Income tax on lump sum amount received by Advocate

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A super senior advocate received a lump sum from the Advocate Welfare Fund upon ceasing practice and is seeking clarification on its taxability. The discussion explores whether this amount should be taxed under 'Profits and Gains of Business or Profession', 'Income from Other Sources', or as 'Long-Term Capital Gains'. Key points include whether bar council enrollment constitutes an asset and if surrendering it is a transfer, with differing opinions on the cost of acquisition.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Querist)
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20 May 2020 An advocate, super senior citizen, received a substantial amount in lumpsum from Advocate Welfare Fund' upon permanently stopping his legal practice. Whether that amount is liable to income tax. If so, the said amount is to be offered under which 'head of income'.

Gokul Sharma

Gokul Sharma (Expert)
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20 May 2020 SIR IN MY OPINION IT SHOULD BE CHARGEABLE UNDER PGBP .....
BECAUSE AMOUNT RECEIVED FOR NOT DOING SOMETHING CHARGEABLE UNDER PGBP

Soumitra Basu

Soumitra Basu (Expert)
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21 May 2020 may be it will be charged under income from other sources depends upon the facts of the case and based on the welfare of the scheme.

c.bakshi

c.bakshi (Expert)
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21 May 2020 its taxable under the head PROFIT UNDER BUSINESS AND PROFESSION

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Querist)
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29 May 2020 Seems the amount is to be assessed under LTCG in view of the following observation.

* Bar council enrollment (Sannath) is an asset per section 2(14)(a).

* Surrendering the enrollment is a transfer per section 2(47(i).

* The amount received from Advocate Welfare fund is income per section 45(1).

* Cost of acquisition is NIL per section 55(2)(a)(ii).

Soumitra Basu

Soumitra Basu (Expert)
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01 June 2020 There is a debatable issue whether enrollment with bar council after passing LLB degree is an asset. In that case member of the every association is an asset. Whether stopping of practice will tantamount to surrendering of enrollment. Is this a sale of Council enrollment to any one or surrendering the same in favour of any body. Cost of acquisition cannot be Nil since this has to be obtained by paying some fees.

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