Now, special audit of DLF Ltd accounts
25 Feb 2009, 2148 hrs IST, deepshikha/sanjeev, ET Bureau
NEW DELHI: The Income-Tax department has ordered a special audit of the accounts of DLF Ltd and would take necessary action after scrutiny, finance
minister of state S S Palanimanickam said in a written reply to a query in Lok Sabha Lok Sabha on Wednesday.
A special audit under section 142(2A) of the I-T Act has been ordered in the case of Delhi Lease and Financing Ltd, also known as DLF for the assessment year 2006-07 , the minister said. As per the minsiter, the audit report"is being examined for taking necessary action as laid down under the law.
The DLF spokesman said, We would like to state that the assessment (of the audit reprot) is still to be done; it will be wrong to say that any action is being taken against DLF . As per DLF, FY 2005-06 was the first year in which DLF revised accounting standards as prescribed by ICAI because it had to go public. As per these standards, DLF started using Percentage of Completion Method (PoCM) for recognizing revenues, and consequently, profits. Prior to this, all accounts were prepared in accordance with Indian GAAP.
Percentage of completion method mandates a realty company to book sales and profit proportionate to the level of construction achieved in any project in the given quarter. Earlier, developers would book sales and profits once the project was completed. DLF said this accounting change led to DLF recognizing an additional profit of Rs 314 crore, resulting in taxable income of Rs 334 crore (for DLF Limited as a standalone entity).
DLF Limited (as a standalone entity) paid tax of Rs 114 crore on the same, which is more than the tax paid by the company in the past years. Under the I-T law, in an assessment year, the tax department assessees income of preceding financial year. To put it simply, in the assessment year 2006-07, the department would assess income in 2005-06.
If the tax official believes that a company s accounts presented to him do not give a true picture of the accounts or are complex, he can order a order a special audit of the accounts of a company or individual under Section 142 (2A) of the Income-Tax Act in the interest of revenue. The special audit is conducted by an independent auditor who is usually on the panel of the I-T department.
The minister acknowledged that some housing companies had misled the I-T department regarding their income and profits, details of which are being collected, would be tabled in the House shortly. The Minister also clarified that the government has not ordered a special audit of the accounts of the Darbari Lal Foundation.
A special audit under section 142(2A) of the I-T Act has been ordered in the case of Delhi Lease and Financing Ltd, also known as DLF for the assessment year 2006-07 , the minister said. As per the minsiter, the audit report"is being examined for taking necessary action as laid down under the law.
The DLF spokesman said, We would like to state that the assessment (of the audit reprot) is still to be done; it will be wrong to say that any action is being taken against DLF . As per DLF, FY 2005-06 was the first year in which DLF revised accounting standards as prescribed by ICAI because it had to go public. As per these standards, DLF started using Percentage of Completion Method (PoCM) for recognizing revenues, and consequently, profits. Prior to this, all accounts were prepared in accordance with Indian GAAP.
Percentage of completion method mandates a realty company to book sales and profit proportionate to the level of construction achieved in any project in the given quarter. Earlier, developers would book sales and profits once the project was completed. DLF said this accounting change led to DLF recognizing an additional profit of Rs 314 crore, resulting in taxable income of Rs 334 crore (for DLF Limited as a standalone entity).
DLF Limited (as a standalone entity) paid tax of Rs 114 crore on the same, which is more than the tax paid by the company in the past years. Under the I-T law, in an assessment year, the tax department assessees income of preceding financial year. To put it simply, in the assessment year 2006-07, the department would assess income in 2005-06.
If the tax official believes that a company s accounts presented to him do not give a true picture of the accounts or are complex, he can order a order a special audit of the accounts of a company or individual under Section 142 (2A) of the Income-Tax Act in the interest of revenue. The special audit is conducted by an independent auditor who is usually on the panel of the I-T department.
The minister acknowledged that some housing companies had misled the I-T department regarding their income and profits, details of which are being collected, would be tabled in the House shortly. The Minister also clarified that the government has not ordered a special audit of the accounts of the Darbari Lal Foundation.
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