AK.Mohan Raj Bharathi (CA in Practice as a Proprietor) (43 Points)
16 April 2010Hi,
One of my client doing two business, namely plying two heavy goods vehicle and retail business income (below Rs.40 Lakhs). I applied Sec 44AE for former business and net profit arrived for the later business. My doubt is
a) Whether i have to show the asset value (Heavy Goods Vehicle) in the balance sheet
b) If it is yes, then which value - Cost or WDV
c) If it is cost, then what is the tax implication at the time of sale of the vehicle
CA LOVELY ARORA
(C.A. B.Com (H) Graduate)
(2151 Points)
Replied 16 April 2010
1. no need to show asset value in balance sheet........
2. N.A.
3. N.A.
sudhir rawal
(B.COM/PCC/ARTICLE/'O'LEVEL)
(314 Points)
Replied 16 April 2010
if your client is comply the section 44AE with this some conditions
(1)who owns not more than ten goods carriages
(2) who is engaged in the business of plying, hiring or leasing such goods carriages
then the one thing with this section clearly stated
"(3) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :"
(4) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
sudhir rawal
(B.COM/PCC/ARTICLE/'O'LEVEL)
(314 Points)
Replied 16 April 2010
CA LOVELY ARORA
(C.A. B.Com (H) Graduate)
(2151 Points)
Replied 16 April 2010
sorry, sudhir but i think you are not correct........ even though not wrong........
an assesse, in this case, is not required to get his accounts audited u/s 44AB as his income from B/P is less than Rs. 40 Lakh........... and also he is following presumptive basis of computation of income as per sec. 44AE........ as he is showing income more than the limit prescribed Rs. 3150 and 3500 per light goods and heavy goods vehicle..........
So, he is not required to follow provisions of sec. 44AA in this case........... and also not required to maintain books of accounts for this purpose........ and also he is not required to show assets value in balance sheet...........
Regards,
Amir
(Learner)
(4016 Points)
Replied 16 April 2010
Dear Sir,
Ur case doesn’t require books to be maintained except –
1) If assesee is a Company.
2) Assessee wants to opt out of Presumptive taxation.
Anyways that is a different issue but I would say for Balance sheet purposes,
a) Yes, assessee has to show assets in the Balance Sheet
b) Depreciation should be reduced at the rates specified in Income tax. (if assesee is not a company) and assets will be carried at WDV.
c) In the year when assets will be sold, {In this case Depreciation means as per Income Tax Act}
Sale Price > WDV or in case no other asset is there in the block = STCG u/s 50 will be charged to tax.
Sale Price < or =WDV AND there are other assets in the Block = No treatment under Income Tax Act since Sec 50 is not attracted but Sale Price would definitely reduce the WDV for future years.
In both the above cases assets has to be written off in the books.
CA LOVELY ARORA
(C.A. B.Com (H) Graduate)
(2151 Points)
Replied 16 April 2010
dear amir,
if assessee show assets in balance sheet........ in that case....... he has to show other assets and liabilities including capital........ in his balance sheet......... (i.e. loans and advances, expenses payable, cash in hand and at bank, sundry debtors and creditors etc.............)
which further requires maintenance of books of accounts for this purpose....... which is not required........ you also supported this point..........
Regards,
Amir
(Learner)
(4016 Points)
Replied 16 April 2010
Dear Love,
Agree with you, maintenance of records are not required under Income Tax in the present case but pls answer this -
1) If assesee happens to be a "Company" - Books are required under Companies Act.
2) Whether Financial Statements are prepared only for the purposes of Income Tax - I could recall my first lecture of 11th Standard, there used to be a long list of "People interested in Financial statements" in the first chapter of Accountancy. {Bhai pls dont take it offensively I mentioned it so that u can easily relate it}
3) Sec 44AE overides Sec 28 to 43C but not Sec 50. So notional depreciation has to be reduced before computing capital gain u/s 50 especially when u read Sec 50 with subsection (3) of Sec 44AE.
CA Babit Khurana
(learning is my passion)
(338 Points)
Replied 16 April 2010
Dear Amir Sir,
In this case he is not required to maintain books and he is using sec44AE for his first business there is no balance sheet. So is he liable to show assets in the balance sheet of other business that is retail business? Kindly clearify this point
1) if he is liable to show assets in this balance sheet of retail business than he can claim depriciation also for this assets in this profit and loss but section 44AE overriddes section 28 to 43C.
Pl clerify this
Amir
(Learner)
(4016 Points)
Replied 16 April 2010
Dear Babit,
The same thing is answered above - Financial statements are not only prepared for the purposes of Income Tax but for many other reasons.
Sorry but I din't get ur second question.. Because first we are talking about depreciation for the purposes of Books then how can sec 44AF have effect on that.....Pls clarify ur doubt...
CA Babit Khurana
(learning is my passion)
(338 Points)
Replied 16 April 2010
Dear Amir Sir
Q1 whether assesse is liable to show asstes in retail business?
Q2 IF assess is liable to show assets in second business then can assesse charged depriciation on these asstes in his retail profit and loss if not then why? or if yes how can he claim if sec 44AE override section 28 to 43C.
Pl explain
CA Ruben Balooni
(Professionalism ™)
(1324 Points)
Replied 17 April 2010
if you are opting for sec 44AE then you are not required to Maintain records u/s 44AA..
Amit Agrawal
(Chartered Accountant)
(75 Points)
Replied 17 April 2010
Dear friends,
Sec. 44AD / AE /AF donot require maintenance of books of accounts under 44AA.
Sec. 44AF assumes that all the deductions including dep. is allowed.
If Balance Sheet is prepared for all businesses seperately then there is no question of not showing it in balance sheet.
Also you can prepare the Balance Sheet (Tentative) even without books of Accounts.
It is always in your client's interest to prepare the Balance Sheet whether you are filing the retun under presumptive Tax schemes or not.
Also if the turnover crosses 44AD limit in the subsequent year ie. liable to audit, you will need the Opening Balance Sheet also in that case this pre preparation will be very helpful.
If you are in Maharashtra and you have not crossed the limit as per 44AD still you may have crossed the limit in MVAT. In such a case the Balance Sheet prepared will be of immence help to you and your client.
Convince the client to maintain books even though not mandatorily required by law if he is crossing even 10 lacs.
Any queries left feel free to call 09404523939
Regards
Amit Agrawal
CA LOVELY ARORA
(C.A. B.Com (H) Graduate)
(2151 Points)
Replied 17 April 2010
| Originally posted by : Amir | ||
 |
Dear Love, Agree with you, maintenance of records are not required under Income Tax in the present case but pls answer this - 1) If assesee happens to be a "Company" - Books are required under Companies Act. 2) Whether Financial Statements are prepared only for the purposes of Income Tax - I could recall my first lecture of 11th Standard, there used to be a long list of "People interested in Financial statements" in the first chapter of Accountancy. {Bhai pls dont take it offensively I mentioned it so that u can easily relate it} 3) Sec 44AE overides Sec 28 to 43C but not Sec 50. So notional depreciation has to be reduced before computing capital gain u/s 50 especially when u read Sec 50 with subsection (3) of Sec 44AE. |
 |
Dear Amir,
I couldn't get what do you want to say............ this forum starts with heading SEC. 44AE........... which is section under Income Tax Act, 1961........... Mr. A.K. Mohan want to get clarification for Income Tax Purpose only......... That's even he should know that under companies act, he is required to show asset value............ no doubt about that..........
Regards,
Amir
(Learner)
(4016 Points)
Replied 17 April 2010
Dear Love,
Reply to the Author's question I had given earlier & pls check the post which u have pasted. It is addressed to You so this was for you and not for the author.............:)
If still you feel that I was wrong or my views were incorrect then Bhai I am sorry I am not an expert and can give incorrect answers....
CAclubindia
