Issue/Justification

Section 44AD was repealed w.e.f. 01/04/2011 i.e. from AY 2011-12.

According to the new provisions, in case of an eligible assessee engaged in eligible business, income shall be deemed equal to a sum @ 8% of the turnover or higher income as per books. Section 44AD is applicable to any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE, agency business, commission / brokerage income business and whose total turnover or gross receipts in the previous year does not exceed an amount of Rs. 2crore. It was further amended by the Finance Act, 2016.

Applicability of section 44AD

The Finance Act, 2012 had inserted subsection (6) with retrospective effect from 1st April, 2011 to clarify that the presumptive tax provisions under section 44AD shall not be applicable to, inter alia, persons earning income in the nature of commission or brokerage or persons carrying on an agency business.

Further, the section 44AD(6) apparently seems to exclude the applicability to persons carrying on profession, agency business and earning commission or brokerage. It is possible that such persons have other businesses eligible for presumptive taxation under section 44AD. Therefore, it is suggested that the definition of “eligible business” be amended to exclude professions, agency business and business in respect of which the earnings are in the form of commission or brokerage.

Suggestion

It is suggested that instead of sub-section 44AD(6), the definition of “eligible business” be amended to exclude professions, agency business and business in respect of which the earnings are in the form of commission or brokerage.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)

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Category : Income Tax (26745)
Type : News (13421)
Tags : Budget (1951) Budget 2018 (394) ICAI (2537) Section 44AD (120)

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