2025 (7) TMI 1365 - AT - Income Tax

Special provision for computing profits and gains of profession on presumptive basis u/s 44ADA - assessee received remuneration as a partner of firm and is a Associates Chartered Accountants - AO did not accept the claim of the appellant stating that the assessee has received remuneration as working partner of the firm and not as an individual carrying on the profession specified u/s 44AA(1). DR argues during the course of hearing that neither the assessee has claimed any expenditure as per assessment findings nor he is entitled to claim section 44ADA presumptive benefit scheme of his impugned amount received as remuneration from the concerned partnership firm HELD THAT - This tribunal finds no merit in the Revenue s instant twin arguments as there is no such pre-condition in section 44ADA either to claim the corresponding expenditure (in light of sub-section (2) thereto) nor he is supposed to carry out his independent professional activities than as a partner in any establishment. Thus invoke stricter interpretation as per Commissioner Vs. Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT (LB) to reject the Revenue s foregoing arguments. Learned assessing authority is accordingly directed to assess the assessee u/s 44ADA of the Act as per law. This assessee s appeal is allowed.

Summary

ISSUES:

Whether remuneration received by a partner from a partnership firm qualifies as income from profession under section 44ADA of the Income Tax Act, 1961.Whether a partner receiving remuneration from a firm can claim the presumptive taxation scheme under section 44ADA.Whether the remuneration received by a working partner constitutes "gross receipts" or "turnover" for the purpose of section 44ADA.Whether the assessee must carry out independent professional activities in individual capacity to be eligible for section 44ADA.Whether claiming expenditure is a pre-condition for availing the presumptive taxation scheme under section 44ADA.

RULINGS / HOLDINGS:

The remuneration received by a partner from a partnership firm is not income from profession carried out individually and hence section 44ADA is not applicable to such remuneration; it is distinct and separate from income from profession.The presumptive taxation scheme under section 44ADA does not apply to remuneration received as a working partner from a firm, as such remuneration does not qualify as "gross receipts" or "turnover" of an individual professional.The share of profit received by a partner from the firm is exempt from taxation, whereas remuneration is taxable as income from business or profession but not under section 44ADA.The assessee need not carry out independent professional activities in individual capacity to claim section 44ADA; however, remuneration received as a partner is not covered under this section.There is no pre-condition under section 44ADA requiring the claimant to furnish details of expenditure or to claim expenditure for availing presumptive taxation benefits.

RATIONALE:

The Court relied on the statutory provisions of section 44ADA and related provisions such as section 44AA(1), section 28(v), and section 40(b) of the Income Tax Act, 1961, as well as CBDT Circular No. 3 of 2017, which clarify the scope and applicability of presumptive taxation for professionals.Precedents considered include the Supreme Court decision in Ramnik Lal Kothari, which dealt with deduction of allowances under section 10(2) of the Income Tax Act, 1922, and ITAT decisions including Sagar Dutta and Shri A. Anand Kumar, with the latter upheld by the Madras High Court distinguishing the applicability of presumptive taxation to remuneration and interest received from partnership firms.The Court emphasized that section 44ADA is a special provision intended to reduce compliance burden for small taxpayers engaged in eligible professions, requiring "gross receipts" or "turnover" from individual professional activity, which remuneration from a firm does not constitute.A stricter interpretation was invoked to reject the Revenue's argument that the assessee must claim expenditure or carry out independent professional activities to avail section 44ADA benefits, citing Commissioner Vs. Dilip Kumar (2018) 9 SSC 1 (SC).The decision reflects a doctrinal clarification that remuneration as a working partner is not professional income eligible for presumptive taxation under section 44ADA, distinguishing it from income earned individually from profession.