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Checklist for Tax Audit Report u/s - Form 3CD - Annexure I & II
Requirements Compliance
Annexure I to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD No Reportable Issues
Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD No Reportable Issues
General Instructions
Audit In-charge
(i) I have satisfied myself that the above checklists has been properly
completed except as stated below.
(ii) All matters requiring the attention of Audit Partner are set forth in Audit
Disposal Notes.
Signature and Date:
Review Manager
(i) I have reviewed the work done by the assistant-in-charge and have
satisfied myself that the above checklist have been satisfactorily
completed.
(ii) Working Papers Reviewed
(iii) Agree with the conclusions above
Signature and Date:
Home
General Instructions
1 The home page contains the links to the detailed checklist of each Annexure responses
and space for comments, if any, for the respective clauses. The conclusion column on the
home page has a drop down menu for choosing the appropriate option.
2. Please select the name of the audit firm from the dropdown menu on the home
page.Please fill in other details like name of client, audit period etc., The home page also
contains affirmation as to work done, review made etc., Please fill in necessary details on
completion and review of the checklist.
5. The Responses column contains a drop down menu with possible responses. Please
select the appropriate response from the options as applicable. Create a Working Paper
for the work done under individual clauses. Specific representations, where required,
should be obtained as a part of firm's standard representation letter.
6. This checklist cannot be construed as a substitute for the Guidance Note on Tax Audit,
the Supplementary Guidance Note on Tax Audit and Changes thereto and Guidance Note
on Audit of Fringe Benefits issued by ICAI. Reference should be made to the said
Guidance Notes guidance and help in specific cases. A copy of these Guidance Notes are
available in the ABAS India Technical Database.
Name of the Client:
Assessment Year:
Completed by: Home
Date:
Reviewed by:
Date:
Checklist for Annexure-I to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
Sl No Audit Program Step/Record of Work done Compliance Remarks
Part A
CLAUSE 1: Name of the Assessee
Procedures
Ascertain the name of the assessee from the Yes
incorporation documents (for eg. Certificate of
incorporation, AOA and MOA)
CLAUSE 2: Address
Procedures
Give the Registered Office Address Yes
CLAUSE 3: Permanent Account Number
Procedures
Verify the number from the communication Yes
received from the Income Tax Department
allotting the PAN
CLAUSE 4 : Status
Procedures
Ascertain from the communication received Yes
from the Income Tax Department
CLAUSE 5
Previous Year Ended March 31,
CLAUSE 6
Assessment Year –
Part B
Nature of business or profession in
respect of every business or profession
carried on during the previous year
Procedures
Code to be filled in accordance to the table Yes
provided
Part B
Clauses 1 to 16
1 Paid-up share capital/capital of
2 partner/proprietor
Share Application Money/Current Account of
Partner or Proprietor, if any,
3 Reserves and Surplus/Profit and Loss
4 Account
Secured loans
5 Unsecured loans
6 Current liabilities and provisions
7 Total of Balance Sheet
8 Gross turnover/gross receipts
9 Gross profit
10 Commission received
11 Commission paid
12 Interest received
13 Interest paid
14 Depreciation as per books of account
Checklist for Annexure-I to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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15 Net Profit (or loss) before tax as per Profit
and Loss Account
16 Taxes on income paid/provided for in the books
Procedures
State the figures as per the audited accounts Yes
for the previous year relevant to the
Assessment year for which the tax audit is
being performed
Code Table for the Nature of business or profession in respect of every
business or profession carried on during the previous year
Sector
(1) Manufacturing Industry
Sub Sector
Agro-based industries 101
Automobile and Auto parts 102
Cement 103
Diamond cutting 104
Drugs and Pharmaceuticals 105
Electronics including Computer Hardware 106
engineering Goods 107
Fertilizers, Chemicals, Paints 108
Four & Rice Mills 109
Food Processing units 110
Marble & Granite 111
Paper 112
Petroleum and Petrochemicals 113
Power and energy 114
Printing & publishing 115
Rubber 116
Steel 117
Sugar 118
Tea, Coffee 119
Textiles, Handloom, Power looms 120
Tobacco 121
Tyre 122
Vanasapati & Edible Oils 123
Others 124
(2) Trading
Chain stores 201
Retailers 202
Wholesalers 203
Others 204
(3) Commission Agents
General Commission Agents 301
(4) Builders
Builders 401
Estate agents 402
Property Developers 403
Others 404
(5) Contractors
Civil contractors 501
Checklist for Annexure-I to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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Excise Contractors 502
Forest Contractors 503
Mining Contractors 504
Others 505
(6) Professionals
Chartered Accountants, Auditors, etc. 601
Fashion designers 602
Legal Professionals 603
Medical professionals 604
Nursing Homes 605
Specialty hospitals 606
Others 607
(7) Service Sector
Advertisement agencies 701
Beauty Parlours 702
Consultancy Services 703
Courier
Computer Agencies
Training/Educational and Coaching 704
institutes 705
Forex Dealers 706
Hospitality services 707
Hotels 708
I.T. enabled services, BPO service provides 709
Security Agencies 710
Software development agencies 711
Transporters 712
Travel agents, tour operators 713
Others 714
(8) Financial Service Sector
Banking Companies 801
Chit Funds 802
Financial Institutions 803
Financial service providers 804
Leasing Companies 805
Money Lenders 806
Non Banking Finance Companies 807
Share Brokers, sub-brokers, etc. 808
Others 809
(9) Entertainment Industry
Cable T.V. productions 901
Film distribution 902
Film laboratories 903
Motion Picture producers 904
Television Channels 905
Others 906
Name of the Client:
Assessment Year:
Completed by: Home
Date:
Reviewed by:
Date:
Checklist for Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
Sl No Audit Program Step/Record of Work done Compliance Remarks
Checklist
1 115WB(1)(a) - Any privilege, service,
facility or amenity, directly or indirectly
provided by an employer, whether by way
of reimbursement or otherwise, to his
employees (including former employee
(s)
Important Note:
Section 115WC provides that the value of
fringe benefits liable to FBT shall be the
aggregate of fringe benefits referred to
in Section 115WB(1)(b), (c), (d)and (2)
only.
Section 115WB(1)(d) is applicable from
Assessment Year 2008-09 only
Therefore, any other fringe benefits
though may be covered within the
provisions of this sub-clause shall not be
liable to FBT in the absence of any
computational provisions
2 115WB(1)(b) - Free or concessional ticket 100%
provided by the employer for private
journeys of his employees or their family
members
Procedures:
Check the Company's policy in this regard and Yes
confirm that the expenditure incurred is
subject to FBT to the extent it does not include
leave travel concession or assistance received
by an emplyee falling under the meaning of
salary as defined in Section 17(1).
3 115WB(1)(c) - Any contribution by the 100%
employer to any approved
Superannuation fund for employees
(Please refer Note 1)
Procedures:
Check that all contributions to approved Yes
superannuation funds have been considered in
this regard.
Cross-refer with Clauses 16(b), 17(j) and 21(1) Yes
(A) of Form 3CD
Notes:
Contribution to Gratuity and Pension Fund
(being statutory obligations) are not liable to
FBT.
3A. Applicable from Assessment Year 2008-
09:
115WB(1)(d) Any specified security or
sweat equity shares allotted or
transferred, directly or indirectly, by the
employer free of cost or at concessional
rate to his employees (including former
employee or employees).
Check whether the value of the fringe benefit Yes
in respect of sweat equity shares and specified
securities allotted by the employer to its
employees including former employees has
been computed in accordance with the
provisions of section 115WC(1)(ba)
Procedures: 20%
(Please refer Note
3)
In case of training, check whether the training Yes
was held in the Company's own training centre.
Procedures: 20%
(Please refer Note
8)
Check whether FBT has been charged by an Yes
employer company on its expenditure incurred
on travelling, hotel etc. wholly and exclusively
for executing an assignment for its client which
reimburses the company for such 'out of
pocket' expenses
(Note: The Employer Company, not the
client, is chargeable to FBT)
Notes:
Checklist for Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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Only fare and travelling expenses are to be
considered under Travelling expenses.
Local conveyance at place visited is to be
considered as conveyance.
Hotel and lodging expenses are covered under
Section 115WB(2)(G)
Checklist for Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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10 115WB(2)(G) - Use of hotel, boarding and
lodging facilities
Procedures: 20%
(Please refer Note
9)
Check whether the per-diem allowances given Yes
to employees has been charged to FBT.
(Note: However, employees will not be liable to
pay income tax on any surplus accruing on
such allowance.)
Check whether expenditure incurred for hotel Yes
stay, air ticket charges etc. in relation to
customer/clients is charged to FBT (Section
115WB(2)(D) or (G))
Note: Expenditure incurred under Section is
applicable for both employees and outsiders.
Where hotels are booked on a continuous basis
(i.e. for use during the year as and when the
employees or representatives visit the hotel ) it
is treated as a guest house
11 115WB(2)(H) - Repair, running (including
fuel), maintenance of motor cars and the
amount of depreciation thereon
Procedures: 20%
(Please refer Note
10)
Check whether the tax depreciation is taken on Yes
a prorata basis for estimating advance tax
payable on fringe benefits
Check that expenditure on running and Yes
maintenance of motor cars is charged to FBT
(Note: Employees will not be liable to income
tax on the perquisite value of motor car
provided by the employer (Rule 3(7)(vii) of the
Income Tax Rules)
Procedures: 20%
Check whether expenditure incurred or Yes
payment made for use of telephone (including
mobile phone) other than expenditure on
leased telephone lines is charged to FBT.
Check whether expenditure on use of Yes
telephones (including mobile phones) installed
in the office is charged to FBT.
Note: This charging to FBT is irrespective of
whether the telephone is in the name of the
company or not and whether payment for its
use is made directly or indirectly by the
Company
14 115WB(2)(K) - Maintenance of any
accommodation in the nature of guest
house other than accommodation used
for training purposes
Procedures: 20%
Check that expenditure on capital items (eg. Yes
Fridge, TV) in a guest house is not charged to
FBT, either by way or cost or depreciation
Procedures: 5%
Note: Expenditure under this head has been
charged to FBT under Section 115WB(2)(F)
upto Asst Year 2007-08
Checklist for Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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Important Definitions & Notes
Definition of Employer [Section 115W(a)]:
- Company (including a foreign company which has employees based in India), a Firm, an AOP,
a BOI, any Local Authority and Artificial juridical person
1 For assessment year 2007-08 and subsequent assessment years, the value of fringe
benefits in respect of contribution by the employer to an approved superannuation fund
shall be the amount of contribution which exceeds one lakh rupees in respect of each
employee
2 Expenditure on hospitality does not include the following:-
(i) any expenditure on, or payment for, food or beverage provided by the employer to his
employees in office or factory;
(ii) any expenditure on, or payment through paid vouchers which are not transferable and
usable only at eating joints or outlets.
3 In the case of an employer engaged in the business of hotel 5% shall be substituted for
20%. In addition to this, in the case of an employer engaged in the business of carriage
of passengers or goods by aircraft or by ship 5% shall be substituted for 20% for
assessment year 2007-08 and subsequent assessment years.
4 For the purposes of this clause, any expenditure on conveyance, tour and travel
(including foreign travel), on hotel or boarding and lodging in connection with any
conference shall be deemed to be expenditure incurred for the purposes of conference.
(i) the expenditure (including rental) on advertisement of any form in any print (including
journals, catalogues or price lists) or electronic media or transport system,
(ii) the expenditure on the holding of, or the participation in any press conference or
business convention, fair or exhibition,
(iii) the expenditure on sponsorship of any sport event or any other event organized by any
Government agency or trade association or body,
(iv) the expenditure on the publication in any print or electronic media of any notice required
to be published by or under any law or by an order of a court or Tribunal,
(v) the expenditure on advertisement by way of signs, art work, painting, banners, awnings,
direct mail, electric spectaculars, kiosks, hoardings, bill boards, display of products(with
effect from Assessment Year 2008-09), or by way of such other medium of
advertisement,
(vi) the expenditure by way of payment of any advertising agency for the purposes of
clauses (i) to (v) above.
(vii) being the expenditure on distribution of samples either free of cost or at concessional
rate (with effect from A/Y 2008-09);and
Checklist for Annexure II to Tax Audit Report u/s 44 AB of IT Act, 1961 - Form 3CD
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(viii) the expenditure by way of payment to any person of repute for promoting the sale of
goods or services of the business of the employer (not to be considered as expenditure
on sales promotion, including publicity for assessment year 2007-08 and subsequent
assessment years).
6 For the purposes of this clause, any expenditure incurred or payment made to fulfil any
statutory obligation or mitigate occupational hazards or provide first aid facilities in the
hospital or dispensary run by the employer shall not be considered as expenditure for
employees’ welfare
7 For assessment year 2007-08 and subsequent assessment years, clause (F) of sub-
section (2) of section 115WB refers to expense on ‘conveyance’.
12 This clause is applicable for assessment year 2007-08 and subsequent assessment years.
Definitions:
Hotel:
Building or part of building where residential accomodation is, by way of business,
provided for a monetary consideration
Member's Club:
Residential accomodation provided at a Club can be contended as a hotel by the
employer and taxed accordingly
Restaurant:
Any premises in which business of sale of food or drink to the public is carried on. A
restaurant in a hotel would be covered under the definiton of hotel.
Guest House:
A place maintained to entertain the guests of the assessee gratuitously
Business of Construction:
Continuous and systematic exercise of activity (usually alteration or repairs or erection
of roads, bridges, dams, canals, etc) with a motive to profit, transacted between two
persons involving a twin activity
Manufacture:
A process where the commodity changes its substantial identity during such processing
Production:
Process involving bringing into existence new goods by a process which may or may not
amount to manufacture, including all by-products, intermediate products and residual
products which emerge in the course of manufacture of goods.
Pharmaceuticals:
Science or study of drugs including their preparation and properties and uses (or)
relating to pharmacy.
Computer software:
As defined in Clause (b) to Explanation to Section 80HHE and explanation 2 to Section
10A of the Act as given below:
Other Notes
1 For dates of payment of advance tax reference should be made to section
115WJ of the Income Tax Act, 1961.
Appendix A
Extracts from the Income Tax Act, 1961:
Section 115WC(1)(ba):
For the purposes of this Chapter, the value of fringe benefits shall be the aggregate of
the following, namely:—
............
(ba) the fair market value of the specified security or sweat equity shares referred to
in clause (d) of sub-section (1) of section 115WB, on the date on which the option
vests with the employee as reduced by the amount actually paid by, or recovered
from, the employee in respect of such security or shares.
(i) “fair market value” means the value determined in accordance with the method
as may be prescribed by the Board(CBDT); (see Rules 40C and 40D of the Income Tax
Rules reproduced below)
(ii) “option” means a right but not an obligation granted to an employee to apply for
the specified security or sweat equity shares at a predetermined price
Recovery of fringe benefit tax by the employer from the employee.
Section 115WKA:
Notwithstanding anything contained in any agreement or scheme under which any
specified security or sweat equity shares referred to in clause (d) of sub-section (1) of
section 115WB has been allotted or transferred, directly or indirectly, by the employer
on or after the 1st day of April, 2007, it shall be lawful for the employer to vary the
agreement or scheme under which such specified security or sweat equity shares has
been allotted or transferred so as to recover from the employee the fringe benefit tax
to the extent to which such employer is liable to pay the fringe benefit tax in relation
to the value of fringe benefits provided to the employee and determined under clause
(ba) of sub-section (1) of section 115WC.
Section 115WKB:
(1) Where an employer has paid any fringe benefit tax with respect to allotment or
transfer of specified security or sweat equity shares referred to in clause (d) of sub-
section (1) of section 115WB, and has recovered such tax subsequently from an
employee, it shall be deemed that the fringe benefit tax so recovered is the tax paid
by such employee in relation to the value of the fringe benefit provided to him only to
the extent to which the amount thereof relates to the value of the fringe benefit
provided to such employee, as determined under clause (ba) of sub-section (1) of
section 115WC.
(2) Notwithstanding anything contained in any other provisions of this Act, where the
fringe benefit tax recovered from such employee is deemed to be the tax paid by
such employee under sub-section (1), such employee shall, under this Act, not be
entitled to claim-
i) any refund out of such payment of tax; or
ii) any credit of such payment of tax against tax liability on other income or against
any other liability.
Provided further that where, on the date of vesting of the option, there is no trading
in the share on any recognized stock exchange, the fair market value shall be—
(a) the closing price of the share on any recognised stock exchange on a date
closest to the date of vesting of the option and immediately preceding such date; or
(b) the closing price of the share on a recognised stock exchange, which
records the highest volume of trading in such share, if the closing price, as on the
date closest to the date of vesting of the option and immediately preceding such
date, is recorded on more than one recognized stock exchange.
(3) In a case where, on the date of vesting of the option, the share in the company is
not listed on a recognized stock exchange, the fair market value shall be such value
of the share in the company as determined by a merchant banker on the specified
date.
(4) For the purpose of this rule,—
Provided that where the stock exchange quotes both “buy” and “sell”
prices, the closing price shall be the “sell” price of the last settlement.
(b) “merchant banker” means Category I merchant banker registered with
Security and Exchange Board of India established under section 3 of the Securities
and Exchange Board of India Act, 1992 (15 of 1992);
(c) “opening price” of a share on a recognised stock exchange on a date shall
be the price of the first settlement on such date on such stock exchange:
Provided that where the stock exchange quotes both “buy” and “sell”
prices, the opening price shall be the “sell” price of the first settlement.
(d) “recognised stock exchange” shall have the same meaning assigned to it in
clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(f) “equity share” shall have the meaning assigned to it in section 85 of the
Companies Act, 1956 (1 of 1956).