1. Meaning
In this advance learning we will learn about the provisions relating to maintenance of books of account as given in section 44AA. These provisions are as follows:
The provisions relating to maintenance of books of account can be classified as follows:
Provisions relating to a person engaged in specified profession.
Provisions relating to a person engaged in non-specified profession.
Provisions relating to a person engaged in business.
Let’s first understand the meaning of terms “specified professions” and “non-specified professions”.
For the purpose of maintenance of books of account, following professions are treated as “Specified professions”:
Legal
Medical
Engineering
Architectural
Accountancy
Company secretary
Technical consultancy
Interior decoration
Authorised representative (*)
Film artist ($)
Information technology
(*) “Authorised representative” means a person who represents any other person on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy.
($) “Film artist” means any person engaged in his professional capacity in the production of a cinematographic film, whether produced by him or by any other person as an actor, a cameraman, a director, a music director, an art director, a dance director, an editor, a singer, a lyricist, a story writer, a screenplay writer, a dialogue writer, and a dress designer.
For the purpose of maintenance of books of account following professions are treated as “non-specified professions”:
“Non-specified professions” means professions other than “Specified professions” mentioned above.
Provisions in case of an assessee carrying on a specified profession, whose gross receipt exceeds Rs. 1,50,000 :
Every person carrying on specified profession, whose gross receipt from such profession exceeds Rs. 1,50,000 in all the three years immediately preceding the previous year (in case of new profession if the gross receipts of the first year are likely to exceed Rs. 1,50,000), shall maintain such books of account and other documents as are prescribed by rule 6F (see list given below).
2. List Of Books Of Account Specifed Under Rule 6F:
(i) A cash book (i.e., a record of all cash receipts and payments, kept and maintained from day-to-day giving the cash balance in hand of each day or at the end of a specified period not exceeding a month);
(ii) A journal, in case of mercantile system;
(iii) A ledger;
(iv) Carbon copies of bills (whether machine numbered or otherwise serially numbered) exceeding Rs. 25 issued by the person and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by the person;
(v) Original bills/receipts issued to him in respect of expenditure (payment vouchers if bills/receipts are not issued and amount of expenditure does not exceed Rs. 50).
In addition to above, a person engaged in medical profession (i.e., a practitioner of any system of medicine – physicians, surgeons, dentists, pathologists, radiologists, vaids, hakims, etc.) has to maintain following items:
A daily case register in prescribed form (i.e. Form 3C), showing date, patient’s name, nature of professional services rendered (i.e., general consultation, surgery, injection, visit, etc.,) fees received and date of receipt; and
An inventory under broad heads, as on the first and last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.
Illustration
Mr. Kumar is a Film artist. His annual gross receipts for past three years are as follows:
Financial year 2012-13 : Rs. 8,40,000
Financial year 2011-12 : Rs. 5,40,000
Financial year 2010-11 : Rs. 4,40,000
In this case which books of account should he maintain in relation to his profession?
**
The profession of film artist is covered under the definition of specified professions. Hence, a person engaged in the profession of film artist has to maintain the books of account specified under rule 6F, if the gross receipt from such profession exceeds Rs. 1,50,000 in all the three years immediately preceding the previous year.
In the given case the gross receipts of Mr. Kumar of the preceding three years exceeded Rs. 1,50,000 and, hence, he has to maintain books of specified under rule 6F. In other words, Mr. Kumar has to maintain following books of account:
(i) A cash book (ii) A journal, in case of mercantile system (iii) A ledger (iv) Carbon copies of bills (whether machine numbered or, otherwise serially numbered) exceeding Rs. 25, issued by the person and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by the person (v) Original bills/receipts issued to him in respect of expenditure (payment vouchers if bills/receipts are not issued and amount of expenditure does not exceed Rs. 50).
Illustration
Mr. Kapoor is a Dentist. His annual gross receipts for past three years are as follows:
Financial year 2012-13 : Rs. 8,84,000
Financial year 2011-12 : Rs. 6,52,000
Financial year 2010-11 : Rs. 4,48,000
In this case which books of account should he maintain in relation to his profession?
**
The medical profession (i.e., practitioner of any system of medicine – physicians, surgeons, dentists, pathologists, radiologists, vaids, hakims, etc.) is covered under the definition of specified professions. Hence, a person engaged in the medical profession has to maintain the books of account specified under rule 6F if the gross receipt from such profession exceeds Rs. 1,50,000 in all the three years immediately preceding the previous year.
In the given case the gross receipts of Mr. Kapoor for the preceding three years exceeded Rs. 1,50,000 and, hence, he has to maintain books of specified under rule 6F. In other words, Mr. Kapoor has to maintain following books of account:
(i) A cash book (ii) A journal, in case of mercantile system (iii) A ledger (iv) Carbon copies of bills (whether machine numbered or, otherwise serially numbered) exceeding Rs. 25, issued by the person and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by the person (v) Original bills/receipts issued to him in respect of expenditure (payment vouchers if bills/receipts are not issued and amount of expenditure does not exceed Rs. 50).
In addition to above, Mr. Kapoor has to maintain following items since he is engaged in the medical profession:
(i) A daily case register in prescribed form (i.e., Form 3C) and (ii) An inventory under broad heads, as on the first and last day of the previous year, of the stock of drugs, medicines and other consumable accessories used for the purpose of his profession.
3. Place of maintenance of such books of account:
The aforesaid books of account and documents (other than those relating to previous year which has come to an end) should be kept and maintained by the person at the place where he is carrying on the profession.
Where the profession is carried on in more than one place, the books of account shall be kept at the principal place of his profession.
However, if the person keeps and maintains separate books of account in respect of each place where the profession is carried out, such books of account and other documents may be kept and maintained at the respective places at which the profession is carried out.
The aforesaid books of account and documents should be kept and maintained for a period of 6 years from the end of the relevant assessment year.
Where, however, the assessment in relation to any assessment year has been reopened under section 147, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment should continue to be so kept and maintained till the assessment so reopened has been completed.
Illustration
Mr. Kapoor is a Dentist. He is carrying on his medical practice at 2 different places situated in Delhi. Out of these 2 places he declares one place as a principal place of his profession. However, he does not maintain separate books of account. His annual gross receipts for past three years were as follows:
Financial year 2012-13 : Rs. 8,84,000
Financial year 2011-12 : Rs. 6,52,000
Financial year 2010-11 : Rs. 4,48,000
In this case, at which place should he maintain books of account in relation to his profession?
**
The following points should be kept in mind while deciding about the place of maintenance of books of account:
The books of account and documents prescribed by rule 6F as well as in certain cases, additional books of account (other than those relating to previous year which has come to an end) should be kept and maintained by the person at the place where he is carrying on the profession.
Where the profession is carried out in more than one place and if separate books of account are not maintained, the books of account should be kept at the principal place of his profession.
Hence, Mr. Kapoor has to maintain books of account prescribed by rule 6F as well as the additional books of account at the principal place of his profession.
4. Provisions in case of an assessee carrying on a specified profession, whose gross receipt does not exceed Rs. 1,50,000 :
In case of a person carrying on specified profession whose gross receipt from such profession does not exceed Rs. 1,50,000 in any one of the three years immediately preceding previous year (in case of new profession the likely receipt of first year does not exceed Rs. 1,50,000), shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income.
Illustration
Mr. Raja is an accountant. His annual gross receipts for past three years were as follows:
Financial year 2012-13 : Rs. 1,84,000
Financial year 2011-12 : Rs. 1,52,000
Financial year 2010-11 : Rs. 1,25,000
In this case which books of account should he maintain in relation to his profession?
**
The profession of an accountant is covered under the definition of specified professions. Hence, a person engaged in the profession of accountancy has to maintain the books of account specified under rule 6F, if the gross receipt from such profession exceeds Rs. 1,50,000 in all the three years immediately preceding the previous year. However, in case of a person carrying on specified profession whose gross receipt from such profession does not exceed Rs. 1,50,000 in any one of the three years immediately preceding previous year (in case of new profession the likely receipt of first year does not exceed Rs. 1,50,000), shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his taxable income.
In the given case the gross receipts of Mr. Raja do not exceed Rs. 1,50,000 in the financial year 2010-11 and, hence, he has to maintain such books of account and other documents as may enable the Assessing Officer to compute his taxable income.
Provisions in case of an assessee carrying on a non-specified profession or any business, income/gross receipt of which exceeds Rs. 1,20,000/Rs. 10,00,000 :
If a person is carrying on a non-specified profession or any business, income from which business or profession exceeds Rs. 1,20,000 or his total sales/gross receipts from such business or profession exceed Rs. 10,00,000, in any one of the three years immediately preceding the previous year (in case of new business or profession, income/gross receipt of that previous year is likely to exceed above limit), then such person shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income.
Further, these provisions also apply to an assessee to whom section 44AD or 44AE or 44BB or 44BBB applies, and who declares his business income to be lower than the income computed as per the provisions of aforesaid sections.
Illustration
Mr. Raja is running a proprietary concern under the name of Raja & Co. His annual turnover for past three years is as follows:
Financial year 2012-13 : Rs. 15,84,000
Financial year 2011-12 : Rs. 9,52,000
Financial year 2010-11 : Rs. 8,48,000
In this case which books of account should he maintain in relation to his business?
**
If a person is carrying on a non-specified profession or any business, income from which business or profession exceeds Rs. 1,20,000 or his total sales/gross receipts from such business or profession exceed Rs. 10,00,000, in any one of the three years immediately preceding previous year (in case of new business or profession, income/gross receipt of that previous year is likely to exceed above limit), then such person shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income.
In the given case, the total sales of Mr. Raja exceeded Rs. 10,00,000 in the financial year 2012-13 and, hence, he has to maintain such books of account and other documents as may enable the Assessing Officer to compute his total income.
Provisions in case of an assessee carrying on a non-specified profession or any business, income/gross receipt of which is below Rs. 1,20,000/Rs. 10,00,000 :
If a person is carrying on a non-specified profession or any business whose income does not exceed Rs. 1,20,000 and his total sales/gross receipts from such business or profession do not exceed Rs. 10,00,000, in all the three years immediately preceding the previous year (in case of new business or profession, income/gross receipt is not likely to exceed aforesaid limit), then such person is not required to maintain any books of account.
Illustration
Mr. Raja is running a proprietary concern under the name of Raja & Co. His annual turnover for past three years is as follows:
Financial year 2012-13 : Rs. 9,52,000
Financial year 2011-12 : Rs. 8,84,000
Financial year 2010-11 : Rs. 7,20,000
Further, his actual income does not exceed Rs. 1,20,000 in all these three years. In this case which books of account should he maintain in relation to his business?
**
If a person is carrying on a non-specified profession or any business whose income does not exceed Rs. 1,20,000 and his total sales/gross receipts from such business or profession do not exceed Rs. 10,00,000, in all the three years immediately preceding the previous year (in case of new business or profession, income/gross receipt is not likely to exceed aforesaid limit), then such person is not required to maintain any books of account.
In the given case, the total sales of Mr. Raja do not exceed Rs. 10,00,000 in all the preceding three financial years as well as income for all the preceding three financial years is below Rs. 1,20,000 and, hence, he is not required to maintain any books of account.
Provisions in case of an assessee covered under section 44AD:
With effect from assessment year 2011-12, section 44AA has been amended so as to provide that in case of an assessee who is covered under the new section 44AD, the maintenance of books of account is required if following conditions are satisfied:
(a) He claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD(1) [i.e., @ 8%]; and
(b) His income exceeds the maximum amount which is not chargeable to tax.
Illustration
Mr. Raja is running a factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,00,000. Mr. Raja wants to adopt the provisions of section 44AD. However, his actual income is only Rs. 5,00,000 which is lower than Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) and, hence, decides to declare his actual income. In this case which books of account should he maintained in relation to his business?
**
If an assessee is covered under the new section 44AD, the maintenance of books of account is required if following conditions are satisfied:
(a) He claims that the profits and gains from the business are lower than the profits and gains computed in accordance with the provisions of section 44AD(1) [i.e., @ 8%]; and
(b) His income exceeds the maximum amount which is not chargeable to tax.
In the given case, Mr. Raja satisfies both the conditions, i.e., his actual income from factory is less than 8% and such income exceeds the maximum amount which is not chargeable to tax. Hence, he is required to maintain such books of account and other documents as may enable the Assessing Officer to compute his taxable income under the Income-tax Act. |
