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Does this fall under section 44ad ?

08 March 2015

Does section 44AD applies to the an individual who is hiring IT professional's to get websites, blogs and software devloped and then earn revenue in USD by selling advertisments on these websites and licences of the devloped software's.

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9 Replies

Ankit (CA, CS) (3064 Points)
Replied 08 March 2015

Dear Shalni,

According to me, it is a business since it is not a preofession covered under section 44AA and nor is it a commission business. Thus, it can be taken under section 44AD and taxed on presumptive basis

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Shalini Agarwal (CEO) (82 Points)
Replied 09 March 2015

Originally posted by : Ankit
	Dear Shalni, According to me, it is a business since it is not a preofession covered under section 44AA and nor is it a commission business. Thus, it can be taken under section 44AD and taxed on presumptive basis

Hi Ankit,

Thanks for the reply, also do I need to maintain books like payment to hired local IT professionals, which I am paying in cash (max. 10,000 at a time)?

Thanks

MAHESH (Tax Consultant) (114 Points)
Replied 09 March 2015

Dear Shalini,

Books of accounts are not compulsory under presumptive taxation.

however for your control on income and expenses better to maintain books of accounts.

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Vishal Goel (Chartered Accountant) (1688 Points)
Replied 09 March 2015

Hello,

Assessee opting for the section 44AD is not required to maintain the books of accounts.
how ever if assessee claims that is income is lower than the income deemed u/s 44AD and his total income is chargeable to tax, then he shall have to get his accounts audited u/s 44AB.

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Vishal Goel (Chartered Accountant) (1688 Points)
Replied 15 March 2015

Hello,

The scheme of section 44AD is designed to give relief to small tax payers ingage in any business except....

- A person who is carrying a agency Business

- A person who is earning Income in Nature of Commission or Brokerage

- A person carrying on a profession refered to section 44AA(1)

As you are running a business and receiving the income as commission are not cover under section 44AD. So not Eligible to file your income tax return on presumptive basis.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 15 March 2015

Business Income’ means income from an activity /adventure in the nature of trade, commerce or manufacture. It also includes services rendered. For the purpose of any income becoming business income, that activity need not be continuous. Even single/isolated transaction can be termed as business.

It is important to note that “if there is neither control over the actual conduct of the day to day business nor there is direct nexus with the profits or losses of a business, there can be no question of a business or profession carried on by the assesse in terms of Section 28 and the case, therefore, must fall within the ambit of Section 56 as income from other sources.

As explained above in case of income generated through advertisement on website, there is no direct control over the day to day business as though the person owning it had right to decide what advertisement to be placed on site and on what place, the agency has right to change the content/remove the advertisement anytime during the contract period. Secondly there is no direct nexus between the income from such advertisement and placement of advertisement on website. The income depends not on putting the advertisement on site but on click on the advertisement by the viewer of website and not otherwise. Hence it can’t be termed as business income.

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 15 March 2015

Commission’ is income which is received or receivable by a person acting on behalf of a person for service rendered (not professional service) in the course of buying/selling goods or any transaction relating to any asset, valuable article or thing not being securities.

Hence, income in the given case will be termed as commission paid by the agency to the website owner providing service by way of space on website for putting advertisement on it.