Max Payne (employed) (2569 Points)
16 March 2010Hello friends,
Pls give ur opinion on the situation...
A Ltd has made sales of Rs 36.5 lakhs as on february 2009.
In March, the company has made sales of Rs. 4 lakhs to its customers....
On the basis of previous experience, expecting a 25% return of sales booked, the company did not recognise Rs1 lakh as its turnover/sales...
Is the company liable for tax audit u/s 44AB?
Assume gross receipts are only Rs.35 lakhs...
Dintakurthi Tirumala
(CA FINAL)
(15989 Points)
Replied 17 March 2010
As per my opinion the company liable to tax audit u/s44AB. I could not under stand Gross receipts meas
Max Payne
(employed)
(2569 Points)
Replied 17 March 2010
I meant cash received only 35 lakhs,
so we can ignore the gross receipts aspect... i.e.,
just on the basis of turnover, whether tax audit necessary?
Amir
(Learner)
(4016 Points)
Replied 17 March 2010
Good Morning Bhai......!
I must tell u nw I have one more reason to log on to this site cos I find ur changing names n pics quite interesting n funny attimes....:) (In a good sense obviously)
Coming to Ur question - Bhai I think -
AS-9 requies "Provision to be made based on past experience of sales return/warranties" I mean in ur example A Ltd. has to recognize its Turnover @ 40.50 Lacs, only thing is Altd. will also make a provision of Rs. 1 Lac asainst expected return.
Now Tax Audit will be required since Rs. 1 LACS IS NOT THE ACTUAL RETURN WHICH CAN BE REDUCED FROM THE TURNOVER IT'S JUST AN EXPECTATION/PROVISION.
Needless to say Rs. 1 Lac will not be allowed as deduction....
gaurav
(trainee ca final and cfa student)
(80 Points)
Replied 17 March 2010
Good Afternoon
sir there is not applicattion of AS in income tax act,
Max Payne
(employed)
(2569 Points)
Replied 17 March 2010
Hi friends,
Thanks for replying.... solved...
Gaurav bhai, section 145 does not say that AS is irrelevant.....
But
I-know-nothing
Mayank Shyamsukha
(CA FINAL)
(119 Points)
Replied 17 March 2010
In my opinion the company should recognised the revenue of Rs. 4 lacs for march beacuase when the property in the goods alongwith risk & rewards has been transferred and there is reasonable certainty regarding the collectibilty at the time of sale. and if there is any uncertainty regarding the collectibily subsewuent to the sale the provision should be made for the same i.e. Rs. 1 lacs. And as per 44AB Gross Turnover would be Rs. 40.50 lacs(36.5+4) and no provision would be allowed for sales return.
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