Meaning of turnover under section 44ab


Dhrunil Bhatt (Chartered Accountant)     24 April 2017

Dhrunil Bhatt
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Dear Experts,

 

As per Section 44AB of the Income Tax Act, an assessee whose turnover from profits and gains from business or profession exceeds Rs. 1,00,00,000 during the Financial Year shall mandatorily get its books of accounts audited under the said section.

However I am little bit confused regarding the definition of "Turnover". Can anybody please explain me which elements are included and which elements are excluded for calculation of turnover for the purpose of Section 44AB. And also state the section from where I could refer it. Definition of the term Turnover has not been defined anywhere in section 44AB.

 

Thanks and Regards,

Dhrunil Bhatt

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kamlesh (Student)     24 April 2017

kamlesh
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Limits are incresed up to 2 Crore for audit

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Dhrunil Bhatt (Chartered Accountant)     24 April 2017

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Okay, then whats the meaning of turnover ?

 

Best Regards,

Dhrunil Bhatt

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arun saluja (student)     24 April 2017

arun saluja
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turnover means receipts or sales

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Sivaiah Ganga   25 April 2017

Sivaiah Ganga

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[2007] 163 TAXMAN 154 (RAJ.)

HIGH COURT OF RAJASTHAN

Bajrang Oil Mills*

v.

Income-tax Officer

RAJESH BALIA AND MANAK MOHTA, JJ.

IT APPEAL NO. 89 OF 2001

AUGUST 2, 2006


Section 44AB of Income-tax Act, 1961 - Compulsory tax audit - Assessment year 1994-95 - Whether expressions ‘sales’, ‘turnover’ and ‘gross receipts’ used in section 44AB are not words of art used in relation to any individual transaction independently but have been used as ‘sales’, ‘turnover’ or ‘gross receipts’ - Held, yes – Whether expression ‘total’ qualifies all other three expressions, viz., ‘sales’, ‘turnover’ and ‘gross receipts’; total sales indicate aggregate price of sales of commodities carried out by assessee as a trading business - Held, yes - Whether for purpose of attracting section 44AB, receipts of an assessee by way of sale or trading business and receipts for doing job work can be clubbed for purpose of finding out whether limit of Rs. 40 lakhs prescribed for attracting provisions of section 44AB is made out - Held, yes

Section 271B, read with section 44AB, of the Income-tax Act, 1961 - Penalty - For failure to get accounts audited - Assessment year 1994-95 - Assessee filed its return declaring total receipts from sales and receipts for job work done by it - Assessing Officer opined that assessee was under an obligation to get its accounts audited under section 44AB and levied penalty under section 271B - Assessee’s case was that it was under bona fide belief that it was not required to get its account audited under section 44AB in as much as its sales and job work receipts on being considered separately did not exceed Rs. 40 lakhs - Whether, on facts, there was reasonable cause for assessee’s failure to comply with provision of section 44AB and, therefore, penalty levied was unjustified - Held, yes

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Dhrunil Bhatt (Chartered Accountant)     25 April 2017

Dhrunil Bhatt
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Thank You Shivaiya for sharing the case law.

However I am still confused whether the indirect taxes charged by the assessee in its sales invoice for example CST, VAT, Excise or service tax, be included in the calculation of gross receipt or turnover for the purpose of section 44AB of the Income Tax Act, 1961?

Thanks and Regards,

Dhrunil Bhatt

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CMA sagar jaiswal (Finance professional)     25 April 2017

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turnover will be inclusive of taxes.

it is clear that turnover includes all gross reciepts.(bill value)

Suppose Price is rs 100/- & vat amount is Rs. 5/- then turnover will be Rs.105/-(100+5)

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Dhrunil Bhatt (Chartered Accountant)     25 April 2017

Dhrunil Bhatt
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Thanks a lot sagar. :)

 

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CMA sagar jaiswal (Finance professional)     25 April 2017

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Your welcome. @ Dhrunil

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Genx Raj   05 September 2019

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The limit for Tax Audit has been increased to 2 Crore. And for this purpose calculation of turnover is made as -- 1. For Equity Delivery trading : Profit / (Loss) is your positive/negative turnover. 2. For Equity Intra-day Trading : Profit / (Loss) is your positive/negative turnover. 3. For Futures and Options speculative trading : Difference of favorable and unfavorable i.e. Profit/(Loss) is your turnover 4. For Futures Non-Speculative (i.e. Notional Delivery Based) : Difference of favorable and unfavorable i.e. Profit/(Loss) is your turnover 5. For Options Non-Speculative (i.e. Notional Delivery Based) : Difference of favorable and unfavorable i.e. Profit/(Loss) Plus(+) the Premium (i.e. the Sale price) is your turnover


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