Sec 44ab & aaae (combined application)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2012 Srry 44AE is mistakely written as aaae in Queary heading, please read "aaae" as "44AE"

A person who is proprietor of a trading business & also having lorries plying business.

Query is regarding combined application of Sec 44AB & 44AE which is as under:

SITUATION:1
Turnover of trading business Rs 70 Lacs & receipts from lorries plying Rs 15 Lacs.

Query:It is confirm that he require to get BOA audited for trading business, does he also require to audit of lorry business or to declare income of it under Sec 44AE?

SITUATION:2
Turnover of trading business Rs 50 Lacs & receipts from lorries plying Rs 15 Lacs.

Query:Does he require to gets books of account audited? If not then what is the best presentation & treatment?

SITUATION:3
Turnover of trading business Rs 30 Lacs & receipts from lorries plying Rs 15 Lacs.

Query: Does he have the option to declare 8% income U/S 44AD w.r.t Trading business & declare income U/S 44AE????

Experts opinion require to solve the query. Request to please full the query in full & not to leave in the middle of the sea?

Very thanks in advance....

Regards

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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30 March 2012 The answer to all the queries is based on two simple statements.

1. Each business is a different business and has to be seen individually.

2. In case of lorry business (Section 44AE), turnover is NOT to be considered. The only condition to be fulfilled is that the assessee should not own more than 10 vehicles at any time during the year.

Situation 1: If the number of lorries does not exceed 10 and he shows the minimum income as required by Section 44AE, accounts are not required to be audited.

Situation 2 & Situation 3 : He has the option of Section 44AD for trading business and Section 44AE for lorry business. In these situations, he is not required to get his accounts audited.

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2012 Mr, Siddharth Bharadwaj, I please to bring your attention that audit is not assessee wise & not on business wise specially in case of DIFF. PROPRIETORSHIP BUSINESS OF SINGLE INDIVIDUAL.

So i think the reply you suggested will be revised & I personally not agreed with your starting statement that "each business is a diff. business & has to be seen individually"

I agreed with reply on Situation No 2 & 3 but not with situation1.

Others expert opinion sought in the matter.

Thanks & Regards

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 You're absolutely correct in pointing out that the audit requirements under Section 44AB are not business-specific but apply to the **individual assessee**, who may be running multiple businesses (like trading and lorry plying in your example).

Let's clarify the different **situations** step by step based on the provisions of **Section 44AB** and **Section 44AE**:

### **Key Provisions:**

* **Section 44AB**: Requires an **audit of accounts** if the **turnover** of a business exceeds **Rs. 1 crore** (or Rs. 50 lakh for professionals) in a financial year.
* **Section 44AE**: Provides a **presumptive taxation scheme** for a **lorries plying business**. The owner of a lorry (not exceeding 10 vehicles) can declare **presumptive income** under **Section 44AE** without having to maintain books of accounts. The income is computed on a presumptive basis of Rs. 7,500 per month per vehicle (or Rs. 1,50,000 per annum for each vehicle), irrespective of actual income.

### **Situations Breakdown:**

#### **Situation 1**:

**Turnover of trading business = Rs. 70 Lakh**
**Receipts from lorry business = Rs. 15 Lakh**

* **Trading business (Rs. 70 Lakh)**:

* The **turnover** from the trading business exceeds **Rs. 1 crore**, so it falls under the **audit requirement** of **Section 44AB**.
* **Books of accounts** need to be audited because the turnover is more than Rs. 1 crore.
* **Lorry business (Rs. 15 Lakh)**:

* **Section 44AE** is applicable here, but **Section 44AE** is **independent** of the turnover in the business. What matters is the **number of vehicles** owned. If the individual owns **10 or fewer vehicles**, he can opt for the **presumptive taxation scheme** under **Section 44AE**.
* **Audit of the lorry business** is **not required** if he declares income under **Section 44AE**. The income is presumed at Rs. 7,500 per month for each vehicle, irrespective of actual receipts.

So, in **Situation 1**, the **audit is only required for the trading business** (as it exceeds Rs. 1 crore turnover), but not for the **lorry business** if he opts for the **presumptive taxation** under **Section 44AE**.

#### **Situation 2**:

**Turnover of trading business = Rs. 50 Lakh**
**Receipts from lorry business = Rs. 15 Lakh**

* **Trading business (Rs. 50 Lakh)**:

* Since the **turnover is less than Rs. 1 crore**, **Section 44AB** **audit requirement does not apply** to the trading business.
* However, the **books of accounts** still need to be maintained as the total income may exceed the basic exemption limit, and it could be taxed under normal provisions.
* **Lorry business (Rs. 15 Lakh)**:

* If the individual owns **10 or fewer vehicles**, he can still opt for **Section 44AE**, and the income can be declared on a **presumptive basis** (Rs. 7,500 per vehicle per month).
* The **audit is not required** for the lorry business as long as the **presumptive income under 44AE** is declared.

In **Situation 2**, **no audit is required** if the **turnover of the trading business is under Rs. 1 crore**, and the **lorry business** is opted for under **Section 44AE**.

#### **Situation 3**:

**Turnover of trading business = Rs. 30 Lakh**
**Receipts from lorry business = Rs. 15 Lakh**

* **Trading business (Rs. 30 Lakh)**:

* Since the **turnover is below Rs. 1 crore**, the **audit requirement** under **Section 44AB** does not apply.
* The individual can declare **presumptive income** under **Section 44AD** (which is 8% of the turnover) and is not required to maintain detailed books of accounts.
* **Lorry business (Rs. 15 Lakh)**:

* The **number of vehicles** must be checked for the applicability of **Section 44AE**. If he owns **10 or fewer vehicles**, the income can be declared under **Section 44AE**.
* Income will be calculated on a **presumptive basis** of Rs. 7,500 per vehicle per month, and **audit is not required**.

In **Situation 3**, the **trading business can opt for the 8% income under Section 44AD**, and **lorry business can declare income under Section 44AE** (if 10 or fewer vehicles). No audit is needed if the income is declared under these sections.

### **Conclusion:**

* In **each situation**, the **audit requirement** under **Section 44AB** is based on the **aggregate turnover** of the entire **proprietorship**.
* Since **lorries are a separate source of income**, **Section 44AE** applies **independently** to the lorry business, and the **turnover** of the lorry business is **not relevant** for the **audit requirement** of the entire business.
* In all cases, you can **combine Section 44AB** (for the trading business) and **Section 44AE** (for the lorry business) **without any conflicts**.

### **Final Answer**:

* In **Situation 1**, **audit is required** for the trading business only (since turnover exceeds Rs. 1 crore).
* In **Situation 2**, **no audit is required**, and income can be declared under the respective **presumptive taxation schemes**.
* In **Situation 3**, **no audit is required**, and income can be declared under both **Section 44AD** (for trading) and **Section 44AE** (for lorry business).

Let me know if you need further clarification or additional details!

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