Tax audit for partnership firm
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 July 2013
my client is partnership firm ,and doing manufacturing business ,firm's turnover in F.Y.2012-2013 is Rs.8,00,000. and firm is in loss.........please tell me if audit is compulsory in this case.
urgent
thanks.
urgent
thanks.
27 July 2013
If 8% of turnover is not declared as income, tax audit becomes mandatory.
Message likes :
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27 July 2013
As per sec 44AB if gross turnover is not exceeding Rs 1 crore then no tax audit is applicable.
Refer ammendment as per Finance act,2012.
Refer ammendment as per Finance act,2012.
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 July 2013
Sampat sir than what about 8% profit of turnover that mandates that minimum profit will be 8% and in case of loss this condition not satisfy
27 July 2013
8 % is to be calculated on gross turnover and not profit.even in case of loss there is gross turnover.
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 July 2013
then as per your suggestion audit is not required,turnover is rs.800000/.and before giving remuneration and interest to partner my loss is around 2 lac.than i should file itr-4 before 31st july without audit showing loss of rs.2 lac or after adding remuneration before 31st july.please suggest
27 July 2013
turnover is less then 1 crore no tax audit is applicable,
u should file itr-4 after applying all provision applicable to partnership firm tha is after deduction partners remuneration and salary as per income tax provisions.
u should file itr-4 after applying all provision applicable to partnership firm tha is after deduction partners remuneration and salary as per income tax provisions.
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 July 2013
thanks sir
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 July 2013
and i have claimed ITC on capital goods than can i also claim depreciation on these capital goods,
27 July 2013
depn allowed on capital assets only.
if used for less then 180 days in fy 12-13 then only 50% of the actual depn is allowed.
if used for less then 180 days in fy 12-13 then only 50% of the actual depn is allowed.
27 July 2013
yes. audit is compulsory if the profit is less than 8%.
27 July 2013
The answer given above by me is reconsidered and hence may be read as given below.
Since the income of the partnership firm is -ve, the second condition of section 44AD(5) is not satisfied, hence 44AB audit is NOT MANDATORY.
Since the income of the partnership firm is -ve, the second condition of section 44AD(5) is not satisfied, hence 44AB audit is NOT MANDATORY.
02 August 2013
I agree with Shri B. Chakrapani.
.
Audit is not applicable in your case because there is a loss in the firm.
.
The CONCEPT behind introducing such law is to give relief to small assessees from maintaining regular books of account.
Further; where such business are not generating profits higher than the limits not liable to tax/loss; not to put assessees in more troubles.
.
.
Now advise your client not to WORRY about audit but to think : How to generate profits in the business.
.
.
Audit is not applicable in your case because there is a loss in the firm.
.
The CONCEPT behind introducing such law is to give relief to small assessees from maintaining regular books of account.
Further; where such business are not generating profits higher than the limits not liable to tax/loss; not to put assessees in more troubles.
.
.
Now advise your client not to WORRY about audit but to think : How to generate profits in the business.
.
02 August 2013
Here one may argue that in partnership business; no such limits (as for Individuals say Rs.2 lacs) are prescribed hence provisions of Sec. 44AD(5) are not applicable to the firms.
.
.
My arguments :
.
1. Section 44AD also covers case of firms.
.
2. Specific provisions have been made to allow remuneration and interest to the partners.
.
3. If after allowing such expenses to the business; if there is a loss; means provisions of Section 44AD(5)are also applicable to partnership firm when there is a loss.
.
.
.
.
My arguments :
.
1. Section 44AD also covers case of firms.
.
2. Specific provisions have been made to allow remuneration and interest to the partners.
.
3. If after allowing such expenses to the business; if there is a loss; means provisions of Section 44AD(5)are also applicable to partnership firm when there is a loss.
.
.
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 August 2013
Thanks sir
31 August 2013
The provisions of Section 44AD are as under:
26 [ 27 Special provision for computing profits and gains of business on presumptive basis.
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009) 27a ; and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. - Deductions in respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 28 [sixty lakh rupees].]
After going through the provisions if the profit is less than 8% of gross income then Tax Audit is required. Now, in case of loss the loss is also less than the 8% and hence to claim the loss TAX Audit is required to be done in case of Partnership Firms.
What is less then 0 (Zero) it is -0 and hence there cannot be any excuse that there is loss and no tax audit is applicable but I am of the opinion that for showing net profit less than 8% you have to get the Tax Audit done. In the act no where it is stated that in case of loss no tax audit is required.
26 [ 27 Special provision for computing profits and gains of business on presumptive basis.
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009) 27a ; and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. - Deductions in respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 28 [sixty lakh rupees].]
After going through the provisions if the profit is less than 8% of gross income then Tax Audit is required. Now, in case of loss the loss is also less than the 8% and hence to claim the loss TAX Audit is required to be done in case of Partnership Firms.
What is less then 0 (Zero) it is -0 and hence there cannot be any excuse that there is loss and no tax audit is applicable but I am of the opinion that for showing net profit less than 8% you have to get the Tax Audit done. In the act no where it is stated that in case of loss no tax audit is required.
31 August 2013
The provisions of Section 44AD are as under:
26 [ 27 Special provision for computing profits and gains of business on presumptive basis.
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009) 27a ; and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. - Deductions in respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 28 [sixty lakh rupees].]
After going through the provisions if the profit is less than 8% of gross income then Tax Audit is required. Now, in case of loss the loss is also less than the 8% and hence to claim the loss TAX Audit is required to be done in case of Partnership Firms.
What is less then 0 (Zero) it is -0 and hence there cannot be any excuse that there is loss and no tax audit is applicable but I am of the opinion that for showing net profit less than 8% you have to get the Tax Audit done. In the act no where it is stated that in case of loss no tax audit is required.
26 [ 27 Special provision for computing profits and gains of business on presumptive basis.
44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009) 27a ; and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. - Deductions in respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 28 [sixty lakh rupees].]
After going through the provisions if the profit is less than 8% of gross income then Tax Audit is required. Now, in case of loss the loss is also less than the 8% and hence to claim the loss TAX Audit is required to be done in case of Partnership Firms.
What is less then 0 (Zero) it is -0 and hence there cannot be any excuse that there is loss and no tax audit is applicable but I am of the opinion that for showing net profit less than 8% you have to get the Tax Audit done. In the act no where it is stated that in case of loss no tax audit is required.
31 August 2013
There are decisions which held that loss is NEGATIVE PROFIT.....
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