Presumptive Taxation

Thane Branch of WIRC of ICAI
e

TAXING INCOME ON
INCOME ON
PRESUM
MPTIVE BASIS
MPTIVE BASIS
Presented by
11 June 11
CA Paras K Savla

2 Legislative history

Taxing income on Presumptive Basis 11-06-11

Legislative history
Legislative history
3

 Computing profits and gains from the business of trading in certain
goods S. 44AC
 Trading in specific goods & deeme
ed income
 Timber obtained under a forestt lease – 35%
 Timber obtained by any mode o other than under a forest lease – 15%
 Any other forest produce not be g
y p eing timber – 35%
 Provisions deleted by FA 92


Legislative history
Legislative history
4

 Chapter XII‐C – S.115K to S.115N
 To building an atmosphere of trust
g p t and confidence and also to widen the
tax base by encouraging small shopkeepers to pay their taxes, the
Finance Act 1992 has introduced a a new simplified procedure for
taxation.
taxation
 Applicable to assessees not assesssed to tax earlier
 Individuals and
Individuals and
 HUFs,
 Conditions
 Income of not more than Rs. 35,000 0 from the business of retail trade or of
running an eating place or any vocation and,
 In the case of retail trade, annual tu
In the case of retail trade annual tuurnover of up to five lakh
urnover of up to five lakh rupees;
 Tax Rs 1,400


Legislative history
Legislative history
5

 S. 44AD (pre amendment) Special provisions for computing
profits and gains of business o
profits and gains of business o civil construction :
of civil construction :
of
 Deemed income – 8%
 Inserted by FA 94 & applicable till FY 2009‐10
Inserted by FA ’94 & applicable till FY 2009‐10

 S. 44AE Special provisions for
S 44AE Special provisions for computing profits and gains of
r computing profits and gains of
r
business of plying, hiring or le
easing of goods carriage
 Applicable till date
A li bl ill d
 W.e.f. 1‐4‐2010 ratio of deemed
d income increased


Legislative history
Legislative history
6

 S. 44AF Special provisions fo
or computing profits and gains
o eta bus ess
of retail business
 Inserted by FA ‘97 and applicable up to FY 2009‐10
Inserted by FA 97 and applicable up to FY 2009 10

 S. 44AD (post amendment) Special provisions for
S 44AD (post amendment) Special provisions for
computing profits and gains
s of business on presumptive
basis
 Amended by Finance (No 2) Act 2009 & applicable from 1 4
Amended by Finance (No. 2) Act 2009 & applicable from 1‐4‐
2010


7 Presumptive taxation legal provision


Why expansion of scope of S. 44AD
Why expansion of scope of S 44AD
8

 There has been a substantial increase in small businesses with the growth of
transport and communication and ge eneral growth of the economy.
 A large number of businesses and s service providers in rural and urban areas
who earn substantial income are out tside the tax‐net.
 Introduction of presumptive tax p provisions in respect of small businesses
would h l a number of small b i
ld help b f ll businesses t comply with th t ti
to l ith the taxation
provisions without consuming their t time and resources.
 A presumptive income scheme for small taxpayers lowers the compliance cost
for such taxpayers and also reduces the administrative burden on the tax
machinery.
 In view of the above, to expand t scope of presumptive taxation to all
, p the p p p
businesses, the existing section 44A has been substituted by a new section
AD
44AD.
 Para 21.1 of Explanatory Notes to the Provisions of th
he Finance (No. 2) Act, 2009 CIRCULAR NO. 5/2010/[F. NO.
142/13/2010‐SO(TPL)], DATED 3‐6‐2010
142/13/2010 SO(TPL)] DATED 3 6 2010


Constitutional validity
9

 Issue may arise whether fixing inco ome at specified rate is constitutionally
valid?
 ‘Income' occurring in Entry 82 in List 1 of the Seventh Schedule should
be construed liberally and in a v very wide manner and the power to
legislate will take in all incidenta and ancillary matters including the
al
authorisation to make provision to prevent evasion of tax, in any
ns
suitable manner and the entry w take within its fold any profits or
will
gains not only actually received, b also income which is supposed b
l ll d but l h h d by
the Legislature to have notionally accrued.
 Difficulties envisaged by the reven to locate the persons and to collect
nue
the tax due in certain trades, if the Legislature in its wisdom thought that
e
it will facilitate, the collection of t tax due from such specified traders
the
on a 'presumptive basis', there is nothing in the said legislative measure
to offend article 14.


10

 The non obstante clause in section 44AC denying such reliefs has no
basis and so unfair and arbitrary and equality of treatment is denied to
such persons, necessitating grant o appropriate relief.
of
 To the extent the non obstante clause in section 44AC excluded the
provisions of sections 28 to 43C (applicable to all assessees),
the provisions are unreasonable.
 A. S
Sanyasi Rao v G
i Government of And
f d dhra
dh Pradesh [ 989] 2 9 ITR 330 (SC)
d h [1989] 219
 The new provisions incorporated a provision permitting rebuttal of
presumption . Hence new provisio may not be constitutional invalid
ons invalid.
 There may be hardship to some as
ssessee.
 Whether hardship
Wh th h d hi can l d t uncon tit
lead to nstitunality?
lit ?


Scheme of new pr
Scheme of new pr
rovisions
11

 Applicable to eligible assessee
 Engaged in eligible business
Engaged in eligible business
 Which has a maximum gross turnover/gross receipts of Rs 60 lakhs.

 Rate of presumptive income
Rate of presumptive income
 8 per cent of gross turnover/gro
oss receipts.


Eligible Assessee
Eligible Assessee
12

 The scheme is applicable to
 Individuals
 HUFs and
 partnership firms
 Not applicable to an assessee who is
 availing deductions under
 sections 10A, 10AA, 10B, 10BA or
sections 10A 10AA 10B 10BA or
 any provisions of Chapter VI‐A under t
the heading “C.—Deductions in respect of certain
incomes”
 In above case in order to claim deduc
b d l d d ctions assessee is required to maintain accounts and also
d d l
get accounts audited
 Non residents
 LLP (Indian or foreign), Company (Indian or foreign), AOP, Local Authority, artificial
jurisdiction person.


Eligible business
Eligible business
13

 Any business
 Excluding a business already co
Excluding a business already co overed under section 44AE ie engaged
overed under section 44AE ie engaged
in plying, hiring or leasing of carriages
 Which has a maximum gross turnover/gross receipts of 60 lakhs
g g p
 Unlike old provision of S. 44AD, S. 44AE & S. 44AF, scope of amended
provisions apply to all business exc
cept specifically excluded.
 It covers traders, manufactures, se
ervice provider.


Whether applies to profession?
14

 S. 44AD(1) states “…engaged in an eligible business, ...”
 The word "business" is of widest imp port and an inclusive one and it means an
p
activity carried on continuously and sy ystematically by a person, by the application
of his labour or skill, with a view to earn income.
 It does not necessarily mean trade or manufacture only. I i b i
I d il d f l It is being used as
d
including within its scope professions vocations and callings from a fairly long
s,
time. Professions are generally regarde as business.
ed
 The words "business connection" in section 9(1) and section 163 are
comprehensive enough to include all heads of income mentioned in section 14.
 The context in which the expression "business connection" is used in section 9(1)
clearly shows that there is no warrant for giving a restricted meaning to it by
excluding "professional connections" fr
professional connections rom its scope.
 Ref Barebdra Prasad Ray v ITO 129 ITR 295 (SC)
5


15

 Part D of Chapter IV of the Act consist
ts of sections 28 to 43 and deals with
profits and gains of business or profession.
 The phrase has been used in certain s
sections as ‘business or profession’, but
nowhere has the phrase been used as s the ‘business and profession’.
 Wherever the Legislature intended th hat the benefit of a particular provision
should be for both business or professsion, it has used the words ‘business or
profession and wherever it intended to restrict the benefit to either business
profession’ and wherever it intended to restrict the benefit to either business
or profession, then the Legislature ha
as used the word either ‘business’ or
‘profession’,
 It intended to extend the benefit to e
either ‘business’ or ‘profession’, i.e., the
one would not include the other.
 Ref G. K. Choksi & Co. v CIT [2007] 295 I 376 (SC)
R f G K Ch k i & C CIT [2007] 295 ITR
ITR 376 (SC)
I


16

 Limit for carrying tax audit is Rs 60 lacs for assessee engaged in business
where as it is Rs 15 lacs for professio
on
 Specific reference for business or pr
rofession in Act
 The data collected on tax deductio in various cases of professionals and
on
technical experts, showed that the tax incidence is much higher than the
e
amount of tax collected by way of ddeduction of tax at source at the existing
rate of five per cent hence higher r
cent, rate of TDS of10% prescribed
prescribed.
 Finance Act, 2007 ‐ Explanatory Notes on provisions relating to Direct Taxes CIR. NO. 3/2008,
DT. 12‐3‐2008
 Better view is that amended provisions does not covers profession, vocation.
s


“Total Turnover” or “Gross Receipts”?
Total Turnover or Gross Receipts ?
17

 S. 44AB uses similar words.
 The term ‘turnover’ is not specifically defined in the Act, nor specifically for the
y
purpose of section 44AB its meaning should be taken as commercially and
44AB,
commonly understood.
 Growmore Exports Ltd. v. Asstt. CIT [2
2001] 78 ITD 95 (Mum.‐ Trib.)
 Regarding the interpretation of the w
word ‘turnover’ as made by the Institute of
Chartered Accountants in the con ntext of section 44AB, the Publication
‘Guidance Note on Tax Audit’ under section 44AB published by the Institute of
Chartered Accountants of I di i rele t
Ch t d A t t f India is levant.
 Asstt. CIT v. Hasmukh M. Shah [2003] 85 ITD 99 (Ahd. ‐ Trib.)
 The terms ‘total sales’, ‘turnover’ and ‘gross receipts’ referred to in section
, g p
44AB are those which have in them income taxable or loss allowable under the
Act.
 Dy. CIT v. Mangal Dayak Chit Fund (P.) Ltd. [2005] 92 ITD 258 (Hyd. ‐ Trib.)
y g y ( ) [ ] ( y )


“Total Turnover” or “Gross Receipts”?
Total Turnover or Gross Receipts ?
18

 Issue may arise what would constitute turnover?
 Consideration on sale of fixed a
Consideration on sale of fixed a
assets
 VAT / Service tax collected

 Interest
Interest
 Incentives

 Stock‐in‐trade
Stock in trade
 Transport / delivery charges

 etc


Turnover of?
Turnover of?
19

 Whether turnover means
 Purchase turnover or
 Sales turnover or
 Any one of it
 Vijay N Maheshwari HUF v ACIT
 ITAT: ITA No. 515/Bom/1991 & 1725 5/Bom/1991 Order dt. 29/9/1994
 HC: ITA/924/1995 Order dt. 27/3/19996
 SC: SLP(Civil) 20074/1997 Order Dt 13/10/1997
 In case purchase turnover practica
al difficulties?


Establishment of t
Establishment of turnover
t
20

 Assessee would be required to est tablish that total turnover as disclosed
by him is within the limits on the b
basis of Documents / records /
evidence such as
 Sales invoice / cash memo / bill ls
 Bank statement

 Any secondary records

 Returns filed under any indirect t taxes like VAT / Service tax etc.


Multiple activities
Multiple activities
21

 In case assessee is engaged in mmultiple activities whether issue may
arise about computation eligible turnover and presumptive income?
 Eg An ‘X’ is an engineer and he has f ll i i
E A ‘X’ i i d h h s following income:
 Consultancy fees Rs 8 lacs
 Gross receipts from trading Rs 52 lacs
 Service charges Rs 7 lacs
 Interest income Rs 12 lacs
 Gross receipts / turnover for comp
Gross receipts / turnover for compputation presumptive income would be Rs
putation presumptive income would be Rs
59 lacs (52+7), consultancy fees ar
re required to excluded.
 Ref Explanatory Memorandum to F FA ‘94.
 Mohd. Aslam v ITO [2006] 150 Taxman 20 (JODH.) (MAG.)
Mohd Aslam v ITO [2006] 150 Taxman 20 (JODH ) (MAG )
 In case trading & service income e
exceeds Rs 60 lacs, S. 44AD would not have
any application


22 Non applicability of ce
ertain provisions


Non Applicability o
Non Applicability o certain sections
of certain sections
of
23

 An assessee opting for the scheme is exempted from :
 Non applicability of provisions o
Non applicability of provisions o Chapter XVII‐C
of Chapter XVII C
of
 Leads to certain unintended conse
equences
 Maintenance of books of accou
Maintenance of books of accou related to such business as required
unt related to such business as required
unt
under section 44AA of the Income‐tax Act.
 S. 44AA (iii) / (iv) gives negative exemp
ption
 S. 44AD no specific exemption from maintenance of books of accounts etc. contra to pre‐
replaced S.44AD(4)
 Assessee claims he has earned inco
Assessee claims he has earned incoome lower than specified percentage and such
ome lower than specified percentage and such
income is more than maximum am mount not chargeable to tax, S.44AD(5) and
44AA(2)(iv), mandates him to mainntain books of accounts and other documents
as specified u/s 44AA, get them au
as specified u/s 44AA get them auudited from the accountant and furnish report
udited from the accountant and furnish report
as required u/s 44AB.


Non Applicability o
Non Applicability o certain sections
of certain sections
of
24

 S.44AE
 S. 44AE specific exemption from mainte
enance of books of accounts etc. as prescribed
u/s 44AA and audit u/s 44AB
 However in case assessee claims that he has earned income lower than specified amount, S.
44AE(7) and 44AA(2)(iii), mandates him to maintain books of accounts and other documents
( ) ( )( ),
as specified u/s 44AA, get them audited f
from the accountant and furnish report as required
u/s 44AB.


Provisions of S. 28
Provisions of S 28 to 43C
8 to 43C
8
25

 Non Applicability of provisions u/s 28 to 4
43C
 No deduction of expenses u/s 30 to 38
 Allowability of losses ? Whether clarif
ficatory?
 Difference in language in para 2 of 14th Schedule of DTC, 2010 bill S. 44AD(1) is
4
notwithstanding clause. Accordingly n
t ith t di l A di l normal business income computation
lb i i t ti
provisions are not applicable to such small business
 As a result various provisions pertaining t following items are not applicable
p p g to g pp
 Certain types of income chargeable under the head business income
 Allow deduction on fulfillment of cert conditions
tain
 Deemed allowance of depreciation, additional depreciation, weighted deduction
 Payment of expenditure otherwise by account payee cheque beyond specified limit
y
 Gopal Si h K R j
G l Singh K. Rajpurohit v. ACIT 9 TTJ (Ahd ) 865
hi 94 (Ahd.)
 Specifically provided that partnership fir is entitle to claim deduction for interest on
rm
partners capital / partners remuneration.
p p p

Implications
26

 Expenditure on scientific research S. 3
35(2AA)
 Assessee is not entitled to claimed we
eighted deduction
 Refund of MVAT
f d f
 Is not included u/s 41(1) but included as a part of gross receipts
 Allowance of depreciation / additiona
Allowance of depreciation / additiona depreciation
al depreciation
al
 Depreciation as well as additional dep
preciation would be deemed to allowed
 Aggregate cost of Machinery pur rchased on 2‐5‐2008, Rs 100,000 and sold on 1‐1‐
2011 for Rs 65,000
2011 for Rs 65 000
 Profits u/s 50 determined as und der
 Depreciation allowed @ 20% FY 08-09 Rs 40,000 (including additional depreciation),
Y
FY 09 10 Rs 12 000
09-10 12,000
 Capital gains Rs 3,000 [65,000-(100000-(40,000+12,000))
 Non allowance of unabsorbed deprec
ciation
 DCIT v. Sunil M. Kankariya[2008] 298 ITR (AT) 205 (ITAT‐Pune)
 Is depreciation is allowed on asset sold during the year?


27 Assessment


Assessment
28

 Unlike provisions of erstwhile Chapter XII‐C, assessee is required to file return
of income and AO has powers to issue e notice u/s 142 /143 for assessment
 Unlike erstwhile S.44AD(5) no manda atory scrutiny assessment in case income
below specified rate
 AO is bound to assess income from sp
AO is bound to assess income from sp pecified business
pecified business
 AO can make additions unexplained investment, cash credit etc.
 During assessment proceeding in case
g p g e assessee ‘s turnover is
 Raised beyond Rs 60 lacs
 Determination of such income is not t geverned by S. 44AD
 Maintenance of accounts and its aud dit
 Penalty for furnishing incorrect parti
iculars, non audit of accounts
 Reduced below Rs 60 lacs
Reduced below Rs 60 lacs
 Determination of income would be g
governed by S. 44AD


Implications of inc
Implications of inc
crease in turnover
crease in turnover
29

 In the instant case even after addi itional income total turnover was below
specified limit. ITAT has held that
 We do not consider it to be a case that fully fits into the scheme of section
44AD, for which, undoubtedly, faith recording of the turnover (and other
hful
relevant financial parameters) is essential.
 Whenever the law provides any con ncession(s) from its rigors, the observance
and satisfaction of the qualifying crit teria are presumed as, also contended by
the assessee correctly met i e with
assessee, met, i.e., hout any doubt as the law contemplates a
doubt,
true disclosure, and in any case are suubject to scrutiny/verification.
 As afore‐stated, in the present case, the same cannot be said for sure, and as
such, in our considered opinion, t the assessee having failed to record its
turnover correctly in its books, it cannnot be said to be a case to which section
44AD of the Act is strictly applicable.
y pp
 Shivani Builders v. ITO [2007] 108 ITD 520 (AHD.)


Filing of belated au
Filing of belated au report
udit report
udit
30

 A combined reading of sections 44AF(5), 44AB and 271B leads to the
conclusion that if the assessee fails to furnish the audit report as required
s
under section 44AB [which has been incorporated in sub‐section (5) of section
sub section
44AF] it may be liable to levy of penalty as mentioned in section 27IB.
 Nowhere in section 44AF [right from sub‐section (1) to sub‐section (5)] it is
m
mentioned that the assessee would be denied the benefit of claiming lower
profits and gains than the profit and gains as specified in sub‐section (1) of
section 44AF, if it furnishes the audit report beyond the due date as mentioned
in section 44AB.
 Thus, it is clear that it is not the intenntion of the Legislature to altogether deny
the benefit of lower profits if the asse essee maintains books of account and gets
them audited and furnishes a repor as required under section 44AB though
rt
belatedly. Otherwise, it would have specified/ mentioned in the section itself to
that effect.
 Further,
Further the filing of audit report is o procedural in nature and the assessee
only
cannot be denied the benefit of exem mption claimed by it.
 Leyland Automobiles v. ITO [2008] 20 SOT 242 (COCHIN)


Few Cases
Few Cases
31

 Once under the special provisio exemption from maintenance of
on,
books of account has been provided and presumptive tax at the
p p p
rate of 8 per cent of the gr ross receipt itself is the basis for
determining the taxable incom the assessee is not under any
me,
obligation to explain individual entry of cash deposit in the bank,
l
unless such entry has no nexus with the gross receipts.
 CIT v Surinder Pal Anand [2010] 192 Taxman (PUNJ. & HAR.)

 Where amount of gross receipts s being in excess of Rs. 40 lakhs,
section 44AD is not applicable, principle underlying said section
also can‐not be adopted
 Shri Ram Jhanwar Lal v ITO [2009]
] 177 TAXMAN 135 (RAJ.)


Few Cases
Few Cases
32

 The additional sales found as a result of search, was not recorded in the
books of accounts regularly kep in the course of business by the
pt
assessee. Merely because the app pellant accepted the additional sales for
the purpose of assessment of the relevant year on the basis of entries in
the i d documents, th same would not constitute accounts of th
th seized d t the ld t tit t t f the
appellant maintained in the regula course of business and on that basis
ar
alone liability cannot be fastened o the assessee by holding him to have
on
committed the default.
 Brij Lal Goyal v. ACIT [2004] 88 ITD 413 (Del.)


33 Presumptive Tax ‐ goods carriage


Presumptive income
Presumptive income for truck owners
e for truck owners
e
34

 Under the existing provisions of s section 44AE, a presumptive scheme is
available to assessees engaged in business of plying, hiring or leasing goods
carriages. The scheme applies to an assessee, who owns not more than 10
n
goods carriages at any time during the previous year.
 Under this scheme, a fixed amount of income per vehicle is taken at the rate of
Rs. 3,500
Rs 3 500 per month per vehicle for owners of heavy goods vehicle and Rs
r vehicle, Rs.
3,150 per month per vehicle for the o
owners of light goods vehicles. An assessee
opting for this scheme is exempted from maintaining books of account to
d
substantiate the income.
 The Act has been amended to take care of inflationary trend, hence the limit
has been enhanced to presume incom per vehicle for the owners of :—
me
 heavy goods vehicle to Rs 5 000 per m
Rs. 5,000 month; and
 other than heavy goods vehicles to Rs 4,500 per month.
s.
 Further an anti‐avoidance clause is provided to state that a prescribed fixed
sum or a sum h h than the afores d sum claimed to h
higher h h f said l d have b been earned b
d by
the assessee shall be deemed to be p
profits and gains of such business.


Assessee plying own & hired vehicle
plying own
ned & hired vehicle
ned
35

 The assessee with multiple business are not barred entirely from availing the
s
benefits of S. 44AE.
 The assesee with multiple business which includes the business of plying etc
with their own goods carriage, are not only entitled to the benefits of S. 44AE
but also for the exclusion of the relev
vant turnover from total turnover of all the
business of the assessee for the pur rposes of computation of monetary limits
for S. 44AB in view of S. 44AE(5)
 S. 44AE shall apply with respect to buusiness carried through own vehicles only
 Anil Ramgopal M li (HUF) ACIT (201 47 DTR (P
A il R l Mali (HUF) v ACIT (201
10) 47 DTR (Pune)(Trib) 513
10) )(T ib) 513
 Under amended provisions income f
from hired vehicles would be governed by
S. 44AD?
 JCB can not be termed as ‘goods carriag Thus, the provisions of section 44AE were
ge’.
not applicable and the income from JCB could not be computed by applying section
Bs
44AE.
 Gaylord Constructions v ITO [2008] 175 TAXMAN 9 (COCH.) (MAG.)
99


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Let’s talk!
36


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37

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1.22.25410049


38 Appendix

Taxing income on Presumptive Basis
n 11-06-11

Sec 44AD : Pre‐am
Sec 44AD : Pre‐am
mendment
39

44AD. Special provision for computing prof and gains of business of civil construction,
fits
etc.—
(1) Notwithstanding anything to the contrary contained in sections 28 to 43C in the case of
y 43C,
an assessee engaged in the business of civil construction or supply of labour for civil
construction, a sum equal to eight per cent of the gross receipts paid or payable to the
assessee in the previous year on account of such business or, as the case may be, a sum
higher h
hi h than the aforesaid sum as d l d by the assessee i hi return of i
h f id declared h in his f income, shall b
h ll be
deemed to be the profits and gains of suc business chargeable to tax under the head
ch
“Profits and gains of business or profession”:
Provided that thi
P id d th t nothing contained i thi s b
t i d in this sub‐section shall apply i case th aforesaid
ti h ll l in the f id
gross receipts paid or payable exceed an amount of forty lakh rupees.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the
purposes of sub section (1) be deemed to have been already given full effect to and no
sub‐section (1),
further deduction under those sections shall be allowed :
l
Provided that where the assessee is a firm the salary and interest paid to its partners
m,
shall be deducted from the income com mputed under sub‐section (1) subject to the
conditions and limits specified in clause (b) o section 40.
of


Sec 44AD : Pre‐am
Sec 44AD : Pre‐am
mendment
40

(3) The written down value of any asset used for the purpose of the business referred to in
d
sub‐section (1) shall be deemed to have be calculated as if the assessee had claimed
een
and h d b
d had been actually allowed th d d ti n i respect of th d
t ll ll d the deductio in t f the depreciation f each of th
i ti for h f the
relevant assessment years.
( )
(4) The provisions of sections 44AA and 44A shall not apply in so far as they relate to the
p AB pp y y
business referred to in sub‐section (1) and i computing the monetary limits under those
in
sections, the gross receipts or, as the case m be, the income from the said business shall
may
be excluded.
(5) Nothing contained in the foregoing pro ovisions of this section shall apply, where the
assessee claims and produces evidence to prove that the profits and gains from the
o
aforesaid business during the previous year relevant to the assessment year commencing
on the 1st day of April, 1997 or any earlier a
assessment year, are lower than the profits and
gains specified in sub‐section (1), and ther reupon the Assessing Officer shall proceed to
make an assessment of the total income or loss of the assessee and determine the sum
r
payable by the assessee on the basis of asse essment made under sub‐section (3) of section
143.

Sec 44AD : Pre‐am
Sec 44AD : Pre‐am
mendment
41

(6) Notwithstanding anything contained in the foregoing provisions of this section, an
n
assessee may claim lower profits and ga ains than the profits and gains specified in
subsection (1) if h k
b ti (1), he keeps and maintains su h b k of account and other d
d i t i uch books f t d th documents ast
required under sub‐section (2) of section 44AA and gets his accounts audited and
n
furnishes a report of such audit as required u
under section 44AB.
Explanation.—For the purposes of this section, the expression “civil construction”
includes—
(a) the
( ) th construction or repair of any b ildi
t ti i f buildi
ing, b id
i bridge, d
dam or other structure or of any
th t t f
canal or road;
( )
(b) the execution of any works contract
y


Sec 44AD : Post‐am
mendment
42

44AD. (1) Notwithstanding anything to the c contrary contained in sections 28 to 43C, in the
case of an eligible assessee engaged in an eeligible business, a sum equal to eight per cent
of th t t l t
f the total turnover or gross receipts of the assessee i th previous year on account of
i t f in the i t f
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 b deemed to be the profits and gains of such
be
business chargeable to tax under the head “Profits and gains of business or profession”.
f f f ”
purposes of sub‐section (1), be deemed to have been already given full effect to and no
sub section
further deduction under those sections shall be allowed :
l
Provided that where the eligible 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.
(3) The written down value of any asset of an
(3) The written down value of any asset of an eligible business shall be deemed to have
n eligible business shall be deemed to have
n
been calculated as if the eligible assessee ha
ad claimed and had been actually allowed the
deduction in respect of the depreciation for each of the relevant assessment years.


mendment
43

(4) The provisions of Chapter XVII‐C shall no apply to an eligible assessee in so far as they
ot
relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an
n
eligible assessee who claims that his profits and gains from the eligible business are lower
than the profits and gains specified in sub‐se
p g p ection (1) and whose total income exceeds the
( )
maximum amount which is not chargeable to income‐tax, shall be required to keep and
maintain such books of account and other documents as required under sub‐section (2) of
section 44AA and get them audited and fur rnish a report of such audit as required under
section 44AB.


mendment
44

Explanation.—For the purposes of this sectio
on,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family oor a partnership firm, who is a resident, but
not a limited liability partnership firm as defined under clause (n) of sub‐section (1) of
section 2 of the Limited Liability Partners
section 2 of the Limited Liability Partnersship Act, 2008 (6 of 2009)27a; and
ship Act 2008 (6 of 2009)27a; and
(ii) who has not claimed deduction under r any of the sections 10A, 10AA, 10B, 10BA or
deduction under any provisions of Chapter VIA under the heading “C. ‐ Deductions in
respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of ply
() ying, hiring or leasing goods carriages referred
to in section 44AE; and
(ii) whose total turnover or gross receipts
(ii) whose total turnover or gross receipts in the previous year does not exceed an
s in the previous year does not exceed an
s
amount of sixty lakh rupees.


Sec 44AE
Sec 44AE
45

44AE. (1) Notwithstanding anything to the c
contrary contained in sections 28 to 43C, in the
case of an assessee, who owns not more th ten goods carriages 30 at any time during
han
the
th previous year and who i engaged i t b i
i d h is d in th business of plying, hi i or l i such
the f l i hiring leasing h
goods carriages, the income of such busine chargeable to tax under the head “Profits
ess
and gains of business or profession” shall b deemed to be the aggregate of the profits
be
and gains, f
from all the goods carriages own by him in the previous year, computed in
ned
accordance with the provisions of sub‐sectio (2).
on
(2) For the purposes of sub‐section (1), the p
sub section profits and gains from each goods carriage,—
carriage,
(i) being a heavy goods vehicle, shall be an amount equal to five thousand rupees 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,
o
whichever is higher;
(ii) other than a heavy goods vehicle, shall be an amount equal to four thousand five
hundred rupees 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 vehicle whichever is highe
vehicle, er

Sec 44AE
Sec 44AE
46

purposes of sub‐section (1), be deemed to have been already given full effect to and no
further deduction under those sections shall be allowed
l
Provided that where the assessee is a firm, t salary and interest paid to its partners shall
the
be deducted from the income computed un nder sub‐section (1) subject to the conditions
and limits specified in clause (b) of section 40.
(4) The written down value of any asset used d for the purpose of the business referred to in
sub‐section (1) shall be deemed to have been calculated as if the assessee had claimed
and had been actually allowed the deduction n in respect of the depreciation for each of the
relevant assessment years.
l t t
(5) The provisions of sections 44AA and 44AB B shall not apply in so far as they relate to the
business referred to in sub‐section (1) and inn computing the monetary limits under those
sections, the gross receipts or, as the case m
sections the gross receipts or as the case may be the income from the said business shall
may be, the income from the said business shall
m
be excluded.
(6) Nothing contained in the foregoing pro ovisions of this section shall apply, where the
assessee claims and produces evidence to prove that the profits and gains from the
o
aforesaid business during the previous year relevant to the assessment year commencing


Sec 44AE
Sec 44AE
47

on the 1st day of April, 1997 or any earlier asse
essment year, are lower than the profits and
gains specified in sub‐sections (1) and (2), and thereupon the Assessing Officer shall proceed to
make an assessment of the total income or loss
make an assessment of the total income or loss of the assessee and determine the sum payable
s of the assessee and determine the sum payable
s
by the assessee on the basis of assessment made under sub‐section (3) of section 143.
(7) Notwithstanding anything contained in the foregoing provisions of this section, an assessee
may claim lower profits and gains than the profits and gains specified in sub‐sections (1) and
(2), if he keeps and maintains such books of acc
count and other documents as required under
sub‐section (2) of section 44AA and gets his acc
counts audited and furnishes a report of such
audit as required under section 44AB.
,—
Explanation.—For the purposes of this section,
(a) the expressions “goods carriage”35 and “he
(a) the expressions “goods carriage”35 and “he eavy goods vehicle”35 shall have the meanings
eavy goods vehicle”35 shall have the meanings
respectively assigned to them in section 2 o
of the Motor Vehicles Act, 1988 (59 of 1988);
(b) an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on
instalments and for which the whole or par rt of the amount payable is still due, shall be
deemed to be the owner of such goods carriage


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