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44ae of the income tax act

Krishna Prasad (Partner) (260 Points)

04 November 2011

HI PROFESSIONAL COLLEAGUES

I HOPE YOU ARE DOING WELL

I HAVE A QUERY REGARDING TAXATION OF PARTNERSHIP FIRM U/S.44AE OF THE INCOME TAX ACT. THE RETURN OF INCOME WAS FILED BY FOLLOWING THE PROVISIONS OF SEC-44AE OF THE IT ACT,1961.

ACTUALLY THE VEHICLES WAS NOT OWNED BY THE PARTNERSHIP FIRM. THE VEHICLES WAS BROUGHT INTO THE FIRM BY THE PARTNERS AS THEIR CAPITAL CONTRIBUTION. HENCE TAX AUDIT WAS NOT DONE U/S.44AB.CAN WE CLAIM THE VEHICLES AS PROPERTY OF THE FIRM. PLEASE CLARIFY IN THIS REGARD. ALSO QUOTE IF THERE IS ANY CASE LAW.

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7 Replies

CA Sripal Jain (Associate Finance) (709 Points)
Replied 04 November 2011

dear krishna,

BY PLAIN READING OF SECTION 44AE IF THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PLYING OR HIRING OR LEASING OF VEHICLES AND ALSO HE IS IN POSSESSION OF THAT VEHICLES THE ABOVE MENTIONED SECTION APPLIES

1. HERE FROM THE ABOVE FACTS FIRM AND PARTNERS ARE DIFFERENT IN THE EYES OF INCOME TAX... AND FIRM IS NOT IN POSSESSION OF THE VEHICLES

2. FIRM IS NOT ENGAGED IN THE BUSINESS OF PLYING,LEASING OR HIRING

THEREFORE ONE CANNOT AVAIL THE BENEFIT OF SECTION 44AE AND ALSO 44AB MIGHT APPLY IN THIS CASE...LETS WAIT FOR OTHERS VIEWS

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CA Mukul Mittal (CA in practice) (384 Points)
Replied 06 November 2011

Sir,

my opinion is different. when a partner introduced assets as his capital contribution, the same will become the property of the firm. we usually pass the entry:

Assets A/c dr.

To Partner's Capital A/c.

Firm can claim Depreciation on the assets as well. Therefore, the firm can file the return on the income of hiring and plying vehicles.

If smone has different opinion, pls write it down...........

Thanks.......

CA Sripal Jain (Associate Finance) (709 Points)
Replied 06 November 2011

if we agree also ,it is the business which is important hiring and plying is not the business of firm

CA PARAS BAFNA (Practising CA ) (33428 Points)
Replied 07 November 2011

In case the firm is engaged in the business of plying, hiring and leasing of Goods Carriages, presumptive income U/s 44AE can be shown. I agree with the view of CA Mukul Mittal. Krishna's view stands good as far as Audit is concerned as Section 44AA and 44AB 's monetary limits are not applicable for such an assessee.

The firm can show other Business Income also, except the income U/s 44AE, by following the provisions of Section 44AA and 44AB.

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