ICAI cracks the whip, says two sets of accounting standards confusing

The apex body of accounting professionals, Institute of Chartered Accountants of India (ICAI), has renewed its call to abolish the tax accounting standards, saying only its standards should be accepted.

The need to keep two sets of accounting records, one as per the requirements of the Companies Act and the other for income tax assessment, has been a major irk for corporates. Jayant Gokhale, Chairman, Expert Advisory Council, ICAI said, “... these are only computational directions given the title of standards, they do not meet the basic criteria for standards, and so, becomes confusing for users.”

The direct taxes committee of ICAI will meet this Friday to frame an official response to the discussion paper released by the finance Ministry recently. The discussion paper makes a case for the need to continue with two sets of accounting standards. From the industry point of view, in a scenario where more and more tax issues end up in long-drawn litigation, clarity on tax computation would be a welcome move. However, they also feel that clarifications issued by CBDT could do the job.

Abuali Darukhanawala, Partner, MZS & Associates elaborated, “ Just like European countries, a set of clarifications to existing standards for tax computation would have made the job easier.”

ICAI had, in fact, come out with suggestions last year to solve the impasse. The suggestions included companies using the same base for taxation, reconciliation between accounting standards & tax standards, and a statement of clarification that would make adjustments required by the tax department. Unfortunately, the I-T department, it seems, is insisting on standards of its own.