TAX TALK-07.09.2015-THE HITAVADA
TAX TALK
CA. NARESH JAKHOTIA
Chartered Accountant
Assessee with Multiple businesses & Applicability of Tax Audit limit of Rs. 1 Crore
Query 1]
Our question is below:
1. I am trader in coal plus own 10 trucks and I also use truck of other truck owner and I make transport bill of sale in my name if my turnover in transport from 10 truck plus other truck not owned by me exceeds one crore;
a] Can I avail benefit of presumptive scheme u/s 44AD? (I treat my transport business as any business as defined in 44AD &
b] I will not opt for presumptive taxation scheme U/s 44AE
2. If I cannot avail benefit under 44AD as per above description of my case then can I have two benefit simultaneously for my transport business as under:
a] 44AE = for 10 truck owned by me (7500 x 12 x 10 =900000)
b] 44AD = 8% on turnover of transport in respects of truck not owned by me. (means total sales turnover less our truck sales turnover = balance is other sales for declare income @ 8 %).
- Please note that our coal trading business is already in audit case and additionally I am proprietor of 2 above entity. [Ujjwalbjha@gmail.com]
Opinion:
Before coming to specific issues raised by you in the query, let us have a general overview of the three related important provisions of Income Tax Act.
1. Under section 44AB, every person, other than person engaged in profession, is compulsorily required to get the books of account audited and have to upload the tax audit report at the income tax website if total sales, turnover, gross receipts from business exceed Rs. 1 Cr. For professional, the limit is of Rs. 25 Lacs.
2. Under section 44AD, any resident- Individual/HUF/partnership firm (but not LLP) whose total sales, turnover etc doesn’t exceed Rs. 1 Crore, is not required to maintain the books of accounts if they agree to offer 8% of the turnover as income. However, benefit of section 44AD is not available if the person has (a) Income from Profession (b) Commission Income (c) Agency business income.
3. Under section 44AE, taxpayer (who may be individual/HUF/AOP/BOI/ Firm /Company/Co-operative society or any other person who may be resident or non-resident) engaged in the business of plying, hiring or leasing of goods carriages and owns not more than 10 goods carriages at anytime during the previous year, may be excluded from the provision of maintaining books of accounts if such taxpayer offers for every goods carriage income of at least Rs. 7,500/- per month or part of a month. It may be noted that tax audit provision of section 44AB will not be applicable in such cases even if the turnover exceeds Rs. 1 Crore if such person agrees to offer income on presumptive basis @ Rs. 7,500/- per month per truck.
Coming to your query, provision of section 44AD is not applicable if the total turnover ( excluding the turnover from the business of plying, hiring, or leasing of goods carriage referred to in section 44AE) of the taxpayer, exceeds Rs. 1 Crore. To be more precise, if turnover of all business of eligible assessee, excluding business covered by section 44AE, exceeds Rs. 1 Crore, taxpayer has to get accounts audited u/s 44AB and option to file return on presumptive basis u/s 44AD in respect of any particular business or part of business or division thereof will not be available. Your coal business is already covered by tax audit provision u/s 44AB for the reason that your turnover therefrom is exceeding Rs. 1 Crore. Resultantly, the benefit of presumptive taxation u/s 44AD in respect of transport business would not be available to you. You have to get the transport business also audited & income of it cannot be offered for taxation on presumptive basis u/s 44AD. Limit of Rs. 1 Crore for tax audit is assessee-wise and not business-wise. Only exception is in respect of income from plying, hiring or leasing of your own goods carriages. You can offer income from goods carriages on presumptive basis u/s 44AE & tax audit would not be mandatory in such case.
Query 2]
I have sold one plot on 15th Feb 2015. Registries amount is Rs. 17,50,000/-. This plot was in the name of my grandmother & she is a Senior citizen. Please guide what amount I have to invest in 54EC bonds for saving capital gain? What are other tax saving option? We had purchased this plot 20 year ago & and paid development charges of NIT. [sachin.bhoyar31@gmail.com]
Opinion:
1. For saving tax arising from transfer of any Long term capital assets, taxpayers have to invest the amount of Long Term Capital Gain (LTCG) in specified bonds issued by NHAI/RECI (normally referred to as 54EC Bonds) within a period of 6 months from the date of transfer of the assets. It may be noted that for an exemption under section 54EC, investment of just LTCG (not entire sale consideration) would be sufficient.
2. In absence of all the relevant details like exact date & amount of purchase, development charge etc, LTCG quantum could not be worked out. However, you have sold the plot on 15th February’2015. The period of 6 months is over now and so the option of saving the tax by investing the amount in 54EC bonds is no more available to you. But, you have an option to save tax by claiming an exemption u/s 54F. To claim an exemption u/s 54F, taxpayers have to invest net sale consideration towards purchase/construction of another house property within a prescribed time frame. The prescribed time periods are as under:
a] For purchase:
One year before or two years after the date of sale.
b] For Constructions:
Three years from the date of sale.
3. Scheme of Deposits:
Although under section 54F, taxpayer is allowed a time period of 2 years for purchase & 3 years for construction of the house property, but the capital gain on transfer of the assets is taxable in the year in which the transfer took place. The return of income of that previous year has to be filed before the due date. To offer the benefit of exemption at the time of filing the income tax return, Income Tax Act has specified a mechanism in the form of deposit under the Capital Gain Deposit Accounts Scheme-1988 (CGDAS). The amount of the net sale consideration, which is not utilized by the taxpayer for purchase or constructions of the new house before the due date of furnishing the return of income, should be deposited by him under the Capital Gain Accounts Scheme, before the DUE DATE of furnishing the return. After Deposits, the amount already utilized by the taxpayer for purchase/ constructions of the new house, along with the amount so deposited, shall be eligible for exemption under section 54F in the year in which LTCG has arisen. Subsequently, taxpayer can utilize the amount for purchase / construction, as the case may be, within a specified period of 2 or 3 years by withdrawing from the account.
4. Government has extended the due date for filing of Income Tax Return for Assessment Year 2015-16 to 7th September 2015 from 31st August 2015 for taxpayers who were required to e-file their tax-return by 31st July, 2015. In your case, the return of income for the AY 2015-16 was required to be filed by 7th September 2015 (i.e., today) which is the due date for individual taxpayers who are not covered by tax audit provision. Though you cannot save tax by investing in the 54EC bonds, you have an option to claim an exemption u/s 54F. But for this, you have to take a final call today itself & have to either
a] make the payment towards purchase/construction of house or
b] deposit the amount of net sale consideration in the CGDAS and subsequently utilize the amount for the purchase/ construction as the case may be within prescribed time frame.
[The author is a practicing Chartered Accountant from Nagpur.
Readers may send their direct tax related queries at
SSRPN & Co
10, Laxmi Vyankatesh Apartment
C.A. Road, Telephone Exch. Square
Nagpur-440008
or email it at
nareshjakhotia@ssrpn.com]
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