tax audit of share broker

This query is : Resolved

CA Mohit kumar agarwal (Querist)
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05 November 2007 sir /madam
if a person is share broker or sub broker and he is dealing in share market .is tax audit is applicable on the basis of profit or sell or purchase transaction. If we take Sell or purchase value for audit then it may be that the limit of 40lakhs will cross in a day . please clear the matter ASAP

CA. Ramesh P Choudhary

CA. Ramesh P Choudhary (Expert)
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05 November 2007 Ref. case of
M/s Babu Lal Enterprises v ACIT, ITA No.6031/Mum/1996 (Mumbai Bench) and Royal Cushion Vinyl Products Ltd, dated January 4, 1994.

If a share broker enters into transactions on his personal account,the sale value also should be taken into account for considering the limit for the purpose of section 44AB. Paragraph 5.9 provides
that share brokers, on purchasing securities on behalf of their customers, do not get them transferred in their names but deliver them to the customers who get them transferred in their names. The same is also true in case of sales. The share broker holds the delivery merely on behalf of his customer. The property in goods does not get transferred to the share brokers.
Only brokerage which is being accounted for in the books of account of share brokers should be taken into account for considering the limits for the purpose of section 44AB.
However, in case of transactions entered into by share broker on his personal account, the sale value should also be taken into account for considering the limit for the purpose of section
44AB.

KAAPIL

KAAPIL (Expert)
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05 November 2007 Only brokerage which is being accounted for in the books of account of share brokers should be taken into account for considering the limits for the purpose of Section 44 AB.
But if he enters into personal transactions then consider the sale value.

KAAPIL

KAAPIL (Expert)
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05 November 2007 Please demarcate the personal and client transactions in order to avoid the mix up.

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