Net income of a Firm is Less than 5% of Turnover after ...

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Vijay Kr. Mishra (Querist)
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08 August 2010 Net income of a Firm is Less than 5% of Turnover after deducting Salary & interest to the Partners, Whether this income is eligible to get Audit ?

Total Turnover of a Partnership FIRM : 38,00,000/-
Income from business of Retail Trading (5% of Rs. 38,00,000/-) : 1,90,000
Salary & interest paid to partners as permitted by section 40b : 2,00,000
Income from Retail business: (10,000)

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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08 August 2010 As per proviso to section 44AF(2) interest and remuneration ,subject to 40(b), can be deducted from the 5 % profit computed under sub section 1 of section44AF. Hence your computation, prima facie, is correct.
Since 44AF is complied, audit under section 44AB is not necessary.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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09 August 2010 Agreed with Shri Warrier.

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