Income tax act, 1961 u/s 44ad
Neeraj Kumar Giri
(Querist) 05 March 2014
This query is : Resolved
Respected Experts,
Kindly give your opinion upon a case below.
If a Assessee, who is engaged in a trading business of Paints and Sanitary goods and he use to purchase goods from outside State as per WEST BENGAL VALUE ADDED TAX & CENTRAL SALES TAX ACT accordingly.
His turnover is below or near about Rs.45 Lakhs during the A.Y.2013-2014 and his net profit is more than 8%, so no question of Tax Audit arises and while filing his Income Tax Return he claim deduction u/s 80c and u/s 24(b), can he file his Income Tax Return u/s 44AD as his nature of business is resaler.
Is it mandatory that he have to maintain regular books of accounts.
(As ones falls in ambit of section 44AD no Books of Accounts is necessary ?)
Kindly tell me that is it mandatory to provide Books of Account before AO during the time of any Proceedings.
R.V.RAO
(Expert) 06 March 2014
Section
44AD
Presumptive taxation not to apply to professions etc. [Section 44AD] [W.r.e.f. A.Y. 2011-12]
Sub-section (6) has been inserted in section 44AD to provide that presumptive scheme is not applicable to:
(i) a person carrying on profession as referred to in section 44AA(1);
(ii) a person earning income in the nature of commission or brokerage income; or
(iii) a person carrying on any agency business.
Further, in line with section 44AB, for the purposes of presumptive taxation under section 44AD, the threshold limit
of total turnover or gross receipts has been increased from `60,00,000 to `1crore.
source:www.icmai.in
so, iam of the view that since you do buying and selling -earning commission/brokerage income,sec44 AD not applicable to you.
since the sec.is not applicable to you ,you need to maintain books of accounts.
tax audit not applicable turnover being less than Rs.one crore.
claiming deductions under IT act sec.80c and 24(b) is allowed.
as for producing mandatorily,the books before ITO,it is necessary only if you get IT notice under sec 143(2),for scrutiny assessment.
R.V.RAO
(Expert) 06 March 2014
after analysing the issue again,i saw another possible view on the "eligible business"under sec 44AD.
44AD (1)
Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent 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”.
According to Explanation (b) to Section 44AD, Eligible Business means:
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE;
AND
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of Rs. 1 Crore. (Rs. 60 Lakhs for A.Y. 2012-13)
so the queriest's business of trading -buying and selling is eligible busness under sec 44AD.
so he is covered under 44AD.he is advised :
no tax audit(being less than Rs 1 crore turnover)required,AS THE QUERIEST RIGHTLY SAID.
no maintenance of books under sec 44 AD required.
HIS CLAIMING DEDUCTIONs UNDER SEC 80C AND 24 (b) allowed.
as to mandatory production of books, before assessing officer,this is necessary only if he gets a scrutiny notice under 143(2).
but it is important to note here,that sec 44AD does not require maintaining books of accounts.therefore producing same before assessing officer does not arise.
I feel this second view given by me is more appropriate,the queriest may follow the second view.
Akshay Jain
(Expert) 06 March 2014
1. 44AD is applicable on you as your in Business and not in profession. See that it is not agency business.
2. Books are not required to be maintained but you will have to maintain required details through which you calculated your Turnover
3. 80C and 24b deductions are seperate from PGBP deductions and thus can be taken.
4. If 44AD not fulfilled you will have to get your accounts audited under section 44AB.
For further query, write to us at:
http://ngoandtaxconsultant.in/p/blog-page.html
T. Kalaiselvan, Advocate
(Expert) 06 March 2014
Well explained and suggested by the experts, however, you may consult your auditor for a second opinion.
C. SANJEEVA RAO
(Expert) 06 March 2014
Mr. RV Rao, is well explained all the provisions lucidly.
R.V.RAO
(Expert) 06 March 2014
thanks.sri.sanjeeva rao garu.
R.V.RAO
(Expert) 07 March 2014
thanks.sri. sanjeeva rao garu
