Accounting watchdog Institute of Chartered Accountants of India (ICAI), which regulates auditors, is currently facing the prospect of meeting an income tax penalty of Rs 16 crore, after the Income-Tax department withdrew tax exemptions on the institute. It is also understood that the I-T department has written to the institute’s banks to freeze the accounting regulator’s accounts till the institute pays the penalty, according to persons familiar with the development.

ICAI’s newly-elected president, Amarjit Chopra, confirmed the tax, but played down the issue saying that the institute is contesting the I-T department’s assessment. The move comes at a time when the government is exploring the feasibility of having an independent regulator for auditors, a proposal that has been opposed by ICAI as it could significantly prune the current role of the institute.

Under section 10 (23C) of the Income Tax Act of 1961, the ICAI, which was formed by an Act of Parliament, is exempted from paying income tax as it had been established for the purpose of education and for advancement of projects of general public utility.

The I-T department’s contention is that the fee earned from training can be construed as business income. A tax assessment panel is also understood to have said that the ICAI allegedly failed to get accounts signed by auditors and of allegedly providing loans to partners without guarantee and interest, said people connected with the development.

ICAI’s Mr Chopra said since the matter is sub-judice, he can’t comment on the topic. RK Sinha, director exemptions at the I-T department, also declined to comment on the issue.

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0 responses to “ICAI may have to pay income tax penalty of Rs. 16 Crore, IT department may freeze bank account to recover penalty”

  1. Vishal Thakkar says:

    The Secretary of ICAI has talke indirectly to resolve the issue to the CHAIRMAN CBDT at Annual Function on 11th Feb Delhi…..2010

    in his speech where CBDT Chairman was Guest of Honour

  2. Rajiv says:

    The black virus has infected the system of institute. Many more colors definitely be come out from the white shirts of the most intelligent stratesgist of our country. POOR!

  3. drparasjain says:

    Theicai has been unduly harsh on students. In fact let me go to the extent of saying that ICAI has taken away the childhood from the life of young children after introduction of IPCC/CPT . They don’t want to pass the studetns and they need free article clerks for peanuts. Then for every little thing students have to pay through their nose . It is High time that the ICAI is divested of its educational functions and opeates asa chamber of commerce for the bigger firms , which is what it is reduced to be.

  4. ican says:

    The institute has functioned as dictator in democratic socity .Till date nobody know how exam results are compiled & what kind of standards have institute set .
    All this must also be looked into .Further ,how the body who prepares draft on Income Tax has so commited this crime .

  5. Guru says:

    Everybody knows how Satyam Accounts were manipulated with the connivance of the members of the so called Professional Institute . From the news item, it appears that their accounts were not signed by an Auditor(?!). When they themselves not audited their accounts properly, how they can do audit of others ? It is high time that the Government orders a high level inquiry about the functioning of the institute.

  6. prathamesh says:

    Institute needs to strengthen it’s operations, income tax department can not on any base raise fingure at statutory body as dept knows consequences of that.
    as far as application of provision is concern it said that from training not fees for study material and exam fees, it might be fees for GMCS
    same needs to be clarified which fees dept considers business income. Details are very general, not specific.

  7. N.Dey says:

    There is nothing to feel shocked or dumbfounded at t5his incident and, in fact, it is only expected of the statutory body for regulating the conduct of the CAs in India. It is high time, CAG, CVC and the Ministry of Company Affairs \, with the help of the CBDT, institute a thorough invstigation into the affairs of the Institute over the last ten years. Many a mystery will then be unearthed. Especially in the financial transactions. It is hoped that the newly installed President will himself start the ball rolling in this regard.

  8. CA Avinash Rajopadhye says:

    It is a “mindless” application of mind to construe that the fee earned from training as business income.If the institute was formed by an Act of Parliament,I feel it is the Parliament’s prerogative to investigate the alleged financial irregularities which led the Income Tax department to impose the penalty of 16 crores denying the exemption u/s 10[23C].

  9. CA. Muthiah Lakshmanan says:

    We are not able to believe that our own Institute is in trouble with regard to Income Tax matters also. How this issue has gone upto the level of freezing our Bank accounts? Who is responible for this mess? Few years back our Benevolant Fund has lost huge amount of money which has been deposited with Mutual Funds. To avoid such grave mistakes in future the new team which has assumed charge has take firm steps.

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