Amidst the grim news that some lawyers are indulging in “cut throat competition” and fee “under-cutting“, one renowned firm of international tax laws experts has sent the stern reminder that this is not professional behavior and gone the other way by indulging in “happiness billing”
Lawyers are alleged to be indulging in “cut-throat competition” and “under-cutting” of fees. However, one legal firm has bucked the trend by indulging in “happiness billing”
Lawyers and Chartered Accountants are a part of the noble profession where you render services without an eye on the fees. Also, the fees that you charge are based objectively on your level of skill and standing in the profession and are uninfluenced by the economics of demand and supply.
Unfortunately, it appears that crass commercialism is rearing its’ ugly head in the legal profession as well.
According to a report in the Economic Times, the slowdown in the economy and other factors has forced legal firms to aggressively offer discounts and indulge in undercutting fees.
The report quotes Neerav Merchant, partner, Majmudar & Partners, as admitting that the legal profession has become super-commercial and cut-throat and that lawyers willy-nilly undercut fellow professionals. He points out that the reason for this malaise is that the large firms have a battalion of lawyers who have to be kept busy.
Other top lawyers like Fereshte Sethna and Berjis Desai acknowledged that the trend of a full-fledged price war is becoming rampant these days.
The report also states that the fall out of the hectic bargaining and undercutting amongst law firms is that the hourly rates for junior partners has slumped 22% from $239 (Rs. 14,000) to $186 (Rs. 11,000). Senior partners have, however, so far managed to hold their ground with a rate of about $360 (Rs. 21000) per hour.
Apparently, the root cause of this evil is the practice amongst the mega PSU companies like ONGC, BHEL, NTPC and SBI to call for tenders and bids for professional work. The legal firms are so eager to get the assignments (because it reflects well on their rankings) that they are willing to do the work for practically free of charge.
Nishit Desai
However, noted international tax expert Nishit Desai struck a contrarian note. He said his firm did not participate in tenders and bids for professional work. “We are professionals and in the profession of law and not in business” Nishit Desai reminded in a stern tone.
The other revelation was that Nishit Desai’s firm had started a policy of charging ‘Happiness billing‘. Under this innovative system, clients have to pay fees only if they are satisfied with the work done by the firm. If the client is not satisfied, he can just walk away without paying any fees.
Nishit Desai also made the astonishing revelation that his firm had refused work from 13 clients in 2013, where the clients were insistent on reducing the price.
So, there may still be hope for the legal profession after all.
If you want to indulge in a bit of nostalgia and see how it was in the “good old days”, you have to read Fali Nariman’s autobiography “Before Memory Fades”. Interestingly, the policy of “under-cutting” was probably in vogue even then. Fali talks of how, when he was a raw junior, he would get a brief with a fixed fee for a matter which was supposed to get over in just one hearing. However, even if the matter took several hearings, the solicitor would not increase the fee. Nobody protested because they did not want to rub the solicitor the wrong way!
Fali also points out that in those days, the solicitor would send counsel a docket with the fees marked on them. If Counsel felt that the fees were insufficient, he was entitled to return the brief. Fali recounts an amusing incident when F. J. Coltman, a leading English Barrister, was sent a brief with the fee marked on it. Coltman looked at the size of the brief and the fee marked on it and said “fees insufficient” and returned the brief. The solicitor then slightly increased the fee but Coltman still returned it. This went on for a couple of occasions until the solicitor got exasperated and told his clerk to tell Coltman to mark whatever fee he pleased. Coltman was, however, a stickler and said he would not accept an unmarked brief. The solicitor then marked a much higher (almost excessive) fee and it is only then that Coltman accepted the brief.
Unfortunately, today, the tables are turned. When the lawyer sends his memo to the client, the client returns it with the endorsement “excessive”. The poor lawyer is forced to reduce the fee till it meets the clients’ satisfaction.
Perhaps, the situation in the CA profession is better? Our CA friends can share their thoughts.
As Advocate C P CHUGH says:
“As a matter of Fact I see a silver lining for those in Practice in the above article. Just look at it.
“The report also states that the fall out of the hectic bargaining and undercutting amongst law firms is that the hourly rates for junior partners has slumped 22% from $239 (Rs. 14,000) to $186 (Rs. 11,000). Senior partners have, however, so far managed to hold their ground with a rate of about $360 (Rs. 21000) per hour.”
If Law firm still hold on to charge 21000.00 per hour for seniors, where does a Chartered Accountant charge on Hourly basis. It is always on assignment basis.”
The recommended Scale of Fees chargeable for the Work done by the members w.e.f 12th May 2006 provides for the maximum of Rs. 4500/- per hour for Investigation, Management Services or Special Assignments by Principal (Senior) . Hence from the date of issuance of the above mentioned Fees Scale till date i.e. passage of 7 years, the ICAI has not revised its fees scale to be followed by professionals according to the changing scenario. Hence, as a member of ICAI, I request to the ICAI to revise the Fees Scale.
Following is the e-mail of CA Atul Bheda of 14th April 2009:
“Professional Development Committee at its 185th meeting held on January, 30 20009 approved the attached “Recommended Scale of Fees for various kind of assignment” (which is in addition to the council decision on revision of recommended scale of fees chargeable for the work done by the members of the Institute).
http://www.icai.org/post.html?post_id=4061
I feel along pending demand from the SMPs has been addressed. I feel all of us should start following the recommendation without waiting for other person doing the same. All study circles, branches and RC are requested to popularize this effort. This should be send to all our clients so that the awareness is also created in our clients. I am glad to be associated with this as I had initiated this and then got support of all members. There are lots of friends who have helped in giving the inputs. Many of my friends are following this and their feedback is that this is working very well
So All of us should make an attempt at least.”
CA ATUL C BHEDA
MUMBAI
Further CA Amrit Porwal’s e-mail of 18 April’ 2009 in continuation with the above e-mail is as under:
“Dear Friends,
Now is the time to realise your true worth.
We all unitedly must resolve to follow the below recommended scale of fees for various assignments.
Thanks & Regards
CA Amrit Porwal
A. PORWAL & ASSOCIATES
Chartered Accountants”
In connection with the above mentioned two e-mails CA Tushar Doctor has recommended as under vide e-mail dated 23rd April 2009
“First of all let me convey my sincere thanks to you on behalf of all CA fraternity for revising the minimum scale of fees to be charged by C.A. professional. It is a very welcome revision & charging of professional fees in accordance with it, definitely will give justice to the amount of efforts & time devoted by we C.A.’s.
Here, I would like to make a humble suggestion that in the said circular while prescribing scale of fees for service tax matters, the bifurcation given is Registration per challan with half yearly return, I.T. clearance certificate, assessment the same should be made more elaborative. It can contain detailed bifurcation such as monthly challan & half yearly return, quarterly challan & half yearly return, SCN attending, summons attending etc. Such bifurcation will help us to quantify exactly the amount to be charged for services rendered.
I hope the above matter will be taken up & attended suitably”
why the other day a client asks me to take after winning the case while legal profession so far never can assure any client what will be the result of a case, as judges are not to be bribed but have to be properly convinced if not naturally you are bound to lose case. i bluntly told my client i am no palmist or astrologer but a lawyer and i do not bribe any even in my own issues how can i assure you sir that i will win your matter. And told my client better find someone who assures you sir. i need payment in advance then only i can take up your case. i cannot assure you what will be the fate of your case. Better consult astro-advocate or astro-palmist advocate. thanQ. regards
problem today every one becomes poorer day by day as their earnings ration is not commensurate with expenses! And yet professionalism is indeed vital.With all that happiness billing is the order today due to a thought of multiple methods o f earning methods.
But i would tell every professional need to have ego like the Lion which will not kill a prey just like a tiger but when its hunger is there but today every professional seems to have become some tiger unfortunately. that way today greed is ruling the mind of professionals. Besides why even IT dept wants quotations from advocates, what degradation as goverment operators also play havoc likethis. that makes clients to talk to their advocates or CA in such a way any professional would not like to accept. But that is the 21st centurians please!sorry
Cut through competition in charging of fee is inherent and depends on the skill and availability of time with the professional. Client used to pay the fee according to the demand of the professional on the basis of his skill and on the other hand client used to pay as much as law considering the availability of time with the professional, in the first case professional and In the second case client used to decide the fee, in fact question competition does not arises if we think broadly.
The expenses of and incidental to audit u/s 142 (2A) (including remuneration to auditor) shall be fixed by Commissioner or Chief Commissioner as per ICAI guidelines, and such fee shall be paid by Central Government – Section 142(2D) of the Income Tax Act’ 1961
The expenses of & incidental to audit (including the remuneration of the Accountant, qualified assistants, semi qualified & other assistants who may be engaged by such Accountant shall not be less than Rs. 3750 & not more than Rs. 7500 for every hour of the period as specified by A.O. – Rule 14B of the Income Tax Rules’ 1962
Less fee is charged by incompetent lawyers or those who indulge in manipulation.you need not accept the brief, if fees paid is not commensurate with services rendered.
Dear All,
It seems that in these slowdown times,everybody is facing the brunt.As regards education is concerned,To me “Maal hai to taal hai,warna sab behaal hai”.This has become the motto of all the educational institutes,politicians,governments etc…It it is about governance in profession,beat it and inculcate it.If it’s about livelihood,then do what others do i.e money laundering,commission agents,prostitution etc…
The situation has so worsened that even if gandhiji would have been alive,he would have preferred to be dead again and also he would have requested our government not to print his image in the currency notes.
Commenting on the fee structure issued by ICAI,I would like to comment that if you charge those fees then you will be kicked out of the profession and that too nobody come to you for the service irrespective of quality of service provided by you because i have lost several assignments and kicked out too when i raised my voice against it.Further,the client is itself saying a CA practioner who has been practising over 20 years charged Rs 1000 for I.T filing,how dare you to charge such high fees and that too in front of that CA who is senior to me.That’s why I am unable to set up my practice for the last 2 years and have been still struggling.
What i have observed till now,education and profession is nothing in these days.What is more important is the individual’s livelihood.
If you want to be different,then be a leader else step into the shoes of the follower so that you can live your life peacefully.
This is my personal opinion.I can write pages here but that would be of no use.So better do your work diligently according to one’s choice.
Agree.
We ourselves are responsible for the detoriaration in quality and unhealthy competition. It is the result of lust for money and materalistic approch, no profession is free from this menace be it Advocates, CA or even Doctors. Peploe are stooping low for money we do not know the levl of fall for it. IT is a bad situation for all, it is begining of corruption and malpractice in profession. We need introspaction and self restrain to improve the situation!
There was a time when lawyer’s profession was considered noble indeed. Today it is certainly not as law firms and lawyers have turned this into “business”. It sounds really strange that the author bracketed “chartered accountants” with lawyers while describing nobility of lawyers profession. May be the author being a CA wanted to include himself. Lawyers do take pro bono cases at times or at least are forced to take them by the disciplinary committees of Bar Councils. I wonder if any CAs undertake any work of that sort!
Worst of all professionals resort to corrupt practices other than under cutting. some one told me in some tribunals some professionals have hold on judges that way they get orders that is indeed a worst crime than a murder is it not?sorry when committed by professionals!
Very true. Today agents are there they simply lower your fee by all means. i faced several occasions. strict code need to be followed by not getting in undercutting as lawyering or CA work are just professions only and not businesses. one should question even question service tax levied by central excise as no client pays but that burden is again on professional who also pays professional tax, why he has to be saddled with so many taxes indeed i recommend that professional associations need to move art 226 writ and question veracity of too many similar kind of taxes while no commensurate benefits are given by governments in place so is it not arbitrary? regards
Sir,respectfully I do not agree with the views stated and reply.Professional provides the services to the client,if u are to bring the result the client is interested in his work to be done.Fee as professional want and the work as the client
want.
CA R.K.BHALLA
Dear All,
Certainly a welcome change. The topic itself is “zara hat ke”. Although a battery of TRPS prepared by FM as pointed out by Mr U K Mohindra gives a gloomy picture of the profession and tax professional, the actual scenario may not be the same. Let us be practical. We all are aware of the fate of those TRPs and their contribution in filling the returns. It is hardly worth any competition.
As a matter of Fact I see a silver lining for those in Practice in the above article. Just look at it.
“The report also states that the fall out of the hectic bargaining and undercutting amongst law firms is that the hourly rates for junior partners has slumped 22% from $239 (Rs. 14,000) to $186 (Rs. 11,000). Senior partners have, however, so far managed to hold their ground with a rate of about $360 (Rs. 21000) per hour.”
If Law firm still hold on to charge 21000.00 per hour for Seniors, where does a Chartered Accountant charge on Hourly basis. It is always on assignment basis.
And my dear juniors in profession should feel proud that their big bros are earning so much and they are in queue to acquire that status and earnings.
There is neither any need nor should we indulge in unethical practices and be part of “Happyness Billing”
Advocate C P Chugh
+91-99711-24526
cpcservices@gmail.com
I READ IN BOOK/ARTICLE THAT LAWYERS WEAR BIG GOWN -POCKETS ARE IN BACK OF THE GOWN.CLINTS PUT FEES IN POCKETS. LAWYERS NOT KNOWN HOW MUCH CLIENT PAID. HAPPINESS BILLING.
The link for the ICAI recommended minimum scale of fees to be charged for various assignments is
http://www.icai.org/post.html?post_id=7252
Reproduced below is the covering letter of email from one of the Chartered Accountants
Dear Professional Colleagues,
It is always a dilema what to charge a client. How do we deal with this? How do we charge our client? Do we charge him based on what the traffic can bear or do we charge him based on what is the benefit he is deriving from our service? The answer to both cases is a NO. We should only charge a client based on the time spent by us. How to value your time is your decision. If you are afraid of competition and charge less to your client on the fear that someone will do the job for less, you do not have confidence in yourself. If you think that you are rendering quality service, you have no reason to be scared of competitors who charge less!
On the other hand compliance are increasing. With the electronic medium being increasingly adopted by regulators, there are more and more validations coming up with every compliance. This makes our job more difficult and laborious. Not only that we have to constantly update ourselves with the new compliances and validations demanded by regulators. So the best way to judge is based on the total time spent by you and your staff on each job. However getting this information is not easy as one may not have an accurate system of recording time.
To ease this problem, the ICAI has done a great job. Earlier the ICAI used to only give indicative hourly rates. For the first time ICAI has recommended the minimum scale of fees to be charged for various assignments. This is no way complusory but is definately indicative of the fees one should charge for an assignment without getting into a micro analysis of the time spent. If everyone starts following this, we would not live under the fear of our compititors charging less but would rather concentrate on the quality of service.
The attached file gives a good idea of the fees to be charged for various assignments. Let’s try and implement what the ICAI has recommended as minimum fees and if necessary show the ICAI recommendations to your clients. Remember that when your client visits other professionals like a doctor or a lawyer, he does not argue about their fees but simply pays with a smile.
=============================
Best Regards,
Pannkaj Ghadiali
Managing Partner
206, Arun Chambers, Tardeo, Mumbai – 400 034 Board: +91-22-4333 5000 Fax: +91-22-4333 5000 Cell: +91-9821096137 Email: pankaj@pcghadiali.com Website: http://www.pcghadiali.com/
The information transmitted is intended only for the person or entity to which it is addressed and may contain confidential and/or privileged material. Any review, retransmission, dissemination or other use of, or taking of any action in reliance upon, this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer.
What a welcome change of topic and a welcome relief for your usual targets !
I know of another solicitor Firm M/s. Markand Desai & Co. They do not prepare bills only. Whatever the client thinks proper they send the payment. Also the Situation of CA’s is much worse than Lawyers today. There is so much competition that it has created a sense of insecurity in the entire profession. Also such low fees are the source of corruption and malpractice.
The situation for CA’s is exactly the same as that of lawyers with the major difference being that Lawyers charge advance from their clients but in case of CA’s that is not the general practice and in some cases fees remain pending for years too. However, I am quite impressed with the “Happiness billing” concept of Nishith Desai and perhaps this shows confidence that he has in his profession.
These days The Ministry of Finance has created an Army of Tax Preparers ,who are supposed to charge Rs500-00 only for the preparation of Income Tax Return ,and actually they charge Rs250-00 only due to cut throat competition. This is really big challenge for Advocates in Tax Practice as well as Chartered Accountants . People with turnover in crores are happy to declare just 2000 over and above exempt income limit and file the Income Tax Return by paying just Rs250-00 as professional fees. On the contrary ICAI expects its members to charge Rs5,000-00 as minimum fees. There is no comparison as far as expertise , knowledge and training is concerned ,but the trader is there to earn money. He has hardly any respect for the profession, as he has to feed scores of Inspectors , Assessing Officers and Commissioners on monthly, quarterly and annual basis . Where is NOBLE PROFESSION in the face of Powerful Government employees and their touts. Quality of service ,knowledge ,education and training are secondary in front of dictation of Assessing Officers ,who promote Income Tax Return Preparers .
A time will come when Chartered Accountant will move on the roadside with his Articled clerk following hi, with Rubber stamps and Stamp Pad and both of them calling ”AUDIT KARWA LO” INCOME TAX RETURN BHARWA LO”. The reason is very simple The people who create ,frame law and pass them in Parliament do not have any respect for education. Any person who holds office of profit is not eligible to contest any election. Persons who have not served at any office ,and who have not earned to bring up any family and who have not carried on any profession or business are in que to become next PRIME MINISTER OF INDIA. HATS OFF.
Sir
CA PROFESSION IS NOWAY BETTER LESS SAID THE BETTER CLIENTS GO TO A CA WHO CHARGE LOWER FEES
THEY ARE NOT BOTHERED ABOUT THE COMPLIANCE OF ANY PROVISIONS OF STATUTE
UNLESS CA HAVE INCOME FROM OTHER HEADS LIKE RENT ETC HE CAN NOT SURVIVE IN THE PROFESSION
ADDED TO THIS IS THE SCANT RESPECT FOR ANY ADVICE YOU GIVE & THE CLIENT WANTS EVERYTHING FREE
MURALI
The CA profession is notorious for undercutting of fees. The prevailing economic gloom has further aggravated this problem with larger firms also resorting to slashing fees and signing up new work at rock bottom prices.
The situation for CA profession is certainly not better. As rightly said, the fee of the professionals is not based on demand and supply nor on the economics of time spent and so on. Inspite of strict professional code of conduct in place, undercutting is rampant . The pity is neither the senior chartered accountants nor the juniors are happy with the state of affairs. The rotation imposed by the new Companies Act is certainly going to add to their misery!