3.2       Query

Interpretation of Companies (Branch Audit Exemption)

Rules, 1961—1.

Under Clause (b) of Sub-rule (1) of Rule 4 of Branch Audit Exemption Rules, 1961, the Central Government, on application made in writing, exempts the branch office of a company from the provisions of Section 228.

In this connection, I shall be highly obliged if you could kindly furnish me clarification in respect of the following points at your earliest:

(1) What is the maximum period for which exemption can be granted? In the application for exemption, can the company ask for permanent exemption or exemption for about five years on the ground that arrangements have been made to audit the accounts of the branch office by a qualified employee?

(2In case the exemption is granted by the Central Government for say 1 or 2 years, then subsequently can the above exemption be renewed or not?

(3) What is the position where the Central Government has granted the exemption in the above case but in the meantime, qualified employee gets another job and leaves the company?

                                                                          Opinion                                         June 27, 1961

Query (1)—Rule 4(2) of the Branch Audit Exemption Rules, 1961, lays down that “an Order made under sub-rule (1) shall be in force to such extent, for such period and subject to such conditions, if any, as may be specified in the Order”. It is believed that the practice of the Government of India is to grant exemption for a period of one year.

Query (2)—Exemption can be renewed by applying again to the Central Government.

Query (3)—As stated in Rule 4(2) above, the conditions subject to which exemption is granted, must be satisfied. If the exemption has been given on the condition that a qualified employee of the company carries out an audit then the leaving of such employee from the company’s service would terminate the exemption.

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ccording to Rule 4(b) of the Companies (Branch Audit Exemption) Rules, 1961, a company can arrange for the audit of the accounts of branch offices by the persons otherwise qualified for appointment as Branch Auditor, even tough such a person is an employee of the Company.

Rule 6(b) of the above Rules reads as follows :

he person so employed shall, during the period the exemption is in force, prepare in respect of each financial year a report on the accounts of the branch office examined by him and forward the same to the Company’s auditor.