K NARASIMHAN Vs. STATE

JUDGEMENT

(1.) THE respondent is carrying on business as a chartered accountant with his headquarters at Vellore. One of the members of his regular office establishment is one Raghavachariar who is his own brother. This Raghavachariar is a B. Com. and is entitled to practise before the Income-tax Tribunals under Section 61 of the Income-tax act, and he is the person who has generally been attending to the work of the respondent before those tribunals. He files the requisite authorization from the assessee to appear before the tribunals; he signs financial statements for them and he conducts their cases. He is paid a monthly salary by the respondent which starting with Rs. 75 per mensem had been raised from time to time and had stood at Rs. 500 per mensem in 1950. It is also found that the work before the income-tax Tribunals forms a substantial portion of the business of the respondent. THE charge of the Disciplinary Committee against the respondent is that while he receives the full fees from the assessees for the work before the tribunals, he actually entrusts that work generally to Raghavachariar, pays him monthly salary as aforesaid and takes the balance of fees for himself. This, it is said, is a violation of the rule of conduct laid down in clause (c) of the schedule to the Act On 9th September, 1984, Raghavachariar was taken by the respondent as an articled clerk and he continued thereafter, as before, to conduct cases before the Income-tax Tribunals and draw monthly salary from the respondent. THE charge against the respondent on this score is that he acted in contravention of Rule 44 of the Auditor's Certificates Rules, 1932, and regulation 38 under Act XXXVIII of 1949 in permitting the articled clerk to engage in business without obtaining the requisite sanction. THEse are the two charges framed against the respondent and the Disciplinary Committee has held in its report that both these charges have been made out and that the respondent is, therefore, not a person fit to continue to be a member of the institute. THE matter comes before us on reference on this report under Section 21 of the Chartered Accountants Act, 1949we have carefully considered the matter and we have come to the conclusion that neither of the two charges is established. On the first charge the Disciplinary Committee holds that on the facts which are not in dispute the action of the respondent falls within clause (c) of the Schedule to the Act which runs as follows :- "a chartered accountant shall be deemed to be guilty of conduct rendering him unfit to be a member of the Institute if he - (c)accepts or agrees to accept any part of the profits of the professional work of a lawyer, auctioneer, broker or other agent who is not a member of the institute."

(2.) MR. R. Ramamurthi Aiyar the learned advocate who appeared for the Council referred us to clauses (b) and (c) in the schedule and argued that they embody the principle that a chartered accountant should not in any manner share the income with one who is not a chartered accountant and that the arrangement between the respondent and Raghavachariar was a violation of this principle. But the true purpose of these provisions is to prohibit the practice of chartered accountants paying commission in any form for work which they get from others and receiving commission for work which they send on to other person such as lawyers, auctioneers and brokers. It is difficult to see how on the facts of this case it can he said that the respondent has acted in contravention of clause (c ). Before that clause can be applied it should be established that Raghavachariar earned fees as a lawyer and the respondent accepted or agreed to accept a portion thereof. Now the facts are that the assessees are the clients of the respondent and not of Raghavachariar. It is the respondent that deals with the assessee, settles the fees with them, receives the same from them and brings them into his account and treats them as his own. He, no doubt, entrusts the conduct of the cases generally to his brother but he continues to be answerable to the clients. In fact and in law raghavachariar did not earn any fees from the assessees and the respondent entered into no arrangement with him for payment by him of any portion of those feesit is said that the authorizations to appear for the assessees before the income-tax Tribunals were signed by Raghavachariar and not by the respondent. But that was for the purpose of conforming to the requirements of Section 61 of the Income-tax Act and is a matter of form. It may be added that even on these authorizations Raghavachariar described himself as "income-tax practitioner and Assistant of Sri K. V. Narasimhan, M. A. , G. D. A. , Chartered accountant. " The real question is whether the assessees are the clients of the respondent or Raghavachariar. It is impossible on the facts stated above to come to any other conclusion than that they were the clients of the respondent; and that Raghavachariar was only an employee looking to the respondent for the payment of his salary and not a lawyer looking to the assessees for the payment of his fees