Amendment of section 44AA – Maintenance of accounts by certain persons carrying on profession or business
As per the provisions of clause (iii) of subsection (2) of Section 44AA of the Income-tax Act, every person carrying on business or profession not being a profession referred to I subsection (1) and who claims that his income is lower than the profits or gains so deemed to be the profits and gains of his business under section 44AD or section 44AE or section 44AF or section 44BB or section 44BBB as the case may be shall have to keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
v It proposed to substitute the figures and letters “section 44AE” for the figures and letters “section 44AD or section 44AE or section 44AF”.
v It has also been proposed to substitute the words “previous year” at the end of the clause with words “previous year or”
v A new clause (iv) shall be inserted after the clause (iii). The new clause (iv) reads as under:
“(iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under the section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,”
The proposed amendment makes it mandatory the maintenance of accounts by an assesse who falls under the ambit of new section 44AD, if he claims that his income from profits and gains of the business is lower than the profits and gains as computed in accordance with the provisions of section 44AD and if his income exceeds the maximum amount which is not chargeable to income-tax.
This amendment will take effect from 1st April 2011. Accordingly apply to the assessment year 2011-12 and subsequent years.
Amendment of section 44AB – Audit of accounts of certain persons carrying on business or profession
It is proposed to amend clause (c) of section 44AB. As per the proposed amendment for the words, figures and letters “section 44AD or section 44AE or section 44AD or section 44AE or section 44AF”, the word, figure and letters “section 44AE shall be substituted.
Ø As per the proposed amendment Every Person who is engaged in the business of plying, hiring or leasing such goods carriages, if he claims that his income from the said business is lower than the presumptive income as specified in subsection (2) of section 44AE has to keep and maintain such books of account and other documents as required under subsection (2) of section 44AA and get his accounts audited and furnish a report of such audit as required under section 44AB before the specified date.
Ø As per the proposed new clause (d) to be inserted Every Person who claims that his income from business deemed to be the profits under section 44AD to be lower than the profits and gains so deemed to be profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable t income-tax in any previous year get his accounts of such previous year audited by an accountant before the specified date.
This amendment will take effect from 1st April, 2011. Accordingly apply to the assessment year 2011-12 and subsequent years.
Amendment of section 44AD – Special provision for computing profits and gains of business of civil constructions, etc.,
This section has been completely redrafted and substituted for the old section.
Ø The provisions of this section apply to eligible assessees engaged in eligible business.
Ø The terms eligible assessee and eligible business have been defined in the Explanation.
Ø An eligible assessee means (1) A resident Individual (2) A resident HUF and (3) A resident partnership Firm. LLP is excluded from the partnership firm for this section. Hence LLP is not an eligible assessee for this section.
Ø Eligible business means any business except the business of plying, hiring or leasing of goods carriages referred to in section 44AE.
Ø The income of the eligible assessee from the eligible business in the previous year is computed @ 8% on the gross receipts or total turnover or a sum higher than the said sum claimed to have been earned by the eligible assessee.
Ø All deductions under sections 30 to 38 shall be deemed to have been given full effect in arriving at the income of the eligible assessee from the eligible business and no further deductions are available under these sections.
Ø If the eligible assessee is a partnership firm the deduction towards interest and partenrs’ remuneration shall be allowed subject to the limits and conditions laid down in section 40(b).
Ø Written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee has calimed the depreciation and he was actually allowed the depreciation for each of the relevant assessment year.
Ø The eligible assessee who is engaged in the eligible business is under no obligation from payment of Advance Tax as the provisions of Chapter XVII-C are not applicable.
Ø There is ambiguity in subsection (5) of the proposed section 44AD.
Ø The eligible assessee is under an obligation to maintain such books of account and other documents as required under subsection (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB, if claims that his profits and gains from the eligible business are lower than the profits and gains specified under subsection (1) of this section and his income exceeds the maximum amount which is not chargeable to tax.
Ø As seen from the above an assessee whose profits are lower than the prescribed rate 8% of his gross receipts or total turnover and his income exceeds the maximum amount which is not chargeable to tax.
Ø Both the conditions are simultaneous.
Ø An amendment is necessary to do away with the ambiguity.
The provisions of this section shall take effect from 1st April 2011 and accordingly apply to the assessment year 2011-12 and subsequent year
Amendment of section 44AE – special provisions for computing profits and gains of business of plying, hiring or leasing goods carriages
Subsection (2) of section 44AE is proposed to be amended.
The deemed profits from the business as per the provisions of amended section are-
§ Rs. 5,000/- per month per each heavy vehicle owned in the previous year by the assessee or the amount actually claimed to have earned by the assessee from such vehichle which ever is higher.
§ Rs. 4,500/- per month per each heavy vehicle owned in the previous year by the assessee or the amount actually claimed to have earned by the assessee from such vehichle which ever is higher.
§ Other provisions of this section remained unchanged.
The amended provisions shall take effect from 1st April 2011. Accordingly will apply to the assessment year 2011-12 and subsequent years.
Deletion of section 44AF – Special Provisions for computing profits and gains of retail business
A new subsection (6) has been proposed to be inserted with effect from 1st April 2011 in section 44AF. As per the proposed subsection the provisions of section 44AF are not applicable from the assessment year 2001-12 onwards.
