Entity : Greaves Cotton Ltd.

Division : Taxation
Financial Year : 2016-2017
Process : Direct Taxation

Fraud Controls
Control No

Type Type Nature

Nature of
Process Sub process Control Objective Risk of Entity actual control Gap Description of of Frequency
Risk
Risk Control Control

DT.01 Direct Tax Tax deducted at Tax codes created and No Tax codes created in system 1. All tax codes in SAP are created by IT team based on approval of finance team.
source entries posted in the are not correct / wrongly
system are as per the categorized and unauthorized. Non-
Financial Manual Preventive Ongoing
applicable tax rates. critical

DT.02 Direct Tax Tax deducted at Entries posted for TDS in No 1. Non - deduction / short - 1. TDS is deducted as per the tax codes defined in the system.
source the system are as per the deduction / deduction with 2. Account executives post entries in the system after verification of all document which is
applicable tax rates. different rates of TDS / further reviewed by AM accounts and verify proper deduction of TDS before making any
incorrect sections at the time of payment to the vendor. This is happening through SAP based on masters.
processing of invoice / 3. Finance team at Plant location submits the details of TDS payment and TDS return
payment; filing to Corporate tax team. Manager taxation ensures that returns filing is done on timely
2. Short - payment / delayed / basis.
non - payment of TDS to the Financial Critical Automated Preventive Monthly
Tax department.
3. Non filling of TDS return on
timely basis.

DT.03 Direct Tax Tax deducted at All transactions / entries No 1. All transactions / entries are 1. Entries in TDS receivables GL are posted on the basis of TDS certificate received from
source / are recorded in the same not recorded in the books of customer.
Advance Tax period to which it is account, due to which, 2. In case of lower tax deduction request, Lower deduction certificate Form 15G and
related. incomplete / incorrect tax Form 15H are collected from the vendors before deducting the TDS.
liability is determined and paid.
2. Provision for tax to return Non- At least
Financial Manual Preventive
adjustments is not recorded. critical Quarterly

DT.04 Direct Tax Tax collected at Entries posted for TCS in No 1. Non - collection/ short - 1. TCS is collected as per the tax codes defined in the system, if applicable.
source the system are as per the collection /Short - payment / 2. Finance team at Plant location submits the details of TCS payment / return filing to
applicable tax rates. delayed / non - payment of Corporate tax team. Manager tax ensures that return filing is done on timely basis.
TCS to the Tax Department. Non-
2. Non filling of TCS return on Financial Automated Preventive Monthly
critical
timely basis.

DT.05 Direct Tax Tax deducted at All relevant compliances No Advance tax liability has not 1.Direct tax team computes advance tax liability based on actuals and estimated
source / including advance tax been computed and paid budgeted net profit (approved by Finance) and after specific adjustment (such as
Advance Tax liability calculation and correctly & timely. Voluntary Retirement Scheme, R&D expenses, etc.)
payment for the period are Non- 2. VP finance reviews the advance tax liability working and then it is approved by CFO.
Financial Manual Preventive Quarterly
properly complied with. critical 3. Advance tax paid is tracked in form 26AS by tax team.
 Fraud Controls
Control No

Type Type Nature

Nature of
Process Sub process Control Objective Risk of Entity actual control Gap Description of of Frequency
Risk
Risk Control Control

DT.06 Direct Tax Tax deducted at Tax amount for the year is No TDS receivable / Advance tax 1. Direct tax team verifies contingent liabilities statement for all tax arrears and ensures
source / accurately calculated and paid / MAT credit (If any) correct knocking - off of tax paid, provision amount and MAT credit (If any) for those
Advance Tax the tax return form is entitlement accounts are not years where assessment is settled at final appellate authority.
complete and accurate cleared against provisions Non-
Financial Manual Preventive Quarterly
made for tax account. critical

DT.07 Direct Tax Deferred Tax Calculation of Deferred tax No Provisions for tax (current & 1. Tax team prepares quarterly calculation of current tax and deferred tax on the basis of
Calculation and amounts for the period is deferred) is computed quarterly accounts considering Accounting Standards.
Recognition complete and accurate incorrectly due to: 2. A reconciliation statement with detailed explanation for the variances in effective rate is
1. Incorrect computation of prepared by Head of Tax team.
deductions / exemptions / 3. VP - Finance, CFO and Tax team reviews and verifies the statement of quarterly
depreciation, etc.; current tax and deferred tax working and effective tax rates for the reporting period.
2. Consideration of incorrect 4. Finance team posts the necessary journal entries in the system which will be approved
P&L / Trial balance; non by VP Finance.
consideration of the provision
for taxes made in the prior
years, or any assessment / Non-
Financial Manual Detective Quarterly
appeals pending before the critical
revenue / appellate authority;
and
3. Unrecognized deferred tax
asset not being considered.

DT.08 Direct Tax Deferred Tax Deferred tax is accurately No Inaccurate reporting of the 1. Finance team posts the entries into system once it is finalized by VP - Finance and
Calculation and reported and presented in deferred tax asset / liability for CFO which will be approved by VP Finance.
Recognition financial statements the purpose of consolidated Non-
financial statements. Financial Manual Preventive Quarterly
critical

DT.09 Direct Tax Transfer Pricing Compliance with Transfer No Compliance with Transfer 1. Finance team ensures reporting / capturing of all transaction subjected to transfer
Pricing provisions Pricing provisions not assessed pricing. The check point is related party transactions.
/ monitored on a regular basis. Financial Critical 2. Transfer pricing audit is conducted annually and all compliances related to transfer Manual Preventive Yearly
pricing laws are checked for adherence.

DT.10 Direct Tax Transfer Pricing Compliance with Transfer No 1. 'Transfer pricing is not on an 1. All transactions subject to transfer pricing are collated from financial statements by Tax
Pricing provisions Arm's Length Price ("ALP") team for transfer pricing audits.
basis; and 2. All supporting's related to such transactions are collated by Tax team for audit
2. All related parties Non- purposes.
transactions are not recorded Financial 3. Transfer pricing auditor, prepares a transfer pricing study report and certifies on Manual Preventive Yearly
critical
at ALP. adequacy of arm length prices.
 Fraud Controls
Control No

Type Type Nature

Nature of
Process Sub process Control Objective Risk of Entity actual control Gap Description of of Frequency
Risk
Risk Control Control

DT.11 Direct Tax Contingent Provision for liability (tax / No Contingent liability is not 1. Contingent liabilities working are annually reviewed by Manager Tax and Finance team
Liability interest / penalty) related monitored, approved and 2. In certain cases, Independent opinion on legal disputes with high values are obtained
to assessments / re- disclosed in financial directly from external tax consultants.
assessments are statements. 3. Liabilities as reviewed and confirmed by Tax team are disclosed in the financial
measured accurately and Non- statements.
recognized properly in the Financial Manual Preventive Quarterly
critical
appropriate accounting
period.

DT.12 Direct Tax Assessment All pending Assessments No Assessment notices received 1. Manager Direct Tax ensures that all show cause notices are replied immediately.
and Litigations are monitored regularly from department are not timely
Non-
and disclosed properly. responded Operational Manual Preventive Quarterly
critical

DT.13 Direct Tax Retention of Adequate evidences / No Inadequate evidences / 1. Manager Direct tax ensures that adequate documentation as requires under Income
documents supporting's in case of any supporting's in case of any tax Act is maintained.
litigation / issues are litigation / issues which may Operational Non-
Manual Preventive Ongoing
maintained properly. occur in future critical

DT.14 Direct Tax Amendments in Respective users are No Changes / amendments in tax 1. Tax team receives regular updates from various sources and on an ongoing basis
tax laws updated of all rates / date of applicability / updates all concerned stakeholder on amendment in law and tax rate revision through e-
amendments / changes on notifications / Acts are not mails.
a regular basis communicated to the Operational Non-
Manual Preventive Ongoing
respective stakeholders. critical

DT.15 Direct Tax Overall Tax Timeliness & compliance No 1. 'Non filing of returns & Tax 1. Tax team ensures for filing all the reports & returns under Income Tax Act within due
Process of Tax Process audit report on timely basis; dates.
2. Tax adjustments, penalties, 2. CFO and VP finance reviews computation & ensures whether tax team has complied
or interest resulting from tax with all tax filings.
audits are not recorded and 3. All tax returns are digitally signed by MD.
inaccurately recorded;
3. Absence of a structured
process and Schedule of
Authority for reviewing & Financial & Critical Manual Preventive Yearly
approving tax computations, Operational
payments, returns, etc.