Urgent:tds liability for audit required u/s 44ab due to 44ad

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rajdip ranpara

proprietor

141 Points Joined December 2012

Hello everyone,

My client, an individual, had turnover of rs. 65 lacs in FY 13-14 , but he has shown profit less than 8 % of turnover and got his account audited u/s 44AB.

now in financial 14-15, his turnover is of rs. 70 lacs and also has shown profit less than 8% of turnover and required get his account audited u/s 44AB.

my question is that whether he is liable to deduct TDS u/s 194A for payment of interest of rs. 1,21,854/-

as per my opinion TDS is not required to deduct because

194A section implies when an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.

while section 44AB States

Every person,—

(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds one crore rupees in any previous year; or

(b) carrying on profession shall, if his gross receipts in profession exceed twenty-five lakh rupees in any previous year; or

(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AE or section 44BB or section 44BBB, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year; or

(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,

so it's clearly specified in section 194A that it is required if individual falls u/s clause (a) or (b) of section 44ab, then TDS is required , but we don't fall in category of clause (a) or (b) of section 44ab.

I had read so many post in this type of issue, but could not get exat idea anywhere further also consulted other CAs but could not get same and one answer.

please give some judgement or specific idea about TDS implementation in this type of issue.

Replies (5)

manish jain

sr associate

63 Points Joined January 2015

Hi,

In the above case, tax audit is also not required as the turnover of the business is less than 1 crore. Further, it is not mandatory to deduct the tds on interest by the individual business if they are not fall under the category of secton 44AB.

Hope you find above in order.

Regards

Manish Jain

Email:manishjaincfa @ gmail.com

rajdip ranpara

proprietor

141 Points Joined December 2012

Dear sir,

Thanks for reply but

It's compulsory from a.y. 2011-12 u/s 44AD that any business who has shown its profit below 8% of his gross sales/turnover/ receipts then he has to get his account audited u/s 44AB.

and our profit is below 8% of sales therefore we are to get our account audited.

my question is that we have not audited because of turnover limit of rs. 1crore but we have audited due to lesser profit below 8% in preceeding previous year.therefore whether we are required for tds liability or not , according to my first post.

manish jain

sr associate

63 Points Joined January 2015

As per my understanding, you are required for deducting TDS because you are fallen into the category of section 44AB. I can understand as you cited above, as per the provision of this section clause (a) and (b) are not met with the requirement of deducting the TDS however kindly note that under interpetation of law, there is one rule which is rules of harmonious construction which means when there are confict between two or more provsion of law, they should be follow in such a way that maximum benefit can be obtained and no rule need to be violated in the process of the following the other one.

So based on the above rule, i think the company is need to required deduct TDS on the same.

Miss Rinkal

Student

1309 Points Joined January 2009

No TDs provisions are not attracted since you are getting tax audit done because of 44AD section. Whereas TDs provisions are reqd only if turnover exceeds rs 1 crore or prof receipts exceeds rs 25 lakhs, otherwise TDs is not required to be deducted