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Major Changes in 3CD from Clauses 1 to 41

Major Changes in 3CD from Clauses 1 to 41. TAX AUDIT REPORT 3CD REVISED. Significant changes in Form 3CD notified on 25th July 2014.

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Major Changes in 3CD from Clauses 1 to 41

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  1. Major Changesin 3CDfrom Clauses 1 to 41 COMPILED BY: CA MANISH BORAD, B.Com, LLB, FCA P/o.Manish Borad & Co. Chartered Accountants, Jaipur

  2. TAX AUDIT REPORT 3CD REVISED • Significant changes in Form 3CD notified on 25th July 2014. • The audit season is already in full swing and all our offices are currently completing the statutory audits and tax audits. Just as we are nearing various deadlines, the CBDT has notified significant changes in Form 3CD and increased the scope and reporting requirements of tax audits.

  3. TAX AUDIT REPORT 3CD REVISED • Broadly speaking changes have been made with a view to have more information and analysis in standard forms. Many details will have to be furnished in comprehensive, tabular and analytical forms. • Form 3CB has also been amended. Observations and qualifications, subject to which report is given in form 3CD, are to be mentioned in details in the report in Form 3CB.

  4. PART-A Two new clauses have been incorporated. First one after clause 3 , which is 4. 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 or any other identification number allotted for the same

  5. Clause 5 is slightly revised in the following manner OLD- Previous year ended =31st March NEW- Previous year from……………..to …………… The other one is stated in the last , which says 8. Indicate the relevant clause of section 44AB under which the audit has been conducted.

  6. PART-B As per old chronological order clause 7(b) is swapped by clause 9(b) , in which underlined words have been introduced CLAUSE 9(b) If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change.

  7. As per new Form 3CD, in clause 10(a) one line is added in a bracket OLD- Nature of business or profession NEW- Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession)

  8. As per new chronological order in Form 3CD clause 11(b) has supplanted clause 9(b) OLD - Books of account maintained (In case books of account are maintained in a computer system, mention the books of account generated by such computer system.)

  9. NEW -List of books of account maintained and the address at which the books of accounts are kept. (In case books of account are maintained in a computer system, mention the books of account generated by such computer system. 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.)Section 44AA

  10. In clause 11(c) of new Form 3CD handful of words have been introduced to give a more detailed meaning OLD - List of books of account examined. NEW - List of books of account and nature of relevant documents examined.

  11. Clause 12 of new Form 3CD (clause 10 of old) Along with specified sections Chapter XII-G and First Schedule are newly added in amended 3CD Form. 12. Whether the profit and loss account includes any profits and gains assessable on presumptive basis, if yes, indicate the amount and the relevant section (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, Chapter XII-G, First Schedule or any other relevant section.)

  12. In clause 13(c) of new Form 3CD(clause 11(b)) a set format is clarified to have a crystal clear view. OLD - If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss. NEW - If answer to (b) above is in the affirmative, give details of such change, and the effect thereof on the profit or loss.

  13. Clause 14(b) of new Form 3CD (12(b) of old) A set format is being furnished for expediency along with previous explanation. 14(b) In case of deviation from the method of valuation prescribed under section 145A, and the effect thereof on the profit or loss, please furnish:

  14. Newly inserted Clause 17 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 or 50C, please furnish:

  15. Clause 15 of old form 3CD replaced by Clause 19 Of new Form 3CD Complete format of this clause has been renovated for descriptive view along with supplementary sections

  16. 19. Amounts admissible under sections:

  17. Clause 16(b) of old form 3CD Substituted by Clause 20(b) Of new Form 3CD This Clause has been modified to provide a coherent view to the assessee.

  18. OLD - Any sum received from the employees towards contributions to any provident fund or superannuation fund or any other fund mentioned in section 2(24)(x); and due date for payment and the actual date of payment to the concerned authorities under section 36(1)(va). NEW - Details of contributions received from employees for various funds as referred to in section 36(1)(va):

  19. CLAUSE 21(a) • Old clause 17 (a) to (e) replaced by Clause 21(a) which says: • Please furnish the details of amounts debited to the profit and loss account, being in the nature of capital, personal, advertisement expenditure etc:

  20. Continued……

  21. Advertisement Expenses • In new 3CD the words used are Advertisement expenses. Now a doubt arises that whether all kind of advertisement expenses to be reported or only the ones disallowed as was reported previously. • The old 3CD specifies the following: “Expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like, published by a political party”. In my opinion the new 3CD will take color from the old 3CD and we should report only the similar expenditure to political party only until any clarification in this regard is received.

  22. Clause 21b • Old Clause 17(f) is replace by New clause 21(b): • Old clause simply asks Amounts inadmissible under section 40(a); New clause is detailed one. It asks to bifurcate the amount paid to Residents and Non Residents u/s 40(a)(i) and section 40(a)(ia). The details required by revised 3CD Form are:

  23. Clause 21(b)(i) of Revised 3CD(b) Amounts inadmissible under section 40(a):- (i) as payment to non-resident referred to in sub-clause (i) of section 40(a). (A) Details of payment on which tax is not deducted: • (I) date of payment • (II) amount of payment • (III) nature of payment • (IV) name and address of the payee

  24. (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) • (I) date of payment • (II) amount of payment • (III) nature of payment • (IV) name and address of the payee • (V) amount of tax deducted

  25. Clause 21(1)(b)(ii) as payment referred to in sub-clause (ia) of section 40a • Details of payment on which tax is not deducted: • (I) date of payment • (II) amount of payment • (III) nature of payment • (IV) name and address of the payee

  26. (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. • (I) date of payment • (II) amount of payment • (III) nature of payment • (IV) name and address of the payer • (V) amount of tax deducted • (VI) amount out of (V) deposited, if any

  27. Amounts Inadmissible under section 40a • (iii) under sub-clause (ic) [Wherever applicable] [Any sum paid on account of Fringe Benefit Tax (FBT) under ch.XII H] • (iv) under sub-clause (iia) Any sum paid on account of Wealth Tax. • (v) under sub-clause (iib) Any amount paid by way of Royalty, License Fee or any other Fee

  28. (vi) under sub-clause (iii) Any payment which is chargeable under the head salaries , if it payable outside India or to a Non Resident and if Tax has not been paid thereon nor deducted therefrom under Chapter XVII-B. • (A) date of payment • (B) amount of payment • (C) name and address of the payee

  29. Clause 21b continues: (vii) under sub-clause (iv) Payment to PF or any other fund for employee benefits unless tax is deducted from payments from fund chargeable to tax. (viiii) under sub-clause (v) Any tax actually paid by employer referred to in section 10(10CC).

  30. Clause 21c is same as Clause 17g of old 3CD • (c) Amounts debited to profit and loss account being, interest, salary, bonus, commission or remuneration inadmissible under section 40(b)/40(ba) and computation thereof; • Payment to non working partner • Payment not authorized by or in accordance with the terms of Partnership deed. • Interest payment though authorized by deed is in excess of 12% per annum. • Remuneration payments exceeds the limits specified u/s 40(b)(v).

  31. Clause 21(d) - Disallowance/deemed income under section 40A(3)/(3A): (A) Section 40A(3) On the basis of the examination of books of account and other relevant documents/evidence, whether the expenditure covered under section 40A(3) read with rule 6DD [Payment in excess of Rs. 20,000] were made by account payee cheque drawn on a bank or account payee bank draft. If not, please furnish the details:

  32. (B) On the basis of the examination of books of account and other relevant documents/evidence, whether the payment referred to in section 40A(3A) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank draft If not, please furnish the details of amount deemed to be the profits and gains of business or profession under section 40A(3A);

  33. Clause 21 continues (No change in these clauses) (e) provision for payment of gratuity not allowable under section 40A(7); (f) any sum paid by the assessee as an employer not allowable under section 40A(9); (g) particulars of any liability of a contingent nature; (h) amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income; (i) amount inadmissible under the proviso to section 36(1)(iii).

  34. Clause 22 [Similar to Clause 17A of old 3CD] • Amount of interest inadmissible under section 23 of the Micro, Small and Medium Enterprises Development Act, 2006.

  35. Clause 23 [Similar to Clause 18 of old 3CD] Particulars of payments made to persons specified under section 40A(2)(b)

  36. Clause 24 [Similar to Clause 19 of old 3CD] with little change in respect of section 32AC. Amounts deemed to be profits and gains under section 32AC or 33AB or 33ABA or 33AC. 32AC has been added to this clause which is newly inserted section in relation to 15% deduction on Investment in new Plant and Machinery for specified assets.

  37. Clause 25 [Similar to Clause 20 of old 3CD] Any amount of profit chargeable to tax under section 41 and computation thereof This is in respect of recovery of any benefit in cash or any other manner by assesse or his successor out of allowance or deduction made out of expenditure/ loss/ trading liability incurred by the assesse.

  38. Clause 26 [Similar to Clause 21 of old 3CD] In respect of any sum referred to in clause (a),(b), (c), (d), (e) or (f) of section 43B, the liability for which:- (A) pre-existed on the first day of the previous year but was not allowed in the assessment of any preceding previous year and was • (a) paid during the previous year; • (b) not paid during the previous year; (B) was incurred in the previous year and was • (a) paid on or before the due date for furnishing the return of income of the previous year under section 139(1); • (b) not paid on or before the aforesaid date. (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.)

  39. Clause 27a [Similar to Clause 22a of old 3CD] with change of word to CENVAT in place of MODVAT 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. The reconciliation of CENVAT Credit needs to be given which may be given as: Opening Credit available: Add: Credit Availed/ Earned: Less: Credit Utilised Balance: Credit available at year end

  40. Clause 27b [Similar to Clause 22b of old 3CD] Particulars of income or expenditure of prior period credited or debited to the profit and loss account

  41. Newly inserted Clause 28 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.

  42. Newly inserted Clause 29 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.

  43. Clause 30 [Similar to Clause 23 of old 3CD] Details of any amount borrowed on hundi or any amount due thereon (including interest on the amount borrowed) repaid, otherwise than through an account payee cheque. [Section 69D]

  44. Clause 31a [Similar to Clause 24a of old 3CD] Particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year :- (i) name, address and permanent account number (if available with the assessee) of the lender or depositor; (ii) amount of loan or deposit taken or accepted; (iii) whether the loan or deposit was squared up during the previous year; (iv) maximum amount outstanding in the account at any time during the previous year; (v) whether the loan or deposit was taken or accepted otherwise than by an account payee cheque or an account payee bank draft. *(These particulars needs not be given in the case of a Government company, a banking company or a corporation established by a Central, State or Provincial Act.)

  45. Clause 31b [Similar to Clause 24b of old 3CD] (b) Particulars of each repayment of loan or deposit in an amount exceeding the limit specified in section 269T made during the previous year :- (i) name, address and Permanent Account Number (if available with the assessee) of the payee; (ii) amount of the repayment; (iii) maximum amount outstanding in the account at any time during the previous year; (iv) whether the repayment was made otherwise than by account payee cheque or account payee bank draft.

  46. Clause 31c [Replaced Certificate required under Clause 24c of old 3CD] Old 3CD Requires to state that Whether a certificate has been obtained from the assessee regarding taking or accepting loan or deposit, or repayment of the same through an account payee cheque or an account payee bank draft. NOW we have to report that: (c) Whether the taking or accepting loan or deposit, or repayment of the same were made by account payee cheque drawn on a bank or account payee bank draft based on the examination of books of account and other relevant documents (The particulars (i) to (iv) at (b) and comment at (c) above need not be given in the case of a repayment of any loan or deposit taken or accepted from Government, Government company, banking company or a corporation established by a Central, State or Provincial Act)

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