.jpg)
Dear Mr Sundesha,
Who told you you're not liable for Tax Audit under the IT Act if your sales do not exceed Rs 40 lacs? MVAT says you're liable for VAT audit if either your sales or purchases exceed Rs 40 lacs. And so does the Income Tax Act!There's a Mumbai Tribunal judgement in the case of Vijay Maheshwari, HUF (228 ITR (St) 157) where it has been held that the word "turnover" used in Section 44AB means purchases as well as sales. The Triumvirate of "Sales, Turnover or Gross Receipts" has stood in Section 44AB of the Income Tax Act since 1985, unchanged, untouched. In accounting terms we understand Turnover to be sales only. Then, why did the legislature feel the need to preface Turnover with Sales, if they mean one and the same thing? Apparently, the law understands these terms in a very different sense than we accountants do. In the Mumbai tribunal judgement referred above, the bench ruled that since the purchases exceeded Rs 40 lacs, tax audit was required. If the legislature intended to consider the figure appearing in the Credit Side of the P & L only as the one determinative of tax audit requirement, it would've just used the word "Sales". But Sales is followed by Turnover, which perhaps means the intention of the law is to go beyond mere looking at the figure arrived at after aggregating the sale invoices issued during the year. Although many people have found fault with this judgement, I see logic in it. I think we accountants restrict the meaning of turnover when we say it means Sales only. Turnover literally means being turned over and over again. The working capital is deployed to buy stock; the stock is processed and then sold; the payment is realized from the buyer; the money is invested back into buying more stock, and this cycle goes on and on. This is what Turnover is--the Working Capital Cycle. So clearly, even from an accounting point of view, Turnover means purchases as well as Sales. The idea of Tax Audit is to subject, to examination by a chartered accountant, the accounts of certain assessees whose volume of business exceeds a certain level. And, the volume of business is surely not measured by the figure of Sales alone. In fact it is Purchases that set in motion the cycle of working capital "turnover". You can also go through my Message No 9521 on this topic. I've discussed this before. So I don't think there's any conflict between requirement of audit under the MVAT and the Income Tax Act. If you're required to have the books audited under MVAT, you'll be required to do so under the I T Act as well, and as such there'd be no problem in procuring and attaching Form 3CB/CD with the MVAT audit report. Thanks,CA Sanjeev Bedi--- In
ICAI_CIRC_MEERUT_ CA@yahoogroups. com, Laxman Sundesha 
No comments:
Post a Comment