Applicability of section 44AD in case of loss of Firm

[CA. Sanjay Agrawal]

In one of the case of partnership firm, the total turnover is Rs. 57.40 Lacs and net loss of Rs. 50,000/-. If the firm does not want to show income u/s. 44AD of the I.T. Act @ 8% of Rs. 57.40 Lacs, whether the firm has to gets its accounts audited u/s. 44AB inspite of loss ?

[BHAVESH PATEL]

YES

AS per Section 44AD if Firm wants to declare lower income then the 8%  of Turnover, TAX Audit is compulsory.

In your case There is loss which  is lower than the 8% of the Turnover and if Firm wants to declare lower income then TAX Audit is to be done.

For this  Cost benefit Analysis to be made that is TAX Saved and Fees for TAX Audit and decision to be made.

AND it is advisable to take TAX Audit option as Tax to be paid if 8% income is considered which is 459200 and TAX is Rs. 138170/- and TAX Audit Fees Say Max Rs .35000 there is Saving of Rs. 103170/-

Hope U find the answer!!!!!!!!!

[CA. Sanjay Agrawal]

But the Firm occured loss which is the maximum amount not chargeable to tax in case of partnership firms and hence the second condition of 44AD (5), being not satisfied, the firm is not covered by 44AB of the Act and is legally correct or not.

[caabhisheksonthalia]

Mr. Sanjay, lets make clear about section Sec 44AB states that for Income tax audit if the turnover does not exceeds 60 lacs in p.y. then no need for audit (a.y.-12-13).Now, it makes it very clear that in Sec 44AD (Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.)Yes audit to be carried out.

[siddhesh]

WITH DUE RESPECT TO UR VIEWS MR SONTHALIA

SECTION 44AB STATES 2 CONDITION TO BE SATISFIED  IN ORDER TO GET THE ACCOUNTS AUDITED BY CA:

1. IF THE ASSESSEE CLAIMS THAT HIS INCOME IS LOWER THAN THE INCOME DEEMED UNDER SECTION 44AD AND

2. THE ASSESSEE TOTAL INCOME IS CHARGEABLE TO TAX

IN MY VIEW SINCE CONDITION 2 IS NOT SATISFIED AUDIT IS NOT REQUIRED TO BE DONE

[ddshah]

i agree with the views of siddhesh

[pawansingla]

There is some ambiguity regarding this. I propose the safer option is to get the accounts audited.No problem. The audit fees is not a big issue for such a small turnover.But it might be trouble some later on. Always be on the safer side.