Revised Tax Audit Report Revised Tax Audit Report Form Nos. 3CA, - - PowerPoint PPT Presentation

Revised Tax Audit Report Form Nos. 3CA, 3CB, 3CD: Important Changes Revised Tax Audit Report Form Nos. 3CA, 3CB, 3CD: Important Changes

• CA Anuj J. Sharedalal

At Ahmedabad Branch of WIRC of ICAI

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Contents

• Tax Audits – History and Brief Background
• Notification No. 33/2014 dated 25.7.2014 and News on e-filing

portal dated 29.7.2014

• F. No.133/24/2014-TPL dt. 20.8.14 – Due date Extension
• Utility and Schema available on e-filing website – 20.8.2014
• Important changes in Tax Audit Report Forms:

– 3CA – 3CB – 3CD

• Important points for Tax Auditors

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• Tax Audits – History and Brief Background
• Notification No. 33/2014 dated 25.7.2014 and News on e-filing

portal dated 29.7.2014

• F. No.133/24/2014-TPL dt. 20.8.14 – Due date Extension
• Utility and Schema available on e-filing website – 20.8.2014
• Important changes in Tax Audit Report Forms:

– 3CA – 3CB – 3CD

• Important points for Tax Auditors

Tax Audits – History and Brief Background Tax Audits – History and Brief Background

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Tax Audits – History

• 1984 – Tax Audit provisions introduced

Memorandum explaining the provisions of the Finance Bill, 1984: “the compulsory audit is intended to ensure proper maintenance of books of account and

• ther records, in order to reflect the true income
• f

the tax payer and to facilitate the administration

• f

tax laws by a proper presentation of the accounts before the tax

• authorities. This would also save the time of the

Assessing Officers considerably in carrying out the verification”

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• 1984 – Tax Audit provisions introduced

Memorandum explaining the provisions of the Finance Bill, 1984: “the compulsory audit is intended to ensure proper maintenance of books of account and

• ther records, in order to reflect the true income
• f

the tax payer and to facilitate the administration

• f

tax laws by a proper presentation of the accounts before the tax

• authorities. This would also save the time of the

Assessing Officers considerably in carrying out the verification”

Tax Audits – History

• 1984 – Tax Audit provisions introduced
• 1997 – Tax Audit provisions applicable to 44AD
• 1999 – All Forms and Rule 6G revised. Form 3CC and

3CE done away with

• 2003 - Tax Audit provisions applicable to 44BB and

44BBB

• 2004 – All Forms revised
• 2006 – Form 3CD revised
• 2008 – requirement to furnish report with return done

away with

• 2011 – cases of fake membership numbers
• 2013 – e-filing of tax audit reports made mandatory

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• 1984 – Tax Audit provisions introduced
• 1997 – Tax Audit provisions applicable to 44AD
• 1999 – All Forms and Rule 6G revised. Form 3CC and

3CE done away with

• 2003 - Tax Audit provisions applicable to 44BB and

44BBB

• 2004 – All Forms revised
• 2006 – Form 3CD revised
• 2008 – requirement to furnish report with return done

away with

• 2011 – cases of fake membership numbers
• 2013 – e-filing of tax audit reports made mandatory

Tax Audits – Brief Background

• Sr. No. Assessment Year

*Limits – Business *Limits – Profession 1. 1985-86 to 2010-11 40,00,000 10,00,000

• Specified Limits u/s 44AB read with Rule 6G:

* Limits = sales/turnover/gross receipts exceeds

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1. 1985-86 to 2010-11 40,00,000 10,00,000 2. 2011-12 & 2012-13 60,00,000 15,00,000 3. 2013-14 1,00,00,000 25,00,000

• Specified Limits u/s 44AB read with Rule 6G:

* Limits = sales/turnover/gross receipts exceeds

Tax Audits – Brief Background

Tax Audit Applicability (Broadly) Businesses u/s 44AD, AE, BB, BBB Limits exceeded (1 crore): Tax Audit Limits not exceeded: Minimum Deemed Income or Tax Audit

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Tax Audit Applicability (Broadly) Limits not exceeded: Minimum Deemed Income or Tax Audit Profession or Other businesses Limits exceeded (1 crore/25 lakhs): Tax Audit Limits not exceeded: No Tax Audit

Tax Audits – Brief Background Rule 6G of Income Tax Rules, 1962:

• 6G(1) - Report of Audit – Form Nos. 3CA & 3CB
• 6G(2) - Particulars to be furnished in Form No.

3CD

• True & Correct vs. True & Fair
• Appendix – II contains the forms

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Rule 6G of Income Tax Rules, 1962:

• 6G(1) - Report of Audit – Form Nos. 3CA & 3CB
• 6G(2) - Particulars to be furnished in Form No.

3CD

• True & Correct vs. True & Fair
• Appendix – II contains the forms

Notification No. 33/2014 dated 25.7.2014 Notification No. 33/2014 dated 25.7.2014

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Notification No. 33/2014 dated 25.7.2014

• Notification

published

• n

website

• n

28.7.2014 (26th & 27th was weekend)

• Comes into force on the date of publication in

the Official Gazette

• Whether this is applicable to tax audit reports
• f any previous AYs not filed till 25.7.2014?

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• Notification

published

• n

website

• n

28.7.2014 (26th & 27th was weekend)

• Comes into force on the date of publication in

the Official Gazette

• Whether this is applicable to tax audit reports
• f any previous AYs not filed till 25.7.2014?

News on e-filing portal dated 29.7.2014 News on e-filing portal dated 29.7.2014

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News on e-filing portal dated 29.7.2014

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• What about reports filed between 25.7.2014 &

29.7.2014?

• F. No.133/24/2014-TPL dt.

20.8.14 – Due date Extension

• F. No.133/24/2014-TPL dt.

20.8.14 – Due date Extension

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• F. No.133/24/2014-TPL dt. 20.8.14 –

Due date Extension

• Due date of filing audit report u/s. 44AB

extended from 30th September to 30th November 2014.

• Tax audit reports filed during the period from

1st April, 2014 to 24th July, 2014 in the pre- revised Forms shall be treated as valid

• Due date of filing audit report u/s. 44AB

extended from 30th September to 30th November 2014.

• Tax audit reports filed during the period from

1st April, 2014 to 24th July, 2014 in the pre- revised Forms shall be treated as valid

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Utility and Schema available on e-filing portal from 20-08-2014 Utility and Schema available on e-filing portal from 20-08-2014

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Utility and Schema

• PR2 version already out – lets see whether last

year’s record is broken or not!

• C.R. Sharedalal & Co.

www.crsharedalalco.com

• PR2 version already out – lets see whether last

year’s record is broken or not!

Important changes in Tax Audit Report Forms Important changes in Tax Audit Report Forms

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Form 3CA

• Applicable in the case of a person who carries
• n business or profession and who is required

by or under any other law to get his accounts audited

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• Applicable in the case of a person who carries
• n business or profession and who is required

by or under any other law to get his accounts audited

Form 3CA

Open Period: 1(a) the audited *profit and loss account / income and expenditure account for the period beginning from ----------------------to ending on -------------------

• ---------.

1(b) the audited balance sheet as at, _____; and

• Period instead of year
• 31st March removed.
• New business or business discontinued

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Open Period: 1(a) the audited *profit and loss account / income and expenditure account for the period beginning from ----------------------to ending on -------------------

• ---------.

1(b) the audited balance sheet as at, _____; and

• Period instead of year
• 31st March removed.
• New business or business discontinued

Form 3CA

Space for Observations - Qualifications:

• 3. In *my / our opinion and to the best of *my / our

information and according to examination of books of account including

• ther

relevant documents and explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to the following observations/qualifications, if any: a. b.

• Space provided to mention observations/qualifications
• Utility – various drop down options including ‘others’

Space of 1000 characters including spaces

• Notes pertaining to TDS, 40A(3), 269SS/T, Books of account

verification can be added here

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Space for Observations - Qualifications:

• 3. In *my / our opinion and to the best of *my / our

information and according to examination of books of account including

• ther

relevant documents and explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to the following observations/qualifications, if any: a. b.

• Space provided to mention observations/qualifications
• Utility – various drop down options including ‘others’

Space of 1000 characters including spaces

• Notes pertaining to TDS, 40A(3), 269SS/T, Books of account

verification can be added here

Form 3CA

• Space for Observations - Qualifications:
• brackets, special characters not allowed

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• Space for Observations - Qualifications:
• brackets, special characters not allowed

Form 3CB

• Applicable in the case of a person who carries
• n business or profession, but not being a

person who is required by or under any other law to get his accounts audited

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• Applicable in the case of a person who carries
• n business or profession, but not being a

person who is required by or under any other law to get his accounts audited

Form 3CB

Open Period:

• 1. *I / we have examined the balance sheet as on,

____, and the *profit and loss account / income and expenditure account for the period beginning from ----------------------to ending on -----------------., attached herewith,

• Period instead of year
• 31st March removed – new or discontinued

business But…one typo error

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Open Period:

• 1. *I / we have examined the balance sheet as on,

____, and the *profit and loss account / income and expenditure account for the period beginning from ----------------------to ending on -----------------., attached herewith,

• Period instead of year
• 31st March removed – new or discontinued

business But…one typo error

Form 3CB

3(c)(i) in the case of the balance sheet, of the state of the affairs of the assessee as at 31st March, ;and

• Not removed in (c)(i) - Typing error?

Typing error still exists in Utility.

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3(c)(i) in the case of the balance sheet, of the state of the affairs of the assessee as at 31st March, ;and

• Not removed in (c)(i) - Typing error?

Typing error still exists in Utility.

Form 3CB

Space for qualifications/observations:

• 5. In *my/our opinion and to the best of *my / our

information and according to explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to following

• bservations/qualifications, if any:

a. b.

• Space provided to mention observations/qualifications
• Utility – various drop down options including ‘others’

Space of 1000 characters including spaces

• Notes pertaining to TDS, 40A(3), 269SS/T, Books of

account verification can be added here

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Space for qualifications/observations:

• 5. In *my/our opinion and to the best of *my / our

information and according to explanations given to *me / us, the particulars given in the said Form No.3 CD are true and correct subject to following

• bservations/qualifications, if any:

a. b.

• Space provided to mention observations/qualifications
• Utility – various drop down options including ‘others’

Space of 1000 characters including spaces

• Notes pertaining to TDS, 40A(3), 269SS/T, Books of

account verification can be added here

Form 3CB

• Space for Observations - Qualifications:
• brackets, special characters not allowed

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• Space for Observations - Qualifications:
• brackets, special characters not allowed

Form 3CD

• Particulars which are required to be furnished

under section 44AB shall be in Form No. 3CD

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• Particulars which are required to be furnished

under section 44AB shall be in Form No. 3CD

Form 3CD - Clause 4 – Registration Nos.

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

• r

any

• ther

identification number allotted for the same

• GN - In case the auditor prima facie is of the
• pinion that any indirect taxes laws is applicable
• n the business or profession of the assessee but

the assessee is not registered under the said law, he should report the same appropriately.

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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

• r

any

• ther

identification number allotted for the same

• GN - In case the auditor prima facie is of the
• pinion that any indirect taxes laws is applicable
• n the business or profession of the assessee but

the assessee is not registered under the said law, he should report the same appropriately.

Form 3CD - Clause 4 – Registration Nos. Utility

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Form 3CD – Clause 8 – Relevant clause of 44AB Indicate the relevant clause of section 44AB under which the audit has been conducted

• Relevant clause of 44AB:

(a) business (b) profession (c) 44AE, 44BB, 44BBB (d) 44AD

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

• Relevant clause of 44AB:

(a) business (b) profession (c) 44AE, 44BB, 44BBB (d) 44AD

Form 3CD – Clause 8 – Relevant clause of 44AB. Utility

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Form 3CD – Clause 11(b) – address – books List of books of account maintained and the address at which the books of accounts are kept. (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. )

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List of books of account maintained and the address at which the books of accounts are kept. (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. )

Form 3CD – Clause 11(b) – address – books List of books of account maintained and the address at which the books of accounts are kept. Utility:

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List of books of account maintained and the address at which the books of accounts are kept. Utility:

Books of Account Type Address Line 1 Address Line 2 City State Pin Sales Register Purchase Register

Form 3CD – Clause 11(b) – address – books

Books defined u/s 2(12A) – includes ledgers, day- books, cash books, account-books and other books whether kept in written form or …..

• Books are maintained in Cloud based software
• Location of data entry and location of storage are
• different. – e.g. cloud based software
• Name and address of cloud service provider to be

given? GN - place where the server is located

• Invoicing at depot = whether or not books of

account? Or document?

• Books maintained and written in accountant’s

computer at his home in case of SMEs

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Books defined u/s 2(12A) – includes ledgers, day- books, cash books, account-books and other books whether kept in written form or …..

• Books are maintained in Cloud based software
• Location of data entry and location of storage are
• different. – e.g. cloud based software
• Name and address of cloud service provider to be

given? GN - place where the server is located

• Invoicing at depot = whether or not books of

account? Or document?

• Books maintained and written in accountant’s

computer at his home in case of SMEs

Form 3CD – Clause 11(b) – address – books

• 3CB [2]- I / we certify that the balance sheet and

the *profit and loss / income and expenditure account are in agreement with the books of account maintained at the head office at _____________ and ** ___________ branches –

• 3CB [3(b)] - (B) In *my / our opinion, proper

books of account have been kept by the head

• ffice and branches of the assessee so far as

appears from*my / our examination of the books.

• Clarification required

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• 3CB [2]- I / we certify that the balance sheet and

the *profit and loss / income and expenditure account are in agreement with the books of account maintained at the head office at _____________ and ** ___________ branches –

• 3CB [3(b)] - (B) In *my / our opinion, proper

books of account have been kept by the head

• ffice and branches of the assessee so far as

appears from*my / our examination of the books.

• Clarification required

Form 3CD – Clause 11(c) – Relevant documents

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

• Documents – 2(22AA) read with 2(1)(t) of the IT

Act, 2000 (amended in 2008) – scope very wide – electronic records covers even sound, digital media, film etc.

• Nature of documents vs. exact documents
• Deeds,

Agreements, Registrations, Returns, Challans, Invoices, BRS, Bank Statements, Salary Register, CENVAT Register etc.

• All documents relied upon in giving the report
• Utility : Sr. No. & Name of document is asked

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

• Documents – 2(22AA) read with 2(1)(t) of the IT

Act, 2000 (amended in 2008) – scope very wide – electronic records covers even sound, digital media, film etc.

• Nature of documents vs. exact documents
• Deeds,

Agreements, Registrations, Returns, Challans, Invoices, BRS, Bank Statements, Salary Register, CENVAT Register etc.

• All documents relied upon in giving the report
• Utility : Sr. No. & Name of document is asked

Form 3CD – Clause 11(c) – Relevant documents Utility:

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Form 3CD – Clause 13(c) – Change in method

Whether there had been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year. If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.

• Utility : Data to be given in Tabular Format now –
• Sr. No., Particulars, Increase in profit, Decrease in

profit

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Whether there had been any change in the method of accounting employed vis-a-vis the method employed in the immediately preceding previous year. If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.

• Utility : Data to be given in Tabular Format now –
• Sr. No., Particulars, Increase in profit, Decrease in

profit

Form 3CD – Clause 17 – Sale of imm. property 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

• r 50C, please furnish:
• 1. Details of property
• 2. Consideration received or accrued
• 3. Value adopted or assessed or assessable

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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

• r 50C, please furnish:
• 1. Details of property
• 2. Consideration received or accrued
• 3. Value adopted or assessed or assessable

Form 3CD – Clause 17 – Sale of imm. property Utility:

Details

• f

Propert y Addres s Line 1 Addres s Line 2 City State Pin Consid eration Receive d Stamp Duty Value

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Details

• f

Propert y Addres s Line 1 Addres s Line 2 Consid eration Receive d Stamp Duty Value

Form 3CD – Clause 17 – Sale of imm. property

• 43CA:

(i) Transfer - Ashaland Corporation 133 ITR 55 (Guj) – Income accrues in the year in which title passes i.e. execution of registered sale deed – even though advance may be received earlier (ii) AS – 9 to be considered for time of transfer (iii) Date of agreement is relevant (43CA(3)) (iv) Leasehold Rights – Whether ‘land’ or ‘building’ in terms of Section 43CA and 50C? (v) Form 1 - stamp duty, details of property, consideration received.

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• 43CA:

(i) Transfer - Ashaland Corporation 133 ITR 55 (Guj) – Income accrues in the year in which title passes i.e. execution of registered sale deed – even though advance may be received earlier (ii) AS – 9 to be considered for time of transfer (iii) Date of agreement is relevant (43CA(3)) (iv) Leasehold Rights – Whether ‘land’ or ‘building’ in terms of Section 43CA and 50C? (v) Form 1 - stamp duty, details of property, consideration received.

Form 3CD – Clause 17 – Sale of imm. property

• 50C:

(i) Section 2(47)(v) – transfer – deemed accrual

• n possession in part performance

(ii) Leasehold right – ‘land’ or ‘building’? (iii) Form 1 – Stamp duty, consideration received, description of property.

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• 50C:

(i) Section 2(47)(v) – transfer – deemed accrual

• n possession in part performance

(ii) Leasehold right – ‘land’ or ‘building’? (iii) Form 1 – Stamp duty, consideration received, description of property.

Form 3CD – Clause 17 – Sale of imm. property

• Form 1 & calculated market value report

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Form 3CD – Clause 17 – Sale of imm. property

• Form 1 & calculated market value report

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Form 3CD – Clause 19 – Deductions

• Deductions allowable under sections 32AC, 35AD,

35CCC etc. are required to be reported

• Conditions have been fulfilled or not to be checked –

Amounts debited vis-à-vis Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified

• GN – “the Tax Auditor has to work out, on the basis of

the conditions prescribed in the concerned Section, the amount admissible there under and report the same.”

• Checklist – Working paper, Separate Audit Report
• Section wise chart to be given

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• Deductions allowable under sections 32AC, 35AD,

35CCC etc. are required to be reported

• Conditions have been fulfilled or not to be checked –

Amounts debited vis-à-vis Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified

• GN – “the Tax Auditor has to work out, on the basis of

the conditions prescribed in the concerned Section, the amount admissible there under and report the same.”

• Checklist – Working paper, Separate Audit Report
• Section wise chart to be given

Form 3CD – Clause 19 – Deductions Utility:

Amounts debited to P&L Account Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified under the relevant provisions of Income-tax Act, 1961 or Income-tax Rules,1962 or any

• ther guidelines, circular, etc.,

issued in this behalf.

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• Sr. No.

Section Amounts debited to P&L Account Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified under the relevant provisions of Income-tax Act, 1961 or Income-tax Rules,1962 or any

• ther guidelines, circular, etc.,

issued in this behalf.

32AC …..

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(a):

Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc

• Should be debited to Profit & Loss Account -
• nly for 21(a)
• Unlike preceding 3CD where it was for entire

Clause 17 – please see screen shot in next slide

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Clause 21(a):

Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc

• Should be debited to Profit & Loss Account -
• nly for 21(a)
• Unlike preceding 3CD where it was for entire

Clause 17 – please see screen shot in next slide

Form 3CD – Clause 21 – Inadmissible amounts

• Should be debited to Profit & Loss Account -
• nly for 21(a)
• Unlike preceding 3CD where it was for entire

Clause 17 –

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• Should be debited to Profit & Loss Account -
• nly for 21(a)
• Unlike preceding 3CD where it was for entire

Clause 17 –

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(a):

• 37(1) – Personal or Capital Expenditure
• Expl to 37(1) – offense or prohibited by law –

37(2B)

• advertisement

in any souvenir, brochure, tract, pamphlet or the like published by a political party

• Contractual damages ? - Expenditure by way of

any other penalty or fine not covered above GN – “This clause covers only penalty or fine for violation of law and not the payment for contractual breach or liquidator damages.”

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Clause 21(a):

• 37(1) – Personal or Capital Expenditure
• Expl to 37(1) – offense or prohibited by law –

37(2B)

• advertisement

in any souvenir, brochure, tract, pamphlet or the like published by a political party

• Contractual damages ? - Expenditure by way of

any other penalty or fine not covered above GN – “This clause covers only penalty or fine for violation of law and not the payment for contractual breach or liquidator damages.”

Form 3CD – Clause 21 – Inadmissible amounts

Utility: Capital Expenditure Personal Expenditure And so on….

• Sr. No

Particulars Amount Rs.

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Utility: Capital Expenditure Personal Expenditure And so on….

• Sr. No

Particulars Amount Rs.

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(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: (B) 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)

• Date, amount, nature of payment, name &

address of payee, amount of tax deducted

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Clause 21(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: (B) 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)

• Date, amount, nature of payment, name &

address of payee, amount of tax deducted

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(b): Amounts inadmissible under section 40(a):- (ii) as payment referred to in sub-clause (ia) (A) Details of payment on which tax is not deducted: (B) 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.

• Date, amount, nature of payment, name &

address of payee, amount of tax deducted

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Clause 21(b): Amounts inadmissible under section 40(a):- (ii) as payment referred to in sub-clause (ia) (A) Details of payment on which tax is not deducted: (B) 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.

• Date, amount, nature of payment, name &

address of payee, amount of tax deducted

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(b): Inadmissible if tax not deducted

• 40(a)(i) read with 200(1) (139(1) from AY 2015-

16) : Non-resident

• 40(a)(ia) read with 139(1) (Salary from AY 2015-

16) : Resident

• 40(a)(iii) : Salary paid to Non-resident or outside

India

• Even if not be debited to Profit & Loss Account –

Typing Error or Intentional?

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Clause 21(b): Inadmissible if tax not deducted

• 40(a)(i) read with 200(1) (139(1) from AY 2015-

16) : Non-resident

• 40(a)(ia) read with 139(1) (Salary from AY 2015-

16) : Resident

• 40(a)(iii) : Salary paid to Non-resident or outside

India

• Even if not be debited to Profit & Loss Account –

Typing Error or Intentional?

Form 3CD – Clause 21 – Inadmissible amounts

Utility: 21(b) (i) & (ii) Part A

21(b)(i)/(ii) Part B – (21(b)(ii)Part B contains typo error – “Payer”)

Date of Paymen t Amount

• f

Paymen t Nature

• f

Paymen t Name

• f the

Payee PAN of the Payee If Availabl e Address Line1 Address Line2 City or Town or District Pincode

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Utility: 21(b) (i) & (ii) Part A

21(b)(i)/(ii) Part B – (21(b)(ii)Part B contains typo error – “Payer”)

PAN of the Payee If Availabl e Date

• f

Payme nt Amou nt of Payme nt Natur e of Payme nt Name

• f the

Payee PAN of the Payee ,If Availa ble Addre ss Line1 Addre ss Line2 City or Town

• r

Distric t Pincod e Amou nt of tax deduc ted Amou nt out

• f (VI)

deposi ted,if any

Form 3CD – Clause 21 – Inadmissible amounts Clause 21(d): Disallowance/deemed income under section 40A(3): Details in Utility: i. Serial No., ii. Date, Nature, Amount of payment iii. Name & PAN of the payee, if available

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Clause 21(d): Disallowance/deemed income under section 40A(3): Details in Utility: i. Serial No., ii. Date, Nature, Amount of payment iii. Name & PAN of the payee, if available

Form 3CD – Clause 21 – Inadmissible amounts

Clause 21(d):

• Section 40A(3A) – allowance made in past year

and payment made in PY – deemed income

• GN – “Where the reporting has been done on the

basis of the certificate of the assessee, the fact shall be reported as an observation in clause (3)

• f Form No. 3CA and clause (5) of Form No.3CB,

as the case may be.”

• Even if not be debited to Profit & Loss Account –

Typing Error or Intentional?

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Clause 21(d):

• Section 40A(3A) – allowance made in past year

and payment made in PY – deemed income

• GN – “Where the reporting has been done on the

basis of the certificate of the assessee, the fact shall be reported as an observation in clause (3)

• f Form No. 3CA and clause (5) of Form No.3CB,

as the case may be.”

• Even if not be debited to Profit & Loss Account –

Typing Error or Intentional?

Form 3CD – Clause 24 – sale of asset u/s 32AC Amounts deemed to be profits and gains under section 32AC or 33AB or 33ABA or 33AC.

• “32AC” added
• deemed income which results from sale or

transfer of new asset, (deduction claimed u/s 32AC) within a period of five years from the date of its installation

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Amounts deemed to be profits and gains under section 32AC or 33AB or 33ABA or 33AC.

• “32AC” added
• deemed income which results from sale or

transfer of new asset, (deduction claimed u/s 32AC) within a period of five years from the date of its installation

Form 3CD – Clause 27(a) – CENVAT Amount of Central 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 Central Value Added Tax credits in the accounts.

• MODVAT replaced by CENVAT
• Opening, Closing balance of CENVAT Credit
• Availed value and utilized value of CENVAT

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Amount of Central 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 Central Value Added Tax credits in the accounts.

• MODVAT replaced by CENVAT
• Opening, Closing balance of CENVAT Credit
• Availed value and utilized value of CENVAT

Form 3CD – Clause 28 – 56(2)(viia) Whether during the previous year the assessee 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.

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Whether during the previous year the assessee 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.

Form 3CD – Clause 28 – 56(2)(viia)

• 56(2)(viia) Inserted by the Finance Act, 2010 w.e.f. 1-6-

2010

• Receiver - Firm / company not being a company in

which public are substantially interested (CNCPSI)

• Property - shares of CNCPSI (from anyone)
• Without Consideration – Entire taxable
• With Consideration –

FMV - Consideration = Taxable

• FMV = Rule 11U and 11UA
• Shall not apply to certain transfers u/s 47

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• 56(2)(viia) Inserted by the Finance Act, 2010 w.e.f. 1-6-

2010

• Receiver - Firm / company not being a company in

which public are substantially interested (CNCPSI)

• Property - shares of CNCPSI (from anyone)
• Without Consideration – Entire taxable
• With Consideration –

FMV - Consideration = Taxable

• FMV = Rule 11U and 11UA
• Shall not apply to certain transfers u/s 47

Form 3CD – Clause 29 – 56(2)(viib) Whether during the previous year the assessee received any consideration 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.

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Whether during the previous year the assessee received any consideration 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.

Form 3CD – Clause 29 – 56(2)(viib)

• 56(2)(viib) Inserted by the Finance Act, 2012 w.e.f. 1-4-

2013

• Recevier - Company not being a company in which

public are substantially interested (CNCPSI)

• Consideration received - for issue of shares that

exceeds face value (from Resident person only)

• Consideration received – FMV = Taxable i.e. excess

share premium

• FMV = Rule 11U/UA or as substantiated to the

satisfaction of the officer w.e. higher

• Shall not apply to – VCU from VCC/VCF, C.G. notified

class of persons

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• 56(2)(viib) Inserted by the Finance Act, 2012 w.e.f. 1-4-

2013

• Recevier - Company not being a company in which

public are substantially interested (CNCPSI)

• Consideration received - for issue of shares that

exceeds face value (from Resident person only)

• Consideration received – FMV = Taxable i.e. excess

share premium

• FMV = Rule 11U/UA or as substantiated to the

satisfaction of the officer w.e. higher

• Shall not apply to – VCU from VCC/VCF, C.G. notified

class of persons

Form 3CD – Clause 28/29 – 56(2)(viia)/(viib) 56(2)(viia) & (viib) – Caution points:

Particulars 56(2)(viia) 56(2)(viib) Accountant Expl to 288(2) FCA other than Tax Auditor or Statutory Auditor

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56(2)(viia) & (viib) – Caution points:

FCA other than Tax Auditor or Statutory Auditor Balance Sheet Audited Balance Sheet as on Valuation date Last Audited Balance Sheet approved at AGM Valuation Date Receipt of Shares Receipt of Consideration for issue of shares

Form 3CD – Clause 28/29 – 56(2)(viia)/(viib) 56(2)(viia) & (viib) – Caution points:

• Report of Valuer to be obtained
• Rough calculation should be done on ones
• wn as a check – Excel working

Particulars 56(2)(viia) 56(2)(viib) Valuation Method Breakup Value Breakup Value

• r DCF

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56(2)(viia) & (viib) – Caution points:

• Report of Valuer to be obtained
• Rough calculation should be done on ones
• wn as a check – Excel working

Valuation Method Breakup Value

• r DCF

Form 3CD – Clause 28/29 – 56(2)(viia)/(viib) Utility 56(2)(viia): Utility 56(2)(viib):

Name of Seller PAN of Seller Name of Company whose shares purchased CIN of Compa ny No of Shares Purchase Value paid Fair Market Value as per Report

• f Valuer

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Utility 56(2)(viia): Utility 56(2)(viib):

Name of Subsriber PAN of subscriber No of Shares Consideration received Fair Market Value as per Report of Valuer

Form 3CD – Clause 32(c)/(e) – Speculation Loss

Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year, If yes, please furnish the details of the same.

• Calculation of loss –Anjlee Exim Pvt Ltd [Guj] dt. 10.6.2013

“The administrative and other expenses incurred by the appellant are found to be common for both the speculative and non-speculative businesses, as these expenses related to both the streams, allocation of expenses was not only necessary but inevitable and moreover there had to be some rationale in bifurcating such expenses and when authorities have done it on the basis of profit and volume of the business in the ratio of 2:3, no error is committed at all by the Tribunal warranting any interference.”

• Utility – Only amount to be given

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Whether the assessee has incurred any speculation loss referred to in section 73 during the previous year, If yes, please furnish the details of the same.

• Calculation of loss –Anjlee Exim Pvt Ltd [Guj] dt. 10.6.2013

“The administrative and other expenses incurred by the appellant are found to be common for both the speculative and non-speculative businesses, as these expenses related to both the streams, allocation of expenses was not only necessary but inevitable and moreover there had to be some rationale in bifurcating such expenses and when authorities have done it on the basis of profit and volume of the business in the ratio of 2:3, no error is committed at all by the Tribunal warranting any interference.”

• Utility – Only amount to be given

Form 3CD – Clause 32(d) – loss in specified busi. whether the assessee has incurred any loss referred to in section 73A in respect of any specified business during the previous year, if yes, please furnish details of the same.

• 35AD – specified businesses – loss to be

reported

• Utility – Only amount to be given

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whether the assessee has incurred any loss referred to in section 73A in respect of any specified business during the previous year, if yes, please furnish details of the same.

• 35AD – specified businesses – loss to be

reported

• Utility – Only amount to be given

Form 3CD – Clause 33 – Chap III/VIA deductions

Section-wise details

• f

deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA)

• Amounts admissible as per the provisions of the

Income-tax Act, 1961 and fulfils the conditions, if any, specified under the relevant provisions of Income-tax Act, 1961

• Auditor to verify the conditions of Chap. III -

10A/10AA – whether they are fulfilled or not?

• Various sub-sections – prepare checklist

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Section-wise details

• f

deductions, if any, admissible under Chapter VIA or Chapter III (Section 10A, Section 10AA)

• Amounts admissible as per the provisions of the

Income-tax Act, 1961 and fulfils the conditions, if any, specified under the relevant provisions of Income-tax Act, 1961

• Auditor to verify the conditions of Chap. III -

10A/10AA – whether they are fulfilled or not?

• Various sub-sections – prepare checklist

Form 3CD – Clause 33 – Chaper III deductions

GN:

• The

admissibility

• f

the aforesaid deductions/ exemptions is dependent upon various conditions laid down in the section under which deduction/exemption is admissible. It is, therefore, advised that while working out the amount of admissible deduction the tax auditor has to ascertain that those conditions stand fulfilled or not. For ascertaining this, the tax auditor has to obtain all necessary evidence which would enable him to express the opinion regarding the admissibility of deductions.

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GN:

• The

admissibility

• f

the aforesaid deductions/ exemptions is dependent upon various conditions laid down in the section under which deduction/exemption is admissible. It is, therefore, advised that while working out the amount of admissible deduction the tax auditor has to ascertain that those conditions stand fulfilled or not. For ascertaining this, the tax auditor has to obtain all necessary evidence which would enable him to express the opinion regarding the admissibility of deductions.

Form 3CD – Clause 33 – Chaper III deductions Utility:

• Sr. No.

Section under which deduction is claimed Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified under the relevant provisions of Income-tax Act, 1961

• r Income-tax Rules,1962 or any other

guidelines, circular, etc., issued in this behalf.

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• Sr. No.

Section under which deduction is claimed Amounts admissible as per the provisions of the Income-tax Act, 1961 and also fulfils the conditions, if any specified under the relevant provisions of Income-tax Act, 1961

• r Income-tax Rules,1962 or any other

guidelines, circular, etc., issued in this behalf.

10A 80G etc

Form 3CD – Clause 34(a) – TDS/TCS Chart

Condition of Auditors these days after verifying Clause 34 of form 3CD. Go to next slide !!!

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Condition of Auditors these days after verifying Clause 34 of form 3CD. Go to next slide !!!

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Form 3CD – Clause 34(a) – TDS/TCS Chart

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:

• Tabular information of TDS/TCS

(i) TAN (ii) Sections under which TDS or TCS deducted or collected (iii) Nature of Payment (iv) Total Amount of payment (including non-tax deductible or collectible portion) (v) Total amount on which tax was to be deducted or collected

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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:

• Tabular information of TDS/TCS

(i) TAN (ii) Sections under which TDS or TCS deducted or collected (iii) Nature of Payment (iv) Total Amount of payment (including non-tax deductible or collectible portion) (v) Total amount on which tax was to be deducted or collected

Form 3CD – Clause 34(a) – TDS/TCS Chart

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:

• Tabular information of TDS/TCS

(vi) Total amount on which tax actually deducted or collected (vii) Total amount of tax actually deducted or collected on above (viii) Total amount on which tax actually deducted or collected at less than specified rate – vis-à-vis Section 197 Certificates –

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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:

• Tabular information of TDS/TCS

(vi) Total amount on which tax actually deducted or collected (vii) Total amount of tax actually deducted or collected on above (viii) Total amount on which tax actually deducted or collected at less than specified rate – vis-à-vis Section 197 Certificates –

Form 3CD – Clause 34(a) – TDS/TCS Chart

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:

• Tabular information of TDS/TCS

GN - In case the payer deducts/recipient collects tax at source at a rate lower than the specified rate on the basis

• f certificate issued under section 195 or 197, the lower

rate or nil rate, as the case may be will be considered as the specified rate for the purpose of reporting under this clause. (ix) Total amount of tax actually deducted or collected at less than specified rate – vis-à-vis Section 197 Certificates - GN (x) Amount of tax deducted or collected but not deposited

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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:

• Tabular information of TDS/TCS

GN - In case the payer deducts/recipient collects tax at source at a rate lower than the specified rate on the basis

• f certificate issued under section 195 or 197, the lower

rate or nil rate, as the case may be will be considered as the specified rate for the purpose of reporting under this clause. (ix) Total amount of tax actually deducted or collected at less than specified rate – vis-à-vis Section 197 Certificates - GN (x) Amount of tax deducted or collected but not deposited

Form 3CD – Clause 34(b) – Late filing of return whether the assessee has furnished the statement of tax deducted or tax collected within the prescribed time. If not, please furnish the details

• If TDS/TCS return is filed late
• Entire late filed return will have to be verified:

Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported

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whether the assessee has furnished the statement of tax deducted or tax collected within the prescribed time. If not, please furnish the details

• If TDS/TCS return is filed late
• Entire late filed return will have to be verified:

Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported

Form 3CD – Clause 34(b) – Late filing of return Utility:

Sr. No. TAN Type of Form Due Date

• f filing

TDS or TCS Return Actual Date of filing TDS

• r TCS

Return Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported

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Utility:

Sr. No. TAN Type of Form Due Date

• f filing

TDS or TCS Return Actual Date of filing TDS

• r TCS

Return Whether the statement of tax deducted or collected contains information about all transactions which are required to be reported

Form 3CD – Clause 34(c) – Interest - TDS/TCS whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). Utility:

• TAN
• Amount of interest payable
• Amount paid
• Dates of payment
• Auditor to recheck calculation

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whether the assessee is liable to pay interest under section 201(1A) or section 206C(7). Utility:

• TAN
• Amount of interest payable
• Amount paid
• Dates of payment
• Auditor to recheck calculation

Form 3CD – Clause 36 – 115O – DDT Dividend Tax u/s 115O:

• Reductions:

115O(1A)(i) - Dividend received by domestic company

• r

foreign company from its subsidiary 115O(1A)(ii) – dividend paid to any person for/on behalf of New pension system trust

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Dividend Tax u/s 115O:

• Reductions:

115O(1A)(i) - Dividend received by domestic company

• r

foreign company from its subsidiary 115O(1A)(ii) – dividend paid to any person for/on behalf of New pension system trust

Form 3CD – Clause 36 – 115O – DDT Utility:

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Utility:

Form 3CD – Clause 37 – Cost audit Clause 37: Whether any cost audit was carried out, if yes, give the details, if any, of disqualification or disagreement on any matter /item/ value/ quantity as may be reported/ identified by the cost auditor. Utility: 500 characters allowed for comment

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Clause 37: Whether any cost audit was carried out, if yes, give the details, if any, of disqualification or disagreement on any matter /item/ value/ quantity as may be reported/ identified by the cost auditor. Utility: 500 characters allowed for comment

Form 3CD – Clause 38 – Excise Audit Clause 38:

• Whether any audit was conducted under the

Central Excise Act, 1944, if yes, give the details, if any,

• f

disqualification

• r

disagreement on any matter /item /value /quantity as may be reported/identified by the auditor. Utility: 500 characters allowed for comment

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Clause 38:

• Whether any audit was conducted under the

Central Excise Act, 1944, if yes, give the details, if any,

• f

disqualification

• r

disagreement on any matter /item /value /quantity as may be reported/identified by the auditor. Utility: 500 characters allowed for comment

Form 3CD – Clause 39 – Service Tax Audit

Clause 39: Whether any audit was conducted under section 72A of the Finance Act, 1994 in relation to valuation of taxable services, if yes, give the details, if any, of disqualification or disagreement

• n any matter/ item/ value/ quantity as may be

reported/identified by the auditor.

• 72A(i) deals with valuation aspect.
• 72A(ii) & (iii) deal with credits and accounts.

Utility: 500 characters allowed for comment

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Clause 39: Whether any audit was conducted under section 72A of the Finance Act, 1994 in relation to valuation of taxable services, if yes, give the details, if any, of disqualification or disagreement

• n any matter/ item/ value/ quantity as may be

reported/identified by the auditor.

• 72A(i) deals with valuation aspect.
• 72A(ii) & (iii) deal with credits and accounts.

Utility: 500 characters allowed for comment

Form 3CD – Clause 40 – Ratios

Clause 40: Details regarding turnover, gross profit, etc., for the previous year and preceding previous year:

• Total turnover is to be reported for the previous year as

well as for preceding financial year

• Other ratios to be reported for preceding FY if audited
• (the details required to be furnished for principal items of

goods traded or manufactured or services rendered) GN - the ratios have to be given for the business as a whole and need not be given product wise. In case the preceding previous year is not subject to audit, nothing should be mentioned in the relevant column.

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Clause 40: Details regarding turnover, gross profit, etc., for the previous year and preceding previous year:

• Total turnover is to be reported for the previous year as

well as for preceding financial year

• Other ratios to be reported for preceding FY if audited
• (the details required to be furnished for principal items of

goods traded or manufactured or services rendered) GN - the ratios have to be given for the business as a whole and need not be given product wise. In case the preceding previous year is not subject to audit, nothing should be mentioned in the relevant column.

Form 3CD – Clause 41 – Any Tax Laws

Clause 41: Please furnish the 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.

• GN - Normally, the Indirect tax laws such as Central Excise

Duty, Service Tax, Customs Duty, Value Added Tax, CST, Professional Tax etc would be covered as other tax laws. Hence, the cess or duty like Marketing Cess, Cess on Royalty, Octroi Duty, Entry Tax etc. would not be covered as

• ther tax laws. However, the auditor should exercise his

professional judgment in determining the applicability to relevant tax laws for reporting under this clause.

• Details of proceedings to be given

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Clause 41: Please furnish the 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.

• GN - Normally, the Indirect tax laws such as Central Excise

Duty, Service Tax, Customs Duty, Value Added Tax, CST, Professional Tax etc would be covered as other tax laws. Hence, the cess or duty like Marketing Cess, Cess on Royalty, Octroi Duty, Entry Tax etc. would not be covered as

• ther tax laws. However, the auditor should exercise his

professional judgment in determining the applicability to relevant tax laws for reporting under this clause.

• Details of proceedings to be given

Form 3CD – Clause 41 – Any Tax Laws Clause 41: Utility:

Sr. No. Financial Year to which demand relates Name of tax Law Type - Demand Raised or Refund Received Date of Demand

• r

Refund Amoun t

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Clause 41: Utility:

Sr. No. Financial Year to which demand relates Name of tax Law Type - Demand Raised or Refund Received Date of Demand

• r

Refund Amoun t Remarks

Drop Down Drop Down 100 characters

Form 3CD – Removal of Annexure I Welcome change: Annexure I removed.

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Welcome change: Annexure I removed.

Important points for Tax Auditors

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Issues that need to be addressed

 3CD preparation is duty of assessee and auditor has to merely verify contents.  However, clauses 4, 19, 28, 29, 33, 34 cast the duty upon auditors – give responsibility para in report  Seems to be outsourcing of work of AOs to auditors without delegation of any powers!!!  Flaws in utility – Not Applicable option missing at various places. Will lead to confusion in the mind of the reader.  Whether order F No 133 was ultra vires? - Date of filing of return u/s 139(1) was to be extended?

C.R. Sharedalal & Co. www.crsharedalalco.com

 3CD preparation is duty of assessee and auditor has to merely verify contents.  However, clauses 4, 19, 28, 29, 33, 34 cast the duty upon auditors – give responsibility para in report  Seems to be outsourcing of work of AOs to auditors without delegation of any powers!!!  Flaws in utility – Not Applicable option missing at various places. Will lead to confusion in the mind of the reader.  Whether order F No 133 was ultra vires? - Date of filing of return u/s 139(1) was to be extended?

Important Points for Tax Auditors

 Maintain detailed working papers (SA 230)  Work Sheets / Time Sheets  Query Sheets /Explanatory Notes /Checklists  Materiality factor calculation  Relevant Standards on Auditing  Judicial Pronouncements relied upon  Certificates – 269SS/T, 40A(3), 40A(2)(b)  Management Representation Letter  Assessee’s and auditor’s responsibility para

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 Maintain detailed working papers (SA 230)  Work Sheets / Time Sheets  Query Sheets /Explanatory Notes /Checklists  Materiality factor calculation  Relevant Standards on Auditing  Judicial Pronouncements relied upon  Certificates – 269SS/T, 40A(3), 40A(2)(b)  Management Representation Letter  Assessee’s and auditor’s responsibility para

Revised Minimum recommended scale of fees chargeable for the professional assignments done by Chartered Accountants – An announcement hosted by Committee for Capacity Building of CA Firms and Small and Medium Practitioners-Last updated on 18th July,2014 (Class A cities including Ahmedabad):

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Old vs. New

Falls on the Floor Falls on the Floor

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Breaks Floor

• simple & rugged

Breaks Screen

• complex and expensive

Thank you!

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