Regarding 40a(3)
This query is : Resolved
18 August 2011
we engaged in construction sector. our contract receipt is received in form of flats from one party.now we are having funds problem because flats are not realized on timely basis so we have to make payment through transfer of flats to our suppliers. we are having 4-5 such flats. Is this doing is permissible under section 40A(3) keeping in view of Rule 6DD of Income tax Rules.
18 August 2011
40A(3) applies on the transactions which are entered in cash book only.
Here the payment is allowable under rule 6DD also. Please refer clause(d).
Here the payment is allowable under rule 6DD also. Please refer clause(d).
18 August 2011
i agree with Mr. paras bafana........this payment is allovable under rule 6DD.
19 August 2011
O.K. it is not related to cash transaction but section 40A(3) applies in all cases if payment is made otherwise through account payee cheque or account payee bank draft so i think transaction of transfer of flats won't be possible considering even clause (d) of Rule 6DD becuase it says like that there sould be liability incurred by payee in respect of goods transferred or services rendered by assessee and if we see definition of goods then we will have to refer to sale of goods act,1930 and it totally ignors immovable property as goods so considering this definiton of sale of goods act,1930, according to me this transaction won't be o.k. keeping in view of even Rule 6DD.
19 August 2011
Sale of Goods Act does not treat the immovable property as goods, but in Income Tax Act, the flats and property constructed by the builder is treated as stock in trade.
.
Further service Tax also treat the construction activity as taxable service.
.
Sale of Goods Act -ignores immovable property as goods, but Income Tax Act and Service Tax , both take cognizance as
stock in trade and Services.
Ignorance can not be more powerful, as it is highly unspecific, then the
recognition and the cognizance as these two are more specific.
.
More ever, from the builders point of view, the case may be presented from the other side of the coin -
The other side may look like -
" As the suppliers intended to purchase flats, they paid in kind. "
" As We (Builders) have to sale our flats for a consideration, we sold these by accepting the booking amount in kind, and the consideration is being shown by us as Income.
.
.
Further service Tax also treat the construction activity as taxable service.
.
Sale of Goods Act -ignores immovable property as goods, but Income Tax Act and Service Tax , both take cognizance as
stock in trade and Services.
Ignorance can not be more powerful, as it is highly unspecific, then the
recognition and the cognizance as these two are more specific.
.
More ever, from the builders point of view, the case may be presented from the other side of the coin -
The other side may look like -
" As the suppliers intended to purchase flats, they paid in kind. "
" As We (Builders) have to sale our flats for a consideration, we sold these by accepting the booking amount in kind, and the consideration is being shown by us as Income.
.
20 August 2011
You may be right on point mentioning that income tax & service tax both takes in to account stock in trade and services respectively. But according to me , goods and stock in trade are not same thing if legislation has wanted to make sure then they must have used stock in trade in place of goods as mentioned in rule 6DD. So that purpose you can refer to section 46(2) where assets is used and not capital assets, so considering that point agricultural land was excluded from purview of other assets.
Even we considering that construction activity is service in service tax but we are just selling flats to our supplier and nothing to do with here service tax.
So, I think definition of goods can be better imported from sale of goods act,1930 even if it doesn't include immovable property because it is basic law to refer definition of goods.
Yes, i admit in case of our contract receipt that could be o.k. if goods includes immovable property from your view point but in case of supplier it won't possible because flats are not goods for us because these can't be stock in trade for us.
Even we considering that construction activity is service in service tax but we are just selling flats to our supplier and nothing to do with here service tax.
So, I think definition of goods can be better imported from sale of goods act,1930 even if it doesn't include immovable property because it is basic law to refer definition of goods.
Yes, i admit in case of our contract receipt that could be o.k. if goods includes immovable property from your view point but in case of supplier it won't possible because flats are not goods for us because these can't be stock in trade for us.
21 August 2011
1. See the business expediency.
2. See the intention of legislation behind
a particular provision.
http://www.indiankanoon.org/doc/1063398/
3. Discussion on 46(2) is not relevant.
Before importing the meaning from any other legislation, please
just confirm whether the asset is a
capital asset as per Income Tax Act ?
.
The best solution:
-------------------
Demand check from the "Debtors" (Purchaser of flats) and issue cheques to the creditors (supplier of the goods).
.
Creditors will support, if they are really interested in recovering their debts.
.
1. See the business expediency.
2. See the intention of legislation behind
a particular provision.
http://www.indiankanoon.org/doc/1063398/
3. Discussion on 46(2) is not relevant.
Before importing the meaning from any other legislation, please
just confirm whether the asset is a
capital asset as per Income Tax Act ?
.
The best solution:
-------------------
Demand check from the "Debtors" (Purchaser of flats) and issue cheques to the creditors (supplier of the goods).
.
Creditors will support, if they are really interested in recovering their debts.
.
24 August 2011
Thanks for discussing regarding this topic a lot and i think your best solution is ultimate solution otherwise situation may go to appeal to finalise.
24 August 2011
Yes , after discussion only, we can find the best way out.
.
You can start the procedure easily as
creditors are also interested in settling their accounts as well as they can expect Gains also.
.
.
You can start the procedure easily as
creditors are also interested in settling their accounts as well as they can expect Gains also.
.
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