transactions in commodities

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vandana (Querist)
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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?

P B Srivathsan

P B Srivathsan (Expert)
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04 August 2009 If the turnover is 1 crore, then tax audit will apply. I hope I am correct in my understanding of the the question.

P B Srivathsan

P B Srivathsan (Expert)
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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.

For all public limited, CARO is applicable.

vandana

vandana (Querist)
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08 August 2009 Trader in commodities here refers to an investor who makes intraday transactions in commodities like some do in shares.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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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.

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