Shrikrishna (S) – Hello, Arjun, you are looking in a good mood today, Any major fees received?
Arjun (A) – No. I am not that lucky. My last September’s bill will be received next September.
S – Then what is the secret of your smiling face today?
A – I just booked a foreign tour for my family in the coming vacation.
S – Great! But you go on vacation every year. What is special this year?
A – My son Abhimanyu is in the 10th SSC. Due to his classes and studies, we did not go anywhere for the last three years.
S – Where are you going?
A – Europe tour. But don’t tell Draupadi and Subhadra. I want to keep it as a secret.
S – But you said your clients don’t pay in time. You always crib about money, especially in March.
A – True. Fortunately, one of my clients went abroad for six months and he has kept a sizeable amount with me for his tax pay ments – Advance tax and self assessment.
S – Oh!
A – Another client has also given some amount to be invested in PPF next month. He is also touring for a long time.
S – Then what do you do with that money?
A – It came in handy to me for paying for the foreign trip. Sometimes, I also use it for my investments or share dealings.
S – Don’t you keep it separate?
A – Why? I will pay the tax or put in PPF at the appropriate time. I do it quite often.
S – But it is client’s money!
A – So what? He has entrusted it to me.
S – But there are restrictions. It is not permissible.
A – Why should there be any bar? If the client has no objection, where is the problem?
S – Dear Partha, please read clause 10 – Second Schedule – in Part I.
A – Whatever I do, you always find some fault with it. My friends are also doing the same thing as I do and they deal with huge sums.
S – See, dear. So long as it is going smoothly, there will not be any problem. But basically, it is not ethical. You are using client’s money for your personal things.
A – But what is the logic?
S – There were instances where the CAs never paid the taxes of the clients. They also did not make investments as directed by the clients.
A – Many times, clients pay us for making Government payments. Stamp duty, registration fees and so on. Can we not deposit that amount in our accounts?
S – See, if it is to be expended in a short time, you may keep it. But if it is a long time, then you need to open a separate bank account for clients’ money.
A – This is strange!
S – Yes. It has also happened that CAs were tempted to play with others’ money. Some times, they lost it in the share market or entered into wrong deals.
A – This is alarming. I know one such instance. Fortunately, he could recover with the help of his friends. Otherwise, he had a tough time.
S – That is the wisdom to be learnt. Your Council does not want it to happen to other members.
A – You mean to say, I should not deposit the clients’ money in my account at all? There are no exceptions?
S – Not necessarily. The Council has already thought of practical situations. For exam ple, if an advance fee is received, it need not be deposited in a separate account. It is your money.
A – Good! Sounds sensible.
S – If some payments are to be made on behalf of clients in a short time, then it can be routed through your normal account.
A – Can I put it in short term deposits?
S – Ideally speaking, No. You are not supposed to use that money for personal benefit. You cannot earn out of it.
A – What do you mean by short time?
S – Council has used the expression ‘reasonably short time’. That depends on facts and circumstances of each case.
A – I have heard that lawyers are also required to keep separate account for clients’ money. They receive huge amounts – for court fees, stamp duty and even as stake-holders – as escrow money.
S – Yes. Same principle applies here. Another thing, whatever you receive in your capacity as a trustee, executor or liquidator, you must put it in a separate account.
A – Oh! I need to be cautious now.
S – What is really objectionable is using it for personal benefit. CAs have gone to the extent of even depositing client’s income tax refund order in their account.
A – That is criminal. It is a fraud.
S – But apart from the fraud, he was held guilty under this clause only.
A – You have opened my eyes. I feel like can celling the tour tickets.
S – You need not go that far. But make sure that whatever obligation of your client you have undertaken, fulfill those, please don’t let him down. Faith and credibility are your greatest assets and you can’t afford to lose those. After all, you are a trustee.
A – I agree. Om Shanti! The above dialogue is with reference to Clause 10 of Part I of the Second Schedule which reads as under:
Clause 10: fails to keep moneys of his client other than fees or remuneration or money meant to be expended in a separate banking account or to use such moneys for purposes for which they are intended within a reasonable time. Further, readers may also refer pages 286 – 289 of ICAI’s publication on Code of Ethics, January 2009 edition (reprinted in May 2009).
