Tag: Event Management

The specific identification method relates to inventory valuation, specifically keeping track of each specific item in inventory and assigning cost individually instead of grouping items together the manner of calculation that is typically done in the first in, first out (FIFO) and last in, first out (LIFO) methods.

The specific identification method is useful and usable when a company is able to identify, mark, and track each item or unit in its inventory. While the specific identification method can be utilized by larger companies with electronic tags or stickers with serial numbers that can be scanned into an electronic inventory tracking system, it is most common with smaller businesses that can easily identify or count items in their inventory.

Sometimes, the process can be done simply by an employee laying eyes on the items and marking them down on a piece of paper. In an age where technology and computer programs seem to run everything, the specific identification method is used in a similar way; however, inventory counts are recorded in a database.

Under the specific identification method, it’s also necessary that the cost of each purchased item can be determined on an individual basis. The cost must be easily associated with a number or other identifying feature of the item so that it can be directly connected to that item. Likewise, the item must be easily tracked, found, and available when the promise of sale is made.

The Pros and Cons of the Specific Identification Method

The primary drawback to the specific identification method is that its use requires a definitive ability to easily and consistently identify all the individual items within a company’s inventory, track their cost, and produce them upon sale or the promise of sale.

Both the cost of the item and the amount received for the sale of the item must be attached to a specific item with some form of a unique identifier that singles it out. The process is incredibly difficult for larger businesses such as big box stores to achieve because of the sheer volume that such companies move on a daily basis.

It is an issue that smaller businesses don’t generally face, which is why such companies are the ones that commonly utilize the specific identification method. One benefit of the method is a much higher degree of accuracy when it comes to the actual numbers of items in inventory and then, of course, a higher degree of accuracy when it comes to the numbers of dollars in earned income or profit, as well as any lost revenue if items are damaged, lost, or returned. The chances of losing or misplacing inventory under such a system are almost obliterated because of its accuracy.

Occasionally, it is used to identify specific securities. This method of identification allows investors to reduce or offset capital gains by picking a specific lot of securities to be used as the basis for a sale.

Obviously, this inventory method takes more work upfront than the alternatives. It might not be a reasonable use of time for a seller of t-shirts or candles. But it could be very useful to a seller of a wide variety of merchandise who wants a steady stream of information on what products or styles are in demand, what’s not selling, and what needs restocking.

In addition, it has practical uses in accounting. It makes it easy to calculate the ending inventory cost. That figure tells the company the total annual expenses associated with all unsold goods in its inventory. It also provides a highly accurate figure for the cost of goods sold.

Advantages

• The first and most important advantage of using the Specific identification method is that it helps the business keep track of every item of the inventory used in the company from the time such inventory comes into the business till the time it goes out of business.
• With the use of the specific identification, method cost is assigned to every item used in the company individually. In the LIFO inventory and FIFO methods, the cost is assigned to the inventory by grouping them based on specified criteria. It ensures a high degree of accuracy in the valuation of closing stock at the end of a particular period and the valuation of the cost of goods sold during the period.

Disadvantages

• As it tracks every item of the inventory used in the company from the time such inventory comes into the business until the time it goes out of business is kept, it requires lots of effort and time from the person responsible for such tracking.
• If the companies use the Specific identification method, then under those situations, the company’s net income can be manipulated easily by the company’s management.
• As the company has a vast number of transactions, it is difficult to identify the purchased products, so this method is rarely used. It is restricted to businesses dealing with high-value items.

Example

Take a retailer for example. Retailers order tons of inventory from wholesalers and manufacturers on a regular basis. Palates of goods can be delivered on a daily basis. Let’s assume an electronics retailer ordered 10 computers. Each computer is slightly different and can be identified by the serial number. The receiving department can unpack the shipment, scan each computer into the system, and assign the total invoice cost to the individual goods.

This system is extremely accurate because each piece of inventory can be tracked separately. There are no estimates involved which make the inventory and cost of goods sold numbers more accurate on the financial statements as well.

Even though this system is extremely accurate, few companies actually use it. There are two main problems with the specific identification method. The first main problem is that the system takes a lot of time and effort. Each piece of inventory must be separately scanned and entered into the system. The second reason is that most goods can’t be separately identifiable. A huge palette of homogenous goods is most like indistinguishable.

Most companies use FIFO or LIFO inventory valuation methods.

A cost accounting system is used by manufacturers to record production activities using a perpetual inventory system. In other words, it’s an accounting system designed for manufacturers that tracks the flow of inventory continually through the various stages of production.

Precautions

The Technical Details

Technical operations of the concern and whether production is more important than selling or vice versa should be kept in mind. Obviously more attention must be paid to the more significant factor.

Objects:

What are the objects which the management wants to achieve and what sort of information does it need for the achievement of its objectives? Information about costs meant for fixing prices would be quite different from that intended to reveal efficiencies or inefficiencies in operations or that required to make decisions on a rational basis.

The Product

The nature of product should be considered to decide type of cost system. For example, if materials used are insignificant, an elaborate system of materials control will not be necessary.

Type of Materials

The type of materials available and the timing of their supplies together with the storage problem, should also be taken into consideration.

Factors

Factors that are or are not amenable to control should be considered. Attention has to be paid to controllable factors. For instance, if a particular method of packing is prescribed by law, it is no use trying to think of an alternative.

Type of Labour

The type of labour which is required and the methods of their remuneration should also be kept in mind.

Management

The character of management itself and the decision-making process should also be taken into account. Modern managements usually need detailed information. The information flows will have to be designed with reference to the sources and end uses of the information. For example, if decisions are taken by a person who refuses to divulge any information, the system must keep this in view.

Business Peculiarities

Any peculiarities of the business, that there may be, must be kept in view. For instance, if purchases of particular item are to be made only from one particular source or firm, the costing system need not build an adequate purchase procedure; it should concentrate on the proper use of the concerned item.

Use of Financial Books

The possibility of using financial books and procedures should also be kept in mind. As stated above, cost accounting is to be treated as an investment and, therefore, all existing useful procedures, books and records should be used. For example financial accounts need adequate record of purchases and wages. With a little change, these can be made to serve the needs of Cost Accounting also. As far as possible, cost records and financial books should be well coordinated, even fully integrated.

Choice of Unit

The choice of the unit regarding which costs have to be obtained should also be considered. For example, in case of steel, costs are ascertained per tonne of steel and in case of cotton textiles, the unit is kg. of yarn or cloth. In case of motor transport the cost will be found per bus-kilometre or passenger-kilometre or sometimes tonne-mile. These are known as units of cost and it is necessary to choose a proper unit neither too big nor too small.

Full Discussion

Above all, the system should be designed after a full and frank discussion with all those who will be involved.

Anti-Competitive Agreements (Section 3)

An agreement includes any arrangement, understanding or concerted action entered into between parties. It may or may not be in writing. Anti-competitive agreements under competition law are broadly classified into two categories, the Anti-competitive Horizontal Agreement and Anti-competitive Vertical/Agreement.

Anti-Competitive Horizontal Agreements-Section 3(3)

Horizontal Agreements are those agreements where enterprises engaged in identical or similar trade of goods or services. When enterprises collude amongst each other to distort competition in the markets, such agreement is presumed to have an appreciable adverse effect on competition and thus, shall be void. The following four categories of such agreements amongst competitors are presumed to have AAEC-

• Agreement to fix price;
• Agreement to limit production and/or supply;
• Agreement to allocate markets;
• Bid rigging or collusive bidding.

However, such presumption is rebuttable.

Vertical Agreements-Section 3(4) Vertical Agreements are those agreements which are entered into by enterprises at different stages or levels of production, distribution, supply, storage etc. Such vertical restrains include:

• Tie-in arrangement;
• Exclusive supply/distribution arrangement;
• Refusal to deal; and
• Resale price maintenance.

Imposition of reasonable conditions as may be necessary for protection of intellectual Property Right (IPR) which are listed under Section 3(5), is generally not to be treated as volatile of the Act.

They are however, subject to scrutiny by the Commission to decide whether such conditions are reasonable and necessary to protect IPR.

Abuse of Dominant Position (Section 4)

Dominance refers to a position of strength which enables an enterprise to operate independently of competitive force in the market or to affect its competitors or consumers in its favour. Dominant position of an enterprise itself is not prohibited; however, if the enterprise by virtue of having dominant position in the relevant market abuses its dominance then the same stands prohibited. Abuse of dominant position impedes fair competition between firms exploits consumers and makes it difficult for the other players in the market to compete with the dominant undertaking. Abuse of dominant position covers:

• Imposing unfair condition or price, including predatory pricing;
• Limiting production/market or technical or scientific development
• Denying market access, and
• Making conclusion of contracts subject to conditions, having no nexus with such contracts; and
• Using dominant position in one relevant market to gain advantages in another relevant market.

Anti-competitive agreements and other conduct

Scheme of the Competition Act

The Competition Act is based on the “effects doctrine” and grants the CCI jurisdiction over any agreement, abuse of a dominant position or combination that takes place outside of India as long as such agreements, conduct or combination have or are likely to have an AAEC in India. This is a significant development in the new competition law regime since the erstwhile MRTP Commission did not have extra-territorial jurisdiction.

Anti-competitive agreements

The Competition Act seeks to regulate two kinds of agreements:

(a) Anti-competitive agreements between/amongst competitors (horizontal agreements)

(b) Anti-competitive agreements between enterprises or persons at different stages or levels of the production chain (vertical agreements).

Under the Competition Act, certain kinds of horizontal agreements (described in the next subsection) are presumed to cause an AAEC in India. The presumption does not mean that all alleged horizontal agreements are necessarily anti-competitive; it remains open to the parties entering into such an agreement to provide evidence that their agreement does not result in an AAEC and rebut the presumption. On the other hand, such presumption does not apply to vertical agreements. Vertical agreements are usually permitted unless it is established that they cause, or are likely to cause, an AAEC within India. The Competition Act provides an exhaustive list of horizontal agreements that are presumed to cause an AAEC in India, as well as an inclusive list of vertical agreements that may be prohibited depending upon their effect on conditions of competition within India.

Cartel conduct

The Competition Act sets out a list of horizontal agreements that are presumed to cause an AAEC within India. In other words, once it is established that such an agreement exists and the agreement results in any of the conduct listed, the CCI may, on the basis of the presumption that they cause an AAEC, seek to prohibit them. These four types of agreements, which are also known as “cartel” arrangements, are set out in this list:

• Price-fixing agreements, i.e., agreements between competitors, which directly or indirectly have the effect of fixing or determining purchase or sale prices;
• Agreements between competitors, which seek to limit or control production, supply or markets;
• Market-sharing agreements between competitors irrespective of the form that they may take; this includes market sharing by way of product allocation, allocation of geographic markets or source of production; and
• Bid-rigging agreements, i.e., agreements between competitors, which have the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process of bidding.

Mergers and Acquisitions

Any combination, whether a merger, an acquisition, or an amalgamation, must adhere to the provisions of Section 5 and Section 6 of the Act and needs prior approval from the CCI. The two requirements are the filing of such mergers and combinations and the de minimise test. The Act also gives jurisdiction to the CCI over all the combinations, even those outside the country.  A notification prior to the combination is required within 30 from the board of directors showing approval in the case of mergers and amalgamations or within 30 of the execution of such an agreement which shows the intention to acquire a business if it is an acquisition. The failure will pave the way for an investigation as authorised by the Act to the CCI.

However, Schedule 1 of the combination regulations provides certain exemptions where a pre-notification to CCI is not necessary. These are:

• Acquisition made only as an investment and where the acquirer does not hold 25% of the shares or more directly or indirectly,
• Acquisition of additional shares which is not more than 5 % in a financial year and where the acquirer holds more than 25% but less than 50% of the shares or voting rights prior to or after such acquisition.
• An acquisition where the acquirer already holds more than 50% of the shares of the company to be acquired except where the transaction is from joint control to sole control.
• Renewed tender where the notice has already been filed with the Commission.
• Acquisition of raw materials, stock-in-trade, spares etc. in the course of business.
• Acquisition by a person in the same group except if the business is jointly controlled and they do not belong to the same group.
• A merger or amalgamation where one has more than 50% of shares in another and the transaction is not from joint control to sole control.

Penalties and liabilities under the Competition Act, 2002

The Act also provides provisions for penalties and gives the CCI the power to impose such penalties. In the case of anti-competitive agreements, it can fine up to 10% of the average turnover of the last 3 financial years. For cartel agreements, the fine is equal to the profits made in 3 continuous years of such agreement. It can also order desist or ask to modify the agreements. The Act also provides penalties for non-compliance with the order of the Commission under Section 42 and false information under Section 44 of the Act. The Act also empowers CCI to impose lesser penalties under Section 46 of the Act.

Articles 5 to 11 of Part II of the Indian Constitution deals with citizenship, defining a citizen as a person of Indian ancestry or a family member having Indian ancestry. Article 10 deals with the continued citizenship of foreigners in India, subject to any further laws adopted by the legislature. The Indian constitution recognizes just one citizenship across the country and does not allow for multiple citizenship.

It also states that a foreign citizen can get Indian citizenship through the Naturalization procedure (after having lived in India for at least 14 years) and foreigner registration with the FRRO (Foreigners Regional Registration Officer) or FRO (Foreigners Registration Officer). The Indian law follows jus sanguinis (citizenship by blood) as opposed to jus soli (citizenship by birth).

Immigrant rules and restrictions:

Certain laws have been enacted to streamline the process of foreigners obtaining citizenship, including:

• Foreigners entering India are obliged to get visas from India Missions under the Passport (Entry in India) Act, 1920.
• The statute also specifies which papers must be submitted during their lawful journey in order to be admitted to the nation.
• The Foreigners Statute, 1946 – This act governs foreigners’ admission and stay within Indian boundaries till they leave.
• The Foreigners Registration Act of 1939 and the Foreigners Registration Rules of 1992. Certain foreigners who remain longer than their visa period is required to register with the Registration Officer.

Types of Visa

The proper Indian diplomatic consular or passport authority i.e. Indian Embassy/High Commission located in various countries issue different types of visa to foreign nationals depending upon their proposed activities in India.

Below is an illustrative list of visas granted in order to enter India basis the purpose to visit India:

Registration of foreigners in India:

• Foreigners travelling for a lengthy period (more than 180 days) on a student visa, work visa, research visa, or medical visa must register with the Indian Missions/FRRO/FRO within 14 days of arrival, with the exception of Certain sorts of nationalities are restricted from participating in this procedure.
• Foreigners entering India on any form of visa other than the ones listed above are not need to register unless they plan to stay in India for more than 180 days. In such circumstances, registration must be completed well before the 6-month term expires.
• Foreigners above the age of 16 are needed to register with the relevant Registration Officer in person or through an authorized agent. Minors under the age of 16 do not need to register.
• Foreign visitors with an Entry(X) visa, such as dependent visas and business visas, who plan to stay for more than 180 days must also register.
• Visitors with journalist visas and other visas that do not have any specific endorsements must register with the FRROS/FRO. The visas applied for registration will be stamped at all Indian missions.

The Patent is granted by the sovereign of the country for the Invention claimed by the inventors which gives him/her territorial rights for excluding others from making, using, selling, and offering to sell or for importing. To get the granted Patent, which is essential for the enforceability, every country has its criteria to judge the invention. Usually, Novelty, Inventive Step/Non-Obviousness and Industrial Applicability are the common criteria for judging an invention.

Conditions:

Inventive Step:

The invention must have some creative input from the inventor. It should be something which is not expected by the person skilled in the art. If an inventor is solving some technical problem by inventing something and if the person skilled in the art who is from the same field is providing the same solution by using his acquired knowledge or by taking teaching, suggestion or motivation, in that case the technical solution provided by the inventor will not be considered as inventive in nature.

Novelty:

The invention must create new knowledge or product or process. It should not be anticipated by the document, granted Patent, published Patent, non-Patent literature or in any form which is already available in the public domain. It must be different from what is already known.

Industrial Application:

Patents are granted to ensure that the inventor can exploit his/her invention freely, without the fear of competition. In this context, it is necessary that the invention is capable of being used and has industrial application. An invention should be used or manufactured in the form of a product or process.

Non-Patentable Subject matter:

In addition, an Invention must relate to the patentable subject matter. Every country has its criteria to judge the Patentable subject matter. In India, the list of non-Patentable subject matters is specifically mentioned.

For example: Frivolous invention or anything which is contrary to the natural laws, mere discovery, abstract theory, discovery of living or non-living things, discovery of new form of known substance, mere admixture, mere arrangement or re-arrangement, method of horticulture/agriculture, surgical process, mathematical/ business method, algorithm or computer program per se, mere scheme or rule, topology of integrated circuit, literary or artistic work, presentation of information, traditional knowledge or an invention related with atomic energy are not Patentable subject matter.

Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may vary by jurisdiction, but it typically includes using or selling the patented invention. In many countries, a use is required to be commercial (or to have a commercial purpose) to constitute patent infringement.

The scope of the patented invention or the extent of protection is defined in the claims of the granted patent. In other words, the terms of the claims inform the public of what is not allowed without the permission of the patent holder.

Patents are territorial, and infringement is only possible in a country where a patent is in force. For example, if a patent is granted in the United States, then anyone in the United States is prohibited from making, using, selling or importing the patented item, while people in other countries may be free to exploit the patented invention in their country. The scope of protection may vary from country to country, because the patent is examined or in some countries not substantively examined by the patent office in each country or region and may be subject to different patentability requirements.

Remedy for Infringement of Patent

An action for infringement must be instituted by way of a suit in any District Court or a High Court having jurisdiction to entertain the suit.

The plaintiff on satisfying the court about infringement of his patent would be entitled to the following relief:

• Interlocutory injunction
• Damages
• Account of profits

Interlocutory Injunction

The Plaintiff may at the commencement of the action move for an interim injunction to restrain the defendant from committing the acts complained of until the hearing of the action or further orders. The plaintiff should make out a prima facie case and also show that the balance of convenience lies in his favour.

Damages

In assessing the damages the important question is what is the loss sustained by the patentee. The loss must be the natural and direct consequence of the defendant’s acts. The object of damages is to compensate for loss or injury.

Accounts of Profits

Where a patentee claims the profits made by the unauthorised use of his patent, it is important to ascertain how much of his invention was appropriated, in order to determine what proportion of the net profits realized by the infringer was attributable to its use.

Ways to prevent patent infringement

Creation of original products

companies can hire staff members who can create original products using their creativity and intellect. However, the company should not forget to add a clause in the contract that the product produced would be the exclusive right of the company so that the staff does not claim its own rights over the invention at a later stage.

Obtaining appropriate licenses from patent holders

If the companies or corporations plan on using any registered material for further use, then they should seek permission from the patent holder before using it otherwise the company would be made liable for using patented material.

Royalty-free material basically refers to the use of online material which can be used without any restrictions. However, in order to avoid any violations of the holder of exclusive rights over such material, it is best suited that due credit is given to the holder of such rights.

Patent Infringement suit

The Patents Act, 1970 empowers the patentee to file a suit in case there is an infringement of his exclusive patent rights. In order to file a suit, the limitation period as specified under the Limitation Act is 3 years within the infringement of the patent rights. The burden of proof usually lies on the plaintiff to prove that there was patent infringement by the defendant but in certain cases, it is at the discretion of the court to decide the burden of proof. In India, both districts and the high courts have the power to hear cases related to patent infringement. However, in case there is a counterclaim for revocation of the patent filed by the defendant, then only the High Court has the right to hear the case. The patentee can file the case in the place of his residence or the place where he carries out his business or where the cause of action arises. Section 48 of the Indian Patents Act contains the rights of the patentees. It list down the following activities as the infringement of the patentee’s rights:

• Using
• Making
• Importing
• Offering for sale
• Selling the patented process

If the defendant is involved in any of the above-mentioned acts, then he will be considered liable for infringement of the rights of the patentee. Section 108(1) of the patents act, 1970 provides for relief to the plaintiff in case his patent rights have been violated. The remedies available to the patentee are:

Temporary/Interlocutory Injunction

A temporary injunction is invoked by the court at the initial stages of the suit filed by the plaintiff. This is passed in order to prevent the defendant from getting further gains by using other patented products. In order to invoke a temporary injunction, it is important for the patentee to prove that the patent is valid and has been infringed by the defendant. Also, the subsequent infringement in his patent rights has caused irreparable loss to him.

Permanent injunction

A permanent injunction is invoked when the case is finally decided by the court. The interim injunction is transferred to a permanent injunction if the defendant is found guilty of patent infringement rights. But if the defendant is absolved from the liability, then the interim injunction stands dissolved and is not converted into a permanent injunction.

Damages

In case the defendant is proven guilty, the plaintiff is either awarded damages or an account of profits by the defendant. Damages may not be provided to the plaintiff in case the defendant pleads ignorance and proves that he had no reasonable grounds to believe that the said patent existed at the time of infringement.

Defences available in the suit

There are various defenses provided in a patent infringement suit which absolves the defendant of his liability:

• When a defendant denies infringement by proving his lack of intention.
• In case of estoppels or res judicata.
• When a plaintiff is not entitled to sue for infringement.
• When the defendant has the express/implied license to use the patented product.
• When there is a revocation of patents for reasons of it being illegal.
• In the case of pharmaceutical drugs/medicines, the government can retain the exclusive right to manufacture patented products in public welfare.
• in case the alleged infringement is obvious and not novel.

What does not amount to infringement

Section 107A in the Patents Act incorporates bolar provision and provision for parallel imports:

Bolar provision: It gives rights to the manufacturers of pharmaceutical products to conduct research on various patented products so that the products can be brought into the market for the welfare of the general public. But this research can only come into effect after the expiry of the patented product.

Parallel import provisions: This gives the right to import the product to the person authorised by the patentee. This importation will not be considered as an infringement of the patent rights of the patentee. This meant any person who is in possession of the license can import the patented products without seeking permission from the patentee and this will not be considered as an infringement.

The Competition Appellate Tribunal is a statutory organization established under the provisions of the Competition Act, 2002 to hear and dispose of appeals against any direction issued or decision made or order passed by the Competition Commission of India under sub-sections (2) and (6) of section 26, section 27, section 28, section 31, section 32, section 33, section 38, section 39, section 43, section 43A, section 44, section 45 or section 46 of the Competition Act, 2002. The Appellate Tribunal shall also adjudicate on claim for compensation that may arise from the findings of the Competition Commission of India or the orders of the Appellate Tribunal in an appeal against any findings of the Competition Commission of India or under section 42A or under sub-section (2) of section 53Q of the Act and pass orders for the recovery of compensation under section 53N of the Act.

The Central Government has set up the Appellate Tribunal on 15th May, 2009 having its Headquarter at New Delhi. Hon’ble Dr. Justice Arijit Pasayat, former Judge of Supreme Court, has been appointed as the First Chairperson of the Appellate Tribunal. Besides, the Chairperson, the Appellate Tribunal shall consist of not more than two Members to be appointed by the Central Government. The Chairperson of the Appellate Tribunal shall be a person, who is, or has been a Judge of the Supreme Court or the Chief Justice of a High Court. A Member of the Appellate Tribunal shall be a person of ability, integrity and standing having special knowledge of, and professional experience of not less than twenty-five years in, competition matters, including competition law and policy, international trade, economics, business, commerce, law, finance, accountancy, management, industry, public affairs, administration or in any other matter which in the opinion of the Central Government, may be useful to the Appellate Tribunal. The Chairperson or a Member of the Appellate Tribunal shall hold office for a term of five years and shall be eligible for re-appointment. Provided that no Chairperson or other Member of the Appellate Tribunal shall hold office after he has attained the age of sixty-eight years or sixty-five years respectively.

Every appeal shall be filed within a period of 60 days from the date on which a copy of the direction or decision or order made by the Competition Commission of India is received and it shall be in the prescribed form and be accompanied by the prescribed fees. The Appellate Tribunal may entertain an appeal after the expiry of the period of 60 days if it is satisfied that there was sufficient cause for not filing it within that period.

The Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules made by the Central Government. The Appellate Tribunal shall have, for the purposes of discharging its functions under the Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908). Every order made by the Appellate Tribunal shall be enforced by it in the same manner as if it were a decree made by a court in a suit pending therein. If any person contravenes, without any reasonable ground, any order of the Appellate Tribunal, he shall be liable for a penalty of not exceeding rupees one crore or imprisonment for a term up to three years or with both as the Chief Metropolitan Magistrate, Delhi may deem fit.

Competition Appellate Tribunal (COMPAT)

Prior to 2007, if a party was not satisfied with the decision of the Competition Commission of India (CCI), It had to file an appeal in the Supreme Court of India, thereby increasing the pendency of cases in the Court. However, after the Competition (Amendment) Act, 2007, the Competition Appellate Tribunal (COMPAT) was established. It provided the provided the parties with a proper channel for appeal and changed the hierarchy of appeal. After the establishment of the Competition Appellate Tribunal (COMPAT), the appeal from Competition Commission of India lies in front of the Appellate Tribunal and a further appeal goes to the Supreme Court.

National Company Law Appellate Tribunal (NCLAT)

However, the establishment of Competition Appellate Tribunal (COMPAT) was found not to be as effective as it was hoped would be. There were a number of conflicts between CCI and COMPAT related to their sharing of power. The result of this conflict was that in 2017 an amendment was made through which the provision of Part XIV of Chapter VI of the Finance Act, 2017 came into operation. After such amendment the Competition Appellate Tribunal (COMPAT) ceased to exist. In place if it the National Company Law Appellate Tribunal (NCLAT) was constituted.  Accordingly, Sections 2(ba) and 53A of the Competition Act and Section 410 of the Companies Act, 2013 have been appropriately amended and various other provisions of the Competition Act dealing with the Competition Appellate Tribunal (COMPAT) have been omitted.

Previously, all appeals against specified orders of the Competition Commission of India (CCI) would lie to the Competition Appellate Tribunal (COMPAT) whereas the National Competition Law Appellate Tribunal (NCLAT) dealt with, inter alia, appeals arising out of orders of the National Company Law Tribunal (NCLT) under the Companies Act, 2013 as well as the Insolvency and Bankruptcy Board of India (IBBI) under the Insolvency and Bankruptcy Code, 2016.

Filing an appeal

The Section 53B of the Competition Act, 2002 provides for ‘Appeal to Appellate Tribunal’.

Clause 1 of Section 53B

Section 53B(1) states that:

“The Central Government or the State Government or a local authority or enterprise or any person, aggrieved by any direction, decision or order referred to in clause (a) of section 53A may prefer an appeal to the Appellate Tribunal.”

This clause of Section 53B provides for the persons who can file an appeal before the Appellate Tribunal. According to it, when any direction, decision or order is passed as per Section 53A of the Act, the Central Government or the State Government or a local authority or enterprise or any person, if aggrieved, can file an appeal before the Appellate Tribunal.

Clause 2 of Section 53B

Section 53B(2) states that:

“Every appeal under Sub-section (1) shall be filed within a period of sixty days from the date on which a copy of the direction or decision or order made by the Commission is received by the Central Government or the State Government or a local authority or enterprise or any person referred to in that sub-section and it shall be in such form and be accompanied by such fee as may be prescribed:

Provided that the Appellate Tribunal may entertain an appeal after the expiry of the said period of sixty days if it is satisfied that there was sufficient cause for not filing it within that period.”

This clause of Section 53B provides for the time limit within which the appeal shall be filed. According to this section, every appeal shall be filed within a period of sixty days from the date on which a copy of the direction or decision or order made by the commission is received by specified parties. It is also provided that the Appellate Tribunal if satisfied that the applicant was prevented by sufficient cause from filing the appeal shall be allowed to file the appeal after the expiry of the said period i.e., 60 (sixty) days.

Common control business combinations will include transactions, such as transfer of subsidiaries or businesses, between entities within the group.

Business combinations involving entities or businesses under common control shall be accounted for using the pooling of interests method.

Pooling of Interest method involve:

• The assets and liabilities of the combining entities are reflected at their carrying amounts (No clarity if carrying amount to be considered of SFS or CFS)
• No adjustments are made to reflect fair values, or recognise any new assets or liabilities
• Financials of prior periods should be restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination
• If business combination had occurred after that date, the prior period information shall be restated only from that date
• Consideration may consist of securities, cash or other assets. Securities issued should be recorded at nominal value. Assets other than cash should be measured at fair value.

Reduction of share capital is often resorted by companies for internal restructuring or altering their capital structure; it entails reduction of issued, subscribed and paid-up share capital (either equity shares or preference shares or both) of a company. The following are the most likely situations of capital reduction.

1. Capital reduction without pay-out or
2. Capital reduction with pay-out

• To all the shareholders
• To selective shareholders

1. Returning surplus capital: A company may have capital which is surplus to its requirements for the foreseeable future and which it may therefore wish to return to its shareholders.
2. Redeeming Shares: A company may wish to redeem its shares but it cannot do so if it has insufficient distributable reserves.
3. Distributing non- cash assets: A company may also use a capital reduction to transfer non-cash assets that it owns to its shareholders, although this is relatively unusual.
4. Structuring mergers and acquisitions as part of a scheme of arrangement: Capital reductions have become a popular method of structuring mergers and acquisitions or group restructurings.
5. Demergers: Capital reduction can be used to split one company’s activities into different companies, called a demerger. Demergers are often used with the help of a scheme of arrangement.

Capital reduction with pay-out:

Advantages of capital reduction with payout for the company are:

• Easy to distribute surplus cash to shareholders.
• No limit for distribution like in buyback or dividend.
• As a consideration, Company may give assets to the shareholders which were not allowed in the buyback.

The capital reduction is provided by section 66 of the companies act 2013 and its taxability is provided in various provisions of the Income Tax Act 1961. We shall discuss regulatory and taxation aspects in case of capital reduction of equity shares.

Capital Reduction: Provisions under the Companies Act 2013

Section 66 of the Companies Act, 2013, provides that, for a company to reduce its share capital, it should have the power under its Articles of Association (AOA) to do so. Thereafter, a special resolution for reducing share capital must be passed by shareholders. Subsequently, the reduction effected by such special resolution must be confirmed by the National Company Law Tribunal (NCLT).

As generally understood, capital reduction is uniform for all the shareholders of the particular class. In this case, it can be compulsory for all the shareholders to abide by the order of the honourable NCLT confirming the special resolution of the shareholders for the size, amount and other terms of the reduction.

Artificial intelligence systems can be very powerful and are improving quickly. They provide outputs that can be extremely accurate, replacing and, in some cases, far superseding human efforts. However, they do not replicate human intelligence. We need to recognise the strengths and limits of this different form of intelligence, and build understanding of the best ways for humans and computers to work together.

Artificial intelligence and Accountancy

Although artificial intelligence techniques such as machine learning are not new, and the pace of change is fast, widespread adoption in business and accounting is still in early stages. To build a positive vision of the future, we need to develop a deep understanding of how artificial intelligence can solve accounting and business problems, the practical challenges and the skills accountants need to work alongside intelligent systems.

ICAEW has long-standing expertise in technology-related issues, drawing on the experience across many aspects of business, finance and accounting, and will focus on building understanding of the practical use of artificial intelligence across business and accounting activities today and in the near future.

Benefits of Artificial Intelligence for Accountants and Finance Professionals

New technology is changing the way people work in every industry. It’s also changing the expectations clients have when working with companies. The same is true for accounting. Artificial intelligence can help accountants be more productive and efficient. An 80-90 per cent reduction in the time it takes to do tasks will allow human accountants to be more focused on providing counsel to their clients. Adding artificial intelligence to accounting operations will also increase the quality because errors will be reduced.

When accounting firms adopt artificial intelligence to their practise, the firm becomes more attractive as an employer and service provider to millennials and Gen Z professionals. This cohort grew up with technology, and they will expect prospective employers to have the latest technology and innovation to support not only their working preferences of flexible schedules and remote locations but also to free them up from mundane tasks that machines are better suited to complete. As clients, millennials and Gen Zers will determine who to do business with based on the service offerings they can provide. As more accounting firms adopt artificial intelligence, they will be able to provide the data insights made possible by automation while those who don’t commit to the technology will not be able to compete.

Robotic process automation (RPA) allows machines or AI workers to complete repetitive, time-consuming tasks in business processes such as document analysis and handling that are plentiful in accounting. Once RPA is in place, time accountants used to spend on these tasks is now available for more strategic and advisory work. Intelligent automation (IA) is a more sophisticated version of RPA. IA can mimic human interaction in many cases, such as understanding inferred meaning in client communication and using historical data to adapt to an activity. There are multiple applications of RPA and IA in accounting work.

AI can often provide real-time status of financial matters since it can process documents using natural language processing and computer vision faster than ever making daily reporting possible and inexpensive. This insight allows companies to be proactive and adjust course if the data show unfavourable trends.

Automated authorization and processing of documents with AI technology will enhance several internal accounting processes including procurement and purchasing, invoicing, purchase orders, expense reports, accounts payable and receivables, and more.

In accounting, there are many internal corporate, local, state and federal regulations that must be followed. AI-enabled systems help support auditing and ensure compliance by being able to monitor documents against rules and laws and flag those with issues. Fraud costs companies collectively billions of dollars each year and financial services companies have $2.92 in costs for every dollar of fraud. Machine learning algorithms can quickly sift through enormous amounts of data to discern potential fraud issues or suspicious activity that might have been otherwise missed by humans and flag it for further review.

Changing the Human mindset

It seems like the only barrier to artificial intelligence adoption in accounting is getting people on board with the change. Nearly 85 per cent of executives understand that AI will help their companies attain or sustain a competitive advantage according to a study from The Boston Consulting Group and MIT Sloan School of Management. Since the chief executives seem to understand the importance of artificial intelligence, it just requires a mindset shift from the accounting professionals to accept the changes. With an assist from AI-enabled systems, accountants are freed up to build relationships with their clients and deliver critical insights.

Enterprises that jump on the digital transformation train by adopting AI have the advantage as they can leverage AI to all aspects of accounting, including improved operational efficiency, reduced costs, and more significant ROI. For instance:

Payables/ Receivables Processing

Invoice processing is considered one of the more time-consuming and labor-intensive parts of the enterprise. AI-based invoice management systems help by increasing the volume, performing zero-error processing, and improving vendor relationships.

Supplier Onboarding

The AI-based approach helps expand customers’ reach, increase revenue, and evaluate the suppliers with minimal human intervention.

Procurement Processes

Purchasing and procurement processes mean a lot of paperwork – sometimes in different systems that are seemingly unconnected! With AI-driven workflows, finance teams can process unstructured data while automatically mitigating governance/compliance/risks.

Auditability

Data analytics establishes the scope of the audit, and risk assessment as RPA and analytics facilitate tracking of routine transactions. Cognitive computing, predictive analytics, and AI enable tracking more complex transactions that go with estimates and judgments.

Monthly and Quarterly Cash Flows

AI-based tools empower enterprises to reconcile financial activities quickly, understand historical cash flows, and predict future cash requirements. AI applications also ensure that all financial processes are secure by collecting data from many sources and integrating the data.

Expenses Management

When manually done, managing expenses-related processes is not only filled with complex paperwork but also prone to fraud and data breaches. Expenses management automation ensures almost zero errors and alerts the team to a breach if it occurs.

Chatbot Support

AI-driven chatbots help solve user queries quickly and efficiently, including queries on account balance, financial statements, account status, etc. Tracking outstanding invoices and automating the follow-up collection processes with AI ensures that accounts are kept balanced and closed promptly. Moreover, AI chatbots answer customers’ routine questions and can provide level-1 support.