The Central Board of Direct Taxes (CBDT) had constituted an Accounting Standards Committee in 2010 for the purpose of formulating and recommending the Accounting Standards (ASs) to be followed by assessees for computation of taxable income under the Income Tax Act, 1961 (the Act). The Committee had recommended that the Standards notified under the Act should be made applicable only to computation of the taxable income and a taxpayer should not be required to maintain books of account on the basis of the Tax Accounting Standards (TAS) notified under the Act. Consequent to above, sub-section (2) of section 145 of the Act was amended vide Finance (No. 2) Act, 2014, empowering the Central Government to issue Income Computation and Disclosure Standards (ICDSs) to be followed by certain class of assessees or in respect of certain class of income.In pursuance of above, the Central Government vide Notification No. 32/2015, dt. 31-3-2015 [S.O. 892(E), dt. 31-3-2015], has issued the following ten Income Computation and Disclosure Standards (ICDSs):
- ICDS I relating to Accounting Policies,
- ICDS II relating to Valuation of Inventories,
- ICDS III relating to Construction Contracts,
- ICDS IV relating to Revenue Recognition,
- ICDS V relating to Tangible Fixed Assets,
- ICDS VI relating to Effects of Changes in Foreign Exchange Rates,
- ICDS VII relating to Government Grants,
- ICDS VIII relating to Securities,
- ICDS IX relating to Borrowing Costs,
- ICDS X relating to Provisions, Contingent Liabilities and Contingent Assets.
These Standards have come into force with effect from 1-4-2015, and accordingly applicable to the assessment year 2016-17 and subsequent assessment years. However, transitional provisions are also provided in respect of almost every ICDS. ICDSs are required 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. Further, it is also stated in the preamble of each ICDS that in case of conflict between the provisions of ICDS and the provisions of the Act, the provisions of the Act, shall prevail to that extent. This Book has been conceived and written with a view to imparting an objective discussion on the nature, scope and implications of the ICDSs on the computation of tax under the Act, of course involving inter alia explanatory discussions of the ICDSs themselves. The Book is divided into fourteen Chapters. Chapter one is devoted to historical perspective of two Tax Accounting Standards (TASs) which were applicable upto 31-3-2015. Chapter Two aims at making an overview of the scope of sub-section (2) of section 145 of the Act, empowering the Central Government to issue Income Computation and Disclosure Standards. Chapter Three provides a brief overview of the important principles contained in all ICDSs in the minimum possible words. Chapter Four makes an overview of general principles contained in all ICDSs. Chapter Five provides an interface of ICDS vis-a-vis ITR Forms notified for the Assessment Year 2016-17. Chapters Six to Fifteen are devoted respectively, to all ten ICDSs. These Chapters comprise analytical study of the nature, scope and applicability of the various ICDSs. In addition, an analytical study of the important differences between the principles contained in the ICDSs and those contained in the Accounting Standards (ASs) issued by the ICAI and the Indian Accounting Standards (Ind-ASs) issued by the MCA, has also been presented in tabular form to the extent possible. The full text of each ICDS has been reproduced as an Appendix at the end of the related Chapter. A useful discussion on the ratio of select judicial pronouncements, which are in agreement as well as in conflict with the principles contained in ICDSs has also been made at appropriate places within the text, in order to throw light on the perception of the implications of the ICDSs on judicially settled legal positions. The book is very useful for all types of income-tax assessees as also for the Chartered Accountants as well as the Tax Consultants. Notwithstanding the best of care, likelihood of certain short-comings creeping in cannot be ruled out. We solicit creative feedback from our learned readers bringing to our notice any mistakes, errors, omissions or discrepancies, as and where noticed.