Taxpublishers.in - Monday Corner Answer to the Quiz for the week (25 Mar 2024)

Share via Whatsapp 155 Views

Back to Monday Corner


Quiz for the week (25 Mar 2024): Ms Lovely is engaged in trade of electrical items by name Lovely Traders. The assessee was admitting income under section 44AD up to the assessment year 2018-19. She opted out of section 44AD and got the books of account audited under section 44AB and filed ITR from the assessment year 2019-20 onwards by admitting income from business below the presumptive rate. Since there is general downward trend in turnover, she wants to admit income for the assessment year 2024-25 under section 44AD instead of getting the books of account audited under section 44AB. Advise suitably Ms Lovely regarding the option of admitting the income under section 44AD instead of getting the books of account audited under section 44AB for the assessment year 2024-25. Best Answer : Section 44AD provides for admission of income on presumptive basis. When the assessee opts for admission of income on presumptive basis contained in section 44AD the provisions contained in sections 28 to 43C would not apply. The benefit of availing section 44AD is with reference to ‘eligible business’ and ‘eligible assessee’. ‘Eligible business’ means (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AD; and (ii) whose total turnover or gross receipts in the previous does not exceed Rs.2 crore. The proviso to clause (b) of the Explanation to section 44AD provides for enhanced limit of Rs.300 lakhs where the receipt in cash does not exceed 5% of the total turnover or gross receipts and such benefit is available from the assessment year 2024-25 onwards. ‘Eligible assessee’ means an individual, HUF or a partnership firm who is a resident but does not include LLP and who has not claimed deduction under any of the sections viz. section 10A, section 10AA, section 10B, section 10BA or deduction under any provisions of Chapter VIA under the heading “C.– Deductions in respect of certain incomes” in the relevant assessment year. Section 44AD(4) says that where an ‘eligible assessee’ declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the 5 assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for 5 assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1) of section 44AD. Thus, when the assessee opts out of section 44AD in an assessment year, he cannot regain the benefit of section 44AD for 5 subsequent assessment years subsequent to the assessment year of opt out. To put it simply, it is 1+5 assessment years for re-entry in order to avail the provisions of section 44AD. In this case, Ms.Lovely opted out of section 44AD in the assessment year 2019-20. For the subsequent 5 assessment years i.e. up to 2024-25, she cannot avail the benefits of section 44AD. Thus, Ms.Lovely is not eligible to avail the benefit of section 44AD for the assessment year 2024-25. S. Suresh Bangalore

Quiz for the week (25 Mar 2024):

Ms Lovely is engaged in trade of electrical items by name Lovely Traders. The assessee was admitting income under section 44AD up to the assessment year 2018-19. She opted out of section 44AD and got the books of account audited under section 44AB and filed ITR from the assessment year 2019-20 onwards by admitting income from business below the presumptive rate. Since there is general downward trend in turnover, she wants to admit income for the assessment year 2024-25 under section 44AD instead of getting the books of account audited under section 44AB.

Advise suitably Ms Lovely regarding the option of admitting the income under section 44AD instead of getting the books of account audited under section 44AB for the assessment year 2024-25.

Best Answer :

Section 44AD provides for admission of income on presumptive basis. When the assessee opts for admission of income on presumptive basis contained in section 44AD the provisions contained in sections 28 to 43C would not apply. The benefit of availing section 44AD is with reference to ‘eligible business’ and ‘eligible assessee’.

‘Eligible business’ means (i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AD; and (ii) whose total turnover or gross receipts in the previous does not exceed Rs.2 crore. The proviso to clause (b) of the Explanation to section 44AD provides for enhanced limit of Rs.300 lakhs where the receipt in cash does not exceed 5% of the total turnover or gross receipts and such benefit is available from the assessment year 2024-25 onwards.

‘Eligible assessee’ means an individual, HUF or a partnership firm who is a resident but does not include LLP and who has not claimed deduction under any of the sections viz. section 10A, section 10AA, section 10B, section 10BA or deduction under any provisions of Chapter VIA under the heading “C.– Deductions in respect of certain incomes” in the relevant assessment year.

Section 44AD(4) says that where an ‘eligible assessee’ declares profit for any previous year in accordance with the provisions of this section and he declares profit for any of the 5 assessment years relevant to the previous year succeeding such previous year not in accordance with the provisions of sub-section (1), he shall not be eligible to claim the benefit of the provisions of this section for 5 assessment years subsequent to the assessment year relevant to the previous year in which the profit has not been declared in accordance with the provisions of sub-section (1) of section 44AD.

Thus, when the assessee opts out of section 44AD in an assessment year, he cannot regain the benefit of section 44AD for 5 subsequent assessment years subsequent to the assessment year of opt out. To put it simply, it is 1+5 assessment years for re-entry in order to avail the provisions of section 44AD.

In this case, Ms.Lovely opted out of section 44AD in the assessment year 2019-20. For the subsequent 5 assessment years i.e. up to 2024-25, she cannot avail the benefits of section 44AD. Thus, Ms.Lovely is not eligible to avail the benefit of section 44AD for the assessment year 2024-25.

S. Suresh
Bangalore