Treatment in financial statement

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muralidhar swain (Querist)
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01 November 2013 when a person gets some income from truck hiring which is shown as other income in computation.where the purchase of truck should be treated?either in capital a/c or as fixed asset of business or in other way.But it is not used for business work.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2013 non-trade investments.

muralidhar swain

muralidhar swain (Querist)
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02 November 2013 can i show it in capital account by passing following journal entry
capital a/c......................Dr
To Bank a/c
in capital a/c i will show that amount taken for purchase of truck.if no,please clarify my doubt clearly.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2013 how? are u reducing capital? No. You buying an asset. So you need to create an asset and credit the bank

muralidhar swain

muralidhar swain (Querist)
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02 November 2013 but i am using it out of my business which gives me other income.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2013 the appropriate way is to create a non-trade investment. and appropriately park it in other incomes.

rather it would be beneficial to you to show it as business income and claim benefits of 44ae.

CA Pallav Singhania

CA Pallav Singhania (Expert)
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02 November 2013 Agree with Expert,
Show it as business income and claim benefit U/S 44AE...

muralidhar swain

muralidhar swain (Querist)
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02 November 2013 Many many thanks sir but say me i will take it in asset side of business balance sheet

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2013 you are welcome murlidhar

CA Pallav Singhania

CA Pallav Singhania (Expert)
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02 November 2013 Yes, take it as a business asset if you treat it as business income..

muralidhar swain

muralidhar swain (Querist)
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02 November 2013 Aryan sir but i am taking it as income from other sources.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2013 murlidhar what we are saying is that it is more beneficial for your to claim it as business income.

In case you are eligible for 44ae, you get very good tax benefits. In case you are not, you get depreciation and other related expenditure.

CA Pallav Singhania

CA Pallav Singhania (Expert)
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02 November 2013 If you show it under individual file then you can not claim depreciation on such trucks my dear friend...
Treat it business income and just relax,
No maintenance of books...

CA Pallav Singhania

CA Pallav Singhania (Expert)
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02 November 2013

Section 44AE

Applicable: Assessee engaged in business except plying, hiring or leasing goods carriages and who owns not more than 10 goods carriages anytime during the previous year. However unlike s. 44AD, there is no condition of maximum turnover of the assessee. Assessee shall be deemed to owner of goods vehicles taken on higher purchase or on instalment, whether whole or part of the amount is payable, when such vehicles are in possession of such assessee.

Applicable to class of taxpayer: Any assessee.

Presumptive or estimated income: Presumptive or estimated income is dependable on the nature of goods vehicle:

— Heavy goods vehicle Rs. 5,000 per heavy goods vehicle for every month or part of the month;

— Other than heavy goods vehicle Rs. 4,500 per such goods vehicle for every month or part of the month.

Terms goods carriage and heavy goods vehicle shall have meaning as per Motor Vehicles Act, 1988.

Higher or lower income: Assessee at his option can claim such higher/lower amount earned by him. Assessee can also claim to have earned income lower than specified amount, subject to fulfilment of conditions as to maintenance of books of account etc. and assessment of such assessee would be made u/s 143(3) ie scrutiny assessment.

Maintenance of books of account: Assessee offering income on presumptive basis is not required to maintain books of account & other documents as prescribed u/s 44AA and audit u/s 44AB. However in case assessee claims that he has earned income lower than specified amount, Ss. 44AE(7) and 44AA(2)(iii), mandates him to maintain books of account and other documents as specified u/s 44AA, get them audited from the accountant and furnish report as required u/s 44AB.

Deduction from presumptive income: No deduction is allowable under provisions of sections 30 to 38. However in case of partnership firm remuneration to partner and interest on partner’s capital is allowable. For the computation of allowable partner’s remuneration, book profits would be deemed income less interest on capital. Further written down value of any depreciable asset of such business shall be calculated as if depreciation has been actually allowed.

Advance tax: No specific provision exempting assessee’s from payment of advance tax.

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