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tax audit

Kamal Jain (FCA) (200 Points)

07 December 2009

X who is a property dealer gets commission for arranging sale/rented properties.He charges service tax also and files his service tax returns.

For tax audit point of view what will be his turnover 40Lacs or 10 Lacs?

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13 Replies

Deepak Tapse (Accounts Manager - Taxation) (1771 Points)
Replied 07 December 2009

Service Tax registered under which category?

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Kamal Jain (FCA) (200 Points)
Replied 07 December 2009

"real estate agent"

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 07 December 2009

in case of individual 10 lacs limit is applicable and in case of company Rs. 40 lacs limit is applicable. this is because independent real estate agents are treated as self employed persons.

regards,

ratan

Kamal Jain (FCA) (200 Points)
Replied 07 December 2009

Dear Mr Ratan,

Could you pls specify relevant section/rule where it is mentioned that self employed are covered under 10 Lac limit.

As per my reading of the Income Tax Act limit is to be applied based on business or profession not the status of the person.According to me the question is wheter real estate agent is a professional within the meaning of Income Tax Act.

Thanks

Ansari (ca final) (444 Points)
Replied 07 December 2009

Mr. jain is right.

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NARENDER PAWAR (CA final Student) (337 Points)
Replied 07 December 2009

limit is applicable 10 lac

all above right

Anup rathi (CA FINAL) (268 Points)
Replied 07 December 2009

Limit applicable will b 10 lacs since he his charging service tax

hence if taxable services exceeds 10 lacs he will hv 2 file returns

Sunil (Trader) (2611 Points)
Replied 07 December 2009

Ratan Deepji. Independent Businessman / proprietor is also a self employed person. A kiosk owner is also a self employed person. Section 44AB is dependent on TYPE of receipt and not status of person wheter company or proprietor.

As per Income Tax Act, profession INCLUDES a vocation.

What is actually happening is a confusion of word Business, Profession, Vocation. All these are OCCUPATION of a person.

Real Estate Commission is a Business Receipt. All DTAAs recognise independent agents as doing business.

Architect, Chartered Accountant, Lawyers, Insurance Actuary,Company Secretary, Cost Accountant etc., Engineers, Doctors etc. are all recognised professions as they have memberships to associations that have a legal or parliamentary sanction without which they cannot practice in the field. Any person doing the work that is in the domain of these professions will also be deemed to be in these professions as per Income Tax. Therefore if you are not a lawyer but charge for legal advice, you are a legal professional. The department is least concerned whether you are eligible or not in your profession.

Besides these, there are also occupations that are deemed as professions. These are interior designers, models, film artistes, artists (painting). These do not have legally sanctioned bodies although they may have unions or associations (not by act of parliament). These too are considered as professions for Income Tax India.

Insurance Agent is a dependent agent carrying on his own business. Insurance Broker is an independent broker carrying on his own business. The receipt for both is identical and would be a business receipt. They are only licensed to do the business. If a business is regulated by license it does not become a profession.

Kamal Jain (FCA) (200 Points)
Replied 07 December 2009

Dear Sunil ji,

Shall I conclude that Real Estate Agent is not a professional and apply the limit of 40 Lacs for tax audit purpose.Pls advice.

CA. Megha Topiwala (Job) (1534 Points)
Replied 07 December 2009

yeh... Mr. Kamal ....

real estate agent is not a professional hence for sec 44AB limit shall be 40 lacs...

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Divya K S (CA) (289 Points)
Replied 07 December 2009

Megha is right. In this case, he is carrying on the business as real estate agent & hence the limit is 40 lacs.

Sunil (Trader) (2611 Points)
Replied 07 December 2009

Yes Mr. Kamal. If you read DTAAs, especially Article 5 and also section 9 of Income Tax Act, they have defined what an independent agent or broker is. It suggests that he is a person acting in the course of his own BUSINESS. Therefore, a GCA or a broker is doing his own business. In the Income Tax Act I have not come across any other section defining the GCA or broker. This is the only section that defines it and it suggests that he does business. I have not gone through this potboiler thriller called Income Tax Act 1961 thoroughly but if you find any reference to a broker or commission agent as a professional please let me know. Section 9 is the closest reference I have come accross.