Section 44AD(6)

Section 44AD(6) — the law in short

What the courts have decided on section 44AD(6), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Dinesh Chandra Das v ITO — s.44AD(6) shuts out the agent and the s.44AA(1) professional, but the whole receipt is still not income ITATCuts both waysValidity unconfirmed
  The Assessing Officer says my client, who runs a pathology sample collection centre, cannot use s.44AD at all and has added the entire understated receipt. Is that right?
  On the first point the department was upheld: s.44AD(6) excludes a person carrying on a profession referred to in s.44AA(1), a person earning income in the nature of commission or brokerage, and a person carrying on any agency business, and the Tribunal agreed the assessee was a commission agent so that s.44AD did not apply. On the second point the assessee got relief: the entire differential receipt could not be treated as income because expenses had to be incurred, and the Tribunal directed a net profit rate of forty-five per cent on the gross receipts the Assessing Officer had worked out.
• Statutory position — s.44ADA: fifty per cent, the Rs 50 lakh / Rs 75 lakh ceiling, and the audit condition in s.44ADA(4) CBDT Circulars & InstructionsCuts both ways
  My client is a professional with gross receipts of about Rs 62 lakh, nearly all banked. Can he still use s.44ADA, and if he wants to declare less than fifty per cent, must he be audited?
  Section 44ADA deems fifty per cent of the total gross receipts of a resident individual or partnership firm (not an LLP) engaged in a profession referred to in s.44AA(1) to be the profits of that profession, where gross receipts do not exceed fifty lakh rupees — raised to seventy-five lakh rupees where cash receipts do not exceed five per cent of gross receipts. By s.44ADA(4), a professional who claims profits LOWER than the deemed fifty per cent must keep books under s.44AA(1) and get them audited under s.44AB only if his total income exceeds the maximum amount which is not chargeable to income-tax.
• Statutory position — s.44AD(4) and s.44AD(5): the five-year lock-out, and why the books-and-audit duty bites only if total income exceeds the exemption limit CBDT Circulars & InstructionsCuts both ways
  My client filed under s.44AD for two years and then declared below eight per cent in the third. What happens to him for the next five years, and does he now have to get audited?
  By s.44AD(4), an eligible assessee who has declared profit in accordance with s.44AD and who, in any of the five assessment years relevant to the succeeding previous years, declares profit NOT in accordance with s.44AD(1), is shut out of s.44AD for the five assessment years subsequent to the assessment year in which he broke ranks. By s.44AD(5), that assessee must keep books under s.44AA(2) and get them audited and reported under s.44AB only if his total income exceeds the maximum amount which is not chargeable to income-tax — a condition that both the department and the assessee routinely read out of the sub-section.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.