Q6. What are the provisions for estimating the profits and gains of an assesse engaged in retail business under section 44AD? Also discuss the provisions of section 438 regarding certain expenditure allowed on actual payment basis?
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Answers
Answer:
Section 44AD Computing profits & gains of business on presumptive basis
A. Meaning of terms used in section 44AD(1)
To understand the provisions of sec 44AD(1) of the Act, we must study the meaning of following terms:
1. Eligible assessee:
1) Resident Individual
2) Resident Hindu Undivided Family
3) Resident Partnership Firm (not a Limited LiabilityPartnership Firm as defined under LLP Act, 2008)
Note: While explaining the meaning of eligible assessee, a rider also provided in Explanation (a) to Sec. 44AD for eligibility i.e.
NON – ELIGIBLE ASSESSEES UNDER SEC. 44AD
Explanation (a) to sec. 44AD provides the following arenot covered under these provisions:
An Individual / HUF / a Partnership Firm who is a resident and claiming deduction under chapter III of the Act section10A,10AA,10B,10BA relating to units located in FREE Trade Zone, Hardware & Software Technology Park etc. OR
Claiming deduction under Chapter VI-A Part-C (deductions in respect of certain Incomes) i.e. Sections80HH to 80RRB.
SO- THE FOLLOWING ARE NOT COVERED U/s 44AD
Individual /HUF who is not Resident
Association of Person
Firm having non-resident Status.
A local Authority
A co-operative Society
LLP both Indian as well as Foreign
Companies both Domestic and Foreign company
Every Artificial Juridical Person
2. Eligible business:The presumptive taxation scheme under section 44AD covers all small businesses with total turnover/ gross receipts of up to 2 crores (except the business of plying, hiring and leasing goods carriages covered under section 44AE). Sub- sec. (6) of sec. 44AD states that ―the provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to-
(i) a person carrying on profession as referred to in sub section (1) of section 44AA ;
(ii) a person earning income in the nature of commission or brokerage ;
(iii) A person who is carrying on any agency business.
(Note : An insurance agent cannot adopt the presumptive taxation scheme of section 44AD)
Eligible Business- COVERED
So Eligible Business includes :
Manufacturing
Trading
Wholesale
Retail
Job Work
Service business
Speculative/ Non speculative
Answer:
Section 44AD Computing profits & gains of business on presumptive basis
A. Meaning of terms used in section 44AD(1)
To understand the provisions of sec 44AD(1) of the Act, we must study the meaning of following terms:
1. Eligible assessee:
1) Resident Individual
2) Resident Hindu Undivided Family
Explanation:
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