Applicability of sec 44ae

Tax queries 1571 views 3 replies

SIDDHARTH KOTHARI

N.A

280 Points Joined March 2009

Hi Friends,

Sec 44AE of Income Tax Act,1961 applies to those assessees who own less than 10 goods cariages at any time during the year and engaged in the business of plying , hiring or leasing of such goods carriages.

If the assessee(Mr.X) has 4 goods carriages and give those goods carriages on rent to other person(Mr.Y).That other person(Mr.Y) uses these goods carriages for the puprose of goods transport by road(GTA Service Provider).

Can we apply the provision of Sec 44AE to both Mr. X and Mr.Y?

Assume that the rent recceived by Mr.X fro Mr Y more than 10 lacs.Under which service Mr.X has to register himself for the purpose of Service Tax?

Should we consider Mr X be considered as Transporter?Whether Mr.Y is liable to deduct the tax at source u/s 194C on assumption that Mr.Y is covered by the provisions of Sec 44AB evethoght Mr. X provide his PAN?

Replies (3)

C.A. Jignesh N. Mehta

C.A.

1030 Points Joined January 2009

44AE. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, who owns not more than ten goods carriages ³⁰ [at any time during the previous year] and who is engaged in the business of plying, hiring or leasing such goods carriages, the income of such business chargeable to tax under the head “Profits and gains of business or profession” shall be deemed to be the aggregate of the profits and gains, from all the goods carriages owned by him in the previous year, computed in accordance with the provisions of sub-section (2).

Explanation.—For the purposes of this section,—

(a) the expressions “goods carriage” ³⁵ and “heavy goods vehicle” ³⁵ shall have the meanings respectively assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);

(b) an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage.]

So, the combined reading of section and its explanation, there are two factors important:

1. engaged in the business of plying, hiring or leasing such goods carriages

2. Owns not more than 10 vehicles.

So in your case you have to decide who is carrying on the business of hiring.

Answer: Ownership is with Mr. X but he has rented the vehicles.

So no one can claim the benefit of section 44AE.

If it is taken otherwise then you might have to face litigation with CIT(Appeals) ITAT if case selected for scrutiny.