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Service sector [it., bpo service providers]

kumar Rahul (account Student) (160 Points)

13 October 2017

Service sector bpo service providers under code 0709. plz advise in which section income be computed ..ie 44AD ...44ADA...44 AE

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177528 Points)
Replied 14 October 2017

For CODE '0709'..... Sec. 44AD can be applied........

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Shaheen S (38 Points)
Replied 10 September 2018

Sorry for hijacking the thread. But I got a notification under s139(9) error code 86.

I provide administrative services and language translation/transcripttion to foreign companies and I employ some people to get the job done.

I filed ITR 4 with the nature of business as 14005 - Other IT enabled services. It is not consultancy, agency or commission.

Should I change Nature of Business to some other code for what I do and submit rectified ITR 4?

Please help me with what I need to do here. Thank you in advance for any help.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177528 Points)
Replied 10 September 2018

"I filed ITR 4 with the nature of business as 14005 - Other IT enabled services. It is not consultancy, agency or commission."

Code... 14005.... comes under....(1) persons carrying on professions that are referred to in Sec.44AA(1)

So, either change sec. 44AD to 44ADA (min. 50% profit margin), if any TDS deducted u/s. 194J.

Or file under normal assessment, in ITR3

Or may change code to .... 19009 or 20011 or 21008 & revise return.

Shaheen S (38 Points)
Replied 10 September 2018

Thank you sir for your prompt reply. Are 14003 or 14006 also covered under s 44AA? In other words, all the codes under computer and related services, including data processing and BPO services under s 44AA?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177528 Points)
Replied 10 September 2018

Though not clarified by CPC, but it should have been...

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Shaheen S (38 Points)
Replied 10 September 2018

I cannot file under s 44ADA since I pay more than 60% of gross as salaries and then 10-15% expenses. ITR3 seems confusing and complicated for me. So 20011 or 21008 & revise return seem to be my only other option here if I cannot use the other computer related services codes. I hope I have understood correctly.

Thank you very much for your clarification sir.

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Shaheen S (38 Points)
Replied 10 September 2018

Also sir, if you don't mind, can you please tell me what are the professions covered under s 44AA(1)?

Shaheen S (38 Points)
Replied 10 September 2018

This was the notice I received.

Error Descripttion
As per Section 44AD(6) of the Income Tax Act, 1961, the provisions of Sec.44AD are not applicable to – (1) persons carrying on professions that are referred to in Sec.44AA(1), (2) persons earning income in the nature of commission or brokerage, and (3) persons carrying on any agency business.As seen from the return of income filed, the nature of business code mentioned is which falls in the categories mentioned above. Hence, the provisions of Sec.44AD are not applicable, in your case.

Probable resolution
As the provisions of Section 44AD are not applicable, in your case, the claim of computing profits and gains of business on presumptive basis, under this special provision is not allowable. Hence, the above defect has to be corrected by way of computing the profits and gains of business under the normal provisions and not under Sec.44AD and offering the same.

I just need to change code to 20011 or 21008 & file in response to s 139(9). Am I right in my understanding?

Thank you very much for your guidance.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177528 Points)
Replied 11 September 2018

Actually, you should go with suggestion provided by CPC, and rectify return with P&L acc and BS details. But you may also revise return as per above said option.