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Tax Audit u/s 44 AB
CA Rajiv Jain
Faridabad Income Tax Bar
5thSeptember 2009
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Section 44 AB
Every person--
carrying on business shall, if his total sales, turnover or gross receipts, as thecase may be, in business exceed or exceeds forty lakh rupees in any previousyear ; or
carrying on profession shall, if his gross receipts in profession exceed ten lakhrupees in any previous year; or
carrying on the business shall, if the profits and gains from the business aredeemed to be the profits and gains of such person under section 44AD orsection 44AE or section 44AF or section 44BB or section 44BBB , as the casemay be, and he has claimed his income to be lower than the profits or gains sodeemed to be the profits and gains of his business, as the case may be, in anyprevious year,
. report by an accountant in the form prescribed under this section.
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Business
S 2(13): Business includes any trade, commerce, or manufacture or any
adventure orconcern in the nature of trade, commerce or manufacture.
The word business is one of wide import and it means activity carried on
continuously and systematically by a person by the application of his labour or
skill with a view to earn income. The expression business does not necessarily
mean trade or manufacture only- Barendra Prasad Roy v ITO [1981]129 ITR
295 (SC).
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Pr
ofession
Section 2 (36):Profession to include vocation.
Profession is a word of wide import and includes vocation which is only a way ofliving.-CIT v. Ram Kripal Tripathi [1980]125 ITR 408 (All).
Whethera particularactivity can be classified as business or profession will dependon the facts and circumstances of each case. The expression profession involves theidea ofan occupation requiring purely intellectual skill or manual skill controlled by theintellectual skill of the operator, as distinguished from an operation which issubstantially the production or sale or arrangement for the production or sale ofcommodities.- CIT vs. Manmohan Das (Deceased) [1966] 59 ITR 699 (SC).
The following have been listed out as profession in section 44AA (rule 6F) and notifiedthere under(Notifications No. SO-17 (E) dated 12.1.77, No. SO 2675 dated 25.9.1992and No. So 385(E) ,dated 4.5.2001):
Accountancy, Architectural, Authorised Representative, Company Secretary,Engineering, Film Artists/Actors, Camera man, Director, Singer, Story Writer,Etc., Interior Decoration, Legal, Medical, Technical Consultancy, InformationTechnology
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Wh
eth
er
Business or
Pr
ofession
Advertising Agent.
Clearing, Forwarding and Shipping agents CIT V. JeevanlalLallubhai & Co, [1994] 206 ITR 548 (Bom).
Couriers.
Insurance agent.
Nursing Home.135 ITR 146, 90 ITD 235
Stockand share broking and dealing in shares and securities-CIT
v. Lallubhai Nagardas & Sons [1993} 204 ITR 93 (Bom). Travelagent.
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Sales - Tur
nover
Computation of Specified Limit of Rs 40 Lacs Excise Duty/ Sales tax
Cash Discount
Rebate and Discount
Sale return.
Sale of Fixed Assets
Sale of Investment.
Sales by Consignment Agent-(Circular 452,17-3-86).
Speculative (Share Commodity). Derivatives-Future/Option transactions.
Delivery Based Share Transactions.
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Speculation Tr
ansaction 43(5)
It means a transaction, in which a contract for the
purchase or sale of any commodity, including
stocks and shares, is periodically or ultimately
settled otherwise than by the actual delivery or
transfer of the commodity or scrips.
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Derivatives Exempted from Speculative
Transaction Definition
o Trading carried electronically on screen basedsystem
o Through stock broker registered with SEBI
o by banks orMF on a recongised stock exchange
o Supported by time stamped contract noteindicating Unique Client Identity No and PAN
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Determination of Turnover:
Speculative vs Derivatives
Speculative
o The total of favorable and unfavorable differences shallbe taken as turnover.
Derivativeso The total of favorable and unfavorable differences shall
be taken as turnover.
o Premium received on sale of options is also to be
included in turnover.
o In respect of any reverse trades entered, the differencethereon, form part of the turnover.
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Capital Gains Vs. Business
Depends on facts and circumstances of each case takinginto consideration nature, frequency and volume oftransaction.
Landmark Judgments :
i. CIT v. P.K.N. and Co. Ltd. (1966) 60 ITR 65 (SC).
ii. Saroj KumarMazumdar v. CIT (1959) 37 ITR 242 (SC).iii. CIT v. Sutlej Cotton Mills Supply Agency (1975) 100 ITR
706 (SC).
iv. Venkataswami Naidu & Co.(G) v. CIT (1959) 35 ITR 594(SC).
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Board Circular No. 4/2007, dated 15-6-2007
It is possible for tax payer to have two portfolios, i.e., aninvestment portfolio comprising of securities which are tobe treated as capital assets and a trading portfoliocomprising of stock in trade which are to be treated astrading assets. Where an assessee has two portfolios,the assessee may have income under both heads i.e.,capital gains as well as business income.
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Gross receipts
Instances of Receipts forming part of Gross Receipts
Duty Draw Back
Commission - Brokerage
Job Work Sale ofLicense
Foreign Exchange surplus/ difference on Export Sales
Surplus on reimbursement e.g. packing forwarding, freight etc.
Advance receipt from customer forfeited
Interest Income ifassessable as business income Income of a partner from a partnership firm such as remuneration
and interest on capital account.
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Instances ofreceipts not forming part o f Gross Receipts
Rental Income.
Reimbursement of expenses and other charges to a clearing /consignment agent.
Amount received by a traveling agent for reimbursement ofexpenses. Except a travel agent engaged in Package Tour.
Write Back ofProvisions Recoveries from Bad Debts.
Principle for ascertaining whether reimbursement is part of gross
receipt or not.
Limits of Business and profession- independent or interdependent.
Gross receipts
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Trust / Association Exempt u/s 10(21), 10(23A),
10(23B), 10(23BB), 10(23C) and Section 11 Agriculturist
Assessee having Exempt income whether required
to get its accounts audited u/s 44 AB
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Section 11.
Section 11 (4) For the purposes of this section "property held under trustincludes a business undertaking so held, and where a claim is made that theincome ofany such undertaking shall not be included in the total income of thepersons in receipt thereof, the Assessing Officer shall have power to determinethe income of such undertaking in accordance with the provisions of this Actrelating to assessment; and where any income so determined is in excess of theincome as shown in the accounts of the undertaking, such excess shall bedeemed to be applied to purposes other than charitable or religious purposes.
Section 11 (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income ofa trust oran Institution,being profits and gains of business, unless the business is incidental to theattainment of the objectives of the trust or, as the case may be, institution, andseparate books ofaccount are maintained by such trust or institution in respectof such business.
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A business whose income is utilised by the trust or the institution forthe purposes ofachieving the objectives of the trust or the institutionis, surely, a business which is incidental to the attainment of theobjectives of the trust.
(247 ITR 785THANTI TRUST SC, 107 ITD 403 CIT V. Beer ShivaEducational Social Welfare Society, Haldwani, 105 ITD 29 SamajKalyan Parishad, Modinagar v. ITO.)
Section 2(15) defining Charitable Purpose amended w.e.f. 1-4-2009
Provided that the advancement of any other object ofgeneral public utility shallnot be a charitable purpose, if it involves the carrying on of any activity in thenature of trade, commerce or business, or any activity of rendering anyservice in relation to any trade, commerce or business, for a cess or fee orany other consideration, irrespective of the nature of use or application, orretention, of the income from such activity;
Trust Engaged in business
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(1) The report ofaudit of the accounts ofa person required to
be furnished under section 44AB shall,-
(a) in the case of a person who carries on business or
profession and who is required by orunderany otherlaw to gethis accounts audited, be in Form No.3CA;
(b) in the case of a person who carries on business orprofession, but not being a person referred to in clause (a), be inForm No.3CB.
(2)The particulars which are required to be furnished under section44AB shall be in Form No.3CD.
6G.Report of audit of accounts to be furnished under
section 44AB.
Rule 6G
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1. We have examined the BS & PL ofXXXX. .
2. We certify that the BS & PL are in agreement with books maintained atthe head office and .branches.
3. We report the following observations/comments/discrepancies/inconsistencies We have taken into consideration the audit report andthe audited statement of accounts, and particulars received fromauditors of the branches not audited by us
Subject to above
A. We have obtained all the information and explanations which tothe best of our knowledge and belief were necessary for thepurpose of the audit.
B. In our opinion proper books ofaccounts have been kept by theassessee so faras appears from our examination of the books.
3CB..Contd..
Audit Report Form 3CB
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C. In our opinion and to the best of our information and according tothe explanations given to us, the said accounts, read with notesthereon, give a true and fair view:
1. in the case of balance sheet, of the state of affairs 31st
March.. And2. in the case of profit and loss account, of the profit that
date.
4. The statement of particulars required to be furnished under section44AB is annexed herewith in Form No 3CD.
5. In our opinion and to the best of our information and according to the
explanations given to us, the particulars given in Form No. 3CD and theAnnexure thereto are true and correct.
3CB Contd..
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True and Fair view
Framework for Preparation and Presentation of financialstatements issued by ICAI.
Financial Statements are frequently described as showing atrue and fair view of the financial position, performance andcash flows ofan enterprises. Although this framework doesnot deal directly with such concepts, the application of theprincipal qualitative characteristics and of appropriate
accounting standards normally result in financial statementsthat convey what is generally understood as true and fairview of such information.
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AAS-28 The Auditors Report on
Financial Statements
Modifications notaffecting Audit opinion
Modification affecting Auditopinion
Emphasis onMatter
QualifiedOpinion
AdverseOpinion
Disclaimerof
Opinion
TYPES OF AUDITREPORTS
CLEAN REPORT MODIFIED REPORT
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Applicability of Accounting Standards
Issued by the ICAI
It is hereby clarified that the mandatory accounting standards also
apply in respect of financial statements audited u/s 44AB of theIncome Tax Act, 1961. Accordingly, the members should examinecompliance with the mandatory accounting standards whenconducting such audit.
(Published in The Chartered Accountant Journal, August 1994.)
Audit Procedures - AAS SAP - Peer Review - ASI
Issued u/s 145 of the I.T.Act
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Mandatory Accounting Standards- ICAI
Enterprises- Level I, II and III
AS 1: Disclosure of Accounting Policies.
AS 2: Valuation of Inventories.
AS 4: Contingencies and Events Occurring After the Balance
Sheet Date.
AS 5: Net Profit or Loss for the Period, PriorPeriod Items and
Changes in Accounting Policies.AS 6: Depreciation Accounting
AS 7: Accounting for Construction Contracts
AS 8: Accounting for Research & Development
AS 9: Revenue Recognition
AS 10: Accounting for Fixed Assets
AS 11: Accounting for the effects of Changes in Foreign
Exch
ange RatesAS 12: Accounting for Government Grants
AS 13: Accounting for Investments
AS 14: Accounting ForAmalgamations
AS 15: Accounting for Retirement Benefits
AS 16: Borrowing Cost
AS 22: Taxes on Income
AS 26: Intangible Assets
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Particulars of form 3CD
CA Rajiv Jain
PracticalIssues
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Give the following particulars of the capitalasset converted into stock-in-trade: -
(a) Description ofcapitalasset,
(b) Date ofacquisition;(c) Cost ofacquisition;
(d) Amount at which the asset is converted into stock-in-trade
The particulars to be stated are required to be furnished with referenceto the previous year in which the conversion has taken place.
The taxability of capital gains or business income arising from such
deemed transfer is not required to be reported. The legislation has not visualized the situation where stock in trade is to
be converted into capital asset. In the absence of a specific provision,the formula which is favorable to assessee should be accepted. (ITA6374/MUM/2004, ACIT v Bright Star Inv P Ltd)
Clause 12A- Conversion of Capital Asset into Stock in
Trade at fairmarket value: Section 45(2)
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Reporting of treatment of Excise Duty, VAT etc
Clause 12 12(a) Method of valuation ofclosing stock employed in the previous year
(b) Details of deviation, ifany, from the method of valuation prescribed undersection 145A, and the effect thereof on the profit orloss.
Clause 21: Residuary note
State whether sales tax, customs duty, excise duty orany other indirecttax, levy, cess, impost etc. is passed through the profit and loss account.
Clause 22(a):
22. (a) Amount of Modified Value Added Tax credits availed of orutilised during the previous year and its treatment in the profit and lossaccount and treatment of outstanding Modified Value Added Tax credits inthe accounts.
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Section 145A v/s AS-2 (ICAI)
S-145 A: Notwithstandinganything to the contrary contained in section 145, the valuation of purchase andsale of goods and inventoryfor the purposes of determining the income chargeable under the head"Profits and gains of businessor profession"shall be(a) in accordance with the methodofaccounting regularly employed by the assessee; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called)
actually paid or incurred by the assessee to bring the goods to the place of its location and conditionas on the date of valuation.Explanation.--For the purposes of this section, any tax, duty, cess or fee (by whatever name called)under any law for the time being in force, shall include all such payment notwithstanding any rightarisingas a consequence to such payment.
AS-2 ICAI: Valuation of Inventory
Cost ofPurchase
7. The costs of purchase consist of the purchase price including duties and taxes (other than those
subsequently recoverable by the enterprise from the taxing authorities), freight inwards and otherexpenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks andother similar items are deducted in determining the costs of purchase.
Cost of Inventories
6. The cost of inventories should comprise all costs of purchase, costs of conversion and other costsincurredin bringing the inventories to their present location and condition.
Exclusive Method for valuation ofPurchases resulting in exclusive method for valuation of inventory.
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Section 145A/ Service Tax/ 43B
Service Tax Charged in bills.
Payment not received till the date of filing of ITR as
such no liability to pay service tax.
Mercantile System ofaccounting followed
Disallowance u/s 43B ?
ACITV Real Image MediaTech PLtd (Chennai)114 ITD 573 145A does not apply to service tax.
IfService Tax not credited to P & L no expenditure is claimed.
If no expenditure is claimed - No disallowance u/s 43B
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ASI-14 wrt AS-9-Revenue Recognition- Published Aug-06
ASI-14
2. The amount of turnover should be disclosed in the following manner onthe face of the statement of profit and loss:
Amount
Turnover (Gross) XXXXLess: Excise Duty XXXX
Turnover (Net) XXXX
3. The amount of excise duty to be shown as deduction from turnover asper paragraph 2 above should be the total excise duty for the yearexcept the excise duty related to the difference between the closing
stock
and opening stock
. Th
e excise dutyrelated to t
he diffe
rencebetween the closing stock and opening stock should be recognised
separately in the statement of profit and loss, with an explanatory notein the notes to accounts to explain the nature of the two amounts ofexcise duty.
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Profit and Loss Account for the year ended on
Expenditure Rs Income Rs
Sales 1392
Less: Excise duty 192
Net Sales 1200
Sales Basic Rs 1200/- Excise Duty Rs 192/-
Gross Sales Rs 1392/-
Presentation of excise duty and sales in Profit
& Loss Account as perASI-14/AS-9 ICAI
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Exclusive Method AS-2 Inclusive Method 145A
O pening Stock 200 O pening Stock 232
Purchases 1000 Purchases 1160
Less: Closing Stock 400 Less: Closing Stock 464
Raw Material Consumed 200+1000-400 800 Sub-total 928
Less Cenvat on raw material Consumed 128
Raw Material Consumed 800
Cenvat Credit
Purchases: 160
Less: Adjustment for increase in stock 32
Total Cenvat 128
Exclusive Method v Inclusive Method vis a vis Raw Material
Opening Stock Basic Rs 200 Excise Rs 32 Total Rs 232
Purchases Basic Rs 1000 Excise Cenvat Rs 160 Total Rs1160
Closing Stock Basic Rs 400 Excise Rs 64 Total Rs 464
-Valuation ofRaw Material (purchases, consumption and stock)
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Valuation of Finished Goods lying in bonded house
Finished Goods in bonded House
Opening Stock Basic Rs 100 Excise Rs 16 Total Rs 116
Closing Stock Basic Rs 250 Excise Rs 40 Total Rs 290
Exclusive Method: AS-2: Profit and Loss Account for the year ended on
Expenditure Rs Income Rs
Finished Goods Opening Stock 100 Sales 1392
Raw Material Consumed 800 Less: Excise duty 192
Net Sales 1200
Net Profit 550 Finished Goods Closing Stock 250
Total 1450 Total 1450
Inclusive Method: 145A: Profit and Loss Account for the year ended on
Expenditure Rs Income Rs
Finished Goods Opening Stock 116 Sales 1392
Raw Material Consumed 800 Less: Excise duty 192
Excise duty on inventory 24 Net Sales 1200
Net Profit 550 Finished Goods Closing Stock 290
1490 Total 1490
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- Cumbersome calculations
- Guidance Note CENVAT inclusive method
withdrawn w.e.f1-4-1999.- Contradictory to mandatory AS-2
- Disallowance u/s 43B
Point at which excise duty is incurred in
respect of Finished Goods lying in bonded house:
[2007] 14 SOT 475 (All) Shyam Biri Works Ltd. V. Asst.
Commissioner of income tax, Allahabad
Shortcoming of inclusive method u/s145A
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Clause 12(b):
The excise duty and VAT in respect of inventory consisting of finished goodslying in bonded house is neither debited to the profit and loss account norconsidered for valuation of inventory.
The value of excise duty in respect of Inventory consisting of raw material is
neither debited to the profit and loss account nor considered for valuation ofinventory.
The entries of excise duty are accounted in the books through separate accountwhich is passed through the profit and loss account read with Clause 21Residuary Note.
The entries of VATare accounted in the books through separate account which isnot passed through the profit and loss account read with Clause 21 ResiduaryNote.
The above accounting treatment has no impact on current year`s profit or loss.
Clause 21: Residuary note
Refer para 12(b). Further Rs 192/- the amount of excise duty onsales is debited to Excise Duty on sales which is reduced from grosssales turnover in the Profit & Loss account.
Suggested reporting - Exclusive method
under respective clauses:
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ExciseD
uty
Clause 22(a): Modified Value Added Tax credits (cenvat credits)
Rs Nil- Opening Balance
Rs 160/-Credit availed is reduced from the cost of purchases.
Rs Nil Credit availed is reduced from cost of capital asset. Rs 160/- credit utilized for payment of excise duty on sales is debited to Excise
Duty A/c which is ultimately reduced from sales in the Profit & Loss account.
Rs NilClosing Balance recognized as Balance Recoverable
PLA Rs32/-, the excise duty on sales paid through PLA is debited to Excise Duty A/c
which is ultimately reduced from sales in the Profit & Loss account
Excise P
aid Finished Goods- S
ales through depot
Ratios of special bench 107 ITD 343 (CHD) DCIT V GLAXO SMITHCLINE
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Clause 17 (e): Penalty
Explanation to s 37: -For the removal of doubts, it is hereby declared
that any expenditure incurred by an assessee forany purpose which
is an offence or which is prohibited by law shall not be deemed tohave been incurred for the purpose of business or profession and no
deduction orallowance shall be made in respect of such expenditure.
201 ITR 684 Prakash Cotton SC, 205 ITR 163 Ahemadabad Cotton.
Penalty is required to be examined as per the provisions of the
relevant statue notwithstanding the nomenclature. If the impost is
compensatory in nature, it is to be allowed, however, if it is penal in
nature it is to be disallowed.
Clause 17 (e)
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Clause 17 (f): 40(a)
Deduction of TDS at lower rates or nondeduction
STT up to AY 2008-09
FBT if shown above the line forMAT
Wealth Tax
Clause 17 (f)
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Interest u/s 193 or 194A, Payment to Contractors/sub-contractors u/s194C, Commission or brokerage u/s 194H, Rent u/s 194-I, Fees fortechnical/ professional services u/s 194J, Royalty (Expl 2 s 9(1)(vi).
In case where the assessee submits that the tax is not required to be
deducted on any payment under clause (ia), the tax auditor mayexercise his judgment in the light of applicable laws and reportaccordingly about the compliance of this provision.
Inadmissible if:-
Tax is not deducted at all.
Tax was deductible and was so deducted during the month March
but not paid on or before the due date of filing ofreturn. In any other case i.e (Tax deducted from April to Feb) TDS is not
paid up to 31st March.
Query: Tax deductible in April to Feb but deducted in March and paidafter 31stMarch before due date of filing ofreturn of income.
Clause 17 (f):Se
ction 40(
a)(i
a)
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Deduction inadmissible u/s14A in respect of the expenditure incurred in relation to incomewhich does not form part of the total income( Subsection 1).
The AO, if he is not satisfied with the claim of the assessee, shall determine the amount ofexpenditure incurred, in relation to income which does not form part of the total income inaccordance with method prescribed under rule 8D (w.e.f. 24-3-2008), ( Subsection 2).
the expenditure which the AO seeks to disallow under s. 14A should be actually incurredand so incurred with a view to producing non-taxable income (101 TTJ 369, ACIT vs EicherLimited.)
Rule 8D w.e.f. 24-3-2008: Method for determining amount of expenditure in relation toincome not includible in total income.
8D. (1)Where the Assessing Officer, having regard to the accounts of the assessee ofaprevious year, is not satisfied with
(a) the correctness of the claim of expenditure made by the assessee; or
(b) the claim made by the assessee that no expenditure has been incurred in relationto income which does not form part of the total income under the Act for such previousyear,he shall determine the amount of expenditure in relation to such income inaccordance with the provisions of sub-rule (2).
Clause 17 (i):
Section 14A
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(2)The expenditure in relation to income which does not form part of the total income shallbe the aggregate of following amounts, namely :
(i) the amount of expenditure directly relating to income which does not form part oftotal income;
(ii) in acase where the assessee has incurred expenditure by way of interest during theprevious year which is not directly attributable to any particular income or receipt,anamount computed in accordance with the following formula, namely :
A x B/C
A = amount of expenditure by way of interest other than the amountof interest included in clause (i) incurred during the previous year ;
B = the average of value of investment, income from which does not or shallnot form part of the total income,as appearing in the balance sheet of theassessee, on the first day and the last day of the previous year ;
C = the average of totalassets as appearing in the balance sheet of the
assessee, on the first day and the last day of the previous year ;(iii) an amount equal to one-half percent of the average of the value of investment,
income from which does not or shall not form part of the total income,as appearingin the balance sheet of the assessee, on the first day and the last day of the previousyear.
3. For the purposes of this rule, the 'totalassets' shall mean, totalassets as appearingin the balance sheet excluding the increase on account of revaluation ofassets butincluding the decrease on account of revaluation ofassets.
Clause 17 (i):
Rule 8D:
D
eter
mination
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Clause 17(m)
The auditor to compute the amount inadmissible under
the proviso to section 36(1)(iii).
Interest paid, in respect of capital borrowed foracquisition ofan asset or extension of existing businessor profession (whether capitalized in the books ofaccount or not) for any period beginning from the dateon which the capital was borrowed foracquisition of theasset till the date on which such asset was put to use,shall not be allowed as a deduction.
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17A. Amount of interest inadmissible under section 23 of
the Micro, Small and Medium Enterprises
development Act, 2006 (NOTIFICATION NO. 36/2009, DATED 13-4-2009)
THE MICRO, SMALL AND MEDIUM ENTERPRISES
DEVELOPMENTACT, 2006
23. Interest not to be allowed as deduction from income.-
Notwithstanding anything contained in the Income-tax Act, 1961, the
amount of interest payable or paid by any buyer, under or inaccordance with the provisions of this Act, shall not, for the purposes
of computation of income under the Income-tax Act, 1961, be allowed
as deduction.
Clause 17 (A)
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Employee/Employer Contribution towards E.S.I. & P.F.
Clause 16 (b)
Any sum received from employees towards contributions to any provident fund or superannuation fund orany other fund mentioned in section 2(24)(x); and due date for payment and the actual date ofpayment to the concerned authorities under section 36(1) (va).
Provisions of Section 43B which is applicable in respect of the Employers Contribution, is quitedifferent than the provisions of section 36(1)(va) which is applicable in case of the employeescontributionJCIT v ITC Ltd. (2008) 299 ITR(AT) 341 (Kol) (SB)
Clause 21(B):
In respect ofany sum referred to in clauses (a),(b),(c),(d),(e) or(f) of section 43B, the liability forwhich was incurred in the previous yearand was
(a) paid on or before the due date for furnishing the return of income of the previous year under section 139(1);
(b) not paid on or before the aforesaid date.
Second proviso to clause 43B deletedw.e.f. AY 2004-05
Reporting requirement is now similar underclause 21(A)
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Clause 20-22(b) Clause 20:Profit u/s 41
Remission or cessation of trading liability.
Recovery from Bad Debts
Clause 22(b):PriorPeriod items.
Income/expenditure to be put to tax as per the
accounting method regularly followed.
(Sanghi Motors 187 ITR 703)
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Clause 25(b) - Change in shareholding of the company and
carry forward of the losses u/s 79 of the Act.
Business loss cannot be carried forward and set off in theprevious year in which a change in shareholding takesplace in case of a company in which public are not
substantially interested , if on the last day of the previousyear in which the change in shareholding took place andon the last day of the previous year in which the loss wasincurred, the shares of the company carrying not less than51% of the voting power were not beneficially held by thesame persons.
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Clause 26-Section wise detail of deduction admissible under
Chapter VIA
o This requirement restricted to the items appearing in the
books of A/c audited by the assessee e.g. only for a
branch in case of branch audit.
o Where tax auditor is not aware of the gross total income of
the assessee (due to return not prepared before tax audit/
audit only ofa unit or branch ), suitable note for the same
is also required as deduction can not exceed gross total
income.
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27. (a) Whether the assessee has complied with the provisions of Chapter XVII-B regarding deduction of
tax at source and regarding the payment thereof to the credit of the Central Government.[Yes/No]
(b) If the provisions of Chapter XVII-B have not been complied with,
please give the following details*, namely:-Amount
(i) Tax deductible and not deducted at all
(ii) shortfall on account of lesser deduction than required to be deducted
(iii) tax deducted late
(iv) tax deducted but not paid to the credit of the Central Government
Please give the details of cases covered in (i) to (iv) above.;
Clause 27: TDS
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Unresolved Issues: 40 A(3)-Third Party Payments - Transferof Balances. w.e.f 13-7-2006 after Amendment Act, 2006
Reporting underClause 17(h):
40A (3): .Second Proviso
Provided further that no disallowance under this sub-section shall be made where anypayment in a sum exceeding twenty thousand rupees is made otherwise than by an accountpayee cheque drawn on a bank oraccount payee bank draft , in such cases and under suchcircumstances as may be prescribed, having regard to the nature and extent of banking facilitiesavailable, considerations of business expediency and other relevant factors.
Rule 6DD
d) where the payment is made by way of adjustment against the amount of any liabilityincurred by the payee forany goods supplied or services rendered by the assessee to suchpayee.
269T.Mode ofrepayment of certain deposits.
No branch ofa banking company ora co-operative bank and no other company orco-operative
society and no firm or other person shall repay any loan or deposit made with it otherwise than byan account payee cheque oraccount payee bank draft drawn in the name of the person who hasmade the loan or deposit if- .
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FBT
Tax on value ofcertain fringe benefits.
Chapter XII H Sections 115W to 115WL.
CBDT CircularNo. 8/2005 dt. 29.08.2005.
Liability to pay FBT even if Income Tax not payable. No relevance of actual fringe benefits. Only presumptive amount
should be considered for FBT.
Share/Stock/Debenture/Warrant etc under ESOP/Scheme coveredu/s 115WB(1)(g) but no computable provision hence not liable toFBT.
Lawyer & Auditor reimbursement also subject to FBT in the handsof professionals.
Expenses incurred-Pre operative- pre commencement
No business/ winding up subject to FBT
FBT v/s BOOK PROFIT Deductible.
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Thanks
CA Rajiv Jain
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FBT
Q 44 & 47
Exempted income of the employee section 10 (5) leave
travel Concession or assistance not taxed as salarysection 17 subject To FBT.
Allowances in the nature of 10 (14)(ii) and specified insub rule (2)Of rule 2 BB children allowance, transportallowance outside the Scope of F B T not covered
115W B (1) or (2). Lease rent paid or payable and recovered from the
employees forms Part of salary not subject to FBT.