Section 44AE of The Income Tax Act, 1961
Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages
This section applies specifically on assessees carrying on business of plying, hiring or leasing good carriages.
This section states that if an assessee is carrying on the above mentioned business then the income of such business chargeable to tax under the head “Profits and gains of business or profession” shall be deemed to be the aggregate of the profits and gains, from all the goods carriages owned by him in the previous year, computed in accordance with the following provisions/parts:
Part I:
If assesse owns a “heavy good vehicle”*: The profit shall be an amount equal to Rs. 1000 per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year
or
an amount claimed to have been actually earned from such vehicle,
whichever is higher.
Part II:
If assesse owns a “light good vehicle”: The profit shall be an amount equal to Rs. 7500 for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year
or
an amount claimed to have been actually earned from such vehicle,
whichever is higher.
But, the assessee should not more than 10 goods carriages in any case at any time during the previous year for availing the benefit of this section.
* The expression “heavy goods vehicle” means any goods carriage, the gross vehicle weight of which exceeds 12 tons.
Now, What if the income so declared is less than as specified in this section?
What if he owns more than 10 goods carriages?
Illustrations:
1) K is engaged in the business of leasing of goods carriages. He owns 11 goods carriages (capacity 14 tons each). He owned it for 7 months in the previous year. Is he eligible for taking the benefit of Section 44AE?
Rs. 10,78,000 in this case. [1000 x 7 (months) x 11 (vehicles) x 14 (tons)]
But, Section 44AE specifically says that this section is applicable only if the assessee owns less than or equals to 10 goods carriages in the previous year.
As, K was owning 11 goods carriages in the previous year. Therefore, K is not eligible from taking the benefit under this section.
2) S is engaged in the business of leasing of goods carriages. He owns 8 goods carriages (capacity 14 tons each). He owned it for 6 months in the previous year. Is he eligible for taking the benefit of Section 44AE?
Rs. 6,72,000 in this case. [1000 x 6 (months) x 8 (vehicles) x 14 (tons)]
As S has fulfilled the basic condition of not owning more than 10 goods carriages in the previous year. Therefore, if S declares minimum of Rs. 6,72,000 as his income from the business, then he can avail the benefit of this section.
Let’s complicate it little:
3) Suppose, S has earned actual profit of Rs. 7,30,000 in the previous year. Now, can he declare Rs. 6,72,000 as his profit and avail the benefit of this section?
4) Now, Suppose, S has declared profit of Rs. 6,00,000. Now what will be the scenario?
5) Now, Suppose, S has owned the vehicles for 5.5 months? Will there be any change in the calculation?
6) Now, Suppose S has owned 8 Light goods carriages instead of heavy goods carriages. Will there be any change in the calculation?
Therefore, the deemed profit shall be Rs. 3,60,000 [7500 x 6 (months) x 8 (vehicles)]
7) Now, Suppose S has owned 8 Light goods carriages and 2 heavy goods carriages weighted 14 tons each (all for 6 months). What will be scenario?
In this case, the calculation will be as follows:
For heavy goods carriages: [1000 x 2 (vehicles) x 14 (tons) x 6 (months)] = 1,68,000
For light goods carriages: [7500 x 8 (vehicles) x 6 (months)] = 3,60,000
Therefore, S has to declare a total of Rs. 5,28,000 [1,68,000 + 3,60,000] as his deemed profit under Section 44AE.
Point to remember:
The number of tons per vehicle need not be considered while the calculation of income from light goods carriages as this section has specifically mentioned that Rs. 7500 per month per vehicle has to be taken in the case of light goods carriages.
Some other provisions of this section:
(The author is a CA Final student and A Published Author of the Book “AN INSIGHT INTO TAX AUDIT”, publication of Young Global Publications, New Delhi. For any doubts or errors in the article, contact the author at [email protected] or whatsapp at 98888-55340)
Well explained!! Amazing examples…
Very very well solved and explained
if truck taken on hire then is it qualify for 44ae, Whether truck should be owned by meaning of title?
Heavy good vehicle has two weights onev is unladen weight and other Is gross weight ( unladen+ max weight which can be loaded)
Which weight we have to take for calculating 1000 per mt
Lorry owners are paying road tax for every vehicle quarterly , is there any option to claim that amount amount rs. 4900 per quarter per vehicle.
If an assessee whose 26AS states receipt of 1772658 on which tds deducted @1% 7860 under 194c. profit income under sec.44AE
If an assessee whose 26AS states receipt of 620000 on which tds deducted @1% under 194c. Can he show his income less than 620000 under sec.44AE