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A long awaited demand of the Institute of Company Secretaries of India (ICSI) and the Institute of Cost Accountants of India (ICWAI) is going to come into reality, as far as what the standing committee’s report on Direct Tax Code Bill, 2010 (DTC) speaks. The standing committee of parliament on finance who was dealing with DTC Bill submitted its report to Lok Sabha on 13th March, 2012 and in its report, it has accented the demand of these two premium professional bodies of India to include there members viz. Practicing Company Secretaries (PCS) and Practicing Cost & Management Accountant (PCMA) in the definition of ‘accountant’ under the proposed DTC.
If all goes well, soon the PCS and PCMA will be auditing the books of accounts under the new income tax regime of the country. However, it would be interesting to see the reaction of Institute of Chartered Accountants of India in this matter. Since auditing is the pre-dominant area of CAs, it would definitely not to be a cakewalk for the ICSI & ICWAI, and the biggest hurdle will be to tackle with the strong lobbying of the former. On the other hand, even though the committee is suggesting to include the PCS and PCMA in the definition of Accountant, the final call will be purely of the Ministry of Finance, which may be influenced by sister professional body. In recent incidence, the ICAI succeeded in protecting its brand by restraining ICWAI from changing its name to ICMAI i.e. Institute of Cost and Management Accountant of India.
The members of ICWAI are already conducting the VAT Audit i.e. financial auditing, under the various states’ legislation. Whereas CS are statutorily recognized to conduct Internal Audit under the various securities laws, supremacy of CS in the matter of financial auditing is yet to be proved, since only Jharkhand has recognized the PCS to VAT Audit under its state legislation. Though CAs are conventionally assumed to be well versed with financial auditing, but one thing here should taken into consideration that, they were also sometime newbie in this field when the concept of auditing were introduced. Each of these three professions are equally competent and as CAs, the CSs and CMAs may also inculcate auditing techniques gradually, once such statutory recognition conferred to these professionals.
Below is the extract of Standing Committee’s Report on Direct Tax Code Bill, 2010 with reference to ‘inclusion of PCS and PCMA in the definition of ‘Accountant’, presented to Lok Sabha on 13th March, 2012
17.2 Clause 182(3) of the Direct Taxes Code Bill, 2010 define “Accountant member” as follows:
“An accountant member shall be a person;
(a) who has for at least fifteen years been in the practice of accountancy as a chartered accountant under the Chartered Accountants Act, 1949; or
(b) who has been a member of the Indian Revenue Service and has held the post of Additional Commissioner of Income-tax or any equivalent or higher post for at least three years.
17.3 Provision as per the existing Act:
288(2) Explanation.—In this section, “accountant” means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949), and includes, in relation to any State, any person who by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), is entitled to be appointed to act as an auditor of companies registered in that State. Provides for computation of income from business. Income of distinct and separate business to be computed separately.
17.4 The Committee has received representations from ICWAI and ICSI demanding changes in the definition of accountant and accountant member.
Suggestions by ICWAI
ICWAI has suggested that since these are exclusive domain of Cost Accountants as per sec 2(2) of the Cost and Works Accountants Act, 1959, the Cost Accountants should be included in the definition of Accountants as per Clause 314(2) of the DTC Bill, 2010. Segmental reporting including ascertainment of cost and profitability should be introduced to ensure correctness of product-wise, unit-wise profitability as per clause 31(2) which should be certified by Cost Accountant in practice as per meaning of Cost and Works Accountants Act, 1959.
Suggestions by ICSI
17.5 ICSI has suggested that “Company Secretary within the meaning of the Company Secretaries Act, 1980(Central Act 56 of 1980)” in the definition of “Accountant” and “Accountant Member” so as to give them the same privilege as given to the Chartered Accountants.
Specific entry in respect of Company Secretary under Clause 304(3) on “Appearance by Authorized representative” or in other applicable provisions be made to define Authorised Representative specifically.
The Institute of Company Secretaries of India is a premier professional body established under an Act of Parliament, i.e., the Company Secretaries Act, 1980. Company Secretary, a competent professional comes in existence after exhaustive exposure provided by the Institute through compulsory coaching, examinations, rigorous training and continuing education programmes, and is governed by the Code of Conduct contained in the Company Secretaries Act, 1980.
The curriculum of Company Secretaryship Course includes, inter-alia, detailed study of Direct Taxation, Indirect Taxation and Financial Accounting. Thus, vast exposure is provided to the Company Secretaries in the areas of taxation and accounts, enabling them to acquire proficiency in taxation and other related subjects.
Secretary of a company has been recognized as a key managerial personnel of the company under the Companies Bill, 2011 and principal officer of the company responsible for its affairs under a host of legislations including Companies Act, 1956, Customs Act, 1962, Central Excise Act, 1944, etc. This Code also recognizes Secretary as Principal Officer [vide Clause 314(200)]. The Company Secretaries in Practice have been recognized to act as Authorized Representative before –
a) The Customs, Excise and Service Tax Appellate Tribunal under the Customs Act, 1962 [Clause 146A(2)(d)] read with Customs (Appeals) Rules, 1982 [Rule 9(c)] and The Central Excise Act, 1944 [Clause 35Q (2)(c)] read with Central Excise (Appeals) Rules, 2001[Rule12(c)].
b) Service Tax vide Authority for Advance Ruling (Procedures) Rules, 2003-Rule 2(d)(i)
c) Income-Tax Act, 1961 vide Clause 288(2)(v) read with Rule 50(2A) of the Income Tax Rules,1962
d) Securities Appellate Tribunal vide Clause 15V of the SEBI Act, 1992
e) Central Electricity Regulatory Commission vide the Central Electricity Regulatory Commission (Miscellaneous Provisions) Order, 1999- Explanation to Order No.6(i)
f) Telecom Regulatory Appellate Tribunal vide the Telecom Regulatory Authority of India Act, 1997-Clause 17
g) National Company Law Tribunal vide Clause 10GD
h) Competition Commission of India Competition Act, 2002 – Clause 35(b)
i) Wealth Tax Authorities vide Wealth Tax Rules – Rule 8A(7)
j) State VAT Legislations.
k) Reserve Bank of India – Diligence Report for Banks Vide Circular DBOD No. BP.PC. 46/08.12.001/2008-09
l) SEBI – Internal Audit of Stock Brokers / Trading Members / Clearing members Vide Circular No. MRD/DMS/CIR/-29/2008
Ministry’s Stand
17.6 The Ministry has replied that the definition of accountant as appearing in the DTC is the same as that in the IT Act. An accountant for the purposes of tax matters is required to deal with all financial matters and audit all financial ledgers, books, records and statements of a company or firm etc whereas a cost accountant deals primarily with estimates of cost for projects and monitoring the project to ensure that these are within the budget. Therefore, a cost accountant may not have the expertise to deal with all the financial statements and matters. Accordingly the suggestion is not acceptable.
17.7 Further, the question here is not of giving privilege to any particular profession rather the most suited profession for dealing with the matters relating to direct taxes has to be assigned the work. Accordingly, the suggestion is not acceptable.
17.8 Under clause 304(3) (F) of the DTC, the Board may prescribe any person with specified educational qualification to act as an authorized representative. The same procedure is followed under the current Act. Accordingly, this will be considered at the time of framing of subordinate legislation.
Committee’s Suggestion
17.9 The Committee observe that the Ministry‟s reasoning for non-inclusion of related professionals in the definition of accountant is a very strict construction of the term. In the view of the Committee, the suggested amendment may provide the Small and Medium Enterprises (SMEs) a wider and cost effective scope for selection of professionals and will be an important initiative towards simplified tax compliance regime. The Ministry may therefore re-consider the suggestion to widen the scope of the definition of “accountant”.
The acceptability of CSs and CMAs in the financial auditing is criticized by Ministry of Finance, the same reflects in the reply given by them to the institute’s suggestions. There may be three reason to such reply, one, lobbying of other professional bodies or two, the government is just unaware about the ground reality of these two professionals, or three, that the government is orthodox and don’t want any new entrants in the area of tax auditing. For ICSI its definitely a high time, where maximum of company secretaries are relying upon corporate compliance work, the institute is need impress upon the government about the competency of the CS profession in financial & taxation sector and that the profession is not restricted to legal & secretarial work of the corporates, which is really going to be a tough task.
Increased power comes increased responsibility and realizing the same, ICSI has given more weightage to subject of auditing in its new syllabi. However taking into consideration all those audit recognition and forthcoming secretarial audit, the institute is also expected to plant auditing techniques in its existing members, by conducting workshops and by issuing Auditing Standards to be followed by its members while discharging their attest function. The ICWAI had already given enough publicity to this move of the standing committee and its council is continuously taking follow up of Ministry of Finance and CBDT in this regard. But from ICSI side there is no such press release yet made nor any follow up seen from the council members, there would be no wonder if most of the ICSI members are still unaware about this upcoming opportunity. This fact definitely should have been presented by the institute to its members, so that tomorrow this recognition if only awarded to CA & CMAs and not CSs (like in case of VAT audit), the members should know that we were also suppose to be there, but due to lack of lobbying or otherwise we were restrained from it.


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