Auditor Collectors Edition by Pennathur Prabhakar

For Private Circulation Only • August 2012 • Vol 6 Issue 8

Society of Auditors Chennai

Contents President’s Message

Editorial

Biographical Sketches His Aura was Trust - Sri D Rangaswamy

What is in a Name? - Sri P Brahmayya

A Benign Teacher - Sri P B Vijayaraghavan

An Elegant Bureaucrat - Sri N. Rangachary

Off Beat - Sri R Seshasayee

Swadharma for Chartered Accountants

Corporate Governance, Ethics and Leadership

Our Fiscal Laws - Some Random Thoughts

India @ 65 - Republic without Responsibility, Democracy without Duty

Taxing Non Incomes in Income Tax Act

The Accounting Profession: The Years Ahead

Gita for Professionals

Do We Need IFRS?

Forgettable (!) relics of the past

Editorial Board CA P S Prabhakar, Editor CA Mahesh Krishnan CA P Anand President, Ex-officio Member CA S Ramakrishnan Vice President, Ex-officio Member

CA B Ramana Kumar CA Subramania Sarma CA R Sivakumar Vice President, Ex-officio Member CA B K Moorthy Secretrary, Ex-officio Member

Society of Auditors “Platinum Chambers”, 33, TNHB Complex, 4, Luz Church Road, Mylapore, Chennai - 600 004. Phone : 044-2498 6979 E-mail : society.auditor@gmail.com / editor@societyofauditors.in Website URL: www.societyofauditors.in

PRESIDENT’S MESSAGE Dear Fellow Member, th

Greetings and Best Wishes as we celebrate the commencement of the 80 year celebrations of the Society. I really feel very blessed and fortunate that I have been given an opportunity to serve the Society when it is reaching a land mark. Normally in an individual's life the 80th birthday is celebrated in a grand manner because he has seen 1000 full moons, an achievement by itself. But with an ever growing young Society of Auditors this is yet another milestone in its journey, on its way to reach the century mark and double century mark and so on. I had reservations when I took over the Presidentship as to whether I deserve this honour as there are seniors to me and those who had done more than me to the Society. May be it was a honour done more to my Principal cum senior Sri M.R.Narayanan, who many refer to as one of the firebrand in the history of the Society. Though he is no more with us, I always remember the words that he used to convey to me “Do something good to the Society at large without expecting any benefit / return. Even after your lifetime, the good work you started must continue. Lay the foundation for that.” Hence with the enthusiastic and committed Committee members I began my stewardship and what we have achieved in this short time with the co-operation of all of them have indeed been noteworthy. Our monthly magazine which was coming bi-monthly has now been made into a monthly magazine with regular dates of circulation and it is growing from size to size and with the Editor's enthusiasm and your co operation, it will be one of the valuable magazines to possess. Our membership strength has started increasing and definitely it will grow from the present strength to a sizeable one before I lay down office. The monthly programmes as well as the seminars (which also have become a monthly affair) are being taken by the respective Committees and conducted with such precision that I can take lessons from others as to how Committees should function. The programs are covering a wide spectrum of professional interest and have a planned execution. We have gone into the virtual world by inaugurating our web site and now improvements are being carried on to make it more dynamic. It has been a long felt need that not only we need to keep equipping our members but also educate the staff of our esteemed members and this was given a shape when the first batch of staff members were trained in practical skills of accounting and commerce so that they could further their career more purposefully. Further batches are being planned and this and will definitely help make the Society to play an important role in the public. The administrative set up of the Society is also being revamped. The popular saying “that I have miles to go before I sleep” is always ringing in me. Hence with an eagerly participative committee and other members we will plan big and achieve big without giving much thought to get any 'continuing professional credit' recognition. The list is small but challenging. a.

To bring in publications on Professional topics using the talent of our Members.

To set up an opinion desk when important statutory changes take place, to give inputs to members.

To have more interactions with Regulators so that both the views could be appreciated mutually and something better could arise out of such interactions.

To increase the Membership to a sizeable strength including corporate members so that the regular meetings could have the views of the practitioner and the industry.

To improve the infrastructure of the Society and make it more responsive to its Members.

To make the Society of Auditors a leader in imparting education to its members and others especially in the field of Accounting/Auditing/ Taxation and allied laws.

Whether I achieve this entire list or at least leave a footprint is in your hands. With your co-operation, motivation, participation, criticism and the blessings of Almighty I will try my best to achieve it. Looking forward to meet every one of you and carry forward the torch given to me till it reaches its stand of glory.

- P. Anand

From the Edit Pad The completion of 80 years for any institution is a momentous occasion. One that calls for a celebration. But one that also is a responsibility and a powerful reminder to stay contemporary, relevant to the times and to excel in the future. We need to re-examine our roles in the context in which we operate. The SOA was founded at a time when ethical behaviour was a matter of routine but technical Guidance to professionals was low, given that the profession itself was in its embryonic stage. The internet age has changed the way we think, live and work. Information is aplenty and everywhere. So much that it has become a challenge to distinguish between what is needed and what is not, what is good and what is bad, what is relevant and what is irrelevant. The professional landscape is overtly simple. There are strategic initiatives for the profession (what we want to do), operational aspects (how we do this) and most importantly the Ethical framework in which we shall operate. Organisations such as the ICAI have mastered the operational aspects very well. For reasons attributable to ability, inclination or the pace of growth, we often find that several lacunae exist in the bedrock of our profession which cause massive fault lines in the way we operate. Organisations such as ours should provide thought leadership at a strategic level and play a much larger role on inculcating better professional behaviour. There are inputs that need to reach individuals and we hope that this Collectors’ edition will be a fine start to our re-positioning for the future. The stories we bring are about and are from amazing intellectuals in our midst. Individuals who have dared to dream, to break out and demonstrated conviction, a rarity in these days. We are presenting some (sort of) biographical sketches of four of the eminent people of the profession one for each genre - Former President of Society of Auditors (Sri D. Rangaswamy), Former President of ICAI (Sri P. Brahmayya), a teacher par excellence (Sri P.B. Vijayaraghavan) and an eminent bureaucrat (Sri N. Rangachary). While the former two are with us only in memories, the latter two keep guiding us. Their times and achievements are any day an inspiration to every one of us. The collectors’ edition is adorned by such sketches. Little did I realise that my off-hand title like "Swadharma for Chartered Accountants" given to Sri Gurumurthy would make a brilliant thought process flow from him with such profound thoughts, woven in a manner that is possible only by him and would beget a jewel of an article from him. When I made a request to him to write for this edition, neither he nor me would have imagined that he would have a bereavement. His dear mother, who was a great source of inspiration to Sri SG who himself is a great inspiration to many like me, passed away and given his state, I was very reluctant to remind him on this. However, he never forgot. In that very week, he wrote this (typed out every word himself) and sent. This has to be read and re-read and re-re-read by everyone of the fraternity to know what is Dharma, Swakarma and Swadharma. The piece is a stunner, believe me. My request to the great Padmashree Awardee Sri T N Manoharan was again laced with a veiled challenge. I asked him to write about Corporate Governence, Leadership and Ethics. The challenge for him was to find the connection between three terms! You will see that he has written a fantastic article. Sri Rajaratnam's excellent article is based on his own speech that he delivered recently. Other articles by Sri M R Venkatesh, Sri Pattabhiram, Sri Banusekar and Sri R G Rajan are with great perspectives and add a lot of pride to this edition. (My own pride is that I gave everyone - well almost - the topic and the concept!) For our off-beat section, we are showcasing Sri R Seshasayee, one of the best known Chartered Accountants in India whose credentials eminently suit the Collectors’ edition! You will find the review on the book “Gita for professionals” about which I mentioned in my Editorial of last issue. This book, as I said, is a must-read for all of us, who have been reeling under stress of several kinds in various dimensions. Some select portions from some of the Editorials of the past issues of AUDITOR are encapsulated under the title ‘Forgettable (1) relics of the past', just to remind the readers of the general attitude that this journal has been donning and will continue to. The responsibility of editing this journal has been an ever rewarding experience. True, there are times that I feel depressed about the absence of copious feedback (and I always believe, as a true auditor, that evidence of absence is not absence of evidence!) but even the occasional ones (especially the critical ones) always inject caffeine in to my system. It is my good fortune that I am associated with this Sathabishekam celebrations of the Society and be fully involved in this Collectors Edition. To the contributors of articles, I have no words to express my thanks. To my President and the editorial team (who certainly do not mind my taking 'liberties' with them), I owe an immense gratitude. Two people who certainly deserve special mention by me are Sri R Sivakumar and Ms Sripriya Kumar. Both of them keep goading me whenever I don’t goad them! – P.S. Prabhakar

His Aura was Trust Sri D Rangaswamy â&#x20AC;&#x153;Every successful man must have behind him somewhere tremendous integrity, tremendous sincerity, and this is the cause of his signal success in life. He may not have been perfectly unselfish, yet he was tending towards it. If he had been perfectly unselfish, his could have been as great a success as that of the Buddha or the Christ. The degree of unselfishness marks the degree of success everywhereâ&#x20AC;? - Swami Vivekananda. If one were to ask any Chartered Accountant to name a person, who was abundantly endowed with such awe inspiring virtues of compassion, integrity, honesty and ethics, many unhesitatingly and unanimously would point out Sri D Rangaswamy. Such was the personality of this man who lived in our midst.

practicing Chartered Accountant, a Tribunal member or as a President of the Society of Auditors. As a practicing Chartered Accountant, DR always desired that the ICAI should play a significant role in the development of the country. He was very firm that the accounts should always reflect the true and fair view and never compromised. It is not surprising to note that even the normally skeptical Income Tax department would accept DR's statements and regarded that there was no necessity to further probe any income tax return prepared by DR. His Aura was the trust he built around him. In the Tribunal, his tenure was marked by total independence and he always believed that equity and Income Tax Law need not be sworn enemies. As described by a colleague Sri.George Cherian, DR's motto as an administrator was that of a true soldier, his country always first, his men always next and himself always last.

Sri DR was born on 19 December 1919. He had his early education in Srirangam and then moved to the North. He completed his graduation in Commercial college and joined M/s.Fraser and Ross as an articled clerk. After completing his Chartered Accountancy he founded his firm M/s D.Rangaswamy& It was a privilege for a few of us to have a Company. He was in practice till 1966, during worked with this great personality who was a which time he served the Regional Council Mentor in every sense of the word. He was a and also the Central Council. He joined the leader bereft of any private agenda, any Income Tax Appellate Tribunal in 1966 and shade of jealousy or selfishness. Every one retired as its President in 31.12.1979. He was enjoyed working with him as well as t h e Pr e s i d e n t o f t h e respected him that often Society from 1980 till his bordered on worship. He In the Tribunal, his tenure was marked by death on 23 October 1995. was a leader you would total independence and he always believed DR demonstrated admire, be in awe of and that equity and Income Tax Law need not be sworn enemies. exemplary character in his respect. He led by varied roles be it a example. Commenting on 6

DR, Late Swaminatha Iyer, an Advocate once said, “It is sometimes very difficult to understand what he conveys, but it is amazing that his decisions are always perfect”.

organizations such as Shastri Bhavan fine arts and YMIA. He had a deep taste for Tamil Theatre (dramatics) and was very fond of Sri Poornam Vishwanathan. His sense of humour was subtle but great. Whereever he was associated, he encouraged the next generation, spotted their talents and voluntarily gave his guidance and advice.

The best part of DR's life can be attributed to his Presidentship of the Society. (Rather, the best part of Society’s 80 glorious years can be attributed to Sri DR!). He was a He exuded affection to all who came to him. visionary and laid his emphasis to the cause Concern for others came foremost. It was of Accounting education and Fiscal problems. always a pleasure to see him with leading Under his aegis, the Society was revived Chartered Accountants, belonging to different thoroughly. He was instrumental in the religions. But he never differentiated anybody Society seeing through its Golden Jubilee and and believed in the dictum that all are Diamond Jubilee. Under his able leadership, human beings first. He was never a regular the Society conducted many training courses, visitor to the temples but had immense faith Seminars and Model examinations to the in himself. students. Memorial lectures were held in “This life is short, the vanities of the world honour of Sri. P Brahmayya. The Society also are transient, but they alone live who live for set up a library, dedicated others, the rest are more to the Memory of two dead than alive” said ……..he returned the same one rupee coin stalwarts Sri. Suri and Sri. Swami Vivekananda. Sri DR which he took as a premium from his ardent S Vidyasankaran. It was he disciple, nay, a devotee Sri N Rangachary at was a testimony to those who was instrumental in the completion of his articleship. great words. The having an extraordinary greatness of his success cordial relationship with lay in his unconditional the Income Tax Department and Tribunal. giving without expecting anything in return A discussion on the many facets of Sri.DR and in being unselfish and altruistic. In effect would be incomplete without a reference to he was a perfect gentleman, a great human the highest standards of Integrity and Ethics being and of course a perfect FCA Fine which he possessed. Some striking incidences Chartered Accountant! are noteworthy. One, he returned the same When he retired from the Tribunal, a farewell one rupee coin which he took as a premium address was given to him by the SIRC and the from his ardent disciple, nay, a devotee Sri. Revenue Bar association. Advocate T V N. Rangachary at the completion of his Viswanatha Iyer, a legendary figure in the articleship. Two, when he wanted to contest legal profession looking at DR said in that the Central Council election, he resigned as meeting Dear DR, Let your dharma and the Chairman of SIRC half way during the righteousness protect you forever. And his tenure. Several things can be added but sense of Dharma does make his memory then this write up will never end! immortal today! Apart from the professional involvements, Sri - R Sivakumar DR was also was associated with many

What is in a Name? - Sri P Brahmayya Brahmayya - It is not very often in history that an individual can be named with a foresight that can be spot on, apt and in our language true, correct and in every sense mirror his life so accurately. This gentleman Chartered Accountant's life and times epitomized his need to create institutions and more importantly build progressive and sustainable value systems that would guide successive generations. The legend was born in 1908 in a village in Andhra Pradesh and shared his birth date with Mahatma Gandhi. A Fellow of the Institute of Chartered Accountants England & Wales and India, Brahmayya is today known far beyond the eponymous firm of Chartered Accountants that he founded in 1932. Shri Brahmayya embodied a phenomenal sense of style that added to his professional appeal. This sense of style, no doubt, got him an easy audience across the members, students and the government. A captive audience that also gained immensely by his overwhelming knowledge of the subject, his concern for the profession and his practicality.

devotion and dedication, and with his extraordinary humane approach to everyone he worked with, always advocating the principle that one can achieve and accomplish whatever they do, more effectively as a cohesive team, than as even the most capable individuals. It was not for money but for love, he trained and shaped the destinies of hundreds of disciples in his own field of Auditing and Accountancy. Not profession alone, but the passion of leading a good and respectable life that counted more to him. No other doyen would have so many disciples spread all over the country who would address his awesome and towering personality, with an affection prefix “AYYA GARU” meaning a revered parent, a rich reward well deserved.

Sri Brahmayya garu in his career spanning nearly five decades adorned many offices. He served as President of the Institute of Chartered Accountants of India and of the Andhra Chamber of Commerce. He was a member of the Executive Committee of the Federation of Indian Chambers of Commerce and Industry and Indian National Council of the Sri Brahmayya was not only an individual International Chamber of Commerce. He represented the I.N.C on the endowed with knowledge, Commission of Taxation of the g i f t e d w i t h g e n i a l i t y, No other doyen would have so International Chamber of intelligence and a touch of many disciples spread all over Commerce, Paris. He was a genius but also was an the country who would address Director of the Unit Trust of his awesome and towering institution by himself. It beats personality, with an affection India and Chairman of the Local one's imagination, that a single prefix “AYYA GARU” meaning a Board of Directors of the State soul could scale such lofty revered parent, a rich reward Bank of India. heights in a given life time. He well deserved. did it with his singular sense of

It was during his Presidential tenure that the Vivian Bose Commission Enquiry Report was widely debated. He was instrumental in asserting the role of auditors at a time the government and societal expectations from the profession just stopped short of auditors having to take responsibility for all management actions and perhaps everything contained or leading to the financial statements The Vivian Bose commission was set up to inquire into the alleged financial irregularities of a well-known industrialist and the auditor's role therein. He strongly asserted that isolated instances should not result in sweeping judgements on the quality of the profession, a sad state even today. While he did concede that audit must be for a larger social interest, he also emphasized that the auditor's should extend his scope beyond his opinion of true and fair if and only if his suspicions are aroused. His contribution was seminal is ensuring that the profession exists today, for the Vivian Commission, if not defended as it was may have resulted in much unimaginable large exposures that we may have had to contend with parts of his Speech that year in the Fourteenth Council meeting are as under: â&#x20AC;&#x153;It has been alleged that Chartered Accountants as auditors are not independent; and that 'the accounts have been certified without looking into the things in the proper perspective'. It has also been suggested that 'they (should) have very little liberty to hobnob with the account heads and what nots'; and that 'they should look more to the needs of the country rather than to that of their employers'. On these grounds, it has been argued that the profession should be socialized. From a study of the views expressed on these matters, in both the Houses of Parliament and outside, one cannot escape the impression that there is a hiatus in the duties of auditor contemplated by the

Companies Act and those conceived by the public. There appears to be a general belief that if. For any reason, a company is not working satisfactorily, it should be the duty of the auditor to draw the attention of the shareholders to such a position; if there has been some fraud in a company very cleverly concealed or when the affairs of a company have been so intelligently planned that there is a legal avoidance of tax or when a secret benefit has been received by a Managing Director or any other highly placed official, the auditor should convert his role to that of an investigator for bringing these facts to the notice of the shareholders. In short, the audit should subserve the needs of public policy. I submit that an auditor of a Company is primarily required to report whether that statements of account presented to him represent a true and fair state of affairs of the company. Only if his suspicion is aroused, he is expected to dig deep into the affairs of the company. In fact, latterly informed opinion has been moving away from the concept that an auditor is responsible for the detection of petty frauds and errors in accountsâ&#x20AC;? He was an impeccable speaker and an embodiment of courtesy in spite of the high offices and positions he occupied. Many youngsters in the profession were recipients of his munificence and generosity which endeared him greatly to the younger generation of professionals. Senior colleagues always found him receptive to every common cause. Shri. Brahmayya, during his lifetime, was actively associated with various Chambers of Commerce and Industry including the Federation of Indian Chambers of Commerce and Industry. He represented the Indian National Committee on the Commission on Taxation of the International Chambers of Commerce at Paris. He was a member of the

Three-man Committee appointed by the then Government of Madras to review the structure of Sales-Tax in Madras. He was a Director of the Unit Trust of India, Hindustan Insecticides and Chairman of the Local Board of Directors of the State Bank of India. He had also served as a Member of the Andhra Pradesh State Planning Advisory Committee, Andhra Pradesh Informal Consultative Committee of Legislators on Industries and Regional Export and Import Advisory Committee. Shri.P.Brahmayya also served the Society of Auditors as its President during 1978-80. He was widely read and had extensively toured in India and abroad. An active participant in the cultural activities at Madras, he was associated with organizations like Kala Bharathi and Telugu Basha Samithi. He was also connected with the Universities of Madras, Andhra and Annamalai.

on everyone, who came into contact with him. He was a personification of honesty, integrity and Selflessness. He never looked down upon anybody. In short, he was a perfect gentleman in every sense of the term described by Newman. There is a humourous anecdote that traces the growth of our profession. Phase one No work, No Fees, Phase two Work but No fees, Phase Three Work and Fees and Phase Four No work and Fees ( yet to happen !). His was a life well lived. His confidence stemmed from his knowledge and integrity. If a quote of his can be singled out for appreciation in the times of No work , no fees and the times of work and no fees, it is what is mentioned below :

“You must feel sorry if you lose the audit for not doing your duty properly. But you should feel happy for losing the audit in trying to maintain highest professional “In order that your work may inspire public confidence, it standards, integrity is also essential that you must maintain the highest or independence.. standard of independence and integrity. The path that not regret.” you have selected is hard and beset with dangers,

E v e n t o d a y, t h r e e decades after his departure from this world, Sri Brahmayya's name is synonymous difficulties and perhaps some temptations. But I assure with competence and The opening you that if you follow this advice unswervingly, the courtesy, proficiency p a r a g r a p h s rewards and satisfactions ultimately will not be small”. and politeness. He comparing him to - Shri Parvataneni Brahmayya always coupled Lord Brahma need to Economics with Ethics extend further for and Value with Values. his life way beyond just creating. Brahmayya He produced professionals of high stature. He was a Creator but a more accomplished knew no fear. Never was he forbiddingly Preserver as well. He sought to build and angry. Nor was he ever found without a sustain propositions by defining sound smile. Love the youngsters, respect the old, cornerstones for the profession. promote the promising, be sincere and steadfast and do selfless service were the No wonder that the Temple of Learning and beacon lights of his life. His colleagues had Knowledge - Brahmayya Hall is named after always looked him with faith and fidelity, this giant who strode its portals. The times affection and affinity. Yet he was humble and ahead are challenging. What would of course, be a larger tribute is to be humane without any pomp or flourish. unrelenting in our pursuance of Ethics and An ever-smiling man of winsome manners and Integrity. great simplicity Shri.Brahmayya cast a spell - Sripriya Kumar

A Benign Teacher Sri P B Vijayaraghavan It was in the year 1973, when the ICAI changed the syllabus and curriculum for entering into articleship. As I could not get into articleship after finishing B.Com I joined for the M.Com course in A M Jain College. I was very firm to do the Chartered Accountancy course after completing the post-graduation. We were in for a great surprise and it was in 1973, the ICAI suddenly changed the rules and regulations, syllabus and curriculum for joining the Chartered Accountancy course. B.Com graduates who had a direct entry into articleship were limited by the new regulations since it required a minimum of 60%. Sri P B Vijayaraghavan was then our teacher for accounts. Having come to know that he is also a Central Council Member I argued with him heavily that it was very unfair to expect a B.Com student to get 60%, since the standard of evaluation were quite different in those days. PBV's answer was a pregnant silence. When I again asked him whether the 60% rule would apply to a postgraduate, pat came the reply â&#x20AC;&#x153;Graduates includes post-graduates alsoâ&#x20AC;?. Such was the wit of a teacher in P B Vijayaraghavan! I took upon the challenge and told him that I will write my entrance examination if that were to be and would certainly become a Chartered Accountant. But then there was an equal compassionate side of that man. Within two months he came back and told me that the Council has decided to relax

the percentage of marks to 50, which at his stature, he need not have done. Sri P B Vijayaraghavan can be easily classified without any hesitation as a type of teacher absolutely superior.He was born in the year 1925 and became a Chartered Accountant in the year 1949 before completing his articleship. He has been in practice since 1950 till date except for a small period of about an year in employment. He was a Central Council member for two terms between 1970 76. Prior to that he was also a regional council member during 196164.Sri P B Vijayaraghavan has a special passion for teaching and he was a part time Professor in Commerce and gave lectures in the subjects of accounting, auditing, taxation and Management Accounting for over 3 decades. In the Central Council, he was associated with the Coaching board, Examination and Research Committees. One of the foremost and finest qualities of Sri P B Vijayaraghavan was his way of conducting classes. Even a nontechnical person, would understand the conceptual framework of the topic. If it is taxation, his style was to read the Bare Act, then an explanation, then the legality and finally the practical side. If it is accounting, it is the principle first, then the legality if any. Not a single minute would be wasted in the class by way of any other reference. The clarity with 11

which he dealt on the partnership accounting was quite amazing. I still remember asking him for the problem in partnership accounts to be solved in the class. Politely, he said that he would come prepared for the said problem in the next class. Not only he did come prepared but he also accepted the fact that there was a technical error in the problem. Such was his humility and sincerity in dealing with students. His contribution as a Central Council Member has been quite unique in the sense that it was during his time the overhaul of the syllabus took place. If one looks back it will still be a wonder as the CA Curriculum has never undergone a big change except for the i n t r o d u c t i o n o f I n d i r e c t Ta x a t i o n a n d Information Technology. It was the band of these great people who foresaw the Profession as early as in the 70's. One of the most admirable qualities of Sri PBV is that he would never compromise on principle and always stood for the Institution. On one occasion when there was a heavy criticism by the CAG, it was PBV who then shot back to them without compromising the image of the Profession, but at the same time never hurt the office of CAG. He was very clear that the independence of the Profession is a must.

On the professional front Sri P B Vijayaraghavanis a man who could be easily accessed for any doubt or clarifications. Many young chartered Accountants have been fascinated by his straightforward approach in sharing the knowledge. Be it on Auditing Standards, Accounting Standards or Company Law, Taxation. His thorough knowledge of the subject was a delight to watch. Even now he finds time to read and gets updated on these subjects. His continuing interest in the Chartered Accountancy profession is also equally interesting. Many would agree that there has been a sea change in the curriculum of CA. On the personal front, he has been a true Vaishnavaite and though is deeply religious, demonstrates sincere respect for other religions as well. He can be rated as a fine human being with the foremost personal discipline. He has been a mentor for many Chartered Accountants and has helped quite a number of them. To the Society, with which his association runs for over six decades (almost for four fifths of its existence!), he has always been a quiet supporter and never aspired for any post or position.

With Best Compliments From

â&#x20AC;&#x201C; R Sivakumar

An Elegant Bureaucrat - Sri N Rangachary Spotless white trousers and white shirt, a proud Sreechoornam on the forehead, an enigmatic smile and a pair of sparkling eyes mark this great man. Erudition personified, not just in the fields he chose and those that chose him, but in many other aspects of life that is what Mr Rangachary is all about. Just one small example a devout Vaishnavite, he is so well versed in Hindu scriptures that a German University once requested him to 'vet' the English translation of Upanishads.

honours in his own inimitably humourous manner. Cheerful disposition comes naturally to him. His office room, wherever he worked, will always remain open and any one walking in will be warmly greeted with a â&#x20AC;&#x153;Vaarumâ&#x20AC;?. His uptake on issues will ever be amazingly sharp as well as incredibly quick and his solutions will be instant, practical and within defined parameters. It is always a delight to see his choice of words in English or Tamil. They will be just apt not a shade less not a tone more. Whenever he attends any programme, there will always be several people known to him, wishing to steal a glance from him and he will be simultaneously attending to many of them. The common sight would be that he will be briefly conversing with someone, will be shaking hands with another while gently resting his other hand on the shoulder of the third person. With an uncanny memory, he will be making personalized enquiries about everyone. It is indeed a wonder how a man can be uncompromising in his work and yet be a friend to everyone. It is always said that an Accountant cannot be both nice (to p e o p l e ) a n d g o o d ( i n h i s w o r k ) . We l l , S r i Rangachary is a defining example of the defiance of that perception. He is too good and too nice. He is a man who believes in 'simple of living, high thinking'. He is a true public servant, who believes that every one of his actions should u l t i m a t e l y have a beneficial bearing on the society.

Academically brilliant to the core, he is a Chartered Accountant , a Cost Accountant, a Company Secretary and a member of Indian Revenue Service. He served in various capacities in various organizations in his career spanning almost half a c e n t u r y, w i t h s u c h e x e m p l a r y distinction that it is indeed very rare to see a person of his eminence. While we will perhaps see what all he has seen through in his illustrious career so far in the succeeding paragraphs, it will certainly be interesting to know that the Government of India even today recognizes that this outstanding man's intellect cannot be retired yet and has made him a member of the GAAR panel (one set up to review the General AntiAvoidance Rules to address the concerns of foreign investors) and also on Prime Minister's direct initiative, adorned him with the responsibility of heading a committee to look into taxation matters pertaining to IT sector and research and The common sight would be development related activities. that he will be briefly When the author (who once had the conversing with someone, will privilege of working under him when be shaking hands with another he was the Financial Adviser of while gently resting his other United India Insurance Co. Ltd) hand on the shoulder of the third person. called him up to congratulate him, the man, made light of such great

His began his career as an officer in the Revenve Department and rose to be the Chairman of CBDT and during the 36 years, also served in companies like Poompuhar Shipping and United India as well as in institutions like ISRO on deputation. From Income tax to insurance, from

shipping to Space science, he mastered everything that came his way and left indelible footprints everywhere. It is said that on the day of his retirement from service, the then FM surprised him by walking in to his office and announcing to him that he was being chosen to head the new regulatory authority for Insurance. From then on, it was a different journey for him and his name indelibly got entwined with the economic governance of the nation.

On the personal side, he is a deeply religious man who but never lets his religious proclivities interfere with camaraderie with his fellow human beings, an erudite scholar who never lets his erudition blunt his humility, a perspicacious connoisseur of carnatic music who believes listening to music to be a meditative experience and a keen lover of sports, especially cricket (possibly because of his Hindu High School Triplicane connection and / or the influence of his childhood friend Sri Ashok Kumbhat, the former President of ICAI and a keen Cricket enthusiast).

His handling of issues during the critical early years of opening up of the Insurance sector has won him universal respect. Those in the The influence of his personal lifestyle on his insurance industry know him as a true friend and official functioning is very obvious. It is no a trustworthy guide, whose ramrod straightness wonder that the hours spent on meditation by and remarkable efficiency provided fairness to this early riser, manifest itself in the shape of a everyone in every way. Thanks to his stewardship, razor sharp intellect that is so evident in his over 15 new insurance companies began official decision making. operations in the very first year of opening up of the sector to private A principled man, he was once participation. The pinnacle of glory From Income tax to insurance, asked aboard a train from Chennai in his career came when he was f r o m s h i p p i n g t o S p a c e to New Delhi, as to why a person of chosen to receive the 'Excellence in s c i e n c e , h e m a s t e r e d his stature was travelling by train. Insurance' award from the hands of everything that came his way To which, he humbly replied, "This is Her Majesty Queen Elizabeth a rare and left indelible footprints my private visit. I came here in everywhere. honour for any Indian. In fact, Sri connection with my father's death Rangachary was one of the very few ceremony. And I can afford only a (I think, just 5) bureaucrats selecte train travel. d for a personal interview with the Queen, during Mr. Rangachary's penchant for idealism is largely her visit to India. He is also the first insurance d ue to the influence of his mentor D. regulator in the world to receive the excellence R a n g a s w a m y, i n w h o s e f i r m h e d i d h i s award from the US-based, International Insurance apprenticeship. Orthodox to the core, another Council -- a council of leading insurers working to interesting nugget about him is that, he never liberalise the closed insurance markets around touches any outside food! Even when he travels the world. Post his IRDA stint, he served as abroad, he carries with him packets of "Aval" or Adviser to the Government of Andhra Pradesh for flattened rice to be had with milk and fruits. a couple of years. He has also been actively associated with the ICAI all through and his immense contribution in the examination functions of the ICAI is always acknowledged by the successive Councils. As Chairperson of IRDA, he ensured that the incumbent President of ICAI is always a member of the Board of IRDA, an honour no other regulator have so far given to ICAI.

Mr.Rangachary apart from all the traits mentioned above is an exceptionably upright man, an outstanding professional, an exemplary leader and above all, a venerable and lovable man. Society of Auditors wishes him excellent health and long life so that the Society at large continues to have the benefit of his wisdom. â&#x20AC;&#x201C; P S Prabhakar

Off Beat - Sri R Seshasayee Sripriya Kumar

The larger charm in profiling R Seshasayee (â&#x20AC;&#x153;Seshâ&#x20AC;?) for the Offbeat section of this Collector's Edition is that very little is known about the personal interests and passions that drive this illustrious, yet intensely private Chartered Accountant. And at the end of this article, it may well remain so. Writing this little script was more complex than I had imagined it to be, for, a Google search on this gent gets you about a hundred thousand hits in 0.54 seconds. The challenge in penning this article, amidst some high expectations, was indeed enormous as it had to avoid stating the obvious (obviously unavoidable) and to present Sesh in all the overwhelming contexts he exists, operates and dominates so effortlessly in. What stands out as most remarkable about Sesh is that this was a man who was unaffected by the usual influence of trends, fads or public opinion. He charted a course for himself, quietly and in a very unassuming manner. His remarkable professional journey qualifies as unparalleled given that his was a self-made story with no god fathers or immense landed wealth. Sesh was born in 1948, studied at Vivekananda College, apprenticed with Brahmayya & Co and qualified as a Chartered Accountant in 1970. He worked for a brief, albeit interesting while with Hindustan Lever. He was a part of the core team that was pivotal in reconstructing the accounts of the giant, post the fire that damaged the LIC building (extensively) which housed the office.

He joined Ashok Leyland in 1976 and after several roles in Finance, was rose to be the Managing Director in 1998, a post he held till recently - until he assumed charge as the Executive Vice Chairman of the Hinduja Automotive group and Ashok Leyland. The turnover grew from Rs 2020 Crores in 1998 to Rs 11,000 Crores in 2011. While market buoyancy did contribute to the growth, Sesh helped steer the Company in its most aggressive phase of growth and expansion ever. The net profit grew from Rs 18 Crores to Rs 631 Crores during the same period. He is also presently the Chairman of the IndusInd Bank. He was the National President of the CII ( 2006-07 ) and also headed the Society of Indian Automobile Manufacturers, the organisations of great eminence. He was also on the famed JJ Irani Committee on Company Law and w a s p a rt of s e ve ra l W TO delegations. There are precisely four reasons why Sesh stands out and will perhaps forever in a crowd to be not just an offbeat Chartered Accountant but an Offbeat personality One, he was an individual who dared to explore areas not familiar to him. He was passionate about Engineering and Technology, the last thing that would normally excite any accountant. He was the Co-chair along with the Principal Scientific Advisor to the Prime Minister in Core Group on Automotive Research (CAR). The CAR was founded to support primary Research at an industry level in the Automotive sector to develop frontier technologies in a public private partnership 15

model. He was the only non- Engineer member of the Society of Automotive Engineers (the equivalent on the ICAI in the field Automotive Engineering). He is also on the Board of the Indo US Forum for Science and Technology, an autonomous, a not for profit society that catalyses collaborations in science and technology. Tw o , h e h a d t h e a b i l i t y t o i n n o v a t e constantly and in this he ensured an inclusive and fair innovation much larger that the corporate's context which he personally operated in. For instance, when governments o f f e r e d S a l e s Ta x Wa i v e r s c h e m e s t o incentivise back ward area growth, he contributed to the definition of a new model and opted for his company a, Sales Tax Deferral Scheme model in the states of Maharashtra and Rajasthan where Leyland was setting up plants. This was a win-win option with n o loss of re ve n u e to th e exchequer also meant lesser approvals and delays. The model in Maharashtra was to be the forerunner of all the other states incentive schemes that followed suit. This is but a small example. He continues to be sought after in several committees and discussion groups chaired by the successive governments as he is often said to bring a refreshing, fair, workable, overreaching perspective which can be agnostic to industry, sector and even politics. Three, Sesh combines a social agenda quite effortlessly with the work he does and for him, his offices and the goodwill are but tools to do his bit for the society. For instance, there is a construction workers children's education initiative that he helped start along with the John Deere commercial venture of Leyland. This initiative along with other programs involving truck drivers'

personal health, hygiene and safety programs do meaningful, effective and scalable work in the sectors they operate in. One finds his approach to social work a little different in the sense that it is not marked by just a sense of pity but a genuine need to empower the marginalised and correct imbalances. He guides a larger number of social and charitable organisations in his spare time. He deems it a privilege to be able to help organisations such as the Cancer Institute which truly serve the down trodden. Four, he is truly multi-faceted. He is passionate about music and he is the Vice President of the Music Academy Trust, a role that he enjoys. If Sesh wasn't the blazing professional that he is today, he may have been a performing musician or a painter. He draws and paints cartoons in his spare time. He writes very well but not his speeches as he only speaks extempore, a rarity these days. A few of his close friends know that in his early days, he used to publish a cartoon strip called Internal Auditor. He also writes Tamizh poetry and stories that one hopes will be published some day. Here is what he is - an acclaimed business l e a d e r, a r t i s t , m u s i c i a n , p o e t , w r i t e r, c a r t o o n i s t , s p e a k e r, a c o m p a s s i o n a t e philanthropist and a Chartered Accountant, all rolled into one and rolled with grace and humility. One cannot but remember Jack Kerouac's book On the Road where he writes â&#x20AC;&#x153;I saw that my life was a vast glowing empty page and I could do I wantedâ&#x20AC;?. This perhaps summarises Ramaswamy Seshasayee's attitude to life personal and professional more succinctly than any essay, epistle or missive ever can.

Swadharma for Chartered Accountants S Gurumurthy Is Dharma religion-neutral? Yes

or sacred. Unless we further understand that Dharma is as much secular as it is sacred we The title â&#x20AC;&#x2DC;Swadharma for Chartered Accoutantsâ&#x20AC;&#x2122; cannot relate it to a secular group like Chartered which connects Chartered Accountancy profession, A ccountants and a secular profession of which is commonly known to be in the secular accountancy. Actually, in ancient Indian world view domain, with Dharma, which is popularly believed and philosophical perspective there is nothing to be in the religous domain, is an intellectually secular as everything is sacred. In contrast, in the challenging yet stimulating subject for discourse. Western view, the world and all things worldly But, before discussing and debating what is earth, water, plant, or animal or river or mountain Swadharma for Chartered Accountants, we need to are secular, and there is nothing sacred about understand what is Dharma first and then them. But in the ancient Indian philosophic view all Swadharma. The discussion on Dharma goes to the such worldly things including matter like stone and root of the Indian civilisation. Before relating metal included are sacred. Extending it further, all Dharma to the accounting profession, first we need material things money, house, profession, business to discuss whether Dharma or Swadharma is a or employment, instruments and machines we use religious concept or religion neutral and if and the rest are also sacred in the ancient Indian religious, how would it apply to a secular view, but, secular in the Western view. Despite profession like the Chartered Accountancy. becoming free as a nation and society, since our In this debate we need be conscious that due to current world view being still influenced by the the gap in understanding of the Western scholarship West, we regard money, house, about Hinduism, the concept of profession, business, Dharma was mostly wrongly In ancient Indian world view and philosophical employment, instruments and associated with religion and perspective there is nothing secular as everything is machines we use as secular. spirituality and even in the sacred. In contrast, in the Western view, the world and all things worldly earth, water, plant, or animal But stop, close your eyes, and Hindi version of the Indian or river or mountain are secular, and there is nothing contemplate for a moment. In Constitution, when conceptually sacred about them. practice we revere them as and in practice Dharma sacred, like we regard books transcends both and is as earthy and office instruments as sacred and even worship and earthly as life itself is. Dharma is not religion them; we revere the home as sacred and even the or equal to religion. Dharma is not a religious keep foot-wears outside. This reverence for that term. In fact, the term Dharma figures in, and is what is secular in the Western sense as sacred in common to, all Indian religions Hinduism, the cultural and civilisational sense in India is Buddhism, Jainism and Sikhism. Being common for common for the followers of all faiths. Once this all religions, it is religion-neutral, not sectarian. civilisational confluence is recognised, the concept Even when it is suffixed to religions like say Hindu of Dharma, which regulates our attitude to worldly dharma, Buddha Dharma, it means not Hindu or things and affairs including our profession, not only Buddhist religion, but Hindu or Buddhist becomes religion-neutral, but also sacred. Once it interpretation of the general concept of Dharma. is accepted that one's profession is not just secular Happily, in recent times, Dharma has acquired a in the sense of its worldliness but sacred as well in religion-neutral, meaning in secular, public the sense that there is a higher value attached to discourse like 'Rajdharma', 'Coalition Dharma'. Even it, the accounting profession too is sacred, and so non believing, secular politicians have started using are all tools associated with it. This marks the first these terms, which indicates the gradual difference between the Western view of the secularisation of the concept of dharma. accounting profession and ancient Indian view. This Is Accounting profession not sacred? Yes, it is. leads us to a discussion on what is Dharma as it is necessary before understanding its connection to But the next question is whether Dharma is secular

the accounting profession and Chartered Accountants. Dharma: Values which hold or sustain institutions, society India is unique in its intellectual, scientific, moral, ethical and philosophic contribution to the world in many respects. But the most distinctive contribution of India to the world is the concept of Dharma. The meaning of Dharma is ascertainable from its root ‘Dhr’ in Samskrit language which means to hold or sustain. The meaning of Dharma is “that which holds or sustains”. In the ancient Indian view, in the macro sense, the compendium of values which sustain the society or any institution be it a family, profession, business, or an association of professionals or businessmen is dharma. The word Dharma has no equivalent in any other language. Without understanding what is Dharma an Indian is incomplete in comprehending life in its intellectual, moral and ethical sense. Dharma includes but transcends duty. It includes but transcends right. So dharma mandates individual duty and ensures collective right. It is virtuous conduct at the personal level which collectivised becomes collective right and moral order at the collective level which ensures individual right. So Dharma comprehends the collective as well as the individual discipline as collective discipline is nothing but collectivised individual discipline, where the micro amalgamates into the macro. Yet, no one enforces Dharma. It is a voluntary obligation undertaken by the Dharmi, the follower of Dharma. What is Swadharma? Swadharma and Swakarma are two inseverable dimensions of a human being. Swakarma means one's own personal, moral, ethical, and social duties and Swadharma means obligation to perform t h a t d u t y, w h i c h d i s c i p l i n e s a n d r e g u l a t e s Swakarma. The collective of Swakarma [personal duty] is the activity of the society and the collective of Swadharma [the obligation to perform that duty [Swakarma] as a whole which sustains all sections by mutuality. One's contribution of duty [Karma] transforms as another's right like the son's or daughter's duty as the parent's right and parent's duty as son's or daughter's right or like a client's duty as the Chartered accountant's right and the Chartered accountant's duty as the client's right and the collective of Swadharma in performing one's Karma [duty] transforms into Dharma which sustains the society, nation and even the world and all institutions which intermediate between the

individual, family, society, nation and the world. Dharma is the phenomenon that sustains the macro phenomenon be it the larger society or the profession of accountancy or for that matter the institution which regulates that profession itself Swadharma, in the case of a Chartered Accountant for example, is the micro version of the concept of Dharma. The collectivised Swadharma is Dharma of the institution. Swakarma was originally regarded as right and obligation by birth. So was Swadharma. But no more. The declaration of Sri Krishna in Bhagwat Gita, “Chaturvarna Mayasrushtam Guna Karma Vibhakasakah” meant that Sri Krishna himself created the four socio-economic classes the intellectual class, the ruling class, the business class and the working class according to one's nature and choice of work. The contentious issue was whether the classification is by birth or by choice and training. Bal Gangadhar Tilak in his Gita Rahasya pointed out that Sri Krishna had used the words “guna” [nature] and “karma” [skill] and not “janma” [birth] and so the formation of the socioeconomic class is by choice and training based on one's nature and work choice, not birth. Tilak's interpretation of Gita, which was contested in his times, is practically being followed in current times as any one can choose any profession that suits his nature and skill. So Swakarma is one's choice based on his nature and skill. And Swadharma is the obligation to perform that duty. While Swakarma is one's choice based on nature and skill, Swadharma, which is the personal, moral, ethical, and social obligation to perform that duty, is not choice. It is a self-imposed, but unenforced discipline. Swadharma of a Chartered Accountant Once, a person exercises his choice to become a Chartered Accountant as his Swakarma, then he is obliged to follow the Swadharma of a Chartered Accountant. What is the Swadharma of a Chartered Accountant? One needs to grasp the the relation between Karma and Dharma to understand what constitutes the Swadharma of a Chartered Accountant. The relation between Dharma and Karma is manifest in the ancient Indian concept of “Purushartha” which is the fundamental rule of human life and society. Purusharta is a four-fold principle Dharma, Artha, Kama and Moksha in which Artha [materialism] and Kama [enjoyment] which are manifestations of Karma are subject to the rule of Dharma. And if human beings earn material things and enjoy the fruits of them according to Dharma then there would be individual and collective fulfilment in the worldly

sense and equally fulfilment and salvation in the religious sense also. This is the principle of Purusharta. Every human being who has desires [this will obviously and only exclude a recluse or saint who has no desire] has a duty [Swakarma] to earn material things [Artha, namely money, power, influence etc] to entitle them to enjoyment [Kama], but both earning [Artha] and enjoying [Kama] must be according to his dharma [Swadharma]. The Purushartha concept will function only in a relation-based society.

does not operate only on contracts. And cannot. Also cannot work only for fee. It works also for fee. Because it works on the basis of relations. An Indian CA firm will have to and will stand by a fallen client who is unable to pay. This is its S w a d h a r m a , e t h i c a l d u t y. I t w i l l c h a r g e a n individual assessee who has no business differently from a businessman who is an assessee even though the time devoted is the same. This is because it is not consistent with the rules of dharma to charge both simiarly. It is true of a businessman making losses as distinct from a businessman making This is where the ancient Indian concepts of profits. The Indian CA firm shares the fortunes of Dharma and Swadharma discipline all professions the clients. An Indian CA firm will not charge a including the accounting profession and such selftrust as much as it will charge a business. Many do disciplines are alien to Western world view. In the not charge charities at all. In fact a large part of West an accoutant has to earn according to law an Indian CA firm's time and resources is committed and rules and there is no other moral, filial, social, for work which fetch no or less than commensurate or other discipline over his earning. And further return. This is because of relation based practice once he has earned according to law, he can spend which is part of their Dharma. It is its Swadharma on what he likes and enjoy as he wishes as an for a CA firm to identify with the fortunes of the individual. But here in India, a Chartered client. The client and the CA are bound by Accountant has not only to earn according to law, he has to An Indian CA firm will not charge a trust as much as relations. Not by contracts. e a r n a c c o r d i n g t o h i s it will charge a business. Many do not charge Contracts make no meaning. Swadharma and follow the rules charities at all. In fact a large part of an Indian CA Where contracts dominate and o f D h a r m a . O t h e r w i s e h e firm's time and resources is committed for work r e l a t i o n s d e c l i n e , D h a r m a cannot get the over all and which fetch no or less than commensurate return. disappears. internal fulfilment which is the very end and goal of Purusharta.

This is because of relation based practice which is part of their Dharma.

Swadharma based on relations, not on contracts Swadharma and Dharma are higher rules than law, rules and contracts. They make contracts, laws and rules work and even superfluous at times as they work more effectively than do formal contracts, rules and laws. This is because Dharma and Swadharma are founded on relations. Dharma cannot be, and is not, the subject of contracts. Relations are the basis of Indian social order, business and professions included. But the West exclusively operates on contracts. In India relations support and supplement, not supplant contracts. So the transactions costs are less. So is generally in most Asian economies as contrasted with the Western, particularly Anglo-Saxon. So the West and we operate on two different paradigms, not just different at the margins. See how the difference between the two works in the case of a CA firm. The Multinational Accounting Firms which operate purely for fee. And on hourly basis. And on contracts. There is no sense of relation other than business relation between two faceless entities the corporates and the CA firm. But an Indian CA firm

There are also other, wellknown aspects of distinctness operating on business and profession as for instance Mutual Funds and securities for Jain community investors, a rich group, who would not invest in securities which involve violence, like businesses involving meat, liquor or tobacco etc. This is neither to be trivialized as un-modern or anti-modern, nor seen as higher value, or a superior virtue. But simply as a distinct value and respected as such. All such distinctness is founded on relations filial, social and religious. This is a reality in Indian way of life. There is no way this can be ignored in legislation and regulation. It is because of diversity in life. The concept of recognising diversities is the very essence of Dharma, while homogenising everything is the very essence of the West. While Dharma seeks unity in diversity, the Western thinking and methods seek uniformity. Likewise there are CA firms which will not take up certain kinds of audits. They should be recognised for such distinctness. This is voluntary restraint or regulation. The formal regulations should recognise this distinctness. This is because of social and spiritual relations, not contracts.

So the critical part of the Swadharma of a CA is relation based approach to professional work. In fact the idea of the West is to ensure that there is no relation other than contractual and legal. But morally sound relation of a CA with a client which is not influenced by money is a great source of ethical influence over him to dissuade him from doing things unacceptable to law, prudence or morals. What contracts cannot ensure and law and rules cannot prevent ethically, sound relations can achieve. However, there is a caveat.

substitute for self-regulation. But self regulation cannot be effective unless there is Swadharma in the CA profession and Swadharma insists on contentment and humility. For the attention of the ICAI

The Institute of Chartered Accountants of India is repeatedly endorsing the regulatory regimes of the West which first make all voluntary regulations and even the ICAI irrelevant. The ICAI is obsessed with the rules and regulations of the West which seems to be concerned in effect only with the sensex and Contentment and humility the foundation of listed companies of India accounting for single Swadharma digit of contribution to India's GDP. Only a The observance of Swadharma is founded on two minuscule number of the Indian CA firms are socially insisted personal principles about which the engaged in sevicing them. A large number of CA Mahaswami of Kanchi, universally acknowledged as firms are servicing the non-corporate sector and a sage, wrote in response to Pundit Nehru's preface government sector which account for over 2/3 of to the book of Rashtrakavi Ramdhari Singh Dinkar the GDP of India. But the ICAI seems to be in late 1950s. It is very relevant to recall his exclusively working on the model of the West and profound response. In his preface to Dinkarâ&#x20AC;&#x2122;s book is ignoring the vast non-corporate sector which Pundit Nehru had lamented that we are unable to needs to be serviced more effectively. It needs to give up our traditions nor keep them up; and we devote greater attention to them. Even the are unable to reject modernity nor follow it and corporate sector in India which accounts for 14% of therefore we are confused and India's GDP is functioning are unable to show lead to the The ICAI is obsessed with the rules and regulations l a r g e l y o n r e l a t i o n - b a s e d youth. As a result, Pundit Nehru of the West which seems to be concerned in effect a p p r o a c h a s d o m o s t A s i a n foresaw, a crisis of character only with the sensex and listed companies of India economines and virtually none emerging in India. To this the accounting for single digit of contribution to India's of the Anglo-Saxon economies. Mahaswami of Kanchi responded GDP. But still ICAI and the saying that such confusion in government of India liberally the mind of the most admired leader of India was import the Anglo-Saxon rules and regulations which not in the interest of the country and even though ignore relation-based business and professional he might not be able to remove the confusion, he model and institute contract based model as had a responsibility to give his views. The replacement. This works in the West because, the Mahaswami said that our dharma was founded on West has lost the traditional relation-based family, two virtues on which only it functions. He said that business, social model long back and so it is Aparigruha [contentment] and Nirahambhavana substituting relations with contract. That is not [humility] are the two virtues which act as the situation in India. And that is why there are crutches for Dharma to function. He added that myriads of approaches to busienss and profession in modernity works against both. He said that unless India. In fact the Anglo-Saxon model tends to we preserved contentment and humility as invalidate the ICAI itself and replace it with a individual and social virtues we would increasingly government regulatory mechanism, thus ignoring face crisis of character. This exchange happened the relation based read Dharma-based model of some 60 years before. But it is still valid today. If chartered accountant-client relations in India. This the Chartered Accountants have to uphold their is a subject for intense discussions. Will the CA Swadharma, first they need to be contented and profession take up this challenge particularly at a next they need to be humble and moderate in their time when the western world is looking for professional methods. A contented CA firm will alternative ideas from the East, particularly India have such high moral and professional standing that which is seen as a rising geo-political power. A will be a heritable quality of the firm and its rising power should begin to think originally and partners. This is what is missing in the modern contribute to the world. It cannot continue to business world. State regulations are poor carbon copy the West.

Corporate Governance, Ethics and Leadership T N Manoharan Introduction The interrelationship between governance, ethics and leadership has assumed greater significance as never before primarily due to the cross border movement of capital and eruption of financial statement related frauds. Instead of studying governance, ethics and leadership in isolated manner, one needs to integrate the three as part of a holistic approach. Without good governance and ethical effective leadership it would be impossible to inspire confidence in the minds of the stakeholders; to attract investment and to sustain progressive growth. The economic prosperity and sustenance of an organisation depends upon efficiency, innovation, quality and adherence to the principles of good corporate governance backed by ethical leadership. Tracing the Origin

M.Com, B.L. F.C.A. on Company Law to offer recommendations on a new Companies Bill. Since 2008 there is an ongoing endeavour to bring a new company law which is yet to meet with success. Governance Governance is all about utilising the scarce economic resources in an efficient manner so as to enhance the value of investment for the stakeholders of the organisation. Accountability and transparency are integral part of the governance norms. Corporate entities ought to realise that intangibles such as goodwill, quality, Brand image, customer satisfaction and human resource development are of greater importance than the tangibles such as asset base, earnings per share, top line, reserves and market capitalisation. If the Intangibles are aggressively pursued, achieved and preserved, then tangibles would automatically fall within achievable ambit. By sheer hardwork, competence and vision any organisation can rise to the peak but if the growth is not backed by ethical values the consequence could be a mighty fall. Without integrity as an ingredient of growth, none can stay on top.

Some of the reforms like establishing the Securities and Exchange Board of India and the National Stock Exchange have significantly contributed to the evolution of governance norms in India. The Confederation of Indian Industry (CII) came up with the first voluntary code of corporate governance in 1998. Subsequently SEBI set up a committee under Ethics and Leadership Kumar Mangalam Birla in 1999 to promote and Ethics is expected to be imbibed at the top by the raise the standards of good corporate governance. leadership and its impact is expected to perculate In 2000 SEBI adopted the key recommendations of down the line in the hierarchy of the the Birla committee which became part of clause management. The work culture, leadership style 49 of the listing agreement of the stock and the image of the company are dependent exchanges. Later, in 2002 the Naresh Chandra u p o n th e e th i c s o f th e d i r e c to r s a n d th e i r Committee set up by the Department of Company competence. When the corporate management Affairs made recommendations in terms of understands the expectations of the Board of financial and non-financial disclosures and Directors for a thorough and honest assessment of independent oversight mechanism. In 2003, SEBI the financial controls by the constituted a committee under the statutory auditors and if there is a chairmanship of Mr. N.R. Narayana The glaring deficiency in the Indian regulatory framework is the inefficient robust internal audit mechanism, Murthy with a view to review the enforcement mechanism. It is marred by the authenticity of the financial clause 49 and suggest measures to complacency and clouded by corruption. figures enhances and the scope for improve the Corporate Governance Undue delays in investigation coupled with manipulation gets eliminated. A standards. Subsequently under the inordinate delays in the judicial process strong and unencumbered audit chairmanship of Dr. J.J. Irani the before a judgement is delivered have put committee can review the work of Ministry of Corporate Affairs (MCA) the image of India in poor light to the the auditors and ensure that there external world. constituted an expert committee is absolute transparency in the

financial systems, procedures and controls thereby ensuring credible disclosures to the stakeholders in general and the regulators in particular. Ethical Leadership can ensure that the desired governance norms are actually internalised and practised than treating it as a mere check the box exercise to be observed more in letter than in spirit. Moving from a regime of voluntary guidelines to mandatory law certainly helps in a democratic set up to infuse the required degree of discipline. Clause 49 of the listing agreement, in that context, is working well. Although morality cannot be legislated, conduct can be regulated and therefore the need arises for such measures. Indian corporate culture has moved from no disclosure to plethora of disclosures. When SOX was introduced in US in 2002, the cost of compliance shot up phenomenally and many companies opted for delisting and moving to other jurisdictions for getting listed. Subsequently, relaxation measures were adopted to strike a balance between the compliance requirement and the cost of such compliance. Similarly, the new reforms proposed as part of the Companies Bill, 2011 should not bring in more complexity thereby enhancing cost of compliance than what is prudent and affordable. The perceived solution should not be worse than the identified problem. Satyam Episode Post the Satyam episode lot of initiatives have been taken by the regulators, Ministry of Corporate Affairs (MCA) and the ICAI to study the existing norms of governance and ethics within the domain of their respective jurisdiction. Confederation of Indian Industry set up a task force to make recommendations to strike a balance between over regulation and promotion of strong corporate governance norms through voluntary reforms. The NASSCOM, under the chairmanship of Mr. N.R. Narayana Murthy, constituted corporate governance and ethics committee which issued its recommendations during 2010. In pursuance of recommendation by such bodies, the Ministry of Corporate Affairs has released a set of voluntary guidelines addressing Myriad Corporate Governance matters. The Companies Bill, 2011, about which none is sure as to when it would become the law, has many significant provisions for improving Corporate Governance in Indian Companies. These provisions mainly relate to the attributes of and restrictions relating to Independent Director; measures for

securing the independence of the Board; selfdeclaration of interest by the Directors; Closer regulation and monitoring of related party transactions and above all empowering group of shareholders to file class action suits under certain circumstances. Enforcement The glaring deficiency in the Indian regulatory framework is the inefficient enforcement mechanism. It is marred by complacency and clouded by corruption. Undue delays in investigation coupled with inordinate delays in the judicial process before a judgement is delivered have put the image of India in poor light to the external world. The First Prime Minister of the country Pandit Nehru remarked that a law is not as good as it is enacted but it is only as good as it is implemented. A good law badly implemented can be disastrous. The effort that goes into the policy making or in bringing out reforms, unfortunately, h a s n e ve r b e e n c h a n n e l i ze d to re va m p th e executive functioning to ensure efficient decision and to prune the judicial mechanism to secure expeditious disposal of cases. Such an endeavour, if successfully undertaken, can do a lot good for the country and auger well for the global investment community eyeing India as one of the attractive destinations for investment. Mr.Madoff, the promotor of Madoff company in US was caught in the financial fraud of the magnitude of $ 65 billion. The fraud came to light in the later part of 2008 due to which he was prosecuted, trial conducted and punishment pronounced to the extent of 150 years of imprisonment within a short span of 6 months. Considering the fact that Mr. Madoff is a senior citizen by age, one might wonder on the purpose of such a severe punishment which cannot be fully served by any convict. But the point is this event sends two important messages to the society at large: 1. The judicial process is so expeditiously carried out that the punishment is imminent; 2. The message is loud and clear as to what is in store in terms of severity of punishment for those who defraud the public and erode the trust and confidence reposed on them. No one can dare to think that they can do anything and get away by sheer tactics of prolonging the investigation process or by hoodwinking the judicial system. If only the Indian system gears up to absorb these two principles and effectively implement them, there would be tremendous scope for economic growth at a pace

which could be beyond anyone's imagination and the dream of India emerging as a strong nation in the global arena by 2020 would be a reality.

window dressing the financial statements for pleasing the analysts and meeting the stock market expectations.

Legislating for the exception

Triple Bottom line Reporting

In the developed economies, the focus is shifting Yet another drawback in the Indian legal system is from financial reporting to “Financial, Social and the tendency to make changes based on isolated Environmental reporting” which is recognised as events or exceptional occurrences. It makes lot of Tr i p l e B o t t o m - l i n e R e p o r t i n g ( T B R ) . T h e sense, no doubt, to pick up lessons in every event management, auditors and stakeholders need to be so as to introspect on the scope for improvement educated about this evolving concept and gear up but at the same time there should not be a knee to play their respective roles. This is not just jerk reaction to bring about drastic changes. Many about corporate social responsibility (CSR). It is far a times, as indicated once by Late Shri Nani beyond CSR and CSR is a small component of TBR. Palkhivala, the cause of concern could be a mere Measuring financial results are comparatively easier aberration warranting just the ironing out of the and so is the function of reporting thereon. But, creases without there being any need for changing measuring contribution to social and environmental the fabric itself. On the surfacing of any fraud or aspects of the society is challenging. The scam, one may review the existing law and rules consciousness to preserve the resources of the to study the scope for refinement or fine tuning to society and preserve the environment is bound to prevent recurrence as no experience should be lost discipline the way the businesses without learning lessons but the are carried on by the corporate thought process should not be Good people do not require laws to tell swayed to take extreme positions them what to do and what not to do. On citizens. The present generation with a view to replace the existing the other hand, there are bad people who cannot be allowed to exhaust or law in entirety. would always find ways and means to contaminate the natural resources to become prosperous at the cost Good people do not require laws circumvent the law irrespective of its robustness. of making the life of the future to tell them what to do and what generation miserable. When TBR not to do. On the other hand, emerges in India, the Governance norms will there are bad people who would always find ways undergo a paradigm change. We need to gear up and means to circumvent the law irrespective of now and rise to the expectations then. its robustness. If the act of changing the law or Conclusion bringing in new provision by itself can prevent frauds from being committed, then corporate Corporate Leadership has a fiduciary relationship to financial frauds must have stopped in the US after the stakeholders and are ultimately responsible for introduction of SOX. On the contrary, there were the actions and results of the entity. Unless the occurrences of frauds of bigger magnitude. An leadership ensures that governance is administered effective law supported by robust investigation, with conscious adherence to ethical values, the speedy trial and stringent punishment strictly faith reposed would be eroded in the minds of the enforced could send a strong message not only to stakeholders and flow of investments would dry the offender but also for the potential offenders in down. In a developing economy, Indian corporate the future that unethical methods would meet leadership faces multiple challenges but if these with zero tolerance in the course of building up of challenges can be overcome with clear conscious a credible economy in an emerging country like and efficient governance, the fruits of the labour India. If the law is changed now and then for would be quite commensurate and rewarding. every such exceptional occurrences, majority of When the corporate governance norm reforms are the entities, who are otherwise law abiding, would at crossroads in India, the need to blend the find it difficult to cope up with the rigors of the governance norms with ethics and leadership stringent law. Law makers, therefore need to cannot be undermined as it can transcend the desist from making life more miserable for those Indian Companies beyond conventional anecdotal who always want to stay on the right side of the w i s d o m to e m e r g e s tr o n g i n th e g l o b a l i s e d legislature and give more importance to the act of competitive environment. “sleeping peacefully every night” than to do

Our Fiscal Laws Some Random Thoughts S Rajaratnam (Excerpts from Sri S.Swaminathan Memorial Lecture” delivered on 30.7.2012 on the Occasion of Golden Jubilee Celebrations of Revenue Bar Association, Chennai)

Administration of law A matter of concern: I am not referring in any detail in this paper to administration of our tax laws making tax compliance burdensome for oneself as well as vicarious liability of others by way of tax deduction at source or the problems arising to the taxpayer on chaotic accounting system with taxpayers often visited with demand for taxes already deducted or paid or refunds inordinately delayed. I am also not referring to the astounding instructions in terrorem dated February 7, 2012 issued by Chairman of Central Board of Direct Taxes to all Chief Commissioners, Director Generals, Commissioners and Directors to achieve collection targets (!) at the risk of losing promotion or posting to the place of their choice. Such an instruction being contrary to law is an insult to the self-respect of lawa bidin g office rs. Th is in stru ction wa s noticed by the High Court as well in UTI Mutual Fund v. ITO (2012) 345 ITR 71 (Bom). Taxpayers have learnt to live with the actions of the Assessing Officers acting on such instructions with fatalistic resignation.

service liable for service tax, an issue, now pending before the Supreme Court. Unfortunately, the State Governments do not appear to be concerned by such levy by the Central Government, as they have not intervened in the dispute as they had done in some earlier disputes relating to other taxes. The most recent introduction of a universal service tax with a negative list is something, which is unprecedented as a tax measure in our laws. Article 265 lays down that no tax can be levied except by the authority of law. The target of any tax is a person with the taxable event identified and spelt out, but a tax on the basis of negative list is probably a rare one in the fiscal history of a federal Constitution. States should have had a say on service tax. It is true, that a tax not listed goes under the residual powers of the Central Government, but where a service is rendered between two parties in the same State, merely because such a tax was not envisaged at the time the Constitution was framed, the States may not be barred from questioning the constitutionality or at least in asking for a share, but nothing so far has come to pass.

Service Tax What is service?: I would refer to the system of taxation, which is being constantly distorted, engulfing tax administration, professions and Retrospectivity in all these and taxpayers in increasing darkness more cases is for “removal of of our tax laws. There are quite a doubt”. Whose doubt? There few mysteries surrounding it. could possibly be no doubt after the decisions of Courts Income by way of rent, one would especially the Supreme Court imagine, is liable for property tax in view of its binding nature t o b e l e v i e d b y t h e l o c a l under Article 141 of the Constitution. Government. No. It is also a 26

S h o u l d c a s h t ra n s a c t i o n s b e treated so harshly?: Disallowances under section 40A(3) not made in crossed cheque or crossed draft was upheld in Attar Singh Gurmukh Singh v. ITO (1991) 191 ITR 667 ( S C ) , b e c a u s e t h e t h e n Ru l e 6DD(j) gave discretion to the Assessing Officer to accept genuine

transactions accepted in cash under compelling circumstances. But this exception in Rule 6DD(j) was removed, but disallowance stands upheld by the Andhra Pradesh High Court disallowing in Smt. Ch.Mangayamma v. Union of India (1999) 239 ITR 687 (AP), even after such deletion on the ground, that such removal is a step forward in the achievement of object of section 40A(3) to encourage bank transactions. Could such object of encouraging banking be legitimately covered by a fiscal law? Even if there be a legitimate object to be covered by income tax law, it should have been best achieved by placing the burden of proving cash transaction on the assessee. There is no further development in law after 1999, when it was upheld. Meanwhile the requirement is now payment by account payee cheque or draft as against crossed cheque or draft with disallowance automatic except for marginal exceptions, so that it tantamounts to a tax transaction on sale of goods, where payment is for purchase of goods, a matter covered by sales tax, value added tax (VAT) or the proposed GST. War on charities!: A recent amendment to section 2(15) of the Income Tax Act is a classic instance of throwing the baby with the bath water. Among the four classes of charities eligible for exemption, those with object of general public utility are singled out for denial of exemption, but for a marginal threshold exception, where there is any collection of fees or sale proceeds smacking of business, so as to lose for the trust or institution not only the right to exemption of such deemed business income, but also on their income from investments, because the amendment is to section 2(15) defining charitable purpose and not in section 11(4A) whereby business is not incidental to objects is being taxed. Retrospectivity for “removal of doubt” How valid?: The Finance Act, 2012 is another

example of a fiscal legislation, which upsets all that has been considered as settled. The “look through” provision in section 9, the inference of royalty in a transaction in a sale of software and inference of technical service in satellite communication besides inference of taxable transfer in a mere reorganisation, all retrospectively made in section 9 unsettles the law alround. Retrospectivity in all these and more cases is for “removal of doubt”. Whose doubt? There could possibly be no doubt after the decisions of Courts especially the Supreme Court in view of its binding nature under Article 141 of the Constitution. Remedy for Government is to seek review before a larger bench. Retrospectivity cannot, therefore, be in accord with the letter and the spirit of the Constitution, though a prospective amendment to neutralize the decisions of the Court cannot be faulted. The retrospective amendment relating to inference of royalty in a sale of licensed software is inconsistent with the inference drawn consistently as goods for purposes of sales tax and import duty. Such retrospective neutralization of judgements of the Courts makes a mockery of separation of powers implicit in the Constitution, besides causing erosion of faith of the taxpayers in such unstable laws. What about GAAR?: The need for General Anti-Avoidance Rule (GAAR), when there are any number of Specific Anti-Avoidance Rules (SAAR) by deeming provisions galore with transfer pricing rules, etc, has not been explained. At any rate, the rule is diluted as fast as it is introduced. It is postponed by a year. Notwithstanding a detailed study by the Standing Committee of Parliament, an administrative Committee came out hurriedly with draft rules, but found to be unsatisfactory by another administrative committee presided over by the Finance Secretary (Business Line, 10th July, 2012) now to be reviewed by still another committee 27

again without any representation from p r o f e s s i o n o r t r a d e a n d i n d u s t r y. T h e language of GAAR is too broadly worded giving scope for abuse. Corporate Taxation Its hard features extended: Corporate taxation is one area crying for reform. There is double taxation of corporate profits in the hands of both the company and the shareholder. Minimum Alternate Tax, which Shri. N.A.Palkhivala characterised as â&#x20AC;&#x153;constitutionally illegal, economically unsound and morally repugnantâ&#x20AC;? is another. Inference of deemed dividend from loans and advances in the hands of concerns in which such shareholders are interested is still another. Recent deeming provisions under section 56(2)(viia) and 56(2)(viib) covering issue of shares below market rate on the basis of hypothetical valuation of shares are meant to tackle some abuses, but largely affecting genuine issue of shares. The worst feature of corporate taxation like Minimum Alternate Tax is extended to non-corporate assessees as Alternate Minimum Tax. Transfer pricing rules, the working of which could hardly be considered as satisfactory, hitherto confined to international taxation, are now extended to domestic transactions. The Finance Ministry like Bourbons seems to learn nothing and forget nothing. The long arm of law: Foreign assets held by residents can be subject matter of opening the assessments for past 16 years on the inference of black money abroad, through an uneven procedure not capable of being applied in spite of retrospectivity, where return had already been filed. Reassessment procedures even in respect of Indian assets are by and large unsuccessful, as they are generally weak, because of the necessary conditions for invoking them. Since only few returns are taken up for scrutiny, resort has to be made to revisional procedure in most cases. Residents holding assets abroad are 28

expected to return the foreign income for income tax purposes, so that the new provision does not really add to the existing powers to any significant extent, while giving ample scope for abuse of the provision by over-zealous tax administrators. Direct Taxes Code Its prospects: Is Direct Ta x e s C o d e , a s o l u t i o n f o r a l l i l l s ? Unfortunately the Code is only a jumbled version of existing law. There have been three Finance Acts after the draft Code each making massive changes. It would mean that the Code will have to incorporate these amendments, which will be necessary to update the Code, the task being one of sweeping Augean stables. Current realities ignored: Power to tackle tax evasion by disregarding reality is unwise. The law continues to allow tax shelters provided by personal laws like Hindu law permitting multiple units inconsistent with the object of Common Civil Code under the Constitution. Random scrutiny checks leaves the unscrupulous tax payer to gamble on the chance of their cases not being taken for scrutiny. Law can never be a substitute for investigation. Considerable talent, which is latent in tax administration is wasted on routine duties. The present law is governed by Ptolemic ideas in a Copernican world without gearing itself to meet many challenges posed by current developments in business world with the rampant tax evasion and corruption having become fine arts. Law's delays: Any discussion on current law without reference to the inordinate delay in disposal of appeals at all levels will be incomplete. Untenable and uncollectible demand (estimated by Chelliah Committee at 70% in 1992 raised in assessments) and equally untenable appeals against reliefs illustrates Parkinson's law creating work alround with nothing to show for it. Tax administration needs to be toned up with

accountability enforced at all level. The A wake-up call: I will end my homage to belief, that quasi-judicial functions are free veteran Shri. S.Swaminathan, Advocate, by a from supervision is mistaken. Effective q u o t e f r o m a n o t h e r v e t e r a n S h r i N . A . supervision is one where the supervisors Palkhivala: themselves are held accountable recalling the “Two things strike the student of Indian Roman adage “who is to guard the guards?”. income-tax law with trepidation and The belief that law cannot be simplified and amazement - the precipitate and that it is only complex law, which chronic tinkering with the law by will be a substitute for investigation It is the profession, which can guide the trade and industry b u r e a u c r a t s w h o a r e t h e and prevent tax evasion, has to be (who are affected by the unacknowledged legislators of shed. present state of things in the t a x w o r l d ) t o v o i c e t h e i r India, and the anaesthetized A regret: I will end by registering protest in a manner that can patience of the Indian public. one regret, which I have for the convince the powers, that are. Truly, we Indians are a “low present state of things in the tax They also have not put their arousal” people. We endure shoulders to the wheel. world. It is no use blaming the injustice and unfairness with bureaucracy or politicians. It is feudalistic servility and fatalistic trade and industry, which is affected and resignation. The poor of India endure should, therefore, raise its voice against inhuman conditions which would lead to a u n j u s t l a w s a n d t h e w a y t h e y a r e bloody revolution in any other country. The implemented. They do not do so. It is the rich endure foolish laws and unending profession, which can guide them to voice amendments which benefit none except the their protest in a manner that can convince legal and accountancy professions, and the powers, that are. They also have not put instinctively prefer to circumvent the law their shoulders to the wheel. Things may than to fight for its repeal”. change, if they do take an active part. I hope they would.

If... If you can keep your calm when your clients Aren't meeting their forecasts and blaming it on you, If you can be yourself and refuse to do What all men around you are asking of you A small sleight of hand, a note here and A change there to meet expectations If you can meet with a paying client or otherwise Offer them counsel sane, fair and wise And treat those two just the same; And extol them for an honest game If you can make your client, open his purse For tax avoidance or evasion, in the same verse Save nothing in the long run but a petty dime Explain, make him pay his legitimate taxes and on time If you can be a good master to your team And enable a shared vision for a dream Groom them as your own to glow It's yours! - their support to grow!

If you can, your knowledge, learn to offer Filled would be your hearts coffer The knowledge and experience they gained Would ensure wishes in plenty retained If you can dream to be at the fore And let your revenues and growth soar Not merely dream but make thoughts your aim With fairness and equity as a constant claim If you can be calm, suave and polite Or loud, firm and sometimes ballistic And be as the event demands Bending rarely, and not too much If you can fill every chargeable hour With sixty minutes of ethical distance run Yours would be the world, Mr. Auditor A universe filled they'd say with True and Fair - Sripriya Kumar inspired by Rudyard Kipling

India @ 65 Republic without Responsibility, Democracy without Duty M R Venkatesh FCA We have been seeing a litany of accounting scams and scandals around the world, with India having its due share. It is not only the errant promoters and the directors of companies who come under fire but the attesting Chartered Accountants too. While Auditors and promoters get lampooned in every corporate fraud, public servants - the ultimate beneficiary in every scam - remain inexplicably outside the radar of the long arm of law. This article focuses on the emerging frontiers of corruption laws while drawing the attention of the readers to the lack of precisely defined duty within the Constition for our public servants. Let me elaborate with reference to our profession. Sections 224-231 of the Companies Act 1956 deals with the appointment, qualifications, rights, duties, responsibilities and disqualifications of an Auditor of a company. Simultaneously, section 233 of the Companies Act deals with penalties to the auditor for noncomplaince of his duties prescribed under the C o m p a n i e s A c t . F u r t h e r, T h e C h a r t e r e d Accountants' Act 1949 deals with the manner in which an Auditors can be hauled by the Institute of Chartered Accountants of India for violating the code of professional ethics or failing to meet the professional standards expected of them.

prescriptions, the political class (Minister etc.), who we willingly invite for the conferences as Chief Guests and Keynote Speakers do not forget to remind us (why, even chide us) on the issue of accountability and pontificate on our duties and responsibilities. We l l , n o c o m p l a i n t s . B u t w h a t a b o u t o u r ministers themselves? Has our Constitution prescribed duties and responsibilities for occupying the highest offices of the land? What are the duties prescribed for our Public servants? Let us examine in greater detail. The Indian Constitution is considered to be a sublime Constitution by constitutional experts. Several Countries grappling with their internal plurality or diversity have often looked to our Constitution for inspiration. Written after an extensive debate by the Constituent Assembly, the Indian Constitution was formally adopted on 26th January 1950. However, decades later, we find that there seems to be a fundamental flaw in the design of our Constitution. The words Duty and Responsibility are conspicuous by their absence. The first instance of the State prescribing certain Duty to its citizens was in 1976 through the amendment of the Constitution by the introduction of Article 51A.

S i m i l a r l y, s e v e r a l o t h e r p r o v i s i o n s o f t h e Companies Act are peppered with prescribing Accordingly, it shall be the duty of every citizen liberally the responsibilities to the Directors of a of India to abide by the Constitution and respect Company along with penal consequences for not its ideals and institutions, the National Flag and discharging the concomitant responsibilities. the National Anthem; to cherish and follow the Simultaneously, the Revenue Laws or the Labour noble ideals which inspired our national struggle Laws cast responsibilities on the Board or on for freedom; to uphold and protect the specific officers or persons to carry out certain sovereignty, unity and integrity of duties and prescripts punishment should they fail to do so. In But what about specific duties for a India; to defend the country and short, most modern statutes are minister? Where are his responsibilities? render national service when a b o u t r i g h t s , d u t i e s a n d O n e i s a f r a i d t h a t t h e r e a r e n o called upon to do so and the list Constitutional obligations cast on any goes on with high utopian ideals responsibilities of various parties. Ministers to carry out certain specific with no direct penal B e s i d e s a l l t h e s t a t u t o r y duties or responsibilities. consequences.

Again all that is stated under Article 51A is merely a "vision statementâ&#x20AC;? and should there be a violation of say the National Flag or act of treason one may be held guilty and punished by a separate legislation - say the Prevention of Insults to National Honour Act, 1971 - but not by the Constitution. Interestingly even this vaguely worded "vision statement" was inserted by the forty-second amendment in 1976 during emergency! Put pithily there is nothing in the Constitution that deals with the Duties and Responsibilities of the Union Council of Ministers except in Article 78. Accordingly, it shall be the duty of the Prime Minister to communicate to the President all decisions of the Council of Ministers relating to the administration of the affairs of the Union. Similarly Article 167 deals with the duty of the Chief Minister and his duty to communicate to the Governor. But what about specific duties for a minister? Where are his responsibilities? One is afraid that there are no Constitutional obligations cast on any Ministers to carry out certain specific duties or responsibilities. Of course there is an oath of office for a Minister for the Union who, before taking office affirms that he will bear true faith and allegiance to the Constitution of India as by law established, that he will uphold the sovereignty and integrity of India, that he will faithfully and conscientiously discharge his duties as a Minister for the Union and that he will do right to all manner of people in accordance with the Constitution and the law, without fear or favour, affection or ill-will.

Let us take a case in point: The 2G scam. It is a classic story of Somebody, Nobody, Everybody and Anybody. Somebody could have stopped it. Everybody was watching it, albeit silently. Nobody did not want to stop it while Anybody could have decisively intervened. While all of them watched the outbreak of the scam from close quarters, documented evidences suggests that public servants including ministers at the highest level knew about the scam not on real time basis but even prior to the out break of the scam. Correspondences available in the public domain between the former telecom minister and his cabinet colleague, the Finance Minister suggest that the FM was completely in the know of the developments in the telecom ministry much ahead of even the PM. Yet, most in the know (and that includes the FM) were silent and continue to be silent even to this day. What is galling is that the FM continues to occupy his office without let or fear for the simple reason that there is no "duty" cast on him under our Constitution to have stepped in, acted and protected the interest of the revenue in such situations. Remember, in Indian public life, people get punished when they perform and fail in the process and not for absolute non-performance. No wonder in our system Somebody, Nobody, Everybody and Anybody continue to proliferate! This paradigm of deep-freeze in governance is one of the most disturbing development in public life post independence. What is agitating the collective conscience of some well-meaning citizens of this country is that this has accentuated in the past few years has been the failure of our public servants to discharge their "duties."

Conscientiously discharge his duties? Exactly, but where is the Duty prescribed, listed or sequenced for ministers in the first place and where? Students of Law know that a legal position is In the absence of precise legal standards violated if and only if the legal benchmark is prescribing Duties and Responsibilities to established in the first place! Interestingly, Minisiters and to comprehend all that is stated neither the Constitution not any other statue a b o v e a r e f e r e n c e t o t h e Pr e v e n t i o n o f contains the same. Consequently most students of Corruption Act (PCA) would be in order. Why such law have come to a conclusion that this is a a contrived, convoluted and constitutional imperative at best, circumbulatory reference to what poor drafting at worst. (Like the It is a classic story of Somebody, Nobody, is a simple proposition in law? tax practitioners know that even Everybody and Anybody. Somebody could a taxing provision cannot be have stopped it. Everybody was watching Well, to be candid, we have no i m p l e m e n t e d i f t h e r e i s n o it, albeit silently. Nobody did not want to other alternative to see if any stop it while Anybody could have decisively action or for that matter inaction specific provision on â&#x20AC;&#x2DC;chargingâ&#x20AC;&#x2122;). intervened. on the part of a Minister that

could give arise to any adverse legal consequences. Accordingly, a "public servant" is said to commit the offence of “criminal misconduct” under subclause (ii) of clause (d) of sub-section (1) of Section 13 where by abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or under sub-clause (iii) while holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest. But there is a fundamental question of Law that remains unasnwered to this date whether Mens Rea is necessary in the first place for cases falling within S 13(1)(d)(ii) and (iii) of PCA. Crucially, will its existence have to be proved beyond doubt even before commencing an investigation? What about the Ministerial Duty and Responsibility? The Delhi HC recently had an occasion to go into these complex issues in Runu Ghosh. Readers may recall that Runu Ghosh was the Director in Telecommunications ministry when Shuk Ram was the minister. The question confronting the HC was i n t h e a b s e n c e o f a d v e r b s l i k e w i l f u l l y, fraudulently, dishonestly, corrupt or illegal means to qualify the verb, whether any act of a public servant would constitute “criminal misconduct" if he while holding such office obtains for any person any pecuniary advantage which is without any public interest? The Court holding that public servants are an entirely different class, and therefore opined that they must have a higher standard of behavior. Therefore, when a public servant's decision exhibits complete and manifest disregard to public interest with the corresponding result of a third party obtaining pecuniary advantage or valuable thing, he is fastened with responsibility for “criminal misconduct” under Section 13 (1) (d) (iii). The Court came to a conclusion that the offence- under Section 13 (1) (d) (iii) “advisedly does not require proof of intent, or mens rea, because what Parliament intended was to punish public servants for acts which were without public interest.” [Para 78] Consequently, the Court opined: “the silence in the statute, about the state of mind, rules out applicability of the mens rea or intent standard,” and therefore concluded, “a decision is said to be

without public interest, if that action of the public servant is the consequence of his or her manifest failure to observe those reasonable safeguards against detriment to the public interest, which having regard to all circumstances, it was his or her duty to have adopted.” [Para 81] Now this judgement of the Delhi HC is under appeal with Hon’ble SC. Yet the ratio is simple Public Servants taking any decision that is opposed to public interest, with or without Mens Rea, are bound to be held accountable. Forget the technicalities for a moment. Will we exonerate a watchman who simply looked away while the house he was supposed to guard got burgled? Will he not be accountable? Will he not also be a suspect? Will he not be questioned by the police? That brings us to the role of the then FM, who has been re-appointed to the same post. Whether he is guilty of “commission” (pun unintended) or not is under the active consideration of Hon’ble SC. But on “omission” there is little doubt as a sentinel of the nation’s finances, he failed to prevent the loot of our exchequer. Nevertheless, this interpretation of PCA in Runu case by Hon'ble Delhi HC is perhaps the most important development in our fight against corruption. Crucially it is the only indirect manner of defining ministerial duty. For sometime now civil society has been demanding a citizens charter - along with a Judges Accountability Act. The Constitution of India has served us fairly well in the past sixty five years except for this serious shortcoming. The 2G saga and the laborious interpretation made out by the Delhi HC in the Runu Ghosh Judgement clearly point out that we also need a Ministerial Accountability Act, if we are unable to embed the same in our Constitution. As citizens, the least we need to know is whether the FM is duty bound to protect the revenue, the Defence Minister to defend us and public servants to serve us. And should they fail, how do we punish them. Are we ready to debate this issue if not legislate one? Perhaps at 65, India can be termed as a Republic without Responsibility, Democracy without Duty and sadly enough, Administration without accountability. Time to change all this!

Taxing Non-Incomes in Income Tax Act T. Banusekar FCA Let us begin this article fairly: The Income Ta x A c t h a s s e v e r a l e x e m p t i o n s a n d deductions which can treat certain incomes as not taxable. Essentially with solid reasons and strong rationales. (Not for long, I su p p ose a s of la te , th e re h a s b e e n a clamour to reduce the number of exemptions and deductions, with a view to simplify (!) the law).

incomesâ&#x20AC;? retrospectively! The purpose of this article is only to highlight a few of such instances in the tax law which may even have an effect of administering many other revenue laws in the country (like P F A c t , E S I A c t , VAT l e g i s l a t i o n s e t c . discussed elsewhere) through moral policing and to make people pay taxes on non incomes. Before you think that the Government is stupid, hold. The idea is to completely curb the black money circulation in the economy and consequently make India a black money free country so that any black money of the country can only remain outside the country in places like Switzerland, Liechtenstein etc.

But, on the unfair side, there are also a plethora of provisions which seek to tax nonincomes and these include deemed incomes (even doomed incomes!), perceived incomes etc. At the helm of the Finance Ministry, where the FM is the ultimate master, the master's mind and several other master minds seem to be working overtime at this job of creating charging provisions to tax non Transfer Pricing incomes with the reasoning that this will For example the Transfer Pricing provisions help curb black money, keep increasing the mandate you to earn as much profit as others d i s a l l o w a n c e o f ( o t h e r w i s e a l l o w a b l e ) have earned on the premise that if you have e x p e n s e s w i t h t h e a v o w e d v i e w o f dealt with an associated or a deemed administering the tax law etc. This apart, associated enterprise, you are likely to have we can also now proudly claim that what was shown lesser profits than what is otherwise not income would retrospectively become the correct profits that should have been i n c o m e t h r o u g h a ' r e m o v a l o f d o u b t ' earned. (If you earn more than them, they a s s u m p t i o n b y t h e G o v e r n m e n t . Ye s , will be in soup and if you earn less, you will explanations are inserted stating that they be in soup!) In such cases, even people earning exempt income in India, are for removal of doubt which show lesser profits in India and never existed in the minds of the The idea is to completely tax payers. c u r b t h e b l a c k m o n e y transfer their profits outside India circulation in the economy so that they will pay taxes outside That the term 'income' is defined and consequently make India India and evade exempt income in inclusively in the Income Tax Act a black money free country India. If you are surprised that any as well as in the Draft DTC bill has so that any black money of assessee can think on such lines come in handy and perhaps FM will the country can only remain thereby paying higher taxes, very soon make an interesting outside the country in places please don't. That is the law. amendment to this section saying l i k e S w i t z e r l a n d , Completely a scheme of taxing Liechtenstein etc. that â&#x20AC;&#x153;income includes non-

perceived income, the transfer pricing provisions also expect you to earn as much profits as is shown by somebody who could probably have fudged his accounts showing higher profits with a view to please the shareholders or with a view to go in for IPO. Peculiar though it may sound this is a part of the Act. TDS and other Compliances - Disallowances There was a weird Act called Expenditure Tax Act in the country. It was repealed long back. The legislators then probably knew that tax on expenditure would be blended in to Income Tax Act itself! Look at the provisions t o d i s a l l o w e x p e n d i t u r e s u c h a s VAT, contribution to employee welfare fund etc. if not paid within stipulated dates so that the VAT law or the employee welfare fund laws are complied with. No study would be made of whether this infact enhances the collections but nevertheless we would continue with the disallowances for this has once been thought of and any person who tries to do away with these disallowances would be branded anti-nationals. We would also have provisions to ensure that if somebody does not deduct tax at source, in some cases even a TDS as low as 1% can suffer a disallowance of the entire sum of payment which can result in a payment of tax of 30% on the entire expenditure and all this to administer TDS compliance. This disallowance in most cases is worse than a penalty which is intended to be a punishment. This provision in many cases is enough for a business entity to close down but then it is imperative that the goose that lays the golden egg must be killed so that TDS laws are complied with. While talking of TDS one cannot but admire the legislature for its great thought of making software purchase payments subject to TDS by amending section 9(1)(vi) that too retrospectively and creating a disallowance for non deduction while assessees based on a fair understanding believed that they had no 34

such obligation. The tax law can make a disallowance of the entire expenditure which is incurred for any purpose which is an offence or which is prohibited by law by inserting an explanation to section 37(1) and thereby any person who carries on a business or profession and incurs such expenditure will have a disallowance though a person who is carrying on an illegal business and has a loss while carrying on such illegal business will be allowed to deduct such losses and such a view has the blessings of the Supreme Court based on the law as it is presently. Deeming Fictions in Treatment of Income from Other Heads Having spoken about the deeming incomes in case of persons carrying on business, it must be remembered that the deeming fictions are not restricted merely to business assessees where non incomes can become taxable. A gift can become income because there is a possibility of misuse and probably because the department does not have the mechanism to identify what is bogus and what is real. Real estate transactions are no exception where guideline value can be taken as the consideration while it is common knowledge that guideline value is arbitrarily fixed by different states for similar properties and such guideline values are based only on the need of the state to generate revenues. This is because black money circulates in immovable property transactions and the State has no mechanism to control this. The law would contemplate inherent safeguards which can even range to an extent where a buyer of a property who is not concerned about the tax liability of the seller having the guideline value reduced by an appeal to a competent authority under the Registration Act so that the seller will have his tax liability reduced. So, essentially the Governmental inabilities may result in citizens' tax liabilities!

A discussion on deemed incomes can go on have no income which can be charged to tax and on so much so the share capital can under the provisions of law. The height of become income under section 56(2)(viib) and such deeming fictions to treat a non income as already discussed a gift can be income as income is what has fortunately since been with exceptions like gifts received from deleted whereby they had a provision for a relatives not being income but then while my fringe benefit tax and a deeming fiction to it father's brother would be my relative and whereby for example if a partner travels the s u m s r e c e i v e d f r o m h i m w o u l d n o t b e employees will deemed to have a fringe income, I would not be a relative of my benefit. There can be possibly no end to this father's brother and sums discussion with imagination received from me by such .......while my fatherâ&#x20AC;&#x2122;s brother would be r u n n i n g r i o t a n d t h e uncle of mine would be his my relative and sums received from him l e g i s l a t u r e a n d t h e income. While this would be would not be income, I would not be a bureaucracy amending the relative of my father's brother and sums so for my father's brother, a received from me by such uncle of mine l a w t o m a k e s u c h n o n sum received by me from my would be his income. While so, a sum incomes income only with a w i f e ' s g r a n d f a t h e r o r r e c e i v e d b y m e f r o m m y w i f e ' s view to curbing the exploits grandmother will not be taxed grandfather or grandmother will not be of assessees and drafting law in my hands even if without taxed in my hands even if without on the foregone conclusion consideration for they are consideration for they are considered my that every tax payer is a relatives and therefore such amounts will considered my relatives and not constitute income. Looks like a riddle crook. This approach it is felt therefore such amounts will from K. Balachanderâ&#x20AC;&#x2122;s movie, isn't it? can only lead to ingenious not constitute income. Looks ways of evasion and not in like a riddle from K. any manner help in reducing Balachander's movie, isn't it? the abuse of the law or the circulation of black money. Can anybody ever otherwise Conclusion imagine that gift / share capital will be The deeming fictions to treat non incomes as income or that royalty will be income income spread its wings further by having retrospectively while several judicial fora provisions for minimum alternate tax and have taken a contrary view. Income Tax Law alternate minimum tax so that assessees pay is lawlessness at its worst! a minimum tax even where they otherwise

As it is the happy occasion of turning Eighty Indeed the celebration time at our Society With every year, the Society getting younger And also becoming wiser, better and stronger No, here the normal rules of ageing donâ&#x20AC;&#x2122;t apply As our zeal and gusto are never in short supply. Revving up for the century that is just a score away To serve the profession, we are ever here to stay.

The Accounting Profession: The Years Ahead V Pattabhi Ram

A tsunami of change is flowing across the world; like never before. And we are not meaning the political one. Occupy Wall Street is one example. Life is no longer the same for those who grew up in the exciting 80s or the nervous 90s. The global business rules have changed and there appears to be no new ones. All this is going to hit the accounting profession big time. We are already seeing some tectonic shifts that leave no holy cows. Like: -

Accountancy has been near fully taken over by technology with near zero manual intervention. Yes, accounting is now on auto-pilot with technology as the new enabler.

Audits have shifted their focus from transactions and balance sheets to people and processes thanks to the growing incidence of white collar crimes.

The grammar of both accounting and auditing is being re-written to keep pace with newer regulations.

Post Satyam, the credibility of the accounting and audit function has hit an abysmal low. The investor keeps asking, “What were the auditors doing?” Work opportunities are spawning across the globe and the work place has become incredibly competitive. No tears are shed for the losers.

Tablets, Networking, Clouds and the Internet have changed the speed, the colour and the contours of work. It's a wired world; and is just almost a weird world.

The skill-set that helped you win in the 90s and the 00s may not help you even survive in the decades ahead.

professionals future-ready. EDUCATION 1. Today, to qualify as a CA you need to pass three levels of examinations. This is (ideally) done in about 4 years. However, like engineers come out of engineering college within 4 years, lawyers graduate from law school within 5 years and doctors come out of medical school within 5.5 years of Class XII, the certainty factor in CA course is certainly missing. But unlike engineering, law and medicine, CA is not only a distance-learning-program; education wise it's also a part-time course. Throwing adolescents, still in their teens into the corporate world calls for and expecting exceptional chutzpah from them and to push them to learn a top heavy syllabus that isn't evenly spread is sheer tyranny. Yes, the syllabus needs to be tuned down and the idea of Internship revisited. 2. I believe that the education pattern could be as under -

Level 1: Common Proficiency Test

Level 2: Exam 1: Group 1 (6 months)

Level 2: Exam 2: Group 2 (6 months)

Level 3: Exam 1: Group 1 (15 months)

Level 3: Exam 2: Group 2 (15 months)

Level 3: Exam 3: Specialization (12 months)

3. Passes at each level should confer on the candidate a meaningful certificate that should be marketed by the ICAI. Level 2 qualifiers could be called “Basic Accountants” while Level 3 could be Chartered Accountants. And those who finish exam 3 could be designated with a Super speciality. It is not enough to give them a certificate; qualification at each level should be aggressively marketed by ICAI.

So, isn't there an urgent need for the profession to look inwards and to have a re-look at the three pillars that shape the …….attest function enjoins on it a massive profession namely Education, responsibility. The frauds in the years ahead Training and Ethical Practice? Let's are going to be white collared, emanating look at what kind of metamorphosis from the Internet and technology and may we perhaps need to make our not leave conventional trials.

4. In the above scheme of things a candidate will write Exam 2 only after he has qualified in Exam 1. The idea is that there shall be no overloading on him in terms of his preparation.

5. The syllabus as it stands now is unreasonably weighty. Typically IPCC takes over 800 hours of classroom study. Add to that 800 hours of home preparation prior until the commencement of study holidays (2 months) and you are looking at a candidate requiring 1600 hours of study in 6 or 7 months. That's 275 hours per month or 9 hours a day. Add to that travel time in a city and you realise that a 17 year old is being squeezed dry. It is in this context that there is an urgent need to thin down the syllabi. 6. How many subjects we should have in each level, what they should be and how intensive they should turn out are matters that can form the subject of a different discussion. Broadly across the spectrum of the CA program a candidate should learn Financial Reporting, Corporate Finance, A u d i t i n g , L a w, Ta x a t i o n , E c o n o m i c s , Q T, Management Accounting and Strategy including Game Theory. 7. Specialization should have a bouquet of subjects from out which the candidate should select three. This is the phase where a candidate will choose subjects based on his desire of whether to Practice or go for Industry.

their Internship. That's the law of life. Those going through larger firms will have a more colourful experience vis a vis those going through small firms. There is no meaning in trying to disturb this balance (unless of course, the regulator steps in to rate firms on the basis of their capability to train students and allow only those firms to take articles but this is a real long shot, knowing ICAI as we do!). Of course, there are factors like demand and supply, the willingness of firms to pay stipends at market rates etc. will ensure that who pay well and provide better training will receive the better Interns. 4. ICAI should restrict itself to ensuring that candidates get a bouquet of training opportunities: with Audit firms, corporate, GMCS, NGO, large consulting houses like the BCGs of the world. EXAMINATION 1. Typically, the exam paper at Level 2, be it Quantitative or Theory should have the following types of questions: a) Multiple choice questions that test concepts (20 marks) b) Short problems (30 marks)

INTERNSHIP 1. Today, a candidate goes through 3 years of Internship with the option to undergo one year of it in Industry. There is a need to consider if a student can plan to do 2 years in an audit firm and one year in Industry. Let me explain. Currently, for good or bad, audit firms believe that they have the trainee with them for 3 years and it becomes a tussle when a candidate wants to opt for industrial training. It would be wiser for ICAI to let Interns into a 2 year agreement with the firm with a one year extension at the option of the trainee. This will ensure that those who want Industrial Training can go for it without fuss. Someone who wants Industry as a career would be at an advantage opting for this more so since every audit firm does not offer exposure of the same kind and nature. 2. An Orientation program for one week before joining Level 2; a GMCS of 15 days after completing Level 2 and another 15 days after passing Level 3 is in order. The 45 day residential program of which I had spoken of in an article in the late 90s should be contemplated as an advanced alternative to GMCS 2 and should give the finishing school atmosphere where the focus is on business cases, people skills, team games. 3. In the current scheme of things there is just no way that all Interns will have uniform experience in

c) Case lets (30 marks) d) Theory questions (20 marks) The Case-lets should ideally test practical knowledge that would have been imbibed in Internship. Would it not be interesting to offer the candidates writing an audit paper a few documents and ask him to identify whether there is a fraud? Or for those taking a law paper to be furnished with dummy documents based on which they would make modifications for the incorporation of a company? 2. Examinations for Level 2 and 3 should be run every quarter with a student having the option of writing only the alternate exam. This will reduce the work load involved in the examinations although overall it could be the same in a year. The ultimate, of-course, would be to let a candidate take an exam anytime when he is ready but that may be far into the future. 3. Today, it is apparent that marks are scaled up for all candidates based on exigencies. This could be for a variety of reasons into which we don't have to now get into. Suffice to say to avoid the anomalous situation of scoring not being uniform across exams the system of relative grading (a k a GPA) should be adopted. All business schools and all engineering colleges have transitioned to this with

success. While life is not about the normal distribution curve, GPA will help iron out the troublesome case of marking. 4. At Specialization level Open book exams should be considered. PRACTICE 1. A large army of accountants are coming out of ICAI's assembly line every May and every November. No quarrels with that so long as they represent quality products. Unfortunately, this may not be true. The fear is that we are simply feeding the market and in the process undermining the profession. The IITs and the IIMs do not necessarily cater to the mass market. There is no reason for ICAI to do that.

of listed companies beyond a certain turnover. Such audits may not necessarily be carried out by chartered accountants but would possibly be by certified fraud examiners who would be running businesses rather than profession. CONTINUOUS PROFESSIONAL EDUCATION 1. There is a definitive concern about the quality of audits. The ICAI can hide behind the spectre of â&#x20AC;&#x153;Where is the proof?â&#x20AC;? But the growing number of scandals in which CAs are willy-nilly a party is an indication of the shape of things to come. Some of it could be related to how members keep themselves updated of professional developments. One argument could be that if they don't update themselves the market would thrown them out automatically

2. ICAI's attest function enjoins on it a massive 2. We tried the first option for the first 50 years responsibility. The frauds in the years ahead are of ICAI's existence; the consequences were going to be white collared, emanating from the consequences. We then moved into mandatory CPE Internet and technology and may not leave which had no mechanism for testing. This turned conventional trials. The professionals need to out to be more a money spinner for ICAI than upgrade their skill set towards this or identify anything constructive. It hit the nadir when skilled professionals with whom networking parties, which is what they would network. While it is The mandatory CPE system is turned out to the regional conferences are, nobody's case that ICAI will be able be more a money spinner for ICAI than began picking high CPE credit to control the activities and antics anything constructive. It hit the nadir when hours. o f e v e r y o f i t s m e m b e r s i t i s networking parties, which is what the The time has now come for necessary that delinquencies and regional conferences are, began picking high 3. us to graduate to the next level, inadequacies are addressed to well CPE credit hours. however tough it might be. A CA in time without fear or favour. who wants to be in the attest Justice should not only be swift function should compulsorily take a multiple choice and stringent, it should also appear to be so. test on a subject of his choice from a bouquet of 3. Today, ICAI has the great advantage of being subjects that would be kept on offer. You could give the sole body authorized by the government to him all the books that he wants to carry to the audit financial statements. The bottom could fall exams. Yes, it would be an open book affair passing off the profession should the government allow in which is mandatory if he wants to continue with similar bodies to do attest function as it is in the his attest function. United Kingdom. Good institutions should build This article does not address all the issues nor does checks and balances by themselves rather than it present the shape of things to come. Instead it incite the governments to do so. After all, the seeks to paint just a very broad canvas. One thing physician should heal himself. is certain. If we don't ready ourselves for the 4. Peer review, rotation of auditors and not just future, we could be left out of the race. The sheer partners, ban on consulting or any other size of our profession should not lull us into a false engagement of a company by the statutory auditor sense of complacency. of the company should all become mandatory. The Ensuring quality boys and girls get into our increasing risk associated with carrying out audit should not mean that the auditor spends all his profession and ensuring that these men and time in documentation and in protecting his skin. women stay qualitative is a precondition to He should continue to search for robustness in success. Education and Examination ensure the processes. We could increasingly see a new form of first. Ethical Practice and Continuous Professional mandatory audit, namely forensic audit in the case Education ensures the rest.

Gita for Professionals Book Review by R Sivakumar

Human mind is a bundle of conflicts. Conflicts arise only when there are choices. One is always at crossroads in deciding as to what should be done in a particular circumstance, be it personal or professional as the challenges are always there. Chartered Accountants are no exception to this rule, as primarily they are human beings. In today's environment surrounded by corruption and deception as well as deterioration of values accentuated by all pervading greed, jealousy and dishonesty, all professionals face the challenge in upholding ethical values. The divine Bhagwad Gita, if read and understood even in smaller measures, one can get absolute solution in the form of ethical guidance. Many think that Bhagwad Gita is only for evolved souls and not for mortals like us with mundane duties and ordinary aspirations. That can be only an excuse for postponing the reading of Gita, which is an extraordinary elixir for life that emanated from India and has transcended to the entire world. The other reason is the perception that Gita is difficult to comprehend. For such of those, the answer is the book â&#x20AC;&#x153;Gita for Professionalsâ&#x20AC;? by Chartered Accountants Chetan Dalal, published by Bombay Chartered Accountants Society. A lot of persons have attempted to write about the Gita. However the book by Chetan Dalal, is the first by a Chartered Accountant. Chetan has completely poured out his experiences and has packed the entire principles as enunciated

by Gita precisely in just 142 pages. More so, the 26 episodes in Chapter 3 brilliantly portray the challenges faced by a Chartered Accountant. The author has carefully considered the long term perspective of the profession. Equating the qualities of a Chartered Accountant to that of the Pandavas stands out as a classic. To quote from him: â&#x20AC;&#x153;First quality should be symbolised by dharma or his ability to implement righteousness and do what is appropriate.The second attribute should be like Bheema, powerful strength to protect, standup and defend at all times in all situations. The third quality should be competence, excellence and expertise to do skilful work like Arjuna. The fourth quality should be to possess good character and moral values like Nakul and lastly his appearance, presentability and being well g r o o m e d l i k e S a h a d e v. Th e examples are quite illuminating and interesting and covers a wide spectrum of the challenges to be faced such as fraud, forgery, ego, insufficient knowledge, unethical practices and so on.

Going through the case illustrations, one would come across the different methodologies to be adopted for the ultimate Many think that Bhagwad Gita is only s o l u t i o n s . H o w G i t a o f f e r s for evolved souls and not for mortals solutions to learn the attributes like us with mundane duties and required to handle situations ordinary aspirations. That can be only such as investigation matters, an excuse for postponing the reading a r r o g a n c e o f t h e o f f i c i a l s , of Gita, which is an extraordinary elixir dealing with people who do not for life that emanated from India and adapt to changes in technology has transcended to the entire world. and environment etc. are all

lucidly brought out by the author. The book portrays the essential values as profounded by the Gita i.e., absence of pride, unpretentiousness, non-injury, accommodation, straight-forwardness, service to the teacher, purity, steadfastness, self-restraint, absence of egoism, being aware of problems of birth, death, old age, disease and sorrow, equality, devotion to the Lord and continuous study. The author has meticulously drawn the examples from various scriptures and text and has come out with the message conveyed in each of the cases. This should certainly appeal to any professional.

Out of the challenges thrown by sorrow, selfdiscipline, failures and shattered ambitions arise an integrated professional. That professional rises beyond, when he is faced to face with these attributes. At this point, he finds that the reading of Gita helps him in finding the solution. A new vision emerges. It becomes pure, intimate and goes beyond the vast laws discovered by Science. Reading the Gita again and again, makes a professional more tolerant, more patient and more forgiving. Egoism falls away and his heart develops the power to befriend all and admire all those who are noble.

The author has carefully chosen a select and relevant slokas of the Bhagwad gita for a basic understanding and have extended them to areas such as meditation, anger management, spiritualism. For the beginners a concise summary of all the 18 chapters of the Gita is appended.

An Accountant swears by the fundamental rule 'Debit the receiver and Credit the giver'. All those who read this book, stands to gain by a permanent asset. Credit to the Lord for making Chetan write such a wonderful book. A permanent Guidance Note which should find a place in the hands of all Chartered Accountants.

The ICAI Logo – A little known Story O.P. Dani The logo of an organization packs in both heritage and brand DNA. Not to mention trivia gems. Think the swoosh and you'll think Nike. The genial, bearded and bow-tied Colonel Sanders is the KFC mainman. MontBlanc's snowtipped mountain-top and McDonald's golden arches are as wellknown as the brands themselves. Nestle's 'small nest' bird family has stood for baby food, milk and milk products for the past nearly 100 years… Logos pack in more than corporate identity. They are about history and heritage. Although very well-known, few people buying a Lacoste T-shirt will know the crocodile motif is a reference to founder Rene Lacoste's fearsome reputation on the tennis court. Fewer still will connect the Goodyear winged shoe with the Greek god Hermes. Or the Dove pigeon as a peace logo harking back to its military antecedents.

history of the organisation's emblem in `The Chartered Accountant’ "Sri Aurobindo gave CS Shastri the emblem with a Garuda in the center and a quotation from the Kathopanishad: Ya esa suptesu jagarti, One who is awake amongst those who are asleep." This logo was finally selected amongst all the suggestions which were received. The choice of Garuda as a mascot was an interesting one. The Garuda packs in strong symbolism as the Vahana of Lord Vishnu. He flies faster than thought and destroys the Nagas and Serpents. Sri Krishna, in the Gita, in the verse 10.30 says: "Vainateyashcha Pakshinam" (I am Garuda, the son of Vinata, among the birds.) The connection between Garuda and the Nagas is crucial to the philosophy of the logo for the newly founded organization. As Sri Aurobindo once described the connection between Garuda and Nagas thus, "....the winged Garuda revered to be the upbearer of divinity, who opens his vans to the sunlight and soars to the highest seat of Vishnu," is also the eternal destroyer of the Nagas and "the Naga is the symbol of the mysterious earth-bound force in man."

That's perhaps why history of logos can be both an interesting and rewarding subject. Take the Institute of Chartered Accountants of India, a professional body which was set up in 1949 under an Act of the Parliament. Its Garuda with an Upanishad quotation logo was actually conceptualized by Sri Aurobindo. And like most logos, the history of its conceptualization also packs in as much trivia gems as its DNA and brand identity.

The emblem was placed and adopted at the first meeting of the Council of the Institute in New Delhi on August 15, 1949 which happens to be Sri Aurobindo’s Birthday. What a coincidence!

Chennai-based chartered accountant CS Shastri, a devotee of Sri Aurobindo and a Council member of the ICAI, sought his advice on a symbol that would capture the spirit and intent of the newly formed organization. According to Prasanta Mukherjee, who wrote about the

Om Prakash Dani, is a Fellow Member of The Institute of Chartered Accountants of India and Past President of The Institute of Company Secretaries of India & Member of the Executive Committee of Sri Aurobindo Society, Puducherry.

Do We Need IFRS? R G Rajan It was circa 2006, when the Government of India, as usual, without consulting any of the stakeholders, be it the corporates, the regulators or the ICAI, indicated that it would introduce the IFRS standards in India from 2011 onwards. It gave all favorable reasons for embracing IFRS such as the possibility of immense inflow of foreign capital, the necessity of having one global business language, need for the so called integration into global economy etc. and also reminded that already most nations were following this. It was clear that its statement was prepared and dictated by the devotees of IASB, an organisation whose credentials are eminently suspect, and read out by the officials of MCA.

government mandated ICAI to study, analyze and suggest suitably modified standards to be adopted in India. The converged standards (with 'carve-outs') were titled as Ind AS. As per IFRS, if those standards are modified in its application, an entity cannot proclaim to be an IFRS compliant entity. So, at the end (or at the beginning?), the story is that after the introduction of Ind AS (IFRS minus the carve outs) Indian companies cannot be said to be IFRS compliant. They are at best (or worst!) in a state of 'Trisung Swarg'. This, of c o u r s e , h a s s u i te d a n d b e n e f i te d MN C consulting firms, which sensed professional opportunities of converting NACAS based accounts to Ind AS based accounts and from there on to IFRS.

Pitily, the Government is never conscious of IFRS indicates that the benefit of following the fact that the accounting profession is a the IFRS outweighs the cost of converting reactionary profession and not a proactive and compliance. But till today, no country one. You cannot visualize a business scenario nor corporate, have made a claim and that will emerge after 20 years and write a quantified the benefits of converting into standard now. Accounting profession responds IFRS. That IFRS would allow flow of foreign to business scenarios and comes out with direct investments, foster the growth of solutions what it considers appropriate at Indian companies in global market scenario is that point of time. To enable comparison, all mega myth. FDI is attracted where the which are human traits, these were codified business opportunities present. India, being and called as standards which corporates are l o w l y g r a d e d o n b u s i n e s s f r i e n d l y e x p e c t e d t o f o l l o w. To t h e I n d i a n environment, due to Government apathy, Accountants, who are not familiar with the bureaucratic controls, corruption at every business practices abroad, many of the walk of life, low quality infrastructure, concepts in IFRS were new and alien. To power situation not to talk of an them, IFRS was like was like I t w a s c l e a r t h a t i t s uncertain business atmosphere due watching a Russian movie with statement was prepared and to frequent changes to laws and Chinese subtitles. dictated by the devotees of that too retrospectively etc., Sensing the opposition to IFRS standards if it were ushered in on 'as is where is' basis, the

IASB, an organisation whose credentials are eminently suspect, and read out by the officials of MCA.

cannot attract FDI only by adoption of IFRS. At best, IFRS can be one more reason to shy away! 41

There is already a serious debate within western nations as to suitability of IFRS because of principles of fair value, mark to market etc. Where the market is absent following mark to model coupled with the human greed saw many financial products were introduced whose valuations were beyond the comprehension of ordinary accountant's brain, which became the prime cause of financial market collapse in US which in turn become a global financial crisis due to free float of currencies allowed in those countries. India survived this crisis (fortunately) because of absence of capital account convertibility.

matter!). Now, even the champions of IFRS the multinational accounting firms have begun to sing a tune that is different from their earlier one. If you do not believe me, please see a news item in Business Line of th 18 August, 2012 where at least three senior parners of KPMG, Grant Thornton and PWC have come out with similar statements that India is not ready for IFRS.

ICAI, which is like a typical Indian bureaucrat, who is subservient and subordinated to its master and tyrannical on its followers. When the government mandated it to provide road map on IFRS convergence, it should have stood up and The Government could not proceed with Ind said that it is in a position to write and A S f r o m A p r 2 0 1 1 o n w a r d s d u e t o n o n recommend standards that are suitable to resolution of many vexatious Indian business environment and W i t h a b o u t 2 l a k h i n taxation issues. Hence corporates practices. Being accustomed to n u m b e r s , i t i s t i m e w e let a sigh of relief which was, of cut, copy, paste culture from the assert ourselves. If we are course, only short lived. Because, inception of ASB in 1980s it choose hazy about our role, others the Minister of Corporate Affairs wil become hazy about our the convenient mode of tinkering, i n d i c a t e d , i n A u g 2 0 1 2 , t h e relevance. welding and painting the IFRS Government's desire to push Ind AS standards and gave it an Indianized standards from Apr 13 onwards, with or name Ind AS. The process of subordinated without resolution of taxation issues. No mentality saw ICAI being looked at low worse news to the corporates than this, who esteem by the Government and routinely have indicated that they are not ready for ignored on many important matters. The Ind AS standards. 'Not ready' subtly indicates c r e a t i o n o f N A C A S i s i n d i c a t i o n o f 'not required'. Strangely, the opposition to government's esteem of ICAI. IFRS which began with an article written here It is time we seriously debate about our role and a blog posted there by some well in the society. We have missed the bus in the meaning CAs became shriller and then, past when WTO, the NPA norms (which was became stronger too after an ICAI funded suited for western model of capitalization) study on the suitability of IFRS in India and blindly adopted. With about 2 lakh in undetaken by a couple of Accounting numbers, it is time we assert ourselves. If we Professors at Oxford University. (That the ICAI are hazy about our role, others wil become put this report under its thick carpet like hazy about our relevance. many other inconvenient reports is another

BB NAIDU STUDY CIRCLE MEETING - SEPTEMBER 2012 Topic

Speaker

Date & Time :

Venue 42

Recent MCA Notifications including Managerial Remuneration and Limited Liability Partnership â&#x20AC;&#x201C; Recent Changes C S Dhanapal, B.Com, B.A.B.L, F.C.S, Practising Company Secretary Friday, 14th September, 2012 at 6.00 p.m (High Tea : 5.45 p.m.) Platinum Chambers, Society Premises, Luz, Mylapore, Chennai

Forgettable (!) relics of the past (Excerpts from the Editorials of some past issues)

Jan-Feb, 2006 We have intensely debated among ourselves that in the obtaining scenario, do we need one more publication? Assuming we do, is it going to make any difference? Is it going to simply keep reflecting the issues already deliberated in other publications? Is it going to be yet another pious, noncontroversial, feel good publication that will find its way to a designated corner in the generally dark junk rooms in the offices of our brethren? “Yes” will be the answer to the first two questions but it will be “No” to the other two. I think that this sets the broad agenda. ……………..There will be no dearth for informative journalism, hard facts, poignant issues, satire & sarcasm, expressions of ecstasy and dismay, words of caution and advice, manifestation of dreams and visions, news & matters of professional interest and so on.

Sep-Oct, 2006 …………. the Institute's election fever is also beginning, with cell phones of power seekers and power makers becoming constantly busy. We are see some seeking re-election warming up to their 'dear friends' once again, some others trying to wean away the 'perceived influencers' from others' camps, the new aspirants making feverish calculations in view of the 'availability' of a very large 'vote bank' vis-à-vis the increase of number from 6 to 8 in the Southern Region, 're-runners' computing the revised possible numbers of 'quota', 'second/third preferences' etc. it will be fun for any close ringside watcher.

Nov-Dec, 2006 The clock has started ticking for Institute's elections. The code of conduct for the elections for the candidates have been announced and it is great to note that by and large the contestants are following the code prescribed, even though the system at our institute will do precious little if they don't. There is a lot of difference between the general political elections of the nation and that of our Institute. In the national scene, the winners get to govern and the losers will sit in opposition to do the check function. However, in our Institute, the losers shake hands with the winners and go about doing their jobs and think of elections again the third year. So, this makes the member's responsibility to select the better people all the more onerous. It is sincerely hoped that the members would evaluate the candidates for what they are and not merely for what they appear to be and to cast their votes for those with reasonably good intentions.

May-Jun, 2007 The only major event that happened between the last issue and this was the passage of the Indian Budget 2007 not only without any sort of meaningful debate on the same in both houses (as usual), but also with the ever condescending FM of ours sticking to all of his unreasonable proposals (also as usual) - with the major stakeholders of our economy like industrialists, business barons, trade bodies, institutions like ICAI etc. doing no more than self-licking the injuries inflicted on them with media still trying to find out reasons to eulogize the master architect of the budget etc. You know what? As the FM had to travel abroad, the Finance Bill was passed without any discussions what so ever on the allocations made to Defence, Agriculture, Power, Environment, Commerce and External Affairs th approximating to 4/5 of the total budget allocations, for 'lack of time availability'. No one questions these things in this country and the media which is supposed to be a watchdog simply compromises its position to remain as 'pet dogs' ever grateful to the breadcrumbs thrown at them by their masters.

With a fantastic trail of achievements like introduction of FBT (and accentuating it with all kinds of confusions and brazenly atrocious CBDT circulars), BCTT, service tax on anything and everything except on his past (and possibly future) profession, bringing a set of new and complicated return forms which ask for any and all information except perhaps the hip size of the assessee and many more too unpleasant to list, the FM's repeated assertions of bringing forth a new Tax code is sending a chill down our spine. Sri Suka Brahma Rishi, in the final phase of “Bhaagavatham” foretold that in the 'Kalyug' - among many other horrendous things that would happen “Governments would themselves loot from the Citizens“ Can we, then fault, our Government when it lives up to the clairvoyance of the great sage?

May-June, 2008 The subject of inflation is on everybody's lips these days and though there is an apparent 'crude' reason for it, the politics behind the oil economics still seems to be a mind boggling issue, controlled by an 'interested' mafia that could well comprise of US Government and some top-notch names of Anglo-American oil futures traders/bankers and perhaps even the (erstwhile?) OPEC. Be that as it may, mighty enough to be comprehended by lesser mortals like us, the bottom line is that the oil price hike is driving every other cost crazy, leaving the common man, consisting of poorer and middle income sections of the society high an dry. The rich guys who 'play' in stocks have their own tales of woe with stock market plummeting to new lows every day and their own margin pressures choking them beyond tolerance levels. Businessmen are struggling with their multiple miseries like the cascading taxes (excise, service tax, VAT, IT, FBT, MAT, DDT etc) of all forms besides bankers induced NPA & SARFESI threats. Exporters are suffering from 'dollar' as well as 'derivatives' difficulties. Agriculturists have no respite from private moneylenders, lower procurement prices and erratic monsoons. Virtually, no one is happy. And that is the precise achievement of the governance we have been cursed with. This is the nation we are seeing being built (or destroyed?). What are we, CAs, the supposedly intelligent and society-conscious profession going to be doing about all these? Do we or don't we have any moral and social responsibility to do whatever little that we can? Or, are we going to simply sit back and relax and even take pride to be a partner in this kind of nation building? Isn't it time to touch, why, even shake our conscience a little?

Jan. ’12 There are so many things happening around us, the 'middle class and upper middle calss' professionals (forming the chunk of the membership of the Society). First, there is a constant pressure on us to keep travelling the learning curve. What with accounting standards to IFRS to Ind AS or the new Schedule VI or the new Companies Bill or the proposed DTC or the XBRL monster………..the buck seems to never stop. Second, on the professional opportunities - Bank branch audits are getting dearer and threaten to get extinct, Central statutory audits of banks are obtained by means that everybody knows how but nobody wants to discuss in open. Third, the costs of running an audit office are escalating what with the ICAI constantly meddling with the education and training pattern of the students and clients reluctant to pay right fee for the services. Lastly, the regulator of the profession viz., ICAI remaining hardly infallible with most of the council members merrily carrying on their private agenda and remembering other members only in election years. The journal will keep a tab on such disturbing happenings and voice its criticism, without fear or favour. The nicer activities (if any) will get unfiltered appreciation (Sigh!).

Feb. ’12 At our ICAI, there has been a change of guard, with new President and Vice President taking over office for what we can call the truncated year (being election year). Yes, we are in for some fun time, as ICAI elections are approaching! Sudden bonhomies, affectionate calls from long last friends, unexpected and surprise visits by the important members of the profession to offices of not-so-important members, very concerned e-mails, invites to parties, well-built apprentices

mistaken for CAs, aspirants to the Councils vying with one another to steal stage space in seminars, conferences etc. to put their verbose skills to best possible use etc. will all be the order of the day in the next few months! Let us all bask under such attentive love tortures! (It's all once in three years, after all!).

March ’12 My own take on the budget was that it was an exercise that had all the ingredients of a TV mega serial conspiracy, vengeance, façade of goodness, making things miserable for the whole lot of population and on top of it making us spend our time and money to get such miseries etc. I have two major points. First on the Vodafone amendment. I hold no brief for the machinations of Vodafone to get around the tax laws and feel, like many others, that our tax laws should not have been in the first place lax laws. However, after having made them go up to the Supreme Court and after getting an unfavourable ruling for the Government, the kind of nose thumbing that the Government gave to the Supreme Court in the guise of a retrospective amendment goes to prove that the Government of the day has utter disregard even to institutions such as the highest Court of the land. In my opinion, retrospective amendments to laws to negate Court rulings are evidences of sick and repulsive minds of the powers that be………. The second is on the merciless increase in indirect taxes and slapping service tax on anything and everything, making the compliance issues hell - all of which are going to take a toll on every citizen of this nation. Sri Gurumurthy calls it as pocket-picking. I respectfully disagree with him. It is daylight robbery.

April ’12 All of us have received the envelope from the Institute containing the demand for renewal fee for the current year and the stinging increase in the annual and COP fee (without any trace of explanation for the necessity of such an increase) would not have gone unnoticed. When I enquired a Council member as to the possible justification for the same, he said that the as the Institute was almost running in students' money, it was felt that members should be made to pay more. When I asked why it did not occur to them that students' fees should be decreased instead, he had no answer. How many of us are aware that the ICAI is sitting on a Reserves & Surplus figure of over Rs. 500 Crores and has earned a surplus of about Rs. 116 crores in the last FY (out of the total revenues of Rs. 442 Crores), which works out to an ROI of a whopping 37%? There is absolutely no case for increasing the fees to the members and in fact a very good case for reducing the fees for students. Why ICAI is this gluttonous for money is unfathomable.

May ’12 May is here along with its characteristic heat. The national economic scene is none too encouraging. It has its own heat wave. The rupee value is plummeting, inflation soaring, FDIs are shrinking and stock market plummeting. FM blames it on global economic crisis and almost cries helpless. Greece always comes in handy. Food grains are rotting and when serious concerns are expressed, FM says that we don't have enough godowns or storage facilities and so says, “what to do?”. While FM is specifically helpless on certain things, our PM is, generally helpless about so many things. So, the mood is one of helplessness, gloom and even hopelessness. Economic pundits are predicting a travel back to 1992. Tiding over such a situation requires a lot of will, courage and resilience on the part of the people who govern. However, the Government of the day, unfortunately, expects such things only from the people who are governed. The despondency created by higher cost of living spiralled further by the all round increase in taxes could only encourage people to look for ways to accumulate wealth by unfair means and to indulge in rampant tax evasions, which will again hurt the economy. So, it will be a classic case of an economic whirlpool in which the nation's prosperity will be sucked in and made a victim. Sri Gurumurthy recently wrote a scintillating piece on the overall decimation of values and had wondered whether Kalki (avatar) was the only hope of salvation. One shudders!

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