An Assessee Doing Contract work and he is also a Service Tax Registration No.
1). His Total Gross Receipts During the FY-2011-2012 Rs. 63,97,400 out of this Contract Work amount is Rs. 58,00,000 and Service Tax is Rs. 5,97,400 at this situation assessee is doing his account audited or he is offerd 8% on 58,00,000 and filed his return in ITR-4S please explain.
10 May 2012
If service tax collected is accounted separately and this method has been followed regularly ,then turnover for the purpose of section 44AB is Rs. 58 lakhs only. Presumptive taxation rate can be opted if the assessee so wishes.
The service tax shall not, in any case, form part of your turnover irrespective of method of accounting followed by you. You are not allowed to book service tax liability as your income as per AS-9.It is a statutory payment which is collected by you from the client and paid to the govt.
Accordingly, you can claim the benefit of presumptive taxation by offering profit @8% of turnover and tax shall be paid on such amount.
Also note, the tax rate shall remain the same and it will be paid on such 8% of turnover.
Method of accounting is relevant. Please see section 145A(a)(i) of the Income tax Act,1961 and page 8 of ICAI publication viz., "issues on Tax Audit" (June 2010 edition).
I agree with the answer given given by you. But if the assessee is credited the service tax amount in Profit & loss then the corresponding amount will be debited to Profit & Loss A/c.
So, ultimately there would be no effect in Profit & loss A/c. Hence, it is better to credit the liability A/c to compaly with AS and for claiming the benefit under Section 44AD.
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