Can a CA in practice do business at all?
The short answer: not freely. A Chartered Accountant holding a Certificate of Practice cannot simply run a business alongside the profession. Under Clause 11 of Part I of the First Schedule to the Chartered Accountants Act, a member in practice is deemed guilty of professional misconduct if he engages in any business or occupation other than the profession of accountancy — unless it falls within the categories the Council permits, or he obtains the Council’s specific and prior permission.
That is the rule most people run into, and it is why the question keeps coming back in a dozen different forms: can a CA do business and practice together in India? Can a practising CA do business in his wife’s name? Can he do it through an HUF?
The three routes that actually exist
- General permission. Some activities are permitted without asking — private tutorship, authorship of books, holding a public elective office, acting as a director simpliciter, and similar. No application needed.
- Specific permission. Other activities are allowed only with the Council’s prior approval, applied for case by case. Interest in a family business falls here.
- Surrender the Certificate of Practice. If the business is the real objective, this is the honest route. Practice and business do not sit together by default.
The category that trips people up is the second one. Members assume that because something is possible, it is permitted. It usually is not — it is permitted after approval, and doing it first is what turns into a disciplinary case.
What about doing business in the family’s name?
This is where the HUF question comes from, and it deserves a direct answer rather than a workaround. The rest of this post covers exactly that — with the actual ICAI disciplinary decisions that have settled it.
The HUF route, specifically
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)