Advance Learning on Income Tax Section 44AD (Practical) TAXCONCEPT

Mr. Raja is running a proprietary concern under the name of Raja Enterprise. The turnover of his firm during the previous year 2012-13 was Rs. 84,00,000. He wants to adopt the provisions of section 44AD and to declare income as per the presumptive taxation scheme. Can he adopt these provisions even if he is an individual?

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Thus, Mr. Raja being an individual if satisfies the other criteria of the scheme can adopt the provisions of section 44AD and can declare income on presumptive basis.

Illustration

Raja HUF, whose Karta is Mr. Raja, is running a departmental store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,252. The HUF wants to adopt the provisions of section 44AD and to declare income as per the presumptive taxation scheme. Can it adopt these provisions even if it is an HUF?

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Thus, being an HUF if it satisfies the other criteria of the scheme can adopt the provisions of section 44AD and can declare income on presumptive basis.

Illustration

SM Enterprise, a partnership firm whose partners are Mr. Soham and Mr. Mohan is running a departmental store. Mr. Soham is also running his proprietary firm. SM Enterprise as well as Mr. Soham wants to adopt the presumptive taxation scheme of section 44AD. In this case can the firm as well as Mr. Soham, both adopt the provisions of section 44AD and declare income as per the presumptive taxation scheme?

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. There is no restriction in adopting the provisions of section 44AD by both – a partnership firm as well as the partners. Hence, in this case, both, i.e., SM Enterprise and Mr. Soham can adopt the provisions of section 44AD if they satisfy the other criteria of the scheme and can declare income on presumptive basis.

Scheme of computation of income Illustration

Mr. Raja is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 1,84,00,000. Can he adopt the provisions of presumptive scheme of section 44AD in respect of this business?

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by an assessee who is engaged in any profession as prescribed under section 44AA or is running agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012- 13).

In this case the turnover of Mr. Raja during the previous year 2012-13 was Rs. 1,84,00,000 which exceeds the limit of Rs. 1,00,00,000 and, hence, he cannot adopt the provisions of section 44AD.

Illustration

Mr. Kumar is a commission agent and is earning income in the nature of commission. His gross commission during the previous year 2012-13 was Rs. 25,84,000. He wants to adopt the provisions of section 44AD in respect of this business. In this case what will be his income as per the provisions of section 44AD?

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012- 13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case Mr. Kumar is earning income in the nature of commission and, hence, he cannot adopt the provisions of section 44AD.

Illustration

Mr. Kapoor is running a factory. The turnover of the factory during the previous year 2012- 13 was Rs. 98,84,252. He wants to adopt the provisions of section 44AD in respect of this business. In this case what will be his income as per the provisions of section 44AD?

As per the provisions of section 44AD, income will be computed on an estimated basis @ 8% of turnover or gross receipts of the eligible business for the previous year. In the present case, Mr. Kapoor is running a factory whose turnover during the previous year 2012-13 was Rs. 98,84,252 and, hence, his income as per the provisions of section 44AD will come to Rs. 7,90,740 (i.e., Rs. 98,84,252 * 8%).

Illustration

Miss Khushali is a doctor. She is doing practice in her own clinic. The gross receipts of the clinic during the previous year 2012-13 were Rs. 1,25,52,252. She wants to adopt the provisions of section 44AD in respect of her clinic. In this case what will be her income as per the provisions of section 44AD?

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012- 13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case Miss Khushali is a doctor (i.e., she is engaged in one of professions prescribed under section 44AA) and, hence, she cannot adopt the provisions of section 44AD.

Provisions relating to various allowances/disallowances Illustration

Mr. Krunal is running a medical store in his own premises. The turnover of the store during the previous year 2012-13 was Rs. 52,84,848 and he declared income as per the provisions of section 44AD. After computing the income @ 8% of such turnover of Rs. 52,84,848, he wants to claim further deduction on account of following items:

Can he claim deduction on account of above expenditure?

Income computed as per section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation).

Thus, in this case Mr. Krunal cannot claim any further deduction on account of any of the above discussed expenditure from the net income computed as per the provisions of section 44AD.

Illustration

SM Corporation, a partnership firm, is running a Color Dying Press in its own premises. The turnover of the press during the previous year 2012-13 was Rs. 84,48,848 and it declared income as per the provisions of section 44AD. After computing the income @ 8% of such turnover of Rs. 84,48,848, the firm wants to claim further deduction on account of following items:

Salary paid to accountant: Rs. 84,000
Expenditure on account of insurance of press building: Rs. 25,200
Depreciation on press building: Rs. 1,84,000
Depreciation on computer: Rs. 48,400
Remuneration paid to its partners: 84,000

Can the firm claim deduction on account of above expenditure?

As per the provisions of section 44AD, from the net income computed at the prescribed rate, i.e., @ 8% of turnover or gross receipts of the eligible business, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such income. Thus, in this case the firm cannot claim any further deduction on account of any of the above discussed expenditure (except remuneration paid to its partners) from the net income computed as per the provisions of section 44AD.

In case of an assessee, being a partnership firm, from the net income computed as per the provisions of section 44AD, further deduction on account of remuneration and interest paid to its partners within the limit specified under section 40(b) is allowed. Thus, in this case the firm can claim further deduction on account of remuneration paid to its partners within the limit specified under section 40(b).

Illustration

Essem Corporation, a partnership firm, is running a Color Dying Press in its own premises. The turnover of the press during the previous year 2012-13 was Rs. 84,48,848 and it declared income as per the provisions of section 44AD. After computing the income @ 8% of such turnover of Rs. 84,48,848, the firm wants to claim further deduction on account of following items:

Depreciation on press building: Rs. 2,84,000
Depreciation on computer: Rs. 24,800
Remuneration paid to its partners: 84,000
Interest on capital paid to its partners @ 12%: Rs. 25,252 Can the firm claim deduction on account of above expenditure?

As per the provisions of section 44AD, from the net income computed at the prescribed rate, i.e., @ 8% of turnover or gross receipts of the eligible business, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such income. Thus, in this case the firm cannot claim any further deduction on account of any of the above discussed expenditure (except remuneration paid to its partners and interest on capital paid to its partners) from the net income computed as per the provisions of section 44AD.

In case of an assessee, being a partnership firm, from the net income computed as per the provisions of section 44AD, further deduction on account of remuneration and interest paid to its partners within the limit specified under section 40(b) is allowed. Thus, in this case the firm can claim further deduction on account of remuneration and interest on capital paid to its partners within the limit specified under section 40(b).

Manner of computation of WDV of depreciable assets Illustration

Mr. Amar is running proprietary firm under the name of Amar Enterprise in the premises owned by him. The turnover of the firm during the previous year 2012-13 was Rs. 52,25,848 and he declared income as per the provisions of section 44AD. After computing the income @ 8% of the turnover of Rs. 52,25,848, he wants to claim further deduction on account of depreciation on the shop premises amounting to Rs. 84,252. Can he do so as per the provisions of section 44AD?

As per the provisions of section 44AD, from the net income computed at the prescribed rate, i.e.,@ 8% of the turnover or gross receipts from the eligible business, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such income. Thus, in this case Mr. Amar cannot claim any further deduction on account of depreciation amounting to Rs. 84,252 from the net income computed as per the provisions of section 44AD.

Illustration

SM Corporation, a partnership firm is running a factory. The turnover of the firm during the previous year 2012-13 was Rs. 99,84,252 and it declared income as per the provisions of section 44AD. The opening WDV of the block of depreciable asset (machinery @ 15%) as on 1-4-2012 was Rs. 8,25,252. Since the firm has opted for the provisions of section 44AD for the year 2012-13 it has not claimed depreciation. In this case, if in the next year it does not opt for section 44AD, what will be the WDV on which the firm can claim depreciation?

As per the provisions of section 44AD, from the income computed as per the provisions of section 44AD, further deduction on account of depreciation is not available. However, the WDV of any asset used in the business covered under the scheme of section 44AD shall be calculated as if depreciation as per section 32 is claimed and allowed. Thus, even though no depreciation is claimed by the firm, yet for purpose of computation of the WDV of the asset, depreciation will be deducted from the value of the block. The WDV eligible for depreciation will be computed as follows:

*Particulars*	*Amount(Rs)*
Opening WDV as on 1-4-2012	8,25,252
(-) Depreciation @ 15% for the year 2012-13	1,23,788
Closing WDV for the year 2012-13	7,01,464
WDV eligible for depreciation for the year 2013-14	7,01,464

Provisions relating to maintenance of books of account Illustration

Mr. Kapoor is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 60,52,252 and he declared income as per the provisions of section 44AD. In this case will he be liable to maintain the books of account in respect of aforesaid business?

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA. However, the relief is available only in respect of business covered by the provisions of section 44AD and not in respect of any other business. Thus, if Mr. Kapoor owns any other business, then in respect of such business the provisions of section 44AA in respect of maintenance of books of account will apply.

Illustration

Mr. Jay is an interior decorator. His gross receipts from this profession during the previous year 2012-13 were Rs. 84,48,848. He wants to declare income as per the provisions of section 44AD. In this case will he be liable to maintain the books of account in respect of aforesaid profession?

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). The presumptive taxation scheme under these provisions can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing of goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case, Mr. Jay is engaged in one of the professions prescribed under section 44AA and, hence, he is not eligible to adopt the provisions of section 44AD and the provisions of section 44AA relating to maintenance of books of account will apply to him and he will be liable to maintain the books of account as specified under section 44AA.

Illustration

Mr. Kaushal is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 25,84,848. He wants to adopt the provisions of section 44AD for the above business. Apart from the business of running a provision shop, he is also engaged in the business of plying, hiring or leasing goods carriages. He owns 5 heavy goods vehicles. His actual income from the goods transportation business is Rs. 3,000 per month (i.e., less than Rs. 5,000 per month or part thereof) per heavy goods vehicle and he wants to declare his actual income of Rs. 3,000 for this business. In this case will he be liable to maintain the books of account in respect of aforesaid businesses?

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA. It should be noted that the relief is available only in respect of business covered by the provisions of section 44AD and not in respect of any other business. Thus, in this case he will not be liable to maintain books of account in respect of business covered under section 44AD i.e., business of provision shop but in respect of business of plying, hiring or leasing goods carriages, he will be liable to maintain books of account as provided under section 44AA.

Declaration of lower income/Higher income Illustration

Mr. Rohan is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 52,25,252. He wants to adopt the provisions of section 44AD. However, his actual income from this business is Rs. 3,65,768 only which is less than Rs. 4,18,020 (i.e., Rs. 52,25,252 * 8%). In this case can he declare his actual income of Rs. 3,65,768 in respect of his business of medical store?

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is lower than the income prescribed under the presumptive scheme, then the assessee can declare income from aforesaid business at a lower rate (i.e., at less than 8%). Thus, in this case Mr. Rohan can declare lower income. However, in this case he has to maintain the books of account prescribed under section 44AA and has to get such books of account audited, since his actual income exceeds the exemption limit (i.e., Rs. 2,00,000).

Illustration

Mr. Rahul is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 58,84,848. However, his actual income is Rs. 5,29,636 which is higher than Rs. 4,70,788 (i.e., Rs. 58,84,848 * 8%). In this case can he declare his actual income of Rs. 5,29,636 which is higher than the limit prescribed under section 44AD?

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from aforesaid business. Thus, in this case Mr. Rahul can declare higher income.

Applicability of Provisions of Advance Tax Illustration

Mr. Kumar is running a garment factory. The turnover of the factory for the previous year 2012-13 amounted to Rs. 84,25,848. He adopted the provisions of section 44AD and declared income @ 8% of the turnover. Apart from income from garment factory, he also earned brokerage of Rs. 3,84,252. In this case will he be liable to pay advance tax in respect of his business of factory as well as his brokerage income?

An assessee opting for the presumptive taxation scheme of section 44AD is not liable to pay advance tax in respect of business covered under section 44AD. In this case, he will not be liable to pay advance tax in respect of income from garment factory, even though the tax liability in respect of income from the garment factory exceeds Rs. 10,000. However, as regards brokerage income, he will be liable to pay advance tax, since the tax liability on brokerage income exceeds Rs. 10,000.

1. By whom the provisions relating to presumptive taxation scheme of section 44AD are adopted?

Following illustrations will explain the provisions relating to applicability of the presumptive taxation scheme of section 44AD.

Illustration

Mr. Raja is running a proprietary concern under the name of Raja Enterprise. The turnover of his firm during the previous year 2012-13 was Rs. 84,00,000. He wants to adopt the provisions of section 44AD and wants to declare income as per the presumptive taxation scheme. Can he adopt these provisions even if he is an individual?

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Thus, Mr. Raja being an individual if satisfies the other criteria of the scheme can adopt the provisions of section 44AD and can declare income on presumptive basis.

Illustration

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Thus, Raja HUF, being an HUF if satisfies the other criteria of the scheme can adopt the provisions of section 44AD and can declare income on presumptive basis.

Illustration

SM Enterprise, a partnership firm whose partners are Mr. Soham and Mr. Mohan, is running a departmental store. Mr. Soham is also running his proprietary firm. SM Enterprise as well as Mr. Soham wants to adopt the presumptive taxation scheme of section 44AD. In this case can the firm as well as Mr. Soham, both adopt the provisions of section 44AD and declare income as per the presumptive taxation scheme?

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. There is no restriction on adopting the provisions of section 44AD by both, a partnership firm as well as the partners. Hence, in this case, both, i.e., SM Enterprise and Mr. Soham can adopt the provisions of section 44AD if they satisfy the other criteria of the scheme and can declare income on presumptive basis.

2. What are the provisions relating to computation of income under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the provisions relating to computation of income under the presumptive taxation scheme of section 44AD.

Illustration

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is running agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13).

In this case the turnover of Mr. Raja during the previous year 2012-13 was Rs. 1,84,00,000 which exceeds the limit of Rs. 1,00,00,000 and, hence, he cannot adopt the provisions of section 44AD.

Illustration

Mr. Kumar is a commission agent and earning income in the nature of commission. His gross commission during the previous year 2012-13 was Rs. 25,84,000. He wants to adopt the provisions of section 44AD in respect of this business. In this case what will be his income as per the provisions of section 44AD?

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012- 13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case Mr. Kumar is earning income in the nature of commission and, hence, he cannot adopt the provisions of section 44AD.

Illustration

The presumptive taxation scheme under the provisions of section 44AD can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012- 13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case, Miss Khushali is a doctor (i.e., she is engaged in one of professions prescribed under section 44AA) and, hence, she cannot adopt the provisions of section 44AD.

3. What are the provisions relating to various allowances/disallowances under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the provisions relating to various allowances/disallowances under the presumptive taxation scheme of section 44AD.

Illustration

Mr. Krunal is running a medical store in his own premises. The turnover of the store during the previous year 2012-13 was Rs. 52,84,848. He declared income as per the provisions of section 44AD. After computing the income @ 8% of such turnover of Rs. 52,84,848, he wants to claim further deduction on account of following items:

Salary paid to accountant: Rs. 84,000
Expenditure on account of insurance of shop: Rs. 25,200
Depreciation on shop building: Rs. 1,84,000
Depreciation on computer system: Rs. 48,400

Can he claim deduction on account of above expenditure?

Income computed as per section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation).

Thus, in this case Mr. Krunal cannot claim any further deduction on account of any of the above discussed expenditure from the net income computed as per the provisions of section 44AD.

Illustration

Salary paid to accountant: Rs. 84,000
Expenditure on account of insurance of press building: Rs. 25,200
Depreciation on press building: Rs. 1,84,000
Depreciation on computer: Rs. 48,400

Remuneration paid to its partners: 84,000

Can the firm claim deduction on account of above expenditure?

Illustration

Essem Corporation, a partnership firm is running a Color Dying Press in its own premises. The turnover of the press during the previous year 2012-13 was Rs. 84,48,848. It declared income as per the provisions of section 44AD. After computing the income @ 8% of such turnover of Rs. 84,48,848, the firm wants to claim further deduction on account of following items:

Depreciation on press building: Rs. 2,84,000
Depreciation on computer: Rs. 24,800
Remuneration paid to its partners: 84,000
Interest on capital paid to its partners @ 12%: Rs. 25,252 Can the firm claim deduction on account of above expenditure?

As per the provisions of section 44AD, from the net income computed at the prescribed rate, i.e., @ 8% of turnover or gross receipts of the eligible business, an assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such income. Thus, in this case the firm cannot claim any further deduction on account of any of the above discussed expenditure (except remuneration paid to its partners and interest on capital paid to its partners) from the net income computed as per the provisions of section 44AD.

In case of an assessee, being a partnership firm, from the net income computed as per the provisions of section 44AD, further deduction on account of remuneration and interest paid to its partners within the limit specified under section 40(b) is allowed. Thus, in this case the firm can claim further deduction on account of remuneration and interest on capital paid to its partners within the limit specified under section 40(b).

4. What is the manner of computation of WDV of depreciable assets under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the manner of computation of WDV of depreciable assets under the presumptive taxation scheme of section 44AD.

Illustration

SM Corporation, a partnership firm, is running a factory. The turnover of the firm during the previous year 2012-13 was Rs. 99,84,252 and it declared income as per the provisions of section 44AD. The opening WDV of the block of depreciable asset (machinery @ 15%) as on 1-4-2012 was Rs. 8,25,252. Since the firm has opted for the provisions of section 44AD for the year 2012-13 it has not claimed depreciation. In this case, if in the next year it does not opt for section 44AD, what will be the WDV on which the firm can claim depreciation?

*Particulars*	*Amount(Rs)*
Opening WDV as on 1-4-2012	8,25,252
(-) Depreciation @ 15% for the year 2012-13	1,23,788
Closing WDV for the year 2012-13	7,01,464
WDV eligible for depreciation for the year 2013-14	7,01,464

5. What are the provisions relating to maintenance of books of account under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the provisions relating to maintenance of books of account under the presumptive taxation scheme of section 44AD.

Illustration

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA. The relief is available only in respect of business covered by the provisions of section 44AD and not in respect of any other business. Thus, if Mr. Kapoor owns any other business, in respect of such business the provisions of section 44AA in respect of maintenance of books of account will apply.

Illustration

Mr. Jay is an interior decorator. His gross receipts from this profession during the previous year 2012-13 were Rs. 84,48,848 and he wants to declare income as per the provisions of section 44AD. In this case will he be liable to maintain the books of account in respect of aforesaid profession?

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). The presumptive taxation scheme under these provisions can be opted for by the eligible assessee who is engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Moreover, the provisions of section 44AD cannot be adopted by an assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage.

In this case Mr. Jay is engaged in one of the professions prescribed under section 44AA and, hence, he is not eligible to adopt the provisions of section 44AD and, hence, the provisions of section 44AA relating to maintenance of books of account will apply to him and he will be liable to maintain the books of account as specified under section 44AA.

Illustration

Mr. Kaushal is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 25,84,848. He wants to adopt the provisions of section 44AD for the above business. Apart from the business of provision shop, he is also engaged in the business of plying, hiring or leasing of goods carriages and he owns 5 heavy goods vehicles. His actual income from the goods transportation business is Rs. 3,000 per month (i.e., less than Rs. 5,000 per month or part thereof) per heavy goods vehicle and he wants to declare his actual income of Rs. 3,000 for this business. In this case will he be liable to maintain the books of account in respect of aforesaid businesses?

As per the provisions of section 44AD, an assessee who adopts the provisions of section 44AD, is not required to maintain books of account as per section 44AA. The relief is available only in respect of business covered by the provisions of section 44AD and not in respect of any other business. Thus, in this case he will not be liable to maintain books of account in respect of business covered under section 44AD, i.e., business of provision shop but in respect of business of plying, hiring or leasing goods carriages, he will be liable to maintain books of account as provided under section 44AA.

6. What are the provisions relating to declaration of lower income/higher income under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the provisions relating to declaration of lower income/higher income under the presumptive taxation scheme of section 44AD.

Illustration

Mr. Rohan is running a medical store and the turnover of the store during the previous year 2012-13 was Rs. 52,25,252. He wants to adopt the provisions of section 44AD. However, his actual income from this business is Rs. 3,65,768 only which is less than Rs. 4,18,020 (i.e., Rs. 52,25,252 * 8%). In this case can he declare his actual income of Rs. 3,65,768 in respect of his business of medical store?

Illustration

7. What are the provisions relating to applicability of provisions of advance tax under the presumptive taxation scheme of section 44AD?

Following illustrations will explain the provisions relating to applicability of provisions of advance tax under the presumptive taxation scheme of section 44AD.

Illustration

An assessee opting for the presumptive taxation scheme of section 44AD is not liable to pay advance tax in respect of business covered under section 44AD. In this case, he will not be liable to pay advance tax in respect of income from garment factory, even though the tax liability in respect of income from the garment factory exceeds Rs. 10,000. However, as regards brokerage income, he will be liable to pay advance tax since the tax liability on brokerage income exceeds Rs. 10,000.

MCQs

Q1. The provisions relating to presumptive taxation scheme applicable to an assessee engaged in any profession prescribed under section 44AA are given in section

                ?

44AD

44AB

44AE

No such provisions exist for an assessee engaged in any profession prescribed under section 44AA

Correct answer (d) Justification of correct answer:

The provisions relating to presumptive taxation scheme applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) are given in section 44AD. Hence, these provisions are not applicable to an assessee engaged in any profession prescribed under section 44AA.

Thus, option (d) is the correct option.

Comment on incorrect answer: Option (d) is the correct option since it gives the correct sections/provisions. All the other options, viz., options (a), (b) and (c) giving incorrect sections/provisions are not correct.

Q2. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm, irrespective of their residential status.

(a) True                                                          (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable only to such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Hence, the presumptive taxation scheme of section 44AD cannot be adopted by a non-resident.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q3.The provisions relating to presumptive taxation scheme prescribed under section 44AD can be adopted by the non-resident assessee, being an Individual and Hindu Undivided Family. However, these provisions cannot be adopted by the non-resident assessee, being a Partnership Firm.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable only to such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Hence, the scheme of section 44AD cannot be adopted by a non-resident whether he is an Individual or Hindu Undivided Family or Partnership Firm or any other non-resident assessee.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q4.The provisions relating to presumptive taxation scheme prescribed under section 44AD cannot be adopted by the non-resident assessee, being a Partnership Firm. Can these provisions be adopted by non-resident assessee being a Limited Liability Partnership Firm?

(a) Yes                                                           (b) No

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable only to such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Hence, the scheme of section 44AD cannot be adopted by a Limited Liability Partnership Firm whether it is resident or non-resident.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q5. The provisions of presumptive taxation scheme prescribed under section 44AD can be adopted by an individual earning income in the nature of commission or brokerage but cannot be adopted by an HUF earning income in the nature of commission or brokerage.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

The provisions of section 44AD cannot be adopted by the eligible assessee who is engaged in any profession as prescribed under section 44AA or is carrying on an agency business or is earning income in the nature of commission or brokerage. Thus, an assessee (irrespective of his status) earning income in the nature of commission or brokerage cannot adopt the provisions of section 44AD.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q6. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in the eligible business only if the income from such eligible business is below the 8% of the turnover or gross receipts of such eligible business.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage).There is no such condition that the provisions can be adopted only if the income from the eligible business is below the 8% of turnover or gross receipts of the eligible business.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q7. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in the business only if the turnover or gross receipts from the eligible business is below the limit of audit prescribed under section 44AB in the preceding financial year.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13) during the financial year in which he wants to adopt the presumptive taxation scheme and not during the preceding financial year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q8. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in the business only if the turnover or gross receipts from the eligible business is below the limit of audit prescribed under section 44AB in the preceding financial year as well as in the financial year in which he wants to adopt the scheme.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13) during the financial year in which he wants to adopt the presumptive taxation scheme and not during the preceding financial year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q9. The provisions relating to presumptive taxation scheme prescribed under section 44AD can be adopted by an assessee engaged in the business of retail trade only if his income from retail trade does not exceed Rs. 5,000 per month.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Hence, the assessee engaged in retail trade can adopt the provisions of section 44AD only if his turnover or gross receipts of the previous year do not exceed the limit of audit prescribed under section 44AB.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q10. Mr. Kapoor is running a factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,25,252 and during the previous year 2011-12 it was Rs. 1,25,84,848. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Hence, Mr. Kapoor can adopt the presumptive taxation scheme of section 44AD since his turnover during the previous year 2012-13 was below the limit of audit (i.e., Rs. 1,00,00,000). Turnover during the previous year in question is relevant. Turnover in the immediately preceding previous year is not relevant.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q11. Mr. Kapoor is running a factory. The turnover of the factory during the previous year 2012-13 was Rs. 1,84,25,252 and during the previous year 2011-12 it was Rs. 84,84,848. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Hence, Mr. Kapoor cannot adopt the presumptive taxation scheme of section 44AD since his turnover during the previous year 2012-13 exceeded the limit of audit (i.e., Rs. 1,00,00,000).

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q12. Mr. Soham is an engineer. His gross receipts during the previous year 2012-13 amounted to Rs. 68,84,252. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13).

In this case, Mr. Soham is engaged in one of the professions specified under section 44AA. Hence, Mr. Soham cannot adopt the presumptive taxation scheme of section 44AD, even though his gross receipts are below the limit of audit.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q13. Raja HUF whose Karta is Mr. Raja is running a departmental store and its gross receipts during the previous year 2012-13 were Rs. 84,00,000. Mr. Raja is also running his own provision shop and the turnover of the shop during the previous year 2012-13 was Rs. 48,84,000. They both want to adopt the provision of section 44AD. Can HUF as well as the Karta, both adopt the provisions of section 44AD?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). There is no restriction in adopting the provisions of section 44AD by a Hindu Undivided Family as well as the Karta of HUF. Hence, in this case, both, i.e., Raja HUF and Mr. Raja can adopt the provisions of section 44AD since the turnover of both of them is below the limit of audit prescribed under section 44AB.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q14. SM Enterprise, a partnership firm, is engaged in agency business. Its gross receipts during the previous year 2012-13 were Rs. 84,25,000. Mr. Shan, one of the partners of SM Enterprise, is also earning a commission income in his own capacity and his gross receipts during the previous year 2012-13 were Rs. 48,52,000. They both want to adopt the provisions of section 44AD. Can they do so?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession as prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). There is no restriction on adopting the provisions of section 44AD by both a partnership firm as well as the partners of the firm.

However, in this case both, i.e., SM Enterprise and Mr. Shan are engaged in the ineligible business, i.e., in the business for which the provisions of section 44AD cannot be adopted. Hence, SM Enterprise as well as Mr. Shan cannot adopt the provisions of section 44AD.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q15. Essem Corporation (a partnership firm) whose partners are Mr. Soham and Mr. Mohan is running a factory. The turnover of the factory during the previous year 2012- 13 was Rs. 88,44,848. The partners also carry their own agency business. In this case, can the firm adopt the provisions of presumptive taxation scheme of section 44AD?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in any business (except business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage) whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Thus, the firm satisfied both the criteria of the scheme and, hence, it can adopt the provisions of section 44AD for its factory. There is no such criteria that a firm cannot adopt the provisions of section 44AD if the partners are engaged in the ineligible business.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q16. SM Corporation (a limited liability partnership firm) is running a departmental store and its gross receipts during the previous year 2012-13 were Rs. 52,25,252. It wants to declare income as per the provisions of section 44AD. Can it do so?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

The provisions of section 44AD can be adopted by such resident assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm. Hence, SM Corporation, a Limited Liability Partnership Firm cannot adopt the presumptive taxation scheme of section 44AD.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q17. In case of an assessee who is willing to adopt the provisions of section 44AD, income will be computed on an estimated basis at prescribed rate of 5% per month.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

In case of an assessee who is willing to adopt the provisions of section 44AD, income will be computed on an estimated basis at the prescribed rate. The rate is 8% of turnover or gross receipts of the eligible business for the whole previous year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q18. Raja HUF whose Karta is Mr. Raja is running a departmental store. The turnover of the store during the previous year 2012-13 was Rs. 88,25,252. It wants to adopt the provisions of section 44AD. However, the Karta of the HUF is of the opinion that in case of HUF the income at the prescribed rate is computed by considering the turnover of the half year and, hence, it declared income of Rs. 3,53,010 [i.e., ( Rs. 88,25,252/2) * 8%]. Is the income shown by HUF correct? (It may be assumed that turnover has accrued evenly during each month).

(a) Yes                                               (b) No

Correct answer (b) Justification of correct answer:

In case of an assessee who is willing to adopt the provisions of section 44AD, income will be computed on an estimated basis at the prescribed rate. The rate is 8% of turnover or gross receipts of the eligible business, for the whole previous year. In no case the turnover is to be considered for the half year. Hence, the income declared by HUF is not correct, since it should be Rs. 7,06,020 (Rs. 88,25,252 * 8%).

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect option is not correct.

Q19. SM Corporation (a partnership firm) of Miss Khushi and Miss Khushali is running a boutique. The gross receipts of the boutique during the previous year 2012-13 were Rs. 94,48,848 and it wants to adopt the provisions of section 44AD. However, Miss Khushi is of the opinion that in case of partnership firm, income at the prescribed rate is computed by considering the turnover of each quarter and, hence, it declared income of Rs. 1,88,977 [i.e., (Rs. 94,48,848/4) * 8%]. Is the income shown by partnership firm correct? (It may be assumed that turnover has accrued evenly during the each quarter).

(a) Yes                                               (b) No

Correct answer (b) Justification of correct answer:

In case of an assessee who is willing to adopt the provisions of section 44AD, income will be computed on an estimated basis at the prescribed rate. The rate is 8% of turnover or gross receipts of the eligible business, for the whole previous year. In no case the turnover is to be considered for each quarter. Hence, the income declared by partnership firm is not correct, since it should be Rs. 7,55,908 (Rs. 94,48,848 * 8%).

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect option is not correct.

Q20. Mr. Soham is running a garment factory whose turnover during the previous year 2012-13 was Rs. 52,84,252. He wants to adkopt the provisions of section 44AD in respect of this business. In this case what will be his income as per the provisions of section 44AD?

(a) Rs. 2,11,371                                              (b) Rs. 4,22,740

(c) Rs. 52,84,252                                            (d) Rs. 1,05,685

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, in respect of business covered under section 44AD, income will be computed on an estimated basis. The rate is 8% of turnover or gross receipts of the eligible business for the previous year. In this case, the turnover of Mr. Soham is Rs. 52,84,252. Hence, his income as per the provisions of section 44AD will come to Rs. 4,22,740 (i.e., Rs. 52,84,252 * 8%).

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct amount of income. All the other options, viz., options (a), (c) and (d) giving incorrect amount of income are not correct.

Q21. Kumar HUF is running a garment factory. Its turnover from this business during the previous year 2012-13 was Rs. 97,25,252. It wants to adopt the provisions of section 44AD in respect of this business. In this case what will be its income as per the provisions of section 44AD?

(a) Rs. 97,25,252

(b) Rs. 1,94,505

(c) Rs. 3,89,010

(d) Rs. 7,78,020

Correct answer (d) Justification of correct answer:

As per the provisions of section 44AD, in respect of business covered under section 44AD, income will be computed on an estimated basis. The rate is 8% of turnover or gross receipts of the eligible business for the previous year. In this case, the turnover of Kumar HUF is Rs. 97,25,252. Hence, its income as per the provisions of section 44AD will come to Rs. 7,78,020 (i.e., Rs. 97,25,252 * 8%).

Comment on incorrect answer: Option (d) is the correct option since it gives the correct amount of income. All the other options, viz., options (a), (b) and (c) giving incorrect amount of income are not correct.

Q22.Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be the net income of the business covered under this scheme. However, in case of partnership firm such income will be the gross income of the business covered under this scheme.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business for the previous year) will be net income for the business covered under this scheme. In no case the income from the eligible business computed as per the provisions of section 44AD will be the gross income of the business.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q23. Mr. Kumar is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 52,00,000. He declared income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, he can further deduct the salary of Rs. 25,000 paid to accountant and depreciation on factory building of Rs. 84,000.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). Hence, he cannot further deduct the salary of Rs. 25,000 and depreciation of Rs. 84,000 from the net income of Rs. 4,16,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q24. Mr. Kumar is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 52,00,000 and he declared income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, he cannot further deduct the salary of Rs. 25,000 paid to accountant, however, he can deduct depreciation on factory building of Rs. 84,000.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). Hence, he cannot further deduct the salary of Rs. 25,000 as well as depreciation of Rs. 84,000 from the net income of Rs. 4,16,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q25. Mr. Kumar is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 52,00,000. He declared income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, he can deduct salary of Rs. 25,000 paid to accountant, however, he cannot deduct depreciation on factory building of Rs. 84,000.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). Hence, he cannot deduct the salary of Rs. 25,000 as well as depreciation of Rs. 84,000 from the net income of Rs. 4,16,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q26. Mr. Kumar is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 52,00,000. He declared income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, he cannot deduct the salary of Rs. 25,000 paid to accountant and depreciation on factory building of Rs. 84,000. However, he can claim deduction in respect of unabsorbed depreciation of Rs. 1,25,848.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). Hence, he cannot deduct the salary of Rs. 25,000, depreciation of Rs. 84,000 and unabsorbed depreciation of Rs. 1,25,848 from the net income of Rs. 4,16,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q27. Mr. Kumar is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 52,00,000. He declared income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, he cannot further deduct the salary of Rs. 25,000 paid to accountant and depreciation on factory building of Rs. 84,000, including unabsorbed depreciation of Rs. 1,25,848. However, he can claim deduction in respect of brought forward business loss of Rs. 2,84,000.

True                                                           (b) False

Correct answer (a) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). Hence, he cannot deduct the salary of Rs. 25,000, depreciation of Rs. 84,000 and unabsorbed depreciation of Rs. 1,25,848 from the net income of Rs. 4,16,000. However, he can claim deduction in respect of brought forward business loss of Rs. 2,84,000.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer: The statement given in the question is true. Hence, option

is not the correct option.

Q28. SM Corporation, a partnership firm, is running a garment factory. The turnover of the factory during the previous year 2012-13 is Rs. 52,00,000. It declared an income of Rs. 4,16,000 (i.e., Rs. 52,00,000 * 8%) as per the provisions of section 44AD. From the net income of Rs. 4,16,000, it cannot deduct the salary of Rs. 25,000 paid to accountant and depreciation on factory building of Rs. 84,000, including unabsorbed depreciation of Rs. 1,25,848. However, it can claim deduction in respect of remuneration of Rs. 84,252 and interest of Rs. 25,848 paid to the partners on their capital within the limit specified under section 40(b).

True                                                           (b) False

Correct answer (a) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income for the business covered under this scheme. From the net income computed as above, assessee is not permitted to claim any deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation). However, assessee, being a partnership firm, can claim further deduction of remuneration and interest paid to its partners within the limit specified under section 40(b). Hence, SM Corporation can claim deduction in respect of remuneration of Rs. 84,252 and interest of Rs. 25,848 paid to the partners on their capital within the limit specified under section 40(b).

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer: The statement given in the question is true. Hence, option

is not the correct option.

Q29. Mr. Raja is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 84,00,000. He declared income of Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) as per the provisions of section 44AD. He further carried on the following transactions.

He paid a commission of Rs. 8,400 to his selling agent without deduction of the tax at source from such commission.

He purchased goods worth Rs. 52,000 from his brother. The fair market value of such goods is Rs. 40,000.

Interest of Rs. 25,000 (for the year 2012-13) on a loan taken for his business from a one of the scheduled banks was not paid till the due date of filing the return of the previous year 2012-13.

Will these transaction be disallowed and added to the net income of Rs. 6,72,000?

Yes                                                            (b) No

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income of the business covered under this scheme. From income computed at the aforesaid rate, no disallowance can be made under sections 40, 40A and 43B. Hence, no disallowance will be made in respect of the above mentioned transactions.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q30. Mr. Raja is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 84,00,000. He declared income of Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) as per the provisions of section 44AD. He further carried on the following transactions.

He paid a commission of Rs. 8,400 to his selling agent without deduction of the tax at source from such commission.

He purchased goods worth Rs. 52,000 from his brother. The fair market value of such goods is Rs. 40,000.

Interest of Rs. 25,000 (for the year 2012-13) on a loan taken for his business from a one of the scheduled banks was not paid till the due date of filing the return of the previous year 2012-13.

From the above transactions, no disallowance is to be made in respect of commission. However, other two transactions will be disallowed and added to the net income of Rs. 6,72,000.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income of the business covered under this scheme. From income computed at the aforesaid rate, no disallowance can be made under sections 40, 40A and 43B. Hence, no disallowance will be made in respect of all above mentioned transactions.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

is not the correct option.

Q31. Mr. Raja is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 84,00,000. He declared income of Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) as per the provisions of section 44AD. He further carried on the following transactions.

He paid a commission of Rs. 8,400 to his selling agent without deduction of the tax at source from such commission.

He purchased goods worth Rs. 52,000 from his brother. The fair market value of such goods is Rs. 40,000.

From the above transactions, no disallowance is made in respect of commission as well as goods purchased from his brother. However, interest will be disallowed and added to the net income of Rs. 6,72,000.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income of the business covered under this scheme. From income computed at the aforesaid rate, no disallowance can be made under sections 40, 40A and 43B. Hence, no disallowance will be made in respect of the above mentioned transactions.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

is not the correct option.

Q32. Mr. Raja is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 84,00,000 and he declared income of Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) as per the provisions of section 44AD. He further carried on the following transactions.

He paid a commission of Rs. 8,400 to his selling agent without deduction of the tax at source from such commission.

He purchased goods worth Rs. 52,000 from his brother. The fair market value of such goods is Rs. 40,000.

Interest of Rs. 25,000 (for the year 2012-13) on a loan taken for his business from a one of the scheduled banks was not paid till the due date of filing the return of the previous year 2012-13.

From the above transactions, no disallowance is made in respect of goods purchased from his brother as well as interest. However, commission will be disallowed and added to the net income of Rs. 6,72,000.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

Income computed as per the provisions of section 44AD (i.e., @ 8% of turnover or gross receipts of the eligible business, for the previous year) will be net income of the business covered under this scheme. From income computed at the aforesaid rate, no disallowance can be made under sections 40, 40A and 43B. Hence, no disallowance will be made in respect of the above mentioned transactions.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q33. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. He cannot claim depreciation on the shop building of Rs. 25,000 as well as on the computer system of Rs. 12,000. However, he wants to compute the WDV of the block of these assets as if the depreciation is claimed and allowed under section 32. Can he do so?

(a) Yes                                                            (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, an assessee opting for the presumptive taxation scheme is not permitted to claim deduction on account of various expenditures including depreciation, however, the WDV of any asset used in the business covered under the scheme of section 44AD shall be calculated as if depreciation as per section 32 is claimed and allowed. Thus, even though no depreciation is available separately, yet for purpose of computation of the WDV of the asset depreciation will be deducted.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q34. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. He cannot claim depreciation on the shop building of Rs. 25,000 as well as on the computer system of Rs. 12,000. Hence, as per his view, the WDV of the block of these assets will also be calculated as if no depreciation is claimed under section 32.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, an assessee opting for the presumptive taxation scheme is not permitted to claim deduction on account of various expenditures, including depreciation, however, the WDV of any asset used in the business covered under the scheme of section 44AD shall be calculated as if depreciation as per section 32 is claimed and allowed. Thus, even though no depreciation is available separately, yet for purpose of computation of the WDV of the asset depreciation will be deducted. Hence, view of Mr. Raja is not correct.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q35. SM Corporation, a partnership firm, is running a factory whose turnover from this business during the previous year 2012-13 was Rs. 52,25,252 and it declared income as per the provisions of section 44AD. After computing the income @ 8% of turnover from such business during the previous year, the partners of the firm have calculated the closing WDV of the block of assets consisting of plants A, B and C as if the depreciation under section 32 is claimed and allowed. Is the closing WDV calculated by the partners correct?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, from the income computed as per the provisions of section 44AD, further deduction on account of depreciation is not available. However, the WDV of any asset used in the business covered under the scheme of section 44AD shall be calculated as if depreciation as per section 32 is claimed and allowed. Even though no depreciation is claimed by the firm, yet for purpose of computation of the WDV of the asset, depreciation will be deducted from the value of the block. Hence, the closing WDV calculated by the partners is correct.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q36. If an assessee, being an individual, adopts the provisions of section 44AD then he is not required to maintain books of account as per section 44AA in respect of business for which the provisions of section 44AD are being adopted. However, the assessee, being a partnership firm is required to maintain the books of account as per section 44AA in respect of the business for which it has adopted the provisions of section 44AD.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

An assessee adopting the provisions of section 44AD is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). This benefit is available to all the assessees who are eligible to adopt the provisions of section 44AD. Hence, partnership firm is also not required to maintain the books of account as per section 44AA in respect of the business for which it has adopted the provisions of section 44AD.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q37. If an assessee, being a partnership firm, adopts the provisions of section 44AD then it is not required to get the books of account audited as per section 44AB in respect of business for which the provisions of section 44AD are being adopted. However, the assessee – HUF is required to get the books of account audited as per section 44AB in respect of the business for which it has adopted the provisions of section 44AD.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

An assessee adopting the provisions of section 44AD is not required to maintain books of account as per section 44AA and is also not required to get such books of account audited as per section 44AB (applicable only for business covered by this section). This benefit is available to all the assessees who are eligible to adopt the provisions of section 44AD. Hence, HUF is also not required to get the books of account audited as per section 44AB in respect of the business for which it has adopted the provisions of section 44AD.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q38. If an assessee, being a partnership firm, adopts the provisions of section 44AD then it is not required to get the books of account audited as per section 44AB in respect of business for which the provisions of section 44AD are being adopted. However, the assessee, being a limited liability partnership firm, is required to get the books of account audited as per section 44AB in respect of all its businesses.

True                                                           (b) False

Correct answer (a) Justification of correct answer:

An assessee, being a limited liability partnership firm, cannot adopt the provisions of section 44AD and, hence, it is required to maintain the books of account as per section 44AA as well as liable to get such books of account audited as per section 44AB in respect of all of its businesses.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer: The statement given in the question is true. Hence, option

is not the correct option.

Q39. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. Is he required to maintain books of account in respect of his medical store?

(a) Yes                                                            (b) No

Correct answer (b) Justification of correct answer:

An assessee who adopts the provisions of section 44AD is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). Hence, Mr. Soham is not required to maintain books of account as per section 44AA in respect of his medical store.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q40. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. He is not required to maintain books of account in respect of his medical store. Shall the provisions of section 44AB in respect of audit be applicable to Mr. Soham?

(a) Yes                                                            (b) No

Correct answer (b) Justification of correct answer:

An assessee who adopts the provisions of section 44AD is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). Further, in respect of such business the provisions of section 44AB (relating to audit) are also not applicable. Hence, Mr. Soham is not liable to maintain books of account as per section 44AA as well as get such books of account audited as per section 44AB in respect of his business of medical store.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q41. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. He is also engaged in the business of passenger transportation. Is he liable to maintain books of account in respect of both of his businesses?

(a) Yes                                                            (b) No

Correct answer (b) Justification of correct answer:

An assessee who adopts the provisions of section 44AD is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). Hence, Mr. Soham is not required to maintain books of account as per section 44AA in respect of his medical store. However, in respect of the passenger transportation business he is liable to maintain the books of account as per section 44AA.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q42. Mr. Soham is running a medical store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,848 and he declared income of Rs. 6,74,068 (i.e., Rs. 84,25,848 * 8%) as per the provisions of section 44AD. He is also engaged in the business of passenger transportation. Is he liable to get books of account audited as per section 44AB in respect of both of his businesses?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

An assessee who adopts the provisions of section 44AD is not required to maintain books of account as per section 44AA (applicable only for business covered by this section). Further, in respect of such business the provisions of section 44AB (relating to audit) are also not applicable. Hence, Mr. Soham is not required to maintain books of account as per section 44AA as well as get such books of account audited as per section 44AB in respect of his medical store. However, in respect of the passenger transportation business, he is liable to maintain the books of account as per section 44AA as well as get such books of account audited as per section 44AB.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q43. Mr. Kapoor is engaged in the business of cement manufacturing whose turnover from this business during the previous year 2012-13 was Rs. 1,02,25,252. In this case he will not be liable to maintain the books of account in respect of this business only if he declares income at a higher rate than the rate prescribed under section 44AD.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

In this case, the provisions of section 44AD cannot be adopted by Mr. Kapoor since the turnover of the business of cement manufacturing exceeds the limit of audit prescribed under section 44AB during the previous year 2012-13 and, hence, he will be liable to maintain books of account prescribed under section 44AA in respect of above business.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q44. Mr. Soham is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,25,000 and he wants to adopt the provisions of section 44AD. However, his actual income from this business is Rs. 5,05,500 which is less than Rs. 6,74,000 (i.e., Rs. 84,25,000 * 8%). Is he liable to maintain the books of account if he declares his actual income?

(a) Yes                                               (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, an assessee who adopts the provision of section 44AD is not required to maintain books of account as per section 44AA. The relief from maintenance of books of account is available only if the assessee adopts the provisions of section 44AD, i.e., if he declares income at the rate prescribed under section 44AD or at the higher rate. In this case, Mr. Soham is not adopting the provisions of section 44AD and, hence, he will be liable to maintain the books of account as provided in section 44AA since his actual income exceeds the maximum amount which is not chargeable to tax.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q45. Mr. Soham is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,25,000 and he wants to adopt the provisions of section 44AD. However, his actual income from this business is Rs. 5,05,500 which is less than Rs. 6,74,000 (i.e., Rs. 84,25,000 * 8%). In this case he is liable to maintain the books of account if he declares his actual income. However, is he liable to get such books of account audited if he declares his actual income?

(a) Yes                                               (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, an assessee who adopts the provision of section 44AD is not required to maintain books of account as per section 44AA. The relief from maintenance of books of account is available only if the assessee adopts the provisions of section 44AD, i.e., if he declares income at the rate prescribed under section 44AD or at the higher rate. In this case, Mr. Soham is not adopting the provisions of section 44AD and, hence, he will be liable to maintain the books of account as provided in section 44AA as well as liable to get such books of account audited as per section 44AB, since his actual income exceeds the maximum amount which is not chargeable to tax.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q46. Mr. Raja is running a stationary mart whose turnover from this business during the previous year 2012-13 was Rs. 52,25,252. However, his actual income from this business is Rs. 2,61,263 which is less than Rs. 4,18,020 (i.e., Rs. 52,25,252 * 8%). In this case, he can declare his actual income of Rs. 2,61,263 which is lower than the limit prescribed under section 44AD.

True                                               (b) False

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is lower than the income prescribed under the presumptive scheme, then the assessee can declare income from aforesaid business at a lower rate (i.e., at less than 8%). Thus, in this case Mr. Raja can declare lower income. However, in this case he has to maintain the books of account prescribed under section 44AA and has to get such books of account audited as per section 44AB since his actual income exceeds the maximum amount which is not chargeable to tax.

Thus, the statement given in the question is true and, hence, option (a) is the correct option.

Comment on incorrect answer: The statement given in the question is true. Hence, option

is not the correct option.

Q47. The assessee, being an individual, can declare income at higher rate (i.e., higher than 8%) if his actual income is higher than the income computed as per the provisions of section 44AD. However, the assessee, being a partnership firm, cannot declare income at a higher rate, even though its actual income is higher than the income computed as per the provisions of section 44AD.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

The scheme permits the assessee to declare at his option higher income (i.e., higher than 8%). Hence, a partnership firm is also not barred from declaring higher income.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q48. Raja HUF is running a departmental store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,000 and it wants to adopt the provisions of section 44AD. Its actual income from this business is Rs. 8,84,848 which is higher than Rs. 6,74,000 (i.e., Rs. 84,25,000 * 8%). In this case, it cannot declare its actual income of Rs. 8,84,848 which is higher than the rate prescribed under section 44AD since HUF cannot declare income at higher rate.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from the aforesaid business. Hence, HUF is not barred from declaring higher income and it can declare its actual income of Rs. 8,84,848.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q49. The assessee, being an individual, is not liable to maintain the books of account as per section 44AA, even though he declares income at higher rate (i.e., higher than 8%). However, the assessee, being a partnership firm is liable to maintain the books of account as per section 44AA if it declares income at a higher rate (i.e., higher than 8%).

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from the aforesaid business. If higher income is declared then there is no need to maintain regular books of account as prescribed under section 44AA. Hence, this benefit of non-maintenance of books of account is also available to partnership firm if it declares income at a higher rate.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q50. Raja HUF is running a departmental store. The turnover of the store during the previous year 2012-13 was Rs. 84,25,000 and it wants to adopt the provisions of section 44AD. Its actual income from this business is Rs. 8,84,848 which is higher than Rs. 6,74,000 (i.e., Rs. 84,25,000 * 8%). In this case it is liable to maintain the books of account if it declares its actual income.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from the aforesaid business. If higher income is declared then there is no need to maintain regular books of account as prescribed under section 44AA. Hence, the benefit of non-maintenance of books of account is also available to Raja HUF.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q51. The assessee, being a partnership firm, is not liable to get the books of account audited as per section 44AB, even though it declares income at higher rate (i.e., higher than 8%). However, the assessee, being an HUF is liable to get the books of account audited as per section 44AB, if it declares income at a higher rate (i.e., higher than 8%).

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from the aforesaid business. If higher income is declared then there is no need to maintain regular books of account prescribed under section 44AA as well as to get such books of account audited as per section 44AB. Hence, this benefit of non-maintenance of books of account as well as not to get such books of account audited is also available to HUF if it declares higher income.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q52. Mr. Kumar is running a provision shop. The turnover of the shop during the previous year 2012-13 was Rs. 44,00,000. He wants to adopt the provisions of section 44AD. Its actual income from this business is Rs. 5,25,225 which is higher than Rs. 3,52,000 (i.e., Rs. 44,00,000 * 8%). In this case, is he liable to get the books of account audited if he declares his actual income?

(a) Yes                                                (b) No

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, if the actual income from the business covered under section 44AD is higher than the income prescribed under the presumptive scheme, then the assessee has to declare such higher income from the aforesaid business. If higher income is declared then there is no need to maintain regular books of account as prescribed under section 44AA as well as to get such books of account audited as prescribed under section 44AB. Hence, Mr. Kumar is not required to get the books of account audited as per section 44AB if he declares higher income.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q53.The assessee, being an individual, can adopt the provisions of section 44AD, even though he claims deduction under any of the sections 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. However, the assessee, being an HUF, cannot adopt the provisions of section 44AD if it claims deduction under any of the sections 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year.

(a) True                                              (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. Hence, individual as well as HUF cannot adopt the provisions of section 44AD if they claim deduction under any of the abovementioned sections.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q54. As per the provisions of section 44AD, the assessee who wants to adopt the provisions of section 44AD cannot claim deduction under any of the sections 10A/10AA/10B/10BA. However, he can claim deduction under sections 80HH to 80RRB in the relevant year.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the

previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q55. SM Corporation, a partnership firm, is an entrepreneur as defined in section 2(j) of the SEZ Act, 2005. It fulfills all the other conditions of section 10AA and claims deduction under section 10AA during the previous year 2012-13. Its turnover during the previous year 2012-13 is Rs. 99,84,000 and wants to adopt the provisions of section 44AD. Can it do so?

(a) Yes                                               (b) No

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. Hence, SM Corporation cannot adopt the provisions of section 44AD.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q56. SM Corporation, a partnership firm is an entrepreneur as defined in section 2(j) of the SEZ Act, 2005. However, it cannot claim deduction under section 10AA from previous year 2012-13 since a period of deduction (i.e., 15 years) is over. Its turnover during the previous year 2012-13 was Rs. 99,84,000 and wants to adopt the provisions of section 44AD. Can it do so?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. Hence, SM

Corporation can adopt the provisions of section 44AD since in previous year 2012-13 it has not claimed deduction under section 10AA.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q57. SM Ltd. is engaged in the business of industrial research. It fulfilled all the other conditions of section 80-IB and claimed deduction under section 80-IB during the previous year 2012-13. It wants to adopt the provisions of section 44AD since its gross receipts during the previous year 2012-13 were below the limit of audit prescribed under section 44AB. Can it do so?

(a) Yes                                               (b) No

Correct answer (b) Justification of correct answer:

The provisions of section 44AD cannot be adopted by the assessee being a company whether it has claimed deduction under any of the sections 80HH to 80RRB or not in the relevant year.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q58. As per the provisions of section 44AD, the assessee who wants to adopt the provisions of section 44AD cannot claim deduction under any of the sections 10A/10AA/10B/10BA or sections 80HH to 80RRB in the relevant year. Can he claim deduction under any of the sections 80C to 80U?

(a) Yes                                                (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. However, deduction under section 80C to 80U can be claimed separately.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q59. As per the provisions of section 44AD, an individual who adopts the provisions of section 44AD can claim deduction under any of the sections 80C to 80U. However, an HUF who adopts the provisions of section 44AD cannot claim deduction under any of the sections 80C to 80U.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. However, deduction under section 80C to 80U (except sections 80HH to 80RRB) can be claimed separately. Hence, an HUF is also not barred from claiming deduction under any of the sections 80C to 80U except sections 80HH to 80RRB.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q60. As per the provisions of section 44AD, an HUF who adopts the provisions of section 44AD cannot claim deduction under any of the sections 80C to 80U if any of its members has claimed deduction under any of the sections 80C to 80U in his personal return.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the scheme can be adopted by the eligible assessee engaged in any business (except the business of plying, hiring or leasing goods carriages referred to in section 44AE and except by the assessee who is engaged in any profession prescribed under section 44AA or is carrying on agency business or is earning income in the nature of commission or brokerage), whose turnover or gross receipts from such business do not exceed the limit of audit prescribed under section 44AB (i.e., Rs. 60,00,000 for the previous year 2011-12 and Rs. 1,00,00,000 from the previous year 2012-13). Further, these provisions can be adopted by the assessee only if he has not claimed deduction under section 10A/10AA/10B/10BA or under sections 80HH to 80RRB in the relevant year. However, deduction under sections 80C to 80U can be claimed separately. Nowhere it is mentioned in section 44AD that an HUF cannot claim deduction under any of the sections 80C to 80U if any of its members has claimed deduction under above mentioned sections in his personal return.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q61. Mr. Raja is running a garment factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,00,000 and he declared income of Rs. 6,72,000 (i.e., Rs. 84,00,000 * 8%) as per the provisions of section 44AD. He further wants to claim deduction under section 80TTA in respect of interest on deposits in saving account. Can he claim deduction under section 80TTA from the net income of Rs. 6,72,000?

(a) Yes                                               (b) No

Correct answer (a) Justification of correct answer:

As per the provisions of section 44AD, the assessee can claim deductions under sections 80C to 80U (except sections 80HH to 80RRB) separately from the net income computed as per the provisions of section 44AD. Hence, Mr. Raja can claim deduction under section 80TTA from the net income of Rs. 6,72,000.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q62. Raja HUF is engaged in the business of cement manufacturing whose turnover during the previous year 2012-13 was Rs. 1,25,52,252. HUF has incurred expenditure for the medical treatment of one of the members of the family suffering from the specified disease as prescribed by the Board under rule 11DD and is wholly dependent upon the family. It claims deduction under section 80DDB and wants to adopt the provisions of section 44AD during the previous year 2012-13. Can it do so?

(a) Yes                                               (b) No

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, Raja HUF cannot adopt the provisions of section 44AD since its turnover during the previous year 2012-13 exceeded the limit of audit (i.e., Rs. 1,00,00,000) as prescribed under section 44AB.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q63. Shall the provisions relating to advance tax apply to the assessee who adopts the presumptive taxation scheme of section 44AD?

(a) Yes                                                 (b) No

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the provisions relating to advance tax shall not apply to the assessee who adopts the presumptive taxation scheme of section 44AD.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct provisions. The other option, viz., option (a) giving the incorrect provisions is not correct.

Q64. A partnership firm adopting the provisions of section 44AD is not liable to pay advance tax in respect of the business covered under section 44AD. However, partners adopting the provisions of section 44AD for their personal business are liable to pay advance tax in respect of the business covered under section 44AD.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

An assessee opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of business covered under section 44AD. In other words, a person

adopting the provisions of presumptive taxation scheme of section 44AD is not liable to pay advance tax in respect of the business covered under section 44AD. Thus, an assessee may be a partnership firm or its partners (i.e., as individuals on their own) adopting the provisions of section 44AD is not liable to pay advance tax in respect of the business covered under section 44AD.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q65. The assessee adopting the provisions of section 44AD is not liable to pay advance tax in respect of all his businesses whether covered under section 44AD or not.

(a) True                                                           (b) False

Correct answer (b) Justification of correct answer:

An assessee opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of only for the business covered under section 44AD. Hence, if an assessee owns any other business for which he has not adopted the provisions of section 44AD or the business for which the provisions of section 44AD cannot be adopted, then in respect of that business he is liable to pay advance tax.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q66. The assessee adopting the provisions of section 44AD is liable to pay advance tax in respect of his other business for which he has not adopted the provisions of section 44AD only if advance tax payable exceeds Rs. 20,000.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

An assessee opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of only the business covered under section 44AD. Hence, if an assessee owns any other business for which he has not adopted the provisions of section 44AD or the business for which the provisions of section 44AD cannot be adopted, then in respect of that business he is liable to pay advance tax if advance tax payable is Rs. 10,000 or more.

Thus, the statement given in the question is false and hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q67. SM Corporation, a partnership firm of Mr. Mohan and Mr. Soham is running a factory whose turnover from this business during the previous year 2012-13 was Rs. 1,01,25,252 and its taxable income was Rs. 10,00,000. Mr. Soham is running a proprietary concern in his own capacity and he has adopted the provisions of section 44AD in respect of his own business during the previous year 2012-13. Hence, in this case SM Corporation is not liable to pay advance tax for its factory business since Mr. Soham has adopted the provisions of section 44AD.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

As per the provisions of section 44AD, the provisions relating to advance tax shall not apply only to the assessee who adopts the presumptive taxation scheme of section 44AD.

In this case the provisions of section 44AD are being adopted by one of the partners of SM Corporation for his own business and not by the SM Corporation. Hence, SM Corporation is liable to pay advance tax since its tax liability exceeds Rs. 10,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q68. SM Corporation, a partnership firm of Mr. Mohan and Mr. Soham, is running a factory whose turnover from this business during the previous year 2012-13 was Rs. 84,25,252 and declared income of Rs. 6,74,020 (i.e., Rs. 84,25,252 * 8%). It also earned a brokerage of Rs. 5,84,000 during the previous year 2012-13. Is it liable to pay advance tax?

(a) Yes                                               (b) No

Correct answer (a) Justification of correct answer:

An assessee opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of only for the business covered under section 44AD. Hence, if an assessee owns any other business for which he has not adopted the provisions of section 44AD or the business for which the provisions of section 44AD cannot be adopted, then in respect of that business he is liable to pay advance tax if advance tax payable is Rs. 10,000 or more.

In this case, SM Corporation is not liable to pay advance tax in respect of factory business. However, in respect of commission income it is liable to pay advance tax since its advance tax liability exceeds Rs. 10,000.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct provisions. The other option, viz., option (b) giving the incorrect provisions is not correct.

Q69. SM Ltd. is engaged in the business of cement manufacturing whose turnover from this business during the previous year 2012-13 was Rs. 98,84,484 and its taxable income was Rs. 15,00,000. It wants to adopt the provisions of section 44AD. Hence, it is not liable to pay advance tax.

(a) True                                               (b) False

Correct answer (b) Justification of correct answer:

An assessee, being a company, is not eligible to adopt the provisions of section 44AD. Hence, it has to pay advance tax during the previous year 2012-13 since its income-tax liability exceeds Rs. 10,000.

Thus, the statement given in the question is false and, hence, option (b) is the correct option.

Comment on incorrect answer: The statement given in the question is false. Hence, option

(a) is not the correct option.

Q70. Mr. Raja is running a factory. The turnover of the factory during the previous year 2012-13 is Rs. 84,52,000 and he declares income as per the provisions of section 44AD. He is also engaged in the business of plying, hiring or leasing of goods carriages. He owns 8 heavy goods vehicles and declares income as per the provisions of section 44AE. In this case, what will be the amount of advance-tax he is liable to pay for the previous year 2012-13?

(a) Nil                                                 (b) Rs. 6,76,160

(c) Rs. 40,000                                     (d) Rs. 10,000

Correct answer (a) Justification of correct answer:

An assessee opting for the presumptive taxation scheme of section 44AD will not be liable to pay advance tax in respect of only for the business covered under section 44AD. Hence, if an assessee owns any other business for which he has not adopted the provisions of section 44AD or the business for which the provisions of section 44AD cannot be adopted, then in respect of that business he is liable to pay advance tax if advance tax payable is Rs. 10,000 or more. In other words, even in respect of business for which the assessee has adopted the provisions of presumptive taxation scheme of section 44AE, he is liable to pay advance-tax if his advance-tax liability exceeds Rs. 10,000.

In this case, Mr. Raja is not liable to pay advance tax in respect of factory business. Moreover, in respect of business of plying, hiring or leasing goods carriages also he is not liable to pay advance tax since his advance tax liability does not exceed Rs. 10,000.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct amount of advance-tax. The other options, viz., option (b), (c) and (d) giving the incorrect amount are not correct.

Related

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Scheme of computation of income Illustration

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Provisions relating to various allowances/disallowances Illustration

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Manner of computation of WDV of depreciable assets Illustration

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<img data-lazy-fallback="1" decoding="async" width="498" height="324" src=""/>Provisions relating to maintenance of books of account Illustration

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Declaration of lower income/Higher income Illustration

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Applicability of Provisions of Advance Tax Illustration

1. By whom the provisions relating to presumptive taxation scheme of section 44AD are adopted?

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2. What are the provisions relating to computation of income under the presumptive taxation scheme of section 44AD?

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3. What are the provisions relating to various allowances/disallowances under the presumptive taxation scheme of section 44AD?

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4. What is the manner of computation of WDV of depreciable assets under the presumptive taxation scheme of section 44AD?

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5. What are the provisions relating to maintenance of books of account under the presumptive taxation scheme of section 44AD?

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6. What are the provisions relating to declaration of lower income/higher income under the presumptive taxation scheme of section 44AD?

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7. What are the provisions relating to applicability of provisions of advance tax under the presumptive taxation scheme of section 44AD?

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Q1. The provisions relating to presumptive taxation scheme applicable to an assessee engaged in any profession prescribed under section 44AA are given in section

Correct answer (d) Justification of correct answer:

Q2. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the assessee who is an Individual, Hindu Undivided Family and Partnership Firm but not Limited Liability Partnership Firm, irrespective of their residential status.

<img data-lazy-fallback="1" decoding="async" width="498" height="324" src=""/>Correct answer (b) Justification of correct answer:

Q3.The provisions relating to presumptive taxation scheme prescribed under section 44AD can be adopted by the non-resident assessee, being an Individual and Hindu Undivided Family. However, these provisions cannot be adopted by the non-resident assessee, being a Partnership Firm.

Correct answer (b) Justification of correct answer:

Q4.The provisions relating to presumptive taxation scheme prescribed under section 44AD cannot be adopted by the non-resident assessee, being a Partnership Firm. Can these provisions be adopted by non-resident assessee being a Limited Liability Partnership Firm?

Correct answer (b) Justification of correct answer:

Q5. The provisions of presumptive taxation scheme prescribed under section 44AD can be adopted by an individual earning income in the nature of commission or brokerage but cannot be adopted by an HUF earning income in the nature of commission or brokerage.

<img data-lazy-fallback="1" decoding="async" width="498" height="324" src=""/>Correct answer (b) Justification of correct answer:

Q6. The provisions relating to presumptive taxation scheme prescribed under section 44AD are applicable to the eligible assessee engaged in the eligible business only if the income from such eligible business is below the 8% of the turnover or gross receipts of such eligible business.

Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Q9. The provisions relating to presumptive taxation scheme prescribed under section 44AD can be adopted by an assessee engaged in the business of retail trade only if his income from retail trade does not exceed Rs. 5,000 per month.

Correct answer (b) Justification of correct answer:

Q10. Mr. Kapoor is running a factory. The turnover of the factory during the previous year 2012-13 was Rs. 84,25,252 and during the previous year 2011-12 it was Rs. 1,25,84,848. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

<img data-lazy-fallback="1" decoding="async" width="498" height="324" src=""/>Correct answer (a) Justification of correct answer:

Q11. Mr. Kapoor is running a factory. The turnover of the factory during the previous year 2012-13 was Rs. 1,84,25,252 and during the previous year 2011-12 it was Rs. 84,84,848. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

Correct answer (b) Justification of correct answer:

Q12. Mr. Soham is an engineer. His gross receipts during the previous year 2012-13 amounted to Rs. 68,84,252. Can he adopt the provisions of presumptive taxation scheme of section 44AD in respect of this business?

Correct answer (b) Justification of correct answer:

Correct answer (a) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Correct answer (a) Justification of correct answer:

Q16. SM Corporation (a limited liability partnership firm) is running a departmental store and its gross receipts during the previous year 2012-13 were Rs. 52,25,252. It wants to declare income as per the provisions of section 44AD. Can it do so?

Correct answer (b) Justification of correct answer:

Q17. In case of an assessee who is willing to adopt the provisions of section 44AD, income will be computed on an estimated basis at prescribed rate of 5% per month.

Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Q20. Mr. Soham is running a garment factory whose turnover during the previous year 2012-13 was Rs. 52,84,252. He wants to adkopt the provisions of section 44AD in respect of this business. In this case what will be his income as per the provisions of section 44AD?

Correct answer (b) Justification of correct answer:

Q21. Kumar HUF is running a garment factory. Its turnover from this business during the previous year 2012-13 was Rs. 97,25,252. It wants to adopt the provisions of section 44AD in respect of this business. In this case what will be its income as per the provisions of section 44AD?

Correct answer (d) Justification of correct answer:

<img data-lazy-fallback="1" decoding="async" width="498" height="324" src=""/>Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

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Provisions relating to maintenance of books of account Illustration

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Correct answer (b) Justification of correct answer:

Correct answer (b) Justification of correct answer:

Correct answer (a) Justification of correct answer:

Correct answer (b) Justification of correct answer: