Answer the following questions in about 150 words each:

(a) What is meant by buyback of shares by companies? Explain the reasons and sources of buyback of shares. (10 marks)

(b) "Cost Accounting is becoming more and more relevant in the emerging ec

Question

Answer the following questions in about 150 words each:

(a) What is meant by buyback of shares by companies? Explain the reasons and sources of buyback of shares. (10 marks)

(b) "Cost Accounting is becoming more and more relevant in the emerging economic scenario in India." Comment. (10 marks)

(c) Explain the major points to be considered by an auditor while auditing the accounts of a non-profit organization. (10 marks)

(d) Briefly explain the accounting treatment of Government Grants as per AS-12. (10 marks)

(e) "An assessee is not only liable in respect of his own incomes for tax purposes but his liability may extend to some other incomes also." Explain. (10 marks)

UPSC Answer Check · Accepted Answer

This multi-part question requires explanatory responses across five distinct areas. Allocate approximately 30 words (20% time) per sub-part, ensuring balanced coverage: for (a) define buyback and list SEBI-permitted sources; for (b) link cost accounting to Make in India, GST compliance, and MSME competitiveness; for (c) cover receipt verification, fund utilization, and donor restrictions; for (d) distinguish revenue recognition vs capital approach for grants; for (e) clarify sections 60-65 (transfer of income) and 61-64 (clubbing provisions). No conclusion needed; prioritize precision over elaboration.
- (a) Buyback definition under Section 68 of Companies Act 2013; sources (free reserves, securities premium, proceeds of fresh issue); reasons (EPS improvement, undervaluation signal, capital structure optimization)
- (b) Cost accounting relevance: competitive pricing under GST, activity-based costing for service sector growth, cost audit mandate for specified industries, support for PLI scheme efficiency
- (c) NPO audit focus: verification of donations vs grants, restricted vs unrestricted funds, compliance with FCRA 2010, utilization certificates, physical verification of assets
- (d) AS-12 treatment: revenue grants (income or deferred income), capital grants (deduction from asset cost or deferred income), refund obligation recognition, non-monetary grants at fair value
- (e) Extended liability: transfer of income without transfer of asset (S.60-63), revocable transfer (S.61), clubbing of spouse/minor income (S.64), cross-border attribution rules

Dimension	Weight	Max marks	Excellent	Average	Poor
Demand-directive understanding	15%	7.5	Correctly interprets all five directives: 'explain' for (a), (c), (d); 'comment' for (b) requiring balanced evaluation; 'explain' for (e) with focus on statutory extension of liability; no misreading of any sub-part	Generally understands directives but may treat (b) as mere description or miss evaluative element; may conflate 'explain' with 'describe' in one sub-part	Misidentifies directives—treats comment as explain, ignores analytical requirement in (b), or writes generic essay without addressing specific demands
Content depth & accuracy	30%	15	Precise legal/statutory references: S.68 for buyback, S.148 cost audit, FCRA 2010, AS-12 para 6-8, S.60-64 for clubbing; accurate technical distinctions (revenue vs capital grants, transfer vs clubbing)	Broadly correct content with minor errors—e.g., confuses buyback sources, omits AS-12 para references, or states clubbing provisions without section numbers	Significant factual errors—wrong sections, confused grant treatments, or fundamental misunderstanding of cost accounting relevance; generic content without specificity
Structure & flow	20%	10	Clear five-part demarcation with sub-headings (a)-(e); each part has internal structure (definition → reasons/sources or points); balanced length (~30 words each); seamless transitions between technical areas	Identifiable parts but uneven length—some parts overdeveloped, others skeletal; minimal internal structure within sub-parts; readable but not optimally organized	Unstructured narrative mixing all topics; no clear part separation; or severely imbalanced—one part dominates, others neglected; illegible or confusing organization
Examples / case-law / data	20%	10	Contemporary Indian illustrations: TCS/Infosys buyback for (a); GST compliance costing or PLI scheme for (b); NGO audit experience (CAG reports) for (c); specific grant schemes (MGNREGA, NHM) for (d); judicial rulings on clubbing (R. Dalmia, Benara Bearings) for (e)	Generic or dated examples—mentions 'companies' without names, 'government schemes' without specificity; or misses examples in 2-3 sub-parts	No examples, case law, or data; purely theoretical response; or irrelevant foreign examples (US tax law, IFRS instead of AS-12)
Conclusion & analytical edge	15%	7.5	Brief synthesizing observation where appropriate—e.g., convergence of cost accounting and GST in (b), or evolving SEBI norms for buyback; demonstrates inter-linkages between accounting, audit, and tax domains	Mechanical ending without synthesis; or strong analytical element in one part (usually b or e) but missing in others	No concluding element; abrupt endings; or repetitive summary without value addition; complete absence of analytical depth in comment-type sub-part (b)

Answer the following questions in about 150 words each: (a) What is meant by buyback of shares by companies? Explain the reasons…

Directive word: Explain

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