Law:

Section:

Section 211, read with sections 209 and 642, of the Companies Act, 1956 - Balance-sheet and profit and loss account - Form and contents of - Whether Companies (Accounting Standards) Rules, 2006 framed under section 642(1), which adopts Accounting Standards ('AS') 22 issued by Institute of Chartered Accountants of India, suffers from vice of excessive delegation and same is incongruous/inconsistent with provisions of Act including Schedule VI - Held, no - Whether AS 22 insofar as it relates to deferred taxation is inconsistent with and ultra vires provisions of Companies Act, 1956, Income-tax Act, 1961 and Constitution of India - Held, no FACTS In exercise of the powers conferred by section 642(1)(a) read with sections 211(3C) and 210A(1), the Central Government in consultation with the National Advisory Committee (NAC) on Accounting Standards, ('AS') made certain rules called as the Companies (Accounting Standards) Rules, 2006 videnotification dated 7-12-2006 whereby AS 22 issued by the Institute of Chartered Accountants of India (Institute) has been made mandatory for all the companies listed in Stock Exchange in India in preparation of their accounts for the financial year 2001-02 onwards. Before that date, AS 22, prescribing accounting for taxes on income insofar as it relates to deferred taxation, when issued in 2001, was challenged in writ petition but the same were dismissed by the High Court. In the instant appeals before the Supreme Court, various companies including the appellant submitted, inter alia, that so long as Schedule VI to the Companies Act is not altered or amended by exercising the power under section 641(1) the 'AS' prescribed by the rules notified under section 642(1) cannot alter or amend or Schedule VI and if the said rules are contrary to or inconsistent with said Schedule then the same are liable to be struck down as inconsistent with the provisions of the Companies Act, Income-tax Act; that in any case the requirement of maintaining accounts on accrual basis and on double entry system of accounting as required under section 209 is mandatory and it is not subject to any provisions of section 211; therefore, the rule prescribing AS 22…

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