M/s. XYZ Enterprieses is a proprietory firm mainly into the business of Clearing & Forwarding. His Job is to handle the Export / Import Cargo of his client. His main job includes:
Paying Transport Charges, Ocean Freight for the Cargo, Handling custom section, Paying packing charges, Loading / Unloading charges etc.,
He get all this expenses reimbursed from his client alongwith his main income is AGENCY CHARGES.
He raises 2 bills. 1 for reimbursement of expenses (Debit Note) & other for his remuneration including Service Tax. The reimbursement of expenses crosses 10 Crorres. However, Agency charges remains to be at 45 Lakh.
As per gudaince note of the institute reimbursement is not treated as Turnover U/s. 44AB. However, if anything excess received by him in reimbursement of expenses shall form part of turnover. For example he pays ocean frieght Rs. 50,000 & receives from his client Rs. 55,000 then Rs. 5,000/- will form part of turnover. His clients while deducting TDS deducts on entire proceed including reimbursement.
In FY 2010-11 Agency charges is Rs. 45 Lakh & excess of reimbursement expenses is Rs. 10 Lakh, totaling Rs. 55 Lakh.
Querrey
1. Will he be covered U/s. 44AD for Tax Audit?
2. If yes, then should Profit & Loss Account be credited with Rs. 10.45 Crore & Debited by Rs. 9.90 Crore (10.45-0.55)?
3. If P& L is debited by Rs. 9.90 Crore then expenses bills which he has paid for his clients stands in the name of his clients, then will it have impact during an Assessment.
Friends, you are requested to reply the same at earliest.
Thanks
Nilesh Saiya
nileshsaiya @ gmail.com
CAclubindia
