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Coverage under section 44 ad of beauty salon ?

ankurmunjal (EMPLOYEE) (32 Points)

07 December 2015

Dear Experts,

Can you please tell me whether beauty salon services (proprieorship/parternship) can claim benefit of section 44AD and claim income of 8% of gross receipts ?

If yes, then i understand that there is no need to maintain any books of accounts. But still what type of records are suggested to be maintained to avoid any problem in future ?

Regards

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5 Replies

Stranger (.) (5531 Points)
Replied 07 December 2015

Yes, beauty salon services are covered under covered u/s-44AD as these are not covered under professions specified u/s-44AA(1), provided the following further conditions are satisfied:

(1) it is a resident proprietorship / partnership firm (excluding LLP)

(2) Gross receipts shouldn't exceed Rs.1 crore

(3) Income to be declared should be 8% of gross receipts or more. However, in case income declared is lower than 8% of gross receipts, the assessee has to maintain books of accounts & also required to get it's accounts audited u/s-44AB provided its total income exceeds maximum exemption limit

(4) All deduction u/s-30 to 38 including depreciation & unabsorbd depreciaition are deemd to have been already allowed. However, in case of firm deduction u/s-40b in respect to interest on capital & salary to partners can be claimed

(5) Books of accounts if maintained, whether mandatorily or volutarily, will be cash book, ledger, bank statement, vouchers,etc, which will enable the A.O to compute the taxable income of the assessee concerned.

Hope ur doubt is cleared now...

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ankurmunjal (EMPLOYEE) (32 Points)
Replied 12 December 2015

Thanks a lot for your response.

Dear Sir, I am confused as there is no clarity w.r.t. this. Some people contest that this is not business and 44AD is applicable only on business (which means trading,manufacturing etc.). Please clarify.

Below menetioned is the response which i have got from one of the experts. Would like to get views of other experts on the same. so as to take a conclusive decoision. Thanks.

According to S.2 (13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Trade-purchasing selling Manufacturing means raw materials are converted into finished goods having value addition Commerce means -service like transportation, insurance and banking. Coverage of beauty salon comes under profession which involves intellectual skill or manual skill. Intellectual skill An advocate. Manual skill means machine operator. Hence can not claim US 44 AD

Stranger (.) (5531 Points)
Replied 13 December 2015

Sir, actually this is a 'debatable' topic.

As far as the provisions of Sec-44AD (1), "Notwithstanding anything to the contrary contained in section 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession".

Explanation.—For the purposes of this section,—

(a) "eligible assessee" means,—

(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and

(ii) who has not claimed deduction under any of the section 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading "C. - Deductions in respect of certain incomes" in the relevant assessment year;

(b) "eligible business" means,—

(i) any business except the business of plying, hiring or leasing goods carriages referred to in Section-44AE; and

(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of one crore rupees.

And as per the provisions of Sec-44AD(6), "The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to—

(i) a person carrying on profession as referred to in sub-section (1) of Section 44AA**;

(ii) a person earning income in the nature of commission or brokerage; or

(iii) a person carrying on any agency business.

**Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorised representative or film artist or any other profession as is notified by the Board in the Official Gazette.

“Authorised representative” means a person who represents any other person, on payment of any fee or remuneration before any Tribunal or authority constituted or appointed by or under any law for the time being in force, but does not include an employee of the person so represented or a person carrying on legal profession or a person carrying on the profession of accountancy;

film artist” means any person engaged in his professional capacity in the production of a cinematograph film whether produced by him or by any other person, as—

(i)		an actor90;
(ii)		a cameraman;
(iii)		a director, including an assistant director;
(iv)		a music director, including an assistant music director;
(v)		an art director, including an assistant art director;
(vi)		a dance director, including an assistant dance director;
(vii)		an editor;
(viii)		a singer;
(ix)		a lyricist;
(x)		a story writer;
(xi)		a screen-play writer;
(xii)		a dialogue writer; and
(xiii)		a dress designer.

My Conclusion: Since the words "gross receipts" & "person carrying on profession as referred to in sub-section (1) of Section 44AA" has been used in sec-44AD, it can be interpreted that the provisions of section-44AD can be applied to those professions which are not covered u/s-44AA(1) & having gross receipts upto Rs.1 Crore.

Moreover, I would like to request Experts of CCI to provide any clarification given, either by ICAI or CBDT, or to provide any case laws of any district courts, ITAT,HC or SC , from which the clear intention of the law can be interpreted.