BASIC PROVISIONS RELATING TO BUSINESS INCOME-TAX BASIC PROVISIONS RELATING TO BUSINESS CA. Pankaj Agrwal B.Com(Hons.), LL.B., FCA Accounting & Taxation Awareness Seminar at Kanpur

DEFINITIONS ASSESSMENT YEAR PREVIOUS YEAR ASSESSEE PERSON RESIDENT NON-RESIDENT “Assessee” means any person by whom any tax or any other sum of money is payable under the Act and includes any person against whom any proceedings under this Act has been taken or who is deemed to be an assessee or assessee in default. “Person” Individual, HUF, Company, Firm, AOP or BOI, Local Authority and Artificial juridical person. (Total 7 ) Resident - 182 days or more during the year Has been in India for a period of 365 days or more in 4 years preceding the year under consideration and has been in India for a period of more than 60 days in that year. This condition does not apply if a person leaves for employment or as a member of the crew of an Indian ship or a citizen of India or a person of Indian Origin comes on a visit to India. NOR If non-resident in nine out of ten years or has been in India for a period of 729 days or less in seven years preceding the year under consideration .

HEADS OF INCOME SALARY INCOME FROM HOUSE PROPERTY PROFITS AND GAINS OF BUSINESS OR PROFESSION CAPITAL GAINS INCOME FROM OTHER SOURCES

PROFITS AND GAINS OF BUSINESS OR PROFESSION Requirement to keep regular books of accounts. Requirement to get accounts audited. Requirement to follow Accounting Standards. Section 44AA if income exceeds Rs. 1.20 lacs or total sales, turnover or gross receipt exceeds Rs. 10.00 lac in any of the three years or in case of new set-up is likely to exceed. He opts out of deeming provisions. Section 44AB Rs. 40.00 lacs or Rs. 10.00 lacs. Section 145A To follow Accounting Standards only two standards notified so far (i) Disclosure of Accounting policies and (ii) Prior Period and Extra Ordinary items and changes in accounting policies.

Tax Audit Report in form 3CD Part A General Information about entity Part B Information relevant for assessment Annexure I Summarized Financial Data of Balance Sheet and Profit and Loss Account Annexure II Value of Fringe Benefit Tax

Part A General Information Name of the assessee Address Permanent Account Number Status Previous year ended Assessment year

Part B For Partnership Firms and Association of Persons: (a) If firm or Association of Persons, indicate names of partners/members and their profit sharing ratios. (b) If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change.

Part B Nature of Business (a) Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession). (b) If there is any change in the nature of business or profession, the particulars of such change.

Part B Books of accounts: (a) Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed. (b) Books of account maintained. (In case books of account are maintained in a computer system, mention the books of account generated by such computer system.) (c) List of books of account examined. Prescription of books is only for Professional services.

Part B Presumptive Income Whether the profit and loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant sections (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB or any other relevant section). 44AD Civil Construction 8% of the gross receipts. 44AE Plying, hiring or leasing goods carriage 3500/- p.m. for Heavy goods Vehicle and Rs. 3150/- for (Not owning more than 10 goods carriage other vehicles. at any time during the previous year 44AF Retail Business 5% of turnover. 44B Shipping Business 7.5% of the aggregate amount received or deemed to be received. 44BB Exploration of Minerals 44BBA Operation of Aircrafts in the case of non-resident 44BBB Civil Construction in certain turnkey projects of Foreign Companies.

Part B Method of accounting (a) Method of accounting employed in the previous year. (b) Whether there has been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year. (c) If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss. (d) Details of deviation, if any, in the method of accounting employed in the previous year from accounting standards prescribed under section 145 and the effect thereof on the profit or loss. Method of accounting employed Cash or Mercantile

Part B Valuation of Stock (a) Method of valuation of closing stock employed in the previous year. (b) Details of deviation, if any, from the method of valuation prescribed under section 145A, and the effect thereof on the profit or loss.

Part B Conversion of Capital Stock in Stock-in-trade Give the following particulars of the capital asset converted into stock-in-trade: - (a) Description of capital asset; (b) Date of acquisition; (c) Cost of acquisition; (d) Amount at which the asset is converted into stock-in-trade.

Part B (a) the items falling within the scope of section 28; Amounts not credited to Profit and Loss Account (a) the items falling within the scope of section 28; (b) the proforma credits, drawbacks, refund of duty of customs or excise or service tax, or refund of sales tax or value added tax, where such credits, drawbacks or refunds are admitted as due by the authorities concerned; (c) escalation claims accepted during the previous year; (d) any other item of income; (e) Capital receipt, if any.

Part B Depreciation: (a) Description of asset/block of assets. (b) Rate of depreciation. (c) Actual cost or written down value, as the case may be. (d) Additions/deductions during the year with dates; in the case of any addition of an asset, date put to use; including adjustments on account of— (i) Modified Value Added Tax credit claimed and allowed under the Central Excise Rules, 1944, in respect of assets acquired on or after 1st March, 1994, (ii) change in rate of exchange of currency, and (iii) subsidy or grant or reimbursement, by whatever name called.

Part B (e) Depreciation allowable. (f) Written down value at the end of the year.

Part B Amount deductible: (a) 33AB Tea Development Account, Coffee Development Account and Rubber Development Account (b) 33ABA Site Restoration Fund (c) 33AC Reserves for Shipping Business (wherever applicable) (d) 35 Expenditure on scientific research (e) 35ABB Expenditure for obtaining license to operate telecommunication services (f) 35AC Expenditure on eligible projects or scheme. (g) 35CCA Payment to association and institutions for Rural Development Programmes

Part B (h) 35CCB Payment to association and institutions for conservation of natural resources. (i) 35D Amortisation of Preliminary expenses (j) 35DD Amortisation of expenditure in case of amalgamation or demerger (k) 35DDA Amortisation of VRS expenditure (l) 35E Expenditure on prospecting etc of certain minerals.

Part B Employee related payments (a) Any sum paid to an employee as bonus or commission for services rendered, where such sum was otherwise payable to him as profits or dividend. [Section 36(1)(ii)]. (b) Any sum received from employees towards contributions to any provident fund or superannuation fund or any other fund mentioned in section 2(24)(x); and due date for payment and the actual date of payment to the concerned authorities under section 36(1)(va)

Part B Amounts specifically to be disallowed under the Act: (a) expenditure of capital nature; (b) expenditure of personal nature; (c) expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like, published by a political party; (d) expenditure incurred at clubs,— (i) as entrance fees and subscriptions; (ii) as cost for club services and facilities used;

Part B (ii) any other penalty or fine; (e) (i) expenditure by way of penalty or fine for violation of any law for the time being in force; (ii) any other penalty or fine; (iii) expenditure incurred for any purpose which is an offence or which is prohibited by law; (f) amounts inadmissible under section 40(a); (g) interest, salary, bonus, commission or remuneration inadmissible under section 40(b)/40(ba) and computation thereof; (h) (A) whether a certificate has been obtained from the assessee regarding payments relating to any expenditure covered under section 40A(3) that the payments were made by account payee cheques drawn on a bank or account payee bank draft, as the case may be 40(a)(i) & (ia) Payment made without deduction of tax at source. (ib) STT (ic) FBT (ii) INCOME_TAX (iia) Wealth-tax (iii) Salary payable outside India, if no tax has been paid thereon. (iv) Payment to PF and other funds, if no effective arrangements have been made for deduction of tax at source from payments made from such fund. (v) Tax paid by the employer. 40A(3) W.e.f. AY 2008-09 Total disallowance.

Part B (B) amount inadmissible under section 40A(3), read with rule 6DD [with break-up of inadmissible amounts; (i) provision for payment of gratuity not allowable under section 40A(7); (j) any sum paid by the assessee as an employer not allowable under section 40A(9); (k) particulars of any liability of a contingent nature. (l) amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income; (m) amount inadmissible under the proviso to section 36(1)(iii); 36(1)(iii) Interest on borrowing for the period from date of borrowing to the date of first put to use is not to be allowed w.e.f AY 2004-05

Part B Related Party Transactions: Particulars of payments made to persons specified under section 40A(2)(b). Chart Deemed Profits u/s 33AB, 33ABA or 33AC Deduction allowable on Actual Payment irrespective of method of accounting (43B) MODVAT credits availed and utilised during the year Prior period items of Income or expenditure 33AB Tea Development Account, Coffee Development Account, Rubber Development Account 33ABA Site Restoration Fund 33AC Reserves for Shipping Business 43B Statutory payments, employee related payments, financial institution related payments. Prior Period Items “Prior period items” means material charges or credits which arise in the previous year as a result of errors or omissions in the preparation of the financial statements of one or more previous year.

Part B Amount borrowed on Hundi Loan or deposits taken or accepted in excess of amounts specified in section 269SS Each loan or deposit repaid in excess of amounts specified in section 269T Brought forward loss or depreciation EXCEL

Part B Chapter VIA deductions Compliance with TDS provisions Quantitative information Dividend Distribution Tax Cost Audit/Excise Audit Accounting Ratios Chapter VIA Section wise details of deductions Quantitative details Opening Stock, Purchases, Sales & Closing Stock and Shortage/Excess if any DDT Amount and date of payment Cost Audit Audit Report to be annexed Accounting Ratio GP/Turnover; NP/Turnover; Stock-in-trade/turnover; Material Consumed/Finished Goods produced.

Annexure Annexure I Salient figures of Balance Sheet and Profit and Loss Account Annexure II Fringe Benefit Tax

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