Income Tax Query:
As per recent amendment, new section was inserted 44ADA in the Income-tax Act relating to special provision for computing profits and gains of profession on presumptive basis, in line with the existing section 44AD. It says that - '' in the case of an assessee, being a resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent. of the total gross receipts of the assessee in the previous year on account of such profession, or as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head "Profits and gains of business or profession".
My query is:
Mr. A is currently partner in 'ABC & Co.' CA firm with 80% share. This ABC & Co. has turnover of Rs. 1.25 crores during the year and earns net profit of Rs. 40 lacs after all expenses including partner's salarys. So, Mr. A gets Rs. 32.00 lacs as profit share and Rs. 6.00 Lacs as salary from the firm during the year.
Now Mr. A, starts properietor-ship CA firm say 'A & Co.' . Total gross receipts of this concern is Rs 45.00 lacs during the year. Mr. A has earned profit of Rs.35.00 lacs in this concern. Now Mr. A, wants to take benefit of this new Section 44AD for professional.
He wants to file return for A & Co. at 50% profit basis i.e. Rs 22.50 lacs of total gross receipts. Is he allowed to do so???
Also, will his share of ABC & Co. would also be clubbed while considering the TOTAL GROSS RECEIPTS under section 44AD ???
Kindly Advice. Thank you.
CAclubindia
