Audit u/s 44ab(d)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2014 Dear Experts,

Our details are as under:
Assessee type- Firm
Turnover - Rs 48 L
Bank Int paid on OD - 1.24 L
Int Recd on FDs (with bank as security for OD limit)- 1.53 L

My problem is, if I whish not to get my accounts audited u/s 44AB(d), How I should declare my profit:
Case-1
8% of 48 = 3.84 L (Less Partners salary & Int on Capital)
Add : Int on Bank FD- 1.53 L
Case 2
Business Income 8% of 49.53 L (Turnover + Int on FD)

Case 3
Business income : 8% of 48 L = 8.84L (Less Partners salary & Int on Capital)

Add : Other Sources : Int recd on FD = 1.53L (Less Int paid on OD 1.24 L) = 0.29 L

Please suggest

Nikhil Kaushik

Nikhil Kaushik (Expert)
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19 October 2014 you will have to do as per case - 1. because under 44AD you cannot claim expenses. And you cannot claim that interest paid was expense under section 57 to earn income from other sources.

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2014 Thanks....calculations should be in following manner:
Gross Profit : 3.84 L
Less- Int on Cap XXX L
Lee- Partners Rem XXX L
Profit from Business (A) XXX L

Income from OS (Int on FD) (B) 1.53 L
GTI (A+B) XXX L

Please suggest why we can not go for Case-3 coz Int from FDRs is also an Income from business only...Yes it is not profit from operation

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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19 October 2014 income from deposits in non-banking cases is accounted for as Income-from other sources. If you want to establish that it is business income, you will have to demonstrate how maintaining FDs is part and parcel of your business.

Querist : Anonymous

Querist : Anonymous (Querist)

19 October 2014 Thanks...But These FDRs are taken to get bank OD sanctioned as same is kept by bank as security deposit for sanctioning OD limit.

Anyway, please suggest that above way of calculations (given in my earlier post) is in order...