Financial Statement Preparation for Tax Audits of AOP (JVs)—Ind AS vs. GAAP
This query is : Resolved
13 September 2024
An Ind AS-compliant company has several Joint Ventures (JVs), all of which are Associations of Persons (AOPs). For tax audit purposes, do we need to prepare financial statements according to GAAP, or is it necessary to prepare them in accordance with Ind AS?
12 August 2025
What the Law Says:
Tax Audit under Income Tax Act:
Tax audit under Section 44AB requires books of accounts and financial statements prepared as per the accounting standards generally accepted in India (GAAP).
The Income Tax Department currently does not mandate Ind AS compliance for tax audit purposes.
Tax audit generally expects financial statements prepared under Indian GAAP (AS) — the pre-Ind AS accounting standards.
Applicability of Ind AS:
Ind AS is mandatory for certain companies under Companies Act for financial reporting and disclosures.
However, for tax purposes, the computation of taxable income and tax audit follows Income Tax Act provisions and GAAP, not Ind AS.
For AOPs (JVs):
AOPs are not companies and generally follow accounting practices as per income tax laws.
For tax audit, the books and statements should align with GAAP (Indian AS), not Ind AS.
Conclusion:
For tax audit of AOPs (JVs), prepare financial statements as per Indian GAAP, not Ind AS.
Ind AS compliance is mainly for statutory financial reporting, not for tax audit.
Ensure proper reconciliation between Ind AS financials of the company and GAAP financials of AOPs for tax purposes.
Tax Audit under Income Tax Act:
Tax audit under Section 44AB requires books of accounts and financial statements prepared as per the accounting standards generally accepted in India (GAAP).
The Income Tax Department currently does not mandate Ind AS compliance for tax audit purposes.
Tax audit generally expects financial statements prepared under Indian GAAP (AS) — the pre-Ind AS accounting standards.
Applicability of Ind AS:
Ind AS is mandatory for certain companies under Companies Act for financial reporting and disclosures.
However, for tax purposes, the computation of taxable income and tax audit follows Income Tax Act provisions and GAAP, not Ind AS.
For AOPs (JVs):
AOPs are not companies and generally follow accounting practices as per income tax laws.
For tax audit, the books and statements should align with GAAP (Indian AS), not Ind AS.
Conclusion:
For tax audit of AOPs (JVs), prepare financial statements as per Indian GAAP, not Ind AS.
Ind AS compliance is mainly for statutory financial reporting, not for tax audit.
Ensure proper reconciliation between Ind AS financials of the company and GAAP financials of AOPs for tax purposes.
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