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INTEGRITY FIRST

“Honesty and Integrity are by far the most

important assets of an entrepreneur.”

Zig Ziglar.

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Cost

S. No. Topic

1.

Startup Desk: Bollant Industries

2.

Easwar Committee Report

3.

Fixed Asset: Component Accounting

4.

Recent Developments in Indirect Taxes

5.

Apple vs FBI: Why should we worry?

6.

Risk Assesment

INDEX

This article aims at:

Insight to story of a Blind CEO Srikant Bolla

who established a 50 Crore Company

Startup Desk

V.K. Verma & Saahil Sharma

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THE BLIND CEO WHO BUILT A 50 CRORE

COMPANY

When he was born, neighbors in the village suggested that his parents smother him. It was better than the

pain they would have to go through their lifetime, some said. He is a “useless” baby without eyes… being

born blind is a sin, others added.

Twenty-three years later, Srikanth Bolla is standing tall living by his conviction that if the “world looks at me and says, ‘Srikanth, you can do nothing,’ I look back at the world and say I can do anything.”

Srikanth is the CEO of Hyderabad-based Bollant Industries, an organisation that employs uneducated and

disabled employees to manufacture eco-friendly, disposable consumer packaging solutions, which is

worth Rs 50 crores.

Underdog Success Story Underdog success stories touch a raw nerve. After all, everyone faces adversity, they dream, and they work

hard. It is another matter that only a few cross the threshold of limits set by society.

In Srikanth’s case, it is his sheer tenacity that shines through the dark clouds of his misfortune. Being

born blind was just one part of the story. He was also born poor. And you know what that means in a

society like ours.

In school, he was pushed to the back bench and not allowed to play. The little village school

had no way of knowing what inclusion meant. When he wanted to take up science after his

class X, he was denied the option because of his disability. All of 18, Srikanth not only

fought the system but went on to become the first international blind student to be

admitted to the prestigious Massachusetts Institute of Technology (MIT) in the US.

Today, Srikanth has four production plants, one each in Hubli (Karnataka) and Nizamabad

(Telangana), and two in Hyderabad (Telangana). Another plant, which will be one hundred

percent solar operated, is coming up in Sri City, an integrated business city in Andhra

Pradesh, 55 kms from Chennai.

Angel investor Ravi Mantha, who met Srikanth about two years ago, was so impressed with

his business acumen and vision for his company that he not only decided to mentor him

but also invested in Srikanth’s company.

“It was a small, tin-roof shack in an industrial area near Hyderabad. There were eight

employees and three machines under the shed. I expected him to talk about how he wanted

to make a social impact, but was surprised by the business clarity and technical knowhow

in someone so young,” Ravi says.

They are raising $2-million (around Rs 13 crores) in funding and have already raised Rs 9

crores. According to Ravi, his personal goal is to “take the company to IPO.” A vision to

build a sustainable company with a workforce comprising 70 percent people with disability

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is no mean task. “Srikanth’s vision is inbuilt in the company. It is not just a lip service to

CSR,” adds Ravi.

Isolation a big curse

When his father realised that the child was not learning anything, he admitted Srikanth to a special needs

school in Hyderabad. The boy thrived in the compassion he was shown there. He not only learnt to play

chess and cricket but excelled in them. He topped his class, even embracing an opportunity to work with

late President Dr APJ Abdul Kalam in the Lead India project.

But none of this mattered much because Srikanth was denied admission to the science stream in class XI.

He cleared the Andhra Pradesh class X state board exams with over 90 percent marks, but the board said

he could only take Arts subjects after that. “I sued the government and fought for six months. In the end, I

got a government order that said I could take the science subjects but at my ‘own risk’. ”

Thus not ‘risking’ anything to chance, Srikanth did whatever he could to prove them wrong. He got all the

textbooks converted to audio books, worked day and night to complete the course and managed to secure

98 percent in the XII board exams.

Fortune favours the brave

Sometimes, life mimics a steeplechase. Especially when it comes to those it has big plans for. It did not

give Srikanth enough time to bask in his victory when it threw another spanner in the works. He applied

for IIT, BITSPilani, and other top engineering colleges, but did not get a hall ticket. Instead,

“I got a letter saying ‘you are blind, hence you are not allowed to apply for competitive

exams.’ If IIT did not want me, I did not want IIT either. How long can you fight?”

He chose his battles carefully and did his homework searching the Internet to find the best engineering

programme for someone like himself. He applied to schools in the US and got into the top four – MIT,

Stanford, Berkeley, and Carnegie Mellon. He went to MIT (with a scholarship) as the first international

blind student in the school’s history.

Good always rebounds Entrepreneur bravehearts like the warriors of Paulo Coelho always find one unflinching support, an

anchor to keep them afloat. In Srikanth’s case, it is his Co-founder Swarnalatha. “She was his special

needs teacher in school. She has been his mentor and guide through all these years. She trains all the

employees with disabilities at Bollant thereby creating a strong community where they feel valued,” says

Ravi, adding, “Srikanth is a true source of my inspiration. He is not only my young friend and protégé but

is also my mentor who teaches me daily that anything is possible if you set your mind to it.”

The boy who was born blind is today showing many the path to real happiness. He says his three most

important life lessons are:

“Show compassion and make people rich. Include people in your life and remove

loneliness, and lastly, do something good; it will come back to you.

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ABOUT BOLLANT

Bollant fulfills its mission through eco-friendly disposable consumer products and packaging industry.

The manufacturing plant employs uneducated disabled employees to bring out various natural leaves and

paper based disposable consumer products and customized packaging solutions.

PRODUCTS

Corrugated Products Paper Plates

Areca Leaf Products Printed Paper Plate

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BOLLANT WILL HAVE IM PACT

Kind Courtesy

Source:

http://yourstory.com/

http://www.bollant.com/

Individual Impact

Whenever Bollant Projects helps people with

disabilities find sustainable employment, a primary

effect is to grant economic independence to each

individual. These individuals feel empowered because

of their more independent financial status, and have

more control over their own lives than ever before.

Economic Impact

To individuals with disabilities, having

employment and financial independence

allows them to have more meaningful lives

and to become a greater part of society.

Environmental Impact

We provide consistent revenue generation

opportunities for small and medium scale farmers of

India. We buy millions of agricultural leaf wasted that

is generated every year. We buy waste leaf and create

revenue stream for farmers. Then we process the leaf

and manufacture beautiful, highly hygienic and high

quality products.

Social Impact

Bollant Projects wants to send the message

that people with disabilities can be a

productive part of society. We look to raise

awareness toward the problems faced by

people with disabilities, especially the

societal discrimination faced by many.

Kind courtesy

This article aims to provide:

Provide knowledge related to Proposed

recommendation of Easwar Committee

regarding simplication of tax.

Easwar Committee

Report

CA Digant Chadha & Priyanka Agarwal

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EASWAR COMMITTEE REPORT In October 2015, the Central Government constituted a committee under the chairmanship of Justice R.V. Easwar for simplification of the Income-tax Act, 1961 (the Act). The committee has dealt with recommendations on issue which are simple and need immediate attention. The objectives behind forming such a committee were to study and identify the provisions of the Act -

Which have given rise to litigation on account of interpretative differences

Which impact the ease of doing business

For simplification in light of the existing jurisprudence,

To suggest alternatives or modifications with a view to ensuring certainty and predictability in tax laws without substantially impacting the tax base or revenue collections.

RECOMMENDATION REQUIRING AMENDMENT TO THE ACT No Section TOPIC RECOMMENDATION

1

2(14)(aa)

Capital Asset

Introduction of a new section 2 (14)(aa) – Capital Asset shall include shares and securities held for a period exceeding 12 months from the date of acquisition (except stock-in-trade/trading asset).

2

45A

Capital Gain

New Section 45A to be introduced to provide that on transfer of shares and securities held for a period of less than 12 months and do not exceed Rs.5 lakhs during the P.Y, the AO shall not treat such profits and gains as business income, provided the shares were not held as stock in trade.

3

14A

Disallowance of

expenses incurred on

exempt income

Dividend Income suffers Dividend Distribution Tax (DDT) and therefore should be treated as deemed income and will not be construed as exempt income.

Similarly, share of profit from a partnership firm should also be deemed income.

Recommendations of Committee

Requiring amendment to the Act Implementation through circulars and

notifications

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4

44AB

Tax Audit

Threshold should be revised :- For business: INR 2 Crores and For Profession: INR 1 Crore

5

44AD

Presumptive

Income

Threshold limit of 1 crore to be increased to INR 2 crore Exempting small businessmen and proessional from maintaining book and tax audit.

6

Presumptive Professional

Income

Income= 331/3 % of total receipt in the P.Y for the professional having income less than 1 crore.

7

50C

Capital Asset

Date of an agreement fixing the consideration value and date of registration for the transfer of the asset are not same, the value referred in Section 50C (1) of the Act may be taken as the value assessable by any authority of a State Government for the payment of stamp duty in respect of such a transfer as on the date of the agreement. The said provision shall apply only in a case where the payment is received on or before date of agreement.

8

56(2)(vii)

(b)(ii)

Inadequate

consideration

Presumption under this act is not as per judicial intrepretation . therefore the section should be deleted

9

143(1d)

Undesirable delay in issue

of reund

This section is proposed to be deleted. Section 143(1D) of the Act provides that the processing of a return shall not be necessary, where a notice has been issued u/s- 143(2) of the Act The time limit for finalization of assessment, in case where notice for scrutiny has been issued under Section 143(2) or International Transfer Pricing, could extend up to 32 months or 40 months from the date of tax return filing

10

139

Fresh claim for

assessement proceeding

The provisions should be amended to provide an opportunity to make a fresh claim during the assessment proceedings. Such claim should be verified and any wrong claim made by the assessee should be subject to penal provisions

11

145(2)

Deferment of

ICDS

Implementation of the ICDS be deferred by making a suitable amendment

12

147

Assessement on account of

audit objection

Audit objection are mistake apparent from record, it should be mandatory for the A.O to take corrective measures.

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13

Rise in threshold limit

of TDS

Committee recommends that small partnership firms should be exempted from the responsibility of TDS, unless their total sales, gross receipts or turnover from the business or profession carried on by them exceeds the monetary limits specified under Section 44AB. The TDS rate of interest and commission need to reduce from 10% to 5%

14

197

Difficulties in

lower deduction

Electronic acceptance of the application. Acceptance of application for issue of certificate at a lower rate, 3 months prior to the commencement of the F.Y and prescribing a suitable time limit for issue

15

Rule-37BA

Credit for TDS

The concerned deductee should be allowed to report the correct information in this regard to designated authority in a prescribed format before due date of filing of return of income

16

Rule – 30

& 31

Payemnt and filing of TDS

statement

For better compliance, it is proposed that an enhanced time limit of 45 days until 15th may be allowed for payment of tax deducted and Non -govt. Deducters need to be given a similar time of 1 month for filing

17

206A

Exempt NRI having TIN

The amended provision recommend that if the non – resident furnishes TIN or any unique number stating his residence proof in lieu of PAN then the TDS will not be deducted at higher rate.

18

220

Recovery of

disputed demand

Taxpayer should be allowed an automatic stay of demand on payment of 7.5% of the demand. In high pitched assessment recovery of the demand arising from the levy of penalty after the order of the commissioner should be stayed till 1 month after the disposal of quantum appeal by the tribunal.

19

234C

Relief from

interest for the deferment of advance tax

Recommends that an appropriate column or space be provided in The return where the taxpayer can disclose the information necessary for taking the benefit of the proviso.

20

234E

Reduction of fee for default infurnishing statement of TDS & TCS

The committee recommends to amend the section – 234E o the Act by reducing the feeRs. 200 per day to 100 per day

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21

143(1)

Refund

The committee recommends that interest on refund should be payable at the rate of – -1% per month interest , if the return is processed u/s-143(1) after the 6 months from the end of month in which return was filed. -1.5% per month interest , if the return is processed u/s-143(1) after the 12 months from the end of month in which return was filed.

22

245

Set off of tax

refund against tax demand

It states that no set off of refund shall be made under this section and the recovery demand will be charged from the taxpayer by the court

23

254(2)

Rectification of

mistake by Tribunal

The committee recommends that the time limit for the rectification of the order of Tribunal u/s- 254(2) of the act should be reduced to 120 days from the date of order sought to be rectified

24

255(3)

Widen the

scope of appeal by the single

member benches

Committee recommends that the interest of sppedy disposal of appeals the limits can be enhanced to 10 million where the tax effect involve would be around 3 million . This will also help the disposal of appeal in places where there is only one bench functioning .

RECOMMENDATION FOR REFORMS THROUGH ADMINISTRATIVE INSTRUCTIONS

S.NO. TOPIC RECOMMENDATION 1

Implementation of Ind-AS

Tax payer and department need to know the impact o taxable income and book profit and have deep knowledge of Ind-AS.

2

TDS Simplification

-TDS filing and rectification software to be accessed by the taxpayer and excess payment should be refunded electronically. -Proposed time limit for the month of march shall be 45 days

3

Transparency in Tax

administration

Electronic technology is needed to be put in place for scrutiny assessement and additional clarification

4

System Issues

IT software needs to be strengthen so that the issues related to this are resolved

5

Issue of PAN to non-

resident

Recommends that document for issuance of PAN may be allowed to be self-attested or notarized

6

Additional disclosure in

Return Form

Require to insert adequate space for his point and jurisdiction of his claims in the return form

This article highlights:

Applicability of Component Accounting

Determination Significant Part of Asset

Determination of Cost of Component

Transitional Provision

Fixed Asset:

Component Accounting

CA Kunal Jain & Renuka Yadav

KGS

FIXED ASSETS: COMPONENT ACCOUNTING

(In consideration of Guidance Note on Accounting for Depreciation in companies in

the context of Schedule II to the Companies Act, 2013 issued on 6th Feburary,2016)

Component accounting requires a company to identify

and depreciate significant components with different

useful lives separately. The application of component

accounting is likely to cause significant change in the

measurement of depreciation and accounting for

replacement costs. Currently, companies need to

expense replacement costs in the year of incurrence.

Under component accounting, companies will

capitalise these costs as a separate component of the

asset and decapitalise the carrying amount of

previously recognised component. When it is not

practicable to determine the carrying amount of the

replaced part, the cost of the replacement may be used

as an indication of what the cost of the replaced part

was at the time it was acquired or constructed.

Applicability

As per note 4 of Schedule II -“Useful life specified in Part C of the Schedule is for whole of the asset.

Where cost of a part of the asset is significant to total cost of the asset and useful life of that part is

different from the useful life of the remaining asset, useful life of that significant part shall be

determined separately.” As per the amendment dated August 29, 2014 notified by the MCA, the said

requirement shall be voluntary in respect for the financial year commencing on or after the April 1,

2014 and mandatory for financial statements in respect of financial years commencing on or after

April 1, 2015.

A company is required to apply component accounting (if appropriate) for all depreciable fixed assets

(existing or newly acquired) as at 1 April 2014 if a company opts to follow it voluntarily and as at 1

April, 2015 mandatorily. However, if the carrying amount of any asset is lower than or equal to the

estimated residual value of the asset(s), company is not required to apply component accounting for

such asset(s).

Determining Significant Part of Asset Companies will need to identify and depreciate significant components with different useful lives

separately. The component approach is already allowed of the current AS 10. Under AS 10, there

seems to be a choice in this matter; however, Schedule II requires application of component

accounting mandatorily. The determination as to whether a part of an asset is significant requires a

careful assessment of the facts and circumstances. This assessment would include at a minimum:

Determine the threshold value to determine which asset requires componentisation.

Threshold value in percentage of cost of component to the total cost of the asset

Proportion of useful life of that part as compared to the useful life of the asset

Potential impact on the total depreciation expenditure

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Determination of Cost of Component For the purpose of determining the cost of such component, the following criteria can be used in the order given below:

Break-up cost provided by the vendor; Cost break-up given by internal/external technical expert; Fair values of various components; or Current replacement cost of component of the related asset and applying the same basis on

the historical cost of asset.

Clarification Regarding Transitional Provision

Under component accounting, an issue arises whether the transitional provision under Note 7 of

Schedule II will be available to company on April 1, 2015, with respect to componentisation, though it

adopted the other provisions (useful life) of Schedule II as on April 1, 2014. This Guidance Note

clarifies that if a company determines the life of a component which is different from the remaining

asset and such useful life happens to be nil as on the date of transition to Schedule II either on

voluntary basis or on mandatory basis as the case may be, the carrying amount of such component

may be transferred directly to the retained earnings. In other words, the transitional provisions of

Schedule II may be applied mutatis mutandis w.r.t. component accounting. Further, if the company

opts to adjust the carrying amount of the components to the retained earnings in accordance with the

transitional provisions of Schedule II, the tax effect of the same has also to be adjusted directly against

the retained earnings in accordance with the Announcement issued by the Institute of Chartered

Accountants of India, “Tax effect of expenses/income adjusted directly against the reserves and / or

Securities Premium Account”

This article aims to familiarize you with

recent notifications introduced by CBEC

Recent Developments

in Indirect Taxes

Garima Sharma & Divya Gupta

KGS

RECENT DEVELOPMENTS IN INDIRECT TAXES

Refund of Swachh Bharat Cess (SBC) paid on

specified services used in Special Economic

Zone (“SEZ”):

The Central Government (CG) vide Notification No. 02/2016-

Service Tax dated February 2, 2016 (“Notification No. 2”)

has amended Notification No. 12/2013-Service Tax dated July 1,

2013 (Exemption on services received by units located in a SEZ or

Developer of SEZ and used for the authorised operation) to enable

the SEZ Unit or the Developer for refund of the SB Cess paid on the

specified services on which ab-initio exemption is admissible but

not claimed.

Erstwhile notification provided ab-initio exemption only to the service tax paid for services received by a

SEZ Unit or Developer and used for authorized operations.

PreviouslyNotification No. 12/2013-Service Tax dated July 1, 2013 grants service tax exemptionfor

services received by a SEZ Unit or Developer and used for authorized operations. The exemption under

this notification was provided:

By way of refund of service tax paid on specified services.

By way of ab-initio exemption in case the specified services are exclusively used for the authorised

operations.

Further, the refund of amount distributed to the SEZ Unit or the Developer in the manner as prescribed in

Rule 7 of the Credit Rules, will be determined as under:

X

Rate of Service tax specified in Section 66B of the Finance Act, 199

Rebate of Swachh Bharat Cess paid on all the input services used in providing services exported:

The CG vide Notification No. 03/2016-Service Tax dated February 3, 2016 (“Notification No.

3”) has amended Notification No. 39/2012-Service Tax dated June 20, 2012 (Rebate of the duty paid on

excisable inputs or Service tax and cess paid on all input services used in providing service exported) to

insert SB Cess under the definition of ‘service tax and cess’, to enable the provider of services to claim

rebate of SB Cess paid on all the input services used in providing services exported in terms of Rule 6A of

the Service Tax Rules, 1994.

Amount distributed to the SEZ Unit or

the Developer in the manner as

prescribed in Rule 7 of the Credit Rules

Effective rate of Swachh Bharat

Cess

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Cenvat credit shall not be used for payment of SB Cess

The CG vide Notification No. 02/2016-CE(NT) dated February 3, 2016 (“Excise Notification

No. 2”), has amended Rule 3(4) of the Credit Rules, to insert a proviso providing that Cenvat credit shall

not be used for payment of SB Cess.

It may also be noted here that the Central Board of Excise and Customs in their Frequently Asked

Questions released on November 14, 2015 on SB Cess, had specifically provided that because SB Cess is

not integrated in the Cenvat credit chain, its credit is not admissible:

“Q.14 Whether Cenvat Credit of the SBC is available?

Ans. SBC is not integrated in the Cenvat Credit Chain. Therefore, credit of SBC cannot be availed.

Further, SBC cannot be paid by utilizing credit of any other duty or tax”

Cenvat credit admissible on services of sales commission agent:

The Central Government (“CG”) vide Notification 02/2016-CE (NT) dated February 3, 2016

(“the Notification”) had amended the definition of ‘input services’ under Rule 2(l) of the Credit Rules

to insert following explanation after sub-clause (C):

“Explanation.-For the purpose of this clause, sales promotion includes services by way of sale of dutiable

goods on commission basis.”

Even though the definition of ‘input services’ given under Rule 2(l) of the Cenvat Credit Rules, 2004 (“the

Credit Rules”) covers the services of sales promotion in its inclusive part, eligibility to avail Cenvat

credit on the services rendered by a commission agent has been disputed recently because of divergent

judgments and views of the Department.

In this regard, the Hon’ble Punjab & Haryana High Court in the case of Commissioner of Central

Excise, Ludhiana Vs. Ambika Overseas [2012 (25) S.T.R. 348)(“Ambika Overseas Case”)

has held that provisioning of services by the overseas commission agents for canvassing and procuring of

orders is ‘sales promotion’ falling within the ambit of definition of input service under Rule 2(l) of the

Credit Rules and the assessee will be entitled to take Cenvat credit of Service tax paid by them as recipient

of those services.

Further, the Central Board of Excise and Customs (“CBEC”) vide Circular No. 943/04/2011-CX

dated April 29, 2011 had also clarified that Cenvat credit on account of commission on sales is

appropriately covered under definition of ‘input service’ as defined under Rule 2(l) of the Credit Rules:

5

Is the credit of Business Auxiliary

Service (BAS) on account of sales

commission now disallowed after

the deletion of expression

“activities related to business”?

The definition of input services allows all credit on services

used for clearance of final products up to the place of

removal. Moreover activity of sale promotion is

specifically allowed and on many occasions the

remuneration for same is linked to actual sale.

Reading the provisions harmoniously it is clarified

that credit is admissible on the services of sale of

dutiable goods on commission basis.”

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However, the Hon’ble High Court of Gujarat in the case of Commissioner of C. Ex., Ahmedabad-II

Vs. Cadila Healthcare Ltd. [2013 (30) S.T.R. 3 (Guj.)] (“Cadila Healthcare case”), held that

the agents are directly concerned with sales rather than sales promotion, thus the services provided by

them is not covered in main or inclusive part of definition of input service in Rule 2(l) of the Credit Rules.

Thus, the matter of availing Cenvat credit on services of sales commission agents has been a subjective

issue mainly due to the judgment in Cadila Healthcare case, which came as a setback for many

manufacturers availing Cenvat credit on the services of commission agents. Further, since the judgments

in both the cases (i.e. Cadila Healthcare case and Ambika Overseas Case) were given by the Hon’ble High

Courts, none of them could be said to have binding precedent. In view of continued litigation, all the eyes

were awaiting decision of the Hon’ble Apex Court to finally have a settled legal jurisprudence.

Conclusion: Thus, Cenvat credit may be availed on services of sales commission agents also. Further,

with the insertion of stated explanation, it may be contended by the assessees that the insertion of said

explanation is clarificatory in nature, which would have retrospective effect.

Rebate of Service tax on services used beyond the factory or any other

place/premises of production/manufacture of goods, for their export:

The CG vide Notification No. 01/2016-Service Tax dated February 3, 2016 (“Notification No.

1”) has amended Notification No. 41/2012-Service Tax dated June 29, 2012 (Rebate of Service tax paid on

the taxable services which are received by an exporter of goods and used for export of goods)

[“Notification No. 41”] to include the taxable services that have been used beyond factory or any other

place or premises of production or manufacture of the goods, for their export, in the case of excisable

goods, under the definition of ‘specified services’. Further, clause (B) of Notification No. 41 prescribing

definition of ‘place of removal’ as the one defined under Section 4(3)(c) of the Central Excise Act, 1944,

has also been deleted.

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Apple vs. FBI: Why should we worry?

This article aims to

Explain Background of the case

Show Position of Apple and FBI

Explain why should We Worry?

CA Chandan Kumar & Shreyansh Jain

KGS

APPLE vs. FBI: WHY SHOULD WE WORRY?

Background

One of the most important legal battles of our times is between Apple Inc. and USA’ Federal Bureau of Investigation (FBI).

Rizwan Farook and his wife carried out mass killings in San Bernardino, USA in December which left 14

people dead. Both Farook and his wife were killed in the shootout. FBI recovered an iPhone 5c which

belonged to Farook- his work phone, but is unable to access the encrypted data in the phone.

Apple had initially helped FBI with the investigation but refused to hack the phone. The company claims

that if it hacks the phone it will open a ‘backdoor’ which affects the security of other iPhones. When the

talks collapsed, Sheri Pym, a federal magistrate judge, at the Department of Justice’s request, ordered

Apple to bypass security functions on the phone.

Apple believes its position is justified by free speech protection available under the US law. Politicians

have portrayed it as a case where a company has placed its business interests above national security.

The battle of encryption "backdoors" has been longstanding in Silicon Valley, where a company's success

could be made or broken based on its ability to protect customer data.

The issue came into the spotlight after Edward Snowden disclosed the extent to which technology and phone companies were letting the U.S. federal government spy on data being transmitted through their

network. Since Edward Snowden's whistle blowing revelations, Facebook, Apple and Twitter have

unilaterally said they are not going to create such backdoors anymore

What Does FBI Want?

Right now, iPhone users have the option to set a security feature that only allows a certain number of tries to guess the correct passcode to unlock the phone before all the data on the iPhone is deleted.

Federal prosecutors looking for more information behind the San Bernardino shootings don’t know the

phone's passcode. If they guess incorrectly too many times, the data they hope to find will be deleted.

That's why the FBI wants Apple to disable the security feature. Once the security is crippled, agents would

be able to guess as many combinations as possible. They’ve essentially forcibly commissioned a new

operating system from Apple – one that the company must digitally sign so that the iPhone “trusts” it, and

then use to take customers’ information. The Department of Justice filed a similar 25-page order today,

backing up the FBI's arguments.

So What Is Wrong With What Fbi Want?

It raises about who can make this type of demand. If the U.S. government can force Apple to do this, why

can't the Chinese or Russian governments?

While the government is requesting a program to allow it to break into this one specific iPhone, once the

program is created it will essentially be a master key. It would be possible for the government to take this

key, modify it and use it on other phones.

Another objection is that the software, once created, would not be limited to just one phone. If Apple

wrote the new software, it could also be modified to help unlock other iPhones and iPads. Apple is

essentially being forced to punch a hole in the security of its own product.

One more of Apple's worry is that complying with the U.S. government's request could open the door to similar requests from foreign governments, particularly Russia or China, the official said.

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“A thoughtful and open discussion

on this important issue is very

important as hacking of devices can

set a troubling precedent.”

- Sundar Pichai,

CEO, Google

“We must not allow this dangerous

precedent to be set. Today our

freedom and our liberty are at stake.”

- Jan Koum

If a court can legally compel Apple to do that, then it likely could also legally compel any other software

provider to do the same, including compelling the secret installation of malware via automatic updates to

your phone or laptop's operating system or other software.

What is the Legal Basis for FBI’s Court Order?

That would be the All Writs Act of 1789, a little-known law dating back almost 230 years which the DoJ

has used at least twice before to try to compel Apple to open a smartphone. Both cases are still open. The

All Writs Act is designed to gives a court the "authority to issue [orders] that are not otherwise covered by

statute," so long as the request is not impossible.

The act is one of last resort. All other avenues have to be exhausted before the All Writs Act can be

invoked.

What Does Apple Say?

According to a senior Apple executive, the company has been working with the federal government since

early January to try to provide a way to access the San Bernardino county-issued iPhone connected with

Syed Farook, the gunman in the massacre.

“Specifically, the FBI wants us to make a new version of the iPhone operating system, circumventing

several important security features, and install it on an iPhone recovered during the investigation. In the

wrong hands, this software — which does not exist today — would have the potential to unlock any iPhone

in someone’s physical possession.

In the physical world, it would be the equivalent of a master key, capable of opening hundreds of millions of locks — from restaurants and banks to stores and homes. No reasonable person would find that

acceptable.

The implications of the government’s demands are chilling. If the government can use the All Writs Act to

make it easier to unlock your iPhone, it would have the power to reach into anyone’s device to capture

their data.”

- Tim Cook CEO, Apple

The problem, according to Apple, is that the company was called too late. That's because the phone was

apparently erased of any chance to access its data only an hour after the device came into government

custody. An unnamed person in the San Bernardino County government — likely an IT employee — reset

the Apple ID associated with the iPhone 5C in an attempt to access the data.

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The FBI called Apple several weeks later, and Apple proposed four potential ways to get into the phone

to the FBI — but the reset erased any chance that authorities had of pulling the information that could

have hinted at Farook's plans just before the attack. Apple has 5 business days to contest the order.

How Can It Affect Us?

In the wake of the technological threats India face and the debate of boundaries of free speech in India following JNU-related developments, this case of free speech has emerged in the U.S.A.

The potential consequences of the ongoing legal battle between Apple and the FBI are huge, gravely

affecting the security of every computer, smartphone and app available today. If this precedent gets set it

will spell digital disaster for the trustworthiness of everyone's computers and mobile phones.

Even in India, Writ Petition under Article 32 along with Article 226 can be used by the government to

access any kind of information from anyone on similar grounds.

There’s no reason they wouldn’t be able to do it again and again, for every operating system, for every

software company in the country, if it’s established that the government has the authority to compel a

company to manufacture a product that undermines its own security. Even if you’re not an iPhone user,

the company that makes your phone or computer would have trouble defending itself if the FBI decided to

sue it for a password bypasser.

Forget the technology. If the FBI successfully forces Apple to create a new OS just to brute-force hack

its own product, it’s the first step through a very dark one-way door — for all of us.

Tech companies, technologists and liberal politicians are firmly on Apple’s side; conservative politicians

and law enforcement professionals who have seen horrific cybercrimes have taken the opposite view.

Our privacy hangs in the balance, and at the end of the day, it all comes down to Privacy vs. Security. Only time would tell what is to follow.

Source: Forbes as on April’14

Source: investor.apple.com/financials.cfm

“We stand with @tim_cook and Apple

(and thank him for his

leadership)!”

- Jack Dorsey, CEO, Twitter

“I hope folks will take a deep breath and stop saying the world is ending, but

instead use that breath to talk to each other.”

- James B. Comey Director, FBI

Apple has thrice as much as Cash on Hand as the cash strapped government of the USA i.e.

$158.8 Bn of Apple vs. $ 48.5 Bn of the government.

Apple made a Profit of $18.4 Billion on Revenue of $75.9 billion in the fiscal quarter that ended on

December 26, 2015 as sales of iPhone and iPads sets quarterly records.

KGS

Risk Assessment

CA Puneet Mehra & Shraddha Sharda

This article aims to:

Risk Assessment

Why Risk Assessment

Risk Categorization

Risk Assessment Criteria

Techniques of Risk Assessment

KGS

RISK ASSESSMENT

Why Risk Assessment?

Detection and Prevention of Fraud Identification of threats and exposures in the business environment causing interruption to

business process Identification of weakness in the control procedures of the organization Identification of material misstatement in significant accounts, disclosures and relevant

assertions Ascertainment of non-compliances of statutory requirements

Risk Categorisation: COSO Framework According to the Internal Control Framework issued by The Committee of Sponsoring Organizations (COSO) of the Treadway Commission, risk can be categorized as under:

Operational Risk-

o Risks that impact the efficiency and effectiveness of the operations of the organization. o E.g., process delays in completing the activity, customer dissatisfaction, inadequate fund

management, excess payment, etc. o Some companies further categorize operational risk into financial risk and non-financial

risk depending on the direct impact of risk.

Reporting Risk- o Risk of incorrect financial reporting. Internal control weaknesses which may result into

incorrect financial reporting are categorized at reporting risk, o E.g., inadequate cutoff procedures, lack of senior management review of financial

statements, etc.

Compliance Risk- o Risk that may result in non-compliance to the applicable regulatory requirements. o E.g., delay in submission of taxes and returns, operating without obtaining the required

licenses, etc. o May result into possible fines and penalties being imposed on the organization.

Risk Risk is a probability or threat of damage, injury, liability, loss or any other negative occurrence that is caused by external or internal vulnerabilities that may be avoided through preventive actions. Every definition speaks directly or indirectly about two terms:

Probability

Impact In simplest form risk is a product of Probability and Impact. Both the terms are equally important while determining risk. Another approach to determine risk is to understand Vulnerability and Threat. It must be noted, in real life scenario, quantifying risk is not an easy task.

Risk Assessment Risk Assessment can be termed as systematic process of evaluating potential risk. It is to identify which business processes and related resources are critical to the business, what threats or exposures exists, that can cause an unplanned interruption of business processes, and what costs accrue due to an interruption. In other words assessment of probability, vulnerability, impact and threat. Prime objective of any risk assessment exercise is to identify the risk, quantify the risk, and to treat the risk.

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Risk Assessment Criteria Risk needs to be assessed in terms of severity of the impact that may come to the organization in the event of risk occurrence. Assigning the rating to the risk depending on the assessed severity is termed as risk prioritization. The typical risk prioritization is done on the scale of 1 to 5. The preliminary risk rating can be assessed and interpreted using the below mentioned methodology.

Preliminary Risk Rating

Description Illustrative parameters for Assessing

1 Insignificant • Process risks with insignificant risk on the organization. • Non-compliance with minor penalties. • Impact of very low financial loss. • No major threat to health, safety & environment. • No history of fraud/ misappropriation. • Minor impact on organizational profitability. • Stable IT and ERP systems.

2 Minor • Process risks with minor risk on the organization.

• Impact of minor financial loss. • No significant threat to health, safety & environment. • Minor fraud/ misappropriation. • Minor impact on organizational profitability. • Stable IT and ERP systems.

3 Moderate • Process risks with tolerable risk on the organization.

• Non-compliance with major financial penalties. • Impact of significant financial loss. • Possible threat to health, safety & environment. • Possible fraud/ misappropriation. • Tolerable impact on organizational profitability. • Stable IT and ERP systems.

4 Major • Process risks with major risk on the organization.

• Risk of reputational impact to organization. • Non-compliance with major financial penalties or

prosecutions. • Impact of major financial loss. • Significant threat to health, safety & environment. • Repeated fraud/ misappropriation. • Major impact on organizational profitability. • Deficient IT and ERP systems.

5 Critical • Process risks with critical risk on the organization.

• Risk of high reputational impact to organization. • Risk with impact on going concern of the organization. • Non-compliance with major financial penalties and

prosecutions. • Impact of high financial loss. • Significant threat to health, safety & environment. • Repeated fraud/ misappropriation with major financial or

reputational consequences. • High impact on organizational profitability. • Missing IT and ERP systems.

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Techniques of Risk Assessment

Interview o Conduct interview at all levels of

management o Identify possible risk in the

particular process as per the experience of the management personnel

o Understand organization's process, policy, control to assess and the control environment.

Survey

o Prepare a qualitative questionnaire to identify qualitative risk and its impact

o Target audience needs to be selected carefully

Workshops o Perform workshops with the selected managerial persons to identify the risk in the

particular process o Ask management to rate risk based on the defined methodology

Past Events

o Activities performed by the internal auditor during the business understating stage can be used to identify the possible risks for the organization

o Example - past events, annual report and directors’ statement, past internal audit reports, risk register, etc.

KGS

Contact Name E-mail Mobile Mr. Anuj Somani anujsomani@kgsomani.com +91 9871098777 Mr. Bhuvnesh Maheshwari bhuvneshmaheshwari@kgsomani.com +91 9810031993

Head office: Branch Offices: Network Offices: DELHI MUMBAI BANGALORE

Delite Cinema Hall GHAZIABAD BHOPAL 3rd Floor, Gate No. 2, New Delhi, India GURGAON BUBNESHWAR

SILIGURI CHENNAI

CHENNAI KOLKATA

Disclaimer

• This material and the information contained herein prepared by the authors is of a general nature and does not exhaustively deal with the subject discussed. • Although the authors have put their earnest effort in providing accurate and appropriate information, the article is not intended to be relied upon as the sole basis for any decision which may affect you or your business. The authors recommend you take professional advice before acting on specific issues. • KGS is neither responsible for any views, opinions and statements made by the authors nor is liable for consequences, if any, arising from actions based on such views or opinion.

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