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TMI Blog2019 (2) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... in our opinion, would not translate such remuneration and interest, to gross receipts or turnover of a business of being partners in firms. In other words, it cannot be construed as gross receipts or turnover of a business independently carried on by a partner. Having a look section 44AD which was substituted by Finance (No.2) Act, 2009 with effect from 01.04.2011. Prior to this substitution, the said Section allowed application of presumptive tax rate only for business of civil construction or supply of labour for civil construction. Presumptive tax rate application was widened to include any business which had turnover or gross receipts of less than one crore through such substitution. In the Explanatory Notes to the provisions of Finance (No.2) Act,2009 vide Circular No.5/2010 dated 03.06.2010, CBDT has explained the reason for widening. It is clear from the reading of the above Explanatory Note, that the intention was to help small business to comply with the taxation provisions. Intention was not at all to construe a partner’s remuneration or interest as business income. - Decided against assessee. - I.T.A. No.573/CHNY/2018 - - - Dated:- 30-1-2019 - SHRI ABRAHAM P. GE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Learned AR was that remuneration and interest being considered as profits and gains of business or profession by virtue of section 28(v) of the Act, it became an eligible business. According to him, gross receipts of the assessee from interest and remuneration was below ₹1 crore, for the impugned assessment year and therefore assessee was eligible for applying presumptive rate of 8% on such receipts for estimating the income. Reliance was placed on the judgement of Hon ble Apex Court in the case of Munjal Sales Corporation Vs.CIT (289 ITR 298) (SC) and an order of Kolkata Bench of the Tribunal in the case of Sagar Dutta Vs.DCIT in ITA No.692/Kol/2012 dated 03.05.2013. 4. Per contra, Learned DR strongly supported orders of lower authorities. 5. We have heard rival contentions and perused material on record. Claim of the assessee is that interest and salary received by him from firms in which, he was a partner had to be construed as business income by virtue of section 28(v) of the Act and hence assessee is eligible for applying presumptive interest rate under section 44AD of the Act. Section 28(v) of the Act is reproduced hereunder:- Profits and gains of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or ( iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of twelve per cent simple interest per annum; or ( v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :- ( a) on the first ₹ 3,00,000 of the book-profit or in case of a loss ( b) on the balance of the book-profit Provided that in relation to any payment under this clause to the partner during the previous year relevant to the assessment year commencing on the 1st day of April, 1993, the terms of the partnership deed ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carriages and business of retail trade. Section 44AD prescribes a method of presumptive taxation for assessee engaged in the business of civil construction or supply of labour for civil construction in which a sum equal to eight percent of the gross receipts is deemed to be the profits and gains from business. Section 44AE provides presumptive provisions for the assessee engaged in the business of plying, hiring or leasing up to ten goods carriages in which a prescribed sum per vehicle is deemed to be the presumptive income of the assessee. Section 44AF prescribes a method of presumptive taxation for retail trade, under which the presumptive income is computed at the rate of a sum equal to five per cent of the total turnover. There has been a substantial increase in small businesses with the growth of transport and communication and general growth of the economy. A large number of businesses and service providers in rural and urban areas who earn substantial income are outside the tax-net. Introduction of presumptive tax provisions in respect of small businesses would help a number of small businesses to comply with the taxation provisions without consuming their time and resource ..... X X X X Extracts X X X X X X X X Extracts X X X X
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