Prescribed limit to be determined in each year independent of the results obtained in the preceding year

[gopalji]

If the assessee write back the creaditors as per section 41(1) of the income tax act, then such wite back would not be clubbed into turnover.

[gopalji]

If the assessee has a turnover if Rs. 35 lakhs and a small business is carried out by the wife of the assessee from the money gifted from the husband, her income from this business would be includible in the income of husband by virtue of the provision of section 64 but the trunover of the wife would not be clubbed in the turnover of the business of husband.

[gopalji]

If the arbitrage income exceeds Rs. 40 lakh, the tax audit will be required.

In case of consignment agent, if the identity of the principal is disclosed to the buyer, then only commision would be taken into account for agent not the sale amount. In such cases, it will be tested whether the title to the goods with risk and reward has passed to the buyer or not. If the agent is holding the goods as the bailee then it can not be the purchase or sale in his account.

[gopalji]

Take a peculiar situation where GJA Marketing (P) Limited is managing a seasoned sale of various brands under a roof and providing them the various manufacturing companies sales counters, godowns, security, insurance cover of the goods. The representatives of each companies are managing their sale counters but the billing is done in the name of GJA Marketing (P) Limited. All the counters sale receipts is deposited with GJA at the end of the day. At week end, GJA makes a account of each vendor and deduct its commission @ 10% of the sale amount and pays the balance 90% payment to these vendors.

The total sales for the year is Rs. 3.5 crore and the commission of GJA is Rs. 35 lakh. In this situtation, the GJA is only bailee of the goods and hence its commission does not exceeds Rs. 40 lakhs hence not required to get its accounts audited under section 44AB.

[gopalji]

The sale and purchase of shares and securities partakes the character of either business or investment. There is no laid down law for ascetaining the nature but of course various factors play a decision role in deciding the nature of transactions whether these have been made with the motto of earning interest or dividend or otherwise. If the transactions are taken with the motto of earning dividend or interest, it is surely an investment and the sale of the investment is not included in turnover.

The various factors which decide the nature are like frequency and volume of the transactions.

The transactions where delivery takes place, the full consideration is taken into account for turinover purpose but where transactions are squared up without delivery, only difference amount is included in turnover.

As per ICAI guidance note the positive and negative profit should be aggregated for the purpose of turnover since these may be independent transactions not invloving the same lot or company.

However, in case of future, option and derivatives, only difference is treated as turnover.

[gopalji]

If an assessee is engaged in business having turnover of Rs. 30 lakhs and profession having receipts of Rs. 12.00 lakhs, is he required to get the account audited in respect of business also.?

Yes, since the assessee is covered under the provisions of section 44AB by virtue of professional receipts of more than Rs. 10 lakh hence he is required to get audited the books of account of all the business or profession.

[gopalji]

A CA is having the professional receipts of Rs. 9.50 lakhs and recovery towards out of pocket expenses Rs. 1.50 lakh for which he maintains a seperate bank account and does not pass the entry through professional income. He makes an account as Clients Expenses Account and debit the account by actual expenditure and credit the same by recovered amount. During the relevant assessment year, he actually made expenses of Rs. 1.10 lakh against the recovery of Rs. 1.50 lakhs leaving a surplus of Rs. 40000/- which he disclose in his other income, whehter he is correct?

No, once the reimbursement of expenses include a margin content then whole recovery would be added to the professional income thus his total receipts would be Rs. 9.50 lakhs plus 1.50 lakh and he is required to get the account audited u/s 44AB.

However, if the reimbursement is for the amount acutally expensed,then it would not partake the character of turnover.