| Article Section | |||||||||||
PRESUMPTIVE TAXATION FOR BUSINESS |
|||||||||||
|
|||||||||||
Discuss this article |
|||||||||||
PRESUMPTIVE TAXATION FOR BUSINESS |
|||||||||||
|
|||||||||||
Presumptive basis Section 44AD (1) of the Income Tax Act, 1961 (‘Act’ for short) provides that an eligible assessee engaged in eligible business may be allowed to compute his business income on presumptive basis. Eligible assessee Explanation to this section defines the expression ‘eligible assessee’ as-
Eligible business The explanation to this section also defines the expression ‘eligible business’ as-
If the amounts received during the previous year, in cash, does not exceed 5% of the total turnover or gross receipts of such previous year, the limitation will be Rs. 3 crores instead of Rs. 2 crores. The receipt of amount or aggregate of amounts by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the receipt in cash. Profits A sum equal to 8% of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘Profits and gains of business or profession’. The eligible assessee can presume his income to be 6% instead of 8% of higher amount in respect of the amount of total turnover or gross receipts which is received by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed during the previous year or before the due date specified in section 139(1) in respect of that previous year. Non-application Section 44AD(6) of the Act provides that the provisions of this section shall not apply to-
Consequences The following are the consequences if an eligible assessee opts for Section 44AD-
Case laws In ‘Commissioner of Income Tax v. Sahu Constructions Private Limited’ - 2013 (10) TMI 374 - ALLAHABAD HIGH COURT it was held that where the profits of the assessee are computed on presumptive basis under Section 44AD the other deduction including depreciation shall not be allowable. In ‘Commissioner of Income Tax v. Surinder Pal Anand’ - 2010 (6) TMI 404 - PUNJAB AND HARYANA HIGH COURT, it was held that once the assessee opted for presumptive income scheme under Section 44AD the assessee is not under any obligation to explain individual entry of cash deposit in bank unless such entry has no nexus with gross receipts. In ‘Shail P. Shah, HUF v. The Principal Commissioner of Income Tax, Ahmedabad - I’ -2024 (3) TMI 170 - ITAT, Ahmadabad, the ITAT observed that as per Commissioner of Income Tax (Appeals), the assessee declared Net Profit from business & profession which is more than 8% of the total turnover of the business as per Section 44AD and profit was earned from transactions of derivative and commodity transactions. The Principal Commissioner of Income Tax observed that the assessee has not disclosed its total turnover and has not claimed the profit as per the actual calculations. The ITAT observed that it is not a correct one. The assessee at the stage of assessment order has given all the details including total turnover which was summarized and put together and give the profit quantification of the total turnover as per Section 44AD of the Act. Therefore, invocation of Section 263 of the Act in the present case is not justifiable when the assessee has given all the details. The ITAT held that the Assessment Order is not at all erroneous or prejudicial to the interest of Revenue and, therefore, the order passed under Section 263 of the Act is not justified. The ITAT allowed the appeal. In ‘Yogis Angel Entertainment & Décor Private Limited v. Income Tax Officer, Ward - 27 (4), New Delhi - 2024 (2) TMI 689 - ITAT, New Delhi, Commissioner of Income Tax (Appeals) has only taken cue from the provisions of Section 44AD but not applied said section. The Commissioner of Income Tax (Appeals) estimated based on the entirety of the business. Having gone through the record, in the absence of any other details, the ITAT held that the interest of justice would be well served by directing the revenue authorities to ‘estimate’ profit @ 5%. The appeal of the assessee on this ground is partly allowed. In ‘Amcon Car rentals v. Principal Commissioner of Income Tax, Panaji, Goa’ - 2023 (11) TMI 445 - ITAT, Panaji, the turnover of the assessee is more than Rs. 1 crore. The assessee did not get is accounts audited. But the assessee had estimated the profit @ 8% of its total receipts under Section 44AD. The ITAT, Panaji observed that Assessing Officer has not conducted any enquiry or verification regarding why the assessee had not got its accounts audited nor had verified whether in the business of assessee, sec. 44AD would be applicable and how the assessee had claimed deduction of remuneration paid to partners. The assessee has not only failed to get its accounts audited, but while taking benefit and recourse u/sec. 44AD, it had even deducted the remuneration paid to partners, which is not allowable as deduction u/sec. 44AD of the Act.
Note —If Income is less than the above percentage of Gross Receipts, it is mandatory to have a tax audit. Income Tax Return The professional who opts presumptive taxation under Section 44AD he shall file income tax return in ITR-4 -Sugam for the Assessment Year 2024-25. ITR-4 has six sections that one needs to fill before submitting the form in online mode and a preview page where you one can validate all your details filled. The sections are as follows:
Due date of filing the income tax return is 31st July 2024.
By: Mr. M. GOVINDARAJAN - March 27, 2024
|
|||||||||||
Discuss this article |
|||||||||||
