All About Tax Audit and Form 3CD (Part-3)

Clause

Particulars

Comments

15

Give the following particulars of the capital asset converted into stock-in-trade:

(a)

Description of capital asset;

Description of the capital asset is required to be mentioned for example shares, security, land, building, plant, machinery etc.

(b)

Date of acquisition;

The date of acquisition is to be reported. For ascertaining the correct date the tax auditor will have to refer to the accounts of the financial year in which such capital asset is acquired. The date assumes importance for the purpose of determining whether the asset is long-term or short-term in nature.

(c)

Cost of acquisition;

The cost of acquisition is required to be reported. Here the cost of acquisition as per the books of account is to be mentioned. In case of depreciable assets, the carrying cost appearing in the books will be the written down value. But the value to be reported will be the original cost of acquisition

(d)

Amount at which the asset is converted into stock-in-trade.

The amount recorded in the books of account at which the asset is converted into stock-in-trade should be stated. Such an amount may not be the fair market value as on the date of conversion or treatment as stock-in-trade. If a value other than carrying cost is recorded then the auditor has to examine the basis of arriving at such a value

16

Amounts not credited to the profit and loss account, being –

(a)

The items falling within the scope of section 28;

Under this clause various amounts falling within the scope of section 28 which are not credited to the profit and loss account are to be stated.Section 28 is the charging section for Income under head PGBP For example- profits or gains of any profession, compensation received on termination of employment, agency etc, profit on the transfer of DEPB Scheme being the Duty Remission Scheme,any interest, salary, bonus, commission or remuneration, by whatever name called, received by a partner of the firm from such firm.

(b)

The proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax where such credits, drawbacks or refunds are admitted as due by the authorities concerned;

The details of proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax where such credits, drawbacks or refunds, if admitted as due by the concerned authorities but not credited to the profit and loss account, are to be stated

(c)

Escalation claims accepted during the previous year;

The escalation claims accepted during the previous year but not credited to the profit and loss account are to be stated.

(d)

Any other item of income;

Clause (d) covers any other items which the tax auditor considers as an income of the assessee based on his verification of records and other documents and information gathered, but which has not been credited to the profit and loss account.

(e)

Capital receipt, if any.

Clause (e), capital receipt, if any, which has not been credited to the profit and loss account has to be stated. The tax auditor should use his professional expertise and judgement in determining whether the receipt is capital or revenue.

17

Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of the State Government referred to in section 43CA or 50C, please furnish details of property, consideration received or accrued and value adopted or assessed or assessable

If the sale consideration of an immovable property is less than the stamp duty value of such property, the stamp duty value shall be deemed to be the sale consideration for the purpose of computing capital gains thereon where such property is held as a capital asset and where the property is held as stock-in-trade, the stamp duty value shall be taken as income/sale value to be considered under the business head of income. This clause aims to check compliance in this regard.

18

Particulars of depreciation allowable as per the Income Tax Act, 1961 in respect of each asset or block of asset, as the case may be, in the following form:-

The Income Tax Act prescribes depreciation to be charged as per the ‘block of assets system’ subject to certain conditions. This clause checks that the depreciation has been arrived at correctly.

(a)

Depreciation of asset/block of assets

(b)

Rate of depreciation

(c)

Actual cost of written down value, as the case may be

(d)

Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustment on account of: (i) Central Value Added Tax credits claimed and allowed under the Central Excise Rules, 1944, in respect of assets acquired on or after 1st March 1994, (ii) change in rate of currency, and (iii) subsidy or grant or reimbursement, by whatever name called.

(e)

Depreciation allowable

(f)

Written down value at the end of the year

19

Amounts admissible under sections: 32AC, 32AD, 33AB, 33ABA, 35(1)(i), 35(1)(ii), 35(1)(iia), 35(1)(iii), 35(1)(iv), 35(2AA), 35(2AB), 35ABB, 35AC, 35AD, 35CCA, 35CCB, 35CCC, 35CCD, 35D, 35DD, 35DDA, 35E;

These sections allow for special deductions for prescribed businesses. The tax auditor should check whether the assessee has complied with all the necessary conditions to claim a deduction under these sections. Some of these sections may require a certificate by a Chartered Accountant certifying the eligibility.

20

(a)

Any sum paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or dividend

The assessee would be allowed a deduction in respect of a payment made to an employee in the nature of a bonus of commission only if such bonus or commission was available exclusively to such employee in relation to the services rendered by him.

(b)

Details of contribution received from employees for various funds as referred to in section 36(1)(va)

These funds include superannuation funds created for the benefit of the employee. The contributions made by the employer to such funds shall be allowed as a deduction only if they are made within the due date as specified in the applicable law.