All About Tax Audit and Form 3CD (Part-4)

Clause

Particulars

Comments

21

(a)

Please furnish the details of amounts debited to profit and loss account, being in the nature of capital, personal, advertisement expenditure etc.

The nature of these expenses are such that they may either be fully disallowed or only allowed subject to certain conditions. If they form a part of the profit and loss account, they have to be disclosed here.

(b)

Amounts inadmissible under section 40(a)(i), 40(a)(ia), 40(a)(ic), 40(a)(iia), 40(a)(iib), 40(a)(iii), 40(a)(iv), 40(a)(v)

Under this clause expenses in respect of which tax was required to be deducted but not deducted shall be disallowed.

(c)

Amounts debited to profit and loss account being, interest, salary, bonus, commission or remuneration inadmissible under section 40(b)/40(ba) and computation thereof;

This is applicable to firm, AOP or BOI assessees where payments are made to the partners/members in the nature of salary, remuneration, interest, etc. The Act has prescribed certain limits upto which such expenditure can be allowed in the hands of the firm/AOP/BOI and if the expenditure exceeds this limit, the same is not allowed as a deduction.

(d)

Disallowance/deemed income under section 40A(3)

This section places a disallowance on any expenditure incurred by any mode other than an account payee cheque/bank draft or through a bank account using ECS if they exceed Rs. 10,000 in a day subject to certain exceptions.

(e)

Provision for payment of gratuity not allowable under section 40A(7);

The deduction under this section is allowed in relation to a provision created for payment of contribution to an approved gratuity fund only if such sum is actually payable during the year.

(f)

Any sum paid by the assessee as an employer not allowable under section 40A(9);

Any payment incurred by an employer towards setting up of any fund, trust, Company, AOP, BOI, Society, etc will not be allowed as a deduction subject to certain exceptions such as contributions to recognized provident fund,  approved superannuation fund, approved gratuity fund, required by or under any other law for the time being in force or to the new pension scheme.

(g)

Particulars of any liability of a contingent nature;

This clause is applicable to all assessees. Under this clause particulars of any liability of contingent nature must be furnished here.

(h)

Amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of total income;

The section prescribes a method of calculation of an amount of expenditure which will be disallowed as it is deemed to be incurred towards earning exempt income.

(i)

Amount inadmissible under the proviso to section 36(1)(iii)

Where the assessee borrows a loan for business purposes, the interest thereon would normally be allowed as a deduction. However, if such loan was used to acquire an asset, the interest shall not be allowed for the period between the date of borrowing of the loan to the date on which the asset was put to use.

22

Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

The MSME act prescribes an amount of interest that would not be allowed as a deduction in the computation of taxable income of the assessee.

23

Particulars of payments made to persons specified under section 40A(2)(b)

This section basically disallows expenditure incurred by way of payment to specified persons (relatives) if the assessing officer finds them to be excessive in nature.

24

Amounts deemed to be profits and gains under section 32AC or 32AD or 33AB or 33ABA or 33AC.

These sections allow for a special deduction to certain assessees subject to certain conditions. In case of a breach of these conditions, the whole or a part of the deduction allowed earlier would be included as deemed income.

25

Any amount of profit chargeable to tax under section 41 and computation thereof.

This section relates to deemed profits arising out of:

Where a deduction has been allowed in an earlier year in respect of expenditure but the assessee has received some benefit whether by cash or by the reduction in actual liability in the current year, such benefit will be chargeable to tax under this section.

Where an asset has been sold by an assessee engaged in the power generation and distribution and such sale consideration exceeds the written down value.

Where an asset used in scientific research has been sold for consideration greater than its original cost

Where a bad debt that was allowed earlier is subsequently recovered.

Where an amount has been withdrawn from a special reserve created by a financial company on which deduction was earlier allowed

Where such amounts/benefits as above have been received even after the closure of business.