Taxpublishers.in - Monday Corner Answer to the Quiz for the week (19 Feb 2024)

Share via Whatsapp 157 Views

Back to Monday Corner


Quiz for the week (19 Feb 2024): Francis (age 55) is a resident. He is engaged in contract manufacture of medicines with his manufacturing unit located at Chennai. For the financial year 2023-24, the total amount of tax deducted at source was Rs.22,000 and Francis has income of Rs.2,40,000 (computed under section 44AD @ 6%). He has no other income. Ganesh (age 63) another resident is a retired employee getting monthly pension of Rs.22,000. In February 2024, he sold a vacant land for Rs.45 lakhs. The indexed cost of acquisition of the vacant land was Rs.47 lakhs (computed). In June, 2023 Ganesh took advance of Rs.10 lakhs from Ajit for sale of the same vacant land and refunded the amount in December 2023 as the agreement got cancelled. Both the transactions of Ganesh were through net banking in the same savings bank account. He has no other income. Decide whether Francis and Ganesh have to file ITR for assessment year 2024-25 on mandatory basis. Answer : This query requires whether mandatory filing of ITR is required for two resident taxpayers viz. Francis and Ganesh. The emphasis is on whether filing of ITR is mandatory. It is a known fact that to receive refund of TDS, ITR has to be filed. The question is whether filing of ITR is required mandatorily or not with backup reasons. Section 115BAC(2)(i) says for the purpose of computing the total income no deduction is allowable under section 24(b) in respect of property referred to in section 23(2). In the case of Francis, he is engaged in business and his gross turnover was Rs.40 lakhs. He has offered 6% thereon under section 44AD which results in Rs.2,40,000. It is stated that he has no other income. Reference is invited to rule 12AB of the Income-tax rules which is inserted to facilitate the seventh proviso to section 139(1). Clause (i) of rule 12 AB mandates filing of ITR if the gross receipt from business exceeds Rs.60 lakhs during the previous year. The ITR has to be filed whether or not the assessee has income exceeding the basic exemption limit. In this case, the turnover is Rs.40 lakhs and therefore Francis need not file ITR on mandatory basis. It is altogether a different issue that for getting refund of tax deducted at source he has to file ITR. Here also the mandate is if the TDS is less than Rs.25,000, there is no compulsion to file ITR. As regards Ganesh his pension income of Rs.2,64,000 (Rs.22,000 per month for 12 months) is less than the basic exemption limit of Rs.3,00,000 applicable for senior citizens. Besides, Ganesh has long-term capital loss of Rs.2,00,000. He need not file ITR on prima facie facts of the case. But reference to rule 12AB(iv) would show that deposit in one or more savings bank account of Rs.50 lakhs or more during the previous year is one of the conditions for mandatory filing of ITR. In this case, Ganesh received Rs.45 lakhs towards sale of vacant land and he had received Rs.10 lakhs earlier from Ajit and thus aggregate deposit in the savings bank account exceeded Rs.50 lakhs. Therefore, Ganesh has to file ITR mandatorily even though his total income is less than basic exemption limit and he may not desire to carry forward long-term capital loss for set off to the subsequent assessment year. Thus, Ganesh has to file ITR mandatorily. In nutshell, Francis need not file ITR for AY 2024-25 and whereas Ganesh has to file ITR mandatorily for AY 2024-25.

Quiz for the week (19 Feb 2024):

Francis (age 55) is a resident. He is engaged in contract manufacture of medicines with his manufacturing unit located at Chennai. For the financial year 2023-24, the total amount of tax deducted at source was Rs.22,000 and Francis has income of Rs.2,40,000 (computed under section 44AD @ 6%). He has no other income.

Ganesh (age 63) another resident is a retired employee getting monthly pension of Rs.22,000. In February 2024, he sold a vacant land for Rs.45 lakhs. The indexed cost of acquisition of the vacant land was Rs.47 lakhs (computed). In June, 2023 Ganesh took advance of Rs.10 lakhs from Ajit for sale of the same vacant land and refunded the amount in December 2023 as the agreement got cancelled. Both the transactions of Ganesh were through net banking in the same savings bank account. He has no other income.

Decide whether Francis and Ganesh have to file ITR for assessment year 2024-25 on mandatory basis.

Answer :

This query requires whether mandatory filing of ITR is required for two resident taxpayers viz. Francis and Ganesh. The emphasis is on whether filing of ITR is mandatory. It is a known fact that to receive refund of TDS, ITR has to be filed. The question is whether filing of ITR is required mandatorily or not with backup reasons.

Section 115BAC(2)(i) says for the purpose of computing the total income no deduction is allowable under section 24(b) in respect of property referred to in section 23(2).

In the case of Francis, he is engaged in business and his gross turnover was Rs.40 lakhs. He has offered 6% thereon under section 44AD which results in Rs.2,40,000. It is stated that he has no other income. Reference is invited to rule 12AB of the Income-tax rules which is inserted to facilitate the seventh proviso to section 139(1). Clause (i) of rule 12 AB mandates filing of ITR if the gross receipt from business exceeds Rs.60 lakhs during the previous year. The ITR has to be filed whether or not the assessee has income exceeding the basic exemption limit. In this case, the turnover is Rs.40 lakhs and therefore Francis need not file ITR on mandatory basis. It is altogether a different issue that for getting refund of tax deducted at source he has to file ITR. Here also the mandate is if the TDS is less than Rs.25,000, there is no compulsion to file ITR.

As regards Ganesh his pension income of Rs.2,64,000 (Rs.22,000 per month for 12 months) is less than the basic exemption limit of Rs.3,00,000 applicable for senior citizens. Besides, Ganesh has long-term capital loss of Rs.2,00,000. He need not file ITR on prima facie facts of the case. But reference to rule 12AB(iv) would show that deposit in one or more savings bank account of Rs.50 lakhs or more during the previous year is one of the conditions for mandatory filing of ITR.

In this case, Ganesh received Rs.45 lakhs towards sale of vacant land and he had received Rs.10 lakhs earlier from Ajit and thus aggregate deposit in the savings bank account exceeded Rs.50 lakhs. Therefore, Ganesh has to file ITR mandatorily even though his total income is less than basic exemption limit and he may not desire to carry forward long-term capital loss for set off to the subsequent assessment year. Thus, Ganesh has to file ITR mandatorily.

In nutshell, Francis need not file ITR for AY 2024-25 and whereas Ganesh has to file ITR mandatorily for AY 2024-25.