The Institute of Chartered Accountants of India (ICAI) is likely to ask for powers to penalise errant audit firms, but only with prior approval from the government.

The ICAI Council, the apex decision-making body that met last week, was divided on the issue of the regulatory agency for auditors getting powers to penalise firms as well. Instead, it agreed that the powers be used only in special circumstances, said members present in the meeting. A panel constituted by the Council has been tasked with defining what can trigger ICAI intervention against a firm. “If we find that auditors from one firm are repeatedly engaged in offences or if the act of an auditor is really grave, ICAI should have powers to act against a firm,” a member of the Council said.

Following the Satyam accounting fraud, ICAI had sought powers to cancel the registration of audit firms as well. At present, its jurisdiction covers individual auditors only. The move was also being seen as a step towards regulating foreign firms, most of which are operating in India through tie-ups with local firms.

Armed with the Council’s approval, ICAI would approach the Ministry of Corporate Affairs to amend the Chartered Accountants Act, the institute’s president Amarjit Chopra said. “It (regulation) will be done on a case-to-case basis after getting approvals from the ministry on each occasion,” Chopra added.

POWER WITH A RIDER
* ICAI is likely to seek powers to penalise errant audit firms, but not without prior approval from the government
* The ICAI Council was divided on the issue of the regulatory agency for auditors getting powers to penalise firms

* A panel constituted by the Council has been tasked with defining what can trigger ICAI intervention against a firm
* At present, ICAI’s jurisdiction covers individual auditors only
* Armed with the Council’s approval, ICAI would approach the Ministry of Corporate Affairs to amend the Chartered    Accountants Act.

Another ICAI Council member said that amendments to Schedule I and Scheduled II of the Act had been proposed. Once Parliament approves the changes, ICAI will have powers to send show cause notices, levy penalties and in cases of grave offences, cancel licences.

The ICAI move comes days after the Bombay High Court had ruled on August 13 that the Securities and Exchange Board of India (Sebi) could proceed with its enquiry against audit firm Price Waterhouse for its alleged role in the Satyam scam.

The court had observed that Sebi had the power to act in the interest of the shareholders of listed companies. However, it noted that actions against the professionals (chartered accountant in this case) could be taken only by the body that regulates that profession. The court’s observation had triggered a debate as to whether Sebi could debar Price Waterhouse from working with listed companies, if proved guilty.

Currently, the disciplinary committee of ICAI holds individual chartered accountants responsible for any malpractices or discrepancy that happens during the audit work. ICAI has the powers to suspend the registration of such persons, if found guilty. However, the institute has no such powers to take similar actions against the audit firm.

MK MPs have passed a resolution opposing the implementation of Goods and Service Tax (GST), party chief and Tamil Nadu Chief Minister M. Karunanidhi said Tuesday.

'A detailed debate is needed on the GST. The same have been expressed in the resolution passed by our party MPs,' he told reporters here after chairing the meeting of the parliamentarians.

Queried about the party's stand on the increase in MPs salaries, he said: 'This issue was not discussed at the MPs meeting.'

On the lack of progress in the Sethusamudram Shipping Canal Project, Karunanidhi said: 'At times, superstition and wrong beliefs hinder good projects like these.'

He dismissed as 'engineered' the crowd that gathered at the recent public rally addressed by AIADMK chief J. Jayalalithaa and recalled that many newspapers had predicted that DMK will not get two seats in the 2009 parliamentary elections.

The DMK, which is part of the ruling United Progressive Alliance at the centre, has 18 seats in the Lok Sabha.

Last Friday, a top tax official hinted at lower tax rates in the new Bill on direct taxes to be introduced in Parliament this week. He was not revealing a Budget secret. A year ago, the government had promised to lighten the burden for over 3.5 crore taxpayers in the country in the original draft direct taxes code (DTC).

The code, which will replace the five-decade-old Income-Tax Act, has been reworked to accommodate concerns raised by individuals and companies. Several exemptions will stay even with lower tax rates, defeating the goal of having a simple and clutter-free tax regime. A glaring example could be savings schemes that qualify for tax breaks in future.

Tax authorities have cherry-picked savings schemes that will be eligible for tax breaks of up to1 lakh a year in the new Bill. The door will be shut for bank deposits, equity-linked savings schemes (ELSS) of mutual funds and the principal amount paid on home loans.

A new window, though, will be opened for unit-linked pension plans. The tax break on pension plans will be granted on a case-to-case basis. This means an insurer launching a new unit-linked pension plan will have to approach tax authorities to get a tax break for investors.

The proposed move to empower tax authorities to take a call on granting tax breaks on pension plans is discretionary and, hence, retrograde. Besides, exemptions tied to conditions will make tax laws more complex.

Time and again, the government has acknowledged that exemptions distort tax structure and are a drain on the exchequer. Yet, our direct tax laws are replete with exemptions. This fiscal year, for instance, the government has given an extra tax break of up to20,000 for individuals investing in infrastructure bonds, saying it was an innovative source to fund long-gestation infrastructure projects. The outgo may not be huge, but the move violates the goal of ending tax exemptions.

Similarly, a few years ago, the government conceded a demand by banks to extend tax benefits to investors parking their money in fixed deposits. Here again, the logic was the money could be used to fund infrastructure projects.

Mutual funds and insurance companies too claimed that tax breaks were needed for ELSS and unit-linked insurance plans (Ulips) to spur infrastructure investment and boost retail investor participation. Net result: more instruments were added to the basket of schemes that qualify for tax breaks under Section 80C of the Income-Tax Act.

Today, there are about 16 schemes — including contributions to government provident fund, recognised provident funds, PPF, superannuation funds, LIC premia, National Savings Certificates, ELSS, bank deposits, Ulips, tuition fees and the principal amount paid on home loans — that qualify for tax breaks. Tax is exempt at all stages — accumulation, contribution and withdrawal — in most of these schemes.

Special Counters on 25th/26th August,2010 for the receipt of filled-in Examination Forms

IMPORTANT ANNOUNCEMENT
 
Special Counters for the receipt of filled-in Examination Forms
 
To facilitate the candidates of November-2010 C.A. Examinations for submitting the filled in CA Examiantion forms , four special counters will be operational in the adjoining premises of the Institute of Chartered Accountants of India viz, Institute of Engineers, Indraprastha Marg on 25th & 26th August,2010. The candidates are requested to avail this facility on 25th & 26th August,2010.

Examination Department