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Can Firm avail the benefit of Sec. 44AF in Case of Loss ?

30 July 2009

A Partnership Firm is resulting Net Loss Rs. 45066/-. Can Firm avail the benefit of Sec. 44AF OR is it required to Audit ?

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5 Replies

Sangam (CA) (1329 Points)
Replied 30 July 2009

S. 44AF is applicable only 4 retail trade & not wholesale trade even partial..

if d firm is engaged in retail trade 5% of turnover will b deemed as income or higher if so shown by d assessee in his return

if assessee claims less den 5% den he should audit his books of account.

Sangam (CA) (1329 Points)
Replied 30 July 2009

in dis case audit should b done of books of account if loss benefit has to b claimed..

Ramakrishna (Financial Executive) (438 Points)
Replied 30 July 2009

Hello!

A partnership concern can declare their income as per 44AF if their total turnover is less than 40 lakhs.

But for availing loss incurred in a year, proper maintanence of books and audit report is compulsory.

Good Bye! Cheers!!

Mukesh N (Articles) (22 Points)
Replied 22 September 2009

A Partnership Firm is resulting Net Loss. Can Firm avail the benefit of Sec. 44AF OR is it required to Audit ?

Sunil (Trader) (2611 Points)
Replied 22 September 2009

You can apply 44AF ONLY IF THE TURNOVER IS RETAIL TRADE. There should be no wholesale trade or manufacture. If an hassessee has a shop and also a fast food counter in the shop and, buys coke, icecream, biscuits and resells the packs or bottles at MRP, that portion is retail trade. However, if it prepares fast food for serving, that does not come under retail trade. You have to seperate the retail trade and other businesses. Deduct the retail trade turnover. Now:-

1) If you apply 44AF and offer 5% of retail trade turnover for tax. No problem for audit. However, the rest of your business after deducting the retail trade should not exceed 40 lakhs, otherwise in any case you will have to audit. You can still claim 44AF on retail trade and audit other businesses if > 40L.

2) If you show the profit below 5% of turnover in retail trade or even a loss, even if your aggregate business in total is < 40L, you will still have to audit.