Audit Under Other Provisions

1. Section 44DA(2): Rule 6GA: Form No. 3CE
   
   Audit Report to be filed by non-resident non-corporate or a foreign company in receipt of Royalty or Fees for Technical Services:
   As per section 44DA(2) of the Income Tax Act, 1961 (“Act”), every non-resident non-corporate entity or foreign company receiving Royalty or Fees for Technical Services from Government or an Indian concern in pursuance of an Agreement made after
   31-3-2003 has to maintain books of account and other documents in accordance with the provisions of section 44AA. Also, it has to get the accounts audited by an Accountant as defined in the Explanation below section 288(2) and furnish Audit Report in Form No. 3CE along with the Return of Income.
    

2. Section 50B(3): Rule 6H: Form No. 3CEA
   
   Audit Report relating to computation of Capital Gains in case of Slump Sale:
   Any Profits or Gains arising from the Slump Sale shall be taxable as Long-term Capital Gains and shall be deemed to be the income of the previous year in which the transfer takes place. Any profits or gains arising from the transfer under the slump sale of one or more undertakings owned and held by an assessee for not more than 36 months immediately preceding the date of its transfer shall be deemed to be the
   Short-term Capital Gains arising from such transfer.
   In relation to capital assets being an undertaking or division transferred by way of such sale, the “Net Worth” of the Undertaking or the Division, as the case may be, shall be deemed to be the Cost of Acquisition and the Cost of Improvement for the purposes of sections 48 and 49 and Indexation shall not be applied.
   For the purposes of this section, “Net Worth” shall be the aggregate value of total assets of the Undertaking or Division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account. Any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the Net Worth.
   For computing the Net Worth, the aggregate value of total assets shall be:
   In the case of depreciable assets, the WDV.
   In the case of other assets, the Book Value.
   The seller of Undertaking or Division shall furnish Audit Report in Form No. 3CEA along with the Return of Income. The said Audit Report shall contain the computation of Net Worth of the Undertaking or Division, as the case may be. It shall also be accompanied by a copy of Profit & Loss Account and Balance Sheet or where audit is applicable in accordance with the provisions of section 139, a copy of Audited Profit & Loss Account and Balance Sheet.
   In Form No. 3CEA, the computation of Net Worth of each Undertaking or Division transferred by way of Slump Sale should be indicated separately.
    

3. Section 92E: Rule 10E: Form No. 3CEB

Audit Report relating to International Transactions:
Every person who has entered into an International Transaction during a previous year shall file Audit Report along with Return of Income on or before 31st October of the relevant Assessment Year in Form No. 3CEB.
By virtue of provisions of section 271BA, any failure in this regard may attract penalty of Rs. 1,00,000.

4. Section 80G(5C)(v): Rule 18AAAA: Form No. 10AA

Audit Report by Trust / Institution claiming exemption in respect of relief to victims of earthquake in Gujarat:
Section 80G(5C)(v) applies only if the donations made to the Trust or Institution or Fund are applied only for providing relief to the earthquake victims of Gujarat on or before the 31st day of March, 2004 and the said Trust or Institution or Fund established in India for charitable purpose maintains separate accounts of Income and Expenditure for providing relief to said victims of earthquake in Gujarat.
Audit Report in Form No. 10AA by Trust / Institution claiming exemption in respect of relief to victims of earthquake in Gujarat was applicable till 31-3-2004.

5. Section 80JJAA(2)(b): Rule 19AB: Form No. 10DA

Audit Report in respect of Employment of new Workmen:
Where the Gross Total Income of an Indian Company includes any Profits or Gains derived from any Industrial Undertaking engaged in the manufacture or production of article or thing, there shall be allowed a deduction of an amount equal to 30% of additional wages paid to the new regular workmen in excess of 100 workmen employed by the Assessee in the Previous Year for 3 Assessment Years, including the Assessment Year relevant to the Previous Year in which such new employment is provided.
As regards the condition of number of new Workmen, if it is a newly set up Unit, the number of new regular Workmen should be in excess of 100 existing regular Workmen. It implies that wages paid to the very first set of workmen employed by a new Unit shall not be eligible for the said deduction, even if the total number of such workmen is more than 100. If it is an existing Unit, the number of new regular Workmen should be in excess of 10% of the existing regular Workmen, but if the increase is less than 10%, none should be entitled.
As regards the amount qualifying for deduction, if it is a new Unit, it is wages paid to the regular Workmen in excess of 100 Workmen employed during the previous year. If it is an existing Unit, it is wages paid to the new regular Workmen in excess of 100 existing regular Workmen. However, if the increase in number of regular Workmen during the year is less than 10% of number of existing regular Workmen as at the beginning of the year, the deduction under this section will be Nil.

6. Rule 20AB: Form Nos. 10DB and 10DC

Securities Transaction Tax (“STT”) on Shares and Units of Equity Oriented Funds:
As per section 88E, if an Assessee has income chargeable under “Profits & Gains of Business or Profession” arising from taxable securities transactions, he shall be entitled to a rebate from the amount of income-tax on such income arising from such transactions. The Rebate shall be of an amount equal to the STT paid by him in respect of the taxable securities transactions entered into in the course of his business during that previous year.
The amount of deduction under this sub-section shall not exceed the amount of income-tax on such income computed in the manner provided in sub-section (2).
However, said deduction shall be allowed only if the Assessee furnishes along with the Return of Income the evidence of payment of STT in Form No. 10DB, or as the case may be, in Form No. 10DC.
As per Rule 20AB, inserted by the Income Tax (First Amendments) Rules, 2005 effective from 6-1-2005, the evidence of payment of STT on value of transactions entered into in a recognised Stock Exchange shall be in Form No. 10DB. The evidence of payment of STT on value of transactions of sale of Units of Equity Oriented Fund shall be in Form No. 10DC.
Regarding Form No. 10DB, it may be kept in mind that where an Assessee has entered into transactions in a recognised Stock Exchange under different client code through the same Stock Broker, details in the said Form should be filed separately for each such client code. Further, separate Form should be furnished in respect of transactions entered into in different Stock Exchanges and also for the transactions entered in same Stock Exchange through different Stock Brokers.
Regarding Form No. 10DC, it may be kept in mind that the said Form should be furnished separately for the transactions with each Mutual Fund. Further, the details of STT paid on sale of Units of various Equity Oriented Funds under a Mutual Fund should be given separately.

7. Section 115JB(4): Rule 40B: Form No. 29B:

Audit Report by Company covered under MAT Provisions
Every company to which section 115JB applies shall furnish Audit Report in Form No. 29B certifying that the Book Profit has been computed in accordance with the provisions of the said section. The said Form shall be filed along with the Return of Income under section 139(1) or along with the Return of Income furnished in response to Notice under section 142(1)(i).

8. Section 195: Circular No. 10 dated 9-10-2002: Annexure “B”:

Audit Report for Payments to NRIs:
Any person responsible for paying to a Non-Resident, not being a company or a foreign company, any interest or any other taxable income (other than Salary) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier, deduct income-tax thereon at the rates in force.
Vide Circular No. 10/2002 dated 9-10-2002, it is provided that Circular No. 759 dated
18-11-1997 was issued by the CBDT to dispense with the requirement of a No Objection Certificate from Income-tax Authorities for remittance to a Non-Resident as required by the Reserve Bank of India. By the aforesaid Circular, remittances were allowed to be made by the RBI without insisting upon a No Objection Certificate from the Department, provided the person making the remittance furnished an Undertaking, in duplicate, accompanied by a Certificate from an Accountant.
However, it was observed that often the Certificates were issued prescribing Nil deduction of tax at source in certain cases where tax was liable to be deducted or prescribing deduction of tax at a lower rate than was payable on the basis of the provisions of the Act and the applicable DTAC. The Certificate did not provide for necessary details or the reasons for adopting a certain rate for deduction of tax. This resulted in unnecessary calling of information from the assessees at a later stage and thus gave rise to an avoidable perception of grievance on the part of the tax payer.
Therefore, in order to streamline the procedure as well as to ensure the correct deduction of tax at source, the proforma of the Undertaking to be given by the Remitter and the Certificate to be issued by a Chartered Accountant were revised. Undertaking is Annexure “A” and Certificate is Annexure “B” to the said Circular dated
9-10-2002.
Specimen of Annexure “B” is attached hereto.

9. Section 33AB(2): Rule 5AC: Form No. 3AC

Deduction For Tea / Coffee / Rubber Plants:
Where an Assessee carrying on business of Growing and Manufacturing Tea or Coffee or Rubber in India has before the expiry of 6 months from the end of Previous Year or before the due date of furnishing the Return of Income, whichever is earlier:

1. deposited with the National Bank for Agriculture and Rural Development (“NABARD”) any amount(s) in an account maintained by the Assessee with that Bank in accordance with, and for the purposes specified in, a Scheme approved in this behalf by the Tea Board or the Coffee Board or the Rubber Board, or

2. has deposited any amount in an account opened by the Assessee in accordance with, and for the purposes specified in, a Scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be, with previous approval of the Central Government,
   the Assessee shall be allowed a deduction of:

1. a sum equal to the amount or the amounts so deposited; or

2. a sum equal to 40% of the Profits of such business,

whichever is less.

However, the said deduction will be available, only if the Accounts of the said business are audited and Audit Report in Form No. 3AC is enclosed with the Return of Income.
Along with the said Audit Report, Profit & Loss Account / Income & Expenditure Statement and the Balance Sheet should also be attached to the said Form. If separate Accounts are maintained for business of Growing and Manufacturing Tea or Coffee or Rubber, as the case may be, Profit & Loss Account / Income & Expenditure Account and the Balance
Sheet may be attached separately for such business.

10. Section 33ABA(2): Rule 5AD: Form No. 3AD

By Site Restoration Plants for Petrol / Gas Extraction:
Where an Assessee is carrying on business consisting of the Prospecting for or Extraction or Production of Petroleum or Natural Gas or both in India and in relation to which the Central Government has entered into an Agreement with such Assessee for such business has, before the end of the Previous Year :

a. deposited with the State Bank of India any amount(s) in an Account maintained by the Assessee with that Bank in accordance with, and for the purposes specified in, a Scheme approved in this behalf by the Government of India in the Ministry of Petroleum and Natural Gas; or

b. deposited any amount in an Account (Site Restoration Account) opened by the Assessee in accordance with, and for the purposes specified in, a Scheme framed by the Ministry of Petroleum and Natural Gas, the Assessee shall be allowed a deduction of:

1. a sum equal to the amount or
   the aggregate of the amounts so deposited; or

2. a sum equal to 20% of the Profits of such business,

whichever is less.
However, the said deduction will be available, only if the Accounts of the said business are audited and Audit Report in Form No. 3AD is enclosed with the Return of Income.
Along with the said Audit Report, Profit & Loss Account / Income & Expenditure Statement and the Balance Sheet should also be attached to the said Form. If separate Accounts are maintained for business of Prospecting for or Extraction or Production of Petroleum or Natural Gas or both in India, as the case may be, Profit & Loss Account / Income & Expenditure Statement and the Balance Sheet may be attached separately for such business.

11. Section 35D(4): Rule 6AB: Form No. 3B:

Assessee, other than Company or a Co-operative Society, claiming Amortisation of Preliminary Expenses:

Where the Assessee is a person other than a company or a co-operative society, no deduction shall be admissible under section 35D(1), unless the Accounts of the Assessee for the year or years in which the expenditure specified in sub-section (2) is incurred, have been audited and the Assessee furnishes along with the Return of Income for the first year in which the deduction under this section is claimed, Audit Report in Form No. 3B.

12. Section 35E(6): Rule 6AB: Form No. 3B

Assessee, other than Company or a Co-operative Society, claiming deduction equal to 10% of expenditure incurred on Extraction / Production of Minerals:
Where the Assessee is a person other than a company or a co-operative society, no deduction shall be admissible under section 35E(1), unless the Accounts of the Assessee for the year or years in which the expenditure specified in sub-section (2) is incurred, have been audited and the Assessee furnishes along with the Return of Income for the first year in which the deduction under this section is claimed, Audit Report in Form No. 3B.

Specimen of Annexure “B”
TDS – Remittance To NRI – Form of Revised Certificate–Circular No. 10 / 2002 Dated 9-10-2002

Annexure “B”
Certificate

I / We have examined the Agreement (wherever applicable) between M/s XYZ Ltd, Unit 1000, SDF X, SEEPZ, Andheri (East), Mumbai 400 096 (Remitter) and Mr. ABC, 10000, Saratoga,Villaplace, Saratoga, CA 95070 (Beneficiary) requiring the above remittance as well as relevant documents and books of account required for ascertaining the nature of remittance and for determining the rate of deduction of tax at source as per provisions of section 195. We hereby certify the following:

(Attach separate sheet duly authenticated wherever necessary)

PQR & Co.
Chartered Accountants
Fort, Mumbai – 400 001
Membership No.: 1000xxx
(To be signed and verified by Accountant as defined in section 288 of the Income-tax Act)