TMI Blog2020 (12) TMI 994X X X X Extracts X X X X X X X X Extracts X X X X ..... ions shall be allowed. Thus, conspicuously section 28(v) has not been included in sub-section (2) of Section 44AD which deals with any interest, salary, bonus, commission or remuneration by whatever name called, due to or received by, a partner of a firm from such firm. We find that the Tribunal rightly rejected the plea raised by the assessee and confirmed the order passed by the CIT(A) and the Assessing Officer. - Tax Case Appeal No. 388 of 2019 - - - Dated:- 23-12-2020 - Honourable Mr. Justice T.S. Sivagnanam And Honourable Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Mr.R.Sivaraman For the Respondent : Mr. M. Swaminathan Senior Standing Counsel Assisted by Ms.V.Pushpa Junior Standing Counsel JUDGMENT T.S.SIVAGNANAM, J. This appeal filed by the assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) is directed against the order dated 30.01.2019 passed by the Income Tax Appellant Tribunal, 'A' Bench, Chennai (hereinafter referred to as 'the Tribunal') in I.T.A.No.573/CHNY/2018 for the assessment year 2012-13. 2.The present appeal has been filed raising the following substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 44AD of the Act is a special provision for computing profits and gains of business on presumptive basis which was introduced in the Act with effect from 1993. Sub-section (1) of Section 44AD states that Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession . Sub-section (2) of Section 44AD states that any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. The explanation found in section 44AD defines eligible assessee as well as the eligible business. Under Clause (a) of the explanation which defines eligible assessee to mean an individual, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Ramniklal Kothari [(1969) 74 ITR 57(SC)] and the decision in the case of Munjal Sales Corporation vs. Commissioner of Income Tax, Ludhiana [(2008) 168 Taxman 43(SC)] . The learned counsel also referred to the Budget Speech of Hon'ble Finance Minister delivered on 29.02.1992, Circular issued by the CBDT [Central Board of Direct Taxes] bearing Circular No.636 dated 31.08.1992, Copy of the Guidance note of Tax Audit under Section 44AB of the Act and the Copy of the Memorandum explaining the provisions of the Finance Bill, 1992. To buttress his submission that the assessee is an eligible assessee, the learned counsel referred to Section 44AD(6)(i), (ii) and (iii) of the Act. 8.The learned Senior Standing Counsel for the revenue would submit that the assessee is not doing any business, but the firm is carrying on business in which the assessee is a partner and therefore, the condition that it should arise from an eligible business is not satisfied. In the Statement issued by the ICAI, it has been stated that the word turnover for the purpose of the clause may be interpreted to mean the aggreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is not in pari materia with Section 44AD which is a special provision intended to help small businesses. Therefore, the decision cannot be applied to the facts of this case. 11.As pointed out earlier, the assessee should be able to satisfy the four main criteria mentioned in sub-section (1) of Sectio 44AD r/w. explanation (a) and (b) in the said provision. Therefore, the assessee should establish that he is an eligible assessee engaged in an eligible business and such business should have a total turnover or a gross receipt. Admittedly, the assessee who is an individual in the instant case is not carrying on any business. Therefore, the remuneration and interest received by the assessee from the partnership firm cannot be termed to be a turnover of the assessee [individual]. Similarly, it will also not qualify for gross receipts. As rightly pointed out by the revenue, in the statement issued by the ICAI on the Companies (Auditors report) Order 2003, the word 'turnover' has been defined under the term 'turnover' for the purpose of this clause may be interpreted to mean the aggregate amount for which sales are effected or services rendered by an enterprise. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s receipts or turnover of a business of being partners in a firm. The Tribunal took note of the position prior to substitution of Section 44AD by Finance (No.2) Act, 2009 with effect from 01.04.2011. Prior to the said substitution, this provision allowed the application of presumptive tax rate only for business of civil construction or supply of labour for civil construction. By virtue of the substitution, the applicability of presumptive rate of tax was expanded to include any business which had turnover or gross receipts of less than ₹ 1 Crore. The Tribunal noted the explanatory notes to the provisions of the Finance (No.2) Act, 2009 vide Circular No.5/2010 dated 03.06.2010, wherein the CBDT had explained as to why the scope of the said provision was enlarged. The relevant portion of the Circular reads as follows: 21.Special Provision for computing profits and gains of business on presumptive basis. 21.1.The existing provisions of the Income Tax Act provide for taxation of income on presumptive basis .............................................................................................. There has been a substantial increase in small businesses wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total turnover with the previous year on account of such business. Section 44ADA is a special provision for computing profits and gains of profession on presumptive basis uses the expression 'Total gross receipts'. As already seen in Section 44AD, the words used are 'total turnover' or 'gross receipts' and it pre-supposes that it pertains to a sales turnover and no other meaning can be given to the said words and if done so, the purpose of introducing Section 44AD would stand defeated. That apart, the position becomes much clearer if we take note of sub-Section (2) of Section 44AD which states that any deduction allowable under the provision of Section 30 to 38 for the purpose of sub-section (1) be deemed to have been already given full effect to and no further deduction under those sections shall be allowed. Thus, conspicuously section 28(v) has not been included in sub-section (2) of Section 44AD which deals with any interest, salary, bonus, commission or remuneration by whatever name called, due to or received by, a partner of a firm from such firm. 14.Thus, for all the above reasons, we find that the Tribunal rightly rejected the plea raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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