Manshi Baid

INCOME IN CASE OF ASSEESSEE ENGAGED IN THE BUSINESS OF PLYING , HIRING OR LEASING OF GOODS CARRIAGES

Applicability : This section applies to all types of assesses whether resident or non-resident who are engaged in the business of plying  , Hiring or leasing of goods carriages and owns not more than 10 goods carriages at any time during the financial year. Here the important point that is to be noted Is that the ownership of the good carriages should be of the assessees.Goods taken on hire purchase or on installments will be treated to be owned by the assessee even if the installments is outstanding partly or wholly. Here no bifurcation made between heavy and light good carriage.

MEANING OF GOOD CARRIAGE :

It means any motor vehicle which has been constructed for the purpose carriage of goods or any motor vehicle which has not been prepared for goods carriage but is used for such purpose.

JCB machine used for the purpose excavation of earth or lifting of heavy vehicle is not treated as good carriage and thus its income cannot be computed under Sec 44AE.

Income :

In respect of the assessee on whom the Sec 44AE is applicable , income will be calculated straight forward @ Rs. 7500.00 per month or part of month  per good carriage in respect of each good carriage for the period during which the good carriage was owned by the assessee during the year under consideration. It is to be noted that the period for the income calculation will be taken from the month in which the asset is purchased not from the month in which the good carriage was put to use. However in case the assessee is earning higher income than the income specified under this section then he can claim higher income.

In case of income is declared @ Rs, 7500.00, then in that case no additional deductions will be allowed under this section. This income will be considered as the net income earned after writing of all expenses including depreciation. However if the assessee under consideration is a partnership firm then from such income the interest or remuneration paid to partners can be deducted.

Note : The assessee who is declaring income under section 44AE is required to apply such provisions in respect of all the goods carriages . He is not allowed to apply provisions of Sec 44AE in case of some lorries and to go for the regular assessment in respect of remaining lorries. 

Relaxation allowed to the assessee covered u/s 44AE

The assessee covered u/s 44AE and declares income equal to or more than the income specied u/s 44AE will get following relaxations under the income tax act:-

  1. Will not be required to maintain goods u/s 44AA whatever is the amount of turnover or gross receipts.
  2. Will not be required to get the accounts audited u/s 44AB whatever is the amount of turnover or gross receipts.

Lower declaration of income :

The assessee covered under this section can declare lower income then the income specified under this section , but in that case the assessee will be required to maintain books of accounts as required u/s 44AA irrespective of the turnover as well as the assessee will be required to get his accounts audited u/s 44AD if the income of the assessee exceeds the exemption limit.

In other words, the assessee covered u/s 44AE and declaring income lower than the income specified under this section will be compulsorily maintaining the books of accounts and will be required to get his accounts audited by a chartered accountant as required under section 44AB irrespective of the turnover of the assessee during the year under assessment.

NOTE :

In case of 44AD of the income tax act it is provided that the assessee covered under 44AD will be required to get his accounts audited under section 44AB if he declares lower income than specified under than section and the declared income exceeds the maximum amount which is not chargeable to tax

However assessee covered u/s 44AE is required to get his accounts audited in case the assessee declares lower income than the income specified under section 44AE. Here the amount of income declared is more than the exemption limit or lower than that will not be consideration for applicability of Sec 44AB.

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Tags : Manshi Baid (14) section 44AB (128) section 44AE (5)

17 responses to “Analysis of Section 44AE of The Income Tax Act 1961”

  1. CA RAJESH MADAAN says:

    IF THE ASSESSE OWN 7 TRUCKS AND OPERATE 4 MORE TRUCKS TAKEN ON RENT ,
    CAN HE DECLARE PROFIT UNDER SEC 44AE , IF YES THEN HOW TO CALCULATE?

  2. ANIL KABIRAJ says:

    A PERSON HAS FOUR TRUCKS. HE IS DECLARING INCOME U/S 44AE FOR TWO TRUCKS AND FOR OTHER TWO TRUCKS HE IS NOT DECLARING ANY INCOME ON THE GROUND THAT THOSE TRUCKS ARE BEING USED IN HIS OWN BUSINESS. WHETHER HIS DECISION IS JUSTIFIED

  3. MANSHI BAID says:

    Its my pleasure Mr Rafeek

  4. MANSHI BAID says:

    Thanks Shalu

  5. MANSHI BAID says:

    thanks Mr. Bhushan

  6. TARAN says:

    WHAT IS THE MEANING OF LOWER DECELERATION OF INCOME? OUT OF THIS TWO FOLLOWING OPTIONS:
    SUPPOSE ASSESSEE HAS 8 TRUCKS.

    1. MIN INCOME TO SHOW PER TRUCK=7500/M BUT ASSESSEE IS SHOWING PER TRUCK 5000/M. OR
    2. ASSESSEE MAINTAINS BOOKS OF A/C AND AS PER THAT INCOME FROM BUSINESS OF PLYING HIRING OF GOODS IS RS. 340000/-

    NOW IN WHICH OF THE ABOVE CASES ASSESSEE IS REQUIRED TO FOLLOW 44AA AND 44AB??

    PLEASE REPLY

    • MANSHI BAID says:

      In first case , the assessee is required to get his books of accounts audited U/s 44AB irrespective of the fact whether the total income exceeds the maximum exemtion limit or not just because the assessee is declaring income lower than Rs. 7500/-

    • MANSHI BAID says:

      In second case , no. of goods carriages has not been mentioned from your side. I am assuming the no. of trucks is 8. As per Sec 44AE income should be 720000.00 but the assessee is declaring income of Rs. 340000.00 . Here in this case also the assessee is required to get his books of accounts audited u/s 44AB

      • TARAN says:

        THANKS MANSHI FOR THE REPLY.
        whether assessee has a choice to opt for 44AE or it is mandatory given to him when he is doing the business of plying and hiring of goods carriages owning less than 8 trucks but maintains A/c as required in 44AA.

        • MANSHI BAID says:

          Mr Taran , if the assessee owns not more than 10 goods carriages at any time durng the P.Y and engaged in the business of plying , hiring or leasing such goods carriages , the income of such business in required to be declared under this section. Thus in this case it is necessary to declare income under this section . In case the income is declared less than required to get his books of accounts audited under section 44AB

      • TARAN says:

        one more thing suppose in second case assessee has 11 trucks instead of 8 and he is showing a profit of Rs. 340000/- and his turnover is less than 1 crore then also he is liable to audit

        • MANSHI BAID says:

          Mr Taran, Sec 44AE is applicable in case the assessee have less than 10 goods carriages.Here the assessee have 11 trucks , hence the question of applicability of this section does not arise at all

  7. Rafeek says:

    Informations are very clear.. Even a small point is clearly mentioned.. Thanks a lot..

  8. shalu says:

    Great Analysis

  9. Bhushan says:

    Thank you for very good analysis of small but important section! Keep it up!!

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