With reference to the provision of section 44 ADA, can i reduce certain costs which are reimbursements from gross receipts?
For Eg.: A dentist bill is as follows:
Cost of ceramic tooth = Rs. 3000
Service charges to patient = Rs. 2000
Total amount charged to patient = Rs. 5000
If the dentist does not charge a mark up on the cost of ceramic tooth ordered only for the patient what is the amount that will form part of gross receipts for Sec 44ADA? Rs. 5000 or Rs. 3000?
1. Gross receipts would be Rs. 5,000 in your case. It would be presumed that the cost of ceramic tooth is part of your expenses in carrying your profession and that’s the reason for allowing you to pay on 50% of your gross receipts.
2. The other 50% will be taken as your expenses and only on balance 50% income tax is charged. It would be hard to prove to the Income-tax segregating the break up of the product used in the services and service fees. Because receipt of Rs. 5,000 would have been received together.
Please correct me if the above solution has an alternative view.
CAclubindia
