income Computation and Disclosure Standard on

construction contractshall mutatismutandis apply to the recognition of revenue and the
associated costs for a service transaction undertaken on or before the 31st day of March,
2015butnotcompletedbythesaiddate.


11. Revenue for a transaction, other than a service transaction referred to in Para 10,
undertaken on or before the 31st day of March, 2015 but not completed by the said date
shallberecognisedinaccordancewiththeprovisionsofthisstandardforthepreviousyear
commencing on the 1st day of April, 2015 and subsequent previous year. The amount of
revenue,ifany,recognisedforthesaidtransactionforanypreviousyearcommencingonor
beforethe1stdayofApril,2014shallbetakenintoaccountforrecognisingrevenueforthe
said transaction for the previous year commencing on the 1st day of April, 2015 and
subsequentpreviousyears.

Disclosure

12.Followingdisclosuresshallbemadeinrespectofrevenuerecognition,namely:

a in a transaction involving sale of good, total amount not recognised as

revenue during the previous year due to lack of reasonably certainty of its
ultimatecollectionalongwithnatureofuncertainty;

b the amount of revenue from service transactions recognised as revenue

duringthepreviousyear;

c themethodusedtodeterminethestageofcompletionofservicetransactions
inprogress;and

d forservicetransactionsinprogressattheendofpreviousyear:

amount of costs incurred and recognised profits less recognised

losses uptoendofpreviousyear;

ii

theamountofadvancesreceived;and

iii theamountofretentions.

E. Income Computation and Disclosure Standard V relating to tangible fixed

assets
Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1. ThisIncomeComputationandDisclosureStandarddealswiththetreatmentoftangible
fixedassets.

Definitions

2 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard
withthemeaningsspecified:

Tangible fixed asset is an asset being land, building, machinery, plant or

furniture held with the intention of being used for the purpose of producing or
providinggoodsorservicesandisnotheldforsaleinthenormalcourseofbusiness.

Fairvalueofanassetistheamountforwhichthatassetcouldbeexchanged

betweenknowledgeable,willingpartiesinanarmslengthtransaction.

2 2

Words and expressions used and not defined in this Income Computation

andDisclosureStandardbutdefinedintheActshallhavethemeaningsassignedto
theminthatAct.

IdentificationofTangibleFixedAssets

3.

Thedefinitioninclause a ofsubparagraph 1 ofparagraph2providescriteriafor

determiningwhetheranitemistobeclassifiedasatangiblefixedasset.

4.

Standby equipment and servicing equipment are to be capitalised. Machinery

spares shall be charged to the revenueasand when consumed. When such spares
canbeusedonlyinconnectionwithanitemoftangiblefixedassetandtheiruseis
expectedtobeirregular,theyshallbecapitalised.

ComponentsofActualCost
5.

Theactualcostofanacquiredtangiblefixedassetshallcompriseitspurchaseprice,
import duties and other taxes, excluding those subsequently recoverable, and any
directlyattributableexpenditureonmakingtheassetreadyforitsintendeduse.Any
tradediscountsandrebatesshallbedeductedinarrivingattheactualcost.

6.

Thecostofatangiblefixedassetmayundergochangessubsequenttoitsacquisition
orconstructiononaccountof
i priceadjustment,changesindutiesorsimilarfactors;or
ii exchange fluctuation as specified in Income Computation and Disclosure
Standardontheeffectsofchangesinforeignexchangerates.

7.

Administration and other general overhead expenses are to be excluded from the
cost of tangible fixed assets if they do not relate to a specific tangible fixed asset.
Expenses which are specifically attributable to construction of a project or to the
acquisitionofatangiblefixedassetorbringingittoitsworkingcondition,shallbe
included as a part ofthe cost of the projector asa part ofthe cost ofthe tangible
fixedasset.

8.

The expenditure incurred on startup and commissioning of the project, including

the expenditure incurred on test runs and experimental production, shall be
capitalised. The expenditure incurred after the plant has begun commercial
production, that is, production intended for sale or captive consumption, shall be
treatedasrevenueexpenditure.

SelfconstructedTangibleFixedAssets

9.

In arriving at the actual cost of selfconstructed tangible fixed assets, the same
principlesshallapplyasthosedescribedinparagraphs5to8.Costofconstruction
thatrelatedirectlytothespecifictangiblefixedassetandcoststhatareattributable
to the construction activity in general and can be allocated to the specifictangible
fixedassetshallbeincludedinactualcost.Anyinternalprofitsshallbeeliminated
inarrivingatsuchcosts.

NonmonetaryConsideration
10.

Whenatangiblefixedassetisacquiredinexchangeforanotherasset,thefairvalue

ofthe tangiblefixedassetsoacquiredshallbeitsactualcost.

11.

When a tangible fixed asset is acquired in exchange for shares or other securities,

thefairvalueofthetangiblefixedassetsoacquiredshallbeitsactualcost.

ImprovementsandRepairs

12.

AnExpenditurethatincreasesthefuturebenefitsfromtheexistingassetbeyondits
previouslyassessedstandardofperformanceisaddedtotheactualcost.

13.

Thecostofanadditionorextensiontoanexistingtangiblefixedassetwhichisofa
capitalnatureandwhichbecomesanintegralpartoftheexistingtangiblefixedasset
is to be added to its actual cost. Any addition or extension, which has a separate
identity and is capable of being used after the existing tangible fixed asset is
disposedof,shallbetreatedasseparateasset.

ValuationofTangibleFixedAssetsinSpecialCases

14.

Whereapersonownstangiblefixedassetsjointlywithothers,theproportioninthe
actualcost,accumulateddepreciationandwrittendownvalueisgroupedtogether
withsimilarfullyownedtangiblefixedassets.Detailsofsuchjointlyownedtangible
fixedassetsshallbeindicatedseparatelyinthetangiblefixedassetsregister.

15.

Whereseveralassetsarepurchasedforaconsolidatedprice,theconsiderationshall
beapportionedtothevariousassetsonafairbasis.

TransitionalProvisions

16. The actual cost of tangible fixed assets, acquisition or construction of which
commencedonorbeforethe31stdayofMarch,2015butnotcompletedbythesaiddate,
shall be recognised in accordance with the provisions of this standard. The amount of

actualcost,ifany,recognisedforthesaidassetsforanypreviousyearcommencingonor
beforethe1stdayofApril,2014shallbetakenintoaccountforrecognisingactualcostof
the said assets for the previous year commencing on the 1st day of April, 2015 and
subsequentpreviousyears.

Depreciation

17.

Depreciation on a tangible fixed asset shall be computed in accordance with the

provisionsoftheAct.

Transfers

18.

Incomearisingontransferofatangiblefixedassetshallbecomputedinaccordance
withtheprovisionsoftheAct.

Disclosures

19.

Followingdisclosureshallbemadeinrespectoftangiblefixedassets,namely:

descriptionofassetorblockofassets;

rateofdepreciation;

actualcostorwrittendownvalue,asthecasemaybe;

additions or deductions during the year with dates; in the case of any

additionofanasset,dateputtouse;includingadjustmentsonaccountof

Central Value Added Tax credit claimed and allowed under the
CENVATCreditRules,2004;


ii

changeinrateofexchangeofcurrency;

iii

subsidyorgrantorreimbursement,bywhatevernamecalled;

depreciationAllowable;and

writtendownvalueattheendofyear.

F.IncomeComputationandDisclosureStandardVIrelatingtotheeffectsof
changesinforeignexchangerates

Preamble
ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.

ThisIncomeComputationandDisclosureStandarddealswith:

a treatmentoftransactionsinforeigncurrencies;

b translatingthefinancialstatementsofforeignoperations;

c treatment of foreign currency transactions in the nature of forward exchange

contracts.

Definitions

2. 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard
withthemeaningsspecified:

a Averagerateisthemeanoftheexchangeratesinforceduringaperiod.

b Closingrateistheexchangerateatthelastdayofthepreviousyear.

c Exchange difference is the difference resulting from reporting the same

number of units of a foreign currency in the reporting currency of a person at
differentexchangerates.

d Exchangerateistheratioforexchangeoftwocurrencies.

e Foreigncurrencyisacurrencyotherthanthereportingcurrencyofaperson.

f Foreign operations of a person is a branch, by whatever name called, of that

person,theactivitiesofwhicharebasedorconductedinacountryotherthanIndia.

g Foreign currency transaction is a transaction which is denominated in or

requires settlement in a foreign currency, including transactions arising when a
person:

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 are

denominatedinaforeigncurrency;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 different

currencies at a forward rate, and includes a foreign currency option contract or
anotherfinancialinstrumentofasimilarnature;

i ForwardrateisthespecifiedexchangerateforexchangeoftwoCurrenciesata
specifiedfuturedate;

j Indian currency shall have the meaning as assigned to it in section 2 of the

ForeignExchangeManagementAct,1999 42of1999 ;

k Integralforeignoperationisaforeignoperation,theactivitiesofwhicharean
integralpartoftheoperationoftheperson;

l Monetary items are money held and assets to be received or liabilities to be

paidinfixedordeterminableamountsofmoney.Cash,receivables,andpayablesare
examplesofmonetaryitems;

m Nonintegral foreign operation is a foreign operation that is not an integral

foreignoperation;

n Nonmonetaryitemsareassetsandliabilitiesotherthanmonetaryitems.Fixed
assets,inventories,andinvestmentsinequitysharesareexamplesofnonmonetary
items;


o Reporting currency means Indian currency except for foreign operations
whereitshallmeancurrencyofthecountrywheretheoperationsarecarriedout.

2 Words and expressions used and not defined in this Income Computation and
DisclosureStandardbutdefinedintheActshallhavethemeaningassignedtothem
intheAct.

ForeignCurrencyTransactions

InitialRecognition

3 1 A foreign currency transaction shall be recorded, on initial recognition in the

reporting currency, by applying to the foreign currency amount the exchange rate
betweenthereportingcurrencyandtheforeigncurrencyatthedateofthetransaction.

2 Anaveragerateforaweekoramonththatapproximatestheactualrateatthedateof
the transaction may be used for all transaction in each foreign currency occurring
during that period. If the exchange rate fluctuates significantly, the actual rate at the
dateofthetransactionshallbeused.

ConversionatLastDateofPreviousYear

4. Atlastdayofeachpreviousyear:

a foreign currency monetary items shall be converted into reporting currency by

applyingtheclosingrate;

b where the closing rate does not reflect with reasonable accuracy, the amount in
reporting currency that is likely to be realised from or required to disburse, a
foreigncurrencymonetaryitemowingtorestrictiononremittancesortheclosing

ratebeingunrealisticanditisnotpossibletoeffectanexchangeofcurrenciesatthat
rate,thentherelevantmonetaryitemshallbereportedinthereportingcurrencyat
theamountwhichislikelytoberealisedfromorrequiredtodisbursesuchitemat
thelastdateofthepreviousyear;and

nonmonetary items in a foreign currency shall be converted into reporting

currencybyusingtheexchangerateatthedateofthetransaction.

RecognitionofExchangeDifferences

5. i Inrespectofmonetaryitems,exchangedifferencesarisingonthesettlementthereof
oronconversionthereofatlastdayofthepreviousyearshallberecognisedasincome
orasexpenseinthatpreviousyear.

ii In 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 as
expenseinthatpreviousyear.

ExceptionstoParagraphs3,4and5

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

conversion and recognition of exchange difference shall be subject to provisions of
section43AoftheActorRule115ofIncometaxRules,1962,asthecasemaybe.

FinancialStatementsofForeignOperations

ClassificationofForeignOperations

7. 1 The method used to translate the financial statements of a foreign operation

dependsonthewayinwhichitisfinancedandoperatesinrelationtoaperson.For
this purpose, foreign operations are classified as either integral foreign
operationsornonintegralforeignoperations.

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

operationratherthananintegralforeignoperation:

a whilethepersonmaycontroltheforeignoperation,theactivitiesoftheforeign
operation are carried out with a significant degree of autonomy from the
activitiesoftheperson;

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

the activities of the foreign operation are financed mainly from its own
operationsorlocalborrowings;

d costs of labour, material and other components of the foreign operations

productsorservicesareprimarilypaidorsettledinthelocalcurrency;

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

cash flows of the person are insulated from the daytoday activities of the
foreignoperation;

g sales prices for the foreign operations products or services are not primarily
responsive on a shortterm basis to changes in exchange rates but are
determinedmorebylocalcompetitionorlocalgovernmentregulation;

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

IntegralForeignOperations

8. The financial statements of an integral foreign operation shall be translated using the
principles and procedures in paragraphs 3 to 6 as if the transactions of the foreign
operationhadbeenthoseofthepersonhimself.

NonintegralForeignOperations

9.

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

previousyear,thepersonshallapplythefollowing,namely:

a theassetsandliabilities,bothmonetaryandnonmonetary,of thenonintegral
foreignoperationshallbetranslatedattheclosingrate;

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

translatedatexchangeratesatthedatesofthetransactions;and

c allresultingexchangedifferencesshallberecognisedasincomeorasexpenses
inthatpreviousyear.

2 Notwithstandinganythingstatedinsubparagraph1,translationandrecognitionof
exchange difference in cases referred to in section 43A of the Act or Rule 115 of
Incometax Rules, 1962 shall be carried out in accordance with the provisions
containedinthatsectionorthatRule,asthecasemaybe.

ChangeintheClassificationofaForeignOperation

10 1 When there is a change in the classification of a foreign operation, the translation

proceduresapplicabletotherevisedclassificationshouldbeappliedfromthedateof
thechangeintheclassification.

2 Theconsistencyprinciplerequiresthatforeignoperationonceclassifiedasintegralor
nonintegraliscontinuedtobesoclassified.However,achangeinthewayinwhicha
foreign operation is financed and operates in relation to the person may lead to a
changeintheclassificationofthatforeignoperation.

ForwardExchangeContracts

11.

1 Anypremiumordiscountarisingattheinceptionofaforwardexchangecontract
shallbeamortisedasexpenseorincomeoverthelifeofthecontract.Exchange
differencesonsuchacontractshallberecognisedasincomeorasexpenseinthe
previousyearinwhichtheexchangerateschange.Anyprofitorlossarisingon
cancellation or renewal shall be recognised as income or as expense for the
previousyear.

2 Theprovisionsofsubpara 1 shallapplyprovidedthatthecontract:

a isnotintendedfortradingorspeculationpurposes;and

b isenteredintotoestablishtheamountofthereportingcurrencyrequiredor
availableatthesettlementdateofthetransaction.

Theprovisionsofsubpara 1 shallnotapplytothecontractthatisentered
into to hedge the foreign currency risk of a firm commitment or a highly
probableforecasttransaction.Forthispurpose,firmcommitment,shallnot
includeassetsandliabilitiesexistingattheendofthepreviousyear.

The premium or discount that arises on the contract is measured by the

difference between the exchange rate at the date of the inception of the
contractandtheforwardratespecifiedinthecontract.Exchangedifference
onthecontractisthedifferencebetween:

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

rateatthelastdayofthepreviousyear,orthesettlementdatewherethe
transactionissettledduringthepreviousyear;and

b the same foreign currency amount translated at the date of inception of

thecontractorthelastdayoftheimmediatelyprecedingpreviousyear,
whicheverislater.

Premium,discountorexchangedifferenceoncontractsthatareintendedfor
tradingorspeculationpurposes,orthatareenteredintotohedgetheforeign
currencyriskofafirmcommitmentorahighlyprobableforecasttransaction
shallberecognisedatthetimeofsettlement.

TransitionalProvisions

12. 1 Allforeigncurrencytransactionsundertakenonorafter1stdayofApril,2015shall
berecognisedinaccordancewiththeprovisionsofthisstandard.

2 Exchangedifferencesarisinginrespectofmonetaryitemsornonmonetaryitems,on
thesettlementthereofduringthepreviousyearcommencingonthe1stdayofApril,2015
oronconversionthereofatthelastdayofthepreviousyearcommencingonthe1stdayof
April, 2015, shall be recognised in accordance with the provisions of this standard after
takingintoaccounttheamountrecognisedonthelastdayofthepreviousyearendingon
the31stMarch,2015foranitem,ifany,whichiscarriedforwardfromsaidpreviousyear.

3 Thefinancialstatementsofforeignoperationsforthepreviousyearcommencingonthe
1stdayofApril,2015shallbetranslatedusingtheprinciplesandproceduresspecifiedin
this standard after taking into account the amount recognised on the last day of the
previousyearendingonthe31stMarch,2015foranitem,ifany,whichiscarriedforward
fromsaidpreviousyear.

4 Allforwardexchangecontractsexistingonthe1stdayofApril,2015orenteredonor
after 1st day of April, 2015 shall be dealt with in accordance with the provisions of this
standardaftertakingintoaccounttheincomeorexpenses,ifany,recognisedinrespectof
saidcontractsforthepreviousyearendingonorbeforethe31stMarch,2015.

G. Income Computation and Disclosure Standard VII relating to government

grants

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccount.

IncaseofconflictbetweentheprovisionsoftheIncomeTaxAct,1961 theAct andthis

IncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailtothat
extent.

Scope
1.

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

2.ThisIncomeComputationandDisclosureStandarddoesnotdealwith:

GovernmentassistanceotherthanintheformofGovernmentgrants;and

b Governmentparticipationintheownershipoftheenterprise.

Definitions

3 1 The following terms are used in the Income Computation and Disclosure Standard
withthemeaningsspecified:
a

GovernmentreferstotheCentral Government,StateGovernments,agencies
andsimilarbodies,whetherlocal,nationalorinternational.

GovernmentgrantsareassistancebyGovernmentincashorkindtoaperson
for past or future compliance with certain conditions. They exclude those
formsofGovernmentassistancewhichcannothaveavalueplaceduponthem
and the transactions with Government which cannot be distinguished from
thenormaltradingtransactionsoftheperson.

3 2

WordsandexpressionsusedandnotdefinedinthisIncomeComputationand
DisclosureStandardbutdefinedintheActshallhavethemeaningassignedto
themintheAct.

RecognitionofGovernmentGrants
4 1 Government grants should not be recognised until there is reasonable assurance
that i the person shall comply with the conditions attached to them, and ii the
grantsshallbereceived.

4 2 RecognitionofGovernmentgrantshallnotbepostponedbeyondthedateofactual
receipt.

TreatmentofGovernmentGrants
5.

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 assets
concerned or from the written down value of block of assets to which concerned
assetorassetsbelongedto.

6.

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

personrequiringfulfillmentofcertainobligations,thegrantshallberecognisedas
income over the same period over which the cost of meeting such obligations is
chargedtoincome.

7.

WheretheGovernmentgrantisofsuchanaturethatitcannotbedirectlyrelatable
totheassetacquired,somuchoftheamountwhichbearstothetotalGovernment
grant,thesameproportionassuchassetbearstoalltheassetsinrespectoforwith
referencetowhichtheGovernmentgrantissoreceived,shallbedeductedfromthe
actualcostoftheassetorshallbereducedfromthewrittendownvalueofblockof
assetstowhichtheassetorassetsbelongedto.

8.

The Government grant that is receivable as compensation for expenses or losses

incurredinapreviousfinancialyearorforthepurposeofgivingimmediatefinancial
supporttothepersonwithnofurtherrelatedcosts,shallberecognisedasincomeof
theperiodinwhichitisreceivable.

9.

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

recognised as income over the periods necessary to match them with the related
costswhichtheyareintendedtocompensate.

10.

TheGovernmentgrantsintheformofnonmonetaryassets,givenataconcessional
rate,shallbeaccountedforonthebasisoftheiracquisitioncost.

RefundofGovernmentGrants

11.

TheamountrefundableinrespectofaGovernmentgrantreferredtoinparagraphs
6,8and9shallbeappliedfirstagainstanyunamortiseddeferredcreditremaining
in respect of the Government grant. To the extent that the amount refundable
exceeds any such deferred credit, or where no deferred credit exists, the amount
shallbechargedtoprofitandlossstatement.

12.

The amount refundable in respect of a Government grant related to a depreciable

fixedassetorassetsshallberecordedbyincreasingtheactualcostorwrittendown
valueofblockofassetsbytheamountrefundable.Wheretheactualcostoftheasset
isincreased,depreciationontherevisedactualcostorwrittendownvalueshallbe
providedprospectivelyattheprescribedrate.

TransitionalProvisions

13.

AlltheGovernmentgrantswhichmeettherecognitioncriteriaofpara4onorafter
1stdayofApril,2015shall berecognisedforthepreviousyearcommencingonor
after1stdayofApril,2015inaccordancewiththeprovisionsofthisstandardafter
takingintoaccounttheamount,ifany,ofthesaidGovernmentgrantrecognisedfor
anypreviousyearendingonorbefore31stdayofMarch,2015.

Disclosures

14.

FollowingdisclosureshallbemadeinrespectofGovernmentgrants,namely:

natureandextentofGovernmentgrantsrecognisedduringthepreviousyear
by way of deduction from the actual cost of the asset or assets or from the
writtendownvalueofblockofassetsduringthepreviousyear;

natureandextentofGovernmentgrantsrecognisedduringthepreviousyear
asincome;

natureandextentofGovernmentgrantsnotrecognisedduringtheprevious
yearbywayofdeductionfromtheactualcostoftheassetorassetsorfrom
thewrittendownvalueofblockofassetsandreasonsthereof;and

natureandextentofGovernmentgrantsnotrecognisedduringtheprevious
yearasincomeandreasonsthereof.

H.IncomeComputationandDisclosureStandardVIIIrelatingtosecurities

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccount.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.ThisIncomeComputationandDisclosureStandarddealswithsecuritiesheldasstock
intrade.

2.ThisIncomeComputationandDisclosureStandarddoesnotdealwith:

the bases for recognition of interest and dividends on securities which are
covered by the Income Computation and Disclosure Standard on revenue
recognition;

securitiesheldbyapersonengagedinthebusinessofinsurance;

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

financial institutions formed under a Central or a State Act or so declared

undertheCompaniesAct,1956 1of1956 ortheCompaniesAct,2013 18
of2013 .

Definitions

3 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard
withthemeaningsspecified:

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

b Securitiesshallhavethemeaningassignedtoitinclause h ofSection2ofthe
SecuritiesContract Regulation Act,1956 42of1956 ,otherthanDerivatives
referredtoinsubclause 1a ofthatclause.

3 2 Words and expressions used and not defined in this Income Computation and
DisclosureStandardbutdefinedintheActshallhavethemeaningrespectivelyassignedto
themintheAct.

RecognitionandInitialMeasurementofSecurities

4.Asecurityonacquisitionshallberecognisedatactualcost.

5.Theactualcostofasecurityshallcompriseofitspurchasepriceandincludeacquisition
chargessuchasbrokerage,fees,tax,dutyorcess.

6. Where a security is acquired in exchange for other securities, the fair value of the
securitysoacquiredshallbeitsactualcost.

7.Whereasecurityisacquiredinexchangeforanotherasset,thefairvalueofthesecurity
soacquiredshallbeitsactualcost.

8.Whereunpaidinteresthasaccruedbeforetheacquisitionofaninterestbearingsecurity
and is included in the price paid for the security, the subsequent receipt of interest is
allocatedbetweenpreacquisitionandpostacquisitionperiods;thepreacquisitionportion
oftheinterestisdeductedfromtheactualcost.

SubsequentMeasurementofSecurities

9. At the end of any previous year, securities held as stockintrade shall be valued at
actual cost initially recognised or net realisable value at the end of that previous year,
whicheverislower.

10.Forthepurposeofpara9,thecomparisonofactualcostinitiallyrecognisedandnet
realisablevalueshallbedonecategorywiseandnotforeachindividualsecurity.Forthis
purpose,securitiesshallbeclassifiedintothefollowingcategories,namely:

a shares;

b debtsecurities;

c convertiblesecurities;and

d anyothersecuritiesnotcoveredabove.

11.Thevalueofsecuritiesheldasstockintradeofabusinessasonthebeginningofthe
previousyearshallbe:

thecostofsecuritiesavailable,ifany,onthedayofthecommencementofthe
businesswhenthebusinesshascommencedduringthepreviousyear;and

thevalueofthesecuritiesofthebusinessasonthecloseoftheimmediately
precedingpreviousyear,inanyothercase.

12.Notwithstandinganythingcontainedinpara9,10and11,attheendofanyprevious
year, securities not listed on a recognised stock exchange; or listed but not quoted on a
recognisedstockexchangewithregularityfromtimetotime,shallbevaluedatactualcost
initiallyrecognised.

13.Forthepurposesofpara9,10and11wheretheactualcostinitiallyrecognisedcannot
be ascertained by reference to specific identification, the cost of such security shall be
determinedonthebasisoffirstinfirstoutmethod.

I.IncomeComputationandDisclosureStandardIXrelatingtoborrowingcosts

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccount.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.

1 This Income Computation and Disclosure Standard deals with treatment of

borrowingcosts.

2 ThisIncomeComputationandDisclosureStandarddoesnotdealwiththeactual
orimputedcostofownersequityandpreferencesharecapital.

Definitions

2.

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 in

connectionwiththeborrowingoffundsandinclude:

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 or

underothersimilararrangements.

b Qualifyingassetmeans:

land,building,machinery,plantorfurniture,beingtangibleassets;

ii

knowhow,patents,copyrights,trademarks,licences,franchisesorany

otherbusinessorcommercialrightsofsimilarnature,beingintangible
assets;

iii inventories that require a period of twelve months or more to bring

themtoasaleablecondition.

2 Words and expressions used and not defined in this Income Computation and
Disclosure Standard but defined in the Act shall have the meaning assigned to
themintheAct.

Recognition

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

productionofaqualifyingassetshallbecapitalisedaspartofthecostofthatasset.The
amountofborrowingcostseligibleforcapitalisationshallbedeterminedinaccordance
withthisIncomeComputationandDisclosureStandard.Otherborrowingcostsshallbe
recognisedinaccordancewiththeprovisionsoftheAct.

4. ForthepurposesofthisIncomeComputationandDisclosureStandard,capitalisation
inthecontextofinventoryreferredtoinitem iii ofclause b ofsubparagraph 1 of
paragraph2meansadditionofborrowingcosttothecostofinventory.

BorrowingCostsEligibleforCapitalisation


5. To the extent the funds are borrowed specifically for the purposes of acquisition,
constructionorproductionofaqualifyingasset,theamountofborrowingcoststobe
capitalisedonthatassetshallbetheactualborrowingcostsincurredduringtheperiod
onthefundssoborrowed.

6. To the extent the funds are borrowed generally and utilised for the purposes of
acquisition,constructionorproductionofaqualifyingasset,theamountofborrowing
costs to be capitalised shall be computed in accordance with the following formula
namely:

AX

B
C

Where

borrowing costs incurred during the previous year except on

borrowingsdirectlyrelatabletospecificpurposes;

i the average of costs of qualifying asset as appearing in the

balancesheetofapersononthefirstdayandthelastdayofthe
previousyear;
ii in case the qualifying asset does not appear in the balance
sheetofapersononthefirstdayorbothonthefirstdayandthe
lastdayofpreviousyear,halfofthecostofqualifyingasset;
iii incasethequalifyingassetdoesnotappearinthebalance
sheetofapersononthelastdayofpreviousyear,theaverageof
thecostsofqualifyingassetasappearinginthebalancesheetofa
person on the first day of the previous year and on the date of
puttouseorcompletion,asthecasemaybe,
otherthanthosequalifyingassetswhicharedirectlyfundedout
ofspecificborrowings; or

the average of the amount of total assets as appearing in the

balancesheetofapersononthefirstdayandthelastdayofthe
previousyear,otherthanthoseassetswhicharedirectlyfunded
outofspecificborrowings;

CommencementofCapitalisation

7. Thecapitalisationofborrowingcostsshallcommence:

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

borrowed;

inacasereferredtoinparagraph6,fromthedateonwhichfundswereutilised.

CessationofCapitalisation

8. Capitalisationofborrowingcostsshallcease:

in case of a qualifyingasset referred to in item i and ii of clause b of sub

paragraph 1 ofparagraph2,whensuchassetisfirstputtouse;

incaseofinventoryreferredtoinitem iii ofclause b ofsubparagraph 1 of

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

9. Whentheconstructionofaqualifyingassetiscompletedinpartsandacompletedpart
iscapableofbeingusedwhileconstructioncontinuesfortheotherparts,capitalisation
ofborrowingcostsinrelationtoapartshallcease:

incaseofpartofaqualifyingassetreferredtoinitem i and ii ofclause b of

subparagraph 1 ofparagraph2,whensuchpartofaqualifyingassetisfirstput
touse;

incaseofpartofinventoryreferredtoinitem iii ofclause b ofsubparagraph

1 ofparagraph2,whensubstantiallyalltheactivitiesnecessarytopreparesuch
partofinventoryforitsintendedsalearecomplete.

TransitionalProvisions

10.

Alltheborrowingcostsincurredonorafter1stdayofApril,2015shallbecapitalised
for the previous yearcommencing on or after 1st day of April, 2015 in accordance
with the provisions of this standard after taking into account the amount of
borrowing costs capitalised, if any, for the same borrowing for any previous year
endingonorbefore31stdayofMarch,2015.

Disclosure

11. Thefollowingdisclosureshallbemadeinrespectofborrowingcosts,namely:

theaccountingpolicyadoptedforborrowingcosts;and

theamountofborrowingcostscapitalisedduringthepreviousyear.

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

contingentliabilitiesandcontingentassets

Preamble

ThisIncomeComputationandDisclosureStandardisapplicableforcomputationofincome
chargeable under the head Profits and gains of business or profession or Income from
othersourcesandnotforthepurposeofmaintenanceofbooksofaccounts.

InthecaseofconflictbetweentheprovisionsoftheIncometaxAct,1961 theAct and

thisIncomeComputationandDisclosureStandard,theprovisionsoftheActshallprevailto
thatextent.

Scope

1.

This Income Computation and Disclosure Standard deals with provisions,

contingentliabilitiesandcontingentassets,exceptthose:

resultingfromfinancialinstruments;

resultingfromexecutorycontracts;

arisingininsurancebusinessfromcontractswithpolicyholders;and

coveredbyanotherIncomeComputationandDisclosureStandard.

2.

This Income Computation and Disclosure Standard does not deal with the

recognition of revenue which is dealt with by Income Computation and Disclosure

StandardRevenueRecognition.

3.

The term provision is also used in the context of items such as depreciation,

impairmentofassetsanddoubtfuldebtswhichareadjustmentstothecarryingamountsof
assetsandarenotaddressedinthisIncomeComputationandDisclosureStandard.

Definitions

4 1 ThefollowingtermsareusedinthisIncomeComputationandDisclosureStandard
withthemeaningsspecified:

Provisionisaliabilitywhichcanbemeasuredonlybyusingasubstantial
degreeofestimation.

Liabilityisapresentobligationofthepersonarisingfrompastevents,the
settlement of which is expected to result in an outflow from the person of
resourcesembodyingeconomicbenefits.

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

personhavingnorealisticalternativetosettlingthatobligation.

Contingentliabilityis:

apossibleobligationthatarisesfrompasteventsandtheexistenceof
whichwillbeconfirmedonlybytheoccurrenceornonoccurrenceof
oneormoreuncertainfutureeventsnotwhollywithinthecontrolof
theperson;or

ii

apresentobligationthatarisesfrompasteventsbutisnotrecognised
because:

it is not reasonably certain that an outflow of resources

embodying economic benefits will be required to settle the
obligation;or

a reliable estimate of the amount of the obligation cannot be

made.

Contingent asset is a possible asset that arises from past events the
existence of which will be confirmed only by the occurrence or
nonoccurrenceofoneormoreuncertainfutureeventsnotwhollywithinthe
controloftheperson.

Executorycontractsarecontractsunderwhichneitherpartyhasperformed
any of its obligations or both parties have partially performed their
obligationstoanequalextent.

Present obligation is an obligation if, based on the evidence available, its

existenceattheendofthepreviousyearisconsideredreasonablycertain.

4 2 Words and expressions used and not defined in this Income Computation and
DisclosureStandardbutdefinedintheActshallhavethemeaningrespectivelyassignedto
themintheAct.

Recognition

Provisions

5.

Aprovisionshallberecognisedwhen:

apersonhasapresentobligationasaresultofapastevent;

it is reasonably certain that an outflow of resources embodying economic

benefitswillberequiredtosettletheobligation;and

areliableestimatecanbemadeoftheamountoftheobligation.

Iftheseconditionsarenotmet,noprovisionshallberecognised.


6.

Noprovisionshallberecognisedforcoststhatneedtobeincurredtooperateinthe

future.

7.

It is only those obligations arising from past events existing independently of a

persons future actions, that is the future conduct of its business, that are recognised as
provisions

8.

Where details of a proposed new law have yet to befinalised, an obligationarises

onlywhenthelegislationisenacted.

ContingentLiabilities

9.

Apersonshallnotrecogniseacontingentliability.

ContingentAssets

10.

Apersonshallnotrecogniseacontingentasset.

11.

Contingentassetsareassessedcontinuallyandwhenitbecomesreasonablycertain

thatinflowofeconomicbenefitwillarise,theassetandrelatedincomearerecognisedin
thepreviousyearinwhichthechangeoccurs.

Measurement

BestEstimate

12.

Theamountrecognisedasaprovisionshallbethebestestimateoftheexpenditure

requiredtosettlethepresentobligationattheendofthepreviousyear.Theamountofa
provisionshallnotbediscountedtoitspresentvalue.


13.

Theamountrecognisedasassetandrelatedincomeshallbethebestestimateofthe

valueofeconomicbenefitarisingattheendofthepreviousyear.Theamountandrelated
incomeshallnotbediscountedtoitspresentvalue.

Reimbursements

14.

Wheresomeoralloftheexpenditurerequiredtosettleaprovisionisexpectedtobe

reimbursedbyanotherparty,thereimbursementshallberecognisedwhenitisreasonably
certain that reimbursement will be received if the person settles the obligation. The
amountrecognisedforthereimbursementshallnotexceedtheamountoftheprovision.

15.

Whereapersonisnotliableforpaymentofcostsincasethethirdpartyfailstopay,

noprovisionshallbemadeforthosecosts.

16.

An obligation, for which a person is jointly and severally liable, is a contingent

liability to the extent that it is expected that the obligation will be settled by the other
parties.

Review

17.

Provisionsshallbereviewedattheendofeachpreviousyearandadjustedtoreflect

thecurrentbestestimate.Ifitisnolongerreasonablycertainthatanoutflowofresources
embodyingeconomicbenefitswillberequiredtosettletheobligation,theprovisionshould
bereversed.

18.

Anassetandrelatedincomerecognisedasprovidedinpara11shallbereviewedat

theendofeachpreviousyearandadjustedtoreflectthecurrentbestestimate.Ifitisno
longer reasonably certain that an inflow of economic benefits will arise, the asset and
relatedincomeshallbereversed.

UseofProvisions

19.

A provision shall be used only for expenditures for which the provision was

originallyrecognised.

TransitionalProvisions

20.

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

Disclosure

21 1 Followingdisclosureshallbemadeinrespectofeachclassofprovision,namely:

a abriefdescriptionofthenatureoftheobligation;

b thecarryingamountatthebeginningandendofthepreviousyear;

c additionalprovisionsmadeduringthepreviousyear,includingincreasesto
existingprovisions;

d amountsused,thatisincurredandchargedagainsttheprovision,duringthe
previousyear;

e unusedamountsreversedduringthepreviousyear;and

f theamountofanyexpectedreimbursement,statingtheamountofanyasset
thathasbeenrecognisedforthatexpectedreimbursement.

21 2 Following disclosure shall be made in respect of each class of asset and related
incomerecognisedasprovidedinpara11,namely:

abriefdescriptionofthenatureoftheassetandrelatedincome;

thecarryingamountofassetatthebeginningandendofthepreviousyear;

additional amount of asset and related income recognised during the year,

includingincreasestoassetsandrelatedincomealreadyrecognised;and

amountofassetandrelatedincomereversedduringthepreviousyear.

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

(RAJESH KUMAR BHOOT)

DIRECTOR (TAX POLICY AND LEGISLATION)