Special provision contained in Section 44A for Trade & Professional Association - Income Tax - Ready Reckoner - Income Tax

Special provision contained in Section 44A for Trade Professional Association. Applicable only to that trade, professional or similar association, the income of which is not distributed to its members. Amount received by the association from its members by way of contribution or otherwise (other than amount received from performing specific services). i.e., General receipts from members. Expenditure incurred for the purposes of protection or advancement of interest of members (other than expenditure which is otherwise deductible under the Act and other than capital Expenditure), i.e., General expenditure on member. If negative - call it deficiency If positive- surplus exempt from Such deficiency will be allowed as a deduction in computing the income under the head PGBP. If deficiency is greater than income under the head P/G/B/P, then the balance deficiency will be allowed as deduction in computing income under other heads of income. Before setting off the deficiency effect shall be first given to the deductions under this Act and brought forward losses and allowances. The total deficiency which can be set off shall not exceed 50% of the Total income computed before giving deduction of deficiency. The deficiency shall be allowed as deduction in the same previous year. Unabsorbed deficiency, if any shall not be allowed to be carry forward. Key Notes: The tax rate applicable to a mutual concern shall be the same as applicable to an individual except where the mutual concern is incorporated as a company. This section applies only to that trade, professional or similar association the income of which or any part thereof is not distributed to its member except as grants to any association or institutions affiliated to it. If any deficiency remains unabsorbed after giving effect to the above provision, the same shall not be allowed to be carried forward. The transfer fees received by a co-operative housing society, whether from outgoing or from incoming members, is not liable to tax on the ground of principle of mutuality since the predominant activity of such co-operative society is maintenance of property of the society and there is no taint of commerciality, trade or business as per the decision held by the High Court in one of the cases.