A firm making loss so i want to know that if it's required to audit U/S 44AD?
NEHA PATEL (Assistant Article) (62 Points)
26 November 2015A firm making loss so i want to know that if it's required to audit U/S 44AD?
Piyush Tanwar
(Assistant Manager - Accounts)
(1432 Points)
Replied 26 November 2015
since there is no income, therefore it does not exceed the maximum amount not chargeable to tax and so the second condition mandating tax audit u/s 44AB r/w section 44AD is not satisfied and therefore the assessee is not required to get the accounts audited u/s 44AB.
Thanx & Regards
Piyush Tanwar
M - 9717468521.
CA Mohit Kumar
(accounts,taxation)
(855 Points)
Replied 26 November 2015
CA Amit Prakash Sharma
(Chartered Accountant)
(92 Points)
Replied 26 November 2015
Karthik.V.Kulkarni
(Chartered Accountant)
(594 Points)
Replied 26 November 2015
Karthik.V.Kulkarni
(Chartered Accountant)
(594 Points)
Replied 26 November 2015
Miss Rinkal
(Student)
(1309 Points)
Replied 27 November 2015
@ Neha Patel:
Please clarify the following facts:
(1) Is the firm a business firm or a professional firm?
(2) Is the said firm earning in the nature of commission or brokerage income?
(3) Is the business firm carrying an agency business
Now as per Sec 44AD rw Sec 44AB, tax audit is mandatory if both the conditions are satisfied:
(1) The said eligible assessee has declared income below the 8% of the turnover
(Income can be positive or negative. I.e profit or loss. Even loss is referred as income only)
AND
(2) The assessee's total income exceeds the maximum amount which is not chargeable to income-tax,
(I.e. For individual and HUF, If total income exceeds the basic exemption limit. In case of firms, since there is no basic exemption limit, therefore any income chargeable to tax)
Ashok J
(CA Final)
(880 Points)
Replied 28 November 2015
Ashok J
(CA Final)
(880 Points)
Replied 28 November 2015
Miss Rinkal
(Student)
(1309 Points)
Replied 28 November 2015
@ Ashok J:
Please quote the entire facts in order to analyse whether tax audit is applicable or not?
Tony John
(Chartered Accountant)
(6085 Points)
Replied 28 November 2015
As per Section 44AD, any deduction allowable under the provisions of Sec 30 to 38 shall be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
Brought forward losses are governed by Section 72. Hence it can be set off with profits declared u/s 44AD. But unabsorbed depreciation being covered in Section 32 shall not be allowed to be set off with profits declared u/s 44AD.
Tony John
(Chartered Accountant)
(6085 Points)
Replied 28 November 2015
@ Neha Patel
It is not mandatory to have books of accounts audited u/s 44AB if an eligible asssessee incure losses during the previous year.
For Section 44AB to apply to a 44AD eligible assessee, two conditions are to be satisfied:
1. The profits declared u/s 44AD are below prescribed limits.
2. Total income exceeds the maximum amount which is not chargeable to income tax.
If both the conditions are satisfied, Sec 44AB shall apply to an eligible assessee u/s 44AD. Hence if a firm (assuming it is eligible assessee u/s 44AD) incurs a loss, it is not subject to mandatory audit u/s 44AB since it has not satisfied the 2nd condition mentioned above.
naresh_ca
(Post Articleship)
(39 Points)
Replied 28 November 2015
the turnover is the crtiria , so if the Turnover is less than 1 Crore it should report at least 8% or more profit if not so, then it should get its books audited u/s 44AB
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