My client has 2 businesses 1 is Manufacturing and another 1 is retail bussiness, both are different, turnover from manufacturing business is around Rs.23 Lakhs, turnover from Retail business is around Rs.26 Laks and he has professional income around Rs.6 lakhs, he is a induvidual person and the business and profession also run in his name ( sole propriety Business), is he required to get his books audited. Whether all the incomes to be clubbed (Business & Profession) under section 44Ab? explain and suggest me in this regard.......
13 August 2009
Thank You sir sec 44AB is Applicable in My Case i have a case law for this purpose
HIGH COURT OF RAJASTHAN Bajrang Oil Mills v. Income-tax Officer FACTS The assessee filed its return for the assessment year 1994-95 declaring the total receipts from sales and receipts for job work done by it. Since the gross receipt of the assessee from the sales and the job work done by it exceeded Rs. 40 lakhs, the Assessing Officer opined that the assessee was under an obligation to get its accounts audited under section 44AB. The assessee contended that under section 44AB, three expressions, viz., ‘total sales’, ‘turnover’ and ‘gross receipts’ are used by the Legislature and each of them is independent criterion and one does not overlap the other. It further contended that since in instant case neither ‘turnover’, nor ‘total sales’ nor ‘gross-receipts’ excluding ‘turnover’, nor ‘total sales’ on being considered independently exceeded Rs. 40 lakhs, it was not liable to have its accounts audited for the assessment year 1994-95. However, the Assessing Officer opined otherwise by finding that the gross receipts include the receipts from all sources and; since the aggregate of the sales and the gross receipts from the job work taken together exceeded Rs. 40 lakhs the assessee was liable to compulsory audit. The Assessing Officer, issued show-cause notice to the assessee for levy of penalty under section 271B. In response to notice to show cause against levy of penalty under section 271B, the assessee pleaded that even if it be assumed that interpretation put by the Assessing Officer was correct, since the assessee was under bona fide belief, in view of the language that was deployed by the legislation, that it was not liable to subject itself to compulsory audit, the penalty ought not to be levied on it for the breach of technical provision since there was no failure on its part to make complete and correct disclosure. The Assessing Officer rejected the contentions of the assessee and imposed penalty under section 271B. The Commissioner (Appeals) as well as the Tribunal affirmed the order of the Assessing Officer. On appeal : HELD SCOPE OF SECTION 44AB The maximum limit of Rs. 40 lakhs in section 44AB has been fixed in the case of every person who is carrying on business and whose total receipts from the business activity, which come under the head ‘Income from the profit and gains from the business, has to be viewed as one integrated whole and not independently. The assessment of a person is on the total income and not on the income derived from the different sources separately. The three expressions used by the legislation, viz., the ‘total sales’, ‘turnover’ or ‘gross receipts’ though not defined under the Act, in the ordinary sense, refer to the volume of the business to which it relates and which is/are carried on by the assessee and in making assessment of profits and gains from the business whether such volume is a part of the business concerns trading in commodities or otherwise the business activities where the assessee has to indulge in incurring cost before receiving the amount in relation to that business or he is carrying on other business activities in which the cost factor is excluded by the assessee and what he is receiving as charges for the work done by him, like job wo rk, where the raw material is provided by the other manufacturer, the assessee is merely to relate his receipts to labour charges or procuring cost incurred by him along with part of his profit. It is in that sense that business which is carried on by the assessee has to be taken in totality. The ‘sales’, ‘turnover’ and ‘gross receipts’ are not words of art used in relation to any individual transaction independently but have been used as ‘sales’, ‘turnover’ or ‘gross receipts’. The expression ‘total’ qualifies all the other three expressions, viz., ‘sales’, ‘turnover’ and ‘gross receipts’. Total sales indicate the aggregate price of the sales of commodities carried out by the assessee as a trading business. [Para 23]. Obviously, it would not include such transfer of immovable or movable property by way of investment. Similarly, where the assessee is not merely selling the movable commodities, but relating to other trading activities, e.g., where assessee is a land developer and he is engaged in business of acquiring land, developing it and selling houses or purchasing or is indulged in leasing business or is indulged in stock market so on and so forth, the expression ‘turnover’ is made out to denote receipts from such activities. There may be third or residuary category which may not be termed properly a trading activity yet it is carrying on as business activity like job works for others, without himself being the manufacturer and selling such manufactured goods, or running a motor service garage, for the receipts of such business can aptly be termed as receipts of firm. However, integral relation of receipts by a person from business, does indicate that it refers to revenue receipts only and do not include capital receipts and certainly not the receipts which are not relatable to business and may fall under the expression income to be subjected to tax as income from sources other than profits or gains from business, profession or vocation. [Para 23] Thus, on true interpretation of section 44AB(a), the assessee, in the instant case, was required to get his accounts audited as his gross receipts had exceeded Rs. 40 lakhs during the previous year relevant to the assessment year 1994-95. [Para 24]
CAclubindia
