Questions
1. In case of a school whose aggregate turnover during the financial year is less than 5CR. Do the school have to submit a report in form 10B/10BB. Will the answer differ if school is not registered u/s 12AA/10(23C)?</strong >
Answer
In case the gross receipts are less then Rs5 Cr then no report is required to be submitted as it is exempt from operation of Income Tax act under section 10(23C) (iiiad)., If the school is not registered U/S 12AA/12(23C) will not make any difference. However if the school desires to take benefit of registration U/S 12AA then it should follow the mandate and requirement of filing of return and submission of audit report on form 10B/10BB.
2. In case a school, having turnover less than 5CR decided not to obtain renewal of 12AA/10(23C) then would he be liable for tax as per section 115TTD as exit tax.?</strong >
Answer
The tax under section 115TD is not free from doubt in view of the amendment from 1-4-2023 by addition of clause (iii) in sub section 3 of section 115Td, it is advised that as precautionary measure the compliance of amended provision should be taken care. In my opinion it is it is not hit by the provisions of section 115TD.More over the income of such institution is not chargeable to Income Tax under section 10(23C)(iiiad).
3. In case of reconstitution of partnership firm, outgoing partner receives payment in cash in excess of the amount of capital in his name in the books of accounts of the firm, the same would be taxable under section 45(4) of Income Tax Act, 1961 as capital gains. This capital gains would be long-term or short-term where the firm has no capital assets? As Rule 8AA provides only with relation to capital asset. Whereas the excess amount received because of huge stock in trade in books of accounts.?</strong >
Answer
The excess amount paid to the specified person shall be chargeable to income tax under section 45(4). It will be subjected to capital gains under section 45 in the hands of specified entity and shall be chargeable to income tax.
4. In continuation to what has been discussed in question number three above what would be the accounting entries in books of account of the firm on recording the same. Will the firm would liable to pay tax again when the stock in trade is actually sold or can the firm rate increase the value of its stock in trade, to the extent, the excess amount paid to the outgoing partner.?</strong >
Answer
The entries in the books of account shall be that excess amount payable to the specified person shall be credited to the account of specified person and it will be debited in the trading account towards the cost of purchase. In other words stock-in-trade value shall be increased by the like amount as per the excess payment made to the specified person. This will avoid double taxation of the same amount again when the stock is sold.