Terms relevant for provisions of section 44AB

[Tax Audit Report]

In the case of a professional

"gross receipts" would include all receipts arising from carrying on of the profession.

Question :

whether the out of pocket expenses received by professional should form part of his gross receipts for purposes of this section.

Solution :

Normally, in the case of solicitors, advocates or chartered accountants, such out of pocket expenses received in advance are credited in a separate client's account and utilised for making payments for stamp duties, registration fees, counsel's fees, travelling expenses etc on behalf of the clients.

These amounts, if collected separately either in advance or otherwise, should not form part of the "gross receipts". If, such out of pocket expenses are not specifically collected but are included / collected by way of a consolidated fee, the whole of the amount so collected shall form part of gross receipts and no adjustment should be made in respect of actual expenses paid by the professional person for and/or on behalf of his clients out of the gross fees so collected.

However, the amount received by way of advance for which services are yet to be rendered will not form part of the receipts, as such advances are the liabilities of the assessee and cannot be treated as his receipts till the services are rendered.

[Tax Audit Report]

Question :

In the case of an assessee carrying on business and at the same time engaged in a profession, what are the limits applicable to him under section 44AB for getting the accounts audited.

Solution :

In such a case if his professional receipts are, say, Rs.17 lakhs but his total sales, turnover or gross receipts in business are, say, Rs.35 lakhs, it will be necessary for him to get his accounts of the profession and also the accounts of the business audited because the gross receipts from profession exceed the limit of Rs.15 lakhs.

If, the professional receipts are, say, Rs.9 lakhs and total sales turnover or gross receipts from business are, say, Rs.34 lakhs it will not be necessary for him to get his accounts audited under the above section, because his gross receipts from the profession as well as total sales, turnover or gross receipts from the business are below the prescribed limits.

[Tax Audit Report]

Act
The Income-tax Act, 1961.

Assessee
As defined in section 2(7).

Audit report
Any report submitted in Form No. 3CA/3CB along with the statement of particulars in Form No. 3CD.

Person
As defined in section 2(31).

Previous year
As defined in section 3.

Rules
The Income-tax Rules, 1962.

Specified date
"Specified date", in relation to the accounts of the previous year relevant to an assessment year means, in the case of a company, the 30th day of November of the relevant assessment year and in any other case, the 31st day of October of the relevant assessment year.

Tax audit
The audit carried out under the provisions of section 44AB.

Tax auditor
Auditor appointed by an assessee to carry out tax audit.