|A is having salary of about Rs. 30 lakhs. He has also done F & O transactions in shares. As per guidance note on tax audit of ICAI total of favourable and unfavourable differences shall be taken as turnover in F & O transaction. For A.Y. 2013-14 favourable difference is 80 lakhs and unfavourable difference is Rs. 10 lakhs, hence, A has paid income tax on Rs. 70 lakhs. Whether A is required to maintain books of account and get tax audit or can A claim that he does not maintain books of account, and offer business income @ 8% of Rs. 70 lakhs as per section 44AD?
|The Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961 states that in case of Derivatives, Futurer and options the difference between total favourable and unfavorable is to be considered as turnover for the purpose of deciding the limit under section 44AB of the Act.
However, the Income tax Appellate Tribunal has held in Growmore Exports Ltd. v. ACIT [78 ITD 95 (Mum.)] and Banwari Sitaram Pasari HUF v. ACIT [140 ITD 320 (Pune)] that in the case of speculative transactions, no delivery takes place and accounts are settled only crediting / debiting the difference which are reflected in profit and loss account. Hence, no turnover has been effected and therefore the assessee is not liable to get the accounts audited under section 44AB. So in the extant case Rs. 70/- lakhs cannot be considered as turnover and therefore A will not have benefit of section 44AD.
|CA. H. N. Motiwalla
|Audit of accounts, tax audit
Opinion Of Eminent Legal Luminaries On Controversial Issues
How To Calculate Limit Of Turnover In Case Of F & O Transactions Or Speculative Transactions?
Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org