Can CA in Practice do Business Through HUF?

Students and Professionals generally both have curiosity to know whether HUF route is open for doing business for CA in practice. People feel restricted when they realise technically they cannot do business along with practice.

So here is GIST of the matter – CA in practice can be member of HUF, where business is being carried. But he cannot be karta of HUF or Representative of HUF for business. If he is karta / representative, then specific permission will be required and their he will have to prove that he is not actively engaged in business , but then he will be considered to be in part time practice.

Further if business comes to him as share of HUF because of his relation then also above thing will be applicable.
If it would have been allowed, it would have been big loop hole which all CAs would have happily implemented. Practically everything is fine till we or anyone inform ca institute, there is no mechanism to detect it.

Requirement under Regulation 190A
Permission to be granted specifically:
Members of the Institute in practice may engage in the following categories of business or occupations, after obtaining the specific and prior approval of the Council in each case:-

  • Interest in family business concern or concern in which interest has been acquired as a result of relationship and in the management of which no active part is taken.
  • Above Specific Resolution would be equally applicable to member carrying out the activities referred to therein in his capacity as Karta/representative of HUF provided he is not actively engaged in carrying on such activities.

 

Past Cases
1. Where a Chartered Accountant acted as karta of a Hindu Undivided Family (HUF) without taking prior permission of the Council. Held that he was inter alia guilty of professional
misconduct under the clause.
(B.L. Asawa, Chief Manager, Punjab National Bank, Delhi vs. P.K.Garg – Page 728 of Vol. IX – 2A – 21(4) of Disciplinary Cases – Council’s decision dated 16th to 18th Sept. 2003)

2. Where a Chartered Accountant was Karta of the HUF and was engaged in the business of a firm without permission of the Council. Held that he was guilty of professional misconduct under the Clause.
(V. Krishnamoorthy vs. T.T. Krishnaswami – Page 192 of Vol.VII(2) of Disciplinary Cases – Council’s decision dated 27th to 29th September, 1992)

3. A member as a Karta of his Hindu Undivided Family entered into partnership business for a short period with non-Chartered Accountants for engaging in business other than the profession of Chartered Accountants, without prior permission of the Council. Therefore, he was found guilty in terms of clauses (4) and (11).
(R.D. Bhatt vs. K.B. Parikh – Page 191 of Vol. VI(2) of Disciplinary Cases – Decided on 15th, 16th and 17th December, 1988)

4. While applying for membership and Certificate of Practice, a Chartered Accountant did not report that he was a partner in his family business. Held that he was guilty of professional misconduct within the meaning of the Clause.
(Baijnath Agarwalla vs. Gopinath Aggarwalla – Pages 426 of Volume VIII (2) of Disciplinary Cases – Council’s decision dated 26th to 28th August, 2001)

CA Ravi Taori
ravitaorisir@gmail.com

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Hello Everyone, here we are going to discuss a very controversial topic. I will try to be unbiased as I was an article of one of the Big4s. First of all, I have huge respect for them. They are one of the biggest employer and recruiters of Chartered Accountants, employing nearly 1,60,000 CAs. They are trend setters in quality & methodology of work. They are known for their professionalism, but some disturbing facts about them cannot be ignored.

Concentration of work & power By Big4s Worldwide

Recent Study shows that Big4s have captured 80% to 90% of audit revenue worldwide. Whereas in Asia pacific region the revenue of big fours was 21.49 billion US $ in 2017. The European Union want to break up this oligopoly of big4s. As they are getting bigger and powerful, they have access to loads on information, they are in dominating position. This is anti-competitive. In India they have acquired many midsized firms again to become bigger and powerful.  Many Central Council Members are from Big4s and some are indirectly supported by big4s. No wonder you don’t see any action against them from ICAI even after Sataym & GTB scams.

 

Are they Legal, is big debate?

Foreign firms and professionals cannot directly practice in India as per CA Act and give Audit Services. As Indian firms cannot directly function in foreign countries they cannot function in India as per Sec 29 of CA Act. Audit constitutes more than 50% of there total revenue worldwide.

 

So, they took help of Indian Chartered Accountants, created firms with all Indian CAs as partners. Like EY created SR Batliboi & Co, KPMG created BSR & Co further Big4s are on acquisition spree. PWC acquired Dala & Shah and so on. Now these Indian firms have their offices with foreign brands, they work closely with corresponding consulting companies, they cross sell services to clients, they share systems & software’s with them. They are virtually integrated with them. They pump money in these Indian firms. PWC Netherland gave 41 crores as interest free loan to PWC Kolkata partners who in turn, introduced it as capital and then acquired Dalal & Shah. PWC has given around 240 crores to Indian affiliate firms. PWC has indemnity insurance policy of 280 crores which is collectively used by all sister firms which again shows. They are virtually one only legally different. If they are doing so much they must be getting something in return in the form of charges for these services. So basically, they have full control of these Indian firms and in short, they are indirectly practicing in India. It is clearly killing of spirit of law created. They are violating Sec 25 CAs creating corporates for accountancy services, Sec 29 doing practice in India when we cannot do it in US or UK. Advertisement Clause / Sharing of Fees Clause. Open many websites and you will find ads from Big4s.

 

Impact of Indian CA Firms

Indian CA firms are muscled out with financial and tactical powers of Big4s. It is killing entrepreneurship of Indian CAs. Reducing their revenue and profits, these profits go to Big4s and to their foreign headquarters. They are not entertained for big assignments, even many government contracts are bagged by them.

Some Indian CAs are fighting against these powers through legal and other modes. But it will need a lot to bring a change. Reliance Industries always employs Indian firms as joint auditors. Modiji said we want our Indian firms as big4s.

It affects India as nation also, all crucial information about companies, economy is indirectly available to foreign controllers.

Video on above article

https://www.youtube.com/watch?v=FUZCld0HXeY

Legal Proceeding and Judgements:

Please refer the below link for Supreme Court latest Judgement on the issue discussed above:

https://sci.gov.in/supremecourt/2013/35041/35041_2013_Judgement_23-Feb-2018.pdf

Further Detailed discussion:

The above issue regarding MAF’s V/s ICAF’s and decision of the Supreme Court has required a detailed study of every aspect of allegation and violation.

For detailed study Please refer the link:

https://1drv.ms/b/s!AqxpYGo5-Bccg4BEuY0RWECk70Ngfg

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You read the question paper. You smiled because you knew the answer. You were very confident that I know the answers and you would be scoring good marks. Exams are over, and you await the results. After the results are announced you are shocked because you did not score that you expected. It is so because you made few silly mistakes. For e.g. Instead of writing SA 510 you wrote SA 501. Your answer is right, but you quoted a wrong SA number. So, it’s possible that you might lose marks.

Watch Video – https://youtu.be/zuBzcMBrjfI

So in this article I am sharing with you few tips to help you avoid these kinds of Silly Mistakes.

1. Speak while you read and write
Try to speak while you read the question paper and also while you write the answers. This does not mean you do it loudly and disturb others. You should speak without making any noise. Speaking will help you to interpret the questions in a better way. Also, if you speak while writing there are less chances of making any silly mistake. You will write what you speak.

2. Use your Thumb
Try to keep your thumb just above the line in which you are writing. This way you will avoid silly mistakes as your concentration will be completely on what you are writing.

3. Jot down important points
It must have happened with many of you that when you read questions, many things come flashing in your mind. Like in this answer I have to write so and so point, this one’s important, this SA needs to be quoted etc etc. But when you actually start writing you remember very few of these.
First of all underline all the important words in the question. So that you know what all needs to be covered in the answer. Then jot down all those points that are flashing in your memory with a pencil on your answer sheet. Write down all those points so that you don’t miss any of them.

4. Last line
Read the last line of the question very attentively. Sometimes the questions are big and in hurry we don’t read it carefully and misinterpret the question. Majority of the times the last line of the question has all things. It tells you very clearly what is expected in the answer. For example, wherever there is mention of Private Co. please underline it. Also whoever you find words like no, incorrect or negative words are written be extra careful.

5. Small sentences
Try to frame small sentences. It happens many times that when you write big sentences, by the time you finish them it does not mean what you intended. They mean completely different. So try to write small sentences so that everything that you want to write is properly explained.

6. Take proper sleep
It is very important that your brain is cool and calm before your exams. So please take proper sleep of 7-8 hours before your exam. Also stop studying 2 hours before your exam. Try to relax and do masti and enjoy your time. This will rejuvenate your brain and take the burden of exams of it. This way you will have better concentration during exams

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