By Rasheela Basheer – On April 17, 2022 6:25 am
The ITAT, Chennai bench has held that the provisions of Section 44AD of the Income Tax Act, 1961 cannot be applied to commission agents who are doing business of agency commission or earning commission income only in view of provisions of Section 44AD(6)(iii) of the Act.
The assessee is an individual and is engaged in commission agency business of agricultural produce and earning income as commission agent. During the relevant year, the AO noticed that the assessee has filed his return of income on 27.11.2018 admitting taxable income at Rs.2,84,824/-. According to him, the assessee carried on business and total credit comes to Rs.1,58,01,195/- after deducting sweep transfer out of total credit in bank account at Rs.3,28,51,635/-. The AO computed the profit and gains of business on presumptive basis after applying the provision of section 44AD of the Act and assessed the net profit equal to 8% of the total credits of Rs.1,58,01,195/-.
The assessee contended that a reasonable profit estimate should be made as the provision of section 44AD of the Act does not applied commission agents of agricultural produce.
After hearing arguments from both the sides, the Tribunal bench comprising Shri Mahavir Singh, Vice President and Shri Manoj Kumar Aggarwal, Accountant Member observed that “the legal position is very clear that profit rate as mentioned in the provisions of Section 44AD of the Act, cannot be applied to commission agents who are doing business of agency commission or earning commission income only in view of provisions of Section 44AD(6)(iii) of the Act. Hence, as canvassed by ld.counsel for the assessee, a reasonable profit can be estimated. Accordingly, we estimate the profit at the rate of 4% of total credits determined by the AO at Rs.1,58,01,195/-, after deducting sweep transfers. The AO will recompute the income accordingly.”To Read the full text of the Order CLICK HERE