Part I -- Applicable Accounting and Auditing Standards |
1
| >> |
| 1. - Status and Applicability of Accounting Standards Issued by ICAI |
2
| >> |
| I. Non-Corporate Entities |
2
| >> |
| Need for compliance of accounting standards by tax auditor |
2
| >> |
| Classification of entities |
2
| >> |
| Level of compliance |
2
| >> |
| Accounting standards issued by ICAI as on 1-4-2020 |
3
| >> |
| Compliance with Accounting Standard where the organisation concerned is not involved in commercial, industrial or business activities |
4
| >> |
| Table showing status and applicability of Accounting Standards as on 1-4-2020 |
4
| >> |
| Enterprises classified as Level I enterprise |
7
| >> |
| Enterprises classified as Level II enterprise |
7
| >> |
| Enterprises classified as Level III enterprise |
7
| >> |
| Enterprises classified as level IV enterprises |
8
| >> |
| Additional disclosure requirements |
8
| >> |
| Applicability of Accounting Standards to Co-operative Societies |
9
| >> |
| Applicability of AS-11 to authorised foreign exchange dealers |
9
| >> |
| II. Corporate Entities [For Period upto 31-3-2021] |
9
| >> |
| I. Applicability of Accounting Standards to Companies other than those following Indian Accounting Standards (Ind AS) |
9
| >> |
| Accounting Standards applicable in their entirety to companies |
9
| >> |
| Exemptions or Relaxations for SMCs as defined in the Notification dated 7th December, 2006, issued by the Ministry of Corporate Affairs, Government of India |
10
| >> |
| Criteria for classification of companies under the Companies (Accounting Standards) Rules, 2006 |
11
| >> |
| Instructions |
12
| >> |
| III. Corporate Entities [From 1-4-2021] |
13
| >> |
| Enterprise |
13
| >> |
| Small and Medium Sized Company -- Meaning of |
13
| >> |
| Accounting Standards |
14
| >> |
| Obligation to comply with Accounting Standards |
14
| >> |
| Qualification for exemption or relaxation in respect of SMC |
14
| >> |
| General instructions |
14
| >> |
| 2. - Standards on Auditing at a Glance |
15
| >> |
| Introduction |
15
| >> |
| Standards on Auditing |
15
| >> |
| Standards an auditing issued by ICAI that may find applicability in the context of tax audit |
17
| >> |
| Retention of working papers |
19
| >> |
| 3. - Valuation of Stock [AS-2 Issued by ICAI] |
20
| >> |
| Relevance |
20
| >> |
| Applicability |
20
| >> |
| Definitions |
20
| >> |
| Measurement of inventories |
21
| >> |
| Cost of inventories |
21
| >> |
| Costs of purchase |
21
| >> |
| Costs of conversion |
21
| >> |
| Other costs |
22
| >> |
| Exclusions from the cost of inventories |
22
| >> |
| Cost formulas |
22
| >> |
| Techniques for the measurement of cost |
23
| >> |
| Net realisable value |
23
| >> |
| Disclosure |
24
| >> |
| 4. - Valuation of Stock -- Provision of Income Tax Act |
25
| >> |
| Related provisions of the Income Tax Act |
25
| >> |
| Recoverable duties and taxes -- Difference between AS-2 and section 145A |
25
| >> |
Part II -- Books of Accounts and Accounting for Income Tax |
27
| >> |
| 5. - Maintenance of Books of Account -- Requirements Under Income Tax Law |
28
| >> |
| Introduction |
28
| >> |
| Books of account -- Meaning of [Section 2(12A)] |
28
| >> |
| Maintenance of books by specified professions |
28
| >> |
| Notified professions for the purposes of section 44AA(1) |
28
| >> |
| Books required to be maintained by specified professionals |
29
| >> |
| Prescribed books of account and duty of tax auditor if gross receipts exceed ₹1,50,000 |
29
| >> |
| Books required to be maintained |
30
| >> |
| Additional books in case of medical profession |
30
| >> |
| Form of daily case register [Rule 6F(3)] |
31
| >> |
| Meaning of certain terms [Explanation to rule 6F] |
31
| >> |
| Place where books of account should be kept [Rule 6F(4)] |
31
| >> |
| Period for which books of account should be maintained [Rule 6F(5)] |
32
| >> |
| Books required to be maintained by non-specified professionals and by person carrying on any business |
32
| >> |
| Penalty for failure to keep or maintain books of account |
32
| >> |
| Books of account do not include profits and loss account and balance sheet |
33
| >> |
| No books prescribed by CBDT -- No default of assessee |
33
| >> |
| ‘Account’ -- Meaning of |
33
| >> |
| 6. - Accounting for Income Tax [Section 145] |
34
| >> |
| Requirement of section 145 |
34
| >> |
| Income to be computed following either cash or mercantile system of accounting |
34
| >> |
| Nature of section 145 |
34
| >> |
| Scope of section 145 |
35
| >> |
| Income to be determined with reference to method employed by the assessee |
35
| >> |
| Difference between method of accounting |
36
| >> |
| Mercantile system of accounting -- Explained |
36
| >> |
| Provision for liability not deductible in case mercantile system of accounting followed |
36
| >> |
| Interest on loan advanced forgone not taxable even under mercantile system of accounting |
36
| >> |
| Cash system of accounting -- Explained |
37
| >> |
| Income can be received in kind under cash system of accounting |
37
| >> |
Part III -- Chartered Accountants’ Obligations Vis-a-Vis Tax Audit |
40
| >> |
| 7. - Who Can be Tax Auditor [As Per ICAI] |
41
| >> |
| Who can be appointed an auditor under section 44AB |
41
| >> |
| ‘Accountant’ for the purpose of section 44AB means a Chartered Accountant [Circular No. 421, dt. 12-6-1985] |
41
| >> |
| Who is authority for appointing tax auditor |
41
| >> |
| Only Chartered Accountants can be tax auditor -- Apex Court view |
42
| >> |
| Tax audit of assessee required to get accounts audited under any other law |
42
| >> |
| Audit by a firm of Chartered Accountants |
42
| >> |
| Statutory auditor or any Chartered Accountants in practice can do tax audit |
42
| >> |
| Tax audit by Chartered Accountant engaged in part time Certificate of Practice |
43
| >> |
| Chartered Accountant appointed as tax consultant can also function as tax auditor |
43
| >> |
| Case of joint auditors |
43
| >> |
| Case of branch audits |
43
| >> |
| 8. - Who Cannot be Appointed as Tax Auditor -- As per ICAI |
43
| >> |
| Chartered Accountant responsible for writing or maintaining books of the assessee |
43
| >> |
| Case of professional firm |
44
| >> |
| Internal auditor |
44
| >> |
| Statutory auditor not having been appointed |
44
| >> |
| Auditor being either owner or partner or auditee |
45
| >> |
| Partner or relative of auditor having substantial interest |
45
| >> |
| Auditor being director in company auditee |
45
| >> |
| Partner or relative of auditor being director in company and having substantial interest |
45
| >> |
| Auditor being indebted to auditee |
46
| >> |
| Tax auditor where different from statutory auditor |
46
| >> |
| Tax auditor being relative of company director |
46
| >> |
| 9. - Restrictions by Income Tax Act on Chartered Accountants as to Signing of Tax Audit Reports |
47
| >> |
| Who can be appointed as tax auditor |
47
| >> |
| Who cannot be appointed auditor by particular assessees |
47
| >> |
| Who cannot be appointed auditor by all assessees |
47
| >> |
| Relative defined |
48
| >> |
| Those not eligible to be auditor under section 141(3) of the Companies Act, 2013 |
48
| >> |
| 10. - Fulfillment of Appointment Related Formalities in Tax Audit Cases |
50
| >> |
| Obtaining from auditee appointment as tax auditor |
50
| >> |
| Need of communication with the erstwhile auditor and mode of communication |
51
| >> |
| Guidelines vis-a-vis acceptance of audit -- Appointment as Statutory auditor |
54
| >> |
| Not to accept assignment where indebted to client |
55
| >> |
| Where the member or his partner or relative is a director or in the employment of an Officer or an employee of the company |
56
| >> |
| Members not to write books of account for auditee clients |
57
| >> |
| Statutory auditor not to be the Internal Auditor simultaneously |
57
| >> |
| Internal auditor not to be the tax auditor simultaneously |
57
| >> |
| Internal auditor not to be the GST Auditor simultaneously |
57
| >> |
| Cooling off period after completion of tenure as Director |
57
| >> |
| Tax auditor to satisfy whether appointment is as per the statute |
58
| >> |
| Appointment of an auditor when he is indebted to a concern |
58
| >> |
| 11. - Removal of Tax Auditor |
59
| >> |
| Possibility of removal of tax auditor |
59
| >> |
| Extracts from Guidance Note on Tax Audit by ICAI |
59
| >> |
| 12. - Ceiling on Tax Audit Assignment |
60
| >> |
| ICAI guidelines |
60
| >> |
| Record of tax audit assignments to be kept by the auditor |
61
| >> |
| No ceiling on number of tax audit cases in certain cases |
62
| >> |
| Ceiling on firm of Chartered Accountants |
62
| >> |
| Constitutional validity of Guidelines No. 1-CA(7)/02/2008, dated 8-8-2008, which mandates cap on number of audits to be done by chartered accountants -- Transfer of writ petition |
63
| >> |
| 13. - Code of Ethics and Tax Audit |
63
| >> |
| ICAI Guidelines |
63
| >> |
| Communication with previous auditor |
63
| >> |
| Code of ethics to be followed |
63
| >> |
| Independence of audit |
63
| >> |
| Period during which independence is required |
64
| >> |
| Communication with those charged with governance |
65
| >> |
| General documentation of independence for audit and review engagements |
65
| >> |
| Overdue fees |
65
| >> |
| Financial interests held by the firm, a network firm, audit team members and others |
66
| >> |
| Financial interests in an entity controlling an audit client |
67
| >> |
| Financial interests held as trustees |
67
| >> |
| Financial interests in common with the audit client |
67
| >> |
| Financial interests received unintentionally |
68
| >> |
| Financial interests -- Other circumstances |
68
| >> |
| Loans and guarantees |
69
| >> |
| Loans and guarantee with an audit client |
70
| >> |
| Family relationship |
70
| >> |
| Immediate family of an audit team member |
70
| >> |
| Close family of an audit team member |
71
| >> |
| Other close relationships of an audit team member |
72
| >> |
| Relationships of partners and employees of the firm |
72
| >> |
| Accounting and book keeping services |
73
| >> |
| 14. - Duties and Obligations of Tax Auditor |
76
| >> |
| Obligations of tax auditor |
76
| >> |
| Need for compliance with accounting standards issued by ICAI |
76
| >> |
| Accounting practice as per AS 1 |
76
| >> |
| Compliance with accounting standard where the organisation concerned is not involved in commercial, industrial or business activities |
77
| >> |
| Where accrual basis of accounting not followed |
78
| >> |
| Correct audit procedures necessary |
78
| >> |
| Duties of Chartered Accountant in case of taxation frauds by assessees |
79
| >> |
| To affix UDIN |
80
| >> |
| 15. - Responsibilities of Tax Auditor |
81
| >> |
| Auditors owe clear duties towards interested parties |
81
| >> |
| Auditor must exercise reasonable care |
81
| >> |
| Role of an auditor as judicially noticed |
82
| >> |
| Auditor to satisfy himself that books of account show the true financial position |
83
| >> |
| Auditor is responsible for proper check |
83
| >> |
| Tax auditor owes duty towards department for his negligence |
83
| >> |
| Furnishing of audit report within time limit |
83
| >> |
| Tax authorities and assessee not bound to follow tax auditor’s opinion |
84
| >> |
| Tax audit for first time to ensure compliance with SA 510 |
84
| >> |
| 16. - Liabilities of Tax Auditor |
84
| >> |
| Liability in respect of a highly debatable issue |
84
| >> |
| Liability in respect of work done by qualified assistants |
85
| >> |
| Liability under the code of conduct |
85
| >> |
| Liability under Income Tax Act |
85
| >> |
| 17. - Safeguards for a Tax Auditor |
86
| >> |
| Retention of working papers |
86
| >> |
| No need to express true and fair view if statutory audit is done by another Chartered Accountant |
86
| >> |
| Indication of extent of checking |
87
| >> |
| Reliance upon report of internal auditor |
87
| >> |
| Tests and checks relevant for audit of corporate assessee also relevant for non-corporate assessee |
87
| >> |
| Test checks not be preferred in the absence of internal control |
88
| >> |
| Refusal of assessee to co-operate with the auditor to be indicated |
88
| >> |
| Auditor not to accept more than 60 tax audit assignments |
89
| >> |
| 18. - Furnishing of Tax Audit Report |
89
| >> |
| Due date for completing audit and furnishing of audit report |
89
| >> |
| Effect of extension of due date for furnishing return of income |
90
| >> |
| Tax audit report to be filed electronically |
90
| >> |
| Whether report of audit as per sections 44AD, 44ADA, 44AE, 44BB or 44BBB to be filed electronically |
90
| >> |
| 19. - Penalty for Furnishing Incorrect Information in Reports or Certificates |
92
| >> |
| Who can levy penalty under section 271J |
92
| >> |
| When penalty can be levied |
92
| >> |
| Amount of penalty |
92
| >> |
| No penalty where re-assessable cases is shares |
92
| >> |
Part IV -- Aspects Basic to Tax Audit |
93
| >> |
| 20. - Requirement of Tax Audit |
94
| >> |
| When is tax audit required to be done |
94
| >> |
| Persons carrying on business required to get his accounts audited on compulsory basis |
95
| >> |
| Effective limits for person carrying on business [From the assessment year 2021-22] |
96
| >> |
| Inclusions/exclusions in receipts/expenditure |
97
| >> |
| Different situations identified |
97
| >> |
| Provisions illustrated |
97
| >> |
| Section 44AB not dependent on accounting method employed |
99
| >> |
| Tax audit requirement is for business income only |
99
| >> |
| ‘Account’ -- Meaning for section 44AB |
99
| >> |
| Exemptions from tax audit |
100
| >> |
| Inclusion of turnover from business referred to in section 44B or 44BBA in turnover referred to in section 44AB |
100
| >> |
| Case of non-resident assessee |
100
| >> |
| Case of persons required to get accounts audited under any other law |
101
| >> |
| Tax audit necessary even where audit taking place under any other section of the Act |
101
| >> |
| Scope of section 44AB |
101
| >> |
| Board Circulars/Notification |
102
| >> |
| 21. - Tax Audit Requirement Where Assessee Having Only Exempt Income |
103
| >> |
| ICAI’s opinion |
103
| >> |
| Judicial opinion |
103
| >> |
| Our opinion |
104
| >> |
| 22. - Presumptive Incomes and Tax Audit |
105
| >> |
| Cases covered by sections 44AD and tax audit |
105
| >> |
| Option to declare income as per section 44AD to be exercised continuously, audit requirements and requirements as to maintenance of books |
106
| >> |
| Cases covered by section 44ADA |
111
| >> |
| Cases covered by sections 44AE, 44BB, 44BBB and tax audit |
111
| >> |
| Profits where claimed being lower than that deemed under presumptive taxation -- Tax audit becomes compulsory |
113
| >> |
| Extracts from the ICAI’s Guidance Note on Tax Audit under section 44AB (Revised 2014 Edition) regarding presumptive income cases |
113
| >> |
| 23. - Sales, Turnover or Gross Receipts -- Generally |
114
| >> |
| Sales, turnover or gross receipts as criteria for identifying tax audit case |
114
| >> |
| What is scope and applicability of terms sales, turnover or gross receipts |
114
| >> |
| Can the assessee claim that each one of the terms sales, turnover or gross receipts to be construed separately |
114
| >> |
| Receipt of revenue nature are only covered by section 44AB |
116
| >> |
| Whether purchases can be considered while computing turnover |
116
| >> |
| Scope of the word profession for the purposes of section 44AB |
117
| >> |
| Scope of the word profession when case covered by section 44ADA |
117
| >> |
| Points to be considered while interpreting section 44AB |
118
| >> |
| Meaning of sales and turnover |
119
| >> |
| Sales turnover -- Scope of |
120
| >> |
| Materiality of treatment in books |
120
| >> |
| Treatment of write back of amount due to a creditor |
121
| >> |
| Gross receipts -- Inclusions and exclusions |
121
| >> |
| Gross receipts in case of professionals -- Treatment of out of pocket expenses |
122
| >> |
| Case of professional carrying on business as well |
123
| >> |
| Case of assessee carrying on several business activities |
123
| >> |
| Proprietor having multiple businesses |
123
| >> |
| Each year to be considered separately for turnover purpose |
124
| >> |
| Treatment of entertainment tax |
124
| >> |
| Many professional say that as per section 145A turnover shall include GST amount also -- Is it correct |
124
| >> |
| Will section 43CA apply for determination of turnover |
125
| >> |
| Business versus profession |
126
| >> |
| Share broker -- Whether engaged in business or profession |
127
| >> |
| Undisclosed sales cannot be added to turnover |
127
| >> |
| Advances received by builder |
128
| >> |
| 24. - Sales, Turnover, Gross Receipts Under Particular Situations |
129
| >> |
| Kachha Arahtia v. Pacca Arahtia |
129
| >> |
| Business turnover below section 44AB limit, however, aggregate exceeding the limit in view of other receipts |
131
| >> |
| Case of money lender |
131
| >> |
| Case of non-residents |
132
| >> |
| Case of exempt income (say, agricultural income) |
132
| >> |
| Case of insurance agent |
132
| >> |
| Case of a civil contractor |
132
| >> |
| Advance received towards sale of flats |
133
| >> |
| Case of finance business |
133
| >> |
| Case of travel agent |
133
| >> |
| Agency business |
133
| >> |
| Case of chit funds |
134
| >> |
| Leasing company/lease financing |
137
| >> |
| Case of commission agent |
137
| >> |
| Treatment of discounts, rebates, etc. while determining total turnover |
138
| >> |
| Different businesses under different trade names |
138
| >> |
| Two firms having same partners carrying on separate businesses |
138
| >> |
| Hire purchase |
139
| >> |
| Freight charged by the assessee from the different parties and paid to the individual truck owner |
139
| >> |
| Case of person carrying on business of plying, hiring or leasing of goods carriage |
140
| >> |
| Exclusion of receipts of business of plying/hiring of goods carriage for section 44AB monetary limit |
141
| >> |
| Application of section 44AB is independent of method of accounting followed |
142
| >> |
| Case of assessee engaged in providing accommodation entries to entry seekers against commission |
142
| >> |
| Assessee being a charitable trust |
142
| >> |
| Assessee being partner in a professional firm -- Income by way of salary exceeded the limit specified under section 44AB |
142
| >> |
| 25. - Securities Transactions and Tax Audit |
143
| >> |
| Case of share broker |
143
| >> |
| Transactions in shares, securities, and derivatives -- Determination of turnover |
144
| >> |
| Turnover from derivative transactions -- How determined |
145
| >> |
| Determination of turnover where assessee carried on business of derivatives/future and options |
148
| >> |
| Transaction carried out through MCX |
148
| >> |
| Assessee engaged in the business of commodity trading |
149
| >> |
| 26. - Running of Nursing Homes -- Whether Constitute Business or Profession |
149
| >> |
| What is profession |
149
| >> |
| Business versus profession |
152
| >> |
| When professional can be said to be carrying on business |
153
| >> |
| Nursing home carried on as private limited company -- Business or profession |
153
| >> |
| Nursing home rendering one nature of service |
154
| >> |
| Can running of nursing home/hospital constitute business activity |
155
| >> |
| Income from pathological lab run by a non-medical person |
156
| >> |
| Partnership firm running nursing home -- Business or profession |
156
| >> |
| Summing up |
156
| >> |
| 27. - Case Studies on Tax Audit |
158
| >> |
| Educational Institution -- Requirement regarding tax audit under section 44AB |
158
| >> |
| Whether trusts are required to get accounts audited |
159
| >> |
| Turnover exceeding ₹ 1 crore -- Total income below basic exemption limit |
161
| >> |
| Tax audit -- Two businesses -- Single proprietorship -- Applicability of limit |
161
| >> |
| Tax audit -- Rendering of consultancy regarding bank finance gross receipts, whether ₹ 50 lakhs or ₹ 1 crore |
161
| >> |
| Tax audit -- Two businesses -- Single proprietorship -- Applicability of limit |
162
| >> |
| Tax Audit -- Whether partner can audit accounts of same professional firm |
163
| >> |
| Tax audit -- Assessee engaged in development of software -- Determination of turnover |
163
| >> |
| Tax audit -- Doctor in radiology running scanning centre |
164
| >> |
| Tax audit -- Total turnover -- Derivative transactions |
166
| >> |
| Tax audit -- Transactions in shares |
167
| >> |
| Tax Audit -- Voluminous nature of share transaction |
168
| >> |
| Tax audit under section 44AB -- Turnover -- Determination where there is change of status |
168
| >> |
| 28. - Consequences of Failure to Get Accounts Audited |
169
| >> |
| I. Statutory Provisions |
169
| >> |
| Penalty under section 271B |
169
| >> |
| Penalty not to be imposed in certain cases |
169
| >> |
| Penalty under section 271B -- When leviable |
169
| >> |
| Amount of penalty |
170
| >> |
| Nature of penalty under section 271B |
170
| >> |
| When penalty leviable |
170
| >> |
| Penalty whether imposable for technical reasons |
171
| >> |
| Penalty is not mandatory |
171
| >> |
| II. Reasonable Cause as a Ground for Non-levy of Penalty |
171
| >> |
| Reasonable cause -- Meaning |
171
| >> |
| Absence of reasonable cause is sine qua non of penalty |
171
| >> |
| Change of auditor |
171
| >> |
| Non-finalisation of accounts of previous year |
172
| >> |
| Illness of auditor |
172
| >> |
| Illness of one of the partners |
173
| >> |
| Technical breach not to invite penalty |
174
| >> |
| Assessee pleading arrest of one director and illness of other |
174
| >> |
| Delay in obtaining and filing of the tax audit report -- Assessee provided valid reasons for delay in obtaining and filing of the tax audit report |
174
| >> |
| Illness of accountant of assessee |
174
| >> |
| Ignorance of law |
175
| >> |
| Partners not being well educated |
175
| >> |
| Failure on part of government to appoint auditor |
175
| >> |
| Default on part of counsel |
175
| >> |
| Inordinate delay by statutory auditor |
176
| >> |
| Delay in completion of statutory audit |
176
| >> |
| Delay due to professional commitments of auditor |
176
| >> |
| Default of assessee’s accountant |
177
| >> |
| Delay in obtaining audit report under Companies Act |
177
| >> |
| Seizure of books of account |
177
| >> |
| Dispute with auditor |
177
| >> |
| Statutory auditor not where appointed by competent authority |
177
| >> |
| Non-appointment of auditor by government |
177
| >> |
| Change of management in middle of previous year |
177
| >> |
| Delay due to locational disadvantage |
178
| >> |
| Assessee not aware of audit provisions |
178
| >> |
| Signed audit report furnished before completion of assessment |
178
| >> |
| Report available at time of assessment |
178
| >> |
| Counsel busy in his activities |
178
| >> |
| Branch office’s audit report not received in time |
179
| >> |
| Belief that staff would file audit report |
179
| >> |
| Bona fide belief as to non-applicability of section 44AB |
179
| >> |
| Proprietor of three concerns filing return with audit report of one concern |
179
| >> |
| Tax audit report obtained by due date but return filed after due date |
180
| >> |
| Appointment of auditor was not in hands of assessee |
180
| >> |
| Accountant left job |
180
| >> |
| Bona fide belief that in view of Circular No. 452, tax audit not required |
180
| >> |
| No satisfaction as to penalty recorded in assessment order |
181
| >> |
| Family dispute |
181
| >> |
| Bona fide belief that provisions of section 44AB not attracted |
181
| >> |
| Inadvertent mistake in filing e-return |
181
| >> |
| Non finalization of accounts of preceding years |
181
| >> |
| Belief that receipts from sale of land not liable to tax audit |
181
| >> |
| Audit triggered only after rejection of methodology of booking profit from project of books |
181
| >> |
| Non-resident unaware of tax audit report by obtained by POA holder |
182
| >> |
| Bad health of assessee due to which proper accounts not maintained |
182
| >> |
| Loss educated assessee not aware of technicalities |
182
| >> |
| Chartered Accountant handling tax matters not doing tax audit |
182
| >> |
| No reasonable case established |
182
| >> |
| Where assessee disclosed proper GP under section 44AD |
182
| >> |
| Assessee under behalf that provisions of section 44AB were not applicable to it |
182
| >> |
| Tax audit report to be filed by assessee for relevant year was filed belatedly -- Delay caused due to illness |
183
| >> |
| Applicability of rule regarding e-filing of report -- Delayed filing of Audit along with return under section 139(4) |
183
| >> |
| Replacement of net profit rate declared by assessee without alleging any difficulty in doing assessment in absence of audit report |
183
| >> |
| Assessee obtained audit report prior to due date of filing of the return but did not attach it alongwith return |
183
| >> |
| Tax audit report not filed by civil contractor -- No format of books prescribed |
183
| >> |
| Assessee not attached tax audit report under section 44AB along with return of income |
184
| >> |
| Delayed filing of tax audit report online -- No mala fide on assessee’s part |
184
| >> |
| Virus in computer system |
184
| >> |
| Assessee’s accounts audited belatedly |
184
| >> |
| Non-submission of audit report in terms of section 44AB within prescribed time limit |
184
| >> |
| Delay in filing tax audit report -- Change of old software |
184
| >> |
| Not filing tax audit report within due date specified under the Act -- Technical glitch in e-portal provided for uploading tax audit report |
184
| >> |
| Failure to produce books of account and audit report under section 44AB -- Books not maintained by assessee but produced audit report |
185
| >> |
| Delay in filing of tax audit report -- Not due to the fault of auditor |
185
| >> |
| Where there was a delay in completion of statutory audit report |
185
| >> |
| Where assessee adopted percentage completion method |
185
| >> |
| III. Penalty Where Held Justified |
185
| >> |
| Where books not audited |
185
| >> |
| Where contradictory stand taken by assessee in establishing reasonable cause |
185
| >> |
| Assessee misrepresenting that it did not maintain any accounts |
186
| >> |
| Absence of reasonable cause |
186
| >> |
| Contravention of section 44AB -- Bar of limitation for imposing penalties |
186
| >> |
| Bogus audit report furnished for getting a bank loan showing fake turnover -- Imposition of |
186
| >> |
| Assessee failed to get his accounts audited and failed to furnish report thereof to AO -- Imposition of |
187
| >> |
| IV. Penalty Where Held Not Justified |
187
| >> |
| Where income exempt |
187
| >> |
| Income exempt under section 80P |
187
| >> |
| Assessee’s income not liable to tax |
187
| >> |
| Effect of granting registration under section 12A |
187
| >> |
| Interest receipts not where part of total turnover |
187
| >> |
| Commission income not exceeding specified limit |
188
| >> |
| Turnover exceeding limit due to additional sales disclosed on the basis of seized material |
188
| >> |
| Tax audit report filed on the basis of unaudited accounts |
188
| >> |
| Audit report where submitted within extended time fixed by CBDT |
188
| >> |
| Form No. 3CD not accompanied by audited trading, profit and loss account and balance sheets |
188
| >> |
| Audit report where filed with belated return |
189
| >> |
| Bona fide belief that income was below taxable limit |
189
| >> |
| Where books not maintained at all |
189
| >> |
| Accounts audited in accordance with company law and penalty proceedings initiated under section 271A |
190
| >> |
| Where accounts of co-operative society not got audited under bona fide belief |
190
| >> |
| Net receipts below specified limit |
190
| >> |
| Audit report filed during reassessment proceedings |
191
| >> |
| Tax audit report where filed with return in response to notice under section 153C |
191
| >> |
| Major income by government grant |
191
| >> |
| Filing audit report under Companies Act, 1956 but no separate report in Form 3CA |
191
| >> |
| Furnishing of audit report in wrong form |
191
| >> |
| Non-obtaining of prior approval of Jt. CIT while imposing penalty |
192
| >> |
| Audit report not where filed with income tax return |
192
| >> |
| V. Validity of Penalty Order |
192
| >> |
| Absence of signature of assessing officer |
192
| >> |
| Penalty levied after completion of assessment |
192
| >> |
| Penalty leviable even if assessment order not passed |
192
| >> |
Part V -- Tax Audit Preparation |
193
| >> |
| 29. - Format of Financial Statements in Case of Non-Corporate Assessee |
194
| >> |
| Format of financial statements |
194
| >> |
| Responsibility for maintenance of account books on assessee |
194
| >> |
| Proper books and accounts -- Meaning of |
194
| >> |
| Prescribed forms by the ICAI |
194
| >> |
| Recommended form of Financial Statements for Non-corporate trading Entities |
195
| >> |
| Recommended form of Financial Statements for Non-corporate manufacturing entities |
200
| >> |
| 30. - Audit Engagement Letter and Management Representation Letter |
205
| >> |
| Format of Audit Engagement Letter |
205
| >> |
| Management Representation Letter -- Overall Audit |
209
| >> |
| 31. - Declarations, Representations, Certificates, Etc., to be Taken From Auditee |
211
| >> |
| Prologue |
211
| >> |
| I. Declarations/Disclosures to be Obtained |
211
| >> |
| Disclosures particularly relevant to partnership firm/LLP |
211
| >> |
| Declaration in case of proprietorships |
212
| >> |
| Declaration as to books of account and method of accounting |
212
| >> |
| II. Management Representation as to Various Clauses of Form No. 3CD |
213
| >> |
| Clause 4 |
213
| >> |
| Clause 10(b) |
213
| >> |
| Clause 14 |
213
| >> |
| Clause 15 |
213
| >> |
| Clause 16 |
213
| >> |
| Clause 17 |
214
| >> |
| Clause 18 |
214
| >> |
| Clause 19 |
214
| >> |
| Clause 20(a) |
214
| >> |
| Clause 21(a) |
214
| >> |
| Clause 21(c) |
214
| >> |
| Clause 21(d) |
214
| >> |
| Clause 21(g) |
215
| >> |
| Clause 22 |
215
| >> |
| Clause 23 |
215
| >> |
| Clause 25 |
215
| >> |
| Clause 26 |
215
| >> |
| Clause 27(a) |
215
| >> |
| Clause 28 |
215
| >> |
| Clause 29 |
216
| >> |
| Clause 29A |
216
| >> |
| Clause 29B |
216
| >> |
| Clause 30 |
216
| >> |
| Clause 30A |
216
| >> |
| Clause 30B |
216
| >> |
| Clause 31 |
216
| >> |
| Clause 35 |
217
| >> |
| Clause 36A |
217
| >> |
| Clause 41 |
217
| >> |
| Clause 43 |
217
| >> |
| III. Certificates Required to be Taken |
217
| >> |
Part VI -- Nature of Reporting, Check Lists and Common Errors in Reporting |
219
| >> |
| 32. - Nature of Reporting in Form No. 3CD |
220
| >> |
| 33. - Check Lists for Filling Up Form No. 3CD |
240
| >> |
| Clause No. 1 of Form No. 3CD : Name of assessee |
240
| >> |
| Clause No. 2 of Form No. 3CD -- Address of assessee |
241
| >> |
| Clause No. 3 of Form No. 3CD : PAN/Aadhaar |
241
| >> |
| Clause No. 4 of Form No. 3CD: Indirect tax registration |
241
| >> |
| Clause No. 5 of Form No. 3CD : Status shall be mentioned |
242
| >> |
| Clause No. 6 of Form No. 3CD : Previous year |
242
| >> |
| Clause No. 7 of Form No. 3CD : Assessment year |
242
| >> |
| Clause No. 8 of Form No. 3CD : Applicable clause of section 44AB |
242
| >> |
| Clause 8A of Form No. 3CD : Option for section 115BA/115BAA/115BAB/115BAC/ 115BAD |
242
| >> |
| Clause No. 9 of Form No. 3CD : Firm or AOP |
243
| >> |
| Clause No. 10 of Form No. 3CD : Nature of business or profession |
243
| >> |
| Clause No. 11 of Form No. 3CD : Books of account |
244
| >> |
| Clause No. 12 of Form No. 3CD : Presumptive incomes |
245
| >> |
| Clause No. 13 of Form No. 3CD : Method of accounting and ICDS |
245
| >> |
| Clause No. 14 of Form No. 3CD : Valuation of stock |
246
| >> |
| Clause No. 15 of Form No. 3CD : Conversion of capital asset into stock-in-trade |
248
| >> |
| Clause No. 16(a) of Form No. 3CD : Amounts not credited to profit and loss account -- Incomes falling under section 28 |
248
| >> |
| Clause No. 16(b) of Form No. 3CD : Amounts not credited to profit and loss account -- proforma credits/drawbacks/refund of duties of customs or excise or GST |
249
| >> |
| Clause No. 16(c) of Form No. 3CD : Amounts not credited to profit and loss account -- Escalation claims |
249
| >> |
| Clause No. 16(d) of Form No. 3CD -- Amounts not credited to profit and loss account -- Any other income |
250
| >> |
| Clause No. 16(e) of Form No. 3CD -- Amounts not credited to profit and loss account -- Capital receipts |
250
| >> |
| Clause No. 17 of Form No. 3CD -- Land or building or both transferred during the previous year |
251
| >> |
| Clause No. 18 of Form No. 3CD -- Depreciation |
251
| >> |
| Clause No. 19 of Form No. 3CD -- Business deduction |
253
| >> |
| Clause No. 20(a) of Form No. 3CD -- Bonus or commission to employees |
254
| >> |
| Clause No. 20(b) of Form No. 3CD -- ESI/PF from employees |
255
| >> |
| Clause No. 21(a) of Form No. 3CD -- Capital expenditure |
255
| >> |
| Clause No. 21(a) of Form No. 3CD -- Personal expenditure |
256
| >> |
| Clause No. 21(a) of Form No. 3CD -- Advertisement expenses |
257
| >> |
| Clause No. 21(a) of Form No. 3CD -- Expenditure incurred at clubs |
257
| >> |
| Clause No. 21(a) of Form No. 3CD -- Penalty or fine |
258
| >> |
| Clause No. 21(b) of Form No. 3CD -- Amounts disallowable under section 40(a) |
258
| >> |
| Clause 21(c) of Form No. 3CD -- Interest, salary, bonus, commission or remuneration to the partners of the firm or AoP |
261
| >> |
| Clause 21(d) of Form No. 3CD. -- Payment in excess of limits specified under section 40A(3) |
262
| >> |
| Clause No. 21(e) of Form No. 3CD -- Provision for gratuity |
263
| >> |
| Clause 21(f) of Form No. 3CD -- Payments hit by section 40A(9) |
264
| >> |
| Clause 21(g) of Form No. 3CD -- Contingent liabilities |
265
| >> |
| Clause 21(h) of Form No. 3CD -- Disallowance under section 14A |
265
| >> |
| Clause 21(i) of Form No. 3CD -- Disallowance under section 36(1)(iii) |
265
| >> |
| Clause 22 of Form No. 3CD. -- Payments to MSME |
266
| >> |
| Clause 23 of Form No. 3CD -- Payment to relatives |
266
| >> |
| Clause 24 of Form No. 3CD -- Deemed profits under section 32AC or under section 32AD, 33AB, 33ABA or 33AC |
267
| >> |
| Clause 25 of Form No. 3CD -- Profits chargeable under section 41 |
268
| >> |
| Clause 26 of Form No. 3CD -- Payment hit by section 43B |
269
| >> |
| Clause 27(a) of Form No. 3CD -- CEVAT Credit |
270
| >> |
| Clause 27(b) of Form No. 3CD -- Prior period expenditure/income |
271
| >> |
| Clause 28 of Form No. 3CD |
271
| >> |
| Clause 29 of Form No. 3CD -- Receipt referred to in section 56(2)(viib) |
272
| >> |
| Clause 29A of Form No. 3CD -- Forfeiture of advances |
272
| >> |
| Clause 29B of Form No. 3CD -- Receipt of movable/immovable property or money |
272
| >> |
| Clause 30 of Form No. 3CD -- Money borrowed on hundi |
274
| >> |
| Clause 30A of Form No. 3CD -- Prima facie adjustment to transfer price |
274
| >> |
| Clause 30B of Form No. 3CD -- Interest limitation |
275
| >> |
| Clause 30C of Form No. 3CD -- General Anti Avoidance Rules |
275
| >> |
| Clause 31 of Form No. 3CD -- Loan/advance/specified sum |
275
| >> |
| Clause 32 of Form No. 3CD -- Brought forward losses |
277
| >> |
| Clause 33 of Form No. 3CD -- Deductions allowable |
280
| >> |
| Clause 34 of Form No. 3CD -- TDS/TCS compliance |
281
| >> |
| Clause 35 of Form No. 3CD -- Stock details |
282
| >> |
| Clause 36A of Form No. 3CD -- Deemed dividends |
283
| >> |
| Clause 37 of Form No. 3CD -- Cost Audit |
284
| >> |
| Clause 38 of Form No. 3CD -- Excise Audit |
284
| >> |
| Clause 39 of Form No. 3CD -- Service Tax Audit |
284
| >> |
| Clause 40 of Form No. 3CD -- Financial Ratios |
284
| >> |
| Clause 41 of Form No. 3CD -- Demand and refunds under tax laws |
285
| >> |
| Clause 42 of Form No. 3CD -- Statement in Form No. 61/61A/61B |
285
| >> |
| Clause 43 of Form No. 3CD -- Report under section 286 |
285
| >> |
| Clause 44 of Form No. 3CD -- GST details |
285
| >> |
| 34. - Commonly Found Errors In Reporting by Auditors |
286
| >> |
| I. Reporting in Form No. 3CA/3CB/3CD |
286
| >> |
| Non-inclusion of scope para in Form No. 3CB |
286
| >> |
| Requirement to give reasons for qualification or negative answer |
287
| >> |
| Reporting in Form No. 3CA/3CB where any query in Form No. 3CD is answered in negative |
287
| >> |
| Reporting under clause 3(a) of Form No. 3CB |
287
| >> |
| Difference of opinion under clause(s) of Form No. 3CD and report in Form No. 3CB |
287
| >> |
| Reporting inconsistencies in Form No. 3CD |
288
| >> |
| Which form to be filed if a new company is incorporated on or after 1-1-2021 but upto 31-3-2021 |
288
| >> |
| II. Errors in Reporting in Form No. 3CD |
289
| >> |
| Clause 4 |
289
| >> |
| Clause 8 |
289
| >> |
| Clause 11 |
289
| >> |
| Clause 14 |
289
| >> |
| Clause 16(e) |
289
| >> |
| Clause 17 |
290
| >> |
| Clause 20(b) |
290
| >> |
| Clause 21(b) |
290
| >> |
| Clause 22 |
291
| >> |
| Clause 23 |
291
| >> |
| Clause 31 |
291
| >> |
Part VII -- Conducting Tax Audit |
293
| >> |
| 35. - Conducting Tax Audit and Reporting |
294
| >> |
| Planning for tax audit |
294
| >> |
| Points to be considered in case of first audit |
294
| >> |
| Time limit for conducting tax audit |
294
| >> |
| Form required for reporting |
295
| >> |
| Where accounts audited under any other law |
295
| >> |
| Person carrying on business and profession both |
295
| >> |
| Person whose accounting year is different from financial year |
295
| >> |
| Where accounts of the assessee reopened/revised |
296
| >> |
| Accounting year different from the previous year -- Form of audit report |
296
| >> |
| Accommodating views of assessee in audit report |
297
| >> |
| Stock records not maintained -- Qualification called for |
297
| >> |
| 36. - Reporting in Form No. 3CA |
297
| >> |
| Applicability of Form No. 3CA |
297
| >> |
| Analysis of Form No. 3CA |
297
| >> |
| Tax auditor where different from statutory auditor |
298
| >> |
| Duty of tax auditor |
298
| >> |
| Submission of membership No. by auditor |
298
| >> |
| Assessee having multiple branches |
299
| >> |
| Assessee having branches outside India |
299
| >> |
| Requirement to give reasons for qualification or negative answer |
299
| >> |
| Reporting in Form No. 3CA/3CB where any query in Form No. 3CD is answered in negative |
300
| >> |
| Reporting against clause 21(d) and Form No. 3CA/3CB |
300
| >> |
| Reporting against clause 31 and Form No. 3CA/3CB |
300
| >> |
| Which form to be filed if a new company is incorporated on or after 1-1-2021 but upto 31-3-2021 |
300
| >> |
| Case of LLP |
301
| >> |
| Where trust books are to be audited |
302
| >> |
| 37. - Reporting in Form No. 3CB |
302
| >> |
| Applicability of Form No. 3CB |
302
| >> |
| Analysis of Form No. 3CB |
302
| >> |
| Reporting about details as to branches |
303
| >> |
| Reporting under clause 3(a) of Form No. 3CB |
303
| >> |
| Difference of opinion under clause(s) of Form No. 3CD and report in Form No. 3CB |
304
| >> |
| Assessee not required to get accounts audited under any other law but having branches |
304
| >> |
| Audit report in respect of one or more businesses but books of other businesses not produced as not required to be audited |
304
| >> |
| Reporting against clause 21(d) and Form No. 3CA/3CB |
305
| >> |
| Reporting against clause 31 and Form No. 3CA/3CB |
305
| >> |
| Reporting in Form No. 3CB and applicability of SA-700 |
305
| >> |
| Submission of membership No. by auditor |
306
| >> |
| Comparative study of Forms 3CA and 3CB |
306
| >> |
| 38. - Reporting in Form No. 3CD |
306
| >> |
| Requirement for filing Form No. 3CD |
306
| >> |
| Analysis of Form No. 3CD |
307
| >> |
| Tax auditor to get particulars authenticated by assessee and rely on judicial opinions and Institute’s opinion |
307
| >> |
| Important considerations for tax auditor |
307
| >> |
| Relevance of Form 3CD |
308
| >> |
| Reporting inconsistencies |
308
| >> |
| Sample qualifications in Form No. 3CD |
309
| >> |
| Revision of Form No. 3CD |
310
| >> |
Part VIII -- Form No. 3CD -- Clausewise Reporting Requirements & Safeguards for Auditor |
311
| >> |
| 39. - Name of Assessee [Clause 1] |
312
| >> |
| I. Requirements of Clause No. 1 |
312
| >> |
| Requirements of clause No. 1 |
312
| >> |
| Requirement under e-filing portal |
312
| >> |
| II. Reporting Requirements |
312
| >> |
| In case of individual/proprietorship concern |
312
| >> |
| In case of firm/LLP |
312
| >> |
| In case of AOP/BOI |
312
| >> |
| In case of company |
312
| >> |
| In case of society |
312
| >> |
| III. Documentation |
312
| >> |
| IV. Extracts from Guidance Note on Tax Audit under section 44AB (Revised 2014 Edition) |
312
| >> |
| 40. - Address of Assessee [Clause 2] |
313
| >> |
| I. Requirement of Clause No. 2 |
313
| >> |
| Requirement of clause No. 2 |
313
| >> |
| Requirement under e-filing portal |
313
| >> |
| II. Reporting Requirements |
313
| >> |
| Non-corporate assessee |
313
| >> |
| Corporate assessee/LLP |
313
| >> |
| Address of HUF proprietor |
313
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
313
| >> |
| IV. Documentation |
314
| >> |
| 41. - Permanent Account or Aadhaar Number of Assessee [Clause 3] |
314
| >> |
| I. Requirement of Clause No. 3 |
314
| >> |
| Requirement of clause No. 3 |
314
| >> |
| Requirement under e-filing portal |
314
| >> |
| II. Reporting Requirements |
314
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
314
| >> |
| IV. Documentation |
314
| >> |
| 42. - Details as to Indirect Tax Registration [Clause 4] |
315
| >> |
| I. Requirement of clause No. 4 |
315
| >> |
| Requirement of clause No. 4 |
315
| >> |
| Requirement under e-filing portal |
315
| >> |
| II. Reporting Requirements |
315
| >> |
| Duty of auditor |
315
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
316
| >> |
| IV. Extracts from Implementation Guide issued by ICAI |
317
| >> |
| V. Documentation |
317
| >> |
| 43. - Status of the Assessee [Clause 5] |
317
| >> |
| I. Requirement of Clause No. 5 |
317
| >> |
| Requirement of clause No. 5 |
317
| >> |
| Requirement under e-filing portal |
318
| >> |
| II. Reporting Requirements |
318
| >> |
| III. Background Material |
318
| >> |
| Person [Section 2(31)] |
318
| >> |
| IV. Documentation |
319
| >> |
| 44. - Previous Year [Clause 6] |
319
| >> |
| I. Requirement of clause No. 6 |
319
| >> |
| Requirement of clause No. 6 |
319
| >> |
| Requirement under e-filing portal |
319
| >> |
| II. Reporting Requirements |
319
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
320
| >> |
| IV. Background Material |
320
| >> |
| Previous year [Section 3] |
320
| >> |
| 45. - Assessment Year [Clause 7] |
321
| >> |
| I. Requirement of clause No. 7 |
321
| >> |
| Requirement of clause No. 7 |
321
| >> |
| Requirement under e-filing portal |
321
| >> |
| II. Reporting Requirements |
321
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
321
| >> |
| IV. Background Material |
321
| >> |
| Assessment year [Section 2(9)] |
321
| >> |
| 46. - Clause of Section 44AB Applicable [Clause 8] |
321
| >> |
| I. Requirement of clause No. 8 |
321
| >> |
| Requirement of clause No. 8 |
321
| >> |
| Requirement under e-filing portal |
322
| >> |
| II. Deciding about Relevant Clause of Section 44AB |
322
| >> |
| III. Reporting Requirements |
322
| >> |
| IV. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
323
| >> |
| 47. - Opting by Assessee for New Tax Regime [Clause 8A] |
323
| >> |
| I. Requirement of Clause No. 8A |
323
| >> |
| Requirement of clause No. 8A |
323
| >> |
| II. Reporting Requirements |
323
| >> |
| III. Interplay with Other Clauses of Form No. 3CD to be taken Care of |
324
| >> |
| IV. Deciding about the Applicable Option |
325
| >> |
| Lower rate of tax on certain domestic manufacturing companies [Section 115BA] |
325
| >> |
| Tax at 22% for certain domestic companies [Section 115BAA] |
325
| >> |
| Reduced tax rate at 15% for newly formed certain domestic manufacturing companies [Section 115BAB] |
327
| >> |
| New taxation regime for individual/HUF [Section 115BAC] |
329
| >> |
| New taxation regime for resident Co-operative Societies [Section 115BAD] |
334
| >> |
| 48. - Details About Firm or Association of Persons [Clause 9] |
336
| >> |
| I. Requirement of Clause No. 9 |
336
| >> |
| Requirement of clause No. 9 |
336
| >> |
| Requirement under e-filing portal |
336
| >> |
| II. Reporting Requirements |
336
| >> |
| Firm -- Meaning |
336
| >> |
| Applicability of clause No. 9 to LLPs |
336
| >> |
| Clause 9(a) |
336
| >> |
| Clause 9(b) |
336
| >> |
| Importance of query |
337
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
337
| >> |
| Information about firm/AOP |
337
| >> |
| Change in partners/their profit sharing ratio |
338
| >> |
| Profit sharing ratio will include loss but not remuneration, etc. |
338
| >> |
| Verification of the particulars regarding clause 9(b) |
338
| >> |
| Non-determinability of shares of members of an AOP |
338
| >> |
| 49. - Nature of Business [Clause 10] |
338
| >> |
| I. Requirement of Clause No. 10 |
338
| >> |
| Requirement of clause No. 10 |
338
| >> |
| Requirement under e-filing portal |
339
| >> |
| II. Reporting Requirements |
339
| >> |
| Clause 10(a) |
339
| >> |
| Reporting under clause 10(a) |
339
| >> |
| Clause 10(b) |
340
| >> |
| Reporting under clause 10(b) |
340
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
341
| >> |
| As to nature of business |
341
| >> |
| As to change in the nature of business |
341
| >> |
| As to enquiry regarding change of nature of business |
341
| >> |
| As to restructuring of business |
342
| >> |
| 50. - Books of Account [Clause 11] |
342
| >> |
| I. Requirements of Clause No. 11 |
342
| >> |
| Requirement of clause No. 11 and requirement under e-filing portal |
342
| >> |
| II. Reporting Requirements |
342
| >> |
| Reporting requirements |
342
| >> |
| Auditor’s responsibility vis-a-vis books of account |
343
| >> |
| Case of company |
343
| >> |
| Manner of books of account to be kept in electronic mode |
344
| >> |
| Case of LLP |
345
| >> |
| Where stock register not maintained |
346
| >> |
| Examined versus maintained |
346
| >> |
| III. Extracts from ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
346
| >> |
| Three types of books required to be stated |
346
| >> |
| Multiple activities carried on by assessee |
346
| >> |
| Placing appropriate identification marks on books of account |
347
| >> |
| Auditor’s duty as to books maintained |
347
| >> |
| Books generated by computer system |
347
| >> |
| Address at which books are maintained |
347
| >> |
| Reference to supporting evidence need be made -- Books of account examined would constitute the books of original entry and the other books of account |
348
| >> |
| IV. Background Material |
348
| >> |
| Books of account -- Meaning |
348
| >> |
| No books prescribed for business and non-specified profession |
348
| >> |
| Specified professions and books of accounts |
348
| >> |
| Additional reporting in case of medical professional |
349
| >> |
| Requirement as to maintenance of books of account in case of business and non-specified profession |
349
| >> |
| Books of account maintained |
350
| >> |
| Books of account and relevant documents examined |
350
| >> |
| Books of account do not include profit and loss account, etc. |
351
| >> |
| Case of assessee carrying on business |
351
| >> |
| Requirement regarding maintenance of books of account by assessee covered by section 44AD and get them audited |
351
| >> |
| 51. - Presumptive Incomes [Clause 12] |
351
| >> |
| I. Requirement of Clause No. 12 |
351
| >> |
| Requirement of clause no. 12 |
351
| >> |
| Requirement under e-filing portal |
352
| >> |
| II. Reporting Requirements |
352
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
352
| >> |
| Relevant business |
352
| >> |
| Amount to be mentioned under clause 12 |
353
| >> |
| Three different situations identified |
353
| >> |
| Assessee opting against presumptive taxation |
354
| >> |
| Maintenance of basic records advised for |
354
| >> |
| Where section 44AE applies |
354
| >> |
| Where Chapter XII-G applies |
355
| >> |
| IV. Background Material |
355
| >> |
| Where profits lower than that deemed but audit report filed belatedly -- Whether assessee looses option to claim lower profits |
355
| >> |
| Presumptive scheme for all businesses except business of hiring, leasing or carriage of goods carriage [Section 44AD] |
356
| >> |
| Presumptive income scheme for professionals [Section 44ADA] |
362
| >> |
| Profits and gains of business of plying, hiring or leasing goods carriages [Section 44AE] |
363
| >> |
| Computation of profits and gains of shipping business of non-resident [Section 44B] |
366
| >> |
| Computation of profits and gains in connection with business of exploration, etc. of mineral oils [Section 44BB] |
368
| >> |
| Computation of profits and gains of business of aircraft operation by non-residents [Section 44BBA] |
375
| >> |
| Computation of profits and gains of foreign companies engaged in certain turnkey projects [Section 44BBB] |
376
| >> |
| Tonnage tax scheme |
379
| >> |
| First schedule to Act |
385
| >> |
| 52. - Method of Accounting [Clauses 13(a) to 13(c)] |
386
| >> |
| I. Requirements of Clause No. 13(a) to 13(c) |
386
| >> |
| Requirements of clauses Nos. 13(a) to 13(c) and requirement e-filing portal |
386
| >> |
| II. Reporting Requirements |
386
| >> |
| Reporting about method of accounting employed |
386
| >> |
| Reasonable checks for determining change of accounting system |
387
| >> |
| Changes expected to have material future effect |
387
| >> |
| Change in method of accounting to be disclosed |
387
| >> |
| Reporting requirements when previous years’ accounts were not audited |
387
| >> |
| Revaluation of depreciable assets |
388
| >> |
| Change in accounting policy |
388
| >> |
| Change in method of valuation of stock -- Whether change in method of accounting |
388
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB [Revised 2014 Edition] |
388
| >> |
| Change in method of accounting and its reporting |
388
| >> |
| Change in accounting policy and its impact |
388
| >> |
| Applying reasonable checks to ascertain change in method of accounting |
388
| >> |
| Income Computation and Disclosure Standards |
388
| >> |
| IV. Background Material |
389
| >> |
| Section 145 and its requirements |
389
| >> |
| Method of accounting employed [Clause 13(a)] |
389
| >> |
| Method of accounting in case of companies |
389
| >> |
| Method of accounting in case of LLP |
389
| >> |
| Withdrawal of cash from an account does not amount to keeping accounts according to cash system of accounting |
390
| >> |
| Presumption as to cash system of accounting |
390
| >> |
| Assessee can adopt any recognised method of accounting |
390
| >> |
| Change in method of accounting [Clauses 13(b) and 13(c)] |
391
| >> |
| Scope of section 145 limited to cash/accrual system of accounting |
391
| >> |
| 53. - Income Computation and Disclosure Standards [Clauses 13(d) to 13(f)] |
392
| >> |
| I. Requirement of Clause No. 13(d) to 13(f) |
392
| >> |
| Requirement of clause nos. 13(d) to 13(f) and requirement of e-filing portal |
392
| >> |
| II. Reporting Requirements |
392
| >> |
| Clause 13(d) |
392
| >> |
| Clause 13(e) |
392
| >> |
| Clause 13(f) |
392
| >> |
| III. Background Material |
393
| >> |
| ICDS : An Overview |
393
| >> |
| ICDS I : Accounting Policies |
393
| >> |
| ICDS II : Valuation of Inventories |
394
| >> |
| ICDS III : Construction Contracts |
398
| >> |
| ICDS IV : Revenue Recognition |
403
| >> |
| ICDS V : Tangible Fixed Assets |
406
| >> |
| ICDS VI : The Effects of Changes in Foreign Exchange Rates |
409
| >> |
| ICDS VII : Government Grants |
411
| >> |
| ICDS VIII : Securities |
413
| >> |
| ICDS IX : Borrowing Costs |
415
| >> |
| ICDS X : Provisions, Contingent Liabilities and Contingent Assets |
419
| >> |
| 54. - Illustrative Disclosures under ICDS |
422
| >> |
| Illustrative disclosures under ICDS |
422
| >> |
| 55. - Method of Valuation of Closing Stock [Clause 14(a)] |
428
| >> |
| I. Requirement of Clause No. 14 |
428
| >> |
| Requirements of clause no. 14 and requirements under e-filing portal |
428
| >> |
| II. Reporting Requirements |
429
| >> |
| Method of valuation of closing stock -- Clause 14(a) |
429
| >> |
| Requirement to obtain statement from auditee |
429
| >> |
| Where stock register not maintained |
429
| >> |
| Interplay with clause 11 |
429
| >> |
| Method of valuation for different items may also be stated |
429
| >> |
| Auditor to study the procedure applied for taking inventory |
430
| >> |
| Method of valuation of closing stock to result in determining correct profits |
430
| >> |
| Method of valuation to be followed consistently |
430
| >> |
| Change in method of valuation of stock |
430
| >> |
| Deviation in method of valuation of closing stock vis-a-vis method pre-scribed under section 145A |
431
| >> |
| III. Background Material |
432
| >> |
| Scope of the term closing stock used in clause 14(a) |
432
| >> |
| Method of Valuation of Stock [Clause 14(a)] |
433
| >> |
| Assessee can follow any of the available methods |
433
| >> |
| Method prescribed under section 145A |
433
| >> |
| Method of valuation of stock as per AS-2 |
433
| >> |
| Valuation of Inventory and AS-2 as Issued by ICAI |
434
| >> |
| Valuation of Inventory [Clause 14(b)] |
434
| >> |
| Conflict between AS-2 and 145A and its resolution |
434
| >> |
| Accounting treatment for State Level VAT |
436
| >> |
| Conflict between valuation of inventory as per section 145A and AS-2 vis-a-vis State Level VAT |
437
| >> |
| IV. Exclusvive v. Inclusive Method -- Effect on Profits |
441
| >> |
| Scope of adjustments under section 145A |
441
| >> |
| Inclusive versus exclusive method of accounting explained |
442
| >> |
| From the provisions of section 145A |
442
| >> |
| Supreme court decisions |
444
| >> |
| Conclusion |
446
| >> |
| V. Relevant Case Law |
446
| >> |
| A. Principles Regarding Stock Valuation |
446
| >> |
| Valuation of stock is to be made on the last day of the accounting year |
446
| >> |
| Method to be in accordance with well accepted accounting principles |
446
| >> |
| Year for the purposes of valuation of stock should be a period of 365 days |
447
| >> |
| Adjustment made in value of closing stock and effect on value of opening stock |
447
| >> |
| Closing stock to be taken as opening stock of the next year |
447
| >> |
| Two different methods cannot be used for valuing closing stock |
447
| >> |
| Valuation accepted by sales tax authorities -- Effect of |
447
| >> |
| Method of valuation of closing stock regularly employed -- Resulting in having notional profits to be rejected |
447
| >> |
| Deduction of notional brokerage |
448
| >> |
| Adjustment to effect both opening and closing stock |
448
| >> |
| Applicability on inventory, i.e., opening stock and closing stock as well as on both purchases and sales |
448
| >> |
| Valuation on cost or net realizable value -- Whether change was bona fide |
448
| >> |
| Work-in-progress valued by ascertaining and accumulating direct cost and other identifiable expenses and adding same to realizable profit as on 31st March having due regard to progress of relevant job |
448
| >> |
| B. Valuation Under Particular Circumstances |
449
| >> |
| Valuation of stock inherited |
449
| >> |
| Treatment of foreign exchange fluctuation |
449
| >> |
| Goods where saleable in foreign market only |
449
| >> |
| Subsidy yet to be received from the government |
449
| >> |
| Treatment of bonus paid to employees |
449
| >> |
| Closing stock lying at quarry |
449
| >> |
| Goods where of inferior quality |
449
| >> |
| Valuation of goods meant for export |
450
| >> |
| Valuation of stock of uncleared goods |
450
| >> |
| Treatment of cess in the value of closing stock |
450
| >> |
| Inclusion of warranty amount |
450
| >> |
| Case of fall in gross profit rate |
450
| >> |
| Valuation using average prices |
450
| >> |
| Valuation of stock of garments which allegedly became out of fashion |
450
| >> |
| Assessee engaged in trading and manufacture of gold ornaments |
451
| >> |
| Method to be in accordance with well accepted accounting principles |
451
| >> |
| Treatment of outright freight on manufactured goods |
451
| >> |
| Addition towards interest attributable to bringing inventory to its present location |
451
| >> |
| Alleged under valuation of assessee's construction project -- Enhancement of cost on part of assessee not established by revenue |
451
| >> |
| Project Completion Method' or 'Percentage Completion Method' -- Assessee engaged in business of real estate |
452
| >> |
| Valuation of closing stock -- On the basis of future sale price of product |
452
| >> |
| Inclusion of expenses towards customs duty and clearing charges in closing stock |
452
| >> |
| C. Treatment of Excise Duty/Customs Duty |
452
| >> |
| Excise duty on stock not cleared from factory |
452
| >> |
| Exclusive method of valuation and effect of section 43B |
452
| >> |
| Gross or net method of Modvat now Cenvat credit what is applicable while valuing closing stock? |
453
| >> |
| Inclusion of unutilized Modvat credit |
453
| >> |
| Treatment of MODVAT in valuation |
455
| >> |
| Treatment of customs duty on imported raw materials |
455
| >> |
| Customs duty not includible in valuation of closing stock |
455
| >> |
| Non-inclusion of excise duty and customs duty |
456
| >> |
| Excise Duty not paid for valuing closing stock of finished goods |
456
| >> |
| Unutilized CENVAT credit shown in balance sheet |
456
| >> |
| AO made disallowance of unutilized balance of VAT and service tax |
456
| >> |
| Valuation of closing stock -- Excise duty |
456
| >> |
| AO made addition of unutilized CENVAT |
456
| >> |
| Unutilized modvat credit -- Adjustment to closing stock |
457
| >> |
| Exclusive method of accounting -- Non-inclusion of Excise/VAT |
457
| >> |
| Alleged under valuation of equity shares held as closing stock |
457
| >> |
| Over-valuation of closing stock on account of non-inclusion of excise duty |
457
| >> |
| Assessee maintaining accounts exclusive of excise duty |
457
| >> |
| Treatment of excise duty on finished goods lying in stock |
457
| >> |
| Exclusive method to account for excise duty |
457
| >> |
| Assessee following exclusive method -- Assessee giving effect to provisions of section 145A in computation of income |
458
| >> |
| Unutilised Cenvat credit -- Exclusive v. Inclusive method |
458
| >> |
| Treatment of differential Cenvat credit -- System of accounting |
458
| >> |
| Assessee having followed inclusive method to account for sales and stock of finished goods |
458
| >> |
| Inclusive v. Exclusive method |
458
| >> |
| Assessee not having included excise duty liability |
459
| >> |
| Treatment of excise duty and VAT -- Exclusive method of inventory |
459
| >> |
| Exclusion of CENVAT credit |
459
| >> |
| Exclusive vis-a-vis inclusive method of accounting |
459
| >> |
| Addition on account of un-utilized CENVAT credit -- Exclusive v. Inclusive method |
459
| >> |
| CENVAT credits treatment |
459
| >> |
| Valuation of closing stock -- AO included excise duty |
459
| >> |
| Assessee following exclusive method -- Addition of difference of opening and closing amount of CENVAT credit |
460
| >> |
| D. Business Reorganisations |
460
| >> |
| Valuation of stock of a firm in liquidation |
460
| >> |
| Stock taken over from amalgamating company |
460
| >> |
| Opening stock of erstwhile firm |
461
| >> |
| Transfer of business as going concern |
461
| >> |
| Dissolved firm taken over by reconstituted firm |
461
| >> |
| Valuation of stock where business of firm did not cease on death of partner |
461
| >> |
| Closing stock to be valued at lower of cost or market value where surviving partner continues the business |
461
| >> |
| Conversion of firm into private limited company |
462
| >> |
| Where proprietary business converted into partnership business |
463
| >> |
| Dissolution where had taken place on death of one of the partners |
464
| >> |
| Customs duty payable on raw-material imported but not cleared |
464
| >> |
| E. Service Contracts |
464
| >> |
| Applicability of provision of section 145A to service contract |
464
| >> |
| 56. - Conversion of Capital Asset into Stock-in-Trade [Clause 15] |
465
| >> |
| I. Requirement of Clause No. 15 |
465
| >> |
| Requirements of Clause No. 15 and requirement under e-filing portal |
465
| >> |
| II. Reporting Requirements |
465
| >> |
| Nature of inquiry |
465
| >> |
| Report of capital gain not required |
465
| >> |
| Description of capital asset |
465
| >> |
| Date of acquisition |
465
| >> |
| Cost of acquisition |
466
| >> |
| Amount at which asset converted into stock-in-trade |
466
| >> |
| Reporting about capital asset converted into stock-in-trade |
466
| >> |
| Auditor to take care |
467
| >> |
| III. Extracts from ICAI’s Guidance Note on Tax Audit (Revised 2014 Edition) |
467
| >> |
| Provisions to be kept in mind |
467
| >> |
| Particulars of previous year of conversion to be furnished |
467
| >> |
| Necessity of accounting entries |
468
| >> |
| Points to be kept in mind while verifying cost of acquisition |
468
| >> |
| IV. Background Material |
469
| >> |
| Scheme of section 45(2) |
469
| >> |
| Conversion of capital asset into stock-in-trade -- Effect of |
469
| >> |
| Section 45(2) -- When comes into play? |
469
| >> |
| Capital gains -- When chargeable? |
470
| >> |
| 57. - Amounts Not Credited to Profit & Loss Account -- Incomes Falling Under Section 28 [Clause 16(a)] |
470
| >> |
| I. Requirement of Clause No. 16(a) |
470
| >> |
| Requirements of clause No. 16(a) |
470
| >> |
| Requirement under e-filing portal |
470
| >> |
| II. Reporting Requirements |
470
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
470
| >> |
| IV. Background Material |
471
| >> |
| Incomes chargeable under the head “Profits and gains of business or profession” |
471
| >> |
| Meaning of term 'business' |
474
| >> |
| Meaning and scope of profession |
474
| >> |
| Business vis-a-vis profession |
474
| >> |
| Profits and gains of business or profession when chargeable |
474
| >> |
| Income from carrying on business but chargeable under other head of income |
475
| >> |
| Chargeability of profits from illegal business |
475
| >> |
| Business or profession not required to be carried on by owner himself |
475
| >> |
| Business required to be carried on at any time during the related previous year |
475
| >> |
| Effect of discontinuance of business |
475
| >> |
| Value of any benefit or perquisite |
476
| >> |
| Voluntary payments |
477
| >> |
| Waiver of loan and interest thereon where loan was taken for acquiring capital assets, whether constitutes income under section 28(iv) |
478
| >> |
| Conversion of inventory into capital asset to be taxed as business income [Section 28(via)] |
479
| >> |
| 58. - Amounts Not Credited to Profit & Loss Account -- Proforma Credits, Drawbacks, Refund of Duty, Etc. [Clause 16(b)] |
479
| >> |
| I. Requirement of Clause No. 16(b) |
479
| >> |
| Requirements of clause No. 16(b) |
479
| >> |
| Requirement under e-filing portal |
480
| >> |
| II. Reporting Requirements |
480
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
481
| >> |
| Tax auditor should examine all relevant records |
481
| >> |
| Relevance of system of accounting |
481
| >> |
| Cases where amount receivable is netted against expenses |
481
| >> |
| 59. - Amounts Not Credited to Profit & Loss Account -- Escalation Claims [Clause 16(c)] |
481
| >> |
| I. Requirement of Clause No. 16(c) |
481
| >> |
| Requirement of Clause No. 16(c) |
481
| >> |
| Requirement under e-filing portal |
481
| >> |
| II. Reporting Requirements |
482
| >> |
| Reporting requirements |
482
| >> |
| Escalation claims |
482
| >> |
| III. Extract from the ICAI’s Guidance Note on Tax Audit under Section 44AB [Revised 2014 Edition] |
482
| >> |
| 60. - Amounts Not Credited to Profit & Loss Account -- Any Other Income [Clause 16(d)] |
483
| >> |
| I. Requirement of Clause No. 16(d) |
483
| >> |
| Requirement of Clause No. 16(d) |
483
| >> |
| Requirement under e-filing portal |
483
| >> |
| Type of income covered |
483
| >> |
| II. Reporting Requirements |
483
| >> |
| Reporting requirements |
483
| >> |
| Whether income of personal nature need be reported? |
483
| >> |
| III. Extract from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
484
| >> |
| 61. - Amounts Not Credited to Profit & Loss Account -- Capital Receipt [Clause 16(e)] |
484
| >> |
| I. Requirement of Clause No. 16(e) |
484
| >> |
| Requirement of clause no. 16(e) |
484
| >> |
| Requirement under e-filing portal |
484
| >> |
| II. Reporting Requirements |
484
| >> |
| Reporting requirements |
484
| >> |
| Auditor to take care of subsidy receipts |
485
| >> |
| Auditor to take care of forex fluctuation gains |
486
| >> |
| III. Extract from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014Edition) |
487
| >> |
| Use of professional skill by auditor |
487
| >> |
| Illustrative list of capital receipts |
487
| >> |
| IV. Background Material |
487
| >> |
| Determination whether capital or revenue receipt |
487
| >> |
| Capital versus revenue receipts |
488
| >> |
| Treatment of gain on account of exchange fluctuation |
488
| >> |
| Subsidy granted for use for the purpose of repayment of term loan |
488
| >> |
| Tests relevant for determination whether capital or revenue receipt |
488
| >> |
| Tests not relevant for determination |
491
| >> |
| Annuity |
493
| >> |
| Compensation for business purposes |
494
| >> |
| Interest |
496
| >> |
| Premium or salami |
497
| >> |
| Subsidy from Government |
498
| >> |
| Sale of trees |
498
| >> |
| Receipt in lieu of royalty and copyright |
499
| >> |
| Dharmada |
499
| >> |
| Forfeiture of deposits |
500
| >> |
| Refund of excise duty (self-Cenvat credit) |
500
| >> |
| Forfeited security amount |
500
| >> |
| Receipt of service line deposits from customers by electricity company |
500
| >> |
| Sum written back for being no longer payable to the depositors |
501
| >> |
| Retention of earnest money |
501
| >> |
| Unclaimed deposits due |
501
| >> |
| Refundable security received from the customers |
501
| >> |
| Unutilized subsidy received as compensation for loss of profit |
501
| >> |
| Sales tax receipt |
501
| >> |
| Subscription for life membership |
501
| >> |
| Encashment of bank guarantee |
501
| >> |
| Discount on buy back of debentures |
501
| >> |
| Deposits collected from public |
502
| >> |
| Receipt of grant for development scheme of industries |
502
| >> |
| Forfeiture of application money |
502
| >> |
| Security deposit and membership fees from members |
502
| >> |
| Interest received on deposit of margin money |
502
| >> |
| Interest on bank deposits made out of unutilized funds received for setting up of factory project |
503
| >> |
| Interest on temporary bank deposits made out of funds borrowed for setting up of power project |
503
| >> |
| Income earned during trial period |
503
| >> |
| Corpus fund received by trust not registered under section 12AA |
503
| >> |
| Receipt of bonus shares out of shares held as stock-in-trade |
503
| >> |
| Important circulars, etc., relevant to capital or revenue receipt controversy |
503
| >> |
| 62. - Transfer of Land or Building or Both [Clause 17] |
504
| >> |
| I. Requirement of Clause No. 17 |
504
| >> |
| Requirements of clause No. 17 and requirement under e-filing portal |
504
| >> |
| II. Reporting Requirements |
505
| >> |
| Reporting requirements |
505
| >> |
| Why amendment of clause 17 |
505
| >> |
| What the auditor need to do while reporting under clause 17 |
505
| >> |
| III. Extracts from ICAI’s Guidance Note on Tax Audit [Revised 2014 Edition] |
506
| >> |
| Inquiry under clause 17 |
506
| >> |
| Filing up details of property |
506
| >> |
| Consideration as disclosed in the books to be stated |
506
| >> |
| Reporting value adopted or assessed or assessable by stamp authorities |
507
| >> |
| What constitutes land or building |
507
| >> |
| IV. Background Material |
507
| >> |
| A. Relevant Provisions |
507
| >> |
| Stamp duty value and immovable property held as stock-in-trade [Section 43CA] |
507
| >> |
| Full value of consideration in case of land, building, etc. [Section 50C] |
508
| >> |
| Transaction not registered before stamp authority |
508
| >> |
| Tolerance band under section 43CA/56(2)(x) raised to 20 per cent in certain cases |
509
| >> |
| Applicability of provisions in the context of buyer |
509
| >> |
| B. Cases where Section 50C Held Applicable/Not Applicable |
510
| >> |
| Case of developer |
510
| >> |
| Applicability of section 50C transaction between husband and wife |
510
| >> |
| Assessee not selling land but transferring rights in land |
510
| >> |
| Rights accrued capital in nature but asset not akin to land or building |
511
| >> |
| Rights in property and section 50C |
511
| >> |
| Depreciable assets and section 50C |
511
| >> |
| Transfer of shares in a company owning certain properties |
512
| >> |
| Assessee where a charitable trust |
512
| >> |
| Applicability of section 50C -- Neither agricultural activities carried out in land nor land situated beyond 8 km. of local municipal limits -- Land not being agricultural nature |
512
| >> |
| Deeming value under section 50C -- Apportionment among various sellers |
512
| >> |
| Rights in property sold through power of attorney |
512
| >> |
| 63. - Depreciation [Clause 18] |
513
| >> |
| I. Requirements of Clause No. 18 |
513
| >> |
| Requirements of clause No. 18(a) |
513
| >> |
| Requirement of clause no. 18(b) |
513
| >> |
| Requirement of clause no. 18(c) |
514
| >> |
| Requirement of clause no. 18(ca), 18(cb) and 18(cc) |
515
| >> |
| Requirement of clause 18(cc) |
518
| >> |
| Requirement of clause no. 18(d) |
518
| >> |
| Requirement of clause no. 18(e) |
521
| >> |
| Requirement of clause 18(f) |
521
| >> |
| Requirement under e-filing portal |
522
| >> |
| Interplay with clause 8A |
522
| >> |
| Auditor to take care |
522
| >> |
| II. Background Material |
523
| >> |
| A. General |
523
| >> |
| Conditions for allowability of depreciation |
523
| >> |
| Depreciation allowable to beneficial owner only |
523
| >> |
| Depreciation on assets used for less than 180 days |
523
| >> |
| Depreciation allowance in case of succession, demerger and amalgamation and conversion of private company or unlisted public company into LLP |
523
| >> |
| Depreciation on superstructure and improvements on the leased premises |
523
| >> |
| Business reorganisation of co-operative banks and depreciation |
525
| >> |
| Where assessee failed to produce bills and vouchers regarding fixed assets |
526
| >> |
| Assessee failed to substantiate proof for making addition |
527
| >> |
| Genuineness of purchase of software not proved |
527
| >> |
| Non-submission of bills and vouchers regarding fixed assets |
527
| >> |
| Purchase of shuttering material but bills not produced |
527
| >> |
| Asset rented out |
527
| >> |
| Ownership of asset is a must |
527
| >> |
| Section 53A of Transfer of Property Act vis-a-vis concept of ownership |
527
| >> |
| Depreciation on leased assets |
528
| >> |
| Asset contributed by partners -- To whom depreciation allowable |
531
| >> |
| Depreciation on hire purchase assets |
532
| >> |
| Registration of vehicles where in assessee’s name |
534
| >> |
| Motor car registered in the name of director and not in the company’s name |
534
| >> |
| Car owned in name of director of assessee company -- Failed to prove business purpose |
535
| >> |
| Ownership of tankers -- Not registered in the name of assessee as loan taken by sellers not paid |
535
| >> |
| User of asset necessary for depreciation purposes |
535
| >> |
| Assets not used during the year |
535
| >> |
| Assets used for trial production |
535
| >> |
| Passive use of assets and depreciation |
536
| >> |
| Assets of closed unit and depreciation claim |
537
| >> |
| Infrastructure set up during year but actual business transaction executed in succeeding year |
537
| >> |
| No business activity in the relevant year due to restriction imposed by SEBI |
537
| >> |
| During earlier year depreciation was allowed on business assets -- No business activity |
537
| >> |
| Some assets not used during the year under consideration |
537
| >> |
| Properties acquired in earlier years and let out throughout the year under consideration and income therefrom being offered for tax under the head income from house property |
538
| >> |
| No business carried on by assessee but business not closed |
538
| >> |
| Assets being ready for use, whether entitled for depreciation |
538
| >> |
| Half depreciation allowable on assets used for less than 180 days |
538
| >> |
| Asset used for single day |
539
| >> |
| Year of working may not be full year but depreciation is allowable for full year |
539
| >> |
| Capital spares not put to use but kept ready of use |
539
| >> |
| Applicability of 2nd proviso attached to section 32 -- Asset put to use for 180 days during the year of acquisition |
539
| >> |
| Meaning of the expression put to use in second proviso to section 32 |
539
| >> |
| Windmill put to use for more than 180 days |
540
| >> |
| B. Description of Asset [Clause 18(a)] |
540
| >> |
| Assets qualifying for depreciation |
540
| >> |
| Various categories of buildings recognised by Income Tax Rules, 1962 |
540
| >> |
| Assets held to be building |
541
| >> |
| Assets not to be treated as building |
542
| >> |
| No depreciation admissible on land |
542
| >> |
| Administrative block where situated within factory building |
542
| >> |
| Computation of depreciation where values of land and building are not separately available |
542
| >> |
| Buildings regarded as factory building |
542
| >> |
| Purely temporary structures |
543
| >> |
| Payment for additional FSI, whether eligible for depreciation at rate applicable to building, i.e., 10 per cent |
543
| >> |
| Value of building and value of land on which it was built were separately identifiable |
543
| >> |
| Assets held to be machinery |
544
| >> |
| Definition of ‘plant’ |
545
| >> |
| Assets held to be plant |
545
| >> |
| Assets held not to be plant |
550
| >> |
| Toll road -- Whether plant |
552
| >> |
| No depreciation allowable on machinery or plant in certain cases |
552
| >> |
| Furniture -- Meaning of |
552
| >> |
| Partitions and false ceiling |
553
| >> |
| Woollen rugs and carpets |
553
| >> |
| Assets held to be furniture |
553
| >> |
| Assets treated as ships |
553
| >> |
| Motor boats as ships |
554
| >> |
| C. Intangible Assets [Clause 18(a)] |
554
| >> |
| Intangible assets entitled to depreciation |
554
| >> |
| AMC contracts constitute intangible assets |
554
| >> |
| Brand name |
554
| >> |
| Goodwill as a depreciable asset |
554
| >> |
| Conditions to be satisfied for allowance of depreciation on intangible assets |
555
| >> |
| Tenancy rights as intangible assets |
555
| >> |
| Depreciation on non-compete fee |
555
| >> |
| Non-compete territory right |
556
| >> |
| Toll collection rights |
556
| >> |
| Infrastructure of money transfer business |
557
| >> |
| Payment made towards approvals licences, etc. under slump sale agreement to run business |
557
| >> |
| Technical know-how and trademark acquired from partnership firms in terms of section 47(xiii) -- Nil valuation done by firms |
557
| >> |
| Assets held to be intangible assets eligible for depreciation |
557
| >> |
| Upfront fee |
558
| >> |
| Payment made towards approvals licences, etc. under slump sale agreement to run business |
558
| >> |
| Depreciation on ‘Content Management Software’ (CMS) |
558
| >> |
| Expenditure incurred on SAP implementation |
558
| >> |
| Membership Cards of BSE and ASE |
558
| >> |
| Development cost of website |
558
| >> |
| Cost incurred for acquiring customer base |
559
| >> |
| Payment towards acquisition of clients from another company |
559
| >> |
| D. Rate of Depreciation [Clause 18(b)] |
559
| >> |
| Categories of assets prescribed by Rules |
559
| >> |
| Rates of depreciation |
559
| >> |
| Important terminologies |
560
| >> |
| Applicability of depreciation rates |
561
| >> |
| Depreciation on plant/machinery used for special purpose |
562
| >> |
| Assessee being a finance company -- Entitlement to depreciation on vehicles leased out and rate of depreciation thereon |
563
| >> |
| Rate of depreciation in case of JCB and Loading vehicles |
563
| >> |
| Rate of depreciation on tripper trucks and JCB which were used mainly for own business and were occasionally let out on hire |
563
| >> |
| Items forming part of windmill |
564
| >> |
| Capital expenditure incidental to windmills |
564
| >> |
| Civil work/foundation of windmill, whether entitled to higher rate of depreciation |
564
| >> |
| Rate of depreciation on windmill |
565
| >> |
| Civil structure connected with RO plant -- Rate of depreciation |
565
| >> |
| Internal road laid for approach to windmills |
565
| >> |
| Cost of civil engineering work for solar power plant |
565
| >> |
| Commercial vehicles like Tippers, Vibrator and Vibrator Soil Compactor |
565
| >> |
| Rate of depreciation on ATMs |
565
| >> |
| CCTV cameras |
565
| >> |
| Pay loaders, dozers and water tankers |
565
| >> |
| Taxiways and parking bays, etc., built up by airport operator |
566
| >> |
| Air condition plant in a bus |
566
| >> |
| Rate of depreciation ‘dumper’ and ‘valvo machines’, used by assessee for own purposes and hire also |
566
| >> |
| Commercial vehicle -- Rate of depreciation |
566
| >> |
| Entitlement to higher claim of depreciation on lorries, dumpers, trailers used in his business used for transportation business |
566
| >> |
| Wireless devices |
566
| >> |
| Assessee not engaged in business of running vehicles on hire |
566
| >> |
| Buses carrying passengers on licensed routes -- Rate of depreciation |
566
| >> |
| License for running container trains whether an intangible capital assets |
567
| >> |
| Shuttering part of plant entitled to depreciation at 100% or 15% |
567
| >> |
| Electrical installation |
567
| >> |
| Boiler being used in the dying machine, whether to be construed as energy saving device eligible for higher rate of depreciation |
567
| >> |
| Injection moulding machine |
567
| >> |
| Net working/computer peripherals |
567
| >> |
| Electrical equipments used in plant |
567
| >> |
| Electrical equipments being automatic voltage stabilizers |
568
| >> |
| Depreciation on electrical equipment @ 15% or 10% -- Electrical equipment v. Electrical fittings |
568
| >> |
| Dumpers, tripper used in business of running them on hire |
568
| >> |
| Hoarding |
568
| >> |
| Set TOP box (STBs) -- Whether 15% or 60% as allowable on computers |
568
| >> |
| Depreciation on computers |
568
| >> |
| Computers |
568
| >> |
| Motor cars |
571
| >> |
| Medical diagnostic imaging equipment |
572
| >> |
| E. Depreciation Specific to Power Companies |
573
| >> |
| Depreciation allowable to power companies |
573
| >> |
| Assets of power company used for less than 180 days |
573
| >> |
| Assets of power generating companies eligible for depreciation |
573
| >> |
| Rates of depreciation for power companies |
573
| >> |
| Depreciation for power companies cannot exceed the actual cost of asset |
573
| >> |
| Power generating company can claim depreciation on written down value method instead of straight line method |
573
| >> |
| Power generating company can change option from year to year |
573
| >> |
| When option for claiming depreciation on written down value method be exercised |
574
| >> |
| Consequences of assessee not exercising option of higher rate within the due date of filing of return of income under section 139(1) |
574
| >> |
| F. Additional Depreciation [Clause 18(e)] |
574
| >> |
| Assets eligible for additional depreciation |
574
| >> |
| Eligibility to claim additional depreciation |
574
| >> |
| Rate at which additional depreciation is allowed |
574
| >> |
| Setting up undertaking in notified background area |
575
| >> |
| Assets excluded from being eligible to additional depreciation |
576
| >> |
| Allowance to be made under clause (ii) |
576
| >> |
| Allowance under section 32(1)(iia) -- One-time affair |
576
| >> |
| Additional depreciation allowable to new plant or machinery |
576
| >> |
| Position of power companies claiming depreciation under section 32(1)(ii) |
577
| >> |
| Depreciation in case of assets used for less than 180 days |
577
| >> |
| Year of allowability |
578
| >> |
| Plant and machinery shall not only be acquired but installed also |
578
| >> |
| Business of printing or printing and publishing can claim additional depreciation under section 32(1)(iia) |
578
| >> |
| Plant and machinery shall not only be acquired but installed also |
578
| >> |
| Allowance available to assessee engaged in manufacture or production and power generation, distribution or transmission |
578
| >> |
| Additional depreciation held allowable |
578
| >> |
| Additional depreciation held not allowable |
579
| >> |
| Acquisition of plant and machinery made partly in earlier year -- Installation completed and production started in current year |
579
| >> |
| Allowability as regards machinery given on lease -- Assessee engaged in manufacturing as well as leasing activity |
580
| >> |
| Plants and machinery installed in Captive Power Plant -- Assessee engaged in generation of electricity |
580
| >> |
| Assets already put to use |
580
| >> |
| Transit mixer mounted on vehicle |
580
| >> |
| G. Actual Cost or Written Down Value of the Asset [Clause 18(c)] |
580
| >> |
| Actual cost -- Meaning of |
581
| >> |
| Amounts directly attributable to cost |
582
| >> |
| Pre-commencement expenses |
583
| >> |
| Expenditure attributable to acquisition of asset |
584
| >> |
| Expenditure on test run |
584
| >> |
| Expenses on foundation stone laying ceremony |
585
| >> |
| Expenses on travelling to acquire plant and machinery |
585
| >> |
| Customs duty |
585
| >> |
| Actual cost of a motor car acquired between certain period |
585
| >> |
| Meaning of written down value [Section 43(6)] |
585
| >> |
| Determination of actual cost in special situation |
585
| >> |
| H. Actual Cost and Special Provisions Consequential to Changes in Rate of Exchange of Currency [Clause 18(e)] |
596
| >> |
| Changes in actual cost consequential to changes in rate of exchange of currency [Section 43A] |
596
| >> |
| Adjustment only upon payment |
596
| >> |
| Special provision in respect of addition to or deduction from actual cost or expenditure or cost of acquisition under section 43A prior to substitution |
596
| >> |
| No account of liability met by any other person |
597
| >> |
| Position as to forward rate contracts |
597
| >> |
| Terminologies defined |
597
| >> |
| Upfront fee |
597
| >> |
| Actual cost and special provision for computation of cost of acquisition of certain assets [Section 43C] |
597
| >> |
| I. Depreciation Allowable [Clause 18(e)] |
598
| >> |
| How to compute depreciation? |
598
| >> |
| Depreciation to be calculated on actual cost or WDV where no depreciation claimed in earlier years |
598
| >> |
| Depreciation in case of units engaged in power generation |
599
| >> |
| Where building, machinery, plant or furniture not exclusively used for the purpose of the business or profession |
599
| >> |
| Proportionate depreciation disallowable where assets not used for business |
599
| >> |
| J. Written Down Value at the Year End [Clause 18(f)] |
599
| >> |
| Written down value -- Meaning of |
599
| >> |
| Various situations identified |
599
| >> |
| Computation of written down value |
600
| >> |
| W.D.V. of the block of assets as on 1-4-2021 (For assessment year 2021-22) -- How determined |
600
| >> |
| Re-determination of written down value of block of assets which included goodwill |
601
| >> |
| WDV of assets acquired during the previous year |
603
| >> |
| Written down value in case of asset acquired during any year prior to the previous year |
604
| >> |
| Actually allowed -- Meaning of |
604
| >> |
| Amount to be taken for allowability of depreciation in terms of provision of section 43(6)(b) |
604
| >> |
| Written down value for existing block of assets which does not include goodwill [Section 43(6)(c)] |
604
| >> |
| WDV of block of assets is to be reduced by sale proceeds received on sale of one or more of assets from block or entire WDV of said asset |
605
| >> |
| AO reduced value as determined under section 50C instead of actual sale consideration received by assessee from opening WDV of the block |
605
| >> |
| WDV in case of slump sale |
605
| >> |
| K. WDV in Special Cases |
605
| >> |
| Written down value of assets in case of succession |
605
| >> |
| Written down value in a case of transfer between holding and subsidiary company |
606
| >> |
| Determination of written down value where there is transfer by a demerged company to resulting company |
606
| >> |
| Written down value in the hands of a resulting company in case of transfer assets by a demerged company to resulting company |
606
| >> |
| Written down value of block of assets received by limited liability partnership formed pursuant to reorganization of private company or unlisted public company |
606
| >> |
| WDV be determined in case of actual transfer made for corporatisation of stock exchange |
606
| >> |
| WDV in case of entities not subject to tax in earlier years |
607
| >> |
| WDV of assets be determined in case of assessees deriving agricultural income and business income simultaneously |
607
| >> |
| WDV in case of partial user of asset for business |
607
| >> |
| Unabsorbed depreciation in the hands of amalgamating company be taken into consideration while determining the written down value in the hands of the amalgamated company |
607
| >> |
| Revaluation of assets, before conversion of firm into company |
608
| >> |
| L. General Observations |
608
| >> |
| Requirements of examination by tax audit purposes |
608
| >> |
| Scope of the word allowable |
608
| >> |
| No depreciation on assets the cost whereof has been allowed as revenue expenditure |
608
| >> |
| Same asset where used for taxable and non taxable business |
608
| >> |
| Depreciation on land and building and both valued separately |
609
| >> |
| Depreciation claimed on entire amount of land and building -- No bifurcation made |
609
| >> |
| Some assets not used during the year under consideration |
609
| >> |
| No business activity since long |
609
| >> |
| Depreciation claimed on vehicles but no log book maintained |
609
| >> |
| Payment made towards purchase from personal account |
609
| >> |
| JCB -- Delayed registration with RTO |
609
| >> |
| Vehicles used for own business -- Assessee having given vehicles occasionally to other parties on hire when vehicles lying idle |
609
| >> |
| Claiming of depreciation mandatory |
610
| >> |
| Proportional depreciation -- What is |
610
| >> |
| Applicability of user test |
610
| >> |
| Applicability of user test in context of block of assets |
610
| >> |
| Applicability of section 38(2) not interfered by section 43(6)(c) |
613
| >> |
| Applicability of section 38(2) not interfered by section 50(2) |
613
| >> |
| Building etc., partly used for business -- Assessee firm failed to controvert personal use of motor car by partners -- No suo motu disallowance claimed as regards depreciation thereon |
614
| >> |
| Non-claiming of depreciation |
614
| >> |
| Use of assets in subsequent years not necessary for the purposes of allowability of depreciation |
614
| >> |
| Allowability of depreciation allowable on assets kept ready for use |
614
| >> |
| Depreciation allowable on stand-by assets |
615
| >> |
| Depreciation whether allowable on revalued figures of intangible assets transferred pursuant to conversion of partnership firm to a company |
615
| >> |
| Assets acquired/put to use at the fag end of the previous year |
616
| >> |
| Payment for acquiring tenancy right |
617
| >> |
| Necessity of use of assets in subsequent years |
617
| >> |
| Depreciation on wind mill -- Not much electricity generated |
617
| >> |
| Building held on lease being used for purpose of business |
617
| >> |
| Ownership of assets established |
617
| >> |
| Factory not running in the year due to stay order by court |
618
| >> |
| Assets belonging to a particular business division transferred during the year |
618
| >> |
| Bungalow used as office premises during relevant year -- Put to renovation subsequently and used as residence of director thereafter |
618
| >> |
| Part of the building let out for non-business purposes |
618
| >> |
| Diagnostic machines owned by the assessee but being installed at site of its customers |
618
| >> |
| Asset not put to use |
618
| >> |
| Sale and lease back transaction entered with loss making group concern whether a sham transaction |
618
| >> |
| Ownership of asset not with assessee |
619
| >> |
| Plant and machinery and building -- Assets remaining idle |
619
| >> |
| Building used for purposes of business |
619
| >> |
| Temporary wooden structure for interior decoration in leased premises |
619
| >> |
| Windmill generating power |
619
| >> |
| Assessee had not closed its business permanently, rather on account of stay from court manufacturing activities were stopped |
619
| >> |
| Equipment purchased financed by bank |
619
| >> |
| Additions towards software made by assessee -- Software expenses if treated as capital expenditure by AO, then depreciation was to be allowed @ 60% instead of 25% |
620
| >> |
| Farm house used for business meeting -- Revenue challenged that Use was few occasions |
620
| >> |
| Heavy goods vehicles -- Assessee produced proof with regard to put to use of vehicles |
620
| >> |
| Gas sweetening plant |
620
| >> |
| Additions to machinery made but installation certificate being 30th March of the financial year -- Assets being ready for use, whether entitled for depreciation |
620
| >> |
| No depreciation allowable on revaluation amount |
620
| >> |
| Initial insurance premium paid for the newly purchased motor cars |
620
| >> |
| Depreciation @10% on residential flats used for its employees |
620
| >> |
| Weaving looms -- Commencement of actual production whether necessary for claiming depreciation |
621
| >> |
| Relevant circulars |
621
| >> |
| M. Section 32(2) : Unabsorbed Depreciation |
622
| >> |
| Treatment of unabsorbed depreciation |
622
| >> |
| Carry forward of unabsorbed depreciation cannot be denied on the ground that no valid return was filed |
622
| >> |
| Section 80 does not affect the unabsorbed depreciation |
622
| >> |
| Allowability of set-off -- Assessee having discontinued business in earlier years |
623
| >> |
| Applicability of amendment to section 32(2) by Finance Act, 2001 |
623
| >> |
| Ratio of the Apex Court’s decision in Virmani Industries (P) Ltd. |
623
| >> |
| 64. - Business Deductions [Clause 19] |
624
| >> |
| I. Requirement of Clause No. 19 |
624
| >> |
| Requirement of clause no. 19 |
624
| >> |
| Requirement of e-filing portal |
624
| >> |
| II. Reporting Requirements |
625
| >> |
| Reporting requirements |
625
| >> |
| Interplay with clause 8A |
625
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB [Revised 2014 Edition] |
625
| >> |
| Reference to separate audit report |
625
| >> |
| What the auditor should indicate under clause 19? |
626
| >> |
| Auditor to work out the amount admissible |
626
| >> |
| Deduction under section 35 |
626
| >> |
| Deduction under more than one section |
626
| >> |
| IV. Extracts from Implimentation Guide Issued by ICAI |
626
| >> |
| V. Background Material |
627
| >> |
| A. Investment Allowance [Section 32AC] |
627
| >> |
| B. Investment Allowance [Section 32AD] |
627
| >> |
| Investment allowance for investment in State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal |
627
| >> |
| Conditions precedent |
627
| >> |
| Backward Areas in State of Telangana, State of West Bengal and State of Bihar Notified |
627
| >> |
| Districts of the State of Andhra Pradesh Notified |
628
| >> |
| Amount and period of deduction |
628
| >> |
| Allowance is one time affair |
628
| >> |
| New asset -- Meaning of |
628
| >> |
| Cumulative impact of section 32, 32AC(1A) and 32AD |
628
| >> |
| Tax implication if new asset is sold or transferred except in connection with amalgamation or demerger or business reorganisation |
629
| >> |
| Tax implication if new asset is sold or transferred in connection with amalgamation or demerger or business reorganisation |
629
| >> |
| C. Tea Development Account, Coffee Development Account and Rubber Development Account [Section 33AB] |
630
| >> |
| Amount of deduction |
630
| >> |
| Conditions precedent for deduction [Section 33AB(1), (2)] |
630
| >> |
| D. Site Restoration Fund [Section 33ABA] |
630
| >> |
| Eligibility |
630
| >> |
| Quantum of deduction |
631
| >> |
| Audit requirements |
631
| >> |
| E. Expenditure on Scientific Research [Section 35] |
631
| >> |
| Category of expenses eligible for deduction |
631
| >> |
| Meaning of scientific research, scientific research expenditure and scientific research related to business |
631
| >> |
| Deduction in respect of in house scientific research expenditure [Section 35(1)(i)] |
632
| >> |
| Sum paid to approved research association, university, college, other institutions [Section 35(1)(ii)] |
632
| >> |
| Sum paid to approved research association, university, college or other institutions to be used for research in social science or statistical research [Section 35(1)(iii)] |
633
| >> |
| No denial to deduction where approval granted under section 35(1)(ii)/35(1)(iia)/ 35(1)(iii) is withdrawn |
633
| >> |
| Not maintenance of books |
633
| >> |
| Research and development expenses -- Research was carried on by some other person on behalf of assessee |
633
| >> |
| Scientific research expenditure -- Non-genuine transactions |
633
| >> |
| Conditions subject to which approval is to be granted to a University, College or other Institution under clause (ii) and clause (iii) of sub-section (1) of section 35 |
633
| >> |
| Fresh approval to be obtained by already approved associations and validity period of such approval [Effective from 1-4-2021] |
634
| >> |
| Any sum paid to a company for carrying out scientific research [Section 35(1)(iia)] |
634
| >> |
| Capital expenditure [Section 35(1)(iv) read with section 35(2)] |
635
| >> |
| Asset sold or ceasing to be used for research, without having been used for other purposes [Section 41(3)] |
637
| >> |
| Payment to approved scientific research programmes [Section 35(2AA)] |
637
| >> |
| Payment for scientific research by certain companies [Section 35(2AB)] |
638
| >> |
| Carry forward and set off of deduction |
642
| >> |
| Amalgamation vis-a-vis expenditure on scientific research [Section 35(5)] |
643
| >> |
| Illustration |
643
| >> |
| Unabsorbed scientific research expenditure of capital nature |
644
| >> |
| Expenditure held allowable |
644
| >> |
| Expenditures held not allowable |
645
| >> |
| F. Amortisation of Telecom Licence Fee [Section 35ABB] |
646
| >> |
| Period during which deduction admissible |
646
| >> |
| Payment has actually been made -- Meaning of |
646
| >> |
| Determination amount of deduction |
646
| >> |
| Amount of deduction when the licence is sold in part |
646
| >> |
| Treatment when licence is transferred or comes to an end |
646
| >> |
| Transfer of licence in a scheme of amalgamation |
647
| >> |
| Transfer of licence in a scheme of demerger |
647
| >> |
| No double deduction [Section 35ABB(8)] |
647
| >> |
| G. Expenditure on Eligible Projects or Schemes [Section 35AC] |
647
| >> |
| H. Deduction in Respect of Expenditure on Specified Business [Section 35AD] |
647
| >> |
| Tax incentive provided to specified business |
647
| >> |
| Cash payments exceeding certain amount not eligible for deduction |
647
| >> |
| Amount of deduction |
647
| >> |
| Conditions to be satisfied |
648
| >> |
| Specified business, ownership thereof and date of commencement |
650
| >> |
| Assessee owning hotel to continue to get deduction under section 35AD even if the operation of hotel transferred to some other person |
653
| >> |
| Consequential effects of claiming deduction under section 35AD |
653
| >> |
| Provisions illustrated |
654
| >> |
| Associated person -- Meaning of |
654
| >> |
| Meaning of ‘cold chain facility’ |
655
| >> |
| Guidelines regarding notification of affordable housing project |
655
| >> |
| Guidelines regarding notification of semiconductor water fabrication manufacturing unit |
655
| >> |
| Illustration |
655
| >> |
| Classification certificate certifying Hotel as a four-star hotel -- Granted in the year subsequent to the year under consideration |
655
| >> |
| I. Payment to Associations and Institutions for Carrying out Rural Development Programmes [Section 35CCA] |
656
| >> |
| Scheme of deduction under section 35CCA |
656
| >> |
| Conditions precedent |
656
| >> |
| Deduction not to be denied in certain cases |
657
| >> |
| Double deduction prohibited |
657
| >> |
| Notified fund |
657
| >> |
| J. Expenditure by Way of Payment to Associations and Institutions for Carrying Out Programmes of Conservation of Natural Resources [Section 35CCB] |
657
| >> |
| K. Weighted Deduction for Expenditure Incurred on Agricultural Extension Project [Section 35CCC] |
658
| >> |
| L. Weighted Deduction for Expenditure on Skill Development Project Incurred by Company [Section 35CCD] |
658
| >> |
| M. Amortisation of Certain Preliminary Expenses [Section 35D] |
658
| >> |
| Amortisation of preliminary expenses [Section 35D] |
658
| >> |
| Expenditures eligible for amortisation [Section 35D(2)] |
659
| >> |
| Quantum of deduction |
659
| >> |
| Cost of the project -- Meaning |
659
| >> |
| Meaning of capital employed |
659
| >> |
| Long-term borrowing [Section 35D(3), Explanation (c)] |
660
| >> |
| Audit requirements |
660
| >> |
| Consequence of amalgamation and demerger |
660
| >> |
| Example |
661
| >> |
| No deduction under any other section |
661
| >> |
| Prohibition against double benefit |
661
| >> |
| CBDT’s clarification regarding applicability of section 35D vis-a-vis section 37(1) |
661
| >> |
| Deduction under section 35D in case of business reorganisation of co-operative banks |
662
| >> |
| Condition precedent for allowability of deduction |
663
| >> |
| Deduction only if expenditure incurred in connection with extension |
663
| >> |
| ‘Expansion’ vis-a-vis ‘extension’ for the purpose of section 35D |
663
| >> |
| Scope of the word “Survey” under 35D(2)(a)(iii) |
663
| >> |
| Expenses be incurred before commencement of business |
663
| >> |
| Bridge loan -- Whether covered by section 35D |
663
| >> |
| Share premium, whether part of capital employed |
664
| >> |
| Money incurred towards fees for registering the company under Companies Act and also for increasing authorised capital of the company |
664
| >> |
| Banking company whether an industrial undertaking |
664
| >> |
| Payment of lease rent in advance |
664
| >> |
| Expenses on issue of GDRs having been incurred by assessee after commencement of business |
664
| >> |
| Expenditures held allowable |
664
| >> |
| Expenditures held not allowable |
667
| >> |
| N. Deduction in Respect of Expenses Incurred on Amalgamation, Etc. [Section 35DD] |
670
| >> |
| Eligible assessee |
670
| >> |
| Amount of deduction |
670
| >> |
| No deduction under any other section |
670
| >> |
| Deduction under section 35DD in case of business reorganisation of co-operative banks to be allowed as per section 44DB(1) |
670
| >> |
| Not to include resultant company |
671
| >> |
| Exemption incurred wholly and exclusively for the purpose of amalgamation |
671
| >> |
| Restructuring expenses |
671
| >> |
| O. Payment made in Connection with the Voluntary Retirement Scheme to be Allowed [Section 35DDA] |
671
| >> |
| Amount of deduction |
671
| >> |
| Amalgamation consequences [Section 35DDA(2)] |
671
| >> |
| Demerger of consequences |
672
| >> |
| Consequences of re-organisation of business [Section 35DDA(4)] |
672
| >> |
| Case of limited Liability Partnership (LLP) |
672
| >> |
| No deduction to amalgamating company, etc. [Section 35DDA(5)] |
672
| >> |
| No deduction under any other provision [Section 35DDA(6)] |
672
| >> |
| Deduction under section 32, 35D, 35DD and 35DDA in case of business reorganisation of co-operative banks to be allowed as per section 44DB(1) |
672
| >> |
| Expenditure on severance pay |
672
| >> |
| Premature retirement of employees |
673
| >> |
| VRS expenses |
673
| >> |
| Requirement on satisfaction of conditions of rule 2BA |
673
| >> |
| Where scheme was voluntary |
673
| >> |
| P. Deduction for Expenditure on Prospecting, Etc., for Certain Minerals [Section 35E] |
673
| >> |
| Amount of deduction |
673
| >> |
| Explanation assessees |
674
| >> |
| Conditions precedent |
674
| >> |
| Expenditure not eligible for deduction |
674
| >> |
| Quantum of deduction |
674
| >> |
| Specified minerals |
675
| >> |
| Carry forward of unallowed expenditure |
675
| >> |
| Certain terminology defined |
675
| >> |
| Transfer of undertaking under a scheme of amalgamation |
676
| >> |
| Transfer of undertaking in a scheme of demerger |
676
| >> |
| Prohibition against double benefit |
676
| >> |
| Relevant case law |
676
| >> |
| 65. - Bonus or Commission Paid to Employees [Clause 20(a)] |
677
| >> |
| I. Requirement of Clause No. 20(a) |
677
| >> |
| Requirement of clause no. 20(a) |
677
| >> |
| Requirement under e-filing portal |
677
| >> |
| II. Reporting Requirements |
677
| >> |
| Reporting requirements |
677
| >> |
| Difficulties in reporting |
677
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit (Revised 2014 Edition) |
677
| >> |
| IV. Background Material |
677
| >> |
| Provisions of section 36(1)(ii) |
677
| >> |
| Guarantee commission paid to directors |
678
| >> |
| Commission and ex-gratia paid to directors as part of their remuneration |
678
| >> |
| Outcomes from certain case law |
678
| >> |
| Allowability of bonus or Commission |
680
| >> |
| Section 36(1)(ii) vis-a-vis section 37(1) |
680
| >> |
| Incentive bonus |
680
| >> |
| Bonus in excess of amount required under Payment of Bonus Act |
680
| >> |
| Special bonus |
681
| >> |
| Bonus to working directors |
681
| >> |
| Commission for actual services rendered |
681
| >> |
| Bonus paid as per agreement |
681
| >> |
| 66. - Contribution From Employees Towards Fund Set Up for Their Welfare [Clause 20(b)] |
681
| >> |
| I. Requirement of Clause No. 20(b) |
681
| >> |
| Requirement of clause no. 20(b) |
681
| >> |
| Requirement under e-filing portal |
682
| >> |
| II. Reporting Requirements |
682
| >> |
| Reporting requirements |
682
| >> |
| Funds covered |
682
| >> |
| Recognition of grace period |
682
| >> |
| Provisions towards funds |
682
| >> |
| Where sub-contracting is done |
683
| >> |
| Only sum received from employees to be reported |
683
| >> |
| Auditor to take care |
683
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
683
| >> |
| Requirement only to disclose amount involved |
683
| >> |
| Grace period to be considered |
684
| >> |
| Auditor to get list of contribution |
684
| >> |
| Record to be maintained by tax auditor |
684
| >> |
| IV. Background Material |
684
| >> |
| Deduction under section 36(1)(va) |
684
| >> |
| Funds mentioned under section 2(24)(x) |
685
| >> |
| Due date -- Meaning of |
685
| >> |
| Payment made within grace period |
685
| >> |
| Amount not deposited with authorities is employer’s income |
685
| >> |
| Amount deposited immediately after holiday |
685
| >> |
| Amendment by the Finance Act, 2021 |
686
| >> |
| Delayed remittance and applicability of new provisions |
686
| >> |
| 67. - Amounts Debited to Profit & Loss Account [Clause 21(a)] |
687
| >> |
| Inquiry Under Clause 21(a) of Form No. 3CD and Requirement Under e-Filing Portal |
687
| >> |
| Capital Expenditure Debited to Profit & Loss Account [Clause 21(a)] |
687
| >> |
| A. Requirement of Clause 21(a) |
687
| >> |
| Requirement of clause 21(a) |
687
| >> |
| B. Reporting Requirements |
687
| >> |
| Auditor to take care |
687
| >> |
| C. Extracts from the ICAI’s Guidance Note on Tax Audit (Revised 2014 Edition) |
688
| >> |
| Tests to determine nature of expenditure |
688
| >> |
| Nature of receipt in hands of recipient not indicative |
688
| >> |
| Those items of capital expenditure which are deductible under the Act shall be disclosed separately |
688
| >> |
| Disclosure of capital expenditure debited to profit and loss account |
689
| >> |
| D. Background Material |
689
| >> |
| Tests for determination -- Whether any expenditure is capital in nature |
689
| >> |
| Positive and negative tests for determining nature of expenditure as observed in CIT v. Navsari Cotton & Silk Mills Ltd. (1982) 135 ITR 546 (Guj) |
691
| >> |
| Expenditure held capital in nature |
692
| >> |
| Expenditure held revenue in nature |
695
| >> |
| III. Personal Expenses Debited to Profit & Loss Account [Clause 21(a)] |
699
| >> |
| A. Requirement of Clause 21(a) |
699
| >> |
| Requirement of clause 21(a) |
699
| >> |
| ‘Personal’ -- Meaning of |
700
| >> |
| B. Reporting Requirements |
700
| >> |
| Auditor’s reporting regarding personal expenses |
700
| >> |
| Extracts from the ICAI’s Guidance Note on Tax Audit under section 44AB (Revised 2014 Edition) |
701
| >> |
| IV. Expenses on Advertisement in the Media of a Political Party [Clause 21(a)] |
702
| >> |
| The Auditing Proposition |
702
| >> |
| Requirement of clause no. 21(a) |
702
| >> |
| Reporting requirements |
702
| >> |
| Extracts from the ICAI’s Guidance Note on Tax Audit under section 44AB (Revised 2014 Edition) |
702
| >> |
| V. Expenses Incurred at Clubs [Clause 21(a)] |
702
| >> |
| A. Requirement of Clause No. 21(a) |
702
| >> |
| Requirement of clause no. 21(a) |
702
| >> |
| B. Reporting Requirements |
703
| >> |
| Reporting requirements |
703
| >> |
| Extracts from the ICAI’s Guidance Note on Tax Audit under section 44AB (Revised 2014 Edition) |
703
| >> |
| VI. Penalty or Fine [Clause 21(a)] |
704
| >> |
| A. Requirement of Clause No. 21(a) |
704
| >> |
| Requirement of clause no. 21(a) |
704
| >> |
| B. Reporting Requirements |
704
| >> |
| Reporting requirements |
704
| >> |
| Late fees |
705
| >> |
| Penalty where show cause notice is issued |
705
| >> |
| C. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
705
| >> |
| Nature of inquiry |
705
| >> |
| Tax auditor may not be expert |
705
| >> |
| Tax auditor to refer relevant law |
705
| >> |
| Court verdicts to be kept in mind |
705
| >> |
| Expenditure in consequence of violation of law |
706
| >> |
| Deciding about the amount to be reported |
706
| >> |
| D. Instances Where Expenditure Held Allowable |
707
| >> |
| Damages where compensating in nature |
707
| >> |
| Penalty for delay in payment of sales tax when allowable |
707
| >> |
| Interest on arrear of sales-tax |
707
| >> |
| Penalty for differential rate |
708
| >> |
| Penalty for delay in payment of purchase tax |
708
| >> |
| Penalty for delay in performance of contract |
708
| >> |
| Penalty for supply of sub-standard goods |
708
| >> |
| Penalty for violation of bye laws of stock exchange |
709
| >> |
| Payment of compensation on compromise between parties |
709
| >> |
| Penalty for procedural non-compliance |
709
| >> |
| Penalty for non-completion of contract |
709
| >> |
| Penalty for supply of lower quality goods |
709
| >> |
| Penalty for delayed contribution to provident fund/ESI contribution, etc. |
710
| >> |
| Interest on delayed payment of royalty, sales tax, etc. |
710
| >> |
| Payment for non-compliance of SEBI Regulations |
710
| >> |
| Penalty paid by assessee to stock exchange |
711
| >> |
| Punitive charges paid to railway for overloading of goods |
711
| >> |
| Penalty for non-fulfilment of export-obligation |
711
| >> |
| Damages for breach of contract |
711
| >> |
| Payment for compliance of law |
711
| >> |
| Expenditure incurred to defend employee from criminal proceedings |
711
| >> |
| Late filing fee |
712
| >> |
| E. Instances Where Expenditure Held Not Allowable |
712
| >> |
| Penalty for infraction of law |
712
| >> |
| Interest for delay in payment of sales tax |
713
| >> |
| Penalty with respect to sales tax matter |
713
| >> |
| Penalty under Central Excise Rules |
713
| >> |
| Penalty under Customs Act or Gold Control Act |
713
| >> |
| Interest on delayed payment of provident fund contribution, etc. |
714
| >> |
| Interest for late deposit of service tax |
714
| >> |
| Interest for delayed payment of income-tax |
715
| >> |
| Interest on delayed deposit of TDS |
715
| >> |
| Penalty for illegal import/export |
716
| >> |
| Secret commission/kickback paid by assessee |
716
| >> |
| Payment of compounding fee to Municipal Authorities for regularisation of deviation from sanctioned plan |
716
| >> |
| Provision of freebees in violation of the provision of Indian Medical Council Regulations, 2002 |
716
| >> |
| Commission paid to doctors for referring patients |
717
| >> |
| Payment of late filing fee |
717
| >> |
| 68. - Amounts Inadmissible Under Section 40(a) [Clause 21(b)] |
717
| >> |
| I. Requirement of Clause No. 21(b) and Reporting Under e-Filing Portal |
717
| >> |
| II. Reporting Requirements |
718
| >> |
| Reporting requirements |
718
| >> |
| Payments covered by clause 21(b) |
718
| >> |
| Auditor to take care while reporting under clause 21(b) |
719
| >> |
| Auditor to take care while reporting about disallowance under section 40(a)(i) |
719
| >> |
| Reporting about disallowance under section 40(a)(ia) |
720
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
720
| >> |
| Auditor to obtain details in writing |
720
| >> |
| In case of actual remittance overseas the auditor can rely upon legal opinion |
720
| >> |
| In case of no remittance overseas the auditor may examine relevant provisions vis-a-vis relevant records |
721
| >> |
| In respect of inquiry under section 40(a)(i) details of each individual payee to be given |
721
| >> |
| Details to be maintained by tax auditor vis-a-vis reporting under section 40(a)(i) |
721
| >> |
| Reporting as regards payments covered by section 40(a)(ia) |
722
| >> |
| In respect of inquiry under section 40(a)(ia) details of individual payee to be given |
722
| >> |
| Details to be maintained by tax auditor vis-à-vis reporting under section 40(a)(ia) |
722
| >> |
| Reporting under section 40(a)(ii), 40(a)(iia), 40(a)(iib) |
723
| >> |
| Reporting under section 40(a)(iii) |
723
| >> |
| Reporting under section 40(a)(iv) |
724
| >> |
| Reporting under section 40(a)(v) |
724
| >> |
| Tax auditor to exercise his judgment |
724
| >> |
| IV. Background Material |
724
| >> |
| Scope of section 40 |
724
| >> |
| A. Interest, Royalty, Fees for Technical Services or Other Sum, Without Deduction of Tax at Source Paid Outside India [Section 40(a)(i)] |
725
| >> |
| Payments covered |
725
| >> |
| When disallowable |
725
| >> |
| Disallowance under section 40(a)(i) -- When to trigger |
725
| >> |
| Deduction in subsequent year or payment in subsequent year |
725
| >> |
| No disallowance under section 40(a)(i) where payee files return and pays tax on income |
725
| >> |
| Conditions which are required to be fulfilled for availing of benefit of second proviso to section 40(a)(i) |
725
| >> |
| Liability to pay interest on tax not deducted [Section 201(1A)] |
726
| >> |
| Effect of return being filed by the payee -- Where assessee fails to deduct tax either in whole or in part |
726
| >> |
| Different situations identified |
726
| >> |
| Provisions illustrated |
727
| >> |
| Clarification regarding amounts not deductible under sub-clause (i) of clause (a) of section 40 |
728
| >> |
| Meaning of the term royalty |
728
| >> |
| Fees for technical services -- Meaning of |
729
| >> |
| Section 40(a)(i) not applicable |
730
| >> |
| Section 40(a)(i) held applicable |
743
| >> |
| B. Payments to Residents Without Tax Deduction [Section 40(a)(ia)] |
745
| >> |
| Scope of section 40(a)(ia) |
745
| >> |
| Applicability of section 40(a)(ia) |
745
| >> |
| Payments covered |
745
| >> |
| Rent -- Meaning of |
745
| >> |
| Disallowance under section 40(a)(ia) when effective |
746
| >> |
| Deduction in subsequent year or payment in subsequent year |
746
| >> |
| Different situations and deductibility |
746
| >> |
| Where the payer is not deemed to be an assessee in default under proviso to section 201(1) then the payer shall be deemed to have deducted and paid the tax for the purposes of section 40(a)(ia) |
747
| >> |
| CBDT clarification as to applicability of section 40(a)(ia) |
749
| >> |
| When to see that tax was deductible |
750
| >> |
| Section 40(a)(ia) held not applicable, hence no disallowance called for |
750
| >> |
| Section 40(a)(ia) held applicable |
772
| >> |
| C. Disallowance Under Section 40(a)(ib) |
774
| >> |
| Consideration paid or payable to a non-resident for a specified service on which equalisation levy is deductible not to be allowed as deduction in certain cases [Section 40(a)(ib)] |
774
| >> |
| Specified service |
774
| >> |
| Rate of levy on specified services |
774
| >> |
| How equalization levy on specified services is levied |
774
| >> |
| When equalisation levy on specified securities shall not be charged |
774
| >> |
| Who shall collect equalization levy on specified services |
775
| >> |
| D. Disallowance of Rate or Tax Levied on Profits or Gains of Any Business or Profession [Section 40(a)(ii)] |
775
| >> |
| E. Disallowance of Sum Paid on Account of Wealth Tax [Section 40(a)(iia)] |
775
| >> |
| Provisions of section 40(a)(iia) of Income Tax Act, 1961 |
775
| >> |
| F. Disallowance of Certain Fee, Charge, etc., in Case of State Government Undertaking [Section 40(a)(iib)] |
776
| >> |
| Disallowance under clause (iib) of section 40(a) |
776
| >> |
| Meaning of State Government undertaking |
776
| >> |
| Royalty, licence, fee, service fee and privilege fee, etc. -- Amount levied exclusively on state Government undertaking |
776
| >> |
| Surcharge on sales-tax paid under Kerala Surcharge on Taxes Act, 1957 |
776
| >> |
| VAT whether falls within the definition of a ‘charge’ |
777
| >> |
| G. Payment in Nature of Salaries Not Deductible in Certain Cases [Section 40(a)(iii)] |
777
| >> |
| The provisions |
777
| >> |
| No tax deducted on salary paid outside India |
777
| >> |
| Foreign allowance not chargeable to tax |
777
| >> |
| Amount paid by assessee company to its parent company -- No employer-employee relationship existed |
777
| >> |
| Where tax has been deducted but not paid to government |
777
| >> |
| Where salary paid to employees abroad in foreign currency but no tax deducted |
778
| >> |
| Where no employer-employee relationship existed |
778
| >> |
| Payment made to seconded employees |
778
| >> |
| H. Payment to Provident Fund Without Arrangement of Deduction of Tax [Section 40(a)(iv)] |
779
| >> |
| I. Payment of Tax on Behalf of Employee [Section 40(a)(v)] |
779
| >> |
| 69. - Amount Inadmissible Under Section 40(b)/40(ba) [Clause 21(c)] |
780
| >> |
| I. Requirement of Clause No. 21(c) |
780
| >> |
| Requirements of clause no. 21(c) |
780
| >> |
| Requirement under e-filing portal |
781
| >> |
| II. Reporting Requirements |
781
| >> |
| Reporting requirements |
781
| >> |
| Auditor to take care |
781
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
782
| >> |
| Tax auditor to state inadmissible amount |
782
| >> |
| Auditor should obtain detailed working of the amount inadmissible under section 40(b) |
782
| >> |
| Auditor should obtain computation of total income |
783
| >> |
| Due regard to CBDT circular |
783
| >> |
| Scope of inquiry and clause 21(c) |
783
| >> |
| Tax auditor to maintain specified information |
783
| >> |
| IV. Background Material |
783
| >> |
| A. Relevant Provisions |
783
| >> |
| Expenditure not allowable in case of a firm [Section 40(b)] |
783
| >> |
| Remuneration to partners |
783
| >> |
| Conditions precedent for allowing remuneration to working partners -- Circular No. 739, dt. 25-3-1996 |
784
| >> |
| Book profit |
785
| >> |
| Meaning of working partner |
787
| >> |
| Interest payment to partners |
787
| >> |
| How does section 40(b)(iv) operate |
788
| >> |
| Computation of book profit -- Treatment of various incomes credited to profit & loss account |
788
| >> |
| B. Payment by Way of Remuneration |
790
| >> |
| Deduction available only to the extent of the payment made |
790
| >> |
| Remuneration is payable to partners on the basis of net profit before taxes |
790
| >> |
| Remuneration where paid less than remuneration as per deed |
790
| >> |
| Remuneration and interest on capital from the firm not claimed by assessee partner -- Whether claim mandatory |
790
| >> |
| Need for quantification of remuneration in partnership deed |
790
| >> |
| Remuneration to partners is allowable against undisclosed book profit |
794
| >> |
| Where partners were not described as working partners |
795
| >> |
| Bonus paid to partner |
795
| >> |
| Discount to partner on sales made to partner |
795
| >> |
| Payment made to partner for specific services |
795
| >> |
| Remuneration being in excess of limit provided in Partnership Deed -- Effect of |
796
| >> |
| Remuneration to a partner not being a working partner |
796
| >> |
| Treatment of interest on deposits held in bank on behalf of clients |
796
| >> |
| Excess remuneration to partners -- Enhancement in view of amended provisions -- Enhancement through supplementary deed |
796
| >> |
| Increase in remuneration supported by addendum partnership deed -- No rebuttal of clause in partnership deed for increase or decrease from time-to-time |
797
| >> |
| AO set-off of brought forward loss before allowing remuneration to partner |
797
| >> |
| Interest and remuneration to partners -- Status of firm whether treated to be AOP |
797
| >> |
| Remuneration paid as per deed |
797
| >> |
| Working partner also working partner in another firm |
797
| >> |
| Kart of HUF being partner |
797
| >> |
| Remuneration to be disallowed only to extent inconsistent with deed |
798
| >> |
| Amendment to partnership deed not registered with Registrar |
798
| >> |
| Assessee not incurring any expenditure towards remuneration |
798
| >> |
| C. Interest Related Issues |
798
| >> |
| How the interest payable to partners be computed? |
798
| >> |
| Payment of interest to partners out of profit arrived at without deducting depreciation |
798
| >> |
| Interest paid in any capacity other than partner |
799
| >> |
| Interest paid to a partner, representing HUF, on fund deposited in individual capacity |
799
| >> |
| Interest to partners representing HUFs |
799
| >> |
| Interest allowable on capital where increased due to appreciation in value of building |
799
| >> |
| Interest paid to HUF partner |
799
| >> |
| Interest paid to AOP, members of whom were partners |
800
| >> |
| Payment of interest to minor partner where assessee had no cash balance in books |
800
| >> |
| Partnership deed not showing any interest to partners |
800
| >> |
| AO calculating interest on opening balance of partners |
800
| >> |
| D. Association of Persons/Body of Individuals |
800
| >> |
| Expenditure not allowable in case of an AoP/BoI |
800
| >> |
| Interest paid to trustees |
801
| >> |
| 70. - Payments Referred to in Section 40A(3) [Clause 21(d)] |
801
| >> |
| I. Requirement of Clause No. 21(d) |
801
| >> |
| Requirement of Clause No. 21(d) |
801
| >> |
| Requirement under e-filing portal |
802
| >> |
| II. Reporting Requirements |
802
| >> |
| Reporting requirements |
802
| >> |
| What the auditor need to do |
802
| >> |
| Auditor’s obligations |
802
| >> |
| Auditor to take care |
804
| >> |
| Interplay with clause no. 18 |
804
| >> |
| Where payment directly deposited in bank account of payee |
805
| >> |
| III. Extracts From the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
805
| >> |
| Tax auditor should obtain list of all cash payments |
805
| >> |
| Technological advancements |
805
| >> |
| Auditor to obtain suitable certificate |
805
| >> |
| Auditor to maintain details |
806
| >> |
| Individual items of inadmissible expenses may be given |
806
| >> |
| Items of expenses which are exempt under rule 6DD need not be stated |
806
| >> |
| IV. Background Material |
806
| >> |
| A. Provisions of Section 40A(3)/40A(3A) |
806
| >> |
| Splitting up of payments in an amount exceeding ₹ 10,000 to result in disallowance of section 40A |
806
| >> |
| Subsequent disallowance due to violation of section 40A(3) in a year other than the year of allowance of deduction of expenses |
806
| >> |
| Prescribed electronic modes [Rule 6AABA] |
807
| >> |
| No disallowance even if payment made in cash exceeds ₹ 10,000 |
807
| >> |
| Hike in limit for cash payment under section 40A(3) where payment is made for plying, hiring or leasing of goods carriage |
807
| >> |
| Does several payments made in a day to same person hit by section 40A(3) |
807
| >> |
| Provisions illustrated |
808
| >> |
| Cases and circumstances in which a payment or aggregate of payments exceeding ten thousand rupees may be made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system |
808
| >> |
| Issues related to section 40A(3) |
810
| >> |
| Applicability of provisions of section 40A(3) to interest and remuneration paid to partners |
813
| >> |
| Scope of section 40A(3) |
814
| >> |
| Applicability of section 40A(3) to illegal business |
814
| >> |
| Timing of payment |
814
| >> |
| When section 40A(3) applies |
814
| >> |
| How section 40A(3) be applied |
815
| >> |
| Meaning and scope of word ‘expenditure’ for purposes of section 40A(3) |
815
| >> |
| Assessee can avail of exemption from rigours of section 40A(3) only if his case falls under the exception provided by rule 6DD |
815
| >> |
| B. Payments Hit by Section 40A(3) |
816
| >> |
| Payment for purchase of stock in trade covered by section 40A(3) |
816
| >> |
| Payment of interest in cash to partner’s minor daughter |
816
| >> |
| Construction of commercial building |
817
| >> |
| Payment credited directly to the account of vendor |
817
| >> |
| Payment through cheques encashed by payee through different shroffs |
817
| >> |
| Cash payment to suppliers, agents, etc. |
817
| >> |
| Advance paid in cash but later adjusted against purchases |
817
| >> |
| Purchase of land through cash payment |
817
| >> |
| Applicability of section 40A(3) where land purchased as stock-in-trade |
817
| >> |
| C. Payments Not Hit by Section 40A(3) |
818
| >> |
| Payment on capital account or disbursements, which are not in the nature of expenses, are not hit by this provision |
818
| >> |
| No disallowance where no deduction of expenditure claimed |
818
| >> |
| Cash payment to suppliers of hide and skin |
819
| >> |
| Making of cash payment for buying processed fish |
819
| >> |
| Payment made by banker’s cheques, pay order and call deposit receipt |
819
| >> |
| Where amount passed on to sub-contractor in pursuance of an agreement |
819
| >> |
| Payment to contractor on behalf of government for royalty collection |
820
| >> |
| Transaction not being business transaction |
820
| >> |
| Payment in cash through agent |
820
| >> |
| Purchases in cash from ‘Kachcha Arahtia’ |
821
| >> |
| Post-dated bearer cheques not to be counted for cash payment |
821
| >> |
| Book entries vis-a-vis applicability of section 40A(3) |
821
| >> |
| Payment through agent on basis of “pay order” |
821
| >> |
| Payment made for purchase of mobile recharge vouchers |
821
| >> |
| Repayment of credit balance not hit by section 40A(3) |
822
| >> |
| Payment made for expenditure paid by the partners on behalf of the firm |
822
| >> |
| Payment for purchase of land capitalised in books |
822
| >> |
| Cash payments exceeding prescribed limit to Electricity Board |
822
| >> |
| Salary paid to partners |
823
| >> |
| Cash payments made to agents not disallowable under section 40A(3) |
823
| >> |
| No disallowance under section 40A(3) is called for in case of payment in cash made for purchasing scrap from Railways, which is run by government |
823
| >> |
| Payment to government -- Not hit by section 40A(3) |
823
| >> |
| Cash payment made to Government electricity company -- Genuineness of payment not in doubt |
824
| >> |
| Electricity bills paid in cash in remote area where banking facilities not available |
824
| >> |
| Payment to suppliers of hide and skin covered by rule 6DD hence not disallowable |
824
| >> |
| Applicability of section 40A(3) in case of purchases in cash from ‘Kachcha Arahtia’ |
825
| >> |
| 71. - Provision for Payment of Gratuity [Clause 21(e)] |
825
| >> |
| I. Requirements of Clause No. 21(e) |
825
| >> |
| Requirements of clause No. 21(e) and requirement under e-filing portal |
825
| >> |
| II. Reporting Requirements |
825
| >> |
| Reporting requirements |
825
| >> |
| What auditor shall do |
825
| >> |
| III. Extracts from ICAI’s Guidance Note in Tax Audit under Section 44AB (Revised 2014 Edition) |
826
| >> |
| IV. Background Material |
826
| >> |
| Provision of gratuity [Section 40A(7)] |
826
| >> |
| Ascertained liability not allowable |
826
| >> |
| What is approved gratuity fund |
826
| >> |
| Conditions precedent to be complied with for deduction under section 40A(7) |
827
| >> |
| Provision only towards contribution to approved gratuity fund is allowable |
827
| >> |
| Approval of gratuity fund -- A condition precedent |
827
| >> |
| Provision for gratuity not made in books of accounts |
828
| >> |
| Actual payment of funds to LIC |
828
| >> |
| Section 40A(7) does not deal with actual payment |
828
| >> |
| Transfer of business with all assets and liabilities including gratuity liability |
828
| >> |
| Payment of gratuity not allowable on general principles |
828
| >> |
| Provision for gratuity -- When admissible |
828
| >> |
| Actual payment is not necessary for claiming deduction |
829
| >> |
| No incremental liability arose during the year |
829
| >> |
| Provision made for approved gratuity fund |
829
| >> |
| Provision related to earlier year |
829
| >> |
| Allowability where the conditions prescribed under section 40A(7) were fulfilled |
829
| >> |
| Change in business |
829
| >> |
| Payment of gratuity at time of retirement |
829
| >> |
| Where neither payment nor provision made |
829
| >> |
| No explanation by assessee as to necessity of making provisions |
830
| >> |
| Provision made for unapproved gratuity fund not allowable |
830
| >> |
| Fund approved with retrospective effect |
830
| >> |
| Amount actually paid is allowable |
830
| >> |
| 72. - Disallowance Under Section 40A(9) of Sum Paid by Assessee as Employer [Clause 21(f)] |
831
| >> |
| Requirements of Clause 21(f) and Under e-filing Portal |
831
| >> |
| Reporting Requirements |
831
| >> |
| Guidelines for Auditor |
831
| >> |
| Extract from the ICAI’s Guidance Note (Revised 2014 Edition) |
833
| >> |
| Background Material |
833
| >> |
| Payments hit by section 40A(9) |
833
| >> |
| Contribution to recognised provident fund or approved superannuation fund [Section 36(1)(iv)] |
833
| >> |
| Contribution to pension scheme referred to section 80CCD [Section 36(1) (iva)] |
834
| >> |
| Contribution to approved gratuity fund [Section 36(1)(v)] |
834
| >> |
| 73. - Contingent Liabilities [Clause 21(g)] |
835
| >> |
| I. Requirement of Clause No. 21(g) |
835
| >> |
| Requirement of clause no. 21(g) |
835
| >> |
| Requirement under e-filing portal |
835
| >> |
| II. Reporting requirements |
835
| >> |
| Reporting by auditor |
835
| >> |
| Auditor to take care |
835
| >> |
| III. Extracts from the ICAI’s Guidance Note (Revised 2014 Edition) |
835
| >> |
| IV Background Material |
836
| >> |
| Provision for entry tax disputed in appeal before court is contingent liability |
836
| >> |
| What constitutes contingent liability? |
836
| >> |
| Contingent Liability as Per ICDS |
836
| >> |
| Contingent liabilities or reserves do not amount to expenditure |
837
| >> |
| Putting aside of money which may become expenditure in future |
837
| >> |
| Contribution to insurance fund is contingent liability not deductible |
838
| >> |
| Liability pending for adjudication is contingent liability |
838
| >> |
| What is contingent liability and what is provision |
838
| >> |
| What is warranty |
839
| >> |
| 74. - Expenditure Inadmissible under Section 14A [Clause 21(h)] |
840
| >> |
| I. Requirement of Clause No. 21(h) |
840
| >> |
| Requirement of clause No. 21(h) |
840
| >> |
| Requirement under e-filing portal |
840
| >> |
| II. Reporting Requirements |
841
| >> |
| Auditor to indicate amount disallowable |
841
| >> |
| Auditor to pay special attention to interest account |
841
| >> |
| Care to be taken in case of partners of partnership firm/LLP |
841
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) Issued by ICAI |
842
| >> |
| Amount of inadmissible expenses depends upon facts of case |
842
| >> |
| Assessee need not follow method prescribed the rule 8D |
842
| >> |
| Duty of assessee to furnish detail of inadmissible expenses |
842
| >> |
| Tax auditor of verify expenses admitted by assessee |
842
| >> |
| Verifying assessee’s claim that no expenditure has been incurred by him |
843
| >> |
| Interest expenditure to be allocated properly |
843
| >> |
| Report of tax audit |
843
| >> |
| IV. Background Material |
844
| >> |
| A. Relevant Provisions |
844
| >> |
| No deduction allowable against exempt income |
844
| >> |
| Assessing officer empowered to determine amount of expenditure incurred in relation to exempt incomes |
844
| >> |
| Method for determining amount of expenditure in relation to income not includible in total income |
844
| >> |
| Clarification regarding disallowance of expenses under section 14A of the Income Tax Act in cases where corresponding exempt income has not been earned during the financial year |
845
| >> |
| Meaning of term “expenditure incurred in relation to” |
846
| >> |
| Necessity of direct and proximate connection between expenditure and exempt income |
846
| >> |
| Various issues relevant to section 14A clarified by Delhi High Court in Maxopp Investment Ltd. & Others v. CIT & Ors |
847
| >> |
| B. Principles Regarding Applicability of Section 14A |
847
| >> |
| Expenditure not identifiable cannot be disallowed |
847
| >> |
| Assessee having one indivisible business |
848
| >> |
| Interpretation of section 14A in Asstt. CIT v. Citicorp Finance (India) Ltd. (2007) 15 (II) ITCL 488 (Mum ‘C’-Trib) |
848
| >> |
| Whether there is any limit under section 14A as to quantum of disallowance |
849
| >> |
| Where no expenditure incurred for earning exempt income |
849
| >> |
| Interplay of section 14A with other provisions |
849
| >> |
| Applicability of provisions of section 14A to business income |
850
| >> |
| Apportionment of expenses in case of indivisible business |
850
| >> |
| Connection between expenditure incurred and income earned |
850
| >> |
| Disallowance whether can exceed the exempted income |
850
| >> |
| Applicability of section 14A to depreciation allowance |
851
| >> |
| Expenses specifically relatable to taxable income |
851
| >> |
| Investment made out of own funds vis-a-vis disallowance under section 14A |
851
| >> |
| Manner of disallowance of expenditure against exempt income |
851
| >> |
| Consideration of investments which did not yield exempt income |
851
| >> |
| Only those investments should be considered which actually yielded exempt income |
851
| >> |
| AO considered all the investments for computation of average value of investments |
852
| >> |
| Disallowance on average value of investment |
852
| >> |
| Invocation of rule 8D vis-a-vis computation of book profit under section 115JB |
852
| >> |
| AO considered gross interest instead of net interest |
852
| >> |
| Assessee claimed of having own source of income out of which investments were made -- Revenue failed to consider claim of assessee |
852
| >> |
| AO considered non-dividend bearing investments also for computing average value of investments |
853
| >> |
| Interest income earned being more than interest paid |
853
| >> |
| Allegation that no corresponding disallowance was made by assessee |
853
| >> |
| Interest-free funds available in excess of investments in tax-free securities |
853
| >> |
| No direct expenditure incurred and also own funds invested so no interest expenditure |
853
| >> |
| Assessee submitted that it was having interest free funds -- Availability of interest free funds not being demonstrated |
853
| >> |
| Administrative and other common expenses -- Management of assessee-company involved in taking decisions with regard to investments in exempt income |
854
| >> |
| No ad-hoc disallowance can be made under section 14A |
854
| >> |
| Expenditure not identifiable cannot be disallowed |
854
| >> |
| Disallowance of estimated expenditure not justified |
854
| >> |
| No disallowance can be made under section 14A where entire income was taxable |
854
| >> |
| Assessee not claiming any exemption |
854
| >> |
| C. Section 14A Held Applicable |
855
| >> |
| Disallowance of pro rata expenditure relating to exempt income |
855
| >> |
| Applicability of section 14A where investment made in partnership firm |
855
| >> |
| Interest paid for investment in firm |
857
| >> |
| Where shares held as stock-in-trade |
857
| >> |
| Assessee being an investment company |
858
| >> |
| Investment in shares of operating companies |
859
| >> |
| Where the entire tax exempt income was lower than the disallowance made by AO |
859
| >> |
| D. Section 14A Held Not Applicable |
859
| >> |
| Where owned funds were higher than funds invested in shares |
859
| >> |
| Where investment was made in earlier years and no interest bearing funds were utilized for making investments |
859
| >> |
| Where no borrowed fund were used for acquiring shares |
860
| >> |
| Applicability of section 14A where deduction under Chapter VI-A available |
860
| >> |
| Where there is no receipt of exempt income |
860
| >> |
| Where borrowed funds not used for making tax-free investments |
860
| >> |
| Assessee having sufficient surplus fund |
861
| >> |
| Where assessee made investment in shares out of its own funds and not out of borrowed funds |
861
| >> |
| Interest on borrowed fund having no nexus with earning of dividend income |
861
| >> |
| Where funds borrowed much after investment in shares |
861
| >> |
| Investment in shares made out of share capital and free reserves |
861
| >> |
| Investment in shares of group companies for gaining controlling stake |
861
| >> |
| Investments made in a non profit making company |
862
| >> |
| Non-charging of interest on advances |
862
| >> |
| Where interest free own fund utilized to make investment and no borrowed fund used |
862
| >> |
| No disallowance under section 14A where investment made out of free reserves |
863
| >> |
| Assessee’s own interest free funds was much higher than average investment held |
864
| >> |
| Disallowance cannot exceed expenditure incurred by the assessee |
864
| >> |
| Assessee failed to establish that no expenditure incurred |
864
| >> |
| Applicability of section 14A where no borrowed fund were used for acquiring shares |
864
| >> |
| No disallowance under section 14A where presumptive scheme is adopted |
864
| >> |
| Applicability of section 14A -- Where no exempt income earned |
864
| >> |
| Scope for disallowance in case assessee engaged in shipping business had exercised option for Tonnage Tax scheme in accordance with section 115VP(1) with effect form assessment year 2005-06 |
865
| >> |
| 75. - Amount Inadmissible Under Proviso to Section 36(1)(iii) [Clause 21(i)] |
866
| >> |
| I. Requirement of Clause No. 21(i) |
866
| >> |
| Requirement of clause no. 21(i) |
866
| >> |
| Requirement under e-filing portal |
866
| >> |
| II. Reporting Requirements |
866
| >> |
| Reporting requirements |
866
| >> |
| Auditor to take care of ICDS-IX |
866
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) Issued by ICAI |
867
| >> |
| Tax auditor to apply his judgment |
867
| >> |
| Assessee to furnish the details of amount inadmissible under the proviso to section 36(1)(iii) |
867
| >> |
| Tax auditor to keep AS-16 in mind |
867
| >> |
| Applicability of Explanation |
868
| >> |
| IV. Background Material |
868
| >> |
| Allowability of interest on borrowed capital under section 36(1)(iii) |
868
| >> |
| Interest on loan raised for purchase of machinery where no extension of business invoked |
868
| >> |
| Where assets not used in relevant year |
868
| >> |
| Interest on borrowed capital not allowable till asset was first put to use |
869
| >> |
| Land purchased utilising sale proceeds of a commercial site sold |
869
| >> |
| Loan taken for acquisition of assets |
869
| >> |
| 76. - Amount of Interest Inadmissible Under Section 23 of the Micro, Small and Medium Enterprises Development Act, 2006 [Clause 22] |
869
| >> |
| I. Requirement of Clause No. 22 |
869
| >> |
| Requirement of clause No. 22 |
869
| >> |
| Requirement under e-filing portal |
869
| >> |
| II. Reporting Requirements |
869
| >> |
| Reporting requirements |
869
| >> |
| Steps to be taken by auditor |
870
| >> |
| Auditor to take care in reporting |
870
| >> |
| Qualification by auditor |
871
| >> |
| III. Extracts from Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) Issued by ICAI |
872
| >> |
| Duty of tax auditor |
872
| >> |
| Steps to be taken by tax auditor |
873
| >> |
| Auditee not providing for interest payable under MSME Act |
873
| >> |
| No interest claimed as deduction |
873
| >> |
| IV. Relevant Provisions of the Micro, Small and Medium Enterprises Development Act, 2006 |
874
| >> |
| Introduction |
874
| >> |
| Enterprise, Micro Enterprise, Small Enterprise and Medium Enterprise -- Meaning of |
874
| >> |
| Classification of enterprises into Micro, Small and Medium |
874
| >> |
| Duty of buyer to make payment to supplier of goods and services |
877
| >> |
| Liability of buyer to pay interest for delay in payment to supplier |
878
| >> |
| Facilitation and grievance redressal of enterprises |
879
| >> |
| Penalty for contravention of section 8 or section 22 or section 26 |
879
| >> |
| V. Amount of Interest Inadmissible Under Section 23 of Micro Small Medium Enterprises Development Act, 2006 |
879
| >> |
| VI. Accounting and Taxation Issues Arising Out of The Micro, Small and Medium Enterprises Development Act, 2006 |
880
| >> |
| Buyer required to disclose the amount due to the supplier and interest thereon in financial statements |
880
| >> |
| Disallowance of interest paid under the provision of the Micro, Small and Medium Enterprises Development Act, 2006 under the Income Tax Act, 1961 |
880
| >> |
| CBDT clarification |
880
| >> |
| Duty of company being a buyer |
881
| >> |
| 77. - Particulars of all Payments Made to Persons Specified [Clause 23] |
881
| >> |
| I. Requirement of Clause No. 23 |
881
| >> |
| Requirement of clause no. 23 |
881
| >> |
| Requirement under e-filing portal |
881
| >> |
| II. Reporting Requirements |
881
| >> |
| Steps to be taken |
881
| >> |
| Auditor to take care |
882
| >> |
| III. Extracts from Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) Issued by ICAI |
883
| >> |
| Steps to be taken by tax auditor |
883
| >> |
| Information to be maintained by tax auditor |
883
| >> |
| IV. Background Material |
884
| >> |
| Payment to specified persons |
884
| >> |
| Persons deemed to have substantial interest |
885
| >> |
| Where assessee not carrying on any business or profession |
885
| >> |
| Case of co-operative society |
885
| >> |
| Where assessee is the seller of goods or provider of services |
885
| >> |
| Payment must be excessive or unreasonable |
885
| >> |
| Where payer and payee both are taxed at maximum rate |
885
| >> |
| Non-applicability of provision in case of wife of son of a partner |
886
| >> |
| Section 40A(2)(a) vis-a-vis section 40(b) |
886
| >> |
| 78. - Deemed Profits and Gains Under Sections 32AC, 32AD, 33AB, 33ABA and 33AC [Clause 24] |
886
| >> |
| I. Requirement of Clause No. 24 |
885
| >> |
| Requirement of clause no. 24 |
886
| >> |
| Requirement under e-filing portal |
887
| >> |
| II. Reporting Requirements |
887
| >> |
| Reporting requirements |
887
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
887
| >> |
| IV. Extracts from Implementation Guide Issued by ICAI |
888
| >> |
| V. Background Material |
888
| >> |
| Deeming of profits under section 32AC |
888
| >> |
| Deemed profits under section 32AD |
889
| >> |
| Amount deemed to be profits and gains under section 33AB |
889
| >> |
| Amount deemed to be profits and gains under section 33ABA |
891
| >> |
| Amount deemed to be profits and gains under section 33AC |
892
| >> |
| 79. - Profits Chargeable to Tax [Clause 25] |
894
| >> |
| I. Requirement of Clause No. 25 |
894
| >> |
| Requirement of clause no. 25 |
894
| >> |
| Requirement under e-filing portal |
894
| >> |
| II. Reporting Requirements |
984
| >> |
| Reporting requirements |
894
| >> |
| Auditor to take care |
894
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
894
| >> |
| Related provisions to be kept in mind |
894
| >> |
| Tax auditor to obtain that all amounts chargeable under section 41 |
896
| >> |
| Details to be maintained by tax auditor |
896
| >> |
| IV. Background Material |
897
| >> |
| A. Provisions of Section 41(1) |
897
| >> |
| Recoupment of loss or expenditure or remission or cessation of trading liability |
897
| >> |
| Scope of fiction created under section 41(1) |
897
| >> |
| Conditions precedent for applicability of section 41(1) |
897
| >> |
| Remission or cessation of liability by way of unilateral act of parties also taxable |
898
| >> |
| Allowance or deduction has to be made in earlier assessment year only then section 41(1) applies |
898
| >> |
| Meaning and scope of remission or cessation of liability |
898
| >> |
| System of accounting not relevant |
899
| >> |
| Tax collected not remitted |
899
| >> |
| Deposits credited to profit and loss account |
899
| >> |
| Creditors continuing in books |
899
| >> |
| Stale drafts |
900
| >> |
| Liability of predecessor, benefit obtained by assessee |
900
| >> |
| Amount written back to profit and loss account |
900
| >> |
| Amount transferred to reserve account |
900
| >> |
| Refund of tax or duty, etc. |
900
| >> |
| B. Section 41(1) Held Applicable |
901
| >> |
| Waiver of loan on revenue account |
901
| >> |
| Amount transferred to capital account to neutralise liability |
901
| >> |
| Refund of customs duty by order of High Court chargeable |
902
| >> |
| Unpaid dues of employees becoming time-barred |
902
| >> |
| Reversal of provision |
902
| >> |
| No claim by creditors |
902
| >> |
| Unsecured loan taken from Bank by treating the same as liability, which ceased to exist -- Assessee failed to Shaw any evidence or record |
902
| >> |
| Reimbursement of excise duty from distributor -- Whether to be taxed as trading receipt under section 41 |
902
| >> |
| Non-existent liability |
903
| >> |
| Waiver of advance by holding company |
903
| >> |
| C. Section 41(1) Held Not Applicable |
903
| >> |
| Waiver of loan towards capital asset |
903
| >> |
| Interest waived off in restructuring not allowed as deduction in earlier year |
903
| >> |
| Where no allowance made earlier |
904
| >> |
| Unsecured loans received but not written off |
904
| >> |
| Liability pending for several years |
904
| >> |
| Amount not claimed as deduction in earlier year |
904
| >> |
| Debtors’ and creditors’ liability set-off by book entry |
905
| >> |
| Liabilities outstanding for three years |
905
| >> |
| Creditors outstanding balance lying in books -- Not waived or written off |
906
| >> |
| Sundry creditor taken over from other companies -- Amount written back |
906
| >> |
| Cessation of liability -- Notice issued under section 133(6) to creditors remaining unserved |
907
| >> |
| Creditors not traceable |
907
| >> |
| No details of creditors filed but the creditors were being paid in subsequent years |
907
| >> |
| Creditor closed down his business but liability continuing in books |
907
| >> |
| No interest deduction earlier claimed by assessee against the written back loan amount |
907
| >> |
| Existence and genuineness of credit balance proved |
907
| >> |
| Addition of liability towards sundry creditors treated as bogus -- Corresponding material purchases claim stood allowed by AO |
908
| >> |
| Assessee unable to produce confirmation from creditors but balance shown in books |
908
| >> |
| Creditors, which had become time barred already written off against other debit balances |
908
| >> |
| Amount payable to creditors not written off |
908
| >> |
| Liabilities brought forward from amalgamating company written off by the amalgamated company (assessee) |
908
| >> |
| Difference between creditors recorded in assessee’s books vis-a-vis balance in the books of creditors |
909
| >> |
| Evidence of repayment of sundry creditors not produced |
909
| >> |
| Non-filing of confirmations of creditors -- Payments in nature of security deposit having also been paid subsequently to all parties |
909
| >> |
| No cessation of liability and assessee filed confirmation and copy of account with regard to such creditor |
909
| >> |
| Payment of present value of deferred sales-tax liability |
909
| >> |
| Write back of share application money |
909
| >> |
| Conversion of trading liability into share application money |
909
| >> |
| Absence of cessation or remission of liabilities |
910
| >> |
| Conversion of interest bearing loan into non-refundable interest-free unsecured loan |
910
| >> |
| Benefit under sales Tax Deferral Scheme of government |
910
| >> |
| Difference between payment of ‘net present value’ and ‘future liability’ of deferred sales tax liability |
911
| >> |
| Long outstanding advances received against sale of plot -- However, not written off |
912
| >> |
| Share application money pending allotment |
912
| >> |
| Settlement with bank as regards interest liability -- Interest not claimed anytime |
912
| >> |
| Conversion of advance into capital |
912
| >> |
| Unclaimed amount out of Guarantee Reserve Account |
912
| >> |
| Remission of sales tax |
912
| >> |
| No remission and/or cessation of liability in the year |
912
| >> |
| No allowance in earlier years |
913
| >> |
| Absence of cessation or remission of liability -- Loan outstanding for 2 odd years |
913
| >> |
| Non-payment of liability owing to pending disputes |
913
| >> |
| Addition of expense disallowed earlier |
913
| >> |
| No deduction of trading liability allowed in earlier year |
913
| >> |
| Liability not written off in books of account |
914
| >> |
| Non-reconciliation of accounts |
914
| >> |
| Unsecured loan taken from Bank by treating the same as liability, which ceased to exist -- Assessee failed to show any evidence or record |
914
| >> |
| Remission or cessation of trading liability -- Liability not written off |
914
| >> |
| No benefit accrued to assessee |
914
| >> |
| Where liability did not exist |
914
| >> |
| Factum of outstanding debt was duly acknowledged in confirmation letter by lender |
914
| >> |
| Liability capitalised in books |
914
| >> |
| Applicability of provision where amount received by the assessee from her father for purchasing a house property |
915
| >> |
| Excess provisions made for establishment and other expenses, in earlier years, transferred to reserve fund |
915
| >> |
| Remission or cessation of trading liability -- No evidence to conclude that there was a final remission or cessation of a trading liability |
915
| >> |
| Remission and cessation of sales tax liability |
915
| >> |
| Advance received towards purchase of machinery -- Transaction not fructified and advance refunded back |
915
| >> |
| AO doubting genuineness of credit -- No remission or cessation of liability involved |
915
| >> |
| Assessee made book adjustments |
915
| >> |
| Whether remission or cessation of trading liability need to be reflected in assessee’s accounts |
916
| >> |
| Amount not written off |
916
| >> |
| Liability arose due to inheritance |
916
| >> |
| No evidence to suggest remission or cessation of liabilities appearing for long in books |
916
| >> |
| Transfer to statutory reserve out of excess provision made by co-operative bank in earlier years -- Impact of withdrawal of exemption under section 80P during the year |
916
| >> |
| Amount shown as payable to certain party not appearing in books of that party |
916
| >> |
| Assessee’s failure to prove existence of liability |
916
| >> |
| No clear finding as regards purpose of loan or claiming of interest under section 36(1)(iii) |
917
| >> |
| Consequence of conversion of loan as well as the unpaid interest into share capital |
917
| >> |
| Waiver of interest and guarantee fees |
917
| >> |
| Sales tax net of sales tax refund had been debited to assessee’s profit and loss account |
917
| >> |
| D. Balancing Charge [Section 41(2)] |
918
| >> |
| Balancing charge -- Assessee during process of being wound up sold assets forming part of block of assets |
918
| >> |
| E. Sale of Assets used for Scientific Research [Section 41(3)] |
918
| >> |
| F. Recovery of Bad Debt [Section 41(4)] |
918
| >> |
| Recovery in respect of bad debts written off |
918
| >> |
| G. Withdrawals From Special Reserve [Section 41(4A)] |
918
| >> |
| H. Set off of Business Loss Against Deemed Income [Section 41(5)] |
919
| >> |
| 80. - Payment of Tax, Duty or Other Sum -- Compliance with Section 43B [Clause 26] |
919
| >> |
| I. Requirement of Clause No. 26 |
919
| >> |
| Requirement of clause no. 26 and under e-filing portal |
919
| >> |
| II. Reporting Requirements |
920
| >> |
| Pre-existed liability |
920
| >> |
| Liability incurred during the year |
921
| >> |
| Query about tax, duty, cess, etc., passed through profit and loss account |
921
| >> |
| Professional tax deducted from salary of employees need not be reported |
922
| >> |
| III. Extracts From the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
922
| >> |
| Assessee maintaining accounts as per mercantile system of accounting |
922
| >> |
| Which payments are to be reckoned |
922
| >> |
| Tax auditor to distinguish liability incurred during the year |
922
| >> |
| Assessee following cash system of accounting |
922
| >> |
| Auditor to report the position upto signing of the report |
922
| >> |
| Provision for excise duty on finished goods lying in bonded warehouse |
923
| >> |
| Position as to sales tax |
923
| >> |
| Provident fund dues and section 43B |
923
| >> |
| Payment of interest to banks |
923
| >> |
| Reporting under clause 43B(f) |
924
| >> |
| Particulars to be reported whether debited to profit and loss account or not |
924
| >> |
| Tax auditor can apply test checks |
924
| >> |
| Details to be maintained by tax auditor |
924
| >> |
| Reporting or clause 43B(g) [Extracts from implementation guide] |
924
| >> |
| IV. Background Material |
925
| >> |
| A. Relevant Provisions and Applicability Thereof |
925
| >> |
| Provisions of section 43B |
925
| >> |
| Certain deductions to be allowed only on actual payment -- Employer’s contribution to welfare funds be allowed if payment made before due date of filing return |
928
| >> |
| Sales tax converted into loan |
929
| >> |
| CBDT circular on practical applicability of Explanations 3C and 3D to section 43B |
929
| >> |
| Applicability of provisions of section 43B to service tax |
932
| >> |
| Liability to pay service tax not existed |
933
| >> |
| Service tax not debited to profit and loss account |
934
| >> |
| Service tax on rent paid by tenant being assessee -- Not deposited to government by landlord -- No disallowance in tenant’s hands |
934
| >> |
| Service tax payable but not received |
934
| >> |
| Assessee failed to deposit service tax to Central Government Account before filing of return but not clamed deduction in accounts |
934
| >> |
| Provision for wage revision with retrospective effect |
934
| >> |
| Provision made for payment of gratuity to retiring staff |
934
| >> |
| Leave encashment and gratuity paid before due date of filing of return |
935
| >> |
| Professional tax deducted from salary of employees not deposited to the Government Exchequer |
935
| >> |
| Rentals payment in respect of vending toddy |
935
| >> |
| Excise duty on closing stock of finished goods not claimed as deduction |
935
| >> |
| Actual payment of gratuity allegedly not made in the relevant year |
935
| >> |
| Deduction on actual payment outstanding Electricity Duty liability -- Assessee acting as collection agent of Government in respect of ‘Electricity Duty’ |
935
| >> |
| Customs duty included in closing stock |
935
| >> |
| Non-payment of sales tax within due date under section 139(1) -- Conversion of sales tax dues into loan |
935
| >> |
| Payment of approved gratuity fund to LIC -- Paid before due date of furnishing return of income |
936
| >> |
| Neither assessee debited impugned amount to profit and loss account as expenditure nor claimed any deduction |
936
| >> |
| Assessee acting as collecting agent for State Government in respect of ‘electricity duty’ |
936
| >> |
| Interest payable to government was not covered under section 43B(d) and 43B(e) |
936
| >> |
| B. Payments Hit by Section 43B |
936
| >> |
| Furnishing of bank guarantee, not amount to actual payment within meaning of section 43B |
936
| >> |
| Duty collected not paid to government on ground of dispute with government |
937
| >> |
| Interest on arrears of sales-tax allowable only if actually paid by the assessee |
937
| >> |
| Interest paid on arrears of SEBI turnover fees |
937
| >> |
| Interest on the payment of PF contribution |
937
| >> |
| Applicability of provision of sales tax |
938
| >> |
| Royalty payment |
938
| >> |
| Conversion of funded interest into loan |
938
| >> |
| Only part amount of works contract tax (WCT) paid by assessee |
938
| >> |
| Interest accrued on loan not paid to bank before due date of filing return -- Assessee pleading subsequent waiver of interest by bank |
938
| >> |
| Interest on custom duty -- Liability not crystallised |
939
| >> |
| Deduction on actual payment outstanding Municipal Tax liability -- Assessee acting as collection agent of State Government in respect of ‘Municipal Tax’ |
939
| >> |
| Interest on purchase tax |
939
| >> |
| Claim of interest outstanding on loan taken on security of insurance policies from LIC |
939
| >> |
| Overdue interest converted into loan, whether to be construed as constructive/ deemed payment of interest |
939
| >> |
| No payment before due date of filing of return |
939
| >> |
| C. Payments Not Hit by Section 43B |
939
| >> |
| Interest not becoming payable during the year |
939
| >> |
| Excise duty paid in advance |
940
| >> |
| Payment of excise duty through Personal Ledger Account (PLA) |
940
| >> |
| Provision for bonus |
941
| >> |
| Amount of customs duty included in the valuation of closing stock |
942
| >> |
| Custom duty, etc., paid on goods manufactured lying in stocks |
942
| >> |
| Service tax billed but not received -- Not hit by section 43B |
942
| >> |
| Pre-payment premium paid to bank for restructuring of advances |
942
| >> |
| Audit fee |
942
| >> |
| Conversion of outstanding interest into share capital -- Applicability of Explanation 3C to section 43B |
942
| >> |
| Licence fee for liquor |
943
| >> |
| Kist |
943
| >> |
| Sales-tax under deferred loan incentive scheme |
943
| >> |
| Sales tax retained pursuant to a Sales Tax Deferment Scheme sanctioned by State Government |
944
| >> |
| Provision for entry tax liability pending resolution of dispute |
944
| >> |
| VAT amount being included in cost of material |
944
| >> |
| Provision of post retirement basis |
944
| >> |
| Interest paid for late deposit of service tax and excise duty, etc. not subject to section 43B |
944
| >> |
| Payment of management incentive bonus on the basis of performance to eligible employees |
944
| >> |
| Unpaid VAT -- Not claimed as deduction in books of account |
945
| >> |
| Assessee suo motu added back TDS on VAT without filing revised return |
945
| >> |
| Contribution towards leave encashment when no actual contribution made |
945
| >> |
| Deduction of Security Transaction Tax (STT) against the transaction of trading -- Assessee was following mercantile system of accounting |
945
| >> |
| VAT payable and excise duty balances brought forward from earlier years exhibited in Schedule 3 of balance-sheet |
945
| >> |
| Provision for retention bonus -- Disallowance of amount not paid before due date for filing return of income |
945
| >> |
| Customs duty of import of inputs |
946
| >> |
| Central excise paid before due date of filing return |
946
| >> |
| Leave travel expenditure and bonus |
946
| >> |
| Provision for leave encashment -- Ascertained liability |
946
| >> |
| Local Body Tax (LBT) paid |
946
| >> |
| Non-remission of electricity during collected in the capacity of agent |
946
| >> |
| Disallowance of incentive given to two employees |
946
| >> |
| Deduction only on actual payment -- Expenses incurred on account of taxes and duties pertaining to earlier year |
946
| >> |
| Disallowance of Contribution to Environmental Relief Fund |
947
| >> |
| Interest on loans or advances -- Payment before due date under section 139(1) |
947
| >> |
| Allowable in year of payment |
947
| >> |
| 81. - CENVAT Credits [Clause 27(a)] |
947
| >> |
| I. Requirement Under Section 27(a) |
947
| >> |
| Requirements of clause no. 27(a) |
947
| >> |
| Requirement under e-filing portal |
947
| >> |
| Auditor to take care |
948
| >> |
| Availing of CENVAT credit |
948
| >> |
| II. Reporting Requirements [As per Notified Form No. 3CD] |
948
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
949
| >> |
| Tax auditor to go through relevant records |
949
| >> |
| Reporting requirement |
949
| >> |
| Reporting requirement under this clause is distinct from that under clause 14(b) |
949
| >> |
| Reporting under clause 27(a) |
950
| >> |
| Details to be maintained by tax auditor |
950
| >> |
| 82. - Expenditure/Income of Earlier Years Debited/Credited in Current Year [Clause 27(b)] |
950
| >> |
| I. Requirement Under Clause 27(b) |
950
| >> |
| Requirement of clause No. 27(b) |
950
| >> |
| Requirement under e-filing portal |
950
| >> |
| II. Reporting Requirements |
950
| >> |
| Reporting by auditor under clause 27(b) |
950
| >> |
| Consequences of difference of opinion between statutory auditor and tax auditor |
951
| >> |
| Particular items whether to be shown as prior period item under clause 27(b) |
951
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
952
| >> |
| Tax auditor to obtain details of prior period income/expenditure |
952
| >> |
| Difference between expenditure of any earlier year and expenditure relating to earlier year crystallised during the year |
952
| >> |
| Tax auditor to give regard to report of statutory auditor |
953
| >> |
| Information to be maintained by tax auditor |
953
| >> |
| 83. - Share of Private Company Received Without or Inadequate Consideration [Clause 28] |
953
| >> |
| I. Requirement of Clause No. 28 |
953
| >> |
| Requirement of clause no. 28 |
953
| >> |
| Requirement under e-filing portal |
953
| >> |
| II. Reporting Requirement |
954
| >> |
| The auditor is required to report whether during the previous year the assessee has received any property, being share of a company not being a company in which the public are substantially interested, without consideration or for inadequate consideration |
954
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
954
| >> |
| Tax auditor to obtain relevant details |
954
| >> |
| Audit to consider the provisions of Rule 11UA(1)(c) |
954
| >> |
| To obtain copy of valuation report |
954
| >> |
| Details to be maintained by tax auditor |
955
| >> |
| IV. Background Material |
955
| >> |
| 84. - Shares Issued at Consideration Which Exceeds Fair Market Value [Clause 29] |
955
| >> |
| I. Requirement of Clause No. 29. |
955
| >> |
| Requirement of clause no. 29 |
955
| >> |
| Requirement under e-filing portal |
955
| >> |
| II. Reporting Requirements |
956
| >> |
| What auditor should do |
956
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
956
| >> |
| Obtain list containing the details of shares issued |
956
| >> |
| To consider relevant provisions |
956
| >> |
| To obtain copy of valuation report |
957
| >> |
| Tax auditor to maintain details |
957
| >> |
| IV. Background Material |
957
| >> |
| Section 56(2)(viib) applicable to whom |
957
| >> |
| How provisions apply |
957
| >> |
| Section not applicable, where shares issued to non-resident |
957
| >> |
| What is taxed |
957
| >> |
| Provisions not to apply where consideration received by venture capital undertaking |
958
| >> |
| Provisions not to apply, where shares issued to certain persons |
958
| >> |
| Fair value of shares |
958
| >> |
| Company in which public are substantially interested -- Meaning of |
958
| >> |
| Determination of fair value of shares |
959
| >> |
| Terminologies defined |
960
| >> |
| Section 56(2)(viib) not applicable to company in which public are substantially interested |
960
| >> |
| Issuance of redeemable non-cumulative preference shares in excess of face value of each share |
960
| >> |
| Fair value as per discounted cash flow higher than issuance price of share |
960
| >> |
| No evidence furnished as to suitability of DCF method for valuation |
960
| >> |
| Fair value arrived at after applying DCF method -- Assessee required to prove cash flow projection |
960
| >> |
| Report of valuer under DCF method -- Valuation done by valuer as per mandate of statute |
960
| >> |
| Year of application v. year of allotment of shares |
961
| >> |
| Issuance of shares at more than fair value -- AO rejected DCF method of valuation on the ground of projected results not matching with actual results |
961
| >> |
| Shares issued at value less than fair market value as per valuation in accordance with rule 11UA(2)(b) |
961
| >> |
| Assessee had option to determine fair market value being either as per NAV method or DCF method |
961
| >> |
| No defect pointed out in value determined as per cash flow method |
962
| >> |
| 85. - Amount Chargeable to Tax Under Section 56(2)(ix) [Clause 29A] |
962
| >> |
| I. Requirement of Clause No. 29A |
962
| >> |
| Requirement of clause No. 29A |
962
| >> |
| II. Reporting Requirements |
962
| >> |
| What to be reported |
962
| >> |
| How to ascertain whether the section 56(2)(ix) got triggered |
963
| >> |
| III. Extracts from Implementation Guide Issued by ICAI |
963
| >> |
| Amount forfeited in respect of a personal capital asset |
963
| >> |
| Actual forfeiture necessary |
963
| >> |
| Only forfeiture of advance towards transfer of a capital asset is required to be reported |
963
| >> |
| When forfeiture can be said to have taken place |
963
| >> |
| Certificate to be obtained |
964
| >> |
| Reporting requirements |
964
| >> |
| IV. Background Material |
964
| >> |
| Taxing money forfeited |
964
| >> |
| Forfeiture of money towards debentures |
965
| >> |
| 86. - Income Chargeable Under Section 56(2)(x) [Clause 29B] |
966
| >> |
| I. Requirement of Clause No. 29B |
966
| >> |
| Requirement of clause No. 29B |
966
| >> |
| II. Reporting Requirements |
966
| >> |
| What to be reported upon |
966
| >> |
| What auditor shall do |
966
| >> |
| Auditor to take care |
966
| >> |
| III. Extracts from Implementation Guide Issued by ICAI |
967
| >> |
| Certificate from auditee |
968
| >> |
| Stamp duty value of which date |
968
| >> |
| Disputing stamp value |
968
| >> |
| Assets other than immovable property |
968
| >> |
| Asking for valuation report |
968
| >> |
| Reporting by auditor |
968
| >> |
| IV. Background Material |
968
| >> |
| Applicability of section 56(2)(x) |
968
| >> |
| Specified property chargeable under section 56(2)(x) |
969
| >> |
| Exclusions -- Receipts that will not be taxed |
970
| >> |
| Receipt of property without adequate consideration -- Exemption from applicability of provisions |
970
| >> |
| ‘Relative’ defined |
971
| >> |
| Properties covered by section 56(2)(x) |
971
| >> |
| Stamp duty value -- How determined |
972
| >> |
| Fair market value |
973
| >> |
| Residential status irrelevant |
973
| >> |
| Provision to apply to all assessees |
973
| >> |
| Taxable event is receipt |
973
| >> |
| What if any such property is received by minors |
974
| >> |
| Only the property/money received from any person is to be taxed |
974
| >> |
| Receipt of money -- Certain issues |
974
| >> |
| Receipt of immovable property -- Related issues |
975
| >> |
| Receipt of property other than immovable property -- Certain issues |
976
| >> |
| Determination of fair market value of property other than immovable property |
978
| >> |
| Aggregation under different sub-clauses of section 56(2)(x) |
980
| >> |
| Consequential provisions |
981
| >> |
| Challenging the stamp duty value |
981
| >> |
| Gifts not in contemplation of death from non relative -- Expenditure incurred on treatment of donor |
981
| >> |
| Loans repayable in future |
981
| >> |
| Amount received by partners on retirement from firm relinquishing all rights/ interest in firm |
982
| >> |
| Amount already taxed in hands of trust |
982
| >> |
| Amount claimed to be received as nominee of deceased friend -- No supportive correspondence or documents |
982
| >> |
| All the shareholders being close relatives |
982
| >> |
| Difference in issue price and fair market value of share -- Transaction of issuance of shares was carried out to comply with a covenant in loan agreement |
982
| >> |
| Gift received by individual from HUF |
982
| >> |
| Whether section applicable to property purchased as stock-in-trade pursuant to real estate business |
982
| >> |
| Amount claimed to be received as nominee of deceased friend -- No supportive correspondence or documents |
983
| >> |
| Market value of the property was less than the circle rate |
983
| >> |
| Purchase of property for consideration less than stamp duty value -- Property shown an the books as stock-in-trade |
983
| >> |
| Addition on account of difference between sale consideration and guideline value of property -- No incriminating evidence that assessee paid higher sale consideration than actual sale consideration recorded in registered sale document |
983
| >> |
| Property not being capital asset -- Applicability of section 56(2)(vii) |
983
| >> |
| Receipt of huge share premium duly substantiated by assessee -- AO taxed the amount received in view of section 78(2) of Companies Act, 1956 on account of non-utilization of premium for business purpose |
983
| >> |
| Corpus contributions received by a private discretionary trust -- Taxability under section 56(2)(vii) alleging that the trust is an "individual" |
984
| >> |
| Addition on account of amount received by the assessee as a legacy through the Will |
984
| >> |
| Applicability of section 56(2)(viia) -- In case of capital contribution made by a partner in the form in kind |
984
| >> |
| Gift from unrelated persons treated as assessee’s income under section 56(2)(vi) |
984
| >> |
| Receipt of bonus shares |
985
| >> |
| Difference between the market value and purchase consideration on date of registration of sale |
985
| >> |
| 87. - Borrowals on Hundi and Repayments Otherwise than Through an Account Payee Cheque [Clause 30] |
985
| >> |
| I. Requirement of Clause No. 30 |
985
| >> |
| Requirement of clause No. 30 |
985
| >> |
| Requirement under e-filing portal |
985
| >> |
| II. Reporting Requirements |
986
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition). |
986
| >> |
| Tax auditor to obtain a complete list of borrowings/repayments |
986
| >> |
| Qualification where difficult to verify that payments made by account payee cheque |
986
| >> |
| Details to be maintained by tax auditor |
986
| >> |
| IV. Background Material |
987
| >> |
| Scheme of section 69D |
987
| >> |
| Avoidance of double taxation |
987
| >> |
| Applicability of provision as regards interest paid on amount borrowed |
987
| >> |
| Applicability of section 69D |
987
| >> |
| What is ‘hundi’? |
988
| >> |
| Characteristics of a hundi |
988
| >> |
| Conditions precedent as regards hundi transaction |
989
| >> |
| Indication of there being a Hundi transaction |
990
| >> |
| Relevant circulars |
991
| >> |
| Documents executed on hundi papers |
992
| >> |
| Documents written in English |
992
| >> |
| When documents are not hundi |
992
| >> |
| Scope for invocation of section 69D |
993
| >> |
| 88. - Secondary Transfer Pricing Adjustments [Clause 30A] |
994
| >> |
| I. Requirement of Clause No. 30A |
994
| >> |
| II. Reporting Requirements |
994
| >> |
| Reporting requirements |
994
| >> |
| III. Extracts from the Implementation Guide Issued by ICAI |
995
| >> |
| Tax auditor is required to verify whether any primary adjustment is ‘made’ in terms of section 92CE(1) |
995
| >> |
| Disclosure required for each and every type of primary adjustment made in the relevant financial year |
995
| >> |
| Tax auditor to obtain certificate from the assessee |
996
| >> |
| Reporting by auditor |
996
| >> |
| As to repartiation of excess money |
996
| >> |
| Ambiguity on reporting |
996
| >> |
| IV. Background Material |
997
| >> |
| Secondary adjustment |
997
| >> |
| Primary adjustment |
997
| >> |
| Secondary adjustment when to be made |
998
| >> |
| Clarification regarding no secondary adjustment in certain cases |
998
| >> |
| Terminologies defined |
998
| >> |
| Scope of section 92CE(2) restricted to excess money or part thereof, which is not repatriated |
998
| >> |
| Assessee provided with option to pay tax on excess money or part thereof not repatriated and not to make any secondary adjustment |
1000
| >> |
| 89. - Thin Capitalisation [Clause 30B] |
1002
| >> |
| I. Requirement of Clause No. 30B |
1002
| >> |
| Requirements of clause no. 30B |
1002
| >> |
| II. Reporting Requirements |
1003
| >> |
| Extracts from the implementation guide issued by ICAI |
1003
| >> |
| III. Background Material |
1004
| >> |
| Thin capitalisation rules -- What is? |
1004
| >> |
| Amendment by the Finance Act, 2017 |
1005
| >> |
| Applicability of section 94B |
1005
| >> |
| When section 94B applies |
1005
| >> |
| Excluding interest paid or payable to Permanent Establishment of a non-resident Bank for the purpose of disallowance of interest under section 94B |
1005
| >> |
| Amount of interest not allowable |
1006
| >> |
| Non-applicability of provision of section 94B |
1006
| >> |
| Carry over of interest expenditure |
1006
| >> |
| Terminologies defined |
1006
| >> |
| Provisions illustrated |
1008
| >> |
| 90. - General Anti Avoidance Rule [Clause 30C] |
1009
| >> |
| I. Requirement of Clause No. 30C |
1009
| >> |
| II. Background Material |
1009
| >> |
| Non-application of GAAR provision |
1009
| >> |
| Declaration of arrangement as impermissible avoidance agreement |
1010
| >> |
| Applicability of Chapter X-A |
1010
| >> |
| Impermissible avoidance arrangement -- What is? |
1010
| >> |
| Arrangement that lack commercial substance -- What is? |
1011
| >> |
| Consequence of impermissible avoidance arrangement |
1012
| >> |
| Treatment of connected person and accommodating party |
1013
| >> |
| Applicability of Chapter X-A and guidelines for applicability |
1013
| >> |
| Terminologies defined |
1013
| >> |
| Provisions of GAAR to apply to assessees covered by sections 90 and 90A |
1015
| >> |
| 91. - Loans or Deposits or Specified Sum or Advance of ₹ 20,000 or More or Receipts/Payments in Violation of Section 269ST [Clause 31] |
1015
| >> |
| I. Requirement of Clause No. 31 and Under e-Filing Portal |
1015
| >> |
| Inquiry under clause 31 |
1015
| >> |
| II. Reporting Requirements |
1018
| >> |
| Clause 31(a) |
1018
| >> |
| Clause 31(b) |
1018
| >> |
| Clause 31(ba) |
1019
| >> |
| Clause 31(bb) |
1019
| >> |
| Clause 31(bc) |
1019
| >> |
| Clause 31(bd) |
1019
| >> |
| Clause 31(c) |
1020
| >> |
| Clause 31(d) |
1020
| >> |
| Clause 31(e) |
1020
| >> |
| Applicability of section 269SS/269T in case of consideration for sale of immovable property |
1020
| >> |
| Auditor to take care |
1021
| >> |
| Significance of opening credit balance of loan taken |
1024
| >> |
| Auditor’s duty as regards credit of interest amount |
1024
| >> |
| Reporting in respect of loans and deposits taken or accepted by means of transfer entries |
1024
| >> |
| Maintenance of current account is also covered by clause 31 |
1025
| >> |
| Reporting requirement in case where certain payments made directly on behalf of depositors from loan account |
1026
| >> |
| No reporting required in certain cases |
1026
| >> |
| Loan taken free of interest |
1026
| >> |
| Advance against sales |
1026
| >> |
| Composite accounts |
1027
| >> |
| Transactions not covered under sections 269SS and 269T |
1027
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
1028
| >> |
| Clause 31(a) |
1028
| >> |
| Clause 31(b) |
1030
| >> |
| Clause 31(c) |
1032
| >> |
| Requirement of certificate |
1032
| >> |
| Practical difficulties |
1032
| >> |
| IV. Reporting under Clause 31(bb) to 31(bd) as per Implementation Guide Issued by ICAI |
1033
| >> |
| No reporting in certain cases |
1033
| >> |
| Scope of section 269ST |
1034
| >> |
| Reporting regarding section 269ST |
1034
| >> |
| V. Background Material |
1037
| >> |
| A. Relevant Provisions |
1037
| >> |
| Restriction on acceptance of loans, deposits and specified sum [Section 269SS] |
1037
| >> |
| Cash receipts [Section 269ST] |
1038
| >> |
| Restrictions on repayment of loans, deposits or specified advance [Section 269T] |
1042
| >> |
| B. Section 269SS Held Not Applicable |
1044
| >> |
| Where each deposit did not exceed ₹ 20,000 |
1044
| >> |
| Cash deposit from director towards share application money |
1045
| >> |
| Transaction between firm and partner |
1045
| >> |
| Capital contribution to proposed partnership in cash |
1046
| >> |
| Assessee being a finance company |
1046
| >> |
| Acceptance and repayment of loan/deposits in cash by assessee non-banking financial company |
1046
| >> |
| Amount received back from borrower in cash |
1047
| >> |
| Agents acting as behalf of principal |
1047
| >> |
| Cash accepted from agriculturists |
1047
| >> |
| Amount paid by director to company |
1047
| >> |
| Amount received from directors in the shape of share application money |
1047
| >> |
| Applicability where assessee acted as agent |
1048
| >> |
| Amount received with no obligation to return |
1048
| >> |
| Section 269SS not applicable where related amount neither loan nor deposit |
1048
| >> |
| Director of a company not covered by section 269SS |
1049
| >> |
| Share application Money |
1049
| >> |
| Payment made by sister concern on behalf of assessee -- Alleged receipt of cash loan by assessee |
1053
| >> |
| Contravention of provision of section 269SS -- Bank deposit treated as business receipt and not loan |
1053
| >> |
| Receipt of loan in cash from relatives |
1053
| >> |
| Allegation that assessee received amounts in cash as loan from HUF -- HUF deposited amounts with assessee company for redemption of jewellery purchased under gold savings scheme |
1054
| >> |
| Loan accepted though bearer cheque -- Loan accepted from father |
1054
| >> |
| Both creditor and borrower being agriculturist |
1054
| >> |
| Acceptance of cash exceeding the limit prescribed under section 269SS from assessee’s own HUF |
1054
| >> |
| Loan transactions made before incorporation of assessee company |
1054
| >> |
| Cash received by assessee from the commission agent against the crops |
1054
| >> |
| C. Section 269T Held Not Applicable |
1054
| >> |
| Refund of advance taken for share application money in cash |
1054
| >> |
| Payment by HUF to its member or vice versa |
1055
| >> |
| Current account transactions |
1055
| >> |
| Repayment of deposit/loan in cash on a single day not exceeding ₹ 20,000 |
1055
| >> |
| Payment to firms exceeding specified limits in cash |
1055
| >> |
| Re-payment of capital balance in cash |
1055
| >> |
| Capital contribution to proposed partnership |
1055
| >> |
| Repayment of deposit/loan in cash on a single day not exceeding ₹ 20,000 |
1056
| >> |
| Cash payment, out of closing balance in capital accounts of retired partners |
1056
| >> |
| Loan squared off by assessee by way of conversion of the loan into equity |
1057
| >> |
| Loan from directors |
1057
| >> |
| Receipt of cash from HUF entity |
1057
| >> |
| 92. - Brought Forward Loss or Depreciation [Clause 32] |
1058
| >> |
| I. Inquiry Under Clause 32(a) and Under e-Filing Portal |
1058
| >> |
| A. Clause 32(b) of Form No. 3CD : Change in Shareholding in Case of Company |
1059
| >> |
| Requirement of Clause No. 32(b) and under e-filing portal |
1059
| >> |
| B. Clause 32(c) and 32(e) of Form No. 3CD : Speculation Loss and Company Deemed to Carry on Speculative Business |
1059
| >> |
| Requirement of clause No. 32(c) |
1059
| >> |
| Clause 32(e) of Form No. 3CD |
1059
| >> |
| Requirement under e-filing portal – Clause 32(c) |
1059
| >> |
| Requirement under e-filing -- Clause 32(e) |
1059
| >> |
| C. Clause 32(d) of Form No. 3CD : Loss in Specified Business |
1059
| >> |
| Clause 32(d) of Form No. 3CD |
1059
| >> |
| Requirement under e-filing portal |
1059
| >> |
| D. Reporting Requirements |
1059
| >> |
| Vis-a-vis clause 32(a) |
1059
| >> |
| Vis-a-vis clause 32(b) |
1060
| >> |
| Points to be kept in mind while reporting under clause 32(b) |
1060
| >> |
| Vis-a-vis clause 32(c) |
1061
| >> |
| Vis-a-vis clause 32(d) |
1061
| >> |
| Vis-a-vis clause 32(e) |
1061
| >> |
| Reporting where necessary records and information not made available to auditor |
1061
| >> |
| Interplay with clause 8A |
1062
| >> |
| Where assessee opts for section 115BAC |
1062
| >> |
| E. Extracts From the ICAI’s Guidance Note (Revised 2014 Edition) |
1062
| >> |
| Clause 32(a) |
1062
| >> |
| Clause 32(b) |
1063
| >> |
| Clause 32(c) |
1063
| >> |
| Clause 32(d) |
1064
| >> |
| Clause 32(e) |
1064
| >> |
| II. Background Material |
1065
| >> |
| A. Clause No. 32(a) of Form No. 32CD : Details of Brought Forward Loss or Depreciation |
1065
| >> |
| Time limit for carry over of losses |
1065
| >> |
| Filing of return before due date -- A pre-condition to claim carry forward and set off of loss |
1065
| >> |
| Adjustment of loss |
1066
| >> |
| Unabsorbed depreciation to be adjusted once option is exercised under section 115BAC/115BAD |
1069
| >> |
| Carry forward and set off of losses of firms [Sections 75 and 78(1)] |
1069
| >> |
| Succession of business -- Carry forward of losses in the case of succession [Section 78(2)] |
1070
| >> |
| B. Clause 32(b) of Form No. 3CD : Change in Shareholding in Case of Company |
1071
| >> |
| Rules regarding carrying over and set off of loss by companies other than start-up |
1071
| >> |
| Non-satisfaction above conditions required in case of eligible start-up |
1072
| >> |
| Exception to provisions of section 79(1) |
1075
| >> |
| Terminologies defined |
1075
| >> |
| Applicability of provisions of section 79 -- On basis of shareholding or beneficial ownership |
1075
| >> |
| Denial on the ground of change in pattern of shareholding having more than 51% voting power |
1075
| >> |
| When section 79 to be applied |
1076
| >> |
| No change in shareholding |
1076
| >> |
| How section 79 be applied |
1076
| >> |
| Section 79 not applicable to unabsorbed depreciation |
1076
| >> |
| Change in shareholding, when is |
1076
| >> |
| Assessee entitled to carry forward losses where requirement of section 79 satisfied |
1077
| >> |
| C. Clause 32(c) and 32(e) of Form No. 3CD : Speculation Loss and Company Deemed to Carry on Speculative Business |
1077
| >> |
| A. Companies Deemed to be Carrying on Speculation Business |
1077
| >> |
| Companies deemed to be carrying on speculation business |
1077
| >> |
| Application of Explanation to section 73 |
1077
| >> |
| Effect of Explanation 2 section 28 and Explanation to section 73 |
1077
| >> |
| Applicability of Explanation to section 73 |
1078
| >> |
| Applicability of Explanation to section 73 to company whose principal business is dealing in shares |
1079
| >> |
| Only composition of gross total income to be checked |
1079
| >> |
| Meaning of “gross total income” for the purpose of Explanation to section 73 |
1080
| >> |
| “Gross total income” within the meaning of Explanation to section 73 |
1080
| >> |
| How gross total income be determined for the purposes of Explanation to section 73? |
1080
| >> |
| Income of company engaged in purchasing and selling of shares to be treated as from speculative transaction |
1080
| >> |
| Explanation to section 73 attracted to buying and selling of shares on delivery basis in case of company |
1081
| >> |
| Explanation to section 73 attracted where gross total income of the assessee comprised mainly income not in relation to granting of loans and advances |
1081
| >> |
| Share trading loss and profit from derivative be set off before applying Explanation to section 73 |
1081
| >> |
| Loss on sale of shares acquired through IPO |
1081
| >> |
| For application of Explanation to section 73, not necessary that purchase and sale of shares take place in the same year |
1082
| >> |
| Assessee engaged in sale and purchase of shares of other companies, whether can be said to be indulged in speculative business |
1082
| >> |
| Only composition of gross total income to be checked for applicability of Explanation to section 73 |
1082
| >> |
| Explanation to section 73 attracted even where a part of the business of the company comprises purchase and sale of shares |
1082
| >> |
| Where the entire business consists of purchasing/selling shares |
1082
| >> |
| Only composition of the gross total income to be checked for applicability of Explanation to section 73 |
1083
| >> |
| Explanation to section 73 applicable where assessee’s principal business consisted of granting loans and advances |
1083
| >> |
| B. Losses in Speculation Business [Section 73] |
1083
| >> |
| Treatment of speculation business |
1083
| >> |
| Meaning of ‘speculative transaction’ |
1083
| >> |
| Scheme of section 73 as to carry forward and set-off of speculative losses |
1088
| >> |
| Nature of section 73 |
1088
| >> |
| Whether carrying on of the same business necessary for set-off |
1088
| >> |
| Carry over of speculative loss |
1088
| >> |
| Precedence to speculative losses over unabsorbed depreciation and unabsorbed scientific research expenditure |
1089
| >> |
| Speculation losses can be set-off and carry forward against speculative gains only |
1089
| >> |
| Losses of illegal speculative business |
1089
| >> |
| Assessee having no business income |
1089
| >> |
| Speculation loss be set off only against speculative gain |
1089
| >> |
| Speculative profit of current year be first adjusted against the brought forward speculation loss |
1090
| >> |
| Business loss be set-off against speculative gains |
1090
| >> |
| Loss on share trading transactions of NBFC |
1090
| >> |
| Setting off against normal business income |
1090
| >> |
| 93. - Deduction Under Chapter III or Chapter VI-A [Clause 33] |
1091
| >> |
| I. Requirement of Clause No. 33 |
1091
| >> |
| Requirement of clause no. 33 and under e-filing portal |
1091
| >> |
| II. Reporting Requirements |
1091
| >> |
| Reporting requirements |
1091
| >> |
| Reporting in cases where deduction is allowed subject to Chartered Accountant Report |
1091
| >> |
| Inter play with clause 8A |
1092
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
1092
| >> |
| Duty of tax auditor restricted only to business activity of the assessee |
1092
| >> |
| Duty of tax auditor while reporting upon accounts of a branch/head office |
1092
| >> |
| Case of sale proprietor -- Allowability of deduction |
1092
| >> |
| Tax auditor to adhere to conditions subject to which deduction admissible |
1092
| >> |
| Difference between amount claimed and amount admissible |
1093
| >> |
| Section where separate audit report is required |
1093
| >> |
| Reporting about deduction under section 10A/10AA |
1093
| >> |
| Special consideration in case of certain sections |
1093
| >> |
| IV. Background Materials |
1094
| >> |
| Deduction under section 10AA allowable to whom and income in respect which deduction allowable |
1094
| >> |
| Mode of computing deduction under section 10AA |
1094
| >> |
| Deduction also to on-site development of computer software |
1094
| >> |
| Deduction under section 10AA to be allowed only to new units |
1094
| >> |
| Amount and period of deduction |
1095
| >> |
| Conditions for special deduction under section 10AA(1)(ii) |
1095
| >> |
| Audit requirements |
1097
| >> |
| CBDT clarification on various issues relating to tax concession to units eligible for benefit under sections 10A, 10AA and 10B |
1097
| >> |
| Clarification on allowability of deduction under section 10A/10AA on transfer of technical manpower in case of software industry |
1098
| >> |
| No deduction under Chapter VI-A |
1098
| >> |
| No deduction in respect of income computed as per ALP |
1098
| >> |
| Deduction available under Chapter VI-A |
1098
| >> |
| 94. - Tax Deduction/Collection at Source [Clause 34] |
1100
| >> |
| I. Requirement of Clause No. 34 |
1100
| >> |
| Requirement of clause no. 34 and under e-filing portal |
1100
| >> |
| II. Tax Audit Requirements |
1100
| >> |
| Duty of auditor under clause 34 of Form No. 3CD |
1101
| >> |
| Auditor to take care |
1102
| >> |
| Inter-play with clause 21(b) |
1102
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
1102
| >> |
| Reporting under clause 34(a) |
1102
| >> |
| Reporting under clause 34(b) |
1105
| >> |
| Reporting under clause 34(c) |
1106
| >> |
| IV. Background Material |
1107
| >> |
| A. Provisions Related to TDS |
1107
| >> |
| Summary of provisions relating to tax deduction at source |
1107
| >> |
| Liability to deduct tax by individual/HUF in various TDS provisions linked to turnover |
1108
| >> |
| TDS Provisions at a Glance [Sections 190 to 197A] |
1109
| >> |
| TDS under Chapter XVII-B of the Income Tax Act, 1961 on service tax/GST component comprised in the payments made to residents |
1121
| >> |
| Income payable net of tax [Section 195A] |
1121
| >> |
| Requirement of tax deduction at source in case of entities whose income is exempted under section 10 -- Exemption thereof |
1121
| >> |
| Lower TDS on certain payments [Section 197B from 14-5-2020 to 31-3-2021] |
1123
| >> |
| Reduction in TDS rates for period 14-5-2020 to 31-3-2021 |
1123
| >> |
| Deposit of tax to the credit of Central Government [Section 200(1) and 200(2) read with rule 30] |
1124
| >> |
| Time for deposit of TDS in case of deductors other than Government deductors |
1124
| >> |
| Time for deposit of TDS where tax is deducted under section 194-IA/194-IB/194M and mode of payment of TDS to government |
1124
| >> |
| Submission of quarterly return [Section 200(3) r/w rule 31A] |
1125
| >> |
| Form of statement of deduction of tax |
1125
| >> |
| Authority to whom statement is to be furnished |
1126
| >> |
| Time limit for furnishing statement other than under section 194-IA/194-IB/194M |
1126
| >> |
| Furnishing of statement by person responsible for deduction of tax under section 194-IA/194-IB/194-IC |
1126
| >> |
| Extension of time limits |
1126
| >> |
| Duty of deductor while preparing statement of tax deducted |
1126
| >> |
| Fee for late furnishing of TDS statement |
1127
| >> |
| Assessee to be treated as in default and interest for failure to deduct or pay TDS [Section 201] |
1128
| >> |
| Issuance of TDS certificate [Section 203] |
1129
| >> |
| Person responsible for deducting tax [Section 204] |
1131
| >> |
| Tax deductee to provide PAN to tax deductor otherwise face tax deduction at higher rate [Section 206AA] |
1132
| >> |
| TDS at higher rate in certain cases [Section 206AB, effective from 1-7-2021] |
1134
| >> |
| Rate of exchange for the purpose of deduction of tax at source on income payable in foreign currency [Rule 26] |
1134
| >> |
| B. Provisions Relating to TCS |
1135
| >> |
| Person being seller responsible for tax collection at source |
1135
| >> |
| When individual or HUF is liable to collect tax |
1135
| >> |
| Specified goods for the purposes of section 206C(1) |
1135
| >> |
| Meaning of ‘Seller’ [Explanation (c) to section 206C] |
1135
| >> |
| Buyer -- Meaning of |
1136
| >> |
| No tax to be collected in case of manufacturing and processing units [Section 206C(1A) and 206C(1B)] |
1136
| >> |
| Declaration by a buyer for no collection of tax at source under section 206C(1A) |
1137
| >> |
| Purchase price to include excise duty, etc. for the purpose of tax collection |
1137
| >> |
| Parking auctions, toll auctions, mining and quarrying leases and TCS provisions [Section 206C(1C)] |
1137
| >> |
| Clarifications regarding applicability of section 206C(1D) and 206C(1F) |
1138
| >> |
| Tax collection at source by authorised dealer receiving sum under the Liberalised Remittance Scheme of RBI [Section 206C(1G)] |
1138
| >> |
| Tax collection at source by seller of overseas tour package [Section 206C(1G] |
1144
| >> |
| Tax collection by seller of goods in certain cases [Section 206C(1H] |
1146
| >> |
| Rates of collection of tax at source |
1151
| >> |
| Reference to section 206C(1) and 206C(1C) in section 206C(2) and 206C(3) replaced by reference to section 206C |
1152
| >> |
| Deposit of tax collected at source [Section 206C(3)] |
1153
| >> |
| Collector of tax at source allowed to furnish correction statement [Section 206C(3B)] |
1153
| >> |
| Deposit of tax collected by collectors other than government authorities |
1153
| >> |
| Furnishing of quarterly statement of TCS [Proviso to section 206C(3)] |
1154
| >> |
| Furnishing of TCS certificate [Section 206C(5) read with rule 37D] |
1155
| >> |
| Liability to pay on failure to collect tax [Section 206C(6)] |
1155
| >> |
| Levy of interest [Section 206C(7)] |
1156
| >> |
| Collection of tax at lower rate [Section 206C(9)] |
1156
| >> |
| Lower rate of TCS for period 14-5-2020 to 31-3-2021 |
1156
| >> |
| Requirement to furnish Permanent Account Number by collectee [Section 206CC] |
1156
| >> |
| TCS at higher rate certain cases [Section 206CCA, from 1-7-2021] |
1158
| >> |
| 95. - Quantitative Details in Case of Trading and Manufacturing Concern [Clause 35] |
1159
| >> |
| I. Requirements of Clause No. 35 |
1159
| >> |
| Requirement of clause no. 35 |
1159
| >> |
| II. Reporting Requirements |
1159
| >> |
| Reporting by the auditor |
1159
| >> |
| What auditor needs to report |
1160
| >> |
| Ascertainment of quantitative details in case of general stores or a supermarket or a departmental store |
1160
| >> |
| Auditor’s duty where proper records are not maintained by the assessee |
1160
| >> |
| Reporting in case of manufacturing concern where raw materials and finished goods are recorded in different units |
1161
| >> |
| Furnishing the quantitative details in case of construction company |
1161
| >> |
| Furnishing of quantitative details in case of assessee rendering technical consultancy services |
1161
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
1161
| >> |
| Clause 35(a) -- Tax auditor should obtain certificate form assessee regarding principal items |
1161
| >> |
| Clause 35(b) |
1161
| >> |
| 96. - Deemed Dividend Under Section 2(22)(e) [Clause 36A] |
1162
| >> |
| I. Requirement of Clause N. 36A |
1162
| >> |
| II. Reporting Requirements |
1162
| >> |
| What auditor shall do |
1162
| >> |
| Auditor to take care |
1163
| >> |
| III. Extracts from the Implementation Guide Issued by ICAI |
1164
| >> |
| Certificate to be obtained as to list of closely held companies in which assessee is beneficial owner of shares carrying not less than 10% of the voting power and list of concerns in which he has substantial interest |
1164
| >> |
| To cross-check Form No. 26AS |
1164
| >> |
| Payment made on behalf of or for the individual benefit of the assessee -- Disclaimer by auditor |
1164
| >> |
| Issues to be considered |
1164
| >> |
| IV. Background Material |
1166
| >> |
| Meaning of dividend in terms of section 2(22)(e) |
1166
| >> |
| Meaning of accumulated profits |
1167
| >> |
| Payment of advance or loan when amounts to dividend |
1167
| >> |
| Items not includible while arriving at the accumulated profits |
1167
| >> |
| Items Includible while arriving at accumulated profits |
1169
| >> |
| Normal charge of depreciation as per Act |
1170
| >> |
| Commercial profits to be taken into account for quantifying accumulated profits |
1172
| >> |
| Applicability of exclusionary clause (ii) of section 2(22)(e) |
1173
| >> |
| Profit already capitalised not to be part of accumulated profits |
1173
| >> |
| Accumulated profits for purpose of section 2(22)(e) -- When to be ascertained |
1173
| >> |
| Amount advanced during the year is to be treated as deemed dividend |
1174
| >> |
| Accumulated profits do not include current years profit |
1174
| >> |
| When section 2(22)(e) comes into play |
1174
| >> |
| Person when deemed to have substantial interest in a concern |
1174
| >> |
| Meaning of ‘concern’ |
1175
| >> |
| What amount shall be taken as deemed dividend? |
1175
| >> |
| Computation of deemed dividend -- Amount advanced in earlier years to be reduced |
1175
| >> |
| No deemed dividend where assessee not shareholder in lending company |
1176
| >> |
| Applicability of section 2(22)(e) where partnership firm taking advance from company in which partners held shares on behalf of firm |
1176
| >> |
| Registered as well as beneficial shareholder -- Whether both necessary for section 2(22)(e) |
1177
| >> |
| HUF being a registered shareholder is not necessary for the purpose of section 2(22)(e) |
1178
| >> |
| Assessee’s wife received loan from a company, wherein the assessee was a director and majority shareholder |
1179
| >> |
| Assessee received loan from company in which he was director and was holding equity shares -- Assessee was paying interest on loan |
1179
| >> |
| Shareholder of company had substantial interest in the Partnership -- Money advanced to firm |
1179
| >> |
| No deemed dividend in case of receipt of share application money |
1179
| >> |
| No deemed dividend where assessee did not hold controlling shares in the transferor company |
1179
| >> |
| Addition of entire amount instead of proportion to shareholding |
1179
| >> |
| Amount in nature of accommodation entries through current account |
1179
| >> |
| Advances for mutual benefit of company as well as assessee |
1180
| >> |
| No deemed dividend where assessee acted as an intermediary |
1180
| >> |
| Transaction between group concerns |
1180
| >> |
| Repayment of advance in subsequent financial year |
1180
| >> |
| Receipt of advance where no accumulated profit in case of lending company |
1180
| >> |
| Business transactions of assessee, a NBFC |
1181
| >> |
| Payment of share application money to associate concern |
1181
| >> |
| Applicability of section 2(22)(e) to payments received from companies wherein assessee has substantial interest |
1181
| >> |
| Percentage of shareholding to be checked at the time of availing of loan for purpose of section 2(22)(e) in case of transaction with company |
1183
| >> |
| Loan from Share Premium Account -- Whether deemed dividend |
1184
| >> |
| Share application money shown under ‘current liabilities’ not to be treated as loan or advance for the purposes of section 2(22)(e) |
1184
| >> |
| Assessee took loan from two companies having common shareholders -- Money borrowed can be treated as deemed dividend as assessee was not a shareholder in the lending company |
1185
| >> |
| Assessee transferred his shareholding to trust -- Applicability of provision of section 2(22)(e) |
1185
| >> |
| Cash amount and assets received on family settlement would not be to be taxed as deemed dividend |
1186
| >> |
| Advance received from company having substantial accumulated profits was to be deemed as dividend |
1187
| >> |
| Loan or advance to a concern -- Assessee being trustee of trust to whom loan advanced |
1187
| >> |
| Accumulated profit -- Computation -- Treatment of capital subsidy |
1187
| >> |
| Advances in nature of normal business |
1188
| >> |
| Loan and advance by company to shareholder -- Assessee not being a shareholder but assessee's partner holding major share |
1189
| >> |
| Loans and advances -- Meaning of the expression loans and advances used in section 2(22)(e) |
1189
| >> |
| Mutual running or current account transactions between shareholder and lender company -- Applicability of section 2(22)(e) |
1190
| >> |
| 97. - Cost Audit [Clause 37] |
1190
| >> |
| I. Requirement of Clause No. 37 and Under e-filing Portal |
1190
| >> |
| II. Reporting Requirement |
1190
| >> |
| III. What Auditor need to do |
1190
| >> |
| IV. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 edition) |
1191
| >> |
| Tax auditor to take note of any observation in the report |
1191
| >> |
| Information about cost audit ordered but not completed to be given |
1191
| >> |
| Information to be given limited to period covered by tax audit report |
1191
| >> |
| V. Background Material |
1191
| >> |
| Requirement as to cost audit under Companies Act, 2013 |
1191
| >> |
| 98. - Excise Audit [Clause 38] |
1192
| >> |
| I. Requirement of Clause No. 38 and e-filing Portal |
1192
| >> |
| II. Reporting Requirements |
1192
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
1192
| >> |
| Tax auditor to incorporate material observations in the excise audit report |
1192
| >> |
| Information about excise audit ordered but not completed |
1193
| >> |
| Information about only such audit covered by the period of tax audit report |
1193
| >> |
| IV. Background Material |
1193
| >> |
| Central Excise Officer empowered to direct audit in certain cases [Section 14A of the Central Excises Act, 1944] |
1193
| >> |
| Commissioner empowered to direct audit [Section 14AA of the Central Excises Act, 1944] |
1193
| >> |
| 99. - Service Tax Audit [Clause 39] |
1194
| >> |
| I. Requirement of Clause No. 39 and e-filing Portal |
1194
| >> |
| II. Extract from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
1194
| >> |
| Tax auditor to take note of the details of disqualification or disagreement on any matter/item/value/quantity as may be reported/identified by the auditor |
1194
| >> |
| Information about service audit ordered but not completed |
1194
| >> |
| Information about only such audit covered by the period of tax audit report |
1194
| >> |
| III. Background Material |
1195
| >> |
| Audit and service tax [Section 72A] |
1195
| >> |
| 100. - Financial Ratios [Clause 40] |
1195
| >> |
| Requirement of clause no. 40 |
1195
| >> |
| Requirement under e-filing portal |
1195
| >> |
| Turnover -- Meaning of |
1196
| >> |
| Gross profit/Turnover ratio |
1196
| >> |
| Net profit/Turnover ratio |
1196
| >> |
| Stock-in-Trade/Turnover ratio |
1196
| >> |
| Material Consumed/Finished goods produced |
1196
| >> |
| Comprehensive illustration |
1197
| >> |
| I. Reporting Requirements |
1198
| >> |
| Data to be used for purpose of calculating ratios |
1198
| >> |
| Computation of ratios in case of a business concern engaged in both manufacturing and trading activities |
1198
| >> |
| Extraordinary items not to be considered while calculating ratios |
1199
| >> |
| Computation of ratios in case of a share-broker |
1199
| >> |
| Computation of ratios in case of a construction company |
1199
| >> |
| Computation of ratios in the case of adatiyas |
1199
| >> |
| Computation of ratios in the case of job worker |
1200
| >> |
| Computation of gross profit ratio under clause (a) |
1200
| >> |
| Basis for calculating stock turnover ratio under clause (4) |
1200
| >> |
| II. Extracts from the ICAI’s Guidance Note on Tax Audit under Section 44AB (Revised 2014 Edition) |
1200
| >> |
| Ratios to be given for different persons |
1200
| >> |
| Tax auditor to assign meaning to the terms used |
1200
| >> |
| Computation of ratios also to given |
1200
| >> |
| Consistency |
1200
| >> |
| Previous year figures |
1200
| >> |
| 101. - Details of Demand Raised/Refund Issued and Income Tax Act/Wealth Tax Act [Clause 41] |
1201
| >> |
| I. Requirements of Clause No. 41 |
1201
| >> |
| Requirement of clause no. 41 |
1201
| >> |
| II. Reporting Requirements |
1201
| >> |
| III. Extracts from the ICAI’s Guidance Note on Tax Audit Under Section 44AB (Revised 2014 Edition) |
1201
| >> |
| Tax auditor to obtain copy of demand/refund order |
1201
| >> |
| Demand/refund order for any year other than previous year |
1202
| >> |
| Details to be maintained by tax auditor |
1202
| >> |
| 102. - Filing of Form No. 61, 61A, and 61B [Clause 42] |
1202
| >> |
| I. Requirement of Clause No. 42 |
1202
| >> |
| II. Reporting Requirements |
1203
| >> |
| III. Extracts from the Implementation Guide Issued by ICAI |
1203
| >> |
| IV. Background Material |
1206
| >> |
| A. As to Form No. 61 |
1206
| >> |
| Documents pertaining to transactions in respect of which PAN must be quoted |
1206
| >> |
| Duty of certain persons to ensure that correct PAN is quoted [Rule 114C] |
1209
| >> |
| Time and manner in which persons referred to in sub-rule (2) of rule 114C shall intimate details of transaction to department [Rule 114D] |
1210
| >> |
| B. As to Form No. 61A |
1211
| >> |
| Statement of Financial Transaction or Reportable Account [Section 285BA] |
1211
| >> |
| Specified financial transactions -- Meaning of |
1211
| >> |
| Who shall furnish statement and in respect which transaction it shall be furnished |
1211
| >> |
| Reporting of certain incomes by specified persons |
1213
| >> |
| Aggregation of transactions |
1214
| >> |
| Manner of furnishing return in Form No. 61A |
1214
| >> |
| Time limit for furnishing of statement of financial transaction |
1215
| >> |
| Verification statement |
1215
| >> |
| Statement of Financial Transaction -- Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Dividend income |
1215
| >> |
| Statement of Financial Transaction -- Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income |
1215
| >> |
| Statement of Financial Transactions (SFT) -- Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Depository Transactions |
1215
| >> |
| Statement of Financial Transactions (SFT) -- Format, Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Mutual Fund Transactions by Registrar and Share Transfer Agent |
1215
| >> |
| C. As to Form No. 61B |
1215
| >> |
| Reporting Financial Institution and Due Diligence -- Requirement [Rules 114F to 114H] |
1215
| >> |
| Meaning of the term ‘reportable account’ |
1215
| >> |
| Meaning of “reporting financial institution” |
1218
| >> |
| Meaning of ‘reportable person’ |
1218
| >> |
| 103. - Country by Country Reporting [Clause 43] |
1219
| >> |
| I. Requirement of Clause No. 43 |
1219
| >> |
| Requirement of clause no. 43 |
1219
| >> |
| II. Reporting Requirement |
1219
| >> |
| III. Extracts from the Implementation Guide Issued by ICAI |
1220
| >> |
| IV. Background Material |
1222
| >> |
| Furnishing of report in respect of an international group |
1222
| >> |
| Notice to prescribed income-tax authority |
1222
| >> |
| Inclusions in the report to be furnished in respect of an international group |
1222
| >> |
| Report by a constituent entity of an international group |
1222
| >> |
| No report to be furnished by a constituent entity of an international group |
1223
| >> |
| Prescribed authority may require an entity to produce specified information and document |
1223
| >> |
| When international group is not required to furnish report in respect of international group |
1223
| >> |
| 104. - GST Related Reporting [Clause 44] |
1224
| >> |
| I. Requirement of Clause No. 44 |
1224
| >> |
| II. Reporting Requirement |
1224
| >> |
| Deferment of reporting |
1224
| >> |