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Sec 44AD

Started by Pankaj, January 13, 2011, 12:16:36 PM

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Dear Members,

Please go through Sec 44AD which is going to be subsituted from 01.04.11.
As per this Section all the eligible business whose total turnover doesnot exceed Rs. 60 lacs is reqd. to get their accounts audited if profit  is less than 8% of the total turnover.

Eligible biz means any biz except the biz of plying, hiring or leasing goods carriages.

Thus all the biz are required to get their accounts audited if they show profit less than 8% of their turnover.
??? ::)

sai prasad

The issue is whether professionals like Doctors,Advocates and Engineers are covered under the new method of presumptive profit. The words gross receipts  is identified with the term business and it may not include professional  receipts.

please contribute your views



Section 44AD has carefully used the word 'Business'. Further the maximum limit of Rs.60 Lacs points it to the Business covered under 44AB for 60 Lacs limit. Therefore, the professions who are subject to tax audit on gross receipts of Rs.15 Lacs are not eligible to claim the benefit of section 44AD.

The issue is however not free from doubt  ???.

Best Regards  :)


the discussion was useful.
please suggest me if the Life Insurance / UTI Agents earning gross commission more than Rs.60,000/-(who are not eligible for ad-hoc deduction of expenses - as per circular no. 594/1991, 648/1993 and 677/1994) can file returns u/s. 44AD .
and if Photography and Astrology are professions or Business


Dear Members,

I have a query:

1)If assesee has 5 business and 2 shows 25% profit while other business showing net loss.
Then assessee has to file return on the base of 8% NP of total of 5 business sales? or
  Presumptive taxation of  8% NP of each business?


please read the section carefully and you will find anomaly in framing of the section. if the assessee wants to show less percentage than the prescribed percentage then in ordinary meaning the books of accounts of the assessee should get audited. But if u go through the section it says that and the income of the assessee is more than the amount which is not chargeable to incometax means both the conditions cumulatively fulfilled for application of the said sub-section. Suppose, if a person's turnover is 58 lakhs and he wants to show 2% on the said turnover then his income is only Rs. 1,16,000/- and this amount is less than the maximum amount which is not chargeable to tax and therefore, he need not audit his accounts provided he had no other income other than income on this turnover. This is a strange situation and legislature donot envisage this. For the time being the business men can escape from this route also.


Dear Experts,
Please suggest: -
1. if Photography and Astrology are professions or Business
2. If the Insurance / NSC agents, who are not eligible for ad-hoc deduction of expenses if their receipts is more than Rs.60,000/- - as per circular no. 594/1991, 648/1993 and 677/1994) can file returns u/s. 44AD .

sai prasad

one has to look at the definition of business u/s.2(13) and profession is  sepatately defined u/s.2(36). The distintion between business and profession is always maintained. Further sec.44AA r/w rule 6F  prescribed books of accounts and  records for professionals and it makes mandatory unlike buisness , where there is no specific prescription of  books and records. Therefore, professionals are kept outside sec.44AD.

As regards various businesses,if 8% is maintained on the aggregate that would do.

As regards the issue that if the income is below the maximum amount which is not chargeable to tax  reckoned with 8% on the turnover ,then audit is not required.Othewise the very purpose of sec.44AD would be defeated.


Under the scheme of the Act the profession is one which is specified under section 44AA
1. Photography and LIC agency are not the business specified under section 44AA hence they are treated as business
Further the ICAI in its guidance note under section 44AB has treated LIC agency as business activity
2. Further the supreme court In G.K. Choksi & Co. v. CIT (2007) 19 (I) ITCL 194 (SC) : (2007) 295 ITR 376 (SC) : (2007) 165 Taxman 299 (SC)held  that Part D of Chapter IV consists of sections 28 to 43 which deals with profits and gains of business or profession. Though the phrase has been used in certain sections as 'business or profession', but nowhere has the phrase been used as the business and profession'. In fact, wherever the Legislature intended that the benefit of a particular provision should be for both business or profession, it has used the words 'business or profession' and wherever it intended to restrict the benefit to either business or profession, then the Legislature has used the word either 'business' or 'profession', meaning thereby that it intended to extend the benefit to either 'business' or 'profession', i.e. the one would not include the other. If the expression 'business' is interpreted to include within its scope 'profession' as well, it would be doing violence to the provisions of the Act. Such interpretation would amount to first creating an imaginative lacuna and then filling it up, which is not permissible in law.
I beleive that above discussion will clarify the doubts raised at the forum