In connection with “Auditors feel the heat: Special meeting convened to discuss new tax rules” (April 10), it is obvious that the Ministry of Corporate Affairs is following the policy of divide and rule.

The earlier the lobbying parties realise this, the better it will be for all professionals — chartered accountants/certified management accountants/company secretaries.

Capping the number of audits by a member to 20 is going to hit the chartered accountants’ fraternity. Cost audit now is virtually going to be the prerogative of a chosen few, if the draft rules take effect.

The same with company secretaries. With private companies excluded from the Secretarial audit, only large CS firms will have business. It is time the three bodies came together and carved out a common programme without indulging in mudslinging at each other.

A Sekar

Mumbai

Section 14A and 14AA of the Central Excise Act, 1944, dealing with special audits leading to detailed investigations on companies, treat cost and chartered accountants alike for conducting special audits of companies — a task that is much more complex than signing off on financial statements.

Excise audit under Sections 14A and 14AA was once the exclusive area of cost accountants. Defining an accountant as a chartered accountant conveys that only CAs can be accountants, which is false, in view of other tax-related Acts such as the Central Excise Act (1944) and VAT (value-added tax) and ST, which recognise cost accountants as “accountants” interchangeably with CAs, If CAs want a share in GST 14A,14 AA, CAS4 and ST, by the same logic they will have to share income-tax with certified management accountants.

Anwar Hasan

Kanpur

Capital concerns

“India Inc must stop playing Scrooge” (April 12) is a good piece but should be qualified with some reservations. The facts are indisputable (Indian companies’ low dividend payout ratios) and quite true in several cases of value-destroying firms. However, the decision to return capital to shareholders versus retaining it rests on the rate of return the capital can be reinvested at.

Apart from a handful of savvy investors, most people either let dividends lie in saving accounts or fixed deposits, which return 4-10 per cent. If a company can retain this capital and reinvest it at a higher rate, the shareholder would be better off leaving it in the stewardship of the company. Many Indian companies reinvest capital at eye-popping rates, something a typical shareholder cannot hope to match. In such cases, paying dividends actually detracts from value creation.

Hedgie

Mumbai

The low dividend payout ratio in Indian companies vis-a-vis US firms is because of the simple fact that the cost and ease of raising capital is much lower in the US than in India. Most companies keep high cash balances as a hedge against some unknown calamity or unexpected opportunity arising that will require sudden mobilisation of funds. That is why a conservative company such as Infosys keeps a huge cash chest instead of giving it away to the shareholders. One more famous example of a company not paying dividends is Berkshire Hathaway because Buffett thinks he is better qualified then others to manage the funds. I think Ajay Piramal is from the same school.

Anti

Chennai

Baru’s book effect

This refers to “Sanjaya Baru’s book effect: BJP’s poser to PM” (April 13). Some of the facts revealed in the book The Accidental Prime Minister: The making and unmaking of Manmohan Singh have, for long, been common knowledge. A large number of Congressmen are also aware of these facts. However, it is necessary to find out why they are silent. The mother and son should read the writing on the wall and pave way for those not connected with the Nehru family. They must learn from the French and Russian revolutions and those that took place in North Africa.

Amrit Patel

Mumbai

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