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Proprietorship firm

rohit jajodia (student) (30 Points)

10 June 2016

1. TURNOVER IS JUST ABOVE 1 cr. and service tax liability not paid Q. should go for tax audit or avoid if possible? Q whether he can avoid payment of service tax payment as business is dissolved 2. amount transferred to relative account 40l and credited the same account with expenses of the firm Q is it correct and what are the tax treatments in both transferor and transferee

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3 Replies

aayushi jain (4 Points)
Replied 10 June 2016

1. The Tax Audit: Even if the Turnover is just above 1 cr SEction 44AB is Applicable on the client. However there is always an option of Presumptive Taxation which further depends on the contention of your client.
2. The Service Tax Payment: Since it is a Proprietorship the payment of service tax to he credit of the goverment will become the personal liability of the Proprietor if remians unpaid, no matter the Proprietorship is dissolved
3.The Expense: Since it is unclear from the question of what is the nature of Expenses so mentioned, i can just say that if the amount is transferred to the account of a relative it will fall under the ambit of Sec 40(A)(2) amd will neverthless be reported if tax audit is done. Therefore it is advisable that the expense be legit

rohit jajodia (student) (30 Points)
Replied 10 June 2016

All expenses are legit and paid in cash by relative. Only journal is passed in firm account against payments made to relative

Example

Electricity dr

Wages dr

Xyz expenses dr

To relative

The client is unaware whether he should go for audit or not since he has not paid service tax for past 3-4 years.

So should ke go for audit? What are accounting treatment in both firm and relative ?

Shresh Patel (CA Final Student) (36 Points)
Replied 11 June 2016

As far as accouting of expenses are concerned, one can book the expenses as journal entry (As in case of reimbursement of expenses) if those are expended actually for business purpose having supportives.