Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.
-
Upload
clifton-stone -
Category
Documents
-
view
216 -
download
0
Transcript of Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.
![Page 1: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/1.jpg)
Tax audit-Issues related to taxation
Programme on 6th September, 2014
Narendra Hindocha
![Page 2: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/2.jpg)
Clause 17-Reference: Section 43CA or 50C• New requirement
• Transfer of land or building or both
• Consideration less than value assessed or assessable by authority of State Government
• Details of property, amount of consideration and value assessed or assessable
![Page 3: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/3.jpg)
Section 50C
• Applies to transfer of Capital Asset as opposed to Stock-in-trade
• Issue:
Assessee is individual. Asset, being not connected with business, not recorded in books of account. Whether need to report.
![Page 4: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/4.jpg)
Section 50C: How ascertain assessed/assessable value
• Certificate of value as per Jantri or ready reckoner.
• Certificate of stamp duty paid.
• Work back from stamp actually used
• Work from the ready reckoner available in public domain.
![Page 5: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/5.jpg)
Section 50C
• Issue:
• Value of immovable assessed separately for land and building.
• Value of land and building written separately in the sale deed.
• Capital gains computed separately for land and building.Whether comparison to be done in aggregate.
![Page 6: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/6.jpg)
Section 43CA
• Applies to stock in trade as opposed to capital asset
• Date of agreement fixing consideration different from date of registration for transfer, allowed to take value on date of agreement-
Condition: some consideration other than cash received before date of agreement for transfer.
![Page 7: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/7.jpg)
43CA
• Issue:
• Builder-enters into development agreement-constructs over 3 years-transfers land or partly constructed building and enters into agreement to construct at different points of time. Accounts for revenue progressively.
• Amount to be reported-year in which to be reported –property to be reported
![Page 8: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/8.jpg)
Clause 19-Amounts admissible under various sections• Corresponds to old clause 15.
• Additional sections 32AC, 35(2AA), 35(2AB), 35AD, 35CCC, 35CCD
• Requirement is tabulated to show sectionwise debit in accounts and allowable.
• To confirm fulfilment of conditions in Act, Rules, Guideline, Circular
![Page 9: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/9.jpg)
Section 32AC
• Conditions:
Manufacturing company-New machinery exceeding 100 cr.-acquired and installed Between 1-4-13 and 31-3-15.
Deduction at 15% of cost. Need to hold the asset for 5 years from date of installation.
Exclude ships, aircraft, office appliances, computers, vehicles, assets installed in office/residential premises and assets getting 100% deduction in one year.
• From A.Y. 15-16, 25 Cr. in relevant year replaces 100 cr. Over 2 years
![Page 10: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/10.jpg)
35 (2AA) and 35 (2AB)
• 35(2AA) : 200% for donations to Laboratory/IIT/University/ specified person for research under programme approved.
Whether we need to go beyond the approval. What if the data given in application is incorrect.
• 35(2AB): Biotechnology/Manufacturing company (Not for Eleventh Schedule product)-cost of inhouse research excluding land and building-200%-need agreement with prescribed authority for cooperation and audit.
![Page 11: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/11.jpg)
35AD
• Allowable in case of new businesses of 13 categories including warehousing facility, hotels, hospitals, project under affordable housing scheme, fertilizer production etc.
• Deduction equal to 100% /150% ,depending on business, of capital expenditure
• Expenditure to be before commencement of business.
![Page 12: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/12.jpg)
35CCC and 35CCD
• 35CCC : Expenditure on Agricultural Extension Project- 150% of expenditure on project notified based on guidelines. Rule 6AAD.
• 35CCD: Expenditure incurred by company on skill development project notified based on guidelines.
![Page 13: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/13.jpg)
Clause 21 (a)
• Corresponds to old 17 (a) to (e)
• Details of debits in nature of capital, personal, advertisement expenditure etc.
• Effect of `etc.’
• Effect of omission of `in any souvenir, brochure……. Published by a political party’ after `advertisement’
• Substitution of the word `Amount’ in place of `details’
![Page 14: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/14.jpg)
Payments to Club, penalty, etc.
• Earlier entrance fees to clubs to be reported. Now only cost of club services and facilities to report.
• Whether only disallowable amount to be reported.
• Penalty for violation of law. • Other penalties • Expenditure for purpose prohibited by law
![Page 15: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/15.jpg)
Clause 21 (b):Disallowance -Section 40(a) (i) • Earlier only amount required. Now to give:
-Date of payment-Amount-Nature of payment-Name and address of payee.
• Separately for cases in which tax not deducted as for cases in which tax deducted but not paid to Government before due date.
![Page 16: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/16.jpg)
Disallowance section 40(a)(ia)
• Disallowance for payment to residents without complying with requirements of TDS
• Requirement similar to 40(a)(i) in case of nonresidents.
• Here payment of TDS upto due date for filing return not to report.
• Last line requires stating `amount (out of tax deducted) deposited, if any.
![Page 17: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/17.jpg)
Section40(a)-Other clauses
• New requirement to report disallowables on account of :
• Fringe benefit tax• Tax In/outside India, on/computed with reference to profits of business• Wealth tax in/outside India• Taxes/fees etc levied exclusively in State Government undertaking• Payment to PF/Other fund unless arrangement made for TDS where
applicable.• Tax paid on behalf of employee under section 10(10CC)
![Page 18: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/18.jpg)
Disallowance under section 40A(3)
• Corresponds to old clause 17(h).
• Omission of requirement to state if certificate obtained
• New Reporting requirement in case payment made in year following the year of incurring expenditure.
• New requirement to report details including date, nature of payment, name and PA No. of payee where available. Address not required.
![Page 19: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/19.jpg)
Clause 23- section 40A(2)
• Rule requires particulars of payments to persons specified in Section 40A(2). Utility on website gives form of particulars.
• Apart from names, relation, nature of transaction and amount, new utility calls for PA NO.
• Disallowance not to be computed.
• No disallowance for transaction at arm’s length as per 92BA
![Page 20: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/20.jpg)
Clause 28 Receipt of shares in closely held company• New requirement -Reference: Section 56 (2)(viia)
• Receipt of Shares of a company other than one in which public are substantially interested
• Report if consideration inadequate. Reference Rule 11U/UA
• Details: Name and PA No., Name and CIN of company, No. of shares, Consideration and fair market value.
![Page 21: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/21.jpg)
Clause 29-Shares issued
• Applies only to closely held company. Report name, PA No., consideration and market value.
• Reporting if shares issued to a resident at more than face value and also more than market rate.
• Reference Rule 11U/UA. Different from earlier clause-here valuation based on discounted free cash flow allowed.
• Not applicable to receipt by venture capital undertaking or other notified companies.
![Page 22: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/22.jpg)
Clause 32:Losses and allowances
• Same details as earlier regarding brought forward losses and depreciation plus change in shareholding-section 79
• Additional relating to losses for the year:
-Speculation loss-section 73-Company deemed to be in speculation business and other cases. -Losses of business referred to in section 35AD
![Page 23: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/23.jpg)
Clause 33 Deductions
• Earlier reporting restricted to Chapter VIA, now extended to Chapter III
• Reporting covers assertion that conditions in Act, Rules, Guidelines, Circular etc are satisfied.
![Page 24: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/24.jpg)
Clause 34-TDS and TCS
• Earlier reporting of only defaults. Now total reporting of all tax deductible.
• Reporting extended to Tax collectible at source also.
• Reporting although data available with Department.
![Page 25: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/25.jpg)
Details to be reported
• TAN
• Section
• Nature of payment
• Total payment/receipt of that nature.
![Page 26: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/26.jpg)
Payments to contractors
• Possible heads in which debited-
-Freight-Advertisement -Staff welfare-Jobwork charges-Labour charges-Fixed assets -Security charges-Recruitment-Effluent disposal-Repairs and maintenance
![Page 27: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/27.jpg)
Other columns
• Amount on which tax was required to be deducted
• Breakup of above-deductible at prescribed rate and deductible at lower rate
• Tax on two components
• Tax not deposited
![Page 28: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/28.jpg)
Other reporting for TDS
• If statement not furnished within prescribed time, report TAN, type of form, due date, date of report.
• Also report whether statement contains information about all transactions required to be reported.
• Details of interest payable under sections 201(1A) and 206C(7)
![Page 29: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/29.jpg)
Dividend Distribution Tax and other audit reports• Dividend distributed, reduction for dividend from subsidiary and
dividend paid to New Pension System Trust, tax paid and date.
• If cost audit/audit under Central Excise Act or audit under Finance Act 1994(Service-tax) carried out:
Details of disqualification or disagreement
![Page 30: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/30.jpg)
Ratios
• Gross profit/Net profit/Stock in trade compared to turnover.
• Material consumed/finished goods produced.
• Now preceding year data to be given
• Calculations not required to be reported.
![Page 31: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/31.jpg)
Clause 41
• Details of demands raised or refund issued
• During the previous year
• Under tax laws
• With details of proceedings
![Page 32: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/32.jpg)
Other changes
• 3CA-adds the words `according to examination of books including documents’ after the words `according to explanations given to us’. However such addition not seen in 3CB.
• In place of `year ended ….’ the words `period beginning from …….to ending on…….
• Stamp and seal required.
• Whether liable to pay indirect taxes. If yes, give registration No.
![Page 33: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/33.jpg)
Other changes
• 3CB allows stating of observations/qualifications. Need to select qualifications from a drop down manu.
![Page 34: Tax audit-Issues related to taxation Programme on 6 th September, 2014 Narendra Hindocha.](https://reader035.fdocuments.us/reader035/viewer/2022062516/56649da95503460f94a9659d/html5/thumbnails/34.jpg)