Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
29 October 2009Suppose there is a case where a single proprietor has two business with different trade name. Both the business are having a turnover exceeding 40 lakh i.e. as specified under section 44AB. So now while calculating the ceiling for conducting of tax audit as specified by ICAI Guidelines, whether it shall be considered as a single audit or two audits. ?
Please share your views. I will also share my point of view.
Gaurav Raichura
(CA-Final Student)
(82 Points)
Replied 29 October 2009
First of all, the turnover of all the businesses carried by a proprietor will be considered except the business of which income is to be taxed under presumptive taxation like 44AD, 44AE etc.
Now as far as no. of audit concerned, IT WILL BE TREATED AS ONE AUDIT i.e. of PROPRIETOR and NOT OF THE BUSINESSES AND TAX AUDIT REPORT IN FORM 3CB ISSUED TO BE IN THE NAME OF PROPRIETOR. THE NAME OF VARIOUS BUSINESS FIRMS ARE ALSO TO BE MENTIONED, BUT AUDIT REPORT WILL BE ISSUED IN THE NAME OF PROPRIETOR AND ACCORDINGLY 3CD FORM IS ALSO TO BE ISSUED ONE AND IN THE NAME OF PROPRIETOR. However, Annexure-I forming part of 3CD and schedules attached to 3CD for various clauses like depreciation chart have to be issued for each business firms separately.
I think this is correct from my point of view.
Amol Gopal Kabra (CA,CS,DISA)
(Practicing CA)
(8539 Points)
Replied 29 October 2009
This is also what my point of view. But i came across some senior members who are taking a contradictory view to it. Thats why i thought to have smoe discussion over it.
Many a times clients require separate report for each business. In this regard somebody had an opinion that if you issure separate report, it shall be considered as separate report. But in my view, even if we issue separate report for each business to the client, the report to be issud for income tax department shall be the one consolidated report. So, it should be considered as one count only for ceiling purposes.
Even in case of company audits, branch audits are excluded from the purview of the ceiling. So the same interpretation can be applied to this also. There is no separate guideline or information by ICAI or IT Department.
Thank you for your view.
Gaurav Raichura
(CA-Final Student)
(82 Points)
Replied 29 October 2009
The Form - 3CB, you have to issue in the name of proprietor mentioning various name of business firms and Profit/loss from them. This is the Audit Report and the Copy of 3CB and 3CD issued to gather can be attached to the separate financial statements of each business firms by client. But you have to issue only One Combined Report.
Amol Gopal Kabra (CA,CS,DISA)
(Practicing CA)
(8539 Points)
Replied 29 October 2009
I agree that the Form 3CB and Form 3CD has to be issued only one for each proprietor. But still clients demand separate set for each business containing the respective clauses as applicable. This is owing to the requirement by the banks if both the business are funded by different banks or branches. Actually, there is no practical use of the Audit forms, 3CB or 3CD to the assessee or the bank, but still they are very keen on their documentation. So they ask for separate reports. But in my opinion, and as said by you also, it should be considered as a single audit only.
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 30 October 2009
Thanks for sharing Your views to all
srmanas
(articled student)
(55 Points)
Replied 30 October 2009
Single Tax Audit will be done in Form 3CB. I have faced this situation earlier in one of the audit.
Manoj Kumar Lohia
(Advocate)
(22 Points)
Replied 30 October 2009
i agree with single audit view expressed above
Sunil
(Trader)
(2611 Points)
Replied 30 October 2009
A proprietorship concern is a disregarded entitiy or entity disregarded as being seperate from the individual. Therefore each proprietorship is a separate business of the same individual and what you are auditing are seperate businesses of an individual only. You may fill certain schedules separately for each business but eventually the data has to be consolidated in one ITR4 form. For purpose of Sales Tax or VAT, two proprietorships are included in one number as administrative relief is granted only once to the proprietor. Therefore I would consider it as one audit only for section 44AB. Even if your client wants a separate report, he is entitled to get from you a package deal to also segregate his businesses and report and give the department a consolidated report that reflects all the segregated reports. You are giving a package deal for doing more work for him in the same audit and this does not increase your number of audit as you are not seperating the individual but his businesses. Yes you could charge him more for the extra workload involved.
This is distinct from companies where one holding company may have 100% ownership of other companies or maybe and some of these companies maybe organised together as yet another company or even LLPs. They are all distict entities for statutory compliances and therefore each one on its own would add up in numbers as far as audit is concerned. There is no doubt a holding company would have to include the audit reports of each entity in its annual reports. Yet, as far as number of audits are concerned, each are individual for ROC/CLB as well as Tax.
Sorry friends that I am entering your domain for this discussion totally uninvited as compared to your qualifications in the matter. However, there are two things I hate the most:-
* Injustice
* Discrimination
I am a firm believer in level playing field for all and I do get into debates and discussion for these.
Sunil
(Trader)
(2611 Points)
Replied 30 October 2009
As CA you have seperate ceiling for Tax Audit or Company audits. What about VAT Audits. In some states VAT Audit seems to be for over Rs.1.00 crores rather than 40 lakhs. Therefore in these states VAT audit report may not be applicable for some assessees even though they may have Tax Audit. I have come accross instances where even non CA STPs carry out VAT audits. Is the VAT audit a seperate audit if done for a proprietorship or a company. A company may have branches in multiple states and each may need to have a separate VAT Audit. For curiosity, how do you calculate ceilings on this?
N GANESHAN.
(CA FINAL STUDENT - PRACTITIONER)
(921 Points)
Replied 30 October 2009
R/senior. It is single audit only despite you are issuing trade wise 3CB/CD. As all the income of any no. of business is Grouped/Clubed under one PAN it is one audit report only
BSN GANESHAN ITP
Sandeep Pandey
(CA FINAL)
(1306 Points)
Replied 01 November 2009
Thanks for sharing your view ...............................................................
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