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Sec 44ad - any restriction that income for which tds u/s194j has been deducted cannot be claimed

23 June 2018

Had filed return for AY2017-18 declaring income under 44AD. I am an individual consultant advising on payments industry and do not come under the definition of "professional" of 44ADA.

Got an email from CPC that since TDS u/s 194J has been deducted on this income, it has to be clubbed under 44ADA and is not eligible for presumptive taxation of 6% of income.

I have previously filed under 44AD in previous assessmet years and have not faced any issue even though TDS is deducted u/s 194J.

I was unable to find any reference to any change in IT Act restricting income on which TDS u/s 194J had been applied to be ineligible for inclusion under 44AD. Can any member clarify this please urgently??

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3 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178281 Points)
Replied 23 June 2018

A person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette is eligible to opt for sec. 44ADA of IT act, for assessment of his professional income under presumptive scheme.

As per sec. 194J TDS is required to be deucted by deductor for

(a) fees for professional services, or

(b) fees for technical services, or

(ba) any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, or

(d) any sum referred to in clause (va) of section 28.

Combined reading of both the sections implies section 194J not only includes professional services as in sec. 44ADA, but also other services which are out of ambit of the sec. 44ADA.

So, because of TDS deduction u/s. 194J do not automatically imply liability as per sec. 44ADA.

Even professionals like engineers having construction contract, doctors running hospitals are classified under business and can opt sec. 44AD but not compulsorily sec. 44ADA.

So, you have to justify your activity as business under law, and deny the applicability of sec. 44ADA, as specified profession under sec. 44AA(1).

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Sundararajan S (Final Student of ICAI) (1764 Points)
Replied 23 June 2018

You can give online response stating that such income is offered u/s 44AD. There's an online reconciliation facility under e-proceeding section in website.

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