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the editor

ISSN : 0972-7124 MAY 2007 Volume 8 No.5 speaks


Dear Students,

thought for the month


All of us are born to succeed is a
universal truth. But we can achieve success
only if we want to. "The road to success is not
to be run upon by seven leagued boots. Step -
by step, little - by - little, bit - by - bit, that is
the way to glory………" says Charles
WHAT CONSTITUTES SUCCESS. Buxton.
If all of us are born to succeed is a
He has achieved success who has lived well, universal truth then how is it that one person
succeeds and another
lived well, fails? The person who
laughed often, know their aim in life
and use their potentials
filled his niche and accomplished his task, looked positively to achieve
best in others, that goal succeed
eventually. Where as
given the best he had; people who lack,
whose life was an inspiration; whose memory a purpose in life,
however hard they
benediction. might struggle, fail to
direct their creative power to attain their end.
To have a plan is the first step
towards success. The second step is to
organise our life according to a well laid - out
plan persistence and perseverence are the
We can do anything we final steps towards success.
So, know what you want, plan well
want to do, if we stick to how to get it, and persevere till you succeed.
with best wishes.
it long enough.
(Arun Kumar)
Hellen Keller
in view

MANAGING CHANGE FOR SOME TIPS FOR EXAMINEES


GLOBALISATION &
COMPETITIVENESS
IN INDIAN INDUSTRIES 2
OF ICSI AND OTHER
PROFESSIONAL COURSES. 9
KNOWLEDGE ZONE 11
OVERVIEW ON THE VAT
AND ACCOUNTING IN VAT 6 STUDENTS’ CORRIDOR 12
TAX FREE INCOME
FOR 2007-08 7 ATTENTION 15
Managing Change
article
for Globalisation
& Competitiveness in Indian Industries Dr. Vijay Pithadia
Assistant Professor [Reader]
R.K. College of Business Management
Rajkot
Abstract organizations are short of this type of dominance, or there
Multinational companies have freely entered into many prevails a "weak culture". The need of the time is, thus, to
sector's of the Indian economy as a result of liberalization. change from a conventional type of working to an
This has made the Indian industry compete in global environment of competitiveness, efficiency, teamwork and
markets and has subjected it to unprecedented level of higher level of achievement.
competition. Changing customer needs and awareness, Organizations evolve through a life cycle, with each
technological developments and environmental issues evolving stage introducing change challenges.
have compelled the existing Indian industry to change Understanding and managing change is salient,
their working practices and culture to face the new especially for matured organizations where stability and
challenges. It is expected that change in an organization security may be replaced by customer-service, self-
would increase the working capacity of its employees, confidence and empowered work force. The purpose of
resulting in higher productivity and continuous this paper is to explore how change can be managed in an
improvement. A successful change process, however, organization. To do this, we will study the organization life
involves structural change, systemic change, cultural cycle, agile manufacturing, detailed principles to guide
change, technological change, employees' involvement, change, and accomplish change.
and application of the philosophy of Total Quality Change in Organizational Life Cycle. An organizational life
Management (TQM) in an organization. In this paper, it is cycle may comprise the following stages:
emphasized that we do need to understand the factors that * Entrepreneurial stage
have undergone a change and how could we manage * Business proliferation stage
them better. A procedure has been suggested to adopt * Organization maturity stage
TQM by providing education and training to the employees * Business renewal stage
introducing change in the organization by changing * Declining stage
existing structure, system, technology, and employees Entrepreneurial Stage
attitude. During this stage, the focus is on the definition and
Keywords : need of change, competitiveness, structural development of new products and marketing avenues.
change, systemic change, technological change, cultural This requires extensive market research through
change, TQM customer interactions. Basic idea is to make a note of
Introduction needs of society (by customers) and translate them into
Unprecented level of competition brought about by values thus overcoming the challenges of market (Beatty
globalization, liberalization and free entry of MNCs in the and Ulrich, 1996).
Indian market has forced the industry to change its age-old Business Proliferation Stage
practices and become competitive. Changing customer After entrepreneurial stage, the business is expected to
needs, rapid technological developments and proliferate, i.e. spread. Many more competitors enter in the
environmental issues have contributed to the present market making similar products with varying features.
situation that demands the industry to be run with utmost Survival of the organization is the major problem during
professionalism, encompassing both short term and long this stage (Brown and Karagonoglu, 1989). As a strategy,
term goals and actions. MNCs have a dominance of small firms frequently join hands to form a large firm to
concepts and capabilities like innovation, risk taking, team sustain in the competitive market. The result is that the
spirit, commitment and stability amongst their employees business organizations shrink down to a few business
leading to a "strong culture", whereas traditional Indian houses.
Shuchita Times May 2007
2
article
Organizational Maturity Stage
After proliferation stage, organization maturity is expected
also. Culture is often formalized in vision,
values and mission.
with time. The business practices are systematized and Policy of an organization affects the culture a lot. As the
also streamlined. Also the organization gains its individual organization becomes matured, the vision, value and
identity in the market. The organization and its employees mission become fixed/get freezed. The employees are
acquire a reputed position in the society (Barlett and paid/ rewarded and compensated as per the established
Ghoshal, 1995). norms of the organization. Organizational culture also
Business Renewal Stage becomes a means of encouraging unity, viz. teamwork,
Business norms responsible for success of matured and enhanced job responsibility. In an old/matured
organizations lead to complacency. These existing norms organization, the fixed norms of culture become a liability
become irrevocable patterns of behaviour, which lead to and act as resistance to change because of fear amongst
an avoidance of challenges in the organization. During the its employees. Another obstacle to change is mindset of
maturity phase, product and technology parity is likely to employees at all levels (Robbins et al., 2001). "Mindset"
emerge (Grover, 1999). Competitors offer customers represents a system of shared meaning held by members
similar products at competitive prices. In the renewal
that distinguishes an organization from others.
phase, manager identifies additional capability to meet
Organizational change is concerned with how employees
customer needs, reduced profit margins, market share,
perceive the characteristics of a culture, not with whether
reduction of scrap and waste, etc. and tries to be
or not they like them.
competitive. The emphasis is on to develop the ability to
Organizational Competitiveness and Change
compete from inside out - to build internal organizational
Competitiveness accounts for a number of parameters like
processes that meet external customer requirements. For
reduction of hidden costs, quality conformance and
building such internal organizational processes, concepts
improvement, reduction of services time and delivery time,
like self-direction, self-management and self-control need
maximization of profits and profitability, enhanced market
to be strengthened in place of traditional control.
reputation, and assured markets in future by innovations,
Declining Stage
learning and strategies in an organization (Szamosi et al.,
In the renewal stage, managers must learn to compete
2002). Accordingly, achieving any of these parameters
through competencies. They must learn and develop the
ability to know and meet customer expectations through leads the organization to achieve an increased
reactive and proactive improvements. Otherwise the competitiveness.
organization ceases to compete in the market and the As has been explained earlier, with the traditional ways of
declining stage starts. During this stage, market share, working and fixed mindsets, it is nearly impossible to
profit margins, turnover, reputation etc. of an organization achieve enhancement of any above parameters. This
starts going down if no measures to be competitive are needs a change of culture, system, structure and
taken (Grover 1999)). technology hitherto being prevalent in the organization.
The challenge of change throughout the organizational life Each of these parameters of change complements one
cycle consists of the following aspects: another. A well thought of change process built on
i) Identification of market and learning how to enter/ scientific and logical basis using these strategies
capture the market share during entrepreneurial stage? sequentially can only be successful.
ii) Survival of organization during the growth stage, Change Process in an Organization
iii) Business renewal and be competitive. Having identified the need for change of an organization,
Thus, change through the life cycle converges to business work activities can be identified for the same. Synthesizing
renewal tactics and competitiveness. the results of various studies reported in literature from
Organizational Culture and Life Cycle time to time, the process of change can be described to
The greatest effort in meeting the renewal challenge is to follow the following stages (Beatty et al., 1996), although
change the culture of the organization, i.e. method of all the organizations may not stick to the same sequence
thinking and working of employees of all levels. Culture as some of the stages may occur simultaneously.
represents a shared way of thinking" and behaving" within However, a justification of the sequence proposed below
an organization. Culture includes behaviours and attitudes is given subsequently.
Shuchita Times May 2007
3
Stage-1: Introducing Structural Change
article
component manufacturers who will supply entire
Organization change begins with the subassemblies. Tier-2 and tier-3 are medium and small
concept of structural changes. Generally it denotes the manufacturers supplying components to tier-1
change of hierarchical structure (vertical) to new manufacturers.
structure (flat). Downsizing and delayering are the Stage-II: Introducing Systemic Changes
possible methods for the same that ultimately result in A system pertains to the existing practices in an organization.
reducing the manpower. In the changed structure, In systemic changes, the attempt is to eliminate the
teams are formed and team management is applied, so unnecessary procedures, reports, approvals, meetings,
the organizational layers are reduced. Strong policies, or other activities, which generally create
communication network is to be formed between teams backlogs/bottlenecks. Red tapism and other bureaucratic
and members of the teams so that the physical hurdles procedures also need to be changed which cause frustration
can be eliminated. With this reduction, the organization amongst employees as their capabilities and role is not judged
becomes lean at all levels. Measures of an organization individually. To achieve this, proper training needs to be given
per employee improve as a result. Task of to the team members so that they can become self managed
organizational structures has to be handled with gradually. Simulation based guidance add more value to it
sensitivity - revolutionary in thought, and evolutionary in (Jick, 1992).
implementation (Business India, Sept. 22, 1999). Systemic changes should follow structural changes in an
Reduction of manpower in public sectors, banks, organization. In structural changes, employees who are afraid
corporations etc. has been introduced as premature of challenges and are in favour of job security only, get
retirements, voluntary retirements, plant annoyed. Most of such changes are being seen as contractual
closings/shutdowns, consolidations and re- appointments than life long appointments. As a result
employment schemes, as a restructuring policy. Such employees feel their contract as short-term contract and
reduction results in huge savings of organizational psychologically react accordingly. Managers in such cases
recurring expenditure and initiate renewal process. It is should be able to sustain employees' commitment by
noted that at HMT Pinjore, a public sector organization, replacing loyalty with other means of employee
around 1800 employees were reduced by VRS. Such considerations like opportunity. Opportunity can be provided
structural changes require a bold leadership. The to the employees to develop talents, participation in key
leaders of structural changes must implement a process decision-making and belongingness to the organization. It is
that ensures equity and due consideration to possible by systemic changes.
employees. Such changes are possible when leaders Stage-III : Employee Involvement and Empowerment
regularly turn around the organizations. The secret of Instead of empowering only top management, involvement of
the organization has as much to do with vision, values employees is very important. If openness between employers/
and culture, as it does with vertical reporting structures managers and employees is increased, this will result in
(Ghoshal et al., 1995). change of nature of the organization. No doubt, by
Recession in automobile industry resulted in bureaucracy, the employees' involvement results in
restructuring of supply chain. Globally, automobile productivity enhancement, cost reduction, waste reduction
manufacturers are moving towards vendors who supply etc. but their effects on the organization are not long-lasting.
complete subassemblies rather than components, to Employees' empowerment is a very wide term. In one sense, it
support a lean manufacturing structure in vehicle allows the employees to take their decisions, plan their
industry. Also there is a global trend to reduce the activities and remove the barrier between them and
number of vendors. The TATA Engineering and managers. In the long run, this results in increased
Locomotive Company (TELCO) had only 130 vendors belongingness of the employees with the organization and
for Indica compared to its truck division, which has over also changes in the nature of organization. A simple technique
1000. Bajaj Autos also restructured its supply chain to for employee involvement and empowerment is to encourage
considerably cut down the number of its vendors the participation of employees in organizational strategies
(Business India, Sept 20,1999). The result was the (Kotier, 1995). In big Indian companies, as a policy, some
transformation of auto component industry into tier-1, important projects are primarily assigned to fresh officers and
tier-2 and tier-3 suppliers. Tier-1 suppliers are large they are supposed to handle independently.
Shuchita Times May 2007
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article
Stage- IV: Cultural Changes
Cultural changes relate the mindset, i.e. the way the
change programme is very much dependent upon
the abilities of change agents. The mission and
employees think about their work. Employees, in vision of the founders of an organization also have a major
general, feel the enthusiasm and commitment of trying impact on the organizational culture. For keeping a culture
new approaches to work and bring more desirable alive, top management and change agents have to
changes in the organizations. From literature (Saleh continuously strive for quality, cost reduction and morale
1993) it is found that it takes roughly double the time to upliftment of employees that ultimately results in increased
introduce a technological change in a matured competitiveness of an organization.
organization as compared to a new organization. Relationship of Change Initiatives with Competitiveness
Cultural changes implementation is a difficult task that TQM involves everyone of the organization in decision-
is generally done by an agent called change agent. making. TQM also stands for continuous improvement.
Every change agent is judged by his ability to preserve, Structural changes, systemic changes and technological
and how strong an advocate he is, of the new culture. changes empower employees towards cultural changes.
he should exhibit tolerance since cultural changes Employee's empowerment builds employee's commitment.
requires time to take effect. Their initial commitment is translated into long-term processes
According to the Chairman of Suzuki motors, "Workers so that individualism gets converted to a systemic version.
come to factories to work, not to walk". At MUL, there is Continuous improvement efforts begin in companies by
no idle hand at the shoopfloor" (India Today, Nov. focusing on error detection and then error prevention by using
2000). By giving proper perks, workplace and statistical and graphical tools. Continuous improvement is
environment, the working culture becomes very strong. changing not only the technical tools of management, but also
Strong beloningness of the employees towards the fundamental approaches to management. Focus on
company is also established.Stage-V: Technological continuous improvement must be upon the "right" work that
Changes was identified through structural and systemic changes
Technological change is an ongoing process. (Saeed, et al., 1993). The work has to be linked to
Technology is the environment within which an technological advancements through speed and simplicity in
organization functions. Technological innovations work process. When this philosophy is understood in the
introduce changes in our social lives in addition to organization, it ensures an ongoing commitment to improve
changing the ways of working. Technological changes work processes. By instilling this philosophy, leaders are able
lead to changed social customs as an irreversible effect. to set a direction, motivate and steer a company through
If the organizations are redesigned/ modified suitably to renewal.
absorb the changed technology, the organization will India's Economic Competitiveness
benefit from the synergy of Man-Machine system. India ranked 43rd overall in the World Economic Forum's
Availability of technologically superior tool, and Global Competitiveness Report 2006-2007. The subcontinent
enhancing the workplace productivity, is giving rise to received excellent scores in capacity for innovation and
one-man-multiple-job concept, like for example, in an sophistication of firm operations. The Report noted that while
office, it is possible for one person to write letters in his firm use of technology and rates of technology transfer were
PC, receive and transmit faxes, and also gather data high, penetration rates of the latest technologies are still quite
from internet. A single person with multiple skills will add low by international standards. This reflects India's low levels
effectiveness to the changing structure of an of per capita income and high incidence of poverty, the Report
organization. With the availability of technologically concluded.
superior system, the time required to complete various "The quality of the business environment in India has improved
activities has drastically reduced. The changing tangibly in recent years, with goods, labor and financial
technology needs to be handled carefully, nurtured and markets making gains in efficiency. There have also been
gainfully adopted in the organization to derive optimum substantial improvements in the underlying institutional
benefits and results in addition of competitiveness. climate in such areas as property rights, the operation of the
This is clear from the earlier discussions that every stage judicial system and other indicators which capture essential
of change management results in an increase of aspects of building a sound investment climate," noted
competitiveness in some direction. The success of Jennifer Blanke, Senior Economist at the World Economic
Contd. on Page 10
Shuchita Times May 2007
5
article
Overview on the VAT and Accounting in VAT
Sachin Agarwal

What is VAT? • VAT for which we are entitled to avail input credit will
The term VAT stands for Value added tax. This not be debited or added to "purchase account" but
refers to tax to increase in value of the goods and services at debited to separate account called "VAT credit
each stage of production or transfer of goods and service. recoverable Account”
Thus a value added tax is basically a tax to be levied on the Purchase A/c ………………………… Dr.
value added by an business enterprise at each stage of its VAT Credit Recoverable A/c ……….. Dr.
rendering services or producing goods. To Supplier/Bank A/c
Under the VAT system, a dealer collects the tax on • Since VAT is collected from customers on the behalf of
his sales, retains the on his purchases and pay balance to the the VAT authorities, its collection is not an economic
government treasury. In the other words, we can say that it benefit and should not be recognize as an income of the
removes cascading effects. organization. Similarly VAT payment is not an
expenses so that VAT collected from the customers
should not be credited or
The rate of tax under VAT included in sales Account but
credited to the "VAT Payable
Sr. No Particulars Rate of Tax Account”
1 Goods specified under the first schedule Exempted from Tax Customers/Bank A/c
2 Goods specified under the second schedule 1% ……………….... Dr.
3 Goods specified under the third schedule 4% To Sales A/c
4 Goods specified under the fourth schedule 20% To VAT Payable A/c
5 In respect of any other goods not specified • As and when VAT Credit
in any of the above four schedule 12.5% is actually utilized against VAT
Payable on Sales, the
Reasons for introduction of the VAT following entry would be passed: -
1. Large number of the Legislation on the matter Sales VAT Payable A/c …………………… Dr.
Tax: - There are various legislation of the matter of the To VAT Credit Receivable A/c
sales in the country. Each state has its own law. And • Till the VAT credit is not availed the VAT Receivable
these legislations are very different from each other. will remain under the "Loans and Advances" on the
2. Large number of the Taxes: - There is large no. of the Asset side and similarly VAT Payable under the head
tax rates in use in the country which arise very difficult "Current Liabilities" on the Liabilities side.
situation for the producer, dealers, distributors,
consumers and at large society. Contd. on Page 12
3. Cascading effect: - Since there was no set of
provisions for the tax paid on purchases. The tax paid EXPERT VISITING FACULTIES AVAILABLE
gets added in the cost price and when seller again sells For all subjects for
the above goods, he knowingly or unknowingly CPT, PCC & FINAL
charges tax on this cost price thereby creating
cascading effect of tax on tax. For conducting short term, highly effective and exam
4. Burden of the no. of Taxes: - large no. of taxes such as oriented coaching.
turnover tax, surcharge and additional surcharge was Ours is a team of senior faculties having minimum 10 years
of experience in teaching CA students. The team members
levied other than sales tax levied on the sales which
are willing to accept assgnments in any part of the country.
created unnecessary burden on the shoulders of the If interested, write details abiut your academy, number of
consumers. students, level for which faculty is required to -

Accounting treatment for the VAT


• As per AS-2 "Valuation of Inventories" only those taxes cafaculties@rediffmail.com
have to be include in the cost of purchases, which are Other faculties who are willing to join the team are also
not subsequently recoverable from taxing authorities. invited to write to us.
Shuchita Times May 2007
6
article
Tax Free Income for 2007-08
Here are some of the important items of income, which are 10(7). This provision can be taken advantage of by the citizens
fully exempt from income tax and which can be utilised by a of India who are in government service so that they can
resident individual Indian assessee for the purpose of tax accumulate tax-free perquisites and allowances received
planning. outside India.
1. Agricultural income 5. Gratuities
Under the provisions of Section 10(1) of the Income Tax Act, Under the provisions of Section 10(10) of the IT Act, any
agricultural income is fully exempt from income tax. death-cum-retirement gratuity of a government servant is
However, for individuals or HUFs when agricultural income is completely exempt from income tax. However, in respect of
in excess of Rs 5,000, it is aggregated with the total income for private sector employees gratuity received on retirement or on
the purposes of computing tax on the total income in a manner becoming incapacitated or on termination or any gratuity
which results into "no" tax on agricultural income but an received by his widow, children or dependants on his death is
increased income tax on the other income. exempt subject to certain conditions.
Agricultural income which fulfils the above conditions is The maximum amount of exemption is Rs 350,000. Of course,
completely exempt from tax. The manner of calculating tax on this is further subject to certain other limits like the one half-
total income and agricultural income, is explained in month's salary for each year of completed service, calculated
Illustration. on the basis of average salary for the 10 months immediately
Illustration preceding the year in which the gratuity is paid or 20 months'
For the assessment year 2008-09 an individual has a total salary as calculated. Thus, the least of these items is exempt
income from trading in cloth amounting to Rs 111,000 besides, from income tax under Section 10(10).
he has earned Rs 40,000 as income from agriculture. 6. Commutation of pension
The income tax payable by him will be computed as under: The entire amount of any payment in commutation of pension
— On the first Rs 110,000 of taxable non-agricultural by a government servant or any payment in commutation of
income: Nil pension from LIC pension fund is exempt from income tax
— On the next Rs 40,000 of agricultural income (falling under Section 10(10A) of IT Act.
under 10% slab): Nil However, in respect of private sector employees, only the
— On the next Rs 1,000 of taxable non-agricultural income following amount of commuted pension is exempt, namely:
@ 20%: Rs 200 (a) Where the employee received any gratuity, the commuted
— IT on aggregated income of Rs 111,000 + Rs 40,000 = Rs value of one-third of the pension which he is normally entitled
151,000: Rs 200 to receive; and (b) In any other case, the commuted value of
2. Receipts from HUF half of such pension.
Any sum received by an individual as a member of a Hindu It may be noted here that the monthly pension receivable by a
Undivided Family, where the said sum has been paid out of the pensioner is liable to full income tax like any other item of
income of the family, or, in the case of an impartible estate, salary or income and no standard deduction is now available in
where such sum has been paid out of the income of the estate respect of pension received by a tax payer.
belonging to the family, is completely exempt from income tax 7. Leave salary of central government employees
in the hands of an individual member of the family under Under Section 10(10AA) the maximum amount receivable by
Section 10(2). the employees of central government as cash equivalent to the
3. Share from a partnership firm leave salary in respect of earned leave at their credit up to 10
Under the provisions of Section 10(2A), in the case of a person months' leave at the time of their retirement, whether on
being a partner of a firm which is separately assessed as such, superannuation or otherwise, would be Rs 300,000.
his share in the total income of the firm is completely exempt 8. Voluntary retirement or separation payment
from income tax since AY 1993-94. Under the provisions of Section 10(10C), any amount received
For this purpose, the share of a partner in the total income of a by an employee of a public sector company or of any other
firm separately assessed as such would be an amount which company or of a local authority or a statutory authority or a
bears to the total income of the firm the same share as the cooperative society or university or IIT or IIM at the time of his
amount of the share in the profits of the firm in accordance voluntary retirement (VR) or voluntary separation in
with the partnership deed bears to such profits. accordance with any scheme or schemes of VR as per Rule
4. Allowance for foreign service 2BA, is completely exempt from tax. The maximum amount
Any allowances or perquisites paid or allowed as such outside of money received at such VR which is so exempt is Rs 5 lakh
India by the government to a citizen of India, rendering service (Rs 500,000).
outside India, are completely exempt from tax under Section
Shuchita Times May 2007
7
9. Life insurance receipts
article
(vi) Interest on certain deposits are: Bhopal Gas victims;
Under Section 10(10D), any sum received under (vii) Interest on bonds of local authorities as notified, and
a Life Insurance Policy (LIP), including the sum allocated by (viii) Interest on 6.5% Savings Bonds [Exempt] issued by RBI.
way of bonus on such policy, other than u/s 80DDA or under a 12. Scholarship and awards, etc.
Keyman Insurance Policy, or under an insurance policy issued Any kind of scholarship granted to meet the cost of education
on or after 1.4.2003 (April 1, 2003) in respect of which the is exempt from tax under Section 10(16). Similarly, certain
premium payable for any of the years during the term of the awards and rewards, etc. are completely exempt from tax
policy exceeds 20% of the actual capital sum assured, is fully under Section 10(17A), for example, Lakhotia Puraskar of Rs
exempt from tax. 31,000 awarded to the best Rajasthani author, every year under
However, all moneys received on death of the insured are fully Notification No. 199/28/95-IT (A-I) dated 22-4-1996. Any
exempt from tax. Thus, generally moneys received from life daily allowance received by a Member of Parliament or by an
insurance policies whether from the Life Insurance MLA or any member of any Committee of Parliament or State
Corporation or any other private insurance company would be legislature is also exempt from tax under Section 10(17).
exempt from income tax. 13. Gallantry awards, etc. Section 10(18)
10. Payment received from provident funds The Finance Act, 1999 has, with effect from AY 2000-2001,
Under the provisions of Sections 10(11), (12) and (13) any provided for complete exemption for the pension and family
payment from a government or recognised provident fund pension of Gallantry Award Winners like Paramvir Chakra,
(PF) or approved superannuation fund, or PPF is exempt from Mahavir Chakra, and Vir Chakra and also other Gallantry
income tax. Award winners notified by the Central Government.
11. Certain types of interest payment 14. Dividends on shares and units - Section 10(34) & (35)
There are certain types of interest payments which are fully With effect from the Assessment Year 2004-05, the dividend
exempt from income tax u/s 10(15). These are described income and income of units of mutual funds received by the
below: assessee completely exempt from income tax.
(i) Income by way of interest, premium on redemption or other 15. Long-term capital gains of transfer of securities -
payment on such securities, bonds, annuity certificates, Section 10(38)
savings certificates, other certificates issued by the Central With effect from FY 2004-05, any income arising to a taxpayer
Government and deposits as the Central Government may, by on account of sale of long-term capital asset being securities is
notification in the Official Gazette, specify in this behalf. completely outside the purview of tax liability especially when
(iia) In the case of an individual or a Hindu Undivided Family, the transaction has been subjected to Securities Transaction
interest on such capital investment bonds as the Central Tax (STT).
Government may, by notification in the Official Gazette, Thus, if the shares of any company listed in the stock exchange
specify in this behalf (i.e. 7% Capital Investment Bonds); are sold after holding it for a minimum period of one year then
(iib) In the case of an individual or a Hindu Undivided Family, there will be no liability to payment of capital gains. This
interest on such Relief Bonds as the Central Government may, provision would even apply for the old shares which are held
by notification in the Official Gazette, specify in this behalf by an assesse and are sold after the Finance (No.2) Act, 2004
(i.e., 9% or 8.5% or 8% or 7% Relief Bonds); (iid) Interest on came into force.
NRI bonds; 16. Amount received by way of gift, etc - Section 10(39)
(iiia) Interest on securities held by the issue department of the As per the Finance (No. 2) Act, 2004, gift, etc. received after 1-
Central Bank of Ceylon constituted under the Ceylon 9-2004 by individual or HUF in cash or by way of credit, etc. is
Monetary Law Act, 1949; being subjected to tax if the same is not received from a
(iiib) Interest payable to any bank incorporated in a country relative, etc. However, Section 10(39) provides that the
outside India and authorised to perform central banking amount received to the extent of Rs 50,000 will, however, be
functions in that country on any deposits made by it, with the exempt from the purview of tax payment.
approval of the Reserve Bank of India or with any scheduled Similarly, amount received on the occasion of marriage from
bank; non-relative, etc. would also be exempted. It may be noted that
(iv) Certain interest payable by Government or a local the gift from relatives, etc. as mentioned in the section can be
authority on moneys borrowed by it, including hedging received without any upper limit.
charges on currency fluctuation (from the AY 2000-2001), etc.
(v) Interest on Gold Deposit Bonds;

OPINIONS
Shuchita Times invites reader’s opinions and reactions on the articles published in this journal. Mail your letters at/to
st@shuchita.com or send by post to Shuchita Prakashan Private Limited, 25/19 L.I.C. Colony, Tagore Town, Allahabad-2
- Editor

Shuchita Times May 2007


8
article
Some tips for examinees of ICSI
and other professional courses. CA Dev Kumar Kothari Kolkata
“The result of examination would depend on what and how initial time stamina is generally weak, attempting compulsory
you write during examination hours (usually three hours) and question or question carrying higher marks, is likely to
how the examiner consider your answers in 10-15 minutes dampen your stamina and confidence. Therefore, attempt
when he checks your answer book and evaluate your answers". some smaller questions during 70-80 minutes. By attempting
Stop reading, writing and discussions about exam, at least to smaller questions first, you may be able to answer questions
three hours before examination- have confidence in memory carrying 40-50 marks within first hour. This will give you
recall. Memory recall will be better if your mind is relaxed and more confidence, stamina and tempo will be improved to face
ready to work vigorously, and fingers are faster to write during more tough and lengthy questions. Now time available per
180 minutes - and that will give you better result. Do some minute for other questions will be more.
exercises, yoga, meditation and light massage on entire body
and slight vigorous massage on your head, forehead and
fingers Have a good bath for at least fifteen minutes, sprinkle
water on entire body, and specially on your eyes and head. Sit
in your pooja room have a ghee /oil lamp lightened and
concentrate on the light of the lamp for at least ten minutes in
two or more exercises, before you leave your home for
examination. This will improve your concentration. Have faith
and confidence in your god- this will improves your self-
confidence. Students not at home but at some other place can
even use candle light or night lamp for the concentration
exercise. Have light food that is easily digestible and provide
you strength and stamina for four -five hours. Relax in lying
condition for 15-20 minutes after taking food. Be ready and During last 5-10 minutes review answers check that question
leave for examination centre. Sufficient time should be kept in nos. and sub question nos. are written correctly, properly tag
view of distance, mode of transportation, usual time and time extra sheets used, put necessary information about code no.
for contingency to ensure that you reach the examination etc. mark each page of additional sheet also with PTO. So that
centre at least 30 minutes before the examination starts. Have the examiner is requested to see all pages, even if any page is
relaxed mood, do some deep breathing exercises and try to left blank in hurry or inadvertently.
have self-confidence. In case of theory papers the answer book Take intermittently, at interval of 30-40 minutes, deep breaths
can be folded on right side to provide margin space, if not for 30-40 seconds each time (which one can easily do while
provided by a demarcation line. On receipt of question paper: reading question paper as well as writing answers). This will
Read instructions about compulsory question, total questions keep you fresh and more attentive. At last while tagging the
in paper and questions to be answered, questions with options answer sheets, and handing over the answer book pray the god
etc. You consider that for each mark you have 1.5 minutes for that the examiner should be in good mood and have fully
writing answers requiring 150 minutes and balance 30 minutes synchronized thinking with yours, while checking your
are for reading question, understanding words used in the answer book. Don't do the following during examination days:
question, planning answer and review etc. Careful reading of Do not discuss much with other examinees about your
question is very important, each word in question is important prepration and prepration of others. That will most likely
and has its significance. However, do not get perturbed if you hamper your level of confidence. During exam do not at all
are not able to understand any question, just Passover it and discuss anything about subject and prepration. Do not pass
read other question. Any question which you can reasonably even signals for objective questions. Such practices will only
answer, just start writing answer without wasting time for harm you by creating confusion and eroding self confidence
selecting question which you can answer in best manner. and put you at risk of cancellation of examination. Do not try to
Do not read entire question paper - it may be wastage of time use cheating material- by using such material at most, if at all
because most of the questions have to be attempted. Do not one can pass examination of lower classes but it will not help
start with compulsory question and questions carrying more you to in nay manner. The risk would be too large to take. Do
marks. These are generally tough, intricate and very lengthy not lose confidence and let break nerves, even if most of others
and involves some features which may cause confusion. At are losing.
Shuchita Times May 2007
9
I recall my examination of CA Final - the paper of
article
and give appropriate weightage to principals understood and
Cost Records and Cost Control. The paper was conveyed in answers and that the clerical aspects can be
very lengthy and tough. Many of examinees wanted to leave completed more efficiently by clerks of a CA.- the result I
the examination centre as early as possible but they were not secured 81marks in that paper. In examination, I have
allowed to go out for minimum period of stay (perhaps at that experienced that some times performance during last 20-25
time it was 45 minutes or one hour). After about one and a half minutes can suddenly changes your overall performance in the
hour more than half of candidates had left the exam. At that paper. I had experienced improving my score by 25-30 marks
time any calculator was not allowed. Calculations were asked during last half an hour. So think ahead and do not get
up to three places of decimals. I was strong in theory, perturbed even if your performance during early part of 180
fundamental, principals and laying out tables but I was and still minutes is poor. There is no use to weep over mistakes
very weak in numerical. I applied a strategy and attempted all committed in any paper till the last paper. Because any paper
questions. I made out rows and columns and placed formulae can be "Dubte ko tinke ka sahara", if you can secure more than
for calculations and below the table I placed comments for 50% marks the excess over 50 will help you to make up
decision making depending on final figures which may be deficiency suffered in earlier papers. SO BE PREPARED FOR
arrived on calculations. At the beginning of the answer book I AND USE 180 MINUTES IN BEST POSSIBLE MANNER.
made a request to the examiner to kindly give importance to Suchita - email sent to email id was returned.
the fact that this examination is not for clerical post but for
granting honorable degree of CA , therefore, please consider

Contd. from Page 5


Managing Change for Globalisation & Competitiveness in Indian Industries
Forum. organizational culture by making each effort adding value to
Further progress in fiscal consolidation should enhance its customers- strategically and continuously.
the ability of the government to respond to pressing Bibliography:
needs, particularly in the areas of education, public Abrahamson E. (2000) Change without Pain, Harvard
health and infrastructure. Insufficient health services Business Review, jul-Aug, 75-79.
and education as well as a poorly developed Brynjolfsson E., Renshaw A.A. and Alstyne M.V. (1997) The
infrastructure are limiting a more equitable distribution Matrix of Change, Sloan Management Review, Winter, 37-54.
of the benefits of India's high growth rates. The available Business India (August 7-20, 200O)WiIl Tejas Lightup, 88-91.
evidence suggests that the Indian economy may have Business India (Sept 20- Oct 3, 1999) Tough Times Ahead, 89-
entered a high growth plateau. The challenge for the 90.
authorities will be to ensure that this process is Garg R.K. et al (2002) Managing Organizational Change for
sustained and that it precipitates further progress in Competitiveness, Proceedings of the second Global
poverty reduction, the Report noted. Conference on Flexible Management Systems, March 24-27,
Conclusion 2002, 424-432.
Any well established organization must change. They Keller R.T., julian S.D. and Kedia B.L. (1996) A Multinational
should redefine their work and recreate work culture Study of Work Climate, Job Satisfaction and the Productivity of
consistent with changing customer demands. The R&D Teams, IEEE Transactions on Engg and Management,
changes are inevitable because organizations and 42(1), 48-55.
leaders at all levels have developed a new vision of Sushil (1997) Flexible Systems Management: An Evolving
strategy and culture. Organizations are becoming far Paradigm, Systematic Research and Behavioural Science,
14(4), 259-275.
more strategic, purposeful and customer-oriented. The
Sushil (2000) Flexibility in Management, Global Institute of
organizations will have to find ways to change their
Flexible Manufacturing Systems, Vikas Publishing House Pvt.
culture. Their vision will have to be translated into
Limited, New Delhi.
specific actions and managers should be helpful to
Sushil (2000) Concept of Systemic Flexibility, Global Journal of
employees to observe their progress and also to
Flexible Systems Management, 1(1), 77-80.
consider their feedbacks. Employees must strive for
Wartin R. (1993) Changing the Mind of Corporation, Harvard
continuous improvement and change the
Business Review, case Study, Nov-Dec, 81-94.

Shuchita Times May 2007


10
knowledge zone
Do You Know
?
1. Do you know that the largest insect has infinitely smaller
brain than the tiniest fish.
2. Do you know that when a person looks at something
IMPROVE YOUR
VOCABULARY
Give One-wod for?
1. The art of beautiful writing?
2. The science of sacred matters?
pleasing the pupil of the eye expands as much as 45 percent. 3. One who is very fond of women?
3. Do you know that Kaiser Wilhelm and Josef Stalin had
4. Morbid aversion to food?
crippled left arms.
4. Do you know that the bat lays no eggs. It gives birth to its 5. A person addicted to drinking?
young ones and suckles them.
6. That which will last for ever and never perish?
5. Do you know that the eastern slope of Mont Blanc is in Italy
but the summit is in France. 7. The action of looking within or into one's mind?
6. Do you know that the longest palace in the world is the
Vatican. 8. A person with narrow, prejudiced religious views?
7. Do you know that there is no soda in soda water. It is water 9. The science of earth quakes?
charged with carbonic acid gas.
10. The art of writing or engraving on stone and printing
8. Do you know that the tail of a comet can extend 100,000,000
there from?
kilometres across space.
9. Do you know that of the entire world population today one- 11. A woman who practices massage?
third eat with their fingers, one-third with chopsticks and
one third with knives and forks. 12. Fire worship?
10. Do you know that some of the most powerful flying fish can 13. The practice of marrying only outside of one's own
jump clear over the decks of small ships. tribe?
11. Do you know that all those creatures who mature early die
14. A general pardon of political offenders?
early.
12. Do you know that female spider is many times longer than 15. Belonging to same country and having the same
the male. interests and feelings?
13. Do you know that only two-billionth of sun's light ever
16. That which cannot be repaired or made good?
reaches the earth. The rest is lost in space.
14. Do you know that in Ceylon, the elephant is often used for 17. Purest and most essential part of a thing?
ploughing the rice fields.
18. Done by way of trial or experiment?
15. Do you know that all mammals suckle their young on milk.
Whale is a mammal. 19. A medicine that kills germs?
16. Do you know that earthquakes take place more frequently in
20. A written declaration on oath?
winter than in any other season.
17. Do you know that the most common form of colour Tentative (19) Germicide (20) Affidavit
blindness is a red-green deficiency. Compatriot (16) Irreparable (17) Quintessence (18)
18. Do you know that the Chinese compasses point towards (12) Pyrolatry (13) Exogamy (14) Amnesty (15)
south, not north. Fanatic (9) Seismology (10) Lithography (11) Masseuse
19. Do you know that the highest motor road in the world is in Sitophobia (5) Bibulous (6) Eternal (7) Introspection (8)
Peru. It was opened in 1936. (1) Calligraphy (2) Hierology (3) Philogynist (4)
20. Do you know that one can see the stars during the day from ANSWERS
the bottom of a well.
Shuchita Times May 2007
11
students’ corridor
BELIEVE IN YOURSELF
Dinesh Kumar, Sirohi (Raj.)
DO MORE THAN Ganpat Kumar
There may be days Ca - Final
when you get up in the morning Sheoganj - Sirohi (raj).
and things aren't the way
you had hoped they would be.
That's when you have to DO MORE THAN EXIST - LIVE.
Tell yourself that things will get better
There are times when people DO MORE THAN TOUCH - FEEL.
Disappoint you and let you down.
DO MORE THAN LOOK - OBSERVE.
But those are the times
When you must remind yourself DO MORE THAN READ - ABSORB.
To keep your life focused on believing in yourself.
There will be challenges to face DO MORE THAN HEAR - LISTEN.
And charges to make in your life,
And it is up to you too accept them. DO MORE THAN LISTEN - UNDERSTAND.
Constantly keep yourself headed
In the right direction for you. DO MORE THAN SAY - COMMIT.
It may not be easy at times,
But in those days of struggle DO MORE THAN GIVE - CONTRIBUTE.
you will find a stranger sense of
who you are. DO MORE THAN WRITE - CREATE.
So when the days come that are filled
with frustration and unexpected DO MORE THAN THINK - IMAGE.
responsibilities,
DO MORE THAN SLEEP - DREAM.
Remember to believe in yourself
And you want your life to be.
DO MORE THAN RECEIVE - COMPILE.
Because the challenges and changes.
will only help you to find the goals DO MORE THAN INFORM - COMMUNICATE.
That you know are meant to came
true for you DO MORE THAN PARTICIPATE - WIN.
Keep believing in yourself !!!!

Conrd. from pg. 6

Calculation of the VAT


Following example will illustrate the tax credit method under VAT as compared to sales tax
Particulars Transaction with VAT Transaction without VAT
Purchase by X 100 100
Value Added by X 100 100
Sub-total 200 200
Added tax @ 10% 20 20
Total 220 220
Purchase by Y from X 200* 220
Value added by Y 50 50
Sub-total 250 270
Add Tax @ 10% 25 27
Total 275 292

* since the set-off provisions are available in VAT, the input paid on purchases will not get added to the cost of
purchase but in case of sales tax.
Shuchita Times May 2007
12
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CPT
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2. Comprehensive questions for quick revision.
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Objective Question Bank


with
Comprehensive Notes
Gourab Ghose
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CPT
Multiple Choice Questions Bank
with FAST TRACK NOTES
Fundamentals of Accounting Mercantile Laws General Economics Quantitative Aptitude
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