CAG can audit private telcos, says High Court

NEW DELHI, JAN 6:  

In an order which can have wide ramification for corporate India, the Delhi High Court on Monday ruled that the Comptroller and Auditor General can audit revenues of private companies if they have an impact on Government’s income.

Though the court ruling came in the context of telecom operators, experts say the CAG can use the ruling to look into the books of any company that pays tax to the Government.

Ramji Srinivasan, senior Supreme Court lawyer, said, “This is direct interference in the working and functioning of private companies. The court ruling can be extended by the CAG to invade every area of a company’s revenue that finds its way to the Government coffers.” Telecom companies said that they will challenge the order. “We will decide on the next course of action by end of this week. Prima facie, we have a strong case against the order,” said Ashok Sud, Secretary-General, Association of Unified Service Providers of India, representing the interest of CDMA operators.

Rajan Mathews of the Cellular Operators Association of India said telecom companies are already being audited by different agencies, including an independent auditor appointed by the Telecom Department. “It’s a drain on our time, cost and resources to facilitate multiple agencies doing the same job. There should be one audit which addresses all concerns,” Mathews said.

The CAG had initiated an audit after TRAI found that some telecom operators were allegedly under-reporting income in a bid to avoid paying revenue share to the Government.

The telecom companies approached the High Court seeking a stay on the CAG’s decision.

Setting aside their plea, the court said there are no doubts on CAG’s constitutional powers to look into all forms of income derived by the Government. It, however, added that in relation to accounts of telecom companies, audit has to pertain to revenues and not into aspects such as “wisdom and economy in expenditures”.

Become Our Fan On Social Sites