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QUERY IN RESPECT OF BUILDER SHIP BUSINESS

umashankar vaishnav (Accounts Dept. Shree Cement - SAP S/4 Hana FICO) (1069 Points)

25 February 2009

RESPECTED MEMBERS,

I HAVE ONE QUESTION IN CASE OF ANY BUILDERS SHIP BUSINESS . HENCE FROM BUILDERS POINT OF VIEW LAND BEING ITS STOCK IN TRADE SO ANY SALE OR PURCHASE OF LAND BEING ITS REVENUE INCOME AND EXPENDITURE RESPECTIVELY.

MY QUESTION IS THAT IF ANY BUILDER PUCHASE ANY LAND IN CASH THAN SUCH TRANSACTION BEING ITS REVENUE EXPENDITURE FOR A PARTICULAR PREVIOUS YEAR.

NOW , SUCH TRANSACTION WILL BE ALLOWED AS REVENUE EXPENDITURE IN ITS "P&L"

ACCOUNT "OR " IT WILL BE DISALLOWED AS PER SECTION 40A(3).

PLZ GUIDE ME SIR

UMASHANKAR VAISHNAV

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4 Replies

Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 25 February 2009

HI Umashankar,

Plz read below first:

The provisions of section 40A(3) would apply in computing the income under the heads “Profits and gains of business or profession” and “Income from other sources” as per section 58(2). All payments in excess of Rs. 20000 at one time whether for goods or services obtained for cash or credit, which are deductible in computing the income, have to be made by crossed cheque or bank draft. Thus, the price of goods purchased for resale or use in manufacturing process or payments for services will be covered by the provisions of section 40A(3).

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Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 25 February 2009

This clarifies that Builders are also covered by this section on purchase of land in cash as such land is Stock in Trade(Goods) for them.

umashankar vaishnav (Accounts Dept. Shree Cement - SAP S/4 Hana FICO) (1069 Points)
Replied 25 February 2009

sir such transaction which i have clarify in my question is finally being deductible or dis allowed from any deduction.

plz reply

Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 25 February 2009

If you charge off this through P/L account, department taking into consideration Sec 40A(3), will dissallow. I will advice not to deduct it for calculating TAx. In accounting books of course you need to book.