![]() ![]() This being dependent on the turnover, as per trade practice, it is in the nature of trade discount and should be deducted from the figure of turnover even if the same is allowed at periodical intervals by separate credit notes. (iii) Turnover discount is normally allowed to a customer if the sales made to him exceed a particular quantity. The same should not be deducted from the figure of turnover. (ii) Cash discount otherwise than that allowed in a cash memo/sales invoice is in the nature of a financing charge and is not related to turnover. (i) Discount allowed in the sales invoice will reduce the sale price and, therefore, the same can be deducted from the turnover. And as such the method of accounting followed by the assessee is also relevant for the determination of sales, turnover or gross receipts.Īpplying the above generally accepted accounting principles, a few typical cases may be considered: They should be understood in view of provisions of Section 145(1), which provide that income chargeable under the head “Profits and gains of business or profession” or “Income from other sources” should be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the words “Sales”, “Turnover” and “Gross receipts” are commercial terms. Sales of scrap shown separately under the heading ‘miscellaneous income’ will form part of turnover.ĭ. In case assessee is following the practice of crediting the Excise duty and / or sales tax recovered separately to Excise duty or Sales tax Account (being separate accounts) and payments to the authority are debited in the same account, then the same will not be included in the turnover.Ĭ. Trade discounts can be deducted from sales but not the commission allowed to third parties. In case the assessee has opted for inclusive method of accounting and the sales price are inclusive of sales tax and excise duty, then no adjustment in respect thereof should be made for considering the quantum of turnover.ī. The aggregate amount for which sales are effected or services rendered by an enterprise. The term “turnover” has been understood for the purpose of Section 44AB to mean:Ī. As per ‘Guidance Note on Terms Used in Financial Statement’ published by the ICAI, the meaning of ‘Turnover’ shall be the aggregate amount for which sales are affected by an enterprise. The deciding basis, i.e., ‘turnover’ is not defined in the Act, thereby leading to different interpretations. 44AB of the Income Tax Act 1961 lays down limits of turnover beyond which taxpayers are liable to get their accounts audited by a Chartered Accountant and present a Tax Audit Report in Form No. ![]() They form the qualifying criteria, determine whether a taxpayer is liable to tax audit during a given year. Incidentally, they are the very starting point of a Tax Audit. ‘Turnover’, ‘Gross Receipts’ and ‘Sales’ are the buzzwords during this Tax Audit season. How to calculate the gross receipt or turnover? ![]()
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