Query

Opinion                            February 13, 1974

1.

Where a provision is made by the Directors for taxation and for dividends, the amounts so provided shall be exhibited in the form of Balance Sheet under the appropriate heading.

Yes

2.

There is, however, no legal obligation on the part of the directors to make a provision for either of the said items and an omission to do so will not be illegal or violative of Section 211.

In our opinion, provision has to be made for liability for taxation.  As regards dividends, while there is no legal obligation to make a provision, the attention of shareholders would have to be drawn to the fact that no appropriation has been made for the proposed dividend.

3.

That the requirement of Section 211 about having to present a true and fair view of the state of affairs of the Company to the shareholders would be sufficiently complied with by giving information about the possible extent of tax liability and the amount that would be required for the distribution of any proposed dividend either in the Board’s Report or in the ‘Notes’ appended to the Balance Sheet.

We do not agree with this view because stating the tax liability and the proposed divided in the Notes or in the Board Report would not tantamount to presentation of the Balance Sheet in the form set out in Part I of Schedule VI which is a Requirement of Section 211.

4.

5.

That the auditor shall qualify his report only where the directors have chosen not to make the provisions for the aforesaid and

That the auditor need not qualify his report where the disclosure is given of the estimated liability for taxation and proposed dividends in the ‘Notes’ appended to the Balance Sheet.

While we agree that Auditor must qualify his report where no provision is made for taxation and draw the attention of the shareholders where no appropriation has been made for proposed dividends we do not agree with the view that the auditor need not qualify his report where the disclosure is given of the estimated liability for taxation and proposed dividends in the ‘Notes’ appended to the Balance Sheet.