Profession or business

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2012 Dear expert,
Suppose there is an auto mechanic who runs a garage will come under the head of profession or in the head of business?
And he has to file his return on itr4 or he also can opt itr4s u/s 44ad.
Please advise me.
Thanks in advance.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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25 July 2012 If he is simply a mechanic, he can file ITR 4S, by showing his income as Business Income. .
.

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2012 he does not sell auto parts, and only charges his labour.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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10 August 2024 An auto mechanic running a garage primarily providing labor services would generally be classified under **"Profession"** rather than "Business." Here’s a detailed breakdown to help you understand the classification and the corresponding tax return forms:

### Classification: Profession vs. Business

**1. **Profession**:**
- **Nature of Services**: A profession typically involves specialized skills or expertise, such as those exercised by doctors, lawyers, chartered accountants, or mechanics.
- **Tax Treatment**: Professionals who render services and charge fees for their expertise usually fall under this category.

**2. **Business**:**
- **Nature of Activities**: Business generally involves commercial activities aimed at earning profits, such as buying and selling goods or rendering services on a regular basis.
- **Tax Treatment**: A business entity engages in trading or commercial activities.

### Mechanic’s Case

Given that the mechanic:
- **Charges for Labor**: The mechanic is providing a service (repairing vehicles) and not selling auto parts.
- **Not Selling Goods**: He does not engage in buying and selling auto parts.

This activity would be classified as a profession, as the income is derived from professional services rather than from trading goods.

### Tax Return Forms

**1. **ITR-4 (for Professionals)**:**
- **Applicability**: ITR-4 is used by professionals and those who are running a business and whose income is computed under sections like 44ADA or 44AE.
- **Eligible Assessees**: Suitable for individuals, Hindu Undivided Families (HUFs), and firms (other than LLPs) who are either professionals (accountants, doctors, etc.) or engaged in business (under presumptive taxation schemes).

**2. **ITR-4S (also known as ITR-4 under section 44AD)**:**
- **Applicability**: ITR-4S is meant for taxpayers who opt for the presumptive taxation scheme under section 44AD and who do not maintain books of accounts.
- **Eligible Assessees**: Suitable for small businesses and professionals with a turnover up to Rs. 2 crores, who are not required to maintain detailed books of accounts.

### Recommendations

**1. **Choosing Between ITR-4 and ITR-4S**:**
- **ITR-4**: Since the mechanic is rendering a service, and assuming he is not opting for the presumptive taxation scheme (section 44AD), he should file ITR-4.
- **ITR-4S**: If the mechanic wants to opt for the presumptive taxation scheme under section 44AD, which is typically used for small businesses, he would file ITR-4S. However, this scheme is more commonly used by small businesses rather than individual professionals.

**2. **Filing the Return**:**
- The mechanic should select the form that aligns with his income and accounting method. If he is opting for a presumptive taxation scheme, ITR-4S is appropriate. If not, ITR-4 is the right choice.

**Summary**

For an auto mechanic who charges for labor and does not engage in selling goods, the profession classification is more suitable. If he wishes to follow the presumptive taxation scheme under section 44AD, he should use ITR-4S; otherwise, he should file ITR-4.

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