Tax audit applicability - 44ab

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2016 Dear Sir,

Total Sales(excluding service tax) during the year 2015-16 is Rs 95,69,401 and Total sales(including service tax) is Rs 1,04,53,499.Please let me know for tax audit(44AB),turnover of Rs 1,00,00,000 is applicable before service tax or after service tax?. Whether tax audit is applicable for above example or not?

Thank You

Sandeep Dharar

Sandeep Dharar (Expert)
Follow

17 September 2016 Yes tax Audit is applicable u/s 44AB.

Message likes : 1 times

S. Harsha

S. Harsha (Expert)
Follow

17 September 2016 Dear sir,

Please refer to Turn over definition in Guidance note issued by ICAI. It depends on how the invoicing is done. if the invoice is issued inclusive of taxes then in turnover we will include the service tax portion otherwise if invoice is issued by showing the taxes separetly then service tax will not form part of the turnover.

Message likes : 1 times

Sandeep Dharar

Sandeep Dharar (Expert)
Follow

17 September 2016 Dear S Harsha

As per section 145A of the Income Tax Act,1961:

145A. Notwithstanding anything to the contrary contained in section 145,

(a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head Profits and gains of business or profession shall be

(i) in accordance with the method of accounting regularly employed by the assessee; and

(ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.

Explanation.For the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.

Message likes : 1 times

S. Harsha

S. Harsha (Expert)
Follow

17 September 2016 Dear sandeep,

Here method of accounting followed by the client is also important whether cash or mercantile. Below is the definition in our guidance note:
If, however, the Excise duty /
or sales tax recovered are credited separately to Excise duty or Sales tax
Account (being separate accounts) and payments to the authority are
debited in the same account, they would not be included in the turnover.

Message likes : 1 times

S. Harsha

S. Harsha (Expert)
Follow

17 September 2016 Dear sir,
It is the method of accounting applied by the assessee for determining sales / turnover. If inclusive method is followed then sales/turnover includes ST/Excise/vat etc otherwise it will not include.