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CS Executive · Tax Laws and Practice · Profits and Gains from Business and Profession

Neha, a resident individual and eligible assessee, has turnover of Rs. 2.5 crore. She received Rs. 9 lakh in cash and Rs. 6 lakh by non-account-payee cheques; the rest was received by banking modes. Does she qualify for the Rs. 3 crore limit under section 58(2) Sl. No. 1?

Neha does not qualify, because non-account-payee cheques are deemed cash under section 58(9). Her cash receipts become Rs. 15 lakh, exceeding 5% of her Rs. 2.5 crore turnover, which is Rs. 12.5 lakh, so the higher Rs. 3 crore limit does not apply.

  1. AYes, because only Rs. 9 lakh is cash, which is below 5% of turnover
  2. BNo, because turnover exceeds Rs. 2 crore and the cash condition is the only test
  3. CNo, because non-account-payee cheques are deemed cash, making cash Rs. 15 lakh, which exceeds 5% of Rs. 2.5 crore, being Rs. 12.5 lakhCorrect
  4. DYes, because cheques are never treated as cash

Explanation

Under section 58(9), cheques or drafts that are not account payee are deemed cash receipts. Cash becomes 9 + 6 = Rs. 15 lakh. 5% of Rs. 2.5 crore is Rs. 12.5 lakh, so the cash condition fails and the Rs. 3 crore limit is unavailable.

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