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V!$H@L $!ngh@L (free.........) (87 Points)

22 December 2009

HII I WANT TO KNOW CAN A SINGLE PERSON BECOMES PROPRIETOR IN TWO OR MORE FIRMS.

IF IT IS SO, WHAT WUD BE THE IMPACT OF SECTION 44AB, IF THE 2 FIRMS AGGREGATE TURNOVER IS 39+39 = 78 LACS,

DOES, EITHER OF THE FIRMS NEED AUDIT UNDER INCOME TAX ACT.

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18 Replies

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

For purpose of CENVAT and Service Tax also the treshold limit is available to the individual is once only irrespective of number of proprietorship. However, each proprietorship will have to take a separate registration.

For VAT administrative relief is given only once to both proprietorships. Common TIN number is given as usually the TIN is in name of individual and he can have more than one proprietorship in the TIN.

For IEC, only one IEC is granted per PAN. Therefore the proprietorships will have to be branches of the individual or one will have to be branch of the other.

Why complicate life? Try and consolidate in one name and create disivisions for different businesses.

1 Like

Prabeer (B. COM (H) CA & CS Final) (5484 Points)
Replied 22 December 2009

Hi! vishal.

I'm pretending here that by "firm" you mean to say proprietory business.

Ans - 1: Yes.

Ans - 2: The proprietory businessess will be assessed under the PAN of the proprietor, thus Sec. 44AB will be applicable.

V!$H@L $!ngh@L (free.........) (87 Points)
Replied 22 December 2009

Originally posted by : Sunil

Yes. You can run two proprietorship concerns by one proprietor. However, the PAN number is of the individual. Therefore, the limit for Section 44AB is Rs.40 lakhs for the individual is irrespective of the number of proprietorships the individual has. For purpose of TDS you can take a separate TAN for each branch of the individual. Each proprietorship can be treated as a separate branch.

For purpose of CENVAT and Service Tax also the treshold limit is available to the individual is once only irrespective of number of proprietorship. However, each proprietorship will have to take a separate registration.

For VAT administrative relief is given only once to both proprietorships. Common TIN number is given as usually the TIN is in name of individual and he can have more than one proprietorship in the TIN.

For IEC, only one IEC is granted per PAN. Therefore the proprietorships will have to be branches of the individual or one will have to be branch of the other.

Why complicate life? Try and consolidate in one name and create disivisions for different businesses.

THANKS FOR THE REPLY, BUT UNDER THE AUDIT REPORT FORM 3 CD, ETC....

WE HAVE TO MENTION THE NAME OF THE BUSINESS & EVERYTHING AS PRESCRIBED ACCOMPANIED BY TR, P&L ,AND B/S.

SO, PLZ JUSTIFY THAT EITHER WE HAVE TO CONSOLIDATE THE ACCOUNTS OF THE CLIENT OR HAVE TO DO SOMETHING ELSE.

1 THING MORE, I DID'NT RECOGNIZE WHERE I READ THAT IF THE INDIVIDUAL CARRIES DIFFERENT FIRMS OF DIFFERENT NATURE AT DIFFERENT PLACE SO SECTION 44AB DOES NOT APPLICABLE, IF THE TURNOVER DOES NOT EXCEED RS 40 LAC. P.A. OF THE INDIVIDUAL BUSINESS. PLZ. QUOTE ON THIS

CA Om Arora (Chartered Accountant) (65 Points)
Replied 22 December 2009

One individual can become propriter in more than one Propritership firms.

the limit of Section 44AB is applicable on Person basis, so the person is liable to Tax Audit becoz its Turn over is 78 Lakhs...

CA. Megha Topiwala (Job) (1534 Points)
Replied 22 December 2009

yeh... 1 individual can go for morethn 1 propriertoy business... here 4 d purpose of tax auit u/s 44AB turnover of all the business r 2 b added n if exceeds 40 lacs thne tax audit of all business is required....

suppose if 1 is business and other is profession thn also if any of both exceeds its respective limts thn audit under both is required...

further if both business n profession is below their limits then no audit is required....

Aashish Dinanath Tripathi (Articled Assistant and NCFM(CMDM)) (233 Points)
Replied 22 December 2009

dear it is first of all not an indepth question. Moreover in case of a propreitory business when the return is being filed, thw assessee and his PAN and not his businesses.

So businesses might be different but the owner being same is assessed u/s 44AB of the IT act.

CA kuldeep kothari (own practice) (375 Points)
Replied 22 December 2009

ya u cn hav two proprietary firms but as turnover will be clubbed for 44AB audit of both firms required

Pammi Srivastav (Assistant Finance Officer ) (84 Points)
Replied 23 December 2009

In form 3CD mention the names of both the business and also the profit of both the business and also other requirements of both the business together in aggregate or can also separately by providing numbers.

CA. Dashrath Maheshwari (TaXpert) (15090 Points)
Replied 23 December 2009

Dear vishal ,

All are right except in case of presumptive taxation, where different businesses shell not be considered at par with each other.

CA Jayesh Gokalgandhi (CA in Industry) (126 Points)
Replied 23 December 2009

An Individual and all his proprietory concerns (entities) are considered as one assessee only for Income Tax purpose.. i.e (Entities + Individual = assessee)

So this is what u do..

First.. prepare accounts (p&l, balane sheet etc) for all entitiy + individual

Second.. Find out if the combined turnover of all entities + individual is more than the prescribed limit. If answer is yes, tax audit needs to be done for all the entities + Individual and a consolidated report prepared for the assessee

Third.. prepare a consolidated computation of total income for the assessee and file the return..

janani (Student - PCC/article assitant) (131 Points)
Replied 23 December 2009

I do agree the same

The Income will be consolidated in the hands of Individua

Sagar (Student) (142 Points)
Replied 23 December 2009

The Income of both Propreitory concern is consolidated in hands of Individual assesses therefore audit under section 44AB shall be applicable....!!!!

Shiv Kumar Goyal (CA ) (28 Points)
Replied 23 December 2009

In my opinion Tax audit is necessary under section 44AB but Tax audit report may be separetely for each proprieotor ship concern.

manish (Article Assitant) (358 Points)
Replied 23 December 2009

yes he may the propreitor for two or more firm. In my opinion, the assessee is the same for the both of the firm. so it will be taxable in the hand of the assessee for both. the 44AB is applicable on it and he need the audit for the aggregrate income.