A specific exemption given in section 44AD... Now withdrawn in FA 2017

Whenever any rule or its amendment is implemented........ it is viewed for betterment of broader section of society........ alongwith aspect of revenue generation.

Partnership has seen many changes in this manner (earlier used to be taxed as per individual slab rate, a biggest blow) ...... but (being non-corporate body)  or unorganized structure, has opportunity for digging holes by experts.......& Government always tried to fill that gap by streching it near to corporate structure.......

Just think it from the angle of taxing authority, ....6%/8% presumptive assessment facility to firms !!!

Firms earning more than 8%....... are they all ready to pay  tax for actual earnings?.... Secondly, authority wishes to bring all such PGBP income to be brough under audit, hence this step.

Well, we are accustomed to all such changes, and easily find out another option/s in the name of SAVING tax.

I do agree that few may be loosers, but practically most of the businesses (other than commission or brokerage) are in general, earning more than 8% on an average. and authority had reviewed these data, before the amendment. 

Of course, the same can get reverted if majority of the business organizations oppose with proper reasoning.

Thanks so much for well explained reply sir with respect to both points of view government as well as businessman... But who is earning more they go for tax audit and show even less than 8% profit in their books.... Small assessee whose turnover is not so much and margin also like in online sale... Portal has deducted 30% commission charges from their sales... Has to suffer in this exemption withdrawn and they now not going to form partnership firm... Section 44AD is for small assessee.... And now a days market situation is not so good. Business of small assessee getting closed.

" And now a days market situation is not so good."

Agreed, recession period extended due to Demonetization & GST implementation..... but that is for all......

"Business of small assessee getting closed.  "

Only partly agree.

Smaller partership firms, not ready to shed 30% over 6/8% profit margin....  trasforming to proprietorship (being more feasible). Though some continue by declaring loss to avoid audit!!

Medium and large firms ready to get audit report, or declare 6/8%  profit. Better option than LLP or company !!

Yes agreed sir.... Thanx for ur valuable time... As i hv every time so much question in my mind so eager to find their solution and reasons behind them... Once again thanks so much sir... Ur reply is always satisfactory and well explained... Thanku CCI

To conclude: I would say, medium sized firms were taking advantage of this factor (diminishing profit by remuneration & interest),  alongwith 8% profit margin.......... tax liability almost reduced to nil !!! (& no books of accounts for verification !!!) Which authority plugged the hole by giving only one advantage..

Yes, thanks to all....

Originally posted by : Dhirajlal Rambhia
	To conclude: I would say, medium sized firms were taking advantage of this factor (diminishing profit by remuneration & interest),  alongwith 8% profit margin.......... tax liability almost reduced to nil !!! (& no books of accounts for verification !!!) Which authority plugged the hole by giving only one advantage.. Yes, thanks to all....

Technically/logically  this deduction under head " Remuneration & interest " (from declared 8% ) was a flaw in it self as how can a act first specifically override section X to section Y BUT at the same time carves out some exception for some clause of some section in between section X to section Y ... so withdrawal of that facility is all OK and can be seen as a move towards a consistent act . BUT again another "even off" measures need to be taken to remove other odds...like for example an individual propreitorship firm is taxed as per general slabs but a partnership firm is taxed at flat 30% ...thats again not in line with logic .
As now this "Remuneration & interest " deduction is gone and partners are liable to pay tax as per slabs on this "Remuneration & interest " earned then I think in that case the taxation rate of a partnership firm should again be brough into general individual tax slabs system ... believe me 30% is too much  .... Irony is ...coporate entity (turnover upto 250 crores) is now enjoying 25% tax rate BUT a Micro enterprises with turnover upto 2 Crores is liable to pay tax at flat 30%...too much imbalance....

" As now this "Remuneration & interest " deduction is gone and partners are liable to pay tax as per slabs on this "Remuneration & interest " earned then I think........."

1. The deduction of remuneration and interest to partners u/s. 40b is not removed. (under normal assessment)

2. It is amended/removed only for the assessee who wish to declare income under presumptive assessment. Once tax paid by firm, partners not liable for double taxation...

Check the query.... should-i-move-to-filing-under-presumptive-tax-44

3. Any recommendation/injustice may be suggested to institite like ICAI or objection may be raised via chamber of commerce.

 

Yes sir... Section 40(b) still applicable... Only in case of presumptive taxation that exemption earlier given now withdrawn... That's why i told that small partnership firm has no option and go for tax audit only.... Presumptive taxation is no beneficial for him.... More compliance burden on small firm..

Yes....... accepted.......... find out alternative......... '"Survival of the fittest"  is law of nature...

Originally posted by : Dhirajlal Rambhia
	" As now this "Remuneration & interest " deduction is gone and partners are liable to pay tax as per slabs on this "Remuneration & interest " earned then I think........." 1. The deduction of remuneration and interest to partners u/s. 40b is not removed. (under normal assessment) 2. It is amended/removed only for the assessee who wish to declare income under presumptive assessment. Once tax paid by firm, partners not liable for double taxation...

Sir , I was talking in context of Presumptive taxation 44AD only ...

Reply lies in the mentality like.......

https://www.caclubindia.com/forum/should-i-move-to-filing-under-presumptive-tax-44da--456005.asp

What would you suggest ????? (Though question is for its legality!)

Also refer: A CA raised serious issues against ICAI at CA Annual Function

Originally posted by : Dhirajlal Rambhia
	Reply lies in the mentality like....... https://www.caclubindia.com/forum/should-i-move-to-filing-under-presumptive-tax-44da--456005.asp What would you suggest ????? (Though question is for its legality!) Also refer: A CA raised serious issues against ICAI at CA Annual Function

Sir ,  for first thing (the post you pointed ) my approach/suggestion  will be to maintain a balance betwee legal rights / legal liability / ease of compliance and offcource some "moral duty" (though in todays`s world this all is "bookish" as the so called pillars of democracy " Executive , Legislature , Judiciary " are`nt in harmony with each other resulting in deviation from the set/expected path which our forefathers dreamed for THE NATION )  . Government /Revenue departments are always in race to earn more and more "Revenue" (in pretex of welfare of the nation and its people  ) and on the other hand citizens too have turned away eyes from the " minimum expected duty towards the nation " (honestly speaking ,majority of the population`s contributions either  comes by arm twisting or they have no option but to pay taxes halfheartedly...thats BOLD BLACK BITTER truth.. )...people may troll me for my comments BUT what I said is the real truth on the ground as observed in day to day life ...I myself is an assesse under 44AD presumptive scheme but I still offers 20%~25% as net taxable income (though all of my receipts are through banking/electronic mode and I am still eligible for lowest specified rate of 6% BUT still I prefers to offer at higher rate as that much tax I can afford +++  not claiming any 80c type deductions except 80TTA deduction )....
Coming back to the query , YES for him its absolutely legal to declare his net profit percentage @ minimum prescribed rate even though his actuall earnings are much higher . BUT as I already mentioned above , its the way you think (applicable to both the people and the Government) ... balance between Morality/legality should be there ....
I already suggested this sort of " maintenance of balance" few days back on a similar query here in this forum :  
https://www.caclubindia.com/forum/section-44ad-query-453383.asp?offset=1

Sir, Regarding that CA annual Function thing ... there should be some robust mechanism collecting independent feedback from all sections of the society , any organisation/govt./institution exhibiting an " Autocratic " behaviour will only harm the entity in long run .....

Really appreciate you Khalid Sab.....

""I myself is an assesse under 44AD presumptive scheme but I still offers 20%~25% as net taxable income (though all of my receipts are through banking/electronic mode and I am still eligible for lowest specified rate of 6% BUT still I prefers to offer at higher rate as that much tax I can afford +++  not claiming any 80c type deductions except 80TTA deduction)"".

Though you are aware of the legal interpretation..... Bravo......

I would summarize the topic with a comment of expert....... that section 44AD (or even 44ADA) override sections 28 to 43 C of the IT Act...... but not section 69A and its consequences"

Hope for the best....... Inshallah........

 

 

Originally posted by : Dhirajlal Rambhia
	Really appreciate you Khalid Sab..... ""I myself is an assesse under 44AD presumptive scheme but I still offers 20%~25% as net taxable income (though all of my receipts are through banking/electronic mode and I am still eligible for lowest specified rate of 6% BUT still I prefers to offer at higher rate as that much tax I can afford +++  not claiming any 80c type deductions except 80TTA deduction)"". Though you are aware of the legal interpretation..... Bravo...... I would summarize the topic with a comment of expert....... that section 44AD (or even 44ADA) override sections 28 to 43 C of the IT Act...... but not section 69A and its consequences" Hope for the best....... Inshallah........

Sir , First of all your " Like " is really an honour for me, thanks for that .... Second please don`t address me with titles like "Sab" I feels uncomfortable ..thats heavy word for me ..... .. I am no where near your stature... 

You said "Though you are aware of the legal interpretation..... Bravo......"
was that a sarcasm .....or you really mean it ?..just confused .......

P.S : As per my understanding in accordance with several case laws/Orders (High Courts/ITAT level) to qualify as a fit case for sections 68/69 (in presumptive taxation context) onus is on A.O to prove/justify that the  additions made are on part of income which has no nexus with disclosed bussiness gross receipts (out of undislosed turnover/receipts)....