Page 374 - CA Final PARAM Digital Book.

In the given situation Mr. C, Chartered Accountant who is in practice allowed a non-Chartered Accountant his
brother-in-law Mr. P to practice in the name of CA. C is not correct in view of Clause 1 of Part I to the First
Schedule. However, he can allow Mr. T who is employee in his firm to practice in his name.

Conclusion: Thus, CA. C will be held guilty of professional misconduct for allowing Mr. P who is not a Chartered
Accountant to practice in his name as a chartered accountant as per Clause (1) of Part I to the First Schedule.

QNO First Schedule, Part I,Cl,2 --Sale of Goodwill Old Course – (N04E, N08R, N12E, PM17, N17R SM17, M22E)
661.000 TITANIUM CNO – PE.1040 New Course – (SM23)
A Chartered Accountant who was in practice since last 18 years died in a road accident. His widow sold
the practice to another Chartered Accountant in practice for ₹ 30 lakhs. The price also included the right
to use the firm name.
OR
CA Ravi, a practising Chartered Accountant, was proprietor of M/s Ravi & Associates. CA Ravi died on 15th
September 2020 due to cardiac arrest. Only family member left behind CA Ravi was his wife, Roohi. On

30th September 2021, Roohi sold the practice of her husband to CA Balwan for ₹ 25 Lacs along with right
to use the firm name i.e., M/s. Ravi & Associates and requested the Institute to consider the effect of such
sale. Give your comments on the following issues with reference to the Chartered Accountants Act, 1949
and Schedules thereto:
(i) Whether Roohi can sell the practice to CA Balwan?
(ii) Can CA Balwan continue to practice as proprietor in name of M/s Ravi & Associates?
Answer Part I -- Relevant Laws
▪ Clause (2) of Part I of First Schedule to the Chartered Accountants Act 1949

Part II -- Requirements of Relevant Laws
➢ A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he
pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage
in the fees or profits of his professional business, to any person other than
• a member of the Institute or a partner or
• a retired partner or the legal representative of a deceased partner, or
• a member of any other professional body or
• with such other persons having such qualification as may be prescribed,
• for the purpose of rendering such professional services from time to time in or outside India.

The Council of the Institute of Chartered Accountants of India had an occasion to consider whether
the goodwill of a proprietary concern of chartered accountant can be sold after the death of the
proprietor to another member who is otherwise eligible.

The Council has clarified that the sale/transfer of goodwill in the case of a proprietary firm of
chartered accountant to another eligible member of the Institute shall be permitted. It further laid
down that in cases where the death of proprietor occurs after 30.08.1998, the goodwill of the
deceased member’s practice can be sold to another member and permission of the Institute has to
be obtained within a year of the death of the proprietor concerned. It is even laid down that in such
cases the name of the proprietary firm concerned would not be removed up to a period of one year
from the death of the proprietor.

In case there exist a dispute as to the legal heir of deceased proprietor, information as to the
existence of dispute is received by the institute within a year of the death. In such a case name of
the firm is kept in abeyance till one year from the date of settlement of dispute.

Part III – Case Discussion
➢ A Chartered Accountant who was in practice since last 18 years died in a road accident. His widow
sold the practice to another Chartered Accountant in practice for ` 30 lakhs. The price also included
the right to use the firm name.
Part IV – Conclusion
➢ Thus, in the instant case, when the widow of the chartered accountant sold the practice to another
member, it is nothing, but goodwill sold to another member. The sale of the practice and the right

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