PRESUMPTIVE TAXATION FOR BUSINESS OF PLYING OR HIRING OR LEASING GOODS CARRIAGES UNDER SECTION 44AE

[Mr. M. GOVINDARAJAN]

Presumptive income

Section 44AE (1) of the Income Tax Act, 1961 (‘Act’ for short) provides that an assessee engaged in the business of plying, hiring or leasing such goods carriages can opt for presumptive income in certain cases. The assessee shall own not more than 10 goods carriages at any time during the previous year and the income of such business chargeable to tax under the head ‘Profits and gains of business or profession’ shall be deemed to be the aggregate of the profits and gains, from all the goods carriages owned by him in the previous year, computed in accordance with the provisions of Section 44AE(2).

Profits and gains

Section 44AE (2) of the Act provides that the profits and gains from each good carriage-

• being a heavy goods vehicle, shall be an amount equal to Rs. 1000/- per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;
• other than heavy goods vehicle, shall be an amount equal to Rs. 7000/- for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such goods carriage, whichever is higher.

Clarification

The CBDT issued clarification for computation of income under Section 44AE vide F.No. 225/233/2019/ITA-II, dated 14.08.2019. The CBDT clarified that the assessees will have to compute the profits and gains of business under Section 44AE on the basis of definitions. In respect of a ‘heavy goods vehicle’ i.e., all goods carriage vehicle whose gross vehicle exceeds 12,000 kgs, the profits and gains from each goods carries shall be the rate of Rs. 1000/- per ton of gross vehicle weight for every month or part thereof. However in respect of a tractor or a road roller, where the goods vehicle weight is not applicable, and unladen weight exceeds Rs. 12000 kilograms the profits and gains from each goods carriage for the purposes of Section 44AE of the Act shall be @ Rs. 1000/- per ton of unladen weight for every month or part of the month.

Consequences

Section 44AE (3) to (7) of the Act provides the consequences if the assessee opts for presumptive taxation scheme under Section 44AE, as detailed below-

• Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of Section 44AE (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. Where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40. - Section 44AE (3)
• The written down value of any asset used for the purpose of the business referred to in Section 44AE(1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.- Section 44AE (4)
• The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in Section 44AE(1) and in computing the monetary limits under those sections, the gross receipts or, as the case may be, the income from the said business shall be excluded. - Section 44E (5)
• An assessee may claim lower profits and gains than the profits and gains specified in Section 44AE (1) and (2), if he keeps and maintains such books of account and other documents as required under section 44AA(2) and gets his accounts audited and furnishes a report of such audit as required under section 44AB.- Section 44AE (7). For applying this section the quantum of total income is irrelevant.

Non applicability

The provisions of Section 44AE are not applicable if the assessee does not own any goods carriage or owns more than 10 goods carriage or where he declares lower profits and gains than the profits and gains specified in Section 44AE.

Case laws

In ‘Commissioner of Income Tax v. Nitin Soni’- 2012 (5) TMI 121 - ALLAHABAD HIGH COURT, it was held that where Section 44AE is applicable, no addition could be made by invoking section 56 on the ground that there were no withdrawal by the assessee.

In ‘Shakir Ahmad v. Income Tax Officer, Ward - 2 (3), Meerut’ - 2022 (10) TMI 541 - ITAT, Delhi, the ITAT observed that the assessee fulfilled the conditions, he owned not more than ten carriages at any time during the previous year and he was also engaged in the business of plying, hiring or leasing of such goods carriages. The receipts related to such goods carriages which owned by the assessee, would be subjected to provisions of Section 44AE of the Act. The assessee has taken certain goods carriages on hire which is not owned by the assessee and the assessee claimed certain expenses related to such carriages which are disallowed by the lower authorities. Commissioner of Income Tax (Appeals) has not appreciated this aspect. The ITAT directed to give deduction of expenditure which related to the goods carriages which were not owned by the assessee but taken on hire from the open market for carrying out the transportation activities. Hence, Ground Raised by the assessee in this appeal is allowed in terms indicated herein above. Appeal of the assessee is partly allowed.

In ‘Koyya Ganga Venkata Satya Bhaskararao A. V. Nagaram v. Income Tax Officer, Ward - 1, Tuni’ - 2023 (8) TMI 83 - ITAT, Vishakapatnam, the ITAT observed that the assessee is not having any agricultural income, but, the assessee is having transport business and thereby earned income of Rs. 4,96,177/- and also deducted TDS under section 194C of the Act. The assessee is having only one lorry, therefore, the provision of Section 44AE is applicable. Considering the TDS deduction, no hesitation to come to the conclusion, that the assessee earned this income only from his transport business, therefore, Section 44AE is applicable and the assessee has already admitted Rs. 90,000/- as income from transport business, therefore, the AO is not justified to ignore the statutory provision of Section 44AE and treat this income as business income of the assessee, just based on the mistake committed by the assessee, i.e. showing the receipt as agricultural income. Hence direct the AO to treat the income of the assessee under Section 44AE of the Act. The ITAT allowed the appeal filed by the appellant.

Computation of income under Section 44AE

Sl. No.	Regn No. of goods carriages	Whether owned/leased/hired	Tonnage capacity of goods carriage (in MT)	No. of months for which goods carriage was owned, leased or hired	Presumptive income under Section 44AE for good carriage (computed @ Rs. 1000/- per ton per month in case tonnage exceeds 12MT, or else Rs. 7500/- per month) or the amount claimed to have been actually earned, whichever is higher
	1	2	3	4	5

Presumptive Income from Goods Carriage under Section 44AE [total of column (5)]

NOTE—If the profits are lower than prescribed under S. 44AE or the number of Vehicles owned at any time exceed 10 then

Other ITR as applicable has to be filed.

2. Salary and interest paid to the partners

NOTE – This is to be filled up only by firms

3. Presumptive income under Section 44AE (1 - 2)
4. Income Chargeable.

 Income Tax Return

The professional who opts presumptive taxation under Section 44AE 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:

• Personal Information
• Gross Total Income
• Disclosures and Exempt Income
• Total Deductions
• Taxes Paid
• Total Tax Liability

Due date of filing the income tax return is 31^st July 2024.