It is learnt that the issue was discussed during last meeting of the Senate Standing Committee on Finance held at Parliament House. While giving a detailed briefing on the rules made under the Companies Act, 2017, the representative of the SECP informed the Committee that the said Act was promulgated on 30th May, 2017, and accordingly two regulations ie Companies, Incorporations, Regulations, 2017, and Intermediaries, Registration, Regulation, 2017, were notified on 26th July, 2017, and were effective on 14th August, 2017.
Officials said 'that other regulations were at draft stage and some of them were under process, however, eight drafts were published as well. Replying to the query raised by the Committee, they said that under a threshold, there was no requirement of audit for an unlisted/private company having up to one million paid up capital, however, it has to submit an un-audited financial statement signed by all the directors of the company.
The Committee showed its reservation on the non-filing of tax returns by the unlisted/private companies and directed the SECP to propose an appropriate amendment to the Companies Act, 2017, accordingly. The Committee also directed that the SECP should ensure to provide copies of both the regulations made under the said Act to the Committee by the 15th September, 2017, positively.
It was decided that the Securities and Exchange Commission of Pakistan (SECP) should propose an appropriate amendment to the Companies Act, 2017, in order to resolve the issue of non-filing of tax returns by the unlisted/private companies having up to one million paid up capital. A progress report in that regards may be submitted to the Committee by the 30th September, 2017.
The SECP should ensure to provide copies of the regulations made under the Companies Act, 2017, i.e. Companies, Incorporations, Regulations, 2017, and Intermediaries, Registration, Regulation, 2017, to the Committee by the 15th September, 2017.
Chairman Committee invited the Additional Secretary Establishment Division to brief the Committee on the issue of separation of accounts from Audit controlled by the Auditor General of Pakistan (AGP). The Additional Secretary Establishment Division said that the case regarding separation of accounts from Audit controlled by the Auditor general of Pakistan (AGP) was under process since long and a summary was sent to the Prime Minister's Office which was approved and an Office Memorandum (O.M) was also prepared for implementation of the decision.
He said that various meetings were held in the Establishment Division way back in 2015, in which Secretaries Establishment Division, Finance and Law were part of the meetings, however, there was no consensus for implementation of O.M and no further progress was made.
He further said that the officials of the Audit & Accounts Service had also some reservations on the issue, however, further course of action on the issue was stopped. On a query raised by-the-Committee, he said that there was no proof available in the record that who had stopped its implementation.
The Chairman Committee read out an order issued by the Finance Division on 14th March, 2013, regarding undertaking a detailed exercise by the Establishment Division for separating the cadres of Accounts and Audit in line with the Auditor-General's (Functions, Terms and Conditions of Service) Ordinance 2001, and the Controller-General of Accounts (Appointment, Functions and Powers) Ordinance 2001, and notifying that the CGA shall be administrative head of the offices sub-ordinate to him with full authority for transfer and posting within his organization and inquired its implementation status. The representative of the AGP informed the Committee that the powers under para 4 of the said order were implemented.
At that juncture, the representative of the AGP Committee that under the summary approved by the Prime Minister, the Establishment Division was asked to undertake a detailed exercise for separating the cadres of Accounts and Audit in line with the Ordinances of both the organizations ie AGP and CGA.
He said the summary which was moved by the CGA through the Finance Division was withdrawn by the CGA; however, the representative f Finance Division rejected the statement given by AGP representative and said that the summary was never withdrawn.
After due deliberation, the Committee deferred further consideration on the Issue and directed the Secretary Finance to hold a meeting with the Secretary Establishment and all relevant stakeholders in order to resolve the issue of separating the cadres of Accounts and Audit in line with the Ordinances of both the organizations and an early appointment of an independent officer to audit the sanctions to expenditure accorded by the Auditor-General as required by clause 7 of the Finance Act, 2015. A report in that regards shall be submitted to the Committee by the 15th September, 2017, positively.
The Committee deferred the matter for a future meeting of the Committee. Regarding utilization of development expenditure with respect to Japanese grant to the Provinces of Sindh and Khyber Pakhtunkhwa the representative of the Economic Affairs Division (EAD) informed the Committee that the Rs 494.54 million were allocated to the Province of Sindh under the said grant while Rs 45.45 million were to be released whereas, Rs 276 million were allocated to the Province of Khyber Pakhtunkhwa and Rs 5.6 million were to be released.
He said that the remaining amounts could not be released and surrendered as per approved mechanism due to non-provision of the certificate of utilization and details of the projects from both the provinces despite various reminders. Replying to the query raised by the Committee he said that EAD has no right to oversee the projects- initiated by the provincial governments under the said grant.
Replying to another query, he said that the amount of the said grant was only for the development projects of the provinces and the EAD was dealing only with the releases of funds under the criteria prescribed by the Finance Division upon provision of the project details. He said that the Provinces of Punjab and Balochistan had utilized their full shares of the said grant whereas the Khyber Pakhtunkhwa and Sindh could not utilize their complete shares.
The Committee deferred the matter for a future meeting of the Committee and directed that the EAD should ensure to provide copies of all the reminders sent to the Provincial Governments of Sindh and Khyber Pakhtunkhwa by the 10th September 2017, and decided to take up the matter with the provincial governments.
Chairman FBR informed that they had sought opinion from the Law Division regarding provision of copy of the reply submitted by the FBR to the Joint Investigation Team (JIT), which had now been received and gave a copy of the same to the Committee for perusal. The Chairman- Committee read out the same which said that "the Income Tax Ordinance 2001, which is a special law dealing with the issues of filling etc. of tax returns and their custody is made by the Parliament, and all executive authorities are bound to implement the laws so made.
The Federal Board of Revenue (FBR) shall state to the Standing Committee that they are all set to assist the Committee; however, they cannot violate the law made by the Parliament itself. The provisions of the Income Tax Ordinance, 2001, contain non-obstinate provision and those provisions even over-ride provisions of the Qanun-e-Shahadat 1984, which is the fundamental regarding evidence and documents produced before the court.
In view of-the above, FBR shall submit the working paper for the Committee meeting clearly indicating legal provisions and submitting that FBR is bound by the law and is handicapped to produce the documents sought for.". After due deliberation, the Committee decided to seek ruling of the Chairman Senate in the matter and directed that a copy of the opinion sought by the FBR from the Law Division may be provided to the Chairman Senate through the legislation Brach of the Senate Secretariat. The Chairman Committee informed the members that he had already approached the Chairman Senate for seeking a ruling in the matter.
The Committee observed that shares of a non-operating/dead company i.e. a Spinning Mills were sold in the market and inquired the reasons thereof. The representative of the SECP informed that the matter was already under investigation, however, at the time of process of winding up of the company, the management submitted a new plan with the reasons that a new party was going to take over the company and a complete process of taking over was followed under the law. The Committee directed the SECP to investigate the matter thoroughly and submit a compliance report to the Committee by the 30th September, 2017, positively.
After due deliberations, the Committee made the following directions and recommendations:-
The Secretary Finance should hold a meeting with the Secretary Establishment and all relevant stakeholders in order to resolve the issue of separating the cadres of Accounts and Audit in line with the Ordinances of both the organizations and O.M of Finance Division. A report in that regards should be submitted to the Committee by the 15th September, 2017, positively.
The Finance Division should take steps to appoint an independent officer to audit the sanctions to expenditure accorded by the Auditor-General as required by clause 7 of the Finance Act, 2015. A report in that regards should be submitted to the Committee by the 15th September, 2017, positively.
The Economic Affairs Division (EAD) should ensure to provide copies of all the reminders sent to the Provincial Governments of Sindh and Khyber Pakhtunkhwa regarding provision of project details initiated under the Japanese grant by the 15th September, 2017, positively.
The FBR should ensure to provide copies of the draft rules under the Benami Act, 2017, to the Committee within one week after issuance of its notification by its Board. A progress report in that regards may also be submitted to the Committee by the 15th September, 2017.
The Securities and Exchange Commission of Pakistan (SECP) should investigate the matter thoroughly regarding sale of shares of a non-operating/dead company. A progress report in that regards may be provided to the Committee by the 30th September, 2017.
Copyright Business Recorder, 2017