08 September 2012
Hello Experts, My query is, There is one partnership firm who is in the business of construction of residential flats. In the F.Y.11-12k, there is no Sale or Turnover but there is Advance Receipt From Customers which is more than Rs. 2 Crores. Whether this firm comes under the ambit of Tax Audit u/s 44AB??
08 September 2012
The accounting of the firm would be done as per AS-7, Construction contracts, so if revenue recognized is more than the limit prescribed by Section 44AB , then u will be coming under the ambit of the said section.
08 September 2012
Advance received would not be treat as turnover for the purpose of section 44AB. I think however agreement to sell the property is also not consider as sale when the ownership rights transfer to the the buyer then only sale has to recognize then it would be consider for turnover. So for your case section 44AB tax audit will not attract for A.Y.2012 - 13.
It is just my option but i am not sure with this because is any notifications or case laws are there in this regards i don't know so its just opinion and replied i also confirm my self along with you. So wait for expert's reply.
08 September 2012
Sir, CA Sumeet Nagpal the case is not regarding to construction contractor it is related to construct and sale by the builder so i think AS-7 will not attract.
08 September 2012
If there is a contractual relationship, in the nature of awarder and contractor, between the the prospective buyers and the partnership firm ,AS-7 attracts and threshold limit of 44AB thereof has to be checked as rightly pointed out by Mr. Sumeet Nagpal.
08 September 2012
No, If The Advance Payment Received is Against Contract Only. If There is a Contracts So It Should Falls Under AS 7. I Agree As it is Rightly Pointed Out by Mr. Nagpal.
08 September 2012
The advance received not against the contract it is received towards the advance for sale not for contract. If the buyer i.e who wants to own the property and he went to the builder and agreed with him to construct a residential house for certain amount and the contract given to the builder to construct the property and for such agreed amount some amount given as advance then such is contractor and comes under AS-7. But in this case advance received against sale not for construction. So not cover under AS-7. Is am i correct? clarify me.
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