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
& Competitiveness in Indian Industries
Abstract
Multinational companies have freely entered into many
sector's of the Indian economy as a result of liberalization.
This has made the Indian industry compete in global
markets and has subjected it to unprecedented level of
competition. Changing customer needs and awareness,
technological developments and environmental issues
have compelled the existing Indian industry to change
their working practices and culture to face the new
challenges. It is expected that change in an organization
would increase the working capacity of its employees,
resulting in higher productivity and continuous
improvement. A successful change process, however,
involves structural change, systemic change, cultural
change, technological change, employees' involvement,
and application of the philosophy of Total Quality
Management (TQM) in an organization. In this paper, it is
emphasized that we do need to understand the factors that
have undergone a change and how could we manage
them better. A procedure has been suggested to adopt
TQM by providing education and training to the employees
introducing change in the organization by changing
existing structure, system, technology, and employees
attitude.
Keywords : need of change, competitiveness, structural
change, systemic change, technological change, cultural
change, TQM
Introduction
Unprecented level of competition brought about by
globalization, liberalization and free entry of MNCs in the
Indian market has forced the industry to change its age-old
practices and become competitive. Changing customer
needs, rapid technological developments and
environmental issues have contributed to the present
situation that demands the industry to be run with utmost
professionalism, encompassing both short term and long
term goals and actions. MNCs have a dominance of
concepts and capabilities like innovation, risk taking, team
spirit, commitment and stability amongst their employees
leading to a "strong culture", whereas traditional Indian
2
article
for Globalisation
Dr. Vijay Pithadia
Assistant Professor [Reader]
R.K. College of Business Management
Rajkot
organizations are short of this type of dominance, or there
prevails a "weak culture". The need of the time is, thus, to
change from a conventional type of working to an
environment of competitiveness, efficiency, teamwork and
higher level of achievement.
Organizations evolve through a life cycle, with each
evolving stage introducing change challenges.
Understanding and managing change is salient,
especially for matured organizations where stability and
security may be replaced by customer-service, self-
confidence and empowered work force. The purpose of
this paper is to explore how change can be managed in an
organization. To do this, we will study the organization life
cycle, agile manufacturing, detailed principles to guide
change, and accomplish change.
Change in Organizational Life Cycle. An organizational life
cycle may comprise the following stages:
* Entrepreneurial stage
* Business proliferation stage
* Organization maturity stage
* Business renewal stage
* Declining stage
Entrepreneurial Stage
During this stage, the focus is on the definition and
development of new products and marketing avenues.
This requires extensive market research through
customer interactions. Basic idea is to make a note of
needs of society (by customers) and translate them into
values thus overcoming the challenges of market (Beatty
and Ulrich, 1996).
Business Proliferation Stage
After entrepreneurial stage, the business is expected to
proliferate, i.e. spread. Many more competitors enter in the
market making similar products with varying features.
Survival of the organization is the major problem during
this stage (Brown and Karagonoglu, 1989). As a strategy,
small firms frequently join hands to form a large firm to
sustain in the competitive market. The result is that the
business organizations shrink down to a few business
houses.
Shuchita Times May 2007
article
Organizational Maturity Stage
After proliferation stage, organization maturity is expected
with time. The business practices are systematized and
also streamlined. Also the organization gains its individual
identity in the market. The organization and its employees
acquire a reputed position in the society (Barlett and
Ghoshal, 1995).
Business Renewal Stage
Business norms responsible for success of matured
organizations lead to complacency. These existing norms
become irrevocable patterns of behaviour, which lead to
an avoidance of challenges in the organization. During the
maturity phase, product and technology parity is likely to
emerge (Grover, 1999). Competitors offer customers
similar products at competitive prices. In the renewal
phase, manager identifies additional capability to meet
customer needs, reduced profit margins, market share,
reduction of scrap and waste, etc. and tries to be
competitive. The emphasis is on to develop the ability to
compete from inside out - to build internal organizational
processes that meet external customer requirements. For
building such internal organizational processes, concepts
like self-direction, self-management and self-control need
to be strengthened in place of traditional control.
Declining Stage
In the renewal stage, managers must learn to compete
through competencies. They must learn and develop the
ability to know and meet customer expectations through
reactive and proactive improvements. Otherwise the
organization ceases to compete in the market and the
declining stage starts. During this stage, market share,
profit margins, turnover, reputation etc. of an organization
starts going down if no measures to be competitive are
taken (Grover 1999)).
The challenge of change throughout the organizational life
cycle consists of the following aspects:
i) Identification of market and learning how to enter/
capture the market share during entrepreneurial stage?
ii) Survival of organization during the growth stage,
iii) Business renewal and be competitive.
Thus, change through the life cycle converges to business
renewal tactics and competitiveness.
Organizational Culture and Life Cycle
The greatest effort in meeting the renewal challenge is to
change the culture of the organization, i.e. method of
thinking and working of employees of all levels. Culture
represents a shared way of thinking" and behaving" within
an organization. Culture includes behaviours and attitudes
Shuchita Times May 2007
also. Culture is often formalized in vision,
values and mission.
Policy of an organization affects the culture a lot. As the
organization becomes matured, the vision, value and
mission become fixed/get freezed. The employees are
paid/ rewarded and compensated as per the established
norms of the organization. Organizational culture also
becomes a means of encouraging unity, viz. teamwork,
and enhanced job responsibility. In an old/matured
organization, the fixed norms of culture become a liability
and act as resistance to change because of fear amongst
its employees. Another obstacle to change is mindset of
employees at all levels (Robbins et al., 2001). "Mindset"
represents a system of shared meaning held by members
that distinguishes an organization from others.
Organizational change is concerned with how employees
perceive the characteristics of a culture, not with whether
or not they like them.
Organizational Competitiveness and Change
Competitiveness accounts for a number of parameters like
reduction of hidden costs, quality conformance and
improvement, reduction of services time and delivery time,
maximization of profits and profitability, enhanced market
reputation, and assured markets in future by innovations,
learning and strategies in an organization (Szamosi et al.,
2002). Accordingly, achieving any of these parameters
leads the organization to achieve an increased
competitiveness.
As has been explained earlier, with the traditional ways of
working and fixed mindsets, it is nearly impossible to
achieve enhancement of any above parameters. This
needs a change of culture, system, structure and
technology hitherto being prevalent in the organization.
Each of these parameters of change complements one
another. A well thought of change process built on
scientific and logical basis using these strategies
sequentially can only be successful.
Change Process in an Organization
Having identified the need for change of an organization,
work activities can be identified for the same. Synthesizing
the results of various studies reported in literature from
time to time, the process of change can be described to
follow the following stages (Beatty et al., 1996), although
all the organizations may not stick to the same sequence
as some of the stages may occur simultaneously.
However, a justification of the sequence proposed below
is given subsequently.
3
 Stage-1: Introducing Structural Change
Organization change begins with the
concept of structural changes. Generally it denotes the
change of hierarchical structure (vertical) to new
structure (flat). Downsizing and delayering are the
possible methods for the same that ultimately result in
reducing the manpower. In the changed structure,
teams are formed and team management is applied, so
the organizational layers are reduced. Strong
communication network is to be formed between teams
and members of the teams so that the physical hurdles
can be eliminated. With this reduction, the organization
becomes lean at all levels. Measures of an organization
per employee improve as a result. Task of
organizational structures has to be handled with
sensitivity - revolutionary in thought, and evolutionary in
implementation (Business India, Sept. 22, 1999).
Reduction of manpower in public sectors, banks,
corporations etc. has been introduced as premature
retirements, voluntary retirements, plant
closings/shutdowns, consolidations and re-
employment schemes, as a restructuring policy. Such
reduction results in huge savings of organizational
recurring expenditure and initiate renewal process. It is
noted that at HMT Pinjore, a public sector organization,
around 1800 employees were reduced by VRS. Such
structural changes require a bold leadership. The
leaders of structural changes must implement a process
that ensures equity and due consideration to
employees. Such changes are possible when leaders
regularly turn around the organizations. The secret of
the organization has as much to do with vision, values
and culture, as it does with vertical reporting structures
(Ghoshal et al., 1995).
Recession in automobile industry resulted in
restructuring of supply chain. Globally, automobile
manufacturers are moving towards vendors who supply
complete subassemblies rather than components, to
support a lean manufacturing structure in vehicle
industry. Also there is a global trend to reduce the
number of vendors. The TATA Engineering and
Locomotive Company (TELCO) had only 130 vendors
for Indica compared to its truck division, which has over
1000. Bajaj Autos also restructured its supply chain to
considerably cut down the number of its vendors
(Business India, Sept 20,1999). The result was the
transformation of auto component industry into tier-1,
tier-2 and tier-3 suppliers. Tier-1 suppliers are large
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article
component manufacturers who will supply entire
subassemblies. Tier-2 and tier-3 are medium and small
manufacturers supplying components to tier-1
manufacturers.
Stage-II: Introducing Systemic Changes
A system pertains to the existing practices in an organization.
In systemic changes, the attempt is to eliminate the
unnecessary procedures, reports, approvals, meetings,
policies, or other activities, which generally create
backlogs/bottlenecks. Red tapism and other bureaucratic
procedures also need to be changed which cause frustration
amongst employees as their capabilities and role is not judged
individually. To achieve this, proper training needs to be given
to the team members so that they can become self managed
gradually. Simulation based guidance add more value to it
(Jick, 1992).
Systemic changes should follow structural changes in an
organization. In structural changes, employees who are afraid
of challenges and are in favour of job security only, get
annoyed. Most of such changes are being seen as contractual
appointments than life long appointments. As a result
employees feel their contract as short-term contract and
psychologically react accordingly. Managers in such cases
should be able to sustain employees' commitment by
replacing loyalty with other means of employee
considerations like opportunity. Opportunity can be provided
to the employees to develop talents, participation in key
decision-making and belongingness to the organization. It is
possible by systemic changes.
Stage-III : Employee Involvement and Empowerment
Instead of empowering only top management, involvement of
employees is very important. If openness between employers/
managers and employees is increased, this will result in
change of nature of the organization. No doubt, by
bureaucracy, the employees' involvement results in
productivity enhancement, cost reduction, waste reduction
etc. but their effects on the organization are not long-lasting.
Employees' empowerment is a very wide term. In one sense, it
allows the employees to take their decisions, plan their
activities and remove the barrier between them and
managers. In the long run, this results in increased
belongingness of the employees with the organization and
also changes in the nature of organization. A simple technique
for employee involvement and empowerment is to encourage
the participation of employees in organizational strategies
(Kotier, 1995). In big Indian companies, as a policy, some
important projects are primarily assigned to fresh officers and
they are supposed to handle independently.
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article
Stage- IV: Cultural Changes
Cultural changes relate the mindset, i.e. the way the
employees think about their work. Employees, in
general, feel the enthusiasm and commitment of trying
new approaches to work and bring more desirable
changes in the organizations. From literature (Saleh
1993) it is found that it takes roughly double the time to
introduce a technological change in a matured
organization as compared to a new organization.
Cultural changes implementation is a difficult task that
is generally done by an agent called change agent.
Every change agent is judged by his ability to preserve,
and how strong an advocate he is, of the new culture.
he should exhibit tolerance since cultural changes
requires time to take effect.
According to the Chairman of Suzuki motors, "Workers
come to factories to work, not to walk". At MUL, there is
no idle hand at the shoopfloor" (India Today, Nov.
2000). By giving proper perks, workplace and
environment, the working culture becomes very strong.
Strong beloningness of the employees towards
company is also established.Stage-V: Technological
Changes
Technological change is an ongoing process.
Technology is the environment within which an
organization functions. Technological innovations
introduce changes in our social lives in addition to
changing the ways of working. Technological changes
lead to changed social customs as an irreversible effect.
If the organizations are redesigned/ modified suitably to
absorb the changed technology, the organization will
benefit from the synergy of Man-Machine system.
Availability of technologically superior tool, and
enhancing the workplace productivity, is giving rise to
one-man-multiple-job concept, like for example, in an
office, it is possible for one person to write letters in his
PC, receive and transmit faxes, and also gather data
from internet. A single person with multiple skills will add
effectiveness to the changing structure of an
organization. With the availability of technologically
superior system, the time required to complete various
activities has drastically reduced. The changing
technology needs to be handled carefully, nurtured and
gainfully adopted in the organization to derive optimum
benefits and results in addition of competitiveness.
This is clear from the earlier discussions that every stage
of change management results in an increase of
competitiveness in some direction. The success of
Shuchita Times May 2007
change programme is very much dependent upon
the abilities of change agents. The mission and
vision of the founders of an organization also have a major
impact on the organizational culture. For keeping a culture
alive, top management and change agents have to
continuously strive for quality, cost reduction and morale
upliftment of employees that ultimately results in increased
competitiveness of an organization.
Relationship of Change Initiatives with Competitiveness
TQM involves everyone of the organization in decision-
making. TQM also stands for continuous improvement.
Structural changes, systemic changes and technological
changes empower employees towards cultural changes.
Employee's empowerment builds employee's commitment.
Their initial commitment is translated into long-term processes
so that individualism gets converted to a systemic version.
Continuous improvement efforts begin in companies by
focusing on error detection and then error prevention by using
statistical and graphical tools. Continuous improvement is
changing not only the technical tools of management, but also
the fundamental approaches to management. Focus on
continuous improvement must be upon the "right" work that
was identified through structural and systemic changes
(Saeed, et al., 1993). The work has to be linked to
technological advancements through speed and simplicity in
work process. When this philosophy is understood in the
organization, it ensures an ongoing commitment to improve
work processes. By instilling this philosophy, leaders are able
to set a direction, motivate and steer a company through
renewal.
India's Economic Competitiveness
India ranked 43rd overall in the World Economic Forum's
Global Competitiveness Report 2006-2007. The subcontinent
received excellent scores in capacity for innovation and
sophistication of firm operations. The Report noted that while
firm use of technology and rates of technology transfer were
high, penetration rates of the latest technologies are still quite
low by international standards. This reflects India's low levels
of per capita income and high incidence of poverty, the Report
concluded.
"The quality of the business environment in India has improved
tangibly in recent years, with goods, labor and financial
markets making gains in efficiency. There have also been
substantial improvements in the underlying institutional
climate in such areas as property rights, the operation of the
judicial system and other indicators which capture essential
aspects of building a sound investment climate," noted
Jennifer Blanke, Senior Economist at the World Economic
Contd. on Page 10
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 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.
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6
article
Tax Free Income for 2007-08
Here are some of the important items of income, which are
fully exempt from income tax and which can be utilised by a
resident individual Indian assessee for the purpose of tax
planning.
1. Agricultural income
Under the provisions of Section 10(1) of the Income Tax Act,
agricultural income is fully exempt from income tax.
However, for individuals or HUFs when agricultural income is
in excess of Rs 5,000, it is aggregated with the total income for
the purposes of computing tax on the total income in a manner
which results into "no" tax on agricultural income but an
increased income tax on the other income.
Agricultural income which fulfils the above conditions is
completely exempt from tax. The manner of calculating tax on
total income and agricultural income, is explained in
Illustration.
Illustration
For the assessment year 2008-09 an individual has a total
income from trading in cloth amounting to Rs 111,000 besides,
he has earned Rs 40,000 as income from agriculture.
The income tax payable by him will be computed as under:
— On the first Rs 110,000 of taxable non-agricultural
income: Nil
— On the next Rs 40,000 of agricultural income (falling
under 10% slab): Nil
— On the next Rs 1,000 of taxable non-agricultural income
@ 20%: Rs 200
— IT on aggregated income of Rs 111,000 + Rs 40,000 = Rs
151,000: Rs 200
2. Receipts from HUF
Any sum received by an individual as a member of a Hindu
Undivided Family, where the said sum has been paid out of the
income of the family, or, in the case of an impartible estate,
where such sum has been paid out of the income of the estate
belonging to the family, is completely exempt from income tax
in the hands of an individual member of the family under
Section 10(2).
3. Share from a partnership firm
Under the provisions of Section 10(2A), in the case of a person
being a partner of a firm which is separately assessed as such,
his share in the total income of the firm is completely exempt
from income tax since AY 1993-94.
For this purpose, the share of a partner in the total income of a
firm separately assessed as such would be an amount which
bears to the total income of the firm the same share as the
amount of the share in the profits of the firm in accordance
with the partnership deed bears to such profits.
4. Allowance for foreign service
Any allowances or perquisites paid or allowed as such outside
India by the government to a citizen of India, rendering service
outside India, are completely exempt from tax under Section
Shuchita Times May 2007
10(7). This provision can be taken advantage of by the citizens
of India who are in government service so that they can
accumulate tax-free perquisites and allowances received
outside India.
5. Gratuities
Under the provisions of Section 10(10) of the IT Act, any
death-cum-retirement gratuity of a government servant is
completely exempt from income tax. However, in respect of
private sector employees gratuity received on retirement or on
becoming incapacitated or on termination or any gratuity
received by his widow, children or dependants on his death is
exempt subject to certain conditions.
The maximum amount of exemption is Rs 350,000. Of course,
this is further subject to certain other limits like the one half-
month's salary for each year of completed service, calculated
on the basis of average salary for the 10 months immediately
preceding the year in which the gratuity is paid or 20 months'
salary as calculated. Thus, the least of these items is exempt
from income tax under Section 10(10).
6. Commutation of pension
The entire amount of any payment in commutation of pension
by a government servant or any payment in commutation of
pension from LIC pension fund is exempt from income tax
under Section 10(10A) of IT Act.
However, in respect of private sector employees, only the
following amount of commuted pension is exempt, namely:
(a) Where the employee received any gratuity, the commuted
value of one-third of the pension which he is normally entitled
to receive; and (b) In any other case, the commuted value of
half of such pension.
It may be noted here that the monthly pension receivable by a
pensioner is liable to full income tax like any other item of
salary or income and no standard deduction is now available in
respect of pension received by a tax payer.
7. Leave salary of central government employees
Under Section 10(10AA) the maximum amount receivable by
the employees of central government as cash equivalent to the
leave salary in respect of earned leave at their credit up to 10
months' leave at the time of their retirement, whether on
superannuation or otherwise, would be Rs 300,000.
8. Voluntary retirement or separation payment
Under the provisions of Section 10(10C), any amount received
by an employee of a public sector company or of any other
company or of a local authority or a statutory authority or a
cooperative society or university or IIT or IIM at the time of his
voluntary retirement (VR) or voluntary separation in
accordance with any scheme or schemes of VR as per Rule
2BA, is completely exempt from tax. The maximum amount
of money received at such VR which is so exempt is Rs 5 lakh
(Rs 500,000).
7
 9. Life insurance receipts
Under Section 10(10D), any sum received under
a Life Insurance Policy (LIP), including the sum allocated by
way of bonus on such policy, other than u/s 80DDA or under a
Keyman Insurance Policy, or under an insurance policy issued
on or after 1.4.2003 (April 1, 2003) in respect of which the
premium payable for any of the years during the term of the
policy exceeds 20% of the actual capital sum assured, is fully
exempt from tax.
However, all moneys received on death of the insured are fully
exempt from tax. Thus, generally moneys received from life
insurance policies whether from the Life Insurance
Corporation or any other private insurance company would be
exempt from income tax.
10. Payment received from provident funds
Under the provisions of Sections 10(11), (12) and (13) any
payment from a government or recognised provident fund
(PF) or approved superannuation fund, or PPF is exempt from
income tax.
11. Certain types of interest payment
There are certain types of interest payments which are fully
exempt from income tax u/s 10(15). These are described
below:
(i) Income by way of interest, premium on redemption or other
payment on such securities, bonds, annuity certificates,
savings certificates, other certificates issued by the Central
Government and deposits as the Central Government may, by
notification in the Official Gazette, specify in this behalf.
(iia) In the case of an individual or a Hindu Undivided Family,
interest on such capital investment bonds as the Central
Government may, by notification in the Official Gazette,
specify in this behalf (i.e. 7% Capital Investment Bonds);
(iib) In the case of an individual or a Hindu Undivided Family,
interest on such Relief Bonds as the Central Government may,
by notification in the Official Gazette, specify in this behalf
(i.e., 9% or 8.5% or 8% or 7% Relief Bonds); (iid) Interest on
NRI bonds;
(iiia) Interest on securities held by the issue department of the
Central Bank of Ceylon constituted under the Ceylon
Monetary Law Act, 1949;
(iiib) Interest payable to any bank incorporated in a country
outside India and authorised to perform central banking
functions in that country on any deposits made by it, with the
approval of the Reserve Bank of India or with any scheduled
bank;
(iv) Certain interest payable by Government or a local
authority on moneys borrowed by it, including hedging
charges on currency fluctuation (from the AY 2000-2001), etc.
(v) Interest on Gold Deposit Bonds;
OPINIONS
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(vi) Interest on certain deposits are: Bhopal Gas victims;
(vii) Interest on bonds of local authorities as notified, and
(viii) Interest on 6.5% Savings Bonds [Exempt] issued by RBI.
12. Scholarship and awards, etc.
Any kind of scholarship granted to meet the cost of education
is exempt from tax under Section 10(16). Similarly, certain
awards and rewards, etc. are completely exempt from tax
under Section 10(17A), for example, Lakhotia Puraskar of Rs
31,000 awarded to the best Rajasthani author, every year under
Notification No. 199/28/95-IT (A-I) dated 22-4-1996. Any
daily allowance received by a Member of Parliament or by an
MLA or any member of any Committee of Parliament or State
legislature is also exempt from tax under Section 10(17).
13. Gallantry awards, etc. Section 10(18)
The Finance Act, 1999 has, with effect from AY 2000-2001,
provided for complete exemption for the pension and family
pension of Gallantry Award Winners like Paramvir Chakra,
Mahavir Chakra, and Vir Chakra and also other Gallantry
Award winners notified by the Central Government.
14. Dividends on shares and units - Section 10(34) & (35)
With effect from the Assessment Year 2004-05, the dividend
income and income of units of mutual funds received by the
assessee completely exempt from income tax.
15. Long-term capital gains of transfer of securities -
Section 10(38)
With effect from FY 2004-05, any income arising to a taxpayer
on account of sale of long-term capital asset being securities is
completely outside the purview of tax liability especially when
the transaction has been subjected to Securities Transaction
Tax (STT).
Thus, if the shares of any company listed in the stock exchange
are sold after holding it for a minimum period of one year then
there will be no liability to payment of capital gains. This
provision would even apply for the old shares which are held
by an assesse and are sold after the Finance (No.2) Act, 2004
came into force.
16. Amount received by way of gift, etc - Section 10(39)
As per the Finance (No. 2) Act, 2004, gift, etc. received after 1-
9-2004 by individual or HUF in cash or by way of credit, etc. is
being subjected to tax if the same is not received from a
relative, etc. However, Section 10(39) provides that the
amount received to the extent of Rs 50,000 will, however, be
exempt from the purview of tax payment.
Similarly, amount received on the occasion of marriage from
non-relative, etc. would also be exempted. It may be noted that
the gift from relatives, etc. as mentioned in the section can be
received without any upper limit.
- Editor
Shuchita Times May 2007
article
Some tips for examinees of ICSI
and other professional courses.
“The result of examination would depend on what and how
you write during examination hours (usually three hours) and
how the examiner consider your answers in 10-15 minutes
when he checks your answer book and evaluate your answers".
Stop reading, writing and discussions about exam, at least
three hours before examination- have confidence in memory
recall. Memory recall will be better if your mind is relaxed and
ready to work vigorously, and fingers are faster to write during
180 minutes - and that will give you better result. Do some
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
leave for examination centre. Sufficient time should be kept in
view of distance, mode of transportation, usual time and time
for contingency to ensure that you reach the examination
centre at least 30 minutes before the examination starts. Have
relaxed mood, do some deep breathing exercises and try to
have self-confidence. In case of theory papers the answer book
can be folded on right side to provide margin space, if not
provided by a demarcation line. On receipt of question paper:
Read instructions about compulsory question, total questions
in paper and questions to be answered, questions with options
etc. You consider that for each mark you have 1.5 minutes for
writing answers requiring 150 minutes and balance 30 minutes
are for reading question, understanding words used in the
question, planning answer and review etc. Careful reading of
question is very important, each word in question is important
and has its significance. However, do not get perturbed if you
are not able to understand any question, just Passover it and
read other question. Any question which you can reasonably
answer, just start writing answer without wasting time for
selecting question which you can answer in best manner.
Do not read entire question paper - it may be wastage of time
because most of the questions have to be attempted. Do not
start with compulsory question and questions carrying more
marks. These are generally tough, intricate and very lengthy
and involves some features which may cause confusion. At
Shuchita Times May 2007
CA Dev Kumar Kothari Kolkata
initial time stamina is generally weak, attempting compulsory
question or question carrying higher marks, is likely to
dampen your stamina and confidence. Therefore, attempt
some smaller questions during 70-80 minutes. By attempting
to smaller questions first, you may be able to answer questions
carrying 40-50 marks within first hour. This will give you
more confidence, stamina and tempo will be improved to face
more tough and lengthy questions. Now time available per
minute for other questions will be more.
During last 5-10 minutes review answers check that question
nos. and sub question nos. are written correctly, properly tag
extra sheets used, put necessary information about code no.
etc. mark each page of additional sheet also with PTO. So that
the examiner is requested to see all pages, even if any page is
left blank in hurry or inadvertently.
Take intermittently, at interval of 30-40 minutes, deep breaths
for 30-40 seconds each time (which one can easily do while
reading question paper as well as writing answers). This will
keep you fresh and more attentive. At last while tagging the
answer sheets, and handing over the answer book pray the god
that the examiner should be in good mood and have fully
synchronized thinking with yours, while checking your
answer book. Don't do the following during examination days:
Do not discuss much with other examinees about your
prepration and prepration of others. That will most likely
hamper your level of confidence. During exam do not at all
discuss anything about subject and prepration. Do not pass
even signals for objective questions. Such practices will only
harm you by creating confusion and eroding self confidence
and put you at risk of cancellation of examination. Do not try to
use cheating material- by using such material at most, if at all
one can pass examination of lower classes but it will not help
you to in nay manner. The risk would be too large to take. Do
not lose confidence and let break nerves, even if most of others
are losing.
9
 I recall my examination of CA Final - the paper of
Cost Records and Cost Control. The paper was
very lengthy and tough. Many of examinees wanted to leave
the examination centre as early as possible but they were not
allowed to go out for minimum period of stay (perhaps at that
time it was 45 minutes or one hour). After about one and a half
hour more than half of candidates had left the exam. At that
time any calculator was not allowed. Calculations were asked
up to three places of decimals. I was strong in theory,
fundamental, principals and laying out tables but I was and still
very weak in numerical. I applied a strategy and attempted all
questions. I made out rows and columns and placed formulae
for calculations and below the table I placed comments for
decision making depending on final figures which may be
arrived on calculations. At the beginning of the answer book I
made a request to the examiner to kindly give importance to
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.
Further progress in fiscal consolidation should enhance
the ability of the government to respond to pressing
needs, particularly in the areas of education, public
health and infrastructure. Insufficient health services
and education as well as a poorly developed
infrastructure are limiting a more equitable distribution
of the benefits of India's high growth rates. The available
evidence suggests that the Indian economy may have
entered a high growth plateau. The challenge for the
authorities will be to ensure that this process is
sustained and that it precipitates further progress in
poverty reduction, the Report noted.
Conclusion
Any well established organization must change. They
should redefine their work and recreate work culture
consistent with changing customer demands. The
changes are inevitable because organizations and
leaders at all levels have developed a new vision of
strategy and culture. Organizations are becoming far
more strategic, purposeful and customer-oriented. The
organizations will have to find ways to change their
culture. Their vision will have to be translated into
specific actions and managers should be helpful to
employees to observe their progress and also to
consider their feedbacks. Employees must strive for
continuous improvement and change the
10
article
and give appropriate weightage to principals understood and
conveyed in answers and that the clerical aspects can be
completed more efficiently by clerks of a CA.- the result I
secured 81marks in that paper. In examination, I have
experienced that some times performance during last 20-25
minutes can suddenly changes your overall performance in the
paper. I had experienced improving my score by 25-30 marks
during last half an hour. So think ahead and do not get
perturbed even if your performance during early part of 180
minutes is poor. There is no use to weep over mistakes
committed in any paper till the last paper. Because any paper
can be "Dubte ko tinke ka sahara", if you can secure more than
50% marks the excess over 50 will help you to make up
deficiency suffered in earlier papers. SO BE PREPARED FOR
AND USE 180 MINUTES IN BEST POSSIBLE MANNER.
Suchita - email sent to email id was returned.
organizational culture by making each effort adding value to
its customers- strategically and continuously.
Bibliography:
Abrahamson E. (2000) Change without Pain, Harvard
Business Review, jul-Aug, 75-79.
Brynjolfsson E., Renshaw A.A. and Alstyne M.V. (1997) The
Matrix of Change, Sloan Management Review, Winter, 37-54.
Business India (August 7-20, 200O)WiIl Tejas Lightup, 88-91.
Business India (Sept 20- Oct 3, 1999) Tough Times Ahead, 89-
90.
Garg R.K. et al (2002) Managing Organizational Change for
Competitiveness, Proceedings of the second Global
Conference on Flexible Management Systems, March 24-27,
2002, 424-432.
Keller R.T., julian S.D. and Kedia B.L. (1996) A Multinational
Study of Work Climate, Job Satisfaction and the Productivity of
R&D Teams, IEEE Transactions on Engg and Management,
42(1), 48-55.
Sushil (1997) Flexible Systems Management: An Evolving
Paradigm, Systematic Research and Behavioural Science,
14(4), 259-275.
Sushil (2000) Flexibility in Management, Global Institute of
Flexible Manufacturing Systems, Vikas Publishing House Pvt.
Limited, New Delhi.
Sushil (2000) Concept of Systemic Flexibility, Global Journal of
Flexible Systems Management, 1(1), 77-80.
Wartin R. (1993) Changing the Mind of Corporation, Harvard
Business Review, case Study, Nov-Dec, 81-94.
Shuchita Times May 2007
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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