Turnover or Gross Receipts vis a vis 44AB

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This query is : Resolved

CA. O.P. Agarwalla (Querist)

25 December 2007 Individual, who is not directly involve in any business earns Interest, Remuneration and Share of Pofit from a Partnership Firm, which is exceeding Rs. 40 Lacs.
As per section 44AB any person carrying on business shall be liable for Tax audit if his total ... gross receipts... in business exceeds Rs. 40 Lacs.
Now, in this case, whether the individual earning such income from firm will be treated as a person carrying on business? Whether he will be liable for Tax audit u/. 44AB.

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

25 December 2007 Secation 44AB starts with the words "every person carrying on business.............." .In your case business is carried on by the partnership firm , which is a separate entity for the purpose of Income Tax Act . In my opinion therefore 44AB is not applicable to partner earning only interest , remuneration or profit from firm .

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Querist)

27 December 2007 Sampat ji has rightly answered. However, the confusion arouse due to the reason that the receipts as said above are asseesable as Business Income. It will mean that the partner has earned business income or received business receipts, without carrying on business activities.It may be kept in mind that, assessing of such income as business are not deeming provisions.
Further, Partner is earning remuneration from firm by participating in the business and for the same he is getting remuneration, which is assessable as business income.
Any case law or circular in this context may be helpful. If we go by the answer of sampat Ji (which seems to be correct), section 44AA will also be not applicable in this case.

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