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Notice u/s 139(9)

Priya (Manager) (35 Points)

26 April 2016

Greetings, I have a small partnership firm doing consultancy services where detailed books of accounts are not maintained.for AY 2015-16 I had a filed a loss return as my expenses were far above the income.Now I have received a notice from CPC under section 139(9) claiming it to be defective as i had not filled in the proper P & L and balance sheet details which needs to be done for a loss return. In this regard I have a couple of questions. 1. Can I revise the return now in response to this notice and declare income @ 8% (TDS have already been deducted from my service charges) 2. If 44AD can be applied where can I claim the remuneration paid to partners in ITR 5. Thank you in advance.

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6 Replies

Prasobhkumar R. (Chief Operating Officer) (67 Points)
Replied 26 April 2016

1. The defective return can be revised, only if the original one is filed before due date.

2. The declaration of income @ 8% means, you are intending to file return with out books of accounts by using ITR 4S. In two situations it is not applicable, 1) If the gross income is above 1 crore, 2) if your activity is a profession eg: consultancy

3. Adoption of 44AD means declaration of 8% of your gross income, then there is no question of partners salary or others.

But here it is not possible. You have to file ITR5 revised with profit and loss account and balancesheet.

Priya (Manager) (35 Points)
Replied 26 April 2016

Thanks for the quick revert.

1.Yes the return was filed before the due date.

2. The entity is a partnership firm (undertaking consultancy services )which means only ITR 5 is applicable

3. Also think section 44AD (presumptive taxation ) is applicable to partnership firms wherein only remuneration to partners & interest on capital can be allowed on the presumptive income.

Hence my query.

Kindly advice.Thank you

Prasobhkumar R. (Chief Operating Officer) (67 Points)
Replied 26 April 2016

Yes interest and salary for partners can be allowed only in case of partnership firm.

Please refer the below.

The presumptive income computed @ 8% is the final income and no further expenses will
be allowed or disallowed
Under the normal provisions of the Income-tax Act, taxable business income will be computed
after allowing deduction in respect of expenses which are deductible as per the Income-tax Act
and after disallowing expenses which are not deductible as per the Income-tax Act.
In case of a person who is opting for the presumptive taxation scheme of section 44AD, the
provisions of allowance/disallowances as provided for under the Income-tax Act will not apply
and income computed at the presumptive rate of 8% will be the final taxable income of the
business covered under the presumptive taxation scheme. In other words, the income computed
@ 8% will be the final taxable income of the business covered under the presumptive taxation
scheme and no further expenses will be allowed or disallowed.
However, in case of a taxpayer, being a partnership firm, opting for the presumptive taxation
scheme, from the income computed @ 8% of the turnover further deduction can be claimed on
account of remuneration and interest paid to partners (computed as per the Income-tax Act).
While computing income as per the provisions of section 44AD, separate deduction on account
of depreciation is not available. However, the written down value of any asset used in such
business shall be calculated as if depreciation as per section 32 is claimed and has been actually
allowed.

source: https://www.incometaxindia.gov.in/tutorials/13.%20tax%20on%20presumptive%20basis%20in%20case%20of%20certain%20eligible%20businesses.pdf

Priya (Manager) (35 Points)
Replied 26 April 2016

Thank you.

Now that I can revise my loss return to opt presumptive taxation (as i have filed the original return before due date) request you to kindly advice on the second part of my question please.

2. If 44AD can be applied where can I claim the remuneration paid to partners in ITR 5.

3. Also is there any section in ITR-5 where I have to specify that I'm opting for presumptive taxation

Thank you .

Prasobhkumar R. (Chief Operating Officer) (67 Points)
Replied 26 April 2016

I already said that the persumptive income of partneship firm subject conditions can be submitted through 4S only. In 4S there is a schedule BP where you can enter the salary and interest given to partners. No other way in ITR5

In my view, In you case you are doing a consulting job and hence 4S is not applicable and 44AD cannot be applied.

sanmit (Student) (35 Points)
Replied 26 March 2017

Hello I am facing a similar problem for a partnership firm in ay 2015-16. That year ITR 4S is not applicable and only IT5 can be done unlike 16-17. How do i show the partner's salary in that and get it deducted from the presumptive income (8%)