03 June 2014
A partnership firm stopped manufacturing business and started trading business in FY 13.14. The turnover for FY 13.14 is Rs. 50 lakhs and profit before interest Rs. 1 lakh. Interest Rs. 4 lakhs was paid on unsecured loans, no interest and salary is paid to partners. The firm has received Rs. 10 lakhs from a Pvt ltd. co.(a related party) on a deposit which was kept kept as deposit in the preceding years and interest on Income Tax refund Rs. 50,000/-. After considering the above the net profit as per P & L is Rs. 750000/-.
1. Whether the interest received is to be treated as income from other sources?
2. Whether audit u/s 44AB is applicable considering provisions of Sec. 44AD?
03 June 2014
As per the provision of section 44AD a profit @8% is to be declared on the gross turnover, if no audit is required to be done. In the present case, profit from business should be Rs.4.00 lakhs apart from interest income, which is computed under head income from other surces. Since the profit before interest as declared is Rs. 1 lakh only which is less than 4 lakhs , the assessee needs to get his accounts audited under the provision of section 44AB. and interest received is to be treated as income from other sources.
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