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CA. VARUN N (A.G.M accounts) (38 Points)

08 August 2012

a partnership firm with Rs.14 lakh turn over, doing works contract business.

they have a loss of Rs. 7 lakh. whether they have to get their accounts audited under Sec. 44AB?

firm maintain book s of accounts. 44AD is compulsory if assesse claims less than 8% profit of turn over?

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8 Replies

CA J.Alamelu lakshmi (Chartered Accountant) (852 Points)
Replied 08 August 2012

The section says " if the Income claimed by the assessee is less than 8% of T/o and more than the basic exemption limit the provisions u/s 44AA and 44AB shall apply ".

So in this case since it is a loss 44AA and 44AB are not applicable.

llllVICTORllll (Internal Auditor) (511 Points)
Replied 08 August 2012

By what i understand of the section i have to disagree with Ms Alamelu

As i understand the line is to be understood as under

Notwithstanding anything contained in the foregoing provisions of this section,

an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1)(which means the one who has turnover below Tax audit limit and claims profit below 8% from said income)

and whose total income exceeds the maximum amount which is not chargeable to income-tax,(which means the person with income above basic exemption limit of income tax (its usually for individual, HUF etc)

shall be required to keep and maintain such books of account and other documents as required under sub-section (2) ofsection 44AA and get them audited and furnish a report of such audit as required under section 44AB.

So I am of view that section 44AA and 44AB does apply to your business and have to get the books audited

CA J.Alamelu lakshmi (Chartered Accountant) (852 Points)
Replied 08 August 2012

Ya sorry its a firm and i dint take tat into account.

I agree with Mr.Victor. Both the sections shall apply.

CA. VARUN N (A.G.M accounts) (38 Points)
Replied 08 August 2012

so all firms having loss have to get audited u/s 44AB....

thus, 44AD Is compulsory?

isnt that an option to the assessee ?

cant we follow normal provisions rather than going for presumptive?

llllVICTORllll (Internal Auditor) (511 Points)
Replied 08 August 2012

As far as I see, (common sense than any notification or circular) 44AD has been introduced to reduce complication of maintaining books etc for small scale business men, but it has an overpowering effect if you read the section carefully

5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) ofsection 44AA and get them audited and furnish a report of such audit as required under section 44AB.

So the above sub section means to say, if you are eligible for 44AD, you have to apply it.... so in short it means all other section relating to business income and exp i.e from sec 28 to 44 except sec 44AD AE etc applies only to people who belong to section 44AB catagory

So i am sorry to say, you have to get your books audited and file the return as if a 44AB assessee

1 Like

TRIYAMBAK PATRO (IPCC STUDENT) (66 Points)
Replied 11 August 2012

WHEN LOSS THEN THERE IS NO NEED TO GET THE ACCOUNTS AUDITED

llllVICTORllll (Internal Auditor) (511 Points)
Replied 13 August 2012

Hi Triyambak, the point here is, that the firm not being an assessee under section 44AB, is claiming an income less that 8% of turnover and loss ofcourse is an income less than 8% of turnover, so the books has to be audited(ignoring the fact that of business having 60 laks or a crore turnover or not .

If you have a circular or notification to uphold your view, then please share, i didnot find any such circulats.

TRIYAMBAK PATRO (IPCC STUDENT) (66 Points)
Replied 13 August 2012

Originally posted by : llllVICTORllll
	Hi Triyambak, the point here is, that the firm not being an assessee under section 44AB, is claiming an income less that 8% of turnover and loss ofcourse is an income less than 8% of turnover, so the books has to be audited(ignoring the fact that of business having 60 laks or a crore turnover or not . If you have a circular or notification to uphold your view, then please share, i didnot find any such circulats.

SORRY BRO, I WAS WRONG.IN THIS CASE IF FIRM OPTS FOR 44AD. AND HE CLAIMS LOSS OF RS.700000 THEN IT IS MANDATORY FOR AUDIT. IF HE DOES NOT OPT FOR 44AD AND HIS GROSS TURNOVER EXCEEDS 6000000 IN ANY PREVIOUS YEAR HE HAS TO GET HIS ACCOUNTS AUDITED.