LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Sec 44ad applicability

abhishek (Audit Executive) (44 Points)

11 July 2013

Hi All,

i would like to regarding applicability of sec 44AD incase the assesee has no turnover /receipts but has incurred expenses ,resulting in Net loss. in such circumstances wheather he should get audited u/s 44AD or not.

Reply
Follow
Share

10 Replies

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 11 July 2013

If the expenses are claimed as business expenses then yes, the person has to get his accounts audited u/s 44AD r.w.s. 44AB.

CA vinod (Chartered Accountant) (518 Points)
Replied 11 July 2013

Do you mean Audit under Sec 44AB ? Audit is applicable only if the turnover/receipts is more than 1 cr otherwise not reqd

abhishek (Audit Executive) (44 Points)
Replied 11 July 2013

Originally posted by : CA vinod
	Do you mean Audit under Sec 44AB ? Audit is applicable only if the turnover/receipts is more than 1 cr otherwise not reqd

The assessee has NIL Turnover but under sec 44AD it says that when you show income less than limit i.e 8% it requires the books of account to be audited.

Rajiv (Senior Accounts Officer) (1548 Points)
Replied 11 July 2013

SIR IF YOUR TURNOVER LESS THEN 100 LAKH. THEN YOU CAN FILL YOUR RETURN U/S 44AD BY SHOWING PROFIT 8% OR ABOVE.BUT IN SEC 44AD YOU CAN NOT SHOW ANY EXPENSES.IN 44AD YOU WILL NOT MAINTAIN ANY BOOKS AND AUDIT YOUR ACCOUNT. SO BETTER TO FILE U/S 44AD

THANKS

abhishek (Audit Executive) (44 Points)
Replied 11 July 2013

Rajiv -since tis is the first year of operations i have NIL turnover , how can i show 8% ?

AKLESH KUMAR GOIT (article) (36 Points)
Replied 12 July 2013

Assessee who opts for 44 AD need not maintain books and get them audited but they have to pay tax on 8% of total turnover or gross receipt.Maintaining the books and getting them audited comes into picture only when assessee's income exceeds maximum amt not chargeable to tax and he claims income lower than 8% of gross receipt or turnover.

In the instant case turnover is nil .This is not a case of claiming income lower than 8% of total receipt .Hence no need to keep and maintain books of a/c and get them audited.

losses cannot be carried forward .

jnshah (BUSINESS) (28 Points)
Replied 13 July 2013

Originally posted by : C.A. Jignesh N. Mehta
	If the expenses are claimed as business expenses then yes, the person has to get his accounts audited u/s 44AD r.w.s. 44AB.

Pl clarify section under which you are saying that account required to be audit?

jnshah (BUSINESS) (28 Points)
Replied 13 July 2013

Originally posted by : jnshah

Originally posted by : C.A. Jignesh N. Mehta

If the expenses are claimed as business expenses then yes, the person has to get his accounts audited u/s 44AD r.w.s. 44AB.

Pl clarify section under which you are saying that account required to be audit?

Section 44AD(5) says, you are required to get acounts audited only if your income is less than 8% and it exceeds maximum limit not chargeable to tax. Here in Mr. Abhishek's case, he is making losses. So where is the question of getting his account audited? Pl clarify.

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 13 July 2013

Dear jnshah

If Mr Abhisekh wants to claim loss under the head business or profession, then it is deemed that he is showing less profits than 8% minimum as per section 44AD.

Hence he needs to get accounts audited.

Now i would ask you the reverse, as per which section you say that accounts are not required to be audited, as you do not satisfy the prime condition of 8% profit.

jnshah (BUSINESS) (28 Points)
Replied 14 July 2013

Section 44AD(5) r.w. memorandum to Finance Bill 2011 cast responsibility / clarifies to get audit done only on those whose shows less than 8% and whose income > limit not chargeable to tax. If a person is making loss, he doesn't fulfill 2nd condition (ie income > limit not chargeable to tax), so section 44AD(5) which puts liability to get account audited do not apply to him, hence there is no question of audit.

In that case, he will fall under 44AD(1), which says one has to declare income as 8% of turnover. This will lead to absurd interpretation that if assessee wants to show < 8% income and his income > 2 lacs (AY 13-14 for individual), he can do so by getting tax audit done but the assessee who is making loss has to compulsorily declare 8% of turnover asincome. This cannot be intension of law nor this gives any logical conclusion.

Not only that I would say, Mr Abhijit is required to file his return on/before 31/7/13; else it is likely that he will loose benefit of carry forward of loss (sec 139(3)). In case of tax audit time is extended to 30/9/13 but in my view, even though for safety pupose he gets his accounts audited (though no section cast responsibility on him), he should file his return on/before 31/7/13.