Topic
Presumptive taxation under the Income Tax Act allows small businesses to compute taxable income based on presumed profits rather than actual accounts, subject to turnover limits and specific conditions.
ITAT Jaipur set aside an unexplained money addition of Rs.10,90,100 u/s 69A after finding assessee's cash withdrawals sufficient to cover credit card payments. The ruling clarifies that correlated withdrawals can rebut Section 69A additions, impacting taxpayers facing similar assessments.
The ITAT Pune has ruled that a partnership firm cannot claim presumptive taxation under Section 44AD once gross receipts surpass Rs. 1 crore, even if income was initially declared at 8%. Crucially, it directed the Assessing Officer to reconsider disallowed business expenses on remand, reinforcing that denial of presumptive benefit does not automatically justify blanket expense rejection without proper scrutiny.
The ITAT Mumbai has ruled that tax authorities cannot invoke Rule 8D to disallow expenses under Section 14A when the taxpayer has not claimed any deduction attributable to exempt income, even if investments exist. This shields taxpayers using presumptive taxation or capitalizing costs from artificial disallowances, reinforcing that disallowance requires actual claimed expenditure - not mere asset holding.
The ITAT Delhi ruled that offshore supply of goods by a UK-based company, with no physical presence or control in India, cannot be taxed under Section 44BB’s presumptive regime. The Revenue failed to prove a permanent establishment under the India-UK Tax Treaty, reinforcing that mere contract execution or remote supervision does not create taxable nexus. This sets a critical precedent for multinational energy and engineering firms operating across borders without local infrastructure.
ITAT Kolkata rules that presumptive taxation under Section 44AD of the Income Tax Act does not apply to businesses with turnover exceeding ₹2 crore, invalidating the 8% addition imposed by the AO. The tribunal reduced the addition to 4% of turnover, setting a precedent for taxpayers in similar disputes.
ITAT Ranchi slashed the presumptive profit rate from 8% to 3% for an unaccounted electronic goods business, ruling that tax authorities cannot impose arbitrary additions without rejecting books or proving higher margins. The decision reinforces that presumptive taxation under Section 44AD must align with actual business performance, protecting small traders from speculative assessments.
ITAT Pune holds that loan source credibility cannot be rejected solely on declared income; bank statements and consistent filing establish legitimacy under Section 69A.