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Turnover less than 44ab limit but the firm is in loss

Deepak (Student) (10 Points)

24 January 2016

Hello there,

A partnership firm has turnover less than the Limit prescribed u/s 44ab but the firm is running in loss. The return has not been filed since AY 2011-12 till now.
So which option is good to opt for
1. Presumptive taxation i.e 8%
2. 44 AB Audit

As the time limit under 44ab has exceeded which would be the best option?
Also pls let me know the interest and penalty applicable

Thanks

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8 Replies

CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 25 January 2016

the audit is required where profits are less than 8% of the gross receipts or turnover and the income exceeds maximum amount not chargeable to tax.

Since, the firm is taxed at an income starting from Rs. one, therefore the maximum amount not chargeable to tax is nil.

In case of loss, since there is no income, therefore it does not exceed the maximum amount not chargeable to tax and so the second condition mandating tax audit u/s 44AB r/w section 44AD is not satisfied and therefore the assessee is not required to get the accounts audited u/s 44AB.

So I Think You Have To Opt For Claiming Loss By Filing Regular Return And Not Go For Presumptive Business

1 Like

Prateek (Partner) (143 Points)
Replied 25 January 2016

You are required to do audit u/s 44AB because 8% of any turnover amount will result in a positive amount. And a partnership firm is required to pay tax from zero amount.

Audit is not required in cases where 8% of turnover is less than the maximum amount which is not charged to tax which is zero in case of partnership firm.

shalini (CA) (525 Points)
Replied 25 January 2016

I totally agree with Mehul. SECTION 44AB applies if two conditions are satified:-

1. THE ASSESSEE CLAIMS THAT HIS INCOME IS LOWER THAN THE INCOME DEEMED UNDER SECTION 44AD AND

2. THE ASSESSEE TOTAL INCOME IS CHARGEABLE TO TAX

so here partnership has loss so audit is not applicable

Prateek (Partner) (143 Points)
Replied 25 January 2016

8% of turnover is considered as Assessee's total income for this purpose..

for eg

1) Turnover 50lakh, deemed income = 4 lakh, assesse claims = 3 lakhs then audit required.

2) Turnover 20 lakh, deemed income = 1.6 lakh, assessee claims = 1 lakh, audit not required.

1 Like

CA. Roopali Kadam (Jobs on assignment basis.) (1453 Points)
Replied 26 January 2016

what is "the maximum amount not chargeable to tax" for a firm

Prateek (Partner) (143 Points)
Replied 26 January 2016

the maximum amount not chargeable to tax for a firm is zero.

Jatin Gada (searching job) (151 Points)
Replied 26 January 2016

I agree with Prateek

Niraj Bista (A/C) (70 Points)
Replied 26 January 2016

Neighther Go for 44ab audit, nor presumptive income. provided you will be not getting the loss carried forward.if u opt 44ad you have to opt 8% of turnover as profit in minimum, which may be result in profit and u will be needed to pay tax on it alongwith interest. So I conclude please go for regular return.