Tribunal accepts assessee's turnover calculation under Section 44AD for presumptive taxation scheme

The ITAT Kolkata allowed the assessee's appeal regarding turnover determination under Section 44AD for presumptive taxation. The tribunal accepted the assessee's contention that total turnover was Rs. 64,74,859/- rather than Rs. 74,26,060/- as determined by authorities below. The assessee had offered income at 6% of total turnover from eligible business as a whole, not item-wise. The tribunal distinguished the case from Section 80IB decisions cited by CIT(A) and directed the AO to accept the assessee's revised tax offer based on the corrected turnover calculation under Section 44AD provisions.

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Issues Involved:

1. Determination of the correct turnover for presumptive taxation under Section 44AD of the Income Tax Act.
2. Addition of Rs. 25,37,352/- on account of sale of license and duty drawback receipts.
3. Addition of Rs. 6,36,509/- under the head 'Income from other sources'.

Issue-wise Detailed Analysis:

1. Determination of the Correct Turnover for Presumptive Taxation:

The primary issue was the discrepancy in the turnover figures reported by the assessee and those computed by the Assessing Officer (AO). The assessee reported a turnover of Rs. 64,74,859/- for the AY 2018-19, while the AO computed it as Rs. 74,26,060/-. The AO included four sale bills that were accounted for in the previous financial year (FY 2016-17). The Commissioner of Income-tax (Appeals) [CIT(A)] directed the AO to verify these claims and delete the addition if found correct. Upon review, it was established that the correct turnover was indeed Rs. 64,74,859/-, and this was accepted by the Tribunal, confirming the CIT(A)'s decision on this point.

2. Addition of Rs. 25,37,352/- on Account of Sale of License and Duty Drawback Receipts:

The AO added Rs. 25,37,352/- to the income, which included Rs. 20,26,817/- from the sale of license and Rs. 5,10,535/- from duty drawback receipts. The CIT(A) upheld this addition. The assessee argued that these receipts were part of the gross receipts and should be taxed under the presumptive scheme of Section 44AD, which allows for taxation at 6% of the total turnover. The Tribunal referenced Section 28 of the Income Tax Act, which includes duty drawback as part of business income. The Tribunal also considered guidance from the Institute of Chartered Accountants of India and precedents from ITAT Delhi and Jaipur, which supported the inclusion of duty drawback in gross receipts. Consequently, the Tribunal accepted the assessee's contention, finding that the duty drawback and license sale receipts should be included in the presumptive taxation scheme, thereby allowing the appeal on this ground.

3. Addition of Rs. 6,36,509/- under the Head 'Income from Other Sources':

The AO added Rs. 6,36,509/- under 'Income from other sources', which included sundry balances written back and miscellaneous receipts. The assessee contended that these should be part of the business income under Section 44AD. The Tribunal, after reviewing the provisions of Section 44AD and relevant case law, concluded that the income from sundry balances written back and miscellaneous receipts should be included in the presumptive taxation scheme. The Tribunal found that these items were ancillary to the business and should be considered part of the gross receipts for presumptive taxation purposes.

Conclusion:

The Tribunal allowed the appeal, setting aside the orders of the CIT(A) and the AO. The AO was directed to accept the revised computation of income offered by the assessee, which included the turnover and additional receipts under the presumptive taxation scheme of Section 44AD. The appeal was pronounced in favor of the assessee, allowing the inclusion of all disputed receipts in the presumptive taxation framework.

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