Presumptive Taxation, Income From Profession Can’t Be In Absence Of Notified Professional Qualification: ITAT

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that income from professions against which TDS is deducted cannot be taxed at 50% in the absence of notified professional qualification.

The bench of Narender Kumar Choudhry (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that the assessee is just a 10th grader who passed matriculation and does not fall under Section 44ADA, and therefore, the addition is liable to be deleted.

Section 44ADA states that presumptive taxation is for professionals who are designed to account for generated profits and earnings. It must be noted that only revenues generated through specific professions mentioned in Section 44AA(1) qualify under the presumptive tax regime.

The appellant/assessee, by filing its income under Section 44AD, showed its income at the rate of 8% on receipts of Rs. 8,30,800 from the business of consultancy qua stamp duty and registration. The amount of Rs. 8,30,800 included the receipt of Rs. 4,81,280, on which TDS was deducted under Section 94J (fees for professional and technical services). Therefore, the AO/CPC added the income at the rate of 50% under Section 44 ADA, which resulted in the addition of Rs. 2,40,640.

The amount on which TDS was deducted under Section 194J of the Act is, in fact, part of the total receipt of Rs. 8,30,800/- on which the assessee has declared income at 8% under Section 44AD. However, both authorities below applied the provisions of Section 44ADA, which in fact deal with persons carrying on a legal, medical, engineering, or architectural profession, or a profession of accountancy, technical consultancy, interior decoration, or any other profession as notified by the Board in the official gazette.

The assessee is just a 10th grader who has passed matriculation and does not have any qualification to act as a legal, medical, engineering, or architectural professional or professional accountant or technical consultant of interior decoration or any other profession as is notified by the Board in the official gazette, as prescribed under Section 44AA.

The ITAT held that the assessee’s case does not fall under the provisions of Section 44ADA, and therefore the addition sustained by the Commissioner to the extent of Rs. 2,40,640 is liable to be deleted.

Counsel For Appellant: Jitendra Singh

Counsel For Respondent: Naganath B. Pasale

Case Title: Shri Vishnu Dattatraya Ponkshe Versus Central Processing Centre

Case No.: ITA No. 1570/Mum/2023

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