A proprietory retail trader,s turnover for fin year 2014-15 is Rs.12 lakhs.His actual net profit is only Rs.90,000/= i.e.less than 8 % of grosss receipts.He has salary income also which amounts to Rs.2,40,000/=for the said fin year. Are section 44 AA and 44 AB applicable if he does not opt for 44 AD for the retail business?.
6 Replies
Kuldipsinh Jadeja
(Job)
(357 Points)
Replied 25 June 2015
Respected Sir,
As per section 44AA if income from business exceeds Rs.1,20,000/- and the total sales/turnover/gross receipts are in excess of Rs.10,00,000/- in all the three years immediately preceding previous year or in case the business is newly setup, income & sales/turnover/gross receipts are likely to exceed the said amount than the Assessee is required to maintain books of accounts.
Also the assessee opting for provision of section 44AD are not required to maintain books of accounts provided the conditions of section 44AD are satisfied.
However if the assesse does not opt for provisions of section 44AD than in such case he is not required to maintain books of accounts as per section 44AA (since income from PGBP is only Rs.90,000 i.e. less than Rs.1,20,000/-) and since sales/turnover/gross receipts does not exceed Rs.1 crore he is not covered under section 44AB of Income Tax Act, 1961.
Conclusion
Hence as per the provisions discussed above if the assesse does not opt for 44AD than section 44AA & 44AB are not applicable.
Section 44AD is not mandatory, it is optional to the assessee.
Hope i have resolved your problem.
Z
( )
(2965 Points)
Replied 25 June 2015
As per S.44AD assessee has the option to opt for computation of profit & gains on the presumptive basis @ 8% of the gross turnover
If assessee chooses NOT TO exercise this option then provisions of 44AA and 44AB i.e maintaining books of accounts and audit report respectively, would become applicable
Hence if you want to show 96,000 as income u/h PGBP you don't need to maintain books and to get it audited. But if you want to declare 90,000 as income U/H PGBP you don't need to maintain account as per 44AA and also no audit would be required
Since the difference is of only 6,000 , you will incurr some expense in getting audit done and maintaining records, you might consider declaring income u/h PGBP of 96,000 [Presumptive]
Nikhil Kaushik
(Fellow CA)
(85743 Points)
Replied 25 June 2015
Dear Jadeja Ji,
there is one problem with ur analysis. The condition of turnover exceeding Rs 10 lakh is applicable if ther turnover exceeds Rs 10 lakh in any of the preceeding three years instead of becoming applicable when it crosses 10 lakhs in each of last three year.
Kuldipsinh Jadeja
(Job)
(357 Points)
Replied 25 June 2015
| Originally posted by : Nikhil Kaushik | ||
 |
Dear Jadeja Ji, there is one problem with ur analysis. The condition of turnover exceeding Rs 10 lakh is applicable if ther turnover exceeds Rs 10 lakh in any of the preceeding three years instead of becoming applicable when it crosses 10 lakhs in each of last three year. |
 |
Agreed Mr. Nikhil thanks for clarification.
Siddharth
(article)
(96 Points)
Replied 26 June 2015
No tax audit as turnover less than 1 cr and assessee not opted for 44ad. 44aa not applicable as 1st conditions for applicability not fulfil by assessee so..no need to go for tax audit
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