September is a busy month for us.
But for September 2017, calling it ‘busy’ will be a ‘material misstatement’.
Every alternate day is a regulatory deadline under some law. While deadlines
have grown exponentially, September 2017 will be – like-no-other – a record of
sorts. Audit closure, tax returns, advance tax payments, AGMs, Tax Audits,
limited reviews, and GST dateline every 5 days all through the month makes this
a marathon month – like no other. While people will put pressure on your time
and attention, know when to insert a full stop, a comma or a semicolon.
A Chartered Accountant plays a
vital role in facilitating compliance for their clients. CA still evokes trust
which few handful professions carry today. It is another matter that some who
call themselves CAs would be better off showing their income under the head
business rather than profession. However, CAs still remain the first port of
call as trusted advisors to help clients tide over difficult times with
multiple timelines and complex issues. This is the hallmark of a professional:
to put client need above personal interest. For that very reason, Chartered
Accountants are not the ones who count, but those on whom clients can count on.
Presumptive Punishment – If suspicion was evidence
Recently, it was reported that
MCA gave information about ‘shell companies’ to SEBI. While the words ‘shell’
company is not defined under the statute, let alone Companies Act, 2013, the
SEBI went ahead and issued an ‘administrative’ order to put a ban and have
stock exchanges initiate proceedings against the companies. Without going into
the validity of whether these companies have committed any default, the basis
on which SEBI went ahead and put strictures on ‘presumptive basis’ is alarming.
SEBI even challenged the jurisdiction of SAT to entertain an appeal against its
order, calling it ‘administrative’, even when the order had ‘serious civil
consequence’ and ‘prejudicially impaired the rights and obligations’ of the companies.
Such actions by MCA and SEBI, even if they contained substance, brings to fore
the approach based on ‘suspicion’, abruptness and disregard to natural justice.
The SAT rightly pointed out – “We are prima facie of the opinion that
the impugned communication issued by SEBI on the basis that the appellants are
‘suspected shell companies’ deserves to be stayed1”. While every
unlawful activity deserves right action, overstepping the boundaries and
violating the rights is more dangerous. Thomas Jefferson said this about
rightful liberty: “Rightful liberty is unobstructed action according to our
will within limits drawn around us by the equal rights of others. I do not add
‘within the limits of the law’ because law is often but the tyrant’s will, and
always so when it violates the rights of the individual.”
Amendments Galore: Notification, Clarification, Corrigendum
Recently, we have seen some
pieces of clarification, exemptions and relaxations which make the
process<purpose! Professionals often seek solace in the adage – better late
than never. Take the example of ICOFR, made applicable to all companies without
reasonable exceptions. The Companies Act, 2013 had a bias to address corporate
frauds, and so it brought out ‘one size fits all’ approach. Recent announcements
by the Ministry of Corporate Affairs have cleared impediments thrust upon
non-public interest entities. Specifically, the notification, corrigendum and
circular dated 13th June, 13th July and 25th
July respectively have eliminated the need to report on ICOFR by the auditors
in respect of certain companies.
A long pending proposal to amend
the Companies Act was passed by Lok Sabha on 27th July 2017 through
the Companies (Amendment) Bill, 2017. The changes are yet to be notified.
Auditor ratification (S. 139) has been done away with. S. 185 (on loans) is
replaced. The move to bring back layers of subsidiaries is still in limbo since
the proviso to S. 2 (87) remains to be notified. Let’s hope that finally the
layers are not brought back and vested interests do not succeed in creating
circular ownership loops. Declaration of dividend out of unrealized/notional/
revaluation gains due to fair value is specifically barred (S. 123). This is
especially relevant considering that many fair valuations have boosted annual
and Q1/2017 results of Ind-AS compliant companies. While garnishing of profit
and loss account through fair valuation makes the results look better, prudence
should hinder distribution of unrealized gains. Amendments made in Companies
Act, 2013 should strengthen the application of law in substance and we can hope
that there is better congruence amongst the family of laws applicable to
companies.
Reporting under Tax Audit has
changed as well. While carrying out the audits u/s. 44AB of the Income Tax Act,
professionals will have to pay special attention to amended clause 13 relating
to ICDS and clause 31 in relation to sections 269SS and 269T. Special attention
must also be paid to cash balances in respect of non-corporate assessees. So
far as companies are concerned, there is a reporting about SBN in the financial
statements, however, in case of other assessees, one will have to be especially
cautious. As if this was not enough, few days ago Form 29B was changed to
address Ind AS companies under MAT.
Paying a tribute
We celebrated 70 years of our
nationhood. A simple, silent yet an all pervasive achievement has been in the
area of payments. It sounds too familiar to be of any consequence. However, one
of the silent institutions of India, National Payments Corporation of India has
been at work to bring about game changing innovations. I recently was at a talk
by the former CEO of NPCI. He recollected how we issued cheques, the cheques
went for ‘collection’ and took up to 21 days when they were ‘outstation’
cheques. Cheques physically moved to a location for ‘clearing’. Millions of
cheques ‘cleared’ daily. Old men and women walked for miles to collect their
pension and other dues from designated banks! All this was not too long ago.
Today, we have come far from all that and financial inclusion has spread all
the way to grass roots level. RTGS, NEFT, IMPS, RuPay Card, BHIM, *99# have
largely replaced cheques, clearing, and passing. Payment technologies, such as
IMPS, were pioneered by India. 24X7 payments through IMPS is one such
innovation which allows one to pay and receive money on a real time basis. We
all have paid hefty bank charges for issuance of demand draft, while today many
banks charge Rs. 5 for transfer up to Rs. 1,00,000 and NIL up to Rs. 1,000.
That is certainly a big payout from financial technologies at work!
Finally, I hope we all sail
through September as we have in the past! Despite the respite given by CBDT on
31st August, remember to take care of yourself. In the words of Jim
Rohn: Take care of your body. It’s the only place you have to live.
Raman
Jokhakar
Editor
