Expert Advisory Committee
ICAI-Expert Advisory Committee
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3.3       Query

 

Whether a company can follow accounting year different from the uniform accounting year enacted by the Direct Tax Laws (Amendment) Act, 1987.

 

1.In terms of Section 3 of the Direct Tax Laws (Amendment) Act, 1987 the financial year ending March 31 will be the uniform previous year for all tax payers with effect from April 1, 1989. The querist has stated that as per a press release issued in the Economic Times, Calcutta, on June 11, 1988, an assessee who wants to continue closing his accounts on a date other than March 31, can do so.

 

2. The accounts of the querist’s company are closed on December 31. The company is a FERA company. The company’s parent company, having more than 40 subsidiaries throughout the world, is insisting on closing the accounts of the company in question on December 31, since this facilitates Group consolidation.

 

3. In this context the querist has sought the opinion of the Expert Advisory Committee on the following issues:

    (i) Whether the company in question can continue to close its accounts on December 31, get the same audited and hold Annual General Meeting accordingly.

     

    (ii) If the company continues to close its accounts on December 31 and prepare its accounts as on March 31 also for the limited purpose of submitting its Income-tax return, then whether the accounts closed on March 31, which are to be enclosed with the return of income as per Section 139(9) of the Income-tax Act 1961, are also required to be passed at a General Meeting of the shareholders.

     

    (iii) Whether there would be two closing of accounts – 31st December and 31st March, two reports from auditors, and two AGMs apart from compliance with Stock Exchange Regulations. Due to two reports from auditors, remuneration of auditors may be required to be refixed. If so, whether such fixation of remuneration can be done by the Board of Directors or this is also required to be passed at the AGM.

 

                                                                  Opinion                                      September 16, 1988

 

1. The opinion of the Expert Advisory Committee on the issues raised by the querist in para 3 of the query, is below: -

    (i) The company can continue to close its accounts on 31st December get the same audited and hold the AGM, for Companies Act purposes as per the Press Release issued by the Department in this regard.

     

    (ii) The Committee is of the opinion that for the purposes of Section 139(9), it would be sufficient if the last audited accounts, i.e., in the case of the company in question, the accounts as on 31st December, audited by the statutory auditors, are enclosed with the return of income, alongwith the accounts for the period between 31st December and 31st March, which will be separately audited. The Committee is further of the opinion that it is not necessary to get the accounts for the latter period passed at a General Meeting of the shareholders since the said accounts are strictly for income-tax purposes and the Income-tax Act does not require that the accounts be passed at a General Meeting.

     

    (iii) As is evident from the above, there would be two closing of accounts – one for Companies Act, i.e., as on 31st December and the other for Income-tax purposes, i.e., as on 31st March. Also, there will be two audit reports for the aforesaid periods. The Committee is, however, of the opinion that it is not necessary to have two Annual General Meetings. The Committee is further of the opinion that the remuneration of the auditors for the latter period can be fixed by the Board of Directors since this audit is different from the statutory audit.

 

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