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Representation
COMMENTS ON EXPOSURE DRAFT OF SCH. XIV OF COMPANIES ACT, 1956
19th October, 2010
To,
The Secretary, Accounting Standard Board
The Institute of Chartered Accountants of India
ICAI Bhawan
Post Box No. 7100, Indraprastha Marg, New Delhi-110002.
Dear Sir,
Subject : Comments to the Exposure Draft of Schedule
XIV to the Companies Act, 1956
1. The current Schedule XIV
prescribes minimum depreciation rate to be charged by all the companies. It
covers different type of assets and residual category and prescribes
depreciation rate for the same. It also prescribes extra shift depreciation and
also rate for ‘continuous process plant’. Since the minimum depreciation rates
were prescribed, companies also had an option to charge higher rate of
depreciation than prescribed. It also has relevance in calculation of managerial
remuneration u/s. 350 and distribution of dividend u/s.205 of the Companies Act,
1956.
2. The proposed Schedule XIV
prescribes indicative useful life of various assets. Since the same is
indicative, it means that applying the said useful life is not mandatory and
company may choose a different useful life, either lower or higher than what is
indicated in the proposed Schedule.
3. For working out depreciation
rate, two elements are required viz. useful life and residual value. In the
Schedule, indicative useful life is given, but in the absence of indication of
residual value, it will not give desired result of providing guidance to
companies which do not want to technically assess applicable depreciation rate.
It is suggested that guidance on indicative residual value is also required, if
at all the proposed Schedule XIV is to form part of the statute.
4. A question also arises as to
whether technical assessment by each company is required for ascertaining useful
life of assets or a company can simply adopt the useful life as given in the
Schedule. It is important to provide guidance for the same.
5. AS-10 (revised) ‘Property
Plant and Equipment’ requires separate identification of major components of
each asset and it requires to be separately depreciated. It is difficult to
envisage applicability of the proposed Schedule XIV to each component. In our
view, there is no point in indicating useful life of asset without indicating
useful life of major component of the asset. It is likely to create confusion
rather than resolving the issue. It is better left to the management of
respective companies to ascertain useful life of assets and their components.
6. In the proposed Schedule XIV
indicative life is also prescribed for mobile phones, library books and other
similar items. In our view, in most cases such items are not treated as assets
but charged to the Profit and Loss account. Providing an indicative life for
such assets would force many companies to treat such items as assets, which may
not be really required.
7. Part B of proposed Schedule
prescribes that for the purpose of S. 350 of the Companies Act, 1956, the useful
life of any specific asset may be provided by the Regulatory Authority or by the
Government. It is not clear to us whether or not technical assessment of useful
life is required in case the useful life of any specific asset is specified by
the Government. Is it mandatory to go by useful life prescribed by the
Government even for providing depreciation in books ? If that is the case, it
may override provisions of AS-10. A clarification may be required on this issue.
In conclusion, we are of the
view that the
proposed Schedule XIV giving indicative useful life of assets would in addition
to going against the spirit of AS-10 (revised) would also lead to unnecessary
complications in applying AS-10 (revised).
It is therefore suggested that
the proposed Schedule XIV may be dispensed with.
Thanking you,
Yours sincerely
Mayur B. Nayak
President, BCAS |
Himanshu V. Kishnadwala
Accounting & Auditing Committee, BCAS |
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SUGGESTION REGARDING INCREASE IN RETIREMENT AGE OF HIGH COURT
JUDGES
6th October, 2010
To,
Smt. Jayanthi Natarajan
Chairperson,
Parliamentary Standing Committee on Personnel, Public Grievance, Law and
Justice,
201, 2nd Floor, Parliament House Annexe,
New Delhi-110001.
Subject : Suggestions on the Constitution (One
Hundred and Fourteenth Amendment) Bill, 2010 — Increase of Retirement
Age lime of the High Court Judges from 62 years to 65 years.
Madam,
The Bombay Chartered Accountants’ Society (BCAS) is a
voluntary organisation established on 6th July 1949. BCAS has about 8,000
members from all over the country at present and is a principle-centred and
learning-oriented organisation promoting quality service and excellence in the
profession of Chartered Accountancy and is a catalyst for bringing out better
and more effective Government policies & laws and for clean & efficient
administration and governance. We make representations regularly on Direct and
Indirect Taxes.
Madam, we believe that due to longevity or increase in life expectancy the age limit which requires to be increased in all judicial and quasijudicial bodies/institutions from present age limit of 62 years to 65 years.
At present the Judges of the Apex Court retire at the age of 65, whereas the Judges of the High Courts retire at the age of 62. Most of the Judges of the Apex Court after retirement render service to the nation by chairing various forums, like Authority for Advance Rulings till the age of 68 years. Similarly, the Judges of the High Courts also serve as Chairman, President or Members of various quasijudicial forums, like Administrative Tribunals, Customs Excise and Service Tax Appellate Tribunal, SEBI Tribunal, etc., where the age limit is 65. When the Judges can render service as Chairman of various judicial forums and render the judicial service which they were rendering earlier on the bench, there is strong reason to increase the age limit of retirement from 62 years to 65 years.
Madam, if the Government can retain the services of such experienced Judges for another three years, it will be a great service to the nation and the pendency of cases before High Courts can be reduced.
In India many professionals join the judiciary with the intention of serving the nation and not with the intention of getting a permanent job in the Government. A fresh law graduate when he joins a multinational gets emoluments more than that of a sitting Judge of a High Court, who may have put in more than 20 years of practice in law. Experience of a Judge and his knowledge is an asset to the justice delivery system; hence it is in the interest of the nation to raise the age limit of retirement of Judges to 65 years.
Madam, the sanctioned strength of the Judges of the 21 High Courts is 895. Hence, it cannot be viewed as a vast opportunity in the employment sector, yet retention of less than 895 persons will have multiplier effect on justice delivery system. In the United States there is no age of retirement for Federal Judges. They are tenured posts. If a Federal Judge feels that by reason of old age he cannot function, he will receive the last-drawn salary as pension for the rest of his life. In the U.K. and Canada, Judges retire at the age of 75. In Australia, Judges of the Federal Court and Supreme Court retire at the age of 70. Similarly, in Japan Judges of the High Court retire at the age of 65.
We therefore, strongly support for the proposal to amend clause (3) of Article 224 of the Constitution
by substituting the words ‘sixty-five years’ for the words ‘sixty-two years’.
Thanking you,
Yours sincerely
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Mayur B. Nayak
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Kishor B. Karia
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President
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Chairman, Taxation Committee
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