Accounting for Carbon Credits

Sorry folks for the long delay in posting! Hereafter I will ensure that I am at least posting short articles frequently. Accounting for Carbon Credits or perhaps, carbon credit itself is one of the most debatable topics. After the implementation of Kyoto Protocol, Carbon Credits emerged as a distinct commodity by itself capable of being bought, sold or offset (used). Since Carbon Credits do not have a physical existence, the accounting and financial reporting of the same has aroused many interesting issues and challenges.  Before going into the detailed accounting treatment of carbon credits it would be apt to go into a small introduction about what carbon credit is and its nature.


What is Carbon Credit?

As everyone is aware, Carbon – di –oxide (CO2) is the major contributor to global warming. Everyday more and more CO2 and other Green House Gases (GHGs) are pumped into our atmosphere. This is causing rapid climatic changes, much against human welfare. To address this issue of global warming, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992.  To supplement the UNFCCC, the Kyoto Protocol was enforced to limit the maximum amount of GHGs a country can emit into the atmosphere. This limit is at present is applicable only to 41 developed countries which are party to the Kyoto Protocol. These countries are also called Annex I countries. India being a developing country the emission commitment is not applicable.

In order to enforce this emission limit, the concept of Carbon Credit was proposed. According to this concept, each carbon credit is equal to 1 Metric Tonne of CO2 or an equivalent amount of other GHGs. Each Annex I country should hold one carbon credit in order to emit 1 Metric Tonne of Carbon into the atmosphere. In simple terms a carbon credit is a license / permit to emit 1 Tonne of Carbon into the atmosphere. Carbon emission credits are issued by the UNFCCC in demat form. Therefore they can be traded just like shares in stock / commodity exchanges. As per the Kyoto Protocol there are three types of carbon credits to serve three different purposes: Continue reading Accounting for Carbon Credits

Mockery of Indian Sports

What are the people at the helm of sports administration doing? They are doing nothing except blocking the National Sports Development Bill.


They don’t want to retire at the young age of 70 because they fear that the old men aged 25-35 would ruin sports development. Lolz!.. After all sports is an all youth affair. We don’t want 70 year old political freaks to run sports bodies. The young athletes will teach them how to run these bodies better.  Everyone wants to see fresh blood in sports bodies.

I mean what is the limit these political messiahs of sports can fool us? Yesterday Mr.Sukla, VP of BCCI (also a union minister) said that he did not want BCCI to come under the bill because they were already implementing all the provisions of the bill.


He said that BCCI is already putting its audited financial statements in public domain and that BCCI is not collecting a single penny from the Government and they are not claiming any tax exemptions. Rubbish and rubbish is all it is!…


BCCI is a private society and has never put its financials in public domain. They have got land worth crores from the state governments for free. Is this not government grant in kind?… And BCCI has no history of paying taxes except for pure commercial transactions.


So friends we must watch out for these rubbish and foolish talk and attempts by these politician to block the National Sports Development Bill because they have vested interest. The efforts of Mr.Maken, Union Minister for Youth Affairs and Sports in drafting this wonderful piece of legislation is truly laudable. I am attaching the draft so that very one can appreciate the wonderful work of Mr. Maken. Click here for the Draft National Sports Development Bill.

Paper on ‘Inflation Adjustment’

I am very happy to share with everyone, the paper which won me the ‘Best Paper Presenter’ award at the Nation Convention of CA Students held at Kolkata. Click to view the power point presentation on Inflation Adjustment.


Inflation adjustment has gained increased importance considering the fact that India is registering double digit inflation. In economics, inflation is considered to be a rise in the general level of prices of goods and services in an economy over a period of time. Inflation and the monetary unit or currency of a particular country or region is just inseparable. Inflation in other terms may be considered as the depreciation in the purchasing power of any given currency. As inflation increases, money buys less and less goods and services.


Inflation is usually estimated using the Inflation rate. Inflation rate is usually calculated as the percentage change in a Price Index year on year. Usually Consumer Price Index is considered the ideal price index for calculating inflation rate. But in India Wholesale Price Index or WPI released by the Reserve Bank of India is considered for calculating the Inflation rate of the Indian National Rupee. For instance, in January 2007, the U.S. Consumer Price Index was 202.416, and in January 2008 it was 211.080. The formula for calculating the annual percentage rate inflation in the CPI over the course of 2007 is

(211.080-202.416) X 100 = 4.28%


From this it is very clear that Inflation measures how costly goods and services have become over a period of time.


There is a general perception that any inflation is really harmful to the economy and the consumers. But inflation though is a measure of price rise is not always harmful. Continue reading Paper on ‘Inflation Adjustment’

Good, Bad and Ugly about DTC bill, 2010

Direct Tax CodeThe much awaited introduction of the Direct Taxes Code Bill in the Lok saba is already over. But there seems to be nothing holistic as it was previously expected. It looks like just another annual Finance Bill with marginal tax effects. The lucidity of the previous draft is now gone. It has the same looks as that of the Income Tax Act, 1961. Almost all exemption available in the erstwhile IT Act is still available. The savings limit only marginally increased from 1 lakh to 1.5 lakhs. No more deferential Treatment for Women Assessee. Basic exemption limit increased from 1.6 lakhs to 2 lakhs. Other than this it is almost the old IT act sections rearranged in a new fashion for the common man. The code bill also carries quite many obsolete provisions. For e.g. the definition of an Accountant still includes reference to Section 226 of the Companies Act which is obsolete now. It seems that the government has once again heeded to popular demands. The Direct Taxes Code a judicious mixture of wonders and blunders of the Indian Tax regime

Cloud Computing

Every generation thinks that they are in the pinnacle of development. But subsequent generation just prove then that they are wrong. One of the fields where this is very evident is the Information Technology and Communication Industry. For Example when Graham Bell invented the telephone he would have thought that their generation has reached the pinnacle in communication. He would have never thought that in future there would be a thing called Mobile phone which would enable anyone in this world to talk to anyone, anywhere. In a similar manner, cloud computing has come to revolutionize the way we use our computers.

So what is cloud computing? Cloud computing means computing based on shared resources which are accessible using the internet. So if Cloud computing has to do a lot with internet and the shared resources. This shared resource may be software or even any hardware. But where did the word cloud come from. Cloud actually has the same meaning as internet. Internet got the name cloud because of the fact that while drawing networking Diagrams, internet is represented by drawing a cloud.

For those who think that Cloud computing is something of the future, think once again. Every one of you here would have definitely used cloud computing. But the fact is that you never knew that you are using cloud computing. The best example I can give about a cloud computing service which everyone uses is email. This is why I said that everyone has used cloud computing without even knowing that.

In order to understand why web based email is a cloud service, we has to go back some 15 – 20 year. Continue reading Cloud Computing

Issues in Tax Audit under Section 44AB

No government in anywhere in this world has placed so much trust and confidence in Public Accountants like the Indian Government has placed on Chartered Accountants. Tax Audit by a Chartered Accountant is an Indian phenomenon and does not exist in any other country. Finance Act, 1984 introduced Tax Audit under Section 44AB with effect from the assessment year 1985-86. This not only broadened the area of practice by a Chartered Accountant to an unimaginable scale but also pinned so much trust on the Chartered Accountancy Profession. If you say that you are a Chartered Accountant to any stranger, he would say “ Oh ! you are one of those people who are busy in the month of September” Yes friends the association between a CA and tax audit is inseparable.

Purpose of Tax Audit:

The purpose of Tax Audit is to ensure that books of Accounts have been maintained in accordance with the provisions of the Income Tax Act. Circular No.387  issued by the Central Board of Direct Taxes which has been annexed to the material circulated to you also highlights this fact. Accordingly a proper audit for tax purposes would ensure that proper records are being maintained, and that the accounts properly reflect the income reported by the Assessee. This audit effectively curbs Tax Evasion and ensures Tax Compliance. Tax Audit also ensures that the Accounts are properly being presented to the Assessing Officers when called for. The precious time of the Assessing Officers is also saved from the routine and ineffective verifications like checking of totals and vouching of Purchase and Sales transactions. They can devote their time in more important investigation aspects of a Case. Thus Tax Audit saves considerable time to the Income Tax Department.

Who has to get accounts audited?

Now after knowing the purpose and necessity of Tax Audit, the next question arises as to the applicability of Tax Audit. Audit under section 44AB is applicable to four categories of Assesseess. Now let me explain each category one by one. Continue reading Issues in Tax Audit under Section 44AB

Critical Appraisal of the DTC Bill, 2009

The Direct Taxes Code (DTC) is the most expected Indian Legislation of the decade. For the first time, a bill has been kept open for public commentary even before its introduction in the Parliament. The DTC, as such, is the simplest any tax legislation can become. Has then the DTC, 2009 proved Albert Einstein’s saying (“The hardest thing in the world to understand is the Income Tax”) to be false? Of course not… It has become simple for people who know income tax and not the layman. Let me critically appraise some of the provisions of the Direct Taxes Code, 2009 which may have missed the common eye.

Hefty Increase in Tax Slabs:

The most welcome measure in the DTC Bill is the increase in individual tax slabs. It has increased the slabs to an extent no one expected. When the DTC Bill is enacted, income up to Rupees 10 Lakhs will be taxed only at 10%. Further income between 10 Lakhs and 25 Lakhs will be taxed at 20% and income above 25 Lakhs will be taxed at 30%. Further there will be no more surcharge, Education Cess and Higher and Secondary Education Cess. This will ensure easier tax compliance. All individual will be making whooping tax savings. Let’s compare how the Gross Total income of a General Individual will be taxed under the present regime and under the Direct Taxes Code.

S. No. Particulars As Per the Income Tax Act 1961, (For AY : 2010- 11) As per Direct Taxes Code Bill, 2009
1. Gross Total Income 15,00,000 15,00,000
2. Less : deduction for savings 1,00,000 3,00,000
3. Total Income 14,00,000 12,00,000
4. Income Tax on Above 3,24,000 1,24,000
5. Add: Education Cess on Above 6,480 Nil
6. Add: Higher and Secondary Education Cess 3,240 Nil
7. Total Tax Payable 3,33,720 1,24,000

From the above it is very much evident that the individual will be making a whooping tax savings of Rs. 2,09,720/- under the Direct Taxes Code.

Adieu Assessment Year!

The Direct Taxes Code proposes to do away with the terms Assessment Year and Previous Year. Continue reading Critical Appraisal of the DTC Bill, 2009