Filing of IT Return when Provision of Section 44AD apply

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Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2010 I am filing the ITR4 of my client (Individual) upon whom provision of section 44AD apply.

His Gross receipts are 780000 and Net Profit as per Profit & Loss a/c comes 480000 but as per section 44AD, 8% of 780000 is 62400 only.

Pls guide whether in the Capital A/c profit of 480000 will include or 62400.
Also guide should we prepare the P&L a/c or not

Aditya Maheshwari

Aditya Maheshwari (Expert)
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25 July 2010 In the capital a/c actual profit will be credited.

Also if Section 44AD is applicable then there is no need to prepare regular books of accounts. So u could directly charge 8% profit on sales.

However for practical purpose we do maintain regualr books but for taxation we offer for tax 8% profit on sale only.

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2010 Sir, It mean in the capital a/c we can credit 480000 for current year profit and if so can it will not invite case in scrutiny.
Pls reply

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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25 July 2010 Special provision for computing profits and gains of business on presumptive basis.

44AD. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :

Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.

(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.

(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.

Explanation.—For the purposes of this section,—

(a) “eligible assessee” means,—

(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and

(ii) who has not claimed deduction under any of the 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) “eligible business” means,—

(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and

(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 96a[sixty lakh rupees].

mohinder kansal

mohinder kansal (Expert)
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25 July 2010 in my opinion, 8% is minimum income which can be shown as taxable on presumptive basis but higher income may be declared and if one shows in balance sheet that Rs. 480000/- of profit earned he has to pay tax on this amount only. otherwise he should not file balance sheet and profit and loss account with the return of income, i.e., he should not show figures of balance sheet and p & l in form 4. also income declared in returns should be shown in balance sheet maintained for personal use only.

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2010 sir but if the assessee has other trading income also then how can we prepare ITR-4 as schedule PL has to prepare in that case

mohinder kansal

mohinder kansal (Expert)
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25 July 2010 as i understand by ur query there are two businesses one retail trade on which 44AE is applicable and one other business in which case pl is to be prepared. in this case prepare pl for other business and show income from retail trade on percentage basis whatever you want to declare. Figure of profit is to be shown only. there is provision in ITR 4 which ask for deducting income under section 44AE included in the profit and loss account and then there is column to add this income. take the decision according to the practical situation in your case

Gangavarapu Abhilash

Gangavarapu Abhilash (Expert)
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29 November 2014 @ Mohider Kansal Sir,

But is it compusary to show the same profit in the books (that if we maintain for other purposes.

I have a doubt in that.Even for practical purposes such as getting loan etc why cannot we maintain at actual profit. 44AD is an option given to us(Assessee).

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