TaxTMI 
TaxTMI 
2020 (12) TMI 994
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....me u/s. 28(v) and therefore not eligible for applying the presumptive interest rate of 8% under section 44AD of the Act? B. Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that only remuneration and salary, received from a firm, to the extent of eligible under clause (b) of Section 40 of the Act, would be considered as profits and gains of business or profession of the recipient partner? 3.The assessee is an individual, a partner in M/s. Kumbakonam Jewellers, M/s.ANS Gupta & Sons and M/s.ANS Gupta Jewellers. The assessee filed his return of income for the assessment year under consideration admitting a total income of Rs. 43,53,066/-. The assessment was selected for scrutiny and it was finalized under Section 143(3) of the Act by order dated 03.03.2015 disallowing the claim made by the assessee under Section 44AD of the Act. While filing the return of income, the assessee had applied the presumptive rate of tax at 8% under Section 44AD and returned Rs. 4,68,240/- as income from the remuneration and interest received from the partnership firm. The Assessing Officer did not agree with the assessee and opined that Section 44AD i....
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....nd (ii) whose total turnover or gross receipts in the previous year does not exceed an amount of Rs. 2 Crores. 6.At the outset, it needs to be noted that Section 44AD is a special provision and it carves out an exception in respect of certain businesses and from Clause (b)(ii) of the explanation under Section 44AD which prescribes the limit of Rs. 2 Crores as total turnover or gross receipts is a clear indication that this provision is meant for small businesses. Further Section 44AD(1) commences with a non-obstante clause and states that notwithstanding anything to the contrary containing in Section 28 to 43C in the case of an eligible assessee engaged in an eligible business a presumptive rate of tax at 8% can be adopted. One more important aspect is that 8% is computed on the basis of the total turnover or gross receipts of the assessee. Therefore, four important aspects to be noted in Section 44AD are that the assessee who claim such a benefit of the presumptive rate of tax should an eligible assessee as defined in Clause (a) of the explanation to Section 44AD, he should be engaged in an eligible business as defined in Clause (b) of Section 44AD and 8% of the presumptive rate ....
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....n and interest in the their profit and loss account and therefore, it cannot be taken as turnover or gross receipts. Further, the revenue would contend that the remuneration and interest is not excessive, it is the total net income of the assessee because of the expenses to earn and this income has already been claimed in the hands of the firm's profit and loss account. Therefore, the claim of the assessee under Section 44AD is wholly incorrect and therefore, rightly negatived. Further, the CIT(A) also considered the facts and correctly held that the assessee has received the remuneration and interest from firms in which he is a partner and the provisions of Section 44AD will not be applicable to the assessee. The Tribunal also re-considered the facts and held that Section 44AD was to help small businesses to comply with the taxation provisions and the partners remuneration and interest is not eligible business of the assessee and hence, Section 44AD will not be applicable. 9.Before we move on to consider the arguments of the learned counsel for the appellant/assessee, we need to point out that the decision in the case of Ramniklal Kothari was couched on a different set of fac....
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....nterest cannot be treated as gross receipt. The CIT(A) also took note of the grounds raised by the assessee which are in fact identical to the grounds raised before us and also the decisions which were cited by the assessee before us arising under the 1922 Act and took note of the factual position and the nature of receipts received by the assessee and dismissed the appeal. The Tribunal once again tested the correctness of the order passed by the Assessing Officer and the CIT(A), it took note of section 28(v) which deals with profits and gains of business or profession and noted that clause (v) mentions about section 40(b) of the Act and rightly concluded that only remuneration and salary received from a firm to the extent eligible under Section 40(b) of the Act would be considered as profits and gains of the business or profession of the recipient partner. Further, it took note of section 40(b) and observed that the language used in the said provision is in the negative as it states that certain amounts shall not be deducted while computing income under the head 'Profits and gains of business or profession'. However, it exempts from the rigors of such prohibition, payment ....
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....o comply with the taxation provisions without consuming their 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 the scope of presumptive taxation to all businesses, the existing section 44AD has been substituted by a new section 44AD. 21.2.The salient features of the new presumptive taxation scheme are as under: (a) The scheme is applicable to individuals, HUFs and partnership firms excluding Limited liability partnership firms. It is also not be applicable to an assessee who is availing deductions under 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) The scheme is applicable for any business (excluding a business already covered under Section 44AE which has a maximum gross turnover/gross receipts of 40 lakhs). (c) The presumptive rate of income is prescribed at 8% of gross turnover/gross receipts. (d) ................. (e) An assessee opting for the above scheme is exempted from ma....