Shazia Khan Vs ITO (ITAT Lucknow)
The Income Tax Appellate Tribunal considered whether the assessee’s receipts from referral and facilitation services for financial products were taxable under the presumptive taxation scheme of Section 44AD or Section 44ADA of the Income-tax Act, 1961. The Assessing Officer had rejected the assessee’s claim under Section 44AD and computed income under Section 44ADA at 50% of gross receipts solely because tax had been deducted at source under Section 194J. The CIT(A) affirmed this approach. The Tribunal observed that the deductor’s decision to deduct tax under Section 194J could not bind statutory authorities in determining the true nature of income. The Assessing Officer and CIT(A) were required to independently examine whether the assessee’s activities constituted professional services covered under Section 44ADA or business activities eligible under Section 44AD. Since no such examination had been undertaken, the Tribunal set aside the appellate order and remanded the matter to the Assessing Officer for fresh adjudication after providing adequate opportunity to the assessee.
Core Issue: Whether receipts can be treated as professional income and subjected to section 44ADA merely because the payer deducted tax at source under section 194J, thereby denying the assessee’s claim of presumptive taxation under section 44AD.
