About Direct Tax Laws, Corporate Laws & Indirect Tax Laws: Section 44AB

Showing posts with label Section 44AB. Show all posts

Friday, December 5, 2014

Sale on principal-to-principal basis to be included in 'turnover' for purpose of tax audit under sec. 44AB

Sale of gas cylinders to consumers was to be included in turnover for purpose of Section 44AB when assessee was appointed as a distributor on principal-to-principal basis for sale of such cylinders.

Facts:

a) The assessee was a distributor of Indian Oil Cooking Gas and was also engaged in sale of gas stoves and spare parts.

b) The assessee did not include the turnover from sale of cylinders for computing the threshold limit prescribed under section 44AB. By including such sales, the turnover of assessee would exceed the threshold limit prescribed under section 44AB.

c) Thus, the Assessing Officer (AO) issued a show-cause notice to assessee on the ground that it did not get its accounts audited under section 44AB.

d) The assessee contended that it had sold gas cylinders on commission basis as the ownership of same remained with the Indian Oil Corporation. Therefore, sale of gas cylinders could not be included in its turnover to compute the threshold limit prescribed under section 44AB. The Assessing Officer did not agree with assessee's reply and imposed a penalty on it under section 271B.

e) The appellate authorities affirmed the order of AO. Aggrieved assessee filed the instant appeal before the High Court.

The High Court held in favour of revenue as under:

1) The agreement clearly indicated that the assessee was appointed as a distributor on principal-to-principal basis for sale of gas cylinders to consumers and it was not selling gas cylinders on commission basis.

2) Consequently, the sale of gas cylinders was liable to be included in the turnover of the assessee. Since the turnover exceeded the threshold limit prescribed under Section 44AB, the books of account were liable to be audited.

3) Since the books of account were not audited, penalty proceedings were rightly initiated. The explanation given by the assessee for non-compliance with the provision of section 44AB was neither sound nor justifiable. - Attara Gas Service v. CIT (2014) 50 taxmann.com 445 (Allahabad)

Wednesday, September 10, 2014

Value of derivative transactions in commodities at MCX won’t be included in turnover for tax audit purposes

Value of sale transactions of commodity through MCX without delivery could not be considered as turnover for purpose of section 44AB.

Facts:

In the instant case, the controversy revolved around as to whether online transactions of future commodities made at MCX would form a part of turnover for purpose of tax audit under section 44AB?

The Tribunal held in favour of assessee as under:

1)In the case of CIT v. Growmore Exports Ltd. (IT Appeal Nos. 18 to 20) instant Tribunal’s co-ordinate had dealt with requirement to get the accounts audited under section 44AB. In that case, the assessee was engaged in the speculative transaction of sale and purchase of units without taking delivery and the account was settled by crediting the difference. The Tribunal held as under:

i)After considering section 18 of the Sale of Goods Act, 1930 it was observed that no property in the said units was passed on to the assessee as the assessee never acquired the property in the units as the units contracted to be bought were future unascertained goods.

ii)Similarly, it could not pass on the property to the party to whom the units were contracted and, therefore, there was no 'sale' or 'turnover' effected by the assessee in the legal sense for the purposes of getting the accounts audited under section 44AB.

2)In the instant case also, the transaction of buying and selling of commodities was a speculative activity where no physical delivery was taken or given. Thus, following the case of Growmore Exports Ltd. (supra), it was to be held that the value of the sale transactions of commodity through MCX without delivery could not be considered as turnover for the purpose of section 44AB.

3)Accordingly, the penalty levied under section 271B was to be deleted, as the transactions carried out by the assessee would not fall under the ambit of turnover for the purpose of section 44AB.- OM STOCK & COMMODITIES (P.) LTD. V. DY. CIT [2014] 48 taxmann.com 186 (Mumbai - Trib.)