Tax Help

Dear Sir

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

- Business of Plying, Hiring or leasing of goods mentioned under section 44AE

- 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 ( 70% pay by Google) are not cover under section 44AD.

So not Eligible to file your income tax return on presumptive basis.

Dear Jay, Thanks for your reply. In this case, if anything Google is the party that is acting as an intermediary and taking a 30% fee from the advertising revenue payable to my client. Also, nowhere in the agreement with Google does it mention the term commissions. Google takes 30% for providing the platform and acting as an intermediary between advertisers and website owners. Client is not dependent on Google alone and can deal with advertisers directly. However, in order to save time and effort in finding advertisers directly, processing advertiser payments individually, client uses Google's platforms.

Considering the above facts, is Sec 44 AD applicable?

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.

‘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.

As income in the above case will be commission income, provisions of Section 44AD won’t be applicable.