01 December 2018
Remuneration from partnership firm is taxable under the head "Income from Business or Profession". However section 44(AA) states a specific list of professionals or others earning more than Rs. 1,50,000/- or having a turnover more than Rs. 25,00,000/- should maintain books of accounts.
The said partner files his income tax return through ITR-3 showing the remuneration as income from business or profession. On the other hand he does not input any amount in P&L or Balance Sheet of the ITR stating he is not eligible to maintain any books of accounts as the amount the remuneration he earned through his firm is a fixed monthly income (after matching the criteria of section 40b) and not any personal profit based on the turnover of his firm.
Although, the partner gets a defective return notice stating that he has selected ITR-3 but has filed the same without updating any amount in his P&L and Balance Sheet.
Questions :-
1) Is the IT department correct in their stance ?
2) Can the remuneration be taxed under the head of "Income from Other Sources" from ITR-2 instead of "Profits & Gains from Business or Profession (PGBP)" through ITR-3 to avoid the nil upload of P&L and Balance sheet ?
3) Is the partner eligible to take a deduction from his remuneration of expenses incurred during the year for the business since he is filing a return under PGBP. If yes, can he still file the same without entering any amount in his P&L and Balance Sheet ?
4) Can he directly opt section 44 AD/ADA under presumptive scheme to stay away from the issues of Section 44AA ?
02 December 2018
I guess you have filed income tax return under incorrect tab.. you should not file profit/loss account and balance sheet.. Remuneration cannot be taxed under other source.. Reimbursement of expense is not taxable so no need to reflect same in return.. s. 44AA is not applicable in case of partner thus question of presumptive taxation doesn't arises.
03 December 2018
Dear Sir, Thank you for the reply. There is a minor query though, when I select ITR-3 for filing the return of the said partner and select the tab stating we are not eligible to maintain books of accounts under section 44AA then the ITR utility freezes the entire "Income from Profits & Loss head" and is not allowing us to enter any amount as earned remuneration for the year in the said head.
I think this is arising because of selecting the Business code "00001", which I believe is the correct code. However after selecting the said code the entire "PGBP" head freezes. Not allowing to enter any amount in the said head.
CAclubindia
