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Category: The Light Elements

Light Elements

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The other day my friend Herambha Shastri was in introspective mood. I felt he certainly came of age. It means now he is not a just an aged colleague but a matured one. He must have done a lot of thinking over (in his full-time thinking and part-time practice) what the role of a chartered accountant is.

When Herambha started to elaborate this issue, what is the role of a chartered accountant — a hero or a villain, or the most vulnerable character actor in the film? Is he a friend, philosopher and guide? Is he a partner in the nation-building? Is he being an auditor watchdog or a bloodhound or the HMV dog (His Master’s Voice)?

Herambha pulled the first string. “When you finally pass the Final C.A. examination you feel that you are a hero or heroine (look at the percentage of girls passing C.A.). But when you appear for the first time before an Assessing Officer — the ‘first fault-finding authority’ in the Income-tax Department, he makes you feel ‘zero’ with his bureaucratic arrogance and ignorance of basic tenets of justice. He is always on a different page. For reasons best known to him or to you, you are a villain of Income-tax Department. As time passes, you develop a thick skin to bear the brunt of comments of the income-tax authorities for the acts of omission and commission in terms of statutory compliances by your clients. You harbour a feeling of a vulnerable character actor in Hindi flick deserving no awards or cheers, neither in the theatre, nor outside the theatre. You are constantly nagged by the clients and the Department.

Next salvo by Herambha was about the role of C.A. as a friend, philosopher and guide. “Well, my dear friend, we are often referred to as a friend, philosopher and guide, particularly in the co-operative sector.” Any seminar on co-operative societies either begins or ends with a statement from the organiser or the faculty that “a chartered accountant is a friend, philosopher and guide” drawing thunderous applause from the audience, especially from C.A.s in the audience. It is a matter of serious research who coined this phrase ‘friend, philosopher and guide’. One can understand the terms friend and guide, but what about ‘the philosopher’. What philosophical need is there in the co-operative sector? God knows!

As soon as I begin to think over this, Herambha broached the next issue “Is C.A. a partner in nation-building?” We always proclaim that we are partners in nation-building. Are we really partners in nation-building? Supplementary question arises, are we sleeping or seasonal partners? Or are we minors admitted to the benefit of partnership? What are we?

While exploring this point, Herambha narrated a situation in a five-star hotel. Suppose a chartered accountant suddenly goes on long leave no one would bother or notice. But if the chief chef of the hotel were to go on long leave, it would create havoc in the kitchen. In short, Herambha concluded we chartered accountants produce nothing except compilations of facts and figures which supposedly present a true and fair view (a rare case indeed). Herambha gave very simple reasoning why we are partners in nation-building. We are so, because the Institute of C.A. of India is set up by an Act of Parliament.

Eventually Herambha came to the last issue. Is C.A., as an auditor, a watchdog or bloodhound or HMV dog? Herambha elaborated, “Look my dear friend, qualities of watchdog or bloodhound have evaporated over the years. C.A. is neither a watchdog nor a bloodhound; in most of cases he plays the role of an HMV dog. I mean, he just listens to the orders of his master.

It is said that we should not compromise our independence for any fear or favour while discharging our professional duties/responsibilities. This is all in theory. But in reality you can’t compromise your dependence for independence. On this point I could not argue with Herambha, because I started introspecting myself what role do I play as a chartered accountant?

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Light elements

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KYC — know your customer is the buzzword in banking sector and elsewhere. In good old days we often read the quote ‘Customer is God’ by Mahatma Gandhi. Under the changed circumstances this quote seems to be redundant with the introduction of ‘Know your customer’ formality. It makes the customer feel that he is no more ‘God’ as per Bapuji’s view. Maybe now the customer is viewed as a devil or a suspect. This is what my friend Herambha Shastri once remarked. However he did not stop there, he encroached into idiosyncrasies of our ‘clients’ giving us bread (applicable to small firms), butter (applicable to medium-size firms) and cheese (applicable to Big Four).

“My dear friend, we also need to do KYC. We have clients of different hues. Clients just flirting with law, law-abiding clients, paying clients, non-paying clients, organised clients, unorganised clients, close relatives as clients, seasonal clients, one-time clients, perpetual clients, local clients, outstation clients, international (MNC) clients, etc. Well, we deal with them day and night! Are you surprised? Check your mobile call log — received calls — the last call at 11.30 p.m. What a generosity we show to them!

At times it so happens that you are attending a funeral of a near and dear one and you receive call from your client. Either to impress or out of compulsion, you answer the call. Despite informing the client that you are at crematorium, he continues: “Sir, first may the soul rest in peace. (Great etiquette indeed!) Please, one second Sir. Can I invest my retirement proceeds in the name of my wife (as if she were his Mumtaz) in a fixed deposit, right now I am in the bank. What should I do? Tomorrow it’s a bank holiday.” You are stumped.

Sometimes you are at a traffic signal and your mobile starts ringing, you identify the person calling you. Oh! A new client or a star client. The moment you answer the call you are spotted by the traffic police hiding in the corner. And your client on the line is asking you how to avoid disallowance u/s.40(A)(3) for cash payment.

My dear friends, if you are in holiday mood and forget to switch off your mobile, clients are bound to play spoil sport. Your family members get irritated. And obviously some urgent matter comes up and you cut short your holiday.

You can’t avoid meeting relatives at family functions. The moment they come to know that you are a C.A., distant relatives become close relatives. Being close relatives they don’t spare you, they feel that you are available 24×7 (note that this is also true with other non-relative clients). Most importantly, you are advising them for free. At times, out of ‘Aatithi Devo Bhav’ ethos you are forced to ask them to join for breakfast, lunch or dinner or a cup of tea. Because consultation takes place at your residence.

Mind you, most of the clients are playing the ‘hideand- seek’ game with you as far as their financial transactions are concerned. When you make enquiries (obviously in client’s interest) in the process of reconciling his investments and income, initially he is very tentative, the moment you talk about ‘penalties and prosecution’ provisions under the Income-tax Act, he reveals something of your interest. You have to play the role of “devil’s advocate” constantly. Devil means the Income Tax officer. Keep in mind, at times your client will not hesitate to share with you his secret love affairs, but not his financial affairs.

Your clients are always ahead you! I am making this statement with full consciousness and experience. Situation number one: They do everything they have in mind to reap the ‘business’ opportunity and ask us to cram it into the ‘legal frame’. So what is left for you is ‘window dressing’. They have their own definition of ‘commercial expediency’. They happen to be at point of no return and you don’t want to lose your client, you keep scratching your head.

Situation number two: They are always influenced by print, electronic media TV/Internet, lectures, seminars, and their personal network. They pose ‘tax planning’ questions to us based on the so-called ‘tax expertise’ they gather from their sources, particularly TV programmes dealing with ‘how to manage your tax matters’ with on-the-spot question — answer segment where eminent tax experts air their views. You get floored by their queries.

So is the case with public awareness campaign by the Income-tax Department, particularly announcement of advance tax due dates. For example, once the 15th June advance tax due date for corporate assessees popped up on the TV screen non-corporate assessees including salaried employees make it a point to confirm from the horse’s mouth meaning ‘you’, whether they are liable to pay any advance tax. The reason for this anxiety of your client, the advertisement comes with a string “if you fail to pay advance tax you attract penalty and prosecution”. Poor taxpayers.

Sometimes your client tells you how his friend or travel acquaintance (from his personal network) has claimed a particular deduction or exemption. You have no choice but to follow the wishes of your client.

Be aware once you start endorsing your client’s views you may feel that you are just rendering ‘courier services’.

Some clients are ‘dashing and daredevil’ clients, they have their own connections with the Incometax Department right from the peon to the Chief Commissioner. So they ask you to do as they say, rest they undertake to ‘manage’.

This is how your clients are always ahead of you. But when you demand certain information, explanations, record and documents he eschews it and air myriad excuses till the time you fire him.

‘Second opinion’ is another fad in the taxpayers community purportedly as an abundant precaution. This opinion ‘poll’ travels from one expert to another till the opinion is to client’s satisfaction. This happens because you give a ‘devil’s opinion’ — opinion against the assessee’s opinion. Some-times the client has it before he approaches you, and then he shrewdly corners you or tests your knowledge on the given issue. But I tell you it is always safe to have ‘second opinion’ to calm down the suspicious clients. This second opinion is also sought when the client invents a new scheme of ‘tax planning’.

I would end my KYC analysis with two more issues.

First, clients at large think tax compliances, particularly dues dates are for you to bother. So you have sleepless nights, blood pressure (high or low) diabetes, etc.

Second, most of the clients are forgetful about your professional charges, but are very particular about getting the work done. Professional charges are always ‘past’ overdue. Either the clients find the fees too high or they are facing financial crunch in the business. In fact, we extend maximum credit period on the earth. Unfortunately, unlike physical goods we cannot repossess services rendered. If you insist for payment of fees/charges they instantly switch over to another professional. So you have to be very patient.

So my dear friend, Do you Know Your Client?

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VACCINATION

Today, corona and vaccination are hitting the front pages of all newspapers. Of course, of late Sachin Waze has started taking precedence over these two. But the main topic of discussion among the general public is still corona and vaccination.

Vaccination stock is over!
Mismanagement at corona vaccination camps;
Vaccine not effective!
Man catches corona despite vaccination;
Bogus and adulterated vaccination stocks held!
Long queues at vaccination centres.

All these reports revolve around the corona virus. And people are flocking to the centres to avail of the facility offered by the Government.

People are taking leave from work, keeping aside other important tasks, to get vaccinated. However, one particular community has no time to take the vaccine. For them, certain things are more important than even their lives and health. This community is engaged in commercial activity but functions like NGOs.

They were keen to keep their offices open even during the pandemic. They incurred heavy expenditure to ensure that their staff should be able to work from home. They worked day and night to meet the deadlines for their clients. Of course, their clients always take it for granted that this community’s charges are never to be paid promptly. And the NGOs consider it inhuman to ask for fees during the pandemic. As soon as the lockdown was relaxed and the unlocking process started, the same clients travelled for ‘outings’. Clients were sure that the NGO would be slogging for them and sacrifice everything for the clients. Not only that, the clients were also sure that since the fees are not received, the NGOs would borrow from banks to run their show. On top of it, the alma mater of these NGOs would tie up with banks and other financial institutions to offer credit facilities for them. And the NGOs kept on slogging, forgetting everything happening around them.

After some time, the Government conducted a review and felt that almost every citizen of the country should get vaccinated. So, it announced the date for closure of vaccination centres.

Suddenly, the NGO community woke up and started representing to the Government for extension of time. They started begging, praying and a few of them even thought of filing writ petitions. They could produce the Object clause of the constitution of many NGOs which prohibited doing things in time. Their object was to start the work only at the eleventh hour, issue certificates based on inadequate data, risk their own licence, work without asking for payment of fees and so on.

Their ‘incidental’ object was to carry all tensions for their clients, sacrifice their personal lives and health, lose their sleep and fight for getting extension of time.

These NGOs are always making some ‘submission’ or other. In the process, they suffer from the virus of ‘submissiveness’. They have lost the energy to be assertive.

The researchers should come out with a new vaccine for the NGOs to make them immune from this virus called ‘submissiveness’.

Note: In case the NGOs described in this article resemble any professional group, it is only a coincidence.

WORK FROM HOME

In my school days, the most boring thing was ‘Homework’. It was a serious hindrance to my playtime. Even during Diwali and Christmas vacations, there used to be homework. I used to curse the teachers and parents and used to wonder who had invented this stupid idea of homework for school children.

After I grew older and saw the homework assignments of my children, I realised that teachers could not do full justice to teaching in class and expected the parents to take care of the deficiencies in their teaching. When parents realised that their ward had not understood what the teachers taught, they would think of tuitions or coaching classes. That added to the misery of the poor school students. So now, even little kids are occupied at least ten hours a day (!), including school time, tuitions, hobby-class and so on. What a torture.

After the school days were over, I heaved a great sigh of relief – relief from ‘homework’. But destiny can be cruel. Corona and the consequent lockdown are the culprits and the ghost of homework has come back to haunt us again, this time in the form of ‘Work From Home!’

When a person physically attended a corporate office, she used to be occupied for a maximum of 12 hours a day, including commuting time. It is a different story that the new work culture makes a corporate employee start working in the evening. This is actually just to ‘show’ his ‘sincerity and dedication’. One of the pretexts is to sit in late to suit the US timings.

But now this ‘Work From Home’ culture has crossed all limits and keeps us ostensibly occupied for 16 hours a day if not more.

I am told that since we are already in the era of regulations, the Government has tabled a Bill called ‘Work From Home Regulations (Restrictions, Liberties and Facilities) Bill, 2021’.

The salient features of the proposed regulations reveal that in addition to the salary, employers shall pay to the employees:

1) Domestic harassment / violence allowance (at the wife’s hands);

2) Allowance for tea, refreshments and meals that they would have got in the office but not now;

3) ‘Voucher allowance’ – the amount which an employee is deprived of for not being able to claim ‘reimbursement’ of un-incurred expenses.

4) Rent allowance – an employee is required to use some space at his residence. The office saves the corresponding expenses on maintenance of office, electricity, etc. So, a proportionate rent allowance would be paid to the employees;
5) Fitness allowance – In physical working, employees could maintain their fitness by commuting in trains, running to catch buses, some walking, etc. But people sitting at home have to specially spend time and money on exercises and fitness.

The Bill also seeks to regulate working hours at home, holidays and so on.

ICAI has demanded that the implementation of this Act be audited by practising CAs. It has also formed a committee to frame a separate Standard on Auditing for this purpose!

Note:

This may seem like fiction, BUT, please note that France has passed a law that there won’t be any obligation on the part of employees to receive / act upon any instructions or directions from employers on their weekly and other holidays. So there!

Suggestions on the Bill are invited from our valued readers.

DIARY OF A NOVICE

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Monday — Afternoon

I have a meeting in the company of my employer over lunch with executives of a multinational company. The company is a client of my employer. We are discussing issues relating to certain approvals that we need to obtain from some government departments for the client. My employer informs the executives that we need to take some extraconstitutional measures to speed up the process of approvals. The executives tell my employer that since their company is multinational, they are bound by the code of ethics which their principal has mandated to be observed in India. The code prohibits them from taking any extra-constitutional measures. I suggest to my employer that we could ourselves take the extra-constitutional measures and get reimbursed for the cost by way of higher fees that the multinational company may pay. My suggestion is not only accepted by all, but also appreciated. I rise in esteem in the eyes of everybody.

At night I wonder how come I could think of a suggestion I should have never been able to think of, given my nature. I am glad that I helped the executives observe their code. I learnt the lesson that it is possible to maintain moral standards through immoral means.

Tuesday — Morning

I am accompanying a senior tax counsel in the Income-tax Appellate Tribunal. My employer has asked me to accompany the counsel, which was a reward for my brilliant suggestion that I made yesterday. Our client has engaged the counsel to argue a matter before the ITAT. Besides being a reward, my visit to the ITAT was necessary since I had worked as a lower-level income-tax authority. I am more aware of the facts than the counsel. That is the reason my employer has asked me to accompany the counsel, so that I can give my inputs on the facts, if required.

I am sitting just behind the Departmental Representative (DR). I start discussing the case with our counsel. The counsel snubs me for revealing the line of arguments that we are going to take, lest the DR should overhear and frame his strategy accordingly. I become silent. The members arrive in the Court Room. When our case is called out, the counsel stands up and makes an impressive presentation. I know he maintains silence about certain crucial facts. Then the DR makes his submissions. The members find themselves in an utterly confused state as regards the facts and decide to restore the matter back to the AO. Our counsel marches out of the Court room in a victorious manner.

At night
All along I had read and was taught that counsels are officers of the Court and counsels from both sides to a litigation are supposed to assist judges deliver justice. I always thought that everybody’s including the litigants’ interest was best served when justice was done. I always thought there was no winning or losing in a Court; it was all about securing justice. It is always justice that should emerge victorious in any Court, or so I thought. I thought justice could be secured by being transparent. Then, why did the counsels frame strategies and keep them from the other side? A case which would have been brought to a closure was restored back only because the counsels from both the sides did not assist the judges properly. I also suspect my counsel wanted the case go back to the officer for reasons best known to him. If that was so, he has succeeded in his attempt.

I now know it is all about winning and losing in courts. It is a battle in Court without conventional weapons. It is less about justice and more about winning. I learnt that there is no absolute justice.

I take a mild tranquilizer and go to sleep.

Wednesday — Morning

I am asked by my employer to appear before a government official. I go to his office. There are others waiting to meet the same officer. I overhear them talking that the officer is very upright. My heart gladdens to hear that. Perhaps it is my skepticism. I always take the stories of upright officer incredulously.

The usher asks me to go in. I find the officer upright. He tells me that I could not expect certain reliefs we had sought. I am also convinced that the law on this issue was against us. I give up and prepare to stand up. He then requests me to find out if my client could arrange for his son a distributorship of some products that my client manufactures. I nod in affirmation. He then suggests a way out for the relief that I had sought. I could modify our application for relief in a particular manner so that it would fall in a certain category, so as to enable him to grant relief we wanted. I agree to do so and leave.

At night I am glad to discover today that methods of grafts come in a variety of ways. I get a better sleep than I have had the two previous nights.

Thursday — Noon

I am at a seminar where my employer is the guest speaker. He has just finished his presentation. He is hugely applauded and I am proud to have an enlightened employer, though my heart tells me that he has created more issues in his presentation than he has answered.

We break for lunch. There is a murmur among the participants. Most of them find themselves more confused than they were in the morning. I see my employer with a dish in his hands, surrounded by such ignoramuses. They are trying to extract answers to some of the issues my employer has thrown in the presentation. My employer seems to be asking those people to come to his chamber.

At night I wonder whether my employer really possessed answers to those issues. I thought it was wise to believe in his prowess rather than be counted among ignoramuses. I also learnt that professionalism is not being true to one’s self; it is being true to others’ selves. Give answers what others want; not what you believe to be true.

I have a really sound sleep.

Friday — about 1.00 p.m.

There is an agitation organised by a professional body of which my employer and I are members. The agitation is against corruption. The agitation is planned for an hour post lunch. We all colleagues and my employer reach the venue of the agitation. I find in the melee those executives of the multinational company I had met on Monday, and the honest government officer. We all march with caps on our head and placards in our hands with anti-graft slogans from Gateway of India to the Taj Hotel. Our march ends there. I notice that those executives have vanished into the Taj Hotel. I do not know why. I had seen pangs of hunger on their face when they were walking in the march.

At night

I learnt today that everybody has the right to protest against corruption no matter who he is. I am happy I am growing wiser and wiser day by day. People around me also tell me that I show a good amount of maturity in my approach. They tell me that I am practical.

My days of slumber are over. I have deep sleep more so thinking that the next day is a Saturday.

Saturday — Day

I have nothing to write today. Office is closed. I will miss the opportunity of getting still wiser. I am surprised at my appetite for learning things every day.

I now bask in the glory of the knowledge of being a man who is wise, matured, and of all the things, ‘practical’. At night Only sound sleep.

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Retrospective amendments

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The day after the Budget, 2012 was presented by Pranavda in the Parliament, I bumped into Herambha Shastri.

 After Hi, Hello, How are you rituals, Herambha broached the Budget issue. I was reluctant to discuss.

As a run-up to his commentary on the Budget he said, “If a human being dies, it is believed that to fulfil his unfulfilled wishes he becomes ghost. It means he or she exists even after death so we experience ghost effect sometimes.”

I could not help but ask Herambha, “I didn’t get the hang of what are you referring to?” Herambha clarified “It’s all about ghost; I mean ghost of retrospective amendments by Pranavda, 50 years backward effect, utter nonsense!”

 “Retrospective amendment is required to plug revenue leakage” I said, adding fuel to the fire. “What revenue leakage? Past or future?” queried Herambha. “Of course future!” said I. “How innocent you are! My dear friend Pranavda and his battery of babu colleagues are trying to reduce the ‘deficit’ of past several budgets through these ghost amendments you know. It is beyond anybody’s imagination.

You are aware once you squeeze the toothpaste, you cannot put it back in the tube, but our Finance Minister — Pranavda is a superman; he can do it with retrospective amendments, 50 years backward!” elaborated Herambha. I was just staring at Herambha nodding my head. What else could I say?

“Apart from this, retrospective amendments are also useful to plug administrative undoing in the Income-tax Department. If action could not be taken in the past due to limitation of time, bring retrospective amendment extending the time limit. So taxpayers or rather their consultants have sleepless nights after every budget presentation. It is not just a hanging sword but the sword about to hit on your neck. Look at the functioning of bureaucrats working in the Income-tax Department and the plethora of reassessments initiated after retrospective amendments.”

 “Have you ever come across any retrospective amendment in any Budget in favour of taxpayers requiring the government to pay back the tax collected in the past? If there is one, it would be the rarest of rare amendment so far” said Herambha in one breath. While concluding his reaction to budget he remarked,

“My dear friend, it is normal practice as a prologue to the Budget, the Finance Minister talks about government’s spending in the coming year on various sectors of the economy like industry, agriculture and infrastructure, so on so forth and on various projects. With announcement of each project, the stock market in the country goes up or down, industry leaders on various channels puff their views, favourable or unfavourable. I think all these rituals should be scrapped since eventually most of the government spending goes into scams and scandals running into lakhs of crores leaving the country’s economy in lurch and making the Aam Aadmi’s day-to-day life difficult. So it is useless to make those announcements on the floor of the House. Instead the Finance Minister should just introduce Direct and Indirect Tax Bill on the floor of the House and sit down. What do you say?”

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