Recent changes in form 3CD - Tax Audit Report U/s 44AB of Income Tax Act, 1961

Changes in form 3CD DK Bholusaria | [email protected]

Highlights of changes

Major Changes

Annexure I and Annexure II removed.

Many details will have to be furnished in comprehensive, tabular and analytical forms (formats as per e-utility given legal force).

Elaborate information and analysis in various tables will have to be furnished.

Adverse reports, qualifications from various other audit reports will have to be given by the tax auditor, instead of merely annexing such reports till now.

TDS compliance reporting has been totally revamped and made comprehensive.

Certain provisions of IT Act which are in force but were not covered in earlier format, have been covered now (Eg., new clause 17).

08/09/2014 DK BHOLUSARIA

Major Changes

ITR forms also synced in tune with new 3CD.

Now you can easily identify if audit has been done pursuant to 44AD/44AF – Long pending demand of profession.

All difference of opinions / disclaimers / qualifications / limitations with regard to different of clauses of form 3CD has to be specifically brought out in clause 3 of form 3CA or clause 5 of form 3CB now – New requirement.


New v/s old Bird’ eye view of changes

New v/s old clause – Clause 1 ~ 12

Brief description of clause New

Clause #

Old

Clause #

Changes

Name 1 1 No Change

Address of assessee 2 2 No Change

PAN of assessee 3 3 No Change

Registration under indirect taxes 4 - New clause*

Status 5 4 No Change

Previous year 6 5 Cosmetic

Assessment year 7 6

Relevant clause of 44AB 8 - New clause*

Firm / AOP / Partner’s details 9 7 Clarificatory Change in sub

clause (b)*

Nature of business 10 8 No change

Books of accounts / other records

and addresses

11 9 Lots of changes*

Presumptive Income in P&L

12 10 Practically no change (Chapter

XII-G and First Schedule specifically added to

list.)




Clause #

Old

Clause #

Changes

Method of accounting 13 11 No Change

Method of valuation of closing stock 14 12 No Change

Conversion of capital asset into stock

in trade

15 12A No Change

Amounts not credited to the profit and

loss account

16 13 No Change

Assets covered u/s 43CA and 50C 17 - New clause*

Depreciation allowable 18 14 No Change

Amounts admissible under various

sections

19 15 List of sections

enlarged*

Payment of bonus/commission u/s

36(1)(ii) and Employee’s contribution

to various funds u/s 36(1)(va)

20 16 Change in the way

transactions are

reported in sub-

clause (b).*


New v/s old clause – Clause 21


Clause #

Old

Clause #

Changes

Amounts debited to the profit and loss

account in the nature of capital,

personal, advertisement expenditure

etc.

21(a) 17(a~e) Clubbed in one sub-

clause.

Amounts inadmissible under section

40(a)

21(b) 17(f)

&

27 (b)(i)

&

27 (b)(iv)

Each sub-clause of

section 40(a) to be

separately reported*

Amount inadmissible under section

40(b) / 40(ba) & computation thereof

21(c) 17(g) No change

Amount inadmissible under section

40A(3) and 40A(3A)

21(d) 17(h) Certificate from

assessee dispensed

with. 40A(3A) reporting

is new requirement*

Gratuity u/s 40A(7), sum u/s 40A(9),

Contingent nature liability, Section

14A and Section 36(1)(iii)

21

(e~f)

17

(i ~ m)

No change




Clause #

Old

Clause #

Changes

Interest inadmissible under MSMED 22 17A No change

Particulars of payments made to

persons specified u/s 40A(2)(b)

23 18 No change

Amounts deemed to be profits and

gains u/s 32AB, 32AC or 33ABA or

33AC

24 19 New section 32AC

added

Any amount of profit chargeable to tax

u/s 41 and computation thereof

25 20 No change

Sums u/s 43B 26 21 No change

CENVAT and prior period

income/expenditures

27 22 MODVAT renamed as

CENVAT

Deemed income u/s 56(2)(viia) 28 - New clause*

Deemed income u/s 56(2)(viib) 29 - New clause*

Amount borrowed on hundi u/s 69D 30 23




Clause #

Old

Clause #

Changes

Loans or deposits taken/accepted

u/s 269SS

31(a) 24(a) No change

Loans or deposits repaid

u/s 269SS

31(b) 24(b) No change

Whether assessee certificate

obtained regarding account payee

cheque or an account payee bank

draft

- 24(c) Assessee certificate no

more required.

Now responsibility

shifted to auditor.

Whether the taking or accepting loan

or deposit, or repayment of the same

were made by account payee cheque

drawn on a bank or account payee

bank draft based on the examination

of books of account and other

relevant documents.

31(c) -


New v/s old clause – Clause 32 & 33


Clause #

Old

Clause #

Changes

Details of brought forward loss /

unabsorbed depreciation

32 (a) 25 (a) No change

Carry forward of loss due to change in

shareholding of a closely held

company u/s 79

32 (b) 25 (b) No change

Details of speculation loss u/s 73 32 (c) - New clause

Details of loss u/s 73A for specified

businesses u/s 35AD

32 (d) - New clause

(read clause 19 also)

In case of a company, please state

that whether the company is deemed

to be carrying on a speculation

business as referred in explanation to

section 73, if yes, please furnish

the details of speculation loss if any

incurred during the previous year

32 (e) - New clause

Deduction under chapter VI-A and

Chapter III (section 10A and 10AA)

33 26 Chapter III added.




Clause #

Old

Clause #

Changes

Whether the assessee is required* to

deduct or collect tax as per the

provisions of Chapter XVII-B or XVII-

BB. If yes, Tax auditor to provide kind

of TDS compliance statement in a

specified table format

34 (a) 27(a)

&

27

(b)(ii)

TCS also added

Back door entry of form

24C after 5 years*.

If the assessee has not furnished the

TDS/TCS return within the due date,

provide complete list of all such

returns

34 (b) - New clause*

Stringent requirements

of reporting

If assessee is liable to pay interest u/s

201(1A) or section 206C(7), tax

auditor to furnish details of interest

and its payment

34 (c) 27

(b)(iii)

New clause*




Clause #

Old

Clause #

Changes

Quantitative details of principal items

of traded goods, raw materials,

finished products etc.

35 28 No change

Details of tax on distributed profits

under section 115-O

36 29 Amount of reduction as

referred to in section

115-O(1A)(i)/(ii) to be

additionally given

If any cost audit / audit under CEA /

Service tax audit u/s 72A of FA 1994

was carried out during the year, then

tax auditor have to give details of

disqualification or disagreement on

any matter / item / value / quantity as

may be reported / identified by the

respective special auditor.

37, 38

and

39

(new

clause)

30 and

31

Instead of copy of report,

now auditor has to

provide all qualified /

adverse aspects of

cost audit / excise

audit / service tax audit

report.




Clause #

Old

Clause #

Changes

Major ratios 40 32 Computation no more

required

Previous year figures

also to be given

Only for Principal Items

Details of demand raised or refund

issued during the previous year under

any tax laws other than Income tax

Act, 1961 and Wealth tax Act, 1957

along with details of relevant

proceedings

41 - New clause


Clause by clause discussion

(key clauses)

Icons for reference in succeeding slides

Icon Represents

What clause says?

What to look for?

What to collect / documentation?

What / how to report?

This is a new requirement


Clause 4 Registration under indirect tax laws

Whether the assessee is liable to pay indirect tax like

excise duty,

service tax,

sales tax,

customs duty etc.

if yes,

please furnish the registration number or any other identification number allotted for the same.

Clause 4 – Registration under indirect tax laws


a. Central VAT - Service tax & Central Excise

b. Custom duty

c. Central Sales tax

d. State VAT / State Excise

e. Professional tax

f. Luxury tax

g. Entertainment tax

h. Entry tax

Clause 4 – Example of indirect taxes


a. Ascertain if any business activity of assessee is liable to any kind of Central or State Indirect Tax

b. Auditor to at least have basic knowledge of various indirect tax laws as to when such laws become applicable.

c. In case of doubts suggest assessee to take proper legal opinion.

d. Check applicability of respective tax laws to each division/location/branch, if applicable.



a. Management representation letter.

b. Written legal opinion(s) of lawyer / Chartered Accountant.

c. Copy of registration certificates / any other documentary proof of registration




SL # Type of Indirect Tax

or Name of statute

Name of

branch/unit, if

applicable

Registration /

Identification Number,

if taken

Remarks

1 Service Tax Corporate office AAACA9999A SD001

2 Service Tax X Division AAACA9999A SD002

3 Service Tax Y Division AAACA9999A SD003

4 Central Excise Duty X Division AAACA9999A XD001

5 Central Excise Duty Y Division AAACA9999A XD002

6 Delhi Value Added Tax Y Division 07871345678

7 Haryana Value Added Tax X Divison 07876930951

8 Custom Duty Corporate office AAACA9999A FT001

Sample reporting

In case the auditee is registered with more than one department or have

more than one identification number allotted for the same, all such numbers

are to be mentioned.


Clause 8 Relevant clause of section 44AB under which

audit conducted

Indicate the relevant clause of section 44AB under which the audit has been conducted.

Clause 8 – Relevant clause of section 44AB

The relevant clauses of section 44AB are as follows:

Section 44AB(a) – Business > 1 cr turnover

Section 44AB(b) – Profession > 25 lakh turnover

Section 44AB(c) – 44AF / 44B / 44BB

Section 44AB(d) – 44AD

You just need to ascertain relevant clause and report it.


Clause 9 (b) Change in Profit sharing ratio

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.

Change cosmetic and clarificatory in nature.

Clause 9 (b) – Change in Profit sharing ratio

For the purpose of above reporting, the auditor needs to examine the instrument of partnership i.e. “Partnership Deed” for firms.

In case of LLPs, LLP Agreement as well as LLP-form 3, 4 and 4A also needs to be checked and documented.


Clause 11 Books of accounts and other records

(a) Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed. (old clause)

(b) List of books of account maintained and the address at which the books of accounts

are kept.

{In case books of account are maintained in a computer system, mention the books of account generated by such computer system}.

{If the books of accounts are not kept at one location, please

furnish the addresses of locations

along with the details of books of accounts maintained

at each location.}

a) List of books of account and nature of relevant documents examined.

Clause 11 – Books of accounts and other records



Section 2(1)(12A) - “Books” or “Books of account”

(1) ledgers,

(2) day-books,

(3) cash books,

(4) account books

(5) and other books,

For certain professions, Board has prescribed Form C vide Rule 6F of the Rules



If an auditor:

refers to and examine for the purpose of the audit

any document which is not covered in the above definition of books of account / prescribed books of accounts,

he shall be obliged to report the nature of such document which is relevant for the audit



a. Take a list of all locations / branches / businesses covered by audit of assessee. You may also refer to various registration certificates to ascertain this information.

b. Check if assessee is maintaining centralised accounting or branch accounting.

c. If assessee has more than one businesses and separate books of accounts are maintained for each business, prepare a list of each such business(es) and its location.

d. Prepare an index of each key type of documents / records , which has been relied by you in support of the particulars given in clauses 12 to 41 for Form No. 3CD



S. No. Location

identifier Full address of Location

1 HO 211-212, Amba Towers, Sector 9, Rohini, Delhi 110 085

2 After market

division

211-212, Amba Towers, Sector 9, Rohini, Delhi 110 085

3 Chassis

Division

240, Udyog Vihar, Phase - I, Gurgaon 122 012

4 EoU Division 62, Chimes Building, Sector 44, Gurgaon 122 002

List of locations where books of accounts and other records

are maintained.



S. No. Particulars Location at

which

maintained

Whether

maintained

in a

computer

system?

Whether

Examined

?

Remarks

1 Cash book / Bank book All Yes Yes

2 General ledger / Journal All Yes Yes

3 Debtors and creditors

ledger

All Yes Yes

4 Fixed assets register All Yes Yes

5 Payroll records HO Yes Yes

Books of accounts maintained and examined

Other records examined:

Such other registers, vouchers and relevant documents and records in

support of the particulars given in clauses 12 to 41 for Form No. 3CD.

Note: The books of account are maintained on a computer system. The books of

account listed above and the other regular reports can be generated by the system

by defining the fields based on the type of books, data, records and extent of details

required.


Clause 17 Assets covered u/s 43CA and 50C

Where any land or building or both is transferred during the previous year for a consideration less than value adopted or assessed or assessable by any authority of a State Government referred to in section 43CA or 50C, please furnish:

(1) Details of property

(2) Consideration received or accrued

(3) Value adopted or assessed or assessable.

Corresponding changes carried out in ITR as well

Clause 17 – Assets covered u/s 43CA and 50C


Clause 17 – Assets covered u/s 43CA or 50C

Section 43CA applicable from AY 2014-15.

Assessee engaged in real estate business of sale and purchase (i.e. stock-in-trade) of land or building or both is covered by this section

Date of transfer is the key to this clause, consideration actually received is not.

Auditor should ascertain assessed/assess value as per respective authority/state govt.

Where any advance/part consideration received (other than in cash) prior to date of agreement, only date of agreement is relevant for the purpose {Sec 43CA (3) / (4))}


a. Take copy of agreement to sale and/or registered sale deed.

b. If assessed value/ assessable value not mentioned on registered deed, appropriate evidence for value like money receipt issued by registration authority.

c. In case of section 43CA(3), of any dispute arise on value, safer to take written opinion.

d. Management representation is must in all cases

e. While reporting, do give reference of document(s) on which reliance has been placed

f. Reporting to be made in format specified in clause itself.

Clause 17 – Assets covered u/s 43CA or 50C


Clause 19 Amounts admissible under various section

Clause 19 – Amounts admissible under various section

Section

No.

Debited to

P&L account

Deduction

admissible*

32AC

33AB

33ABA

35(1)(i)

35(1)(ii)

35(1)(iia)

35(1)(iii)

35(1)(iv)

35(2AA) 35(2AB)

35ABB 35AC

35AD

35CCA

35CCB

35CCC

35CCD

35D

35DD

35DDA

35E

*Deduction admissible as per the

provisions of the Income Tax Act, 1961

and also fulfils the conditions, if any

specified under the the conditions, if

any specified under the relevant

provisions of Income Tax Act, 1961 or

Income Tax Rules,1962 or any other

guidelines, circular, etc., issued in this

behalf.

No more required to disclose

amount not debited to the profit

and loss account under above

sections.

Section 33AC deleted

Section 35 divided into sub-

clauses


Clause 20 Contribution to various funds u/s 36(1)(va)

Clause 20(b) – Contribution to various funds u/s 36(1)(va)

(b) Details of contributions received from employees

for various funds as referred to in section

36(1)(va):

1) Serial number

2) Nature of fund

3) Sum received from employees

4) Due date* for payment

5) The actual amount paid

6) The actual date of payment to the concerned

authorities

* As per explanation to the clause (va), the “due date” means the

relevant date under the Act, rule, order, notification, standing order,

award, contract of service or otherwise of the relevant fund


Clause 20(b) – Contribution to various funds u/s 36(1)(va)

New reporting

Fields

Old reporting fields

(e-filing utility)

Remarks

Nature of fund Name of fund

Sum received from

employees Amount

Now we have to

report both

amount received

and deposited The actual amount paid

Due date for payment Due Date

The actual date of

payment to the

concerned authorities

Actual date


Clause 21

Clause 21(a) – Amounts debited to the P&L.

(a) Please furnish the details of amounts debited to the profit and loss account,

being in the nature of capital, personal, advertisement expenditure etc.

Nature Serial

Number

Particula

rs

Amt (in

₹)

Capital Expenditure

Personal Expenditure

Advertisement Expenditure in any souvenir, brochure,

tract, pamphlet or the like, published by a political

party

Expenditure incurred at clubs being entrance fees

and subscription

for club services and facilities used.

Expenditure incurred at clubs being cost for club

services and facilities used

Expenditure by way of any other penalty or fine not

covered above.

Expenditure incurred for any purpose

which is an offence or which is prohibited by law


Clause 21(b) – Amounts inadmissible under section 40(a)

Amounts inadmissible under section 40(a):-

i. as payment to non-resident referred to in sub-clause (i)*

ii. as payment referred to in sub-clause (ia)* {TDS}

iii. under sub-clause (ic) [Wherever applicable] {FBT}

iv. under sub-clause (iia) {Wealth Tax}

v. under sub-clause (iib) {Applies to state PSUs}

vi. under sub-clause (iii)

i. date of payment

ii. amount of payment

iii. name and address of the payee

vii. under sub-clause (iv)

viii. under sub-clause (v) {Tax paid on expat Salaries}

* Separately discussed


Clause 21(d) – Disallowance / deemed income u/s 40A(3)

(A) On the basis of the examination of books of account and other

relevant Documents / evidence, whether the expenditure covered under

section 40A(3) read with rule 6DD were made by account payee cheque

drawn on a bank or account payee bank draft. If not, please furnish the

details :{old clause}

(1) Serial number

(2) Date of payment {New field}

(3) Nature of payment

(4) Amount

(5) Name and Permanent Account Number of the payee, if available

{New field}

(B) On the basis of the examination of books of account and other

relevant Documents / evidence, whether the payment referred to in

section 40A(3A) read with rule 6DD were made by account payee cheque

drawn on a bank or account payee bank draft If not, please furnish the

details of amount deemed to be the profits and gains of business or

profession under section 40A(3A): (1) Serial number

(2) Date of payment


(4) Amount

(5) Name and Permanent Account Number of the payee, if available


Clause 21(d) – Comparison with old clause

Earlier Now

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;

On the basis of the examination of

books of account and other relevant

Documents / evidence,

whether the expenditure covered under

section 40A(3) read

with rule 6DD

were made by account payee cheque

drawn on a bank or account payee

bank draft.

If not, please furnish the details


Clause 21(d) – Guidance note of ICAI

2005 Edition

when certificate was not required

2013 edition

When certificate was required

Quote

“…there may be practical difficulties in

verifying of payments made through

crossed cheques or bank drafts. If no

proper evidence for such verification of

the payment by crossed cheque of draft

is available, such a fact could be brought

out by appropriate comments in the

following manner:

It is not possible for me/us to verify

whether the payments in excess of

Rs. 20000/- have been made

otherwise than by crossed cheque or

bank draft, as the necessary evidence

is not in the possession of the

assessee…”

Unquote

• Since after obtaining certificate

from assessee such disclaimer

was no more required, thus

• ICAI withdrew the observations

and guidance note from 2005

edition

The observation and the

guidance note of the 2005 edition

should be followed in view of

revised clause.


The assessee has not made any payment for expenses

incurred covered by section 40A(3) read with Rule 6DD in

excess of sums exceeding Rs. 20000/- or Rs. 35000/-, as

the case may be, in cash, except as mentioned in Form

3CD.Though as per our examination of the books of account

and relevant record such payments have been made by

cheques or bank drafts, yet it could not be verified by us

conclusively as to whether all such payments were made by

account payee cheques or account payee bank drafts, as it

is not practically possible, since there are no satisfactory

evidence or material with the assessee for such verification

except bank statements.

Clause 21(d) – Suggested disclaimer


Clause 28 and 29 Deemed income u/s 56(2)(viia)/(viib)

Clause 28 and 29 – Deemed income u/s 56(2)(viia)/(viib)

28. Whether during the previous year

- the assessee {firm and closely held company}

- has received any property, being share of a company not being

a company in which the public are substantially interested,

- without consideration or for inadequate consideration

- as referred to in section 56(2)(viia),

if yes, please furnish the details of the same

29. Whether during the previous year

- the assessee {closely held company}

- received any consideration {basically share premium}

- for issue of shares

- which exceeds the fair market value of the shares

- as referred to in section 56(2)(viib),

if yes, please furnish the details of the same.


Sl# Date of

transaction

/ transfer

Name of

Transferor

/

Name of

company of

which

equity

shares are

being

transferred

Value of

transaction/

considerati

on

FMV of

shares

Clause 28 and 29 – Suggested reporting format

Sl# Date of

transaction

/ allotment

Name of

share

holder

Value of

transaction

FMV of shares

Clause 28

Clause 29


TDS compliance reporting

TDS compliance tree and reporting

Default

reporting Clause 34(a)

TDS not deducted

Clause 21 (b)(i)(A) or 21(b)(ii)(A)

TDS deducted

TDS Deducted / Deposited late

Clause 34(c)

Not paid before

due date u/s 139(1) / 200(1)

Clause 21(b)(i)(B) or 21(b)(ii)(B)

TDS return reporting

All returns filed on time

Nothing to report

Any return filed late

Clause 34(b)

Not

required

Nothing to report

Deduction part reporting

Required to deduct / collect

TD

S/T

CS

co

mp

lian

ce

tre

e


Clause 21 (b)(i)(A) / 21(b)(ii)(A) – TDS not deducted

(b) Amounts inadmissible under section 40(a):-

(i) as payment to non-resident referred to in sub-clause (i)

(A)Details of payment on which tax is not deducted:

i. date of payment


iii. nature of payment

iv. name and address of the payee

…

…

(ii) as payment referred to in sub-clause (ia)

(A)Details of payment on which tax is not deducted

i. date of payment





Clause 21 (b)(i)(B) / 21(b)(ii)(B) – TDS deducted but not deposited

(b) Amounts inadmissible under section 40(a):-

(i) as payment to non-resident referred to in sub-clause (i)

(A) Details of payment on which tax has been deducted but has not been

paid during the previous year or in the subsequent year before the

expiry of time prescribed under section 200(1):

i. date of payment




v. amount of tax deducted

…

(ii) as payment referred to in sub-clause (ia)

(A) Details of payment on which tax has been deducted but has not been

paid on or before the due date specified in sub- section (1) of

Section 139

i. date of payment




v. Amount of tax deducted

vi. Amount out of (v) deposited, if any


Clause 34(b) – TDS returns compliance

whether the assessee has furnished the statement of tax deducted or

tax collected within the prescribed time. If not, please furnish the

details:

(1) Tax deduction and collection Account Number (TAN)

(2) Type of Form

(3) Due date for furnishing

(4) Date of furnishing, if furnished

(5) Whether the statement of tax deducted or collected contains

information about all transactions which are required to be reported

a. Make a list of all TANs assessee has.

b. Make a list of all returns (for each TAN and quarter), assessee is

required to file, with due date and actual date of filing. NIL returns are

not required to be filed!

c. Do not forget to take copy of all PRs from assessee as audit evidence.

d. Wherever returns are filed late, report in clause 34(b)


Clause 34(b) – TDS returns compliance

SL # TAN Type of Form Due date for

furnishing

Date of

furnishing, if

furnished

Whether the statement of

tax deducted or collected

contains information about

all transactions which are

required to be reported

1 DELD01234F 24Q 15/12/2013 17/12/2013 Yes

2 DELD01234F 26Q 15/12/2013 17/12/2013

No. Transporter details on

which TDS was not

deducted u/s 194C (6) were

not reported

3 RTKD9765X 27Q 15/05/2014 - NA

4 MUMD9211F 27EQ 15/05/2014 18/05/2014 Yes

Sample reporting


Clause 34(c) – Interest payable u/s 201(1A)/206C(7)

Whether the assessee is liable to pay interest under section 201(1A) or

section 206C(7). If yes, please furnish:

(1) Tax deduction and collection Account Number (TAN)

(2) Amount of interest under section 201(1A) / 206C(7) is payable

(3) Amount paid out of column (2) along with date of payment.

a. All cases of late deduction as well late payments (and even non-

deduction) are covered by reporting under this clause.

b. Irrespective of payment of interest, reporting has to be made.

c. You may download Aggregated TDS Compliance report from TRACE.

Aggregated TDS Compliance report will list down all the TAN's with

defaults mapped to a deductor's PAN.

d. Special emphasis should be given to incorrect date of

payments/deduction reported in TDS returns


Clause 34(c) – Interest payable u/s 201(1A)/206C(7)

SL # TAN Amount of interest

under section

201(1A) / 206C(7) is

payable

Amount paid

out of column

(2) along with

date of

payment.

Remarks

1 DELD01234F ₹ 15750

₹ 15750

dated

15/12/2013

For 26Q

2 DELD01234F ₹ 7000

₹ 7000

dated

15/12/2013

For 27Q

3 DELD01234F ₹ 2345 Not paid For 27Q

4 MUMD9211F ₹ 1435

₹ 1000

Dated

14/11/2013

For 27EQ

Sample reporting


Clause 34(a) – TDS/TCS compliance statement

(a) Whether the assessee is required to deduct or collect tax as per the

provisions of Chapter XVII-B or Chapter XVII-BB, if yes please furnish:

(1) Tax deduction and collection Account No. (TAN)

(2) Section


(4) Total amount of payment or receipt of the nature specified in column (3)

(5) Total amount on which tax required to be deducted or collected out of

(4)

(6) Total amount on which tax was deducted or collected at specified rate

out of (5)

(7) Amount of tax deducted or collected out of (6)

(8) Total amount on which tax was deducted or collected at less than

specified rate out of (7)

(9) Amount of Tax deducted or collected on (8)

(10)Amount of Tax deducted or collected not deposited to the credit of the

Central Government out of (6) and (8)



In 2009 Government had made unsuccessful attempt to bring in form 24C – TDS compliance statement through notification no. 31/2009 dated 25th March 2009 read with circular no. 02/2009.

This statement is exact copy of form 24C (except 1 field)

This is the very statement which all TDS AO invariably demands during proceedings u/s 201 {TDS Survey}

It’s a more or less reconciliation of your PL with your TDS/TCS returns.

If assessee is not covered by TDS/TCS provisions at all – No need to jump into this clause.



Let’s understand this with example:

Amount (₹)

Total Interest outgo A 1.00 cr

Total amount paid below threshold limit B 0.30 cr

Balance (A-B) C 0.70 cr

Total amount for which 15G/15H recd. D 0.20 cr

Balance (C-D) E 0.50 cr

Total amount covered by sec. 197 @ 1% F 0.20 cr

Balance (E-F) G 0.30 cr

TDS not deducted H 0.01 Cr

Balance (G-H) I 0.29 Cr

TDS on I … 20 Lakhs @ 10% J 2.90 Lakhs

TDS on F … 20 Lakhs @ 1% K 0.20 Lakhs


Clause 34(a) – Suggested disclosure (per erst. 24C)

TAN (1) DELD09763X

Section (2) 194A

Nature of payment (3) Interest other than

interest on securities

Total amount of payment or receipt of the nature

specified in column (3) (4) 1,00,00,000 A

Total amount on which tax was required to be

deducted or collected out of (4) (5) 70,00,000 C

Total amount on which tax was deducted or

collected at specified rate out of (5) (6) 29,00,000 I

Amount of tax deducted or collected out of (6) (7) 2,90,000 J


collected at less than specified rate out of (7) (8) 40,00,000 D+F

Amount of tax deducted or collected on (8) (9) 20,000 K

Amount of tax deducted or collected not deposited

to the credit of the Central Govt. out of (6) and (8) (10) Nil


Clause 34(a) – Suggested disclosure (second school of thought)

TAN (1) DELD09763X

Section (2) 194A

Nature of payment (3) Interest other than

interest on securities

Total amount of payment or receipt of the nature

specified in column (3) (4) 1,00,00,000 A

Total amount on which tax was required to be

deducted or collected out of (4) (5) 50,00,000 C


collected at specified rate out of (5) (6) 49,00,000 F+I

Amount of tax deducted or collected out of (6) (7) 3,10,000 J


collected at less than specified rate out of (7) (8) 1,00,000 H

Amount of tax deducted or collected on (8) (9) Nil K

Amount of tax deducted or collected not deposited

to the credit of the Central Govt. out of (6) and (8) (10) Nil


Suggested disclaimer on clause 34(a)

In column (4) of Clause 34(a) of Form No. 3CD "total

amount of payments of the nature specified in column (3)"

has been mentioned to the extent it was possible; out of

which the aggregate "amount on which tax was not required

to be deducted" in view of any exemption / deduction

allowable under the respective section or the payment being

below the threshold provided or the assessee has obtained

Permanent Account Numbers (PAN) of the payee u/s

194C(6) etc., as the case may be, has been reduced to

derive the amount on which tax was required to be deducted

for reporting in column (5) of Clause 34(a) of the Form No.

3CD.

Clause 34(a) – Suggested disclaimer # 1


Though the assessee has made available the books of account,

necessary records and relevant documents for the purpose of our

examination for reporting the particulars in Clause 34(a) of Form

No. 3CD, however, keeping in view the scope of section 194C of

the Income Tax Act,1961 and considering the volume of payments

covered in section194C it is not possible to prepare and compile

the "total amount of payment of the nature specified in column (3)".

It is not out of place to mention that on most of the payments made

for carrying out "work' in pursuance of "a contract" no tax is

required to be deducted in view of the threshold provided in sub-

section (5) and the provisions of sub-section (6) of section 194C.

Therefore, in column (4) of Form No. 3CD the aggregate amount

as declared in the quarterly statements of tax deducted at source

furnished in Form No. 26Q has been reported.

Clause 34(a) – Suggested disclaimer # 2


Clause 40 – Ratios

Details regarding turnover, gross profit, etc., for the previous year and

preceding previous year:

SL# Particulars Previous

year

Preceding

previous year

1 Total turnover of the assessee

2 Gross profit / turnover

3 Net profit / turnover

4 Stock-in-trade / turnover

5 Material consumed / finished

goods produced

(The details required to be furnished for principal items of goods

traded or manufactured or services rendered)


Clause 40 – Guidance note of ICAI

a) Gross Profit: The excess of the proceeds of goods sold and services

rendered during a period over their cost, before taking into account

administration, selling, distribution and financing expenses. When the

result of this computation is negative it is referred to as gross loss.

b) Turnover: The aggregate amount for which sales are effected or services

rendered by an enterprise. The terms gross turnover and net turnover (or

gross sales and net sales) are sometimes used to distinguish the sales

aggregate before and after deduction of returns and trade discounts.

c) Net Profit: The excess of revenue over expenses during a particular

accounting period. When the result of this computation is negative, it is

referred to as net loss. The net profit to be shown here is net profit before

tax.

d) The term `stock-in-trade' used therein does not include stores and spare

parts or loose tools. The term “stock-in-trade” would include only finished

goods and would not include the stock of raw material and work-in-

progress since the objective here is to compute the stock-turnover ratio


Credits

This presentation would not have been possible without inputs from:

CA. Rajiv Kumar Jain

([email protected])


Thanks !

Recent changes in form 3CD - Tax Audit Report U/s 44AB of Income Tax Act, 1961

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Transcript of Recent changes in form 3CD - Tax Audit Report U/s 44AB of Income Tax Act, 1961