chartered accountants (CA)

The Bar Council of Delhi (BCD) has issued notice to the Big Four accounting firms in a complaint filed by Society of Indian Law Firms (Silf) president Lalit Bhasin (read order below).

Can your accountant also assist you on drafting a joint venture agreement? Or is this work best left to a lawyer to check for compliance with various rules and legislation? And what happens when one company drops a nasty legal notice on the former joint venture partner? Is when things get contentious and litigious the line where only a lawyer can step in and take care of business?

The global chartered accountancy (CA) firms dwarf even global law firms in revenue and have increasingly been getting into legal services, with PwC’s legal arm now having a headcount of lawyers equivalent to the world’s tenth-largest firm already generating $500m per year from law, reports the Economist:

Those most at risk from the attack of the bean-counters are the profusion of mid-tier legal firms in liberalised markets. Since their profit margins are already low, they cannot afford even a modest loss of market share. Unfortunately for them, much of their business is high-volume, repetitive tasks—just the sort of work that the Big Four excel at standardising and automating.

In India, CA firms have been making inroads into legal too, with Ernst & Young (E&Y) having arguably been the most visible via its close alliance with aggressively growing start-up PDS Legal. Even domestic CA firms such as Mohinder Puri & Co have made forays into legal best friendships, having hired former Amarchand Mangaldas tax head Aseem Chawla in 2012.

The Society of Indian Law Firms (Silf) and the Bar Council of India (BCI) have also been in talks about the growing threat of CA firms, other than just foreign law firms, with the Madras high court having indicated that CA firms might be in violation of the law by practising it.

PricewaterhouseCoopers' legal services head Leon Flavell said that the consultancy firm would become a $1bn global legal services player, aiming to grow from the $500m it generated from legal services in 2013. In the UK the firm has won a licence to operate as an Alternative Business Structure (ABS), allowing non-lawyers and companies to own legal services businesses. In India accountancy firms have been building legal capacity too for the last several years, winning a growing number of instructions [The Lawyer]

The Bar Council of India (BCI) wants chartered accountants and auditors banned from advising on income tax matters of values below Rs 60 lakh, therefore leaving the domain exclusively to advocates, reported the New Indian Express.

The regulator has sent a communication dated 11 September to the Central Board of Direct Taxes (CBDT) in Delhi and the Income Tax Appellate Tribunal (ITAT) in Bangalore to delete clauses in Section 288(2) of the Income Tax Act 1995 that allow persons other than advocates from advising on tax matters, if the value of the matter is below Rs 60 lakh.

The BCI was acting on the report of its members S Prabakaran and Rameshchandra G Shah, which was considered at its 28 July meeting.

According to the report:

“Originally, under sec 44AB of IT Act, persons carrying on business having turn over exceeding Rs 60 lakh per year have to submit Tax Audit Report in Form 3CD duly signed only by CAs. The Act was redefined, and sec 44AD added to it in April, 2011, which included all business class assessees having a turn over `60 lakh and below within the ambit of tax audit. In view of the redefined clause, assessees approaching the CAs can declare less income and pay less tax. If they approach a legal professional, they have to declare fixed percentage of income and pay more tax, because of no authority to attach such Tax Audit Report. Then, nobody will approach the legal professionals and they will be indirectly threatened to extinction from income tax practice. This will amount to virtual withdrawal of the right conferred on legal professionals under Sec 288(2)(iii) of IT Act.”

Everything you need to know.

Exclusive: Ex-Amarchand Mangaldas tax head Aseem Chawla has started a tax, business and corporate advisory law firm called MPC Legal with two co-founding partners, as the “best friend” firm of chartered accountancy (CA) firm Mohinder Puri & Co.

The ruling in the Chennai writ petition was hailed as pragmatic for solving the nearly two-year-old deadlock foreign firms were in. But frankly it is likely to continue exposing the deficiencies of the 1961 Advocates Act in dealing with modern-day India. And it could possibly  plunge a number of industries into a world of pain via the Bar Council of India (BCI).