Stamp paper vendor

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 Dear Sir,
Treasury has issued certificate of commission accrued from selling of stamp papers and which is about 247000/-

while filing itr 4 I should mention Rs. 247000/- as his gross receipts
or
I should mention the whole value of stamp papers sold by him as gross receipts.

Guest

Guest (Expert)

07 August 2013 The whole value of stamp paper sold should be considered as gross receipts.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 However, he has received stamp paper value on behalf of treasury as his agent.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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07 August 2013 No agency. No commission. It is discount. Treasury is not supposed to deduct income tax also.

Citation :- Kerala State Stamp Vendors ... vs. Office Of The Accountant General ... (2006) 282 ITR 7 (Ker)

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 Suppose the vendor has sold stamp papers of 70 lacs and discount received is Rs 247000/- then he is liable to audit or not.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 Suppose the vendor has sold stamp papers of 70 lacs and discount received is Rs 247000/- then he is liable to audit or not.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 Suppose the vendor has sold stamp papers of 70 lacs and discount received is Rs 247000/- then he is liable to audit or not.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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07 August 2013 Yes because 44AD(5) says so.

Querist : Anonymous

Querist : Anonymous (Querist)

07 August 2013 suppose after deducting business expenditures from commission received, net profit comes below the exemption limit, even then the assessee is liable for audit?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2025 Regarding your question about audit liability for a stamp paper vendor:

* The vendor sells stamp papers worth Rs. 70 lakhs.
* The vendor's **commission (discount)** is Rs. 2,47,000.
* After deducting business expenses from this commission, the **net profit** falls below the exemption limit.

### Key points under Income Tax Act:

* **Section 44AD(5)** mandates audit if turnover exceeds Rs. 2 crore (limit revised from Rs. 1 crore).
* Here, the turnover (sales value of stamp papers) is Rs. 70 lakhs, which is **below Rs. 2 crore**.
* However, the business income for audit is generally considered as **gross receipts or turnover** — not just net profit.

Since the **total sales of stamp paper (turnover)** is Rs. 70 lakhs (less than Rs. 2 crore threshold), **audit under section 44AD(5) is not mandatory** based on turnover.

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### But what about commission/profit below exemption limit?

* If net profit is below exemption limit (usually Rs. 2.5 lakh for individuals), the person may not have taxable income.
* Even then, if the turnover is below threshold, audit is not compulsory.
* But if the vendor opts for regular income computation or is under any other section, audit rules may differ.

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### Summary:

* **Audit under Section 44AD(5) depends on turnover (gross receipts), not profit.**
* Here, with Rs. 70 lakhs turnover (below Rs. 2 crore), **audit is not mandatory even if net profit is below exemption.**

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If you want, I can help clarify further or check for other audit applicability (like under Section 44AB for other criteria).

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