Applicability of Tax Audit

Save Share

This query is : Resolved

Aditya Bajaj (Querist)
Follow

21 September 2009 Hi. I wanted to know the applicability of Tax Audit for an client who has received advance amounting Rs 1 Cr, but having his gross turnover less than 40 lakh. The client is engaged in the project activity.

Jitender

Jitender (Expert)
Follow

21 September 2009 in this case, Tax audit is not applicable.

Rajeev

Rajeev (Expert)
Follow

21 September 2009 gross revenue receipts if at 1 crore , 44Ab attracted , audit applicable.

Capital receipts if at 1 crore , audit not applicable,

Although the guidance note on tax audit clearly states that advance received is liability until services are rendered , hence they dont form a part of gross receipts , but still there are issues left .

It has been held in some cases , that advances include an element of profit , hence it's covered in gross receipts

Guidance note of the ICAI for turnover of contractors replacing ASI 29 is a big help.

Although i believe the provisions are still open to intepretation , even after 25 years.

Anjani Pratap Tiwari

Anjani Pratap Tiwari (Expert)
Follow

21 September 2009 no tax audit is not applicable

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

21 September 2009 Advance can be refunded if you do not carry on the project or disassociate yourself from the project. Advance is not considered for Section 44AB. I agree with expert Jitendra in the present context.