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Freedom from accounting, audit, scrutiny & advance tax for small businesses declaring 8% or higher profits

Business entities having an annual turnover or gross receipts of less than Rs. 1 crore need to be familiar with the special provisions of Section 44AD of the Income-tax Act in regard to computing profits and gains of business on presumptive basis. The major highlights of the ‘Presumptive Income Scheme’ are as under:

  • It applies to any ‘eligible taxpayer’ being an individual, HUF or partnership firm (not claiming any exemption or deduction in respect of special undertakings or incomes under the Section 10 or 80 family), who has income from ‘eligible business.’

  • An ‘eligible business’ means any business, other than business of a transport operator (since the same is covered under Section 44E), whose annual total turnover or gross receipts does not exceed Rs.1 crore. (more…)



Latest HC decision holds that mere agreement for addition cannot constitute concealment of income leading to penalty!

      A number of real life situations arise, where a taxpayer, either during the course of his scrutiny assessment proceedings or during an income-tax survey at his business premises, accepts an addition or disallowance as proposed by the Assessing Officer or even offers the survey team to pay tax on income disclosed during the survey. Can a taxpayer be penalized for concealment in such cases, when such acceptance or offer is made by the taxpayer bonafide, with a view to buy peace of mind and avoid litigation?

     The latest decision of the Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory 35 250 (2013), deserves a special mention, not just because it answers the above question in favour of the taxpayer with a categorical ‘no’ and clearly holds that “levy of penalty is not automatic,” but also because, it can be acknowledged as a masterly treatise on the subject. The High Court has, in its elaborate, well reasoned and absorbing judgement, lucidly analyzed diverse perspectives on the ever raging controversy of penalty and finally rested its conclusion in the light of the underlying ratios of landmark rulings of the Apex Court and various High Courts. (more…)


Don’t miss tax breaks for SB interest earned upto Rs.10,000 and preventive health check up expenditure of Rs.5,000!

While you are all set to file your income-tax returns for Assessment Year 2013-14, here is a gentle reminder to ensure that you do not miss to claim two new deductions under the Section 80 family, which are making their first appearance this year.

Under section 139(1C), the Central Government has been authorized to exempt any class or any classes of persons from the requirement of furnishing a return of income, subject to such conditions as may be prescribed, through the issue of a notification in the official gazette.

Accordingly, for the Assessment Years 2011-12 and 2012-13, salaried employees, whose total income did not exceed Rs.5 lakhs and whose income consisted only of salaries and income from other sources, by way of interest from a savings account in a bank, not exceeding Rs.10,000, were granted exemption from filing of their income-tax returns. This was subject to the condition that the taxpayer had discharged his total tax liability in respect of both salary and interest income through tax deduction at source by his employer and no claim of refund of any tax was due to him. (more…)


Be prepared to handle situations, where law requires you to file your return even though no tax is payable in your case!

        Section 139 of the Income-tax Act provides that an individual or a Hindu Undivided Family (HUF) is required to file his Income-tax Return, if his Gross Total Income (GTI) prior to various deductions under Section 80 family (such as 80C, 80D, 80G etc.) exceeds the basic income-tax exemption limit. From Assessment Year 2013-14, the prescribed exemption limit is Rs.2,00,000 (in case of both a male and female taxpayer), Rs.2,50,000 for resident Senior Citizens, aged 60 years and above but below 80 years and Rs.5,00,000 for resident Super Senior Citizens aged 80 years and above.

       GTI includes within its scope the total of all taxable incomes, after considering the relevant deductions available under the five heads of income, but before allowing the eligible deductions under Section 80 family for purpose of computing the Total Income (TI). The case studies below will meaningfully illustrate this point.

Case Study – 1: Mr. J earned gross salary of Rs.4,00,000 in FY 2012-13. After excluding his exempt allowances and perquisites of Rs.70,000, his taxable salary works out to Rs.3,30,000. The interest payable on housing loan eligible for deduction under Section 24 is Rs.1,00,000 and his taxable income from other sources is Rs.30,000. His GTI thus works out to Rs.2,60,000 (3,30,000-1,00,000+30,000). Mr. J has invested Rs. 1,00,000 in investments eligible for deduction u/s 80C and also paid Mediclaim premium of Rs.10,000 entitled to deduction under Section 80D. His TI stands determined at Rs.1,50,000 (2,60,000-1,00,000-10,000) and therefore, the income-tax payable by him is Rs. Nil. However, in this case, Mr. J would be required to mandatorily file his tax return for Assessment Year 2013-14. (more…)


Courts hold that exemption u/s. 54 is available even for multiple houses, if they are adjacent, lateral or vertical!

The term ‘a residential house’ used in the Sections 54 & 54F of the Income-tax Act has of late drawn quite significant and interesting interpretations from Courts paving way for an investor to invest his taxable capital gains in even more than one residential house and claim exemption, if the residential units are adjacent or have a common point of entry or are located in the same building, though on different floors.

In its very recent decision in the case of CIT vs. Syed Ali Adil 33 212, (2013) the Andhra Pradesh High Court has clarified that the expression ‘a residential house’ has to be understood in a sense that the building should be of residential nature and should not be understood to indicate a singular number. The Court thus held that even where a taxpayer had purchased two residential flats under separate purchase deeds out of the capital gains arising out of sale of his residential house, he was entitled to exemption under Section 54, more so, since the flats were situated side by side and the builder had carried out modifications in the same, so as to make it as one unit.

The Andhra Pradesh High Court disapproved the decision of the ITAT Special Bench (Mumbai) in the case of Sushila M. Jhaveri 107 ITD 327, holding that the view of the Tribunal to the effect that only one residential house should be given relief under Section 54 does not appear to be correct.

On this very issue, the Karnataka High Court in the case of CIT vs. Smt. K.G.Rukminiamma 196 Taxmann 87 has also held that the expression ‘a residential house’ used in Section 54 makes it clear that it was not the intention of the legislation to convey the meaning that it refers to a single residential house. If that was the intention, they would have used the word ‘one’. (more…)

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