25 May 2008
While preparing the P&L a/c under Sales turn-over I have taken sales amount + VAT i.e. total invoice amount. While preparing the return my auditor has set off the VAT component against VAT paid (expenses) and take only the bare sales. To my knowledge Sales turnover has been defined in the IT Act. Will some CA clarify supported by sec. no. and contents of the relevant sec. Thanks in advance.
25 May 2008
I do not understand your query. The return is not prepared by the auditor. Auditor does audit/gives consultation. I do not know why this impression that an auditor prepares accounts, incometax return etc.
26 May 2008
Dear Mr Raghavan, In my case I hand over the books, vouchers and trial balance to the auditor. He audits, prepares the final accounts, prepares the return and files it. The dispute is not who prepares the accounts, IT return, etc. I just wanted the definition of Total Sales Turnover according to IT Act. I will be happy if you can quote the relevant sec. verbatim. Thanks and regards.
26 May 2008
There is no definition of sales turnover under Income tax Act. It has to be understood in the commecial sense only, in the absense of definition.
26 May 2008
TURNOVER NOT DEFINED IN INCOME TAX ACT OR TAX AUDIT .SO YOUR AUDITOR ACTION IS ACCEPTABLE. SEE THE FOLLOWING INTERESTING CASE LAW IN HIGH COURT OF RAJASTHAN
Bajrang Oil Mills
v.
Income-tax Officer
Section 44AB of Income-tax Act, 1961 - Compulsory tax audit - Assessment year 1994-95 - Whether expressions ‘sales’, ‘turnover’ and ‘gross receipts’ used in section 44AB are not words of art used in relation to any individual transaction independently but have been used as ‘sales’, ‘turnover’ or ‘gross receipts’ - Held, yes – Whether expression ‘total’ qualifies all other three expressions, viz., ‘sales’, ‘turnover’ and ‘gross receipts’; total sales indicate aggregate price of sales of commodities carried out by Assessee as a trading business - Held, yes - Whether for purpose of attracting section 44AB, receipts of an Assessee by way of sale or trading business and receipts for doing job work can be clubbed for purpose of finding out whether limit of Rs. 40 lakhs prescribed for attracting provisions of section 44AB is made out - Held, yes
26 May 2008
All the experts replies are only theoritical and indirect but not inclined to solve my problem. In the instant case, bare sale is Rs.39 lacs, while as per sales invoice total which includes VAT, it is Rs.41 lacs. Can I project Rs.39 lacs as sales turnover, setting off the VAT charged in the sales Inv. against the VAT paid to Sales-tax Dept. and then get off without tax audit. The experts should be adopting some method acceptable by IT Dept.while handling the cases of their clients i.e. turnover taken as (1) inclusive of VAT or (2) exclusive of VAT.
26 May 2008
Dear sir, as per the guidance note isuued by the ICAI in respect of VAT accounting, sales turnover include only net sales i.e without vat and same way purchases on which set off is claimed is also shown net of vat. VAT is balance sheet item and will be accounted same as cenvat. in ur case net sales i.e 39 lakhs will be shown under profit loss account while 2 lakhs will accounted as balance sheet item after set off of input tax and balance if refund will be shown under curremt assets and if balance is payable it will be shown under the head current liabilities in balance sheet. hope the above will solve your purpose.
26 May 2008
Dear Mr Chheda, Your reply is specific and forthright.I appreciate your attitude. I would look up to you in the future when I am in doubt. Thanks and regards. Shanmugam.
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