Shrikrishna (S) – Arjunji, you are smiling. Khush Dikh Rahe ho!
Arjun (A) – Yes. Scrutinies are under control. MVAT audit is on 15th January. So December is a little relaxed.
S – I Know. You will start VAT audits only after 10th January – at 11th hour, and then expect further extension.
A – Can’t help it. Articles now go on leave from December itself for May exam!
S – Such a long leave? But what about Council’s rule about maximum leave?
A – That is only on paper. Articles always dictate their terms.
S – Anyway. But there must be something else behind your happy mood. Any plans for festival season?
A – Yes. Good news is that one of my client’s bank loan of Rs. 5 crores has been sanctioned !
S – So what?
A – He has agreed to pay me fees of 3% of the loan. I had also insisted on it, so there will be good collection.
S – Hey! Talk softly. Somebody will hear.
A – I am taking my family on a long holiday. Wait. I will just call my office to raise an invoice. Sanction letter is in my hand. I should get fees as soon as the loan is disbursed.
S – If bill is not raised, please hold it. For God’s sake, don’t mention this to anyone and never ever mention it in the bill.
A – Why? What is wrong about it? I have slogged for the sanction. I spent so much time on preparing the project report; visited the bank so many times; had so many meetings. 3% is absolutely reasonable.
S – O dear. Please don’t do such foolish acts. A – I don’t understand. You only preached Karmayog in Geeta. I have performed Karma. I must get the fruit. It is my rightful reward.
S – Do you always charge like this? Based on the result of your work?
A – Of course! Now see, for client’s refunds, you know how many times we need to visit tax offices? It is common to charge 10% of refunds.
S – Before talking of 10%, please spend two minutes to read clause (10) of Part I of the First Schedule. Very simple.
A – What do you mean? Should we not charge?
S – You should always charge. But not linked with loan amount or refund amount. Are you a broker?
A – Then how should we charge?
S – It should be based on your inputs in terms of time, paper work done, expense incurred, representation skills, seniority, experience and such factors.
A – But why? Client is benefited after all. What is wrong if he pays based on the benefit?
S – That is precisely what I preached in Geeta. Karmayog is – Just do your duty sincerely. You have no right in the reward in this manner.
A – You are confusing me. You mean, we should do social work in the profession?
S – No dear. I only mean you should not be attached to the fruit. If your percentage theory is accepted, will you not charge any fees if loan is not sanctioned? Or refund is not received?
A – This, I had never thought about. But clients don’t pay unless the client gets a beneficial result.
S – See, a doctor will charge you even if you are not cured; even if surgery is not successful. Why? Because rendering service is in his hands and not the result. His fees are quoted before the operation and he does not increase it when operation is successful; nor reduces it even if treatment fails.
A – But I am told lawyers charge on the result of the case especially in Western countries. S – Don’t quote these examples. It is not a standard of ethical behaviour. A – But what is the logic?
S – If your reward is dependent on results, you are likely to make many compromises; resort to unscrupulous means. You may try to give result by hook or by crook. Not necessarily by professional approach.
A – You said it is acting like a mere broker. I see a point in what you are saying.
S – It may impair your independence. Your dignity and grace will be lost. In fact, you will lose respect in the eyes of clients.
A – It will be like a gamble. Either a big fee or a big zero! And the result is never in our hands. Anything may happen between the cup and the lip. All efforts then go waste. That’s what you to mean to say.
S – Same is the case with assignments of investigation. You cannot say that fees will be a percentage of quantum of discrepancy or fraud detected; or on any other findings as such.
A – Yes. I agree. If nothing is found, that does not mean we should not get any fees. After all, we have worked diligently. Result is always uncertain. But tell me, is it always a misconduct? There could be situations where we need to charge based on some result.
S – Yes. Council has thought of this. See clause 192 of your Regulations.
A – What is that?
S – Basically, it is in respect of assignments where the Government decides the structure of fees. For example, a Liquidator’s fees may be based on realisation of assets or disbursement of assets; or audit of a cooperative society where fee is decided on the basis of capital or net profits; or that of a valuer under direct taxes.
A – I have seen some of my colleagues even entering into a regular written agreement for fees on a percentage basis. I must caution them.
S – Yes dear. Remember, yours is a profession; not a business. And certainly not a broking business or commission agency.
A – Thanks for opening my eyes in time. Your advice is always ‘invaluable’; and you also should not charge me a percentage of it! Indeed, You Are Bhagwan! Om Shanti This is based on Clause 10 of Part I of First Schedule and Regulation 192 Clause (10) – charges or offers to charge, accepts or offers to accept in respect of any professional employment, fees which are based on a percentage of profits or which are contingent upon the findings, or results of such employment, except as permitted under any regulation made under this Act; Regulation 192 – Restriction on fees No Chartered Accountant in practice shall charge or offer to charge, accept or offer to accept, in respect of any professional work, fees which are based on a percentage of profits, or which are contingent upon the findings, or results of such work:
Provided that:
(a) in the case of a receiver or a liquidator, the fees may be based on a percentage of the realisation or disbursement of the assets;
(b) in the case of an auditor of a co-operative society, the fees may be based on a percentage of the paid up capital or the working capital or the gross or net income or profits; and
(c) in the case of a valuer for the purposes of direct taxes and duties, the fees may be based on a percentage of the value of the property valued.
