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IS 44AB AUDIT APPLICABLE?

(Guest)

IS 44 AB AUDIT NECESSARY FOR A PATNERSHIP FIRM CONSISTING OF TWO DOCTORS RUNNING A HOSPITAL WITH ALL DIAGNOSTIC AND IN-PATIENT FACILITIES & HAVING GROSS RECEIPTS OF 14 LAKHS FOR THE YEAR ENDED 31.03.2010? THE MAIN REASON FOR THIS QUERY IS WHETHER IT WILL BE CONSIDERED UNDER BUSINESS OR PROFESSION..

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Naveen (CA Final) (53 Points)
Replied 14 August 2010

Originally posted by : DIVYA PONNARASI.A.

sec44AB is applicable for the py 2009-2010 as the total gross receipts from the profession exceeds Rs. 10 Lacs..and it will be taxable under the head business or profession

(Guest)

SIR..MY DOUBT IS IF THEY WOULD BE CONSIDERED UNDER BUSINESS WHERE 44AB AUDIT WOULD BE APPLICABLE ONLY IF THE INCOME EXCEEDS 40 LAKHS OR UNDER PROFESSION WHERE GROSS RECEIPTS EXCEEDS 10 LAKHS.. AS THEY ARE INVOLVED IN ALL SCAN AND OTHER DIAGNOSTIC FACILITY INSIDE THEIR CAMPUS, THERE IS A COUNTER ARGUEMENT TELLING THEY ARE INOLVED IN BUSINESS.. PLEASE CLARIFY..

* Krishna * (CA Student) (6149 Points)
Replied 14 August 2010

In my view it comes under Profession because Doctors are rendereding their services to public, hence treated as Profession. Here, gross receipts from the Profession has exceeded Rs 10 Lakh. Though the Act has not defined the term Profession, in the study material it is given as the term Profession includes a Doctor also. Hence, 44AB is applicable.

1 Like

CA Arindam Sain (Practice) (308 Points)
Replied 15 August 2010

Hi,

As profession implies professed attainments in special knowledge as distinguished from mere "skill", which used in case if business, doctor's practice cane be termed as profession.

There fore as it crossed 10 lacs for A.Y 2010-11, it is well within the jurisdiction of tax audit U/S 44AB.

But in this case as they formed partnership firm some points are relevant here

Under partnership law, a partnership firm is not a legal entity, but only consists of individual partners for the time being. It is not a distinct legal entity apart from the partners constituting it,EXCEPT FOR LIMITED PURPOSE IN TAX LAW WHERE PARTNERSHIP FIRM IS TREATED AS DISTINCT ENTITY.

More over, “Business” includes every trade, occupation and profes sion. [section 2(b)]. Thus, a ‘partnership’ can be formed only with intention to share profits of business. People coming together for some social or philanthropic or religious purposes do not constitute ‘partnership’.

So, in my view , as they formed the partnership firm, they lost the identity of profession as far as tax law is concerned.

and it would be considered as business . So as gross receipts did not exceeded 40 lacs, Tax Audit U/S 44AB would not applicable.

1 Like

CA Rohit Gupta (Partner) (1982 Points)
Replied 15 August 2010

In my opinion it will still be a profession. because all sorts of diagnostic and scan facilities can be rendered by professional doctors only. Also, the person constituting the partnerships are doctors and are not doing any business unrelated with their profession as a doctor.

If raju view is taken then even CA firms would be business ventures and not professional firms.

There is a very thin line between business and profession however u have to choose a specific one.

Scan centres and diagnostics centres and even nursing homes come under the category of professionals even if run by partnerships by qualified doctors.

However, hospitals etc. run as trusts, company forms are different forms altogether and would constiture a business venture.

Hence in the present case tax audit shall be applicable after the limit of 10 lakhs for a.y. 2010-11.

regrds

3 Like

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 15 August 2010

HI DIVYA,

DOCTORS ARE COME UNDER THE SPCIFIED PROFESSIONS AS NOTIFIED BY THE INCOME TAX ACT. U MAY REFER TO SECTION 44AB. THUS EVEN IF THE PROFESSION IS CARRIED ON IN PARTNERSHIP BY DOCTORS, IT WILL BE A PROFESSION AND IF GROSS RECEIPTS OF SUCH PROFESSION EXCEEDS RS. 10 LAKHS, IT WILL BE LIABLE FOR TAX AUDIT U/S 44AB.

HOPE THIS SOLVES U'R QUERY.

REGARDS,

MANOJ

Shalini Nayyar (Student) (365 Points)
Replied 15 August 2010

Originally posted by : Krishna
	In my view it comes under Profession because Doctors are rendereding their services to public, hence treated as Profession. Here, gross receipts from the Profession has exceeded Rs 10 Lakh. Though the Act has not defined the term Profession, in the study material it is given as the term Profession includes a Doctor also. Hence, 44AB is applicable.

CS LLB Pulkit Gupta (https://www.facebook.com/pages/Life-and-Promises/553962034682487) (16631 Points)
Replied 15 August 2010

Hey I am 100% sure dat it will come under Profession . I hv been doing audit of a nursing home which is a partnership firm . It's gross receipts have been less than 15 lakh but more than 10 Lakh. So definitely it will come under profession .

Pankaj Gulati (Tax Advisor) (81 Points)
Replied 15 August 2010

Here two doctors are running a 'Hospital' in a partnership firm. Hospital is an institution which may also provide several other facilities like luxury rooms, medicines, cafetaria, OT, ICU etc, all these facilities comes with consideration that includes profit in it apart from medical treatment and diagonisis fees. All these activities are being carried under one roof in an institution termed as 'Hospital' and is purely a business with an objective of earning profit. Hence in my opinion section 44AB limit of 40 lac is applicable in this case.

Situation would have been afcourse different and the limit of 10 lac u/s 44AB would have been applicable had they been running merely a 'doctors clinic' which can be termed as profession. Like CA firms running consultancy audit services etc.

1 Like

Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8310 Points)
Replied 15 August 2010

Guidance Note on Tax Audit Under
Section 44AB of the Income-tax Act, 1961

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Attached File : 1_230announ1178.pdf downloaded 1 times

(Guest)

Originally posted by : Manoj B. Gavali
	HI DIVYA, DOCTORS ARE COME UNDER THE SPCIFIED PROFESSIONS AS NOTIFIED BY THE INCOME TAX ACT. U MAY REFER TO SECTION 44AB. THUS EVEN IF THE PROFESSION IS CARRIED ON IN PARTNERSHIP BY DOCTORS, IT WILL BE A PROFESSION AND IF GROSS RECEIPTS OF SUCH PROFESSION EXCEEDS RS. 10 LAKHS, IT WILL BE LIABLE FOR TAX AUDIT U/S 44AB.

CA.SKR (CA; CS-Final (One Group); DISA (ICAI); Insolvency Professional) (442 Points)
Replied 15 August 2010

I fully agree with the reply of Mr. Pankaj Gulati. In the present case, tax audit will not be applicable as running a hospital will be treated as Business and not as a Profession.