29 July 2009
If a trader in commodities with actual investment of Rs 1,00,000/- but with a turnover of Rs 1,00,00,000/- and loss of Rs 5,00,000/-. Will he have to get his books of accounts audited? If not how will the sales be accounted for?
04 August 2009
Are you referring to a private limited company and applicability of CARO? In that case, if paid up capital and reserves is less than 50 lacs and turnover is less than 5 crores and there is no public accepted, then CARO is not applicable.
02 August 2025
Here's a quick breakdown for your query on **commodities trading and audit applicability**:
* **Turnover of Rs 1 crore with loss**: Yes, tax audit under Section 44AB of the Income Tax Act is **applicable** if your turnover exceeds Rs 1 crore (for business other than trading in goods, it's Rs 1 crore; for goods, Rs 10 crore, but for commodities, it is treated like goods). Since your turnover is Rs 1 crore, tax audit is generally required.
* **Loss of Rs 5 lakh**: Loss doesn’t exempt you from audit if turnover criteria are met.
* **How to account sales?** Sales in commodities trading are recorded as **revenue from business operations** in your Profit & Loss account. Each trade's buy and sell are recorded as purchase and sale transactions, with profits or losses recognized accordingly.
* **Regarding CARO (Companies Auditor's Report Order)**: CARO applies based on company type (private/public) and thresholds like paid-up capital and turnover. If it's a private limited company with turnover < 5 crores and capital + reserves < 50 lakhs, CARO may **not apply**.
* **Intraday vs. Delivery trading**: Intraday commodity trading might be treated as speculative business. Tax audit rules differ slightly in such cases.
CAclubindia
