08 December 2009
Whether a sales commission agent's income is business income or professional income? The question arises in case of applicability of tax audit income limit.
08 December 2009
Income Tax Act is not giving you a clear definition of any of the occupations being profession or business.
For a General Commission Agent or a broker, the closest reference that you can get is in Section 9 (1) Explanation 2 that reads:- Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business.
If you consider this sentence, the Act recognises the activity of a commission agent as a business.
However there are certain circumstances in which a commission agent can be a professional. If he offers technical, managerial or consultancy services and provides personnel for these services or other services, then the same Section 9 defines these as Technical Services. Then it is a profession.
Therefore you have to test the circumstances. If it is an indenting agent who receives orders and passes them to a manufacturer or supplier for an over riding commission, then it is a business. If agent is as a broker bring buyer and seller together on the table to negotiate and the buyer / seller conclude their business on a principal to principal basis and either or both pay an over riding commission, whether the agent is a one man show or organised to carry out this work,it is a business activity.
However an exclusive dependent agent who binds his principal and manages the affairs of his principal for sales / purchase can be said to be giving managerial services that comes under FTS and would accordingly be a professional consultant.
If you would like to arm yourself with yet another blunt weapon, refer to the Instructions for filling the ITR 4, Item No. 9 (ii). It gives codes for nature of business. Here general Commission Agent is listed separately. There is a Separate listing for Professionals. Therefore I would conclude that General Commission Agent is not listed as a professional. However, advertising agencies and some other specified professions of section 44AA are also listed separately. If one goes by this, professions should be those listed as professions in this ITR4 Form PLUS other deemed professions in the Section 44AA (Film Artistes, Models, IT Professionals, Interior Decorators). The Commission Agent is not listed as a profession in either 44AA or in the ITR4 codes. The way the codes are listed, profession is a business but business is not a profession. Both are occupations.
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