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AT THE board meeting in which the annual accounts were considered the minority objected to some aspects of accounts but the majority carried the resolution approving the accounts. What should the auditor do in the circumstances? -- V. Murali, e-mail

It is not for the auditor to get himself enmeshed in boardroom squabbles and objections. But if he his convinced that the matters objected to by the minority directors are such that they call for a qualified or negative report from him, he must go ahead and do accordingly. The board is enjoined to reply to the negative findings of the auditor. It is not the other way round whether the self-flagellation is only by the minority or by the entire board.

If this company is governed by Section 292A, it will have an audit committee in place. If the minority viewpoint is also reflected in the audit committee report, the board simply cannot brush the issues under the carpet, but will have to communicate the same to the shareholders in terms of Section 292A(9) together with the reasons of the board for not agreeing with the viewpoint of the audit committee.

Civil doubt

WE ARE a firm of civil contractors assessed under Section 44AD of the Income-Tax Act. Our turnover for the year is Rs 37 lakh and our profits are more than 8 per cent of the turnover. Are we required to get our accounts audited in terms of Section 44AB and file the tax audit report with our return? -- V. Gopakumar, Eranakulam

You may pay tax @ 8 per cent of the gross receipts, which is Rs 37 lakh, and be done with it. Though the actual profit is more, you can avail yourself of the concession offered by the presumptive tax scheme enshrined in Section 44AD because sub-section (1) does not compel one to disclose a higher sum by way of profit than the one warranted by the presumptive rate of 8 per cent.

Indeed, the law-makers, with due respect, have been naive in expecting one to file a return disclosing a greater income — the centerpiece of any presumptive taxation scheme is the attraction of the lower presumed rate of profits. Tax audit is compulsory only when you file a return for an income that is lesser than the one derived by applying the presumptive rate of 8 per cent.

Split rent

A HOUSE owner can split his income from the house property into two: rent and hire charges for furniture, and so on. By the same token, is rent paid by a person in receipt of house rent allowance from his employer also required to be similarly broken up? If a person, living as a tenant in a flat, pays monthly maintenance charges to the society, can this be treated as part of rent paid for the purpose of claiming exemption under Section 10(13A)? -- S. Shenbagavalli, e-mail

Strictly speaking, one cannot claim Section 10(13A) exemption in respect of amount paid to the landlord towards hire charges of furniture, and so on, because the section talks only about "rent in respect of residential accommodation". This answers your second query as well — monthly maintenance charges is by no means rent for the residential accommodation. Hence, it is not eligible for exemption under the section.

Who signs

SHOULD the accounts be signed only by those directors who approved them as well at the board meeting or can even directors who did not participate in the board meeting in which the accounts were approved also sign? -- V. Murali, e-mail

Section 215(1), which deals with authentication or signature on behalf of the board of directors, and Section 215(3), on approval of accounts by the board of directors, must be read together. Indeed, both the sub-sections make it clear that the signature is on behalf of the board.

It would be untenable for a director to sign the accounts if he has not participated in the related deliberations of the Board. Approval and authentication have been contemplated as related acts. It would be incongruous for a dissenting director to cast his signature on the accounts.

In other words, if a director voices his dissent in the board meeting on some facets of accounts which is overruled by the majority, such a dissenting director ought not to lend his signature to the accounts.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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