‘Maintenance of Accounts’ by HUF

 

Earlier there were no provision regarding maintenance of accounts. Now the provisions relating to maintenance of accounts are contained in. Section 44AA of the Income-tax Act, 1961 and Section 44AA (2) of the Income-tax Act, 1961 deals with the provisions as are related to HUF assessees.


Section 44AA (2) of the Act says that every person carrying on business or profession shall:

 

i.)         if his income from business or profession exceeds Rs. 120000/- or if his total sales, turnover or gross receipts, as the case may be, in business or profession, exceeds Rs. 1000000/- in any of the three years inimediately preceding the previous year, or

 

ii)         where the business or profession has been newly set up in any previous year, if his  income from business or profession is likely to exceed Rs. 120000/- or his total sales, turnover or gross receipt as the case may be in business or profession are or is likely to exceed Rs. 1000000/- during such previous year;

 

iii)         where the profits and gains from business are deemed under the following sections i.e.,


a)         Section 44AE-Profits and gains of business of plying, hiring or leasing goods

carriages


b)         Section 44BB- Profits and gains in connection with the business of exploration

etc of mineral oils

 

c)         Section 44AD-Profits and gains of business on presumptive basis.

 
and if the HUF assessee claims the income to be lower than the deemed income to be computed in accordance with the above provisions,

 
the HUF has to keep and maintain such books of accounts and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of the Act.


There has been sweeping changes in the provisions relating to presumptive taxation as contained in Section 44AD, 44AE, 44AF by the Finance (No.2) Act 2009 w.e.f. 1/4/2011. In this regard, the amended provisions of Section 44AA dealing with the Maintenance of Accounts are reproduced herein below:

 

[ Maintenance of accounts by certain persons carrying on profession or business.]


44AA. (1) Every person carrying on’ legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.


(2)        Every person carrying on business or profession not leing a profession referred to in sub-section (1) shall,—


(i)         if his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or


(ii)        where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales; turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lath rupees, during such previous year; or

 

(iii)       where the profits and gains from the business are deemed to be the profits and gains of the assessee under 44AE or section 44BB or section 44BBB, as the case may be, and the assessee 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, during such 1[previous y


The following clause (iv) shall be inserted after clause (iii) of sub-section (2) of section 44AA by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2011:


(iv)       where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,


keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.


(3)        The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.


(4)        Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]


Implications of amendment in Section 44AA w.e.f. 1/4/2011


1.         It may be noted that w.e.f. 1/4/2011, the provisions of Section 44AF are no longer

applicable and therefore w.e.f. A.Y. 2011-12, the special provisions for computation of profits & gains from retail business no longer being applicable, the applicability of maintenance of accounts in respect of retail business is to be determined according to the

 

criteria as specified in clause (iv) as above since the provisions of Section 44A1) has been made applicable to all types of Assessees including those engaged in Retail trade. This is the reason that reference to Section 44AF in Section 44AA has therefore been deleted w.e.f. 1/4/2011.


2.         Secondly, the reference to Section 44AD in Section 44AA (2) (iii) has been omitted and

has separately been provided in Section 44AA (2) (iv) in view of the amendment made in Section 44AD of the Income- tax Act, 1961 which has been replaced by a new section w.e.f. 1/4/2011.


What books are required to be maintained


The Act though has not specified what are the books which are required to be maintained, the following books of accounts and other documents must be maintained taking clue from Rule 6F of the Income-tax rules,1962 which prescribes the books to be maintained by certain professionals:

 

1          Cash book


2.         Bankbook


3.         General Ledger


4.         Debtors and creditors Ledger


5.         Journal


6.         Bank Statement


7.         Sales and purchase invoices


8.         General expenses bills and invoices


9.         Stock register


The books may be maintained manually or electronically in a Computer. In case the books are maintained in a Computer, adequate safeguard to protect the data must be in place for preserving the same for future reference.

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