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Section 133: Central Government to prescribe accounting standards

Companies Act • Official Statutory Text & Practice Guide

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Act 2013
Section 132 All 470 Sections of Companies Act Section 134
Statutory Defined Terms in this Section: (Click any term for official legal definition)
Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 133

Section 133 of the Companies Act, 2013 empowers the Central Government to prescribe statutory accounting standards upon the recommendation of the Institute of Chartered Accountants of India (ICAI) and in consultation with the National Financial Reporting Authority (NFRA), establishing binding norms for corporate financial statements.

  • Statutory Power to Prescribe Standards: The Central Government prescribes standards of accounting or any addendum thereto, which have mandatory statutory force across all companies incorporated under the Act.
  • Institutional Consultative Mechanism: Standards are formulated through a structured statutory process: recommended by the ICAI, examined and evaluated by the NFRA, and officially notified by the Central Government via Gazette notification.
  • Dual Framework of Ind AS and AS: Encompasses the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS converged with IFRS for listed and high-net-worth entities) and the Companies (Accounting Standards) Rules, 2006 (AS for small and medium-sized enterprises).
Key Landmark Precedents:
  • J.K. Industries Ltd. v. Union of India, (2007) 13 SCC 673: The Supreme Court upheld the constitutional validity and mandatory nature of accounting standards notified under company law, holding that statutory accounting standards override ordinary commercial accounting conventions and possess the force of law.
  • Chambal Fertilisers and Chemicals Ltd. v. CIT, 2018 SCC OnLine Raj 3832: The High Court affirmed that accounting standards prescribed under statutory corporate authority are legally binding in measuring corporate profits, computing depreciation, and determining financial liability.
Courtroom Practice & Strategic Litigation Guidance:

In litigation involving alleged manipulation of profits or suppression of liabilities, plead non-compliance with the specific Ind AS or AS notified under Section 133 (such as Ind AS 115 on revenue recognition or Ind AS 109 on financial instruments). Demonstrating that the financial statements departed from notified standards without mandatory note disclosures invalidates the statutory 'true and fair' presumption under Section 129.

Section 132 All 470 Sections of Companies Act Section 134