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Issues in Tax Audit

Issues in Tax Audit. CA Avinash Gupta. Acclaim Management Solutions Private Limited. Finance Act, 1984 Hon. Finance Minister “ Tax Audit intented to ensure that the books of account and other records are properly maintained and faithfully reflect the true income of the taxpayer ”.

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Issues in Tax Audit

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  1. Issues in Tax Audit

    CA Avinash Gupta Acclaim Management Solutions PrivateLimited
  2. Finance Act, 1984Hon. Finance Minister“Tax Audit intented to ensure that the books of account and other records are properly maintained and faithfully reflect the true income of the taxpayer”
  3. Applicability of Section 44AB Applicable to every person- Carrying on business having turnover > Rs 60Lacs Carrying on profession having gross receipts > Rs 15 Lacs Limits increased by Finance Act, 2010 to Rs60 lacs& Rs15 lacs respectively wef01-04-2011 In case the assessee claims income to be less than the presumptive basis provided u/s 44AD, 44AE, 44AF, 44BB, 44BBB
  4. Liability of Tax Audit Income exempt from tax Trust carrying on business Income below taxable limits Non-residents
  5. Business v Profession Section 2(13) - Business includes any trade, commerce or any adventure or concerning the nature of trade, commerce or manufacture; Profession means Architectural Authorised Representative Company Secretary Engineering Film Artists, etc Interior Decoration Legal and Medical Technical Consultancy Information Technology
  6. Business v Profession Advertising agent Clearing, forwarding and shipping agents Couriers Insurance agent Nursing home Stock and share brokers Travel agents Dealing in shares Derivatives Jobbing Speculation Sale of Capital Assets
  7. Turnover or Gross Receipts Speculative transactions:- Sum total of positive and negative differences Derivatives, futures and options:- Total of favourable and unfavourable differences + premium received on sale of options Delivery based transactions:- Total value of sales
  8. Turnover or Gross Receipts Sales returned Trade discount Scrap credited to misc. income Service / installation charges Excise duty / sales tax Cash discount Sale proceeds of fixed assets Sale of investments
  9. Applicability of Sec 44AD The amended provisions of this section are applicable with effect from 1stApril, 2011 and will accordingly apply in relation to assessment year 2011‐12 and subsequent assessment years. Brief eligibility Individuals, HUFs & partnerships firms (not being a LLP) Any business except the business covered unde Sec.44AE. Gross Receipts should not exceed Rs 60 lakhs No requirement of payment of advance tax 8% of Gross Receipts or such higher as may be earned by the assessee
  10. Applicability of Sec 44AD Issues Whether 44AD is optional or mandatory ? If the total income is not chargeable to tax, audit u/s 44AB is to be conducted or not? Whether speculative business is covered or not?
  11. Issues in 3CEB report
  12. Issues in 3CEB report Essentially comments : whether the tax payer has maintained the transfer pricing documentation as required by the legislation, whether as per the transfer pricing documentation the prices of international transactions are at arm’s length, and certifies the value of the international transactions as pert he books of account and as per the transfer pricing documentation are “true and correct”
  13. Conclusion to be given Independent entity Associated enterprise International transactions - goods - services - intangibles - loans Resident Resident Transfer price Arm’s length price
  14. How to arrive at the ALP Choice to be made from the following methods (Section 92C): comparable uncontrolled price method (CUP Method); resale price method (RPM); cost plus method (CPM); profit split method (PSM); transactional net margin method (TNMM); such other method as may be prescribedby the Board.
  15. Acclaim Management Solutions Private Limited D – 10, Kailash Colony New Delhi: 110 048 Ph: +91 11 2410 8838 Fax: +91 11 40556069 W: www.acclaimindia.com Avinash Gupta: +91 98107 51999 avinash.gupta@acclaimindia.com caavinashgupta@gmail.com
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