Expenses related to contract - disaalowed

[vivek choudhary]

RETURN WAS FILED UNDER 44AD, CONTRACT RECEIPT WAS 37LACS. FIRSTLY A.O. TREATED CONTRACT RECEIPT AS UNEXPLAINED INVESTMENT U/S 69. AFTER APROACHING C.I.T (APPEALS) IT ORDERED THAT TREATING CONTRACT RECEIPT AS UNEXPLAINED NVESTMENT HAS NO MERIT, BUT HE DISALLOWED THE EXPENSES SHOWN IN PROFIT AND LOSS ACCOUNT RELATED TO CONTRACT AND THUS ENHANCED THE APPEAL. WHEN a return is filed u/s 44AD, then how the expenses shown in Profit/loss account be disallowed.

[Mukesh Kumar]

If wish to calculate profit less that 8% as specified u/s 44AD, you are permitted to do so by virtue of sub section (6) of section 44AD i.e. 44AD(6) of the Income Tax Act, 1961 - Special provision for computing profits and gains of business of civil construction, etc. - The provisions of section 44AD(6) read as follows: - (6) 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-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.

AI Summary

Presumptive taxation allows a taxpayer to claim lower profits if books are maintained and audited. Under the presumptive taxation scheme an assessee may claim profits lower than the deemed rate only if the assessee keeps and maintains the required books of account and obtains and furnishes an audit report; compliance with these bookkeeping and audit conditions is the operative basis for recognising actual expenses and computing lower taxable profits instead of the deemed presumptive income.