Search Results For: CA. H. N. Motiwalla


Audit of accounts – Business – Profession -Tax Audit u/s. 44AD r.w.s. 44AB

QUERY: ABC partnership firm is engaged in retail business. It sale for F.Y. 2016-17 is Rs. 40/- lakhs. Net profit, before remuneration to partners, but after interest to partners is Rs. 1,40,000/-. The firm gives remuneration Rs. 1,50,000/- to partners and thus, there is a net loss of Rs. 10,000/- In this situation, are books of account of firm liable to Audit under section 44AD r.w.s 44AB?
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From the above stated fact, it is clear that during the financial year 2016-17, a firm has incurred loss of Rs. 10,000/-, however, its turnover is less than Rs. 1/- crore, so a firm is eligible assessee under section 44AD of the Act.

Posted in Income-tax

Deductions on actual payment -Whether GST is covered u/s. 43B of the Income tax Act, 1961

QUERY: Deductions on actual payment -Whether GST is covered u/s. 43B of the Income tax Act, 1961?
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GST (Goods & Services Tax) is applicable from July 1, 2017. GST has replaced the Excise Duty, Service Tax, Countervailing Duty (CVD), Special Additional Duty of Customs (SAD), Value Added Tax (VAT), Central Sales Tax (CST), Octroi, Entry Tax, Purchase Tax, Luxury Tax, Taxes on Lottery, States cesses and surcharges and Entertainment Tax (other than tax levied by the Local Bodies). Thus GST is one tax which covers all the above taxes and which is destination based tax.

Posted in Income-tax

Expenses or payments not deductible – Cash payments exceeding prescribed limits

QUERY: Mr. A has taken over the running business of Mr. B with all its assets and liabilities w.e.f. April 1,2014. He makes a cash payment of Rs. 40,000/- on June 1, 2014 to one of the trade creditors of the predecessor, Mr. B., deduction in respect of which obviously not claimed by the Mr. A. Can there be any disallowance in the hands of Mr. A in the assessment year 2015-16?
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The requisites of succession, as the Supreme Court laid down in CIT v. K. H. Chambers [55 ITR 674] are:
i) There shall be a change of ownership.
ii) The integrity of the business shall remain – the whole business should devolve upon the successor.
iii) The identity and continuity of the business should be substantially preserved. The same business shall be carried on by the person succeeding.

Posted in Income-tax

Amounts not deductible – Working partner – Remuneration – Remuneration paid to HUF

QUERY: In case when both the HUF and his Karta is a partner of same partnership firm, remuneration paid to HUF will be allowed or not?
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In V. D. Dhanwatey v. CIT [68 ITR 365 (SC)], V. D. D. as a member of a bigger HUF was looking after the family business of lithography and printing and was remunerated for the same between 1930 and 1939. After partition the business was converted into partnership but VDD continued to be with one eighth share on behalf of his smaller HUF which had contributed proportionate capital. Under clause 7 of the partnership deed the general management and supervision of the business was to be in the hands of VDD, who under clause 16, was to be paid remuneration.

Posted in Income-tax

Depreciation on income assessed under other sources

QUERY: The main object of the company is to carry on the business of the construction. However, construction business was not carried on. The querist has purchased the wind mill and received the charges for use of electricity. Whether income can be assessed a business income or income from other sources. If income is assessed as income from other sources, the depreciation is allowable?
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From the fact, it is clear that the company has not started construction business but received electricity charges by letting out wind mill; which is presumed to be not business of the company.

Posted in Income-tax

Business income or Income from house property or Income from other sources-Single Transaction in the course of business

QUERY: The main object of the company is leasing of the premises. However, the company is having only one property as investment which is shown in the books of account. The said property is leased to a third party, whether the income of leasing of premises can be assessed as income from house property or business income. If the consolidated agreement is entered into for leasing of property and furniture can the AO bifurcate the expenses as a income from other sources and property income.
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The main object of the company is leasing of the premises. The company is having only one property shown as investment in the books of account and the said property is given on lease to third party as per the object of the company. Therefore, income from leasing is to be shown under the head “Profits and gains of business or profession”.

Posted in Income-tax

Business income or capital gains-Developers position on renting & selling of flats

QUERY: Assessee is a developer of housing complex. He intends to sell the all the flats in a building constructed. However latter on instead of selling flats assessee gave them on the rent. Under which head of income such rental income would be taxable? Further if sells such flats after 7/8 years to same tenants. Whether sale proceeds would be taxed as business income or capital gains?
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Though, the assessee being a developer and developed housing complex with intention to sell the flats. Due to circumstances, he could not sell the flats and therefore he has rented out the same. The income from renting outould be assessed under the head “Income from house property”.

Posted in Income-tax

Income from house property – Deduction u/s. 24

QUERY: Is it permissible to show rental income from shops u/s. 22 & claim any deduction in the hands of the Trust?
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‘Owner’ for the purpose of section 22 may be an individual, a company, a firm, an association of persons or an artificial juridical entity. The term “owner” includes a legal owner such as a trustee, an executor and an official assignee or an official receiver etc. Thus, the trustee of the Trust or trust can be owner.

Posted in Income-tax

Denial of exemption-Trust or institution-Investment restrictions

QUERY: If a Section 25 company is registered as charitable trust whether threshold limits of
Rs. 2,50,000/- will be available to the company as charitable trusts are assessed as AOP? Similarly what will be the threshold limit applicable in case a society is registered as charitable trust?

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Income derived by charitable or religious trust is exempt from tax to the extent to which such income is applied to charitable or religious purposes or is accumulated or set apart, in accordance with the provisions of Income-tax Act, for application to such purpose.

Posted in Income-tax

Denial of exemption-Trust or institution-Investment restrictions -Taxability of Charitable Trust in case exemption is forfeited.

QUERY: In case of violation of Section 13(1)(c) or 13(1)(d) what are the repercussions and how the tax is calculated in above situations as there is some confusion in that?
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Section 164(2) of the Income-tax Act, 1961 provides that in case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, tax shall be charged on so much of the relevant income as is not exempt under Section 11, as if the relevant income not so exempt were the income of an association of persons.

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