New Delhi: The finance ministry has ignored calls by cost accountants that they be treated at par with chartered accountants and be allowed to sign off on the financial statements of companies.
Cost accountants expected the government to allow them to do this in the new direct tax code that is waiting to be cleared by the cabinet, but they have been disappointed.
The direct tax code, which has proposed a dramatic makeover of the country’s 48-year tax law, will replace the Income-tax Act, 1961.
Cost accountants are those finance professionals who clear examinations conducted by the Institute of Cost and Works Accountants of India, or Icwai. Chartered accountants are those who clear examinations conducted by the Institute of Chartered Accountants of India, or Icai.
That apart, there is little difference between the two, as, indeed, cost accountants pointed out to the finance ministry in a recent representation which also said that cost and chartered accountants are treated alike for conducting special audits of companies—a task that is more complex than signing off on financial statements.
Section 14A and 14AA of the Central Excise Act, 1944, dealing with special audits leading to detailed investigations on companies, treat chartered accountants and cost accountants at par.
An income tax official who was involved in the preparation of the draft direct tax code claimed that the government’s motive in allowing only chartered accountants to sign off on statements was motivated by a desire to keep compliance costs low for taxpayers.
“The code restricts some functions to qualified chartered accountants as other legislations give them powers not given to cost accountants. Especially in direct tax matters, chartered accountants have always had additional rights,” added this person who did not want to be identified.
Officials at Icwai have been lobbying the government to include cost accountants under the definition “accountant” as defined in the subsection 2 of Section 288 of the Income-tax Act.
“Since that was not done, we wanted to the government to incorporate the change in the draft direct tax code which if implemented will replace the Income-tax Act,” said G.N. Venkataraman, president of Icwai.
“This is very funny. I can agree that when the Income-tax Act was formed in 1961, Icwai was just two years old, therefore, non-inclusion of cost accountants at that point of time may still be justified, but the direct tax code has come into being when the profession is 50 years old.”
Section 284 (2) of the draft direct tax code clearly specifies that an accountant means a chartered accountant within the meaning of the Chartered Accountant Act, 1949.
“Defining an accountant as a chartered accountant conveys that only CAs can be accountants, which is false in view of other acts such as the Central Excise Act (1944) and VAT (value-added tax) that recognize cost accountants interchangeably with CAs,” said Rakesh Singh, a Delhi-based practising cost accountant.
Sanjiv Shankaran contributed to the story.