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Profession vs. business

Prince Garg (CA) (31 Points)

09 July 2015

Respected Sir/Madam

Actually i was going through section 44 AD of income tax act and i saw there is used a word "business". i have a case in which a professional is providing classes(tutions) to students and charges tution fees. So i have a query will he/she come under this section.

if not, then when he/she keep other teachers as employees and provide tutions to students then will it become a business? if yes, then can you please define a when a profession becomes business.

Thanks.

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9 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 09 July 2015

https://www.simpletaxindia.net/2012/02/audit-44ab-business-profession-meaning.H T M L#sthash.1QkIvOty.dpuf

Prince Garg (CA) (31 Points)
Replied 09 July 2015

Dear Poornima,

Thanks for your reply but this weblink is not available can you please direct me further for my query.

(Guest)

Yes, for purpose of section 44ad only business are covered ..this section does not apply to profession... In first case,this section will not apply because this is a profession.. However in second case,it will apply because u r not applying ur skills to teach other rather u hire other people to work for you so it becomes a business here.

1 Like

Prince Garg (CA) (31 Points)
Replied 10 July 2015

Thanks a Lot Jyotsna G

Can you further guide me if few persons get togesther and start providing professional services in the above case then will it be called a business ?

:-)

(Guest)

My answer for first case is wrong..sorry fr tht..because 44ad is not applicable to the profession covered u/s 44aa and teaching is not a profession for the purpose of section 44aa..so u can opt for 44ad .. And answer would remain same for all three cases.

Prince Garg (CA) (31 Points)
Replied 11 July 2015

Okay :-)

but as per income tax act the definition of profession nd business is as per the photo attached (in PDF) herewith and in my all cases no trading, manufacturing and commercial activities are taken.

so will all the three cases come under 44 AD ?

please reply...!!!

:-)

Attached File : 771604 20150711123136 full page photo.pdf downloaded: 102 times

(Guest)

let me explain this-

as per section 44AD(6) , 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; or

(iii) a person carrying on any agency business.

(and for section 44AA (1) ,profession includes legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board.)

(Guest)

actually m confused whether it is business or profession but no matter what we call it ( Profession or business) , in both ways you can choose for section 44AD in all above case.

Hope u got what i actually mean