Tax Audit u/s 44 AB

Faridabad Income Tax Bar

5th September 2009

CA Rajiv Jain
Section 44 AB

Every person--

 carrying on business shall, if his total sales, turnover or gross receipts, as the
case may be, in business exceed or exceeds forty lakh rupees in any previous
year ; or

 carrying on profession shall, if his gross receipts in profession exceed ten lakh
rupees in any previous year; or

 carrying on the business shall, if the profits and gains from the business are
deemed to be the profits and gains of such person under section 44AD or
section 44AE or section 44AF or section 44BB or section 44BBB , as the case
may be, and he has claimed his income to be lower than the profits or gains so
deemed to be the profits and gains of his business, as the case may be, in any
previous year,
……. report by an accountant in the form prescribed under this section.
 Business

 S 2(13): Business includes any trade, commerce, or manufacture or any

adventure or concern in the nature of trade, commerce or manufacture.

 The word business is one of wide import and it means activity carried on
continuously and systematically by a person by the application of his labour or
skill with a view to earn income. The expression business does not necessarily
mean trade or manufacture only- Barendra Prasad Roy v ITO [1981]129 ITR
295 (SC).
Profession

 Section 2 (36):Profession to include vocation.

 Profession is a word of wide import and includes vocation which is only a way of
living.-CIT v. Ram Kripal Tripathi [1980]125 ITR 408 (All).

 Whether a particular activity can be classified as business or profession will depend

on the facts and circumstances of each case. The expression profession involves the
idea of an occupation requiring purely intellectual skill or manual skill controlled by the
intellectual skill of the operator, as distinguished from an operation which is
substantially the production or sale or arrangement for the production or sale of
commodities.- CIT vs. Manmohan Das (Deceased) [1966] 59 ITR 699 (SC).

 The following have been listed out as profession in section 44AA (rule 6F) and notified
there under (Notifications No. SO-17 (E) dated 12.1.77, No. SO 2675 dated 25.9.1992
and No. So 385(E) ,dated 4.5.2001):
Accountancy, Architectural, Authorised Representative, Company Secretary,
Engineering, Film Artists/Actors, Camera man, Director, Singer, Story Writer,
Etc., Interior Decoration, Legal, Medical, Technical Consultancy, Information
Technology
Whether Business or Profession

 Advertising Agent.
 Clearing, Forwarding and Shipping agents –CIT V. Jeevanlal
Lallubhai & Co, [1994] 206 ITR 548 (Bom).
 Couriers.
 Insurance agent.
 Nursing Home. 135 ITR 146, 90 ITD 235
 Stock and share broking and dealing in shares and securities-CIT
v. Lallubhai Nagardas & Sons [1993} 204 ITR 93 (Bom).
 Travel agent.
Sales - Turnover

Computation of Specified Limit of Rs 40 Lacs

 Excise Duty/ Sales tax
 Cash Discount
 Rebate and Discount
 Sale return.
 Sale of Fixed Assets
 Sale of Investment.
 Sales by Consignment Agent-(Circular 452, 17-3-86).
 Speculative (Share – Commodity).
 Derivatives-Future/Option transactions.
 Delivery Based Share Transactions.
Speculation Transaction 43(5)

It means a transaction, in which a contract for the

purchase or sale of any commodity, including
stocks and shares, is periodically or ultimately
settled otherwise than by the actual delivery or
transfer of the commodity or scrips.
Derivatives Exempted from Speculative
Transaction Definition

o Trading carried electronically on screen based

system
o Through stock broker registered with SEBI
o by banks or MF on a recongised stock exchange
o Supported by time stamped contract note
indicating Unique Client Identity No and PAN
 Determination of Turnover:
Speculative vs Derivatives

Speculative
o The total of favorable and unfavorable differences shall
be taken as turnover.
Derivatives
o The total of favorable and unfavorable differences shall
be taken as turnover.

o Premium received on sale of options is also to be

included in turnover.

o In respect of any reverse trades entered, the difference

thereon, form part of the turnover.
 Capital Gains Vs. Business

Depends on facts and circumstances of each case taking

into consideration nature, frequency and volume of
transaction.

Landmark Judgments :

i. CIT v. P.K.N. and Co. Ltd. (1966) 60 ITR 65 (SC).

ii. Saroj Kumar Mazumdar v. CIT (1959) 37 ITR 242 (SC).
iii. CIT v. Sutlej Cotton Mills Supply Agency (1975) 100 ITR
706 (SC).
iv. Venkataswami Naidu & Co.(G) v. CIT (1959) 35 ITR 594
(SC).
Board Circular No. 4/2007, dated 15-6-2007

It is possible for tax payer to have two portfolios, i.e., an

investment portfolio comprising of securities which are to
be treated as capital assets and a trading portfolio
comprising of stock in trade which are to be treated as
trading assets. Where an assessee has two portfolios,
the assessee may have income under both heads i.e.,
capital gains as well as business income.
Gross receipts

Instances of Receipts forming part of Gross Receipts

 Duty Draw Back
 Commission - Brokerage
 Job Work
 Sale of License
 Foreign Exchange surplus/ difference on Export Sales
 Surplus on reimbursement e.g. packing forwarding, freight etc.
 Advance receipt from customer forfeited
 Interest Income if assessable as business income
 Income of a partner from a partnership firm such as remuneration
and interest on capital account.
Gross receipts

Instances of receipts not forming part of Gross Receipts

 Rental Income.
 Reimbursement of expenses and other charges to a clearing /
consignment agent.
 Amount received by a traveling agent for reimbursement of
expenses. Except a travel agent engaged in Package Tour.
 Write Back of Provisions – Recoveries from Bad Debts.
 Principle for ascertaining whether reimbursement is part of gross
receipt or not.

 Limits of Business and profession- independent or interdependent.

Assessee having Exempt income whether required
to get its accounts audited u/s 44 AB

 Trust / Association Exempt u/s 10(21), 10(23A),

10(23B), 10(23BB), 10(23C) and Section 11
 Agriculturist
Section 11.

 Section 11 (4) For the purposes of this section "property held under trust“
includes a business undertaking so held, and where a claim is made that the
income of any such undertaking shall not be included in the total income of the
persons in receipt thereof, the Assessing Officer shall have power to determine
the income of such undertaking in accordance with the provisions of this Act
relating to assessment; and where any income so determined is in excess of the
income as shown in the accounts of the undertaking, such excess shall be
deemed to be applied to purposes other than charitable or religious purposes.
 Section 11 (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-
section (3A) shall not apply in relation to any income of a trust or an Institution,
being profits and gains of business, unless the business is incidental to the
attainment of the objectives of the trust or, as the case may be, institution, and
separate books of account are maintained by such trust or institution in respect
of such business.
Trust Engaged in business

 A business whose income is utilised by the trust or the institution for

the purposes of achieving the objectives of the trust or the institution
is, surely, a business which is incidental to the attainment of the
objectives of the trust.
(247 ITR 785 THANTI TRUST SC, 107 ITD 403 CIT V. Beer Shiva
Educational Social Welfare Society, Haldwani, 105 ITD 29 Samaj
Kalyan Parishad, Modinagar v. ITO.)

Section 2(15) defining ‘Charitable Purpose’ amended w.e.f. 1-4-2009

Provided that the advancement of any other object of general public utility shall
not be a charitable purpose, if it involves the carrying on of any activity in the
nature of trade, commerce or business, or any activity of rendering any
service in relation to any trade, commerce or business, for a cess or fee or
any other consideration, irrespective of the nature of use or application, or
retention, of the income from such activity;
 Rule 6G
6G.Report of audit of accounts to be furnished under
section 44AB.

(1) The report of audit of the accounts of a person required to

be furnished under section 44AB shall,-
(a) in the case of a person who carries on business or
profession and who is required by or under any other law to get
his accounts audited, be in Form No.3CA;

(b) in the case of a person who carries on business or

profession, but not being a person referred to in clause (a), be in
Form No.3CB.

(2)The particulars which are required to be furnished under section

44AB shall be in Form No.3CD.
Audit Report Form 3CB

1. We have examined the BS & PL of XXXX. .

2. We certify that the BS & PL are in agreement with books maintained at
the head office …and ….branches.
3. We report the following observations/comments/discrepancies/
inconsistencies “We have taken into consideration the audit report and
the audited statement of accounts, and particulars received from
auditors of the branches not audited by us”
……………Subject to above

A. We have obtained all the information and explanations which to

the best of our knowledge and belief were necessary for the
purpose of the audit.
B. In our opinion proper books of accounts have been kept by the
assessee so far as appears from our examination of the books.
3CB..Contd..
3CB Contd..
C. In our opinion and to the best of our information and according to
the explanations given to us, the said accounts, read with notes
thereon, give a true and fair view:
1. in the case of balance sheet, of the state of affairs… 31st
March.. And
2. in the case of profit and loss account, of the profit… that
date.
4. The statement of particulars required to be furnished under section
44AB is annexed herewith in Form No 3CD.
5. In our opinion and to the best of our information and according to the
explanations given to us, the particulars given in Form No. 3CD and
the Annexure thereto are true and correct.
True and Fair view

Framework for Preparation and Presentation of financial

statements issued by ICAI.

Financial Statements are frequently described as showing a

true and fair view of the financial position, performance and
cash flows of an enterprises. Although this framework does
not deal directly with such concepts, the application of the
principal qualitative characteristics and of appropriate
accounting standards normally result in financial statements
that convey what is generally understood as true and fair
view of such information.
AAS-28 The Auditor’s Report on
Financial Statements

TYPES OF AUDIT
REPORTS

CLEAN REPORT MODIFIED REPORT

Modifications not Modification affecting Audit

affecting Audit opinion opinion

Emphasis on
Matter
Qualified Adverse Disclaimer of
Opinion Opinion Opinion
Applicability of Accounting Standards

 Issued by the ICAI

It is hereby clarified that the mandatory accounting standards also
apply in respect of financial statements audited u/s 44AB of the
Income Tax Act, 1961. Accordingly, the members should examine
compliance with the mandatory accounting standards when
conducting such audit.
(Published in The Chartered Accountant Journal, August 1994.)
 Audit Procedures - AAS – SAP - Peer Review - ASI

 Issued u/s 145 of the I.T.Act

Particulars of form 3CD

Practical
Issues

CA Rajiv Jain
Clause 12A- Conversion of Capital Asset into Stock in
Trade at fair market value: Section 45(2)

Give the following particulars of the capital asset converted into stock-
in-trade: -
(a) Description of capital asset,
(b) Date of acquisition;
(c) Cost of acquisition;
(d) Amount at which the asset is converted into stock-in-trade
 The particulars to be stated are required to be furnished with reference to
the previous year in which the conversion has taken place.
 The taxability of capital gains or business income arising from such
deemed transfer is not required to be reported.
 The legislation has not visualized the situation where stock in trade is to
be converted into capital asset. In the absence of a specific provision,
the formula which is favorable to assessee should be accepted. (ITA
6374/MUM/2004, ACIT v Bright Star Inv P Ltd)
Reporting of treatment of Excise Duty, VAT etc

 Clause 12
– 12(a) Method of valuation of closing stock employed in the previous year
– (b) Details of deviation, if any, from the method of valuation prescribed under
section 145A, and the effect thereof on the profit or loss.

 Clause 21: Residuary note

State whether sales tax, customs duty, excise duty or any other indirect
tax, levy, cess, impost etc. is passed through the profit and loss account.

 Clause 22(a):
22. (a) Amount of Modified Value Added Tax credits availed of or
utilised during the previous year and its treatment in the profit and loss
account and treatment of outstanding Modified Value Added Tax credits in
the accounts.
Section 145A v/s AS-2 (ICAI)

S-145 A: Notwithstanding anything to the contrary contained in section 145, the valuation of purchase
and sale of goods and inventory for the purposes of determining the income chargeable under the
head "Profits and gains of business or profession" shall be–
(a) in accordance with the method of accounting regularly employed by the assessee; and
(b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called)
actually paid or incurred by the assessee to bring the goods to the place of its location and condition
as on the date of valuation.
Explanation.--For the purposes of this section, any tax, duty, cess or fee (by whatever name called)
under any law for the time being in force, shall include all such payment notwithstanding any right
arising as a consequence to such payment.

AS-2 ICAI: Valuation of Inventory

Cost of Purchase
 7. The costs of purchase consist of the purchase price including duties and taxes (other than those
subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other
expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and
other similar items are deducted in determining the costs of purchase.

Cost of Inventories
 6. The cost of inventories should comprise all costs of purchase, costs of conversion and other costs
incurred in bringing the inventories to their present location and condition.

Exclusive Method for valuation of Purchases resulting in exclusive method for valuation of inventory.
Section 145A/ Service Tax/ 43B

• Service Tax Charged in bills.

• Payment not received till the date of filing of ITR as
such no liability to pay service tax.
• Mercantile System of accounting followed
Disallowance u/s 43B ?

ACIT V Real Image Media Tech P Ltd (Chennai) 114 ITD 573
 145A does not apply to service tax.
 If Service Tax not credited to P & L no expenditure is claimed.
 If no expenditure is claimed - No disallowance u/s 43B
ASI-14 wrt AS-9-Revenue Recognition- Published Aug-06

ASI-14
2. The amount of turnover should be disclosed in the following manner on
the face of the statement of profit and loss:
Amount
Turnover (Gross) XXXX
Less: Excise Duty XXXX
Turnover (Net) XXXX

3. The amount of excise duty to be shown as deduction from turnover as

per paragraph 2 above should be the total excise duty for the year
except the excise duty related to the difference between the closing
stock and opening stock. The excise duty related to the difference
between the closing stock and opening stock should be recognised
separately in the statement of profit and loss, with an explanatory note
in the notes to accounts to explain the nature of the two amounts of
excise duty.
Presentation of excise duty and sales in Profit
& Loss Account as per ASI-14/AS-9 ICAI

Sales Basic Rs 1200/- Excise Duty Rs 192/-

Gross Sales Rs 1392/-

Profit and Loss Account for the year ended on…

Expenditure Rs Income Rs
Sales 1392

Less: Excise duty 192

Net Sales 1200

 Exclusive Method v Inclusive Method vis a vis Raw Material

Opening Stock Basic Rs 200 Excise Rs 32 Total Rs 232

Purchases Basic Rs 1000 Excise Cenvat Rs 160 Total Rs1160
Closing Stock Basic Rs 400 Excise Rs 64 Total Rs 464

-Valuation of Raw Material (purchases, consumption and stock)

Exclusive Method AS-2 Inclusive Method 145A
Opening Stock 200 Opening Stock 232  
Purchases 1000 Purchases 1160  
Less: Closing Stock 400 Less: Closing Stock 464  

Raw Material Consumed 200+1000-400 800 Sub-total 928  

Less Cenvat on raw material Consumed 128  

Raw Material Consumed 800

 
Cenvat Credit
Purchases: 160
Less: Adjustment for increase in stock 32
Total Cenvat 128
Valuation of Finished Goods lying in bonded house

Finished Goods in bonded House

Opening Stock Basic Rs 100 Excise Rs 16 Total Rs 116
Closing Stock Basic Rs 250 Excise Rs 40 Total Rs 290
Exclusive Method: AS-2: Profit and Loss Account for the year ended on…
Expenditure Rs Income Rs
Finished Goods Opening Stock 100 Sales 1392
Raw Material Consumed 800 Less: Excise duty 192
Net Sales 1200

Net Profit 550 Finished Goods Closing Stock 250

Total 1450 Total 1450

Inclusive Method: 145A: Profit and Loss Account for the year ended on…
Expenditure Rs Income Rs
Finished Goods Opening Stock 116 Sales 1392
Raw Material Consumed 800 Less: Excise duty 192
Excise duty on inventory 24 Net Sales 1200

Net Profit 550 Finished Goods Closing Stock 290

1490 Total 1490
Shortcoming of inclusive method u/s145A

- Cumbersome calculations
- Guidance Note CENVAT inclusive method
withdrawn w.e.f 1-4-1999.
- Contradictory to mandatory AS-2
- Disallowance u/s 43B

Point at which excise duty is incurred in respect of

Finished Goods lying in bonded house: [2007] 14 SOT
475 (All) Shyam Biri Works Ltd. V. Asst. Commissioner of
income tax, Allahabad
 Suggested reporting - Exclusive method
under respective clauses:

 Clause 12(b):
– The excise duty and VAT in respect of inventory consisting of finished goods
lying in bonded house is neither debited to the profit and loss account nor
considered for valuation of inventory.
– The value of excise duty in respect of Inventory consisting of raw material is
neither debited to the profit and loss account nor considered for valuation of
inventory.
– The entries of excise duty are accounted in the books through separate account
which is passed through the profit and loss account read with Clause 21
Residuary Note.
– The entries of VAT are accounted in the books through separate account which is
not passed through the profit and loss account read with Clause 21 Residuary
Note.
The above accounting treatment has no impact on current year`s profit or loss.

 Clause 21: Residuary note

Refer para 12(b). Further Rs 192/- the amount of excise duty on
sales is debited to Excise Duty on sales which is reduced from gross
sales turnover in the Profit & Loss account.
 Excise Duty

 Clause 22(a):
– Modified Value Added Tax credits (cenvat credits)
 Rs Nil- Opening Balance
 Rs 160/- Credit availed is reduced from the cost of purchases.
 Rs Nil Credit availed is reduced from cost of capital asset.
 Rs 160/- credit utilized for payment of excise duty on sales is debited to Excise
Duty A/c which is ultimately reduced from sales in the Profit & Loss account.
 Rs Nil Closing Balance recognized as Balance Recoverable
– PLA
 Rs32/-, the excise duty on sales paid through PLA is debited to Excise Duty A/c
which is ultimately reduced from sales in the Profit & Loss account

 Excise Paid Finished Goods- Sales through depot

 Ratios of special bench 107 ITD 343 (CHD) DCIT V GLAXO SMITHCLINE
 Clause 17 (e)
 Clause 17 (e): Penalty
– Explanation to s 37: -For the removal of doubts, it is hereby declared
that any expenditure incurred by an assessee for any purpose which
is an offence or which is prohibited by law shall not be deemed to
have been incurred for the purpose of business or profession and no
deduction or allowance shall be made in respect of such expenditure.

201 ITR 684 Prakash Cotton SC, 205 ITR 163 Ahemadabad Cotton.
Penalty is required to be examined as per the provisions of the
relevant statue notwithstanding the nomenclature. If the impost is
compensatory in nature, it is to be allowed, however, if it is penal in
nature it is to be disallowed.
Clause 17 (f)

Clause 17 (f): 40(a)

– Deduction of TDS at lower rates or non
deduction
– STT up to AY 2008-09
– FBT if shown above the line for MAT
– Wealth Tax
Clause 17 (f): Section 40(a)(ia)

• Interest u/s 193 or 194A, Payment to Contractors/sub-contractors u/s 194C,

Commission or brokerage u/s 194H, Rent u/s 194-I, Fees for technical/ professional
services u/s 194J, Royalty (Expl 2 s 9(1)(vi).

• In case where the assessee submits that the tax is not required to be deducted on
any payment under clause (ia), the tax auditor may exercise his judgment in the light
of applicable laws and report accordingly about the compliance of this provision.

• Inadmissible if :-
 Tax is not deducted at all.
 Tax was deductible and was so deducted during the month March but not paid
on or before the due date of filing of return.
 In any other case i.e (Tax deducted from April to Feb) TDS is not paid up to 31st
March.

 Query: Tax deductible in April to Feb but deducted in March and paid after 31st
March before due date of filing of return of income.
 Clause 17 (i): Section 14A
 Deduction inadmissible u/s14A in respect of the expenditure incurred in relation to income
which does not form part of the total income( Subsection 1).

 The AO, if he is not satisfied with the claim of the assessee, shall determine the amount of
expenditure incurred, in relation to income which does not form part of the total income in
accordance with method prescribed under rule 8D (w.e.f. 24-3-2008), ( Subsection 2).

 the expenditure which the AO seeks to disallow under s. 14A should be actually incurred
and so incurred with a view to producing non-taxable income (101 TTJ 369, ACIT vs Eicher
Limited.)

 Rule 8D w.e.f. 24-3-2008: Method for determining amount of expenditure in relation to

income not includible in total income.
8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a
previous year, is not satisfied with
(a) the correctness of the claim of expenditure made by the assessee; or

(b) the claim made by the assessee that no expenditure has been incurred in relation
to income which does not form part of the total income under the Act for such previous
year,he shall determine the amount of expenditure in relation to such income in
accordance with the provisions of sub-rule (2).
 Clause 17 (i): Rule 8D: Determination
(2) The expenditure in relation to income which does not form part of the total income shall be the
aggregate of following amounts, namely :
(i) the amount of expenditure directly relating to income which does not form part of total
income;
(ii) in a case where the assessee has incurred expenditure by way of interest during the
previous year which is not directly attributable to any particular income or receipt, an amount
computed in accordance with the following formula, namely :
A x B/C
A = amount of expenditure by way of interest other than the amount of interest included
in clause (i) incurred during the previous year ;
B = the average of value of investment, income from which does not or shall not form
part of the total income, as appearing in the balance sheet of the assessee, on the first day and
the last day of the previous year ;
C = the average of total assets as appearing in the balance sheet of the assessee, on the
first day and the last day of the previous year ;
(iii) an amount equal to one-half per cent of the average of the value of investment, income
from which does not or shall not form part of the total income, as appearing in the balance sheet
of the assessee, on the first day and the last day of the previous year.
3. For the purposes of this rule, the 'total assets' shall mean, total assets as appearing
in the balance sheet excluding the increase on account of revaluation of assets but including
the decrease on account of revaluation of assets.

 
Clause 17(m)

The auditor to compute the amount inadmissible under

the proviso to section 36(1)(iii).

Interest paid, in respect of capital borrowed for

acquisition of an asset or extension of existing business
or profession (whether capitalized in the books of
account or not) for any period beginning from the date
on which the capital was borrowed for acquisition of the
asset till the date on which such asset was put to use,
shall not be allowed as a deduction.
 Clause 17 (A)

17A. Amount of interest inadmissible under section 23 of

the Micro, Small and Medium Enterprises
development Act, 2006 (NOTIFICATION NO. 36/2009, DATED 13-4-2009)

THE MICRO, SMALL AND MEDIUM ENTERPRISES

DEVELOPMENT ACT, 2006
23. Interest not to be allowed as deduction from income.-
Notwithstanding anything contained in the Income-tax Act, 1961, the
amount of interest payable or paid by any buyer, under or in
accordance with the provisions of this Act, shall not, for the purposes
of computation of income under the Income-tax Act, 1961, be allowed
as deduction.
Clause 25(b) - Change in shareholding of the company and
carry forward of the losses u/s 79 of the Act.

Business loss cannot be carried forward and set off in the

previous year in which a change in shareholding takes
place in case of a company in which public are not
substantially interested , if on the last day of the previous
year in which the change in shareholding took place and
on the last day of the previous year in which the loss was
incurred, the shares of the company carrying not less than
51% of the voting power were not beneficially held by the
same persons.
Clause 26-Section wise detail of deduction admissible under
Chapter VIA

o This requirement restricted to the items appearing in the

books of A/c audited by the assessee e.g. only for a
branch in case of branch audit.

o Where tax auditor is not aware of the gross total income of

the assessee (due to return not prepared before tax audit/
audit only of a unit or branch ), suitable note for the same
is also required as deduction can not exceed gross total
income.
Clause 27: TDS
27. (a) Whether the assessee has complied with the provisions of Chapter XVII-B regarding deduction of
tax at source and regarding the payment thereof to the credit of the Central Government.[Yes/No]

(b) If the provisions of Chapter XVII-B have not been complied with,
please give the following details*, namely:-
Amount

(i) Tax deductible and not deducted at all

(ii) shortfall on account of lesser deduction than required to be deducted

(iii) tax deducted late

(iv) tax deducted but not paid to the credit of the Central Government

Please give the details of cases covered in (i) to (iv) above.;

Unresolved Issues: 40 A(3)- Third Party Payments - Transfer
of Balances. w.e.f 13-7-2006 after Amendment Act, 2006

Reporting under Clause 17(h):

 40A (3): ….Second Proviso
Provided further that no disallowance under this sub-section shall be made where any
payment in a sum exceeding twenty thousand rupees is made otherwise than by an account
payee cheque drawn on a bank or account payee bank draft , in such cases and under such
circumstances as may be prescribed, having regard to the nature and extent of banking facilities
available, considerations of business expediency and other relevant factors.

Rule 6DD
d) where the payment is made by way of adjustment against the amount of any liability
incurred by the payee for any goods supplied or services rendered by the assessee to such
payee.

 269T.Mode of repayment of certain deposits.

No branch of a banking company or a co-operative bank and no other company or co-operative
society and no firm or other person shall repay any loan or deposit made with it otherwise than by
an account payee cheque or account payee bank draft drawn in the name of the person who has
made the loan or deposit if- ….
 FBT

 Tax on value of certain fringe benefits.

 Chapter XII – H – Sections 115W to 115WL.
 CBDT Circular No. 8/2005 dt. 29.08.2005.
 Liability to pay FBT even if Income Tax not payable.
 No relevance of actual fringe benefits. Only presumptive amount
should be considered for FBT.
 Share/Stock/Debenture/Warrant etc under ESOP/Scheme covered
u/s 115WB(1)(g) but no computable provision hence not liable to
FBT.
 Lawyer & Auditor – reimbursement also subject to FBT in the hands
of professionals.
 Expenses incurred-Pre operative- pre commencement
 No business/ winding up – subject to FBT
 FBT v/s BOOK PROFIT – Deductible.
Thanks

CA Rajiv Jain