Remuneration From Partnership Not 'Gross Receipt' For Purpose Of Audit Under Section 44AB Of Income Tax Act: Bombay High Court
Parina Katyal
25 March 2022 10:01 AM GMT
The Bombay High Court has ruled that remuneration received from partnership firm cannot be treated as gross receipt in profession for the purpose of compulsory audit under Section 44AB of the Income Tax Act, 1961. The Bench, consisting of Justices K.R. Shriram and N.J. Jamadar, ruled that none of the clauses under Section 44AB envisage the situation where an assessee is carrying on...
The Bombay High Court has ruled that remuneration received from partnership firm cannot be treated as gross receipt in profession for the purpose of compulsory audit under Section 44AB of the Income Tax Act, 1961.
The Bench, consisting of Justices K.R. Shriram and N.J. Jamadar, ruled that none of the clauses under Section 44AB envisage the situation where an assessee is carrying on both profession as well as business.
The Petitioner/Assessee Perizad Zorabian Irani filed her income tax return under Section 139(1) of the Income Tax Act. The Assessing Officer (AO) treated the income tax return filed by the Assessee as invalid due to non auditing of accounts under Section 44AB of the Act. Against the order of the AO the Assessee filed a revision application before the Principal Commissioner of Income Tax (PCIT). The PCIT rejected the revision application and upheld the order of AO. The Assessee filed a writ petitioner before the Bombay High Court against the order of the PCIT.
The counsel for the Assessee Perizad Zorabian Irani submitted before the High Court that the remuneration received by the Assessee as a partner could not be construed as gross receipts from profession for the purpose of Section 44AB of the Act. Also, it contended that Section 44AB was not applicable where an assessee was carrying on a profession as well as a business simultaneously in different fields.
Section 44AB (b) of the Income Tax Act provides that every person who is carrying on profession and whose gross receipts in profession exceed fifty lakh rupees in any previous year, he shall get his accounts of such previous year audited by an accountant and furnish the audit report by the specified date. Section 44AB (a) provides that any person who is carrying on business and whose total sales, turnover or gross receipts in business exceed one crore rupees in any previous year, he shall get his accounts of such previous year audited by an accountant and furnish the audit report by the specified date.
The High Court observed the provisions of Section 44AB (a) and 44AB (b) are mutually exclusive and none of the clauses under Section 44AB envisage the situation where an assessee is carrying on both profession as well as business.
The High Court placed reliance on the judgment of the Madras High Court in the case of Anandkumar versus Assistant Commissioner of Income Tax (2020) and held that the Petitioner/Assessee's remuneration from partnership firm could not be treated as gross receipt in profession. Therefore, the High Court ruled that the Assessee Perizad Zorabian Irani was not required to get her accounts audited under Section 44AB.
The High Court allowed the writ petition of the Assessee and direct the revenue authorities to treat the income tax return filed by the Assessee as valid.
Case Title: Perizad Zorabian Irani Versus PCIT And Ors.
Citation: 2022 LiveLaw (Bom) 98
Dated: 09.03.2022 (Bombay High Court)
Counsel For The Petitioner/Assessee: Dr. K. Shivram, Sr. Advocate, Mr. Rahul K. Hakani
Counsel For The Respondent/Revenue Department: Mr. Suresh Kumar
