Page 410 - CA Final PARAM Digital Book.

QNO First Schedule, Part I,Cl,10 --Fees as percentage of Loan Old Course – (N08E, N11R, N12M,
707.020 TITANIUM CNO – PE.1260 M15R, PM17, N18E)

D, a practising Chartered Accountant examined and reported on the prospective financial statements for
one of his clients to obtain a cash credit facility of Rs75 lakhs from a Private Bank. The Bank has
sanctioned the cash credit facility for Rs 60 lakhs to his client. Consequent to the sanction of loan by
Bank, he charged a fee of Rs 60, 000 based on 1% of the credit facility sanctioned.
OR
Mr Clever, a Chartered Accountant, prepared a project report for one of his client, Mr King, to obtain long
term loan of Rs 100 lakhs from a scheduled bank and decided to charge fees @10% of the loan approved
Subsequently, the bank approved the loan amounting to Rs 80 lakhs Consequent to the approval of loan
by the bank, Mr Clever raised an invoice for his services @10% of the loan approved, as decided.

Answer Part I -- Relevant Laws
▪ Clause (10) of Part I of the First Schedule to the Chartered Accountants Act, 1949

Part II -- Requirements of Relevant Laws
➢ The clause prohibits a Chartered Accountant in practice to charge, to offer, to accept or accept
fees which are based on a percentage of profits or which are contingent upon the findings or
results of such work done by him. However, this restriction is not applicable where such payment
is permitted by the Chartered Accountants Act, 1949.

➢ Regulation 192
The Council of the Institute has framed regulation 192 which exempts certain professional
services from the operation of Clause (10). In the case of “certain fund-raising services”, the fees
may be based on a percentage of the fund raised.

Part III – Case Discussion
➢ In the present situation, CA. D examined and report on the prospective financial statements to
obtain a cash credit facility from a private bank. Consequent to sanction of loan by bank, he
charged 1% of credit facility sanctioned as his fees.

Part IV – Conclusion
➢ The services rendered by CA D are not covered under the said exemption.CA D is liable for
professional misconduct as he has charged fees at 1% on the credit facilities sanctioned, which is
prohibited under clause 10 of Part I of 1st schedule to CA Act 1949.
Author’s Note:

I had long discussion with audit team of BOS, I also strongly feel it is part of fundraising but BOS says words
used are “Certain Fundraising Services” and now what is this “certain” services need to be listed out by
ICAI but they have not done it yet, even after 6 years of regulation amendment. They say till the time ICAI
issues list we will assume no services are allowed.

So final conclusion, no fundraising servicing is allowed till ICAI defines what do you mean by “Certain
Fundraising Services”

First Schedule, Part I,Cl,10 Fees on Percentage Basis Old Course – (M15E, M16M, PM17, N17M,
QNO (Liquidator) N18M, M20M)
709.000
TITANIUM CNO – PE.1260 New Course – (SM23)
XYZ & Co. appointed CA. M, a practicing chartered accountant, as liquidator of the company. CA. M

charged his professional fees based on percentage of the realisation of assets

Answer Part I -- Relevant Laws
▪ Clause (10) of Part I of the 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
charges or offers to charge, accepts or offers to accept in respect of any professional employment
fees which are based on a percentage of profits or which are contingent upon the findings, or results
of such employment, except as permitted under any regulations made under this Act.
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