M/S. GLOBAL CONSULTING SERVICES,CHENNAI vs. ITO, NCW-11(3), CHENNAI

The brief facts of the care are that the assessee is a partnership firm, carrying on the business of providing advisory facilitation and coordination services to educational institutions under formal written agreements for global ranking. The assessee filed the return of income for the AY 2024-25 on 03.07.2024 declaring a total income of Rs.9,45,850/- under the presumptive taxation scheme in accordance with sec.44AD of the Act. The case was selected for scrutiny for the reason to verify the substantial receipts u/s.194J of the Act and income shown u/s.44AD instead of 44ADA of the Act. Accordingly, the statutory notices were issued to the assessee and the assessee furnished the necessary details and explanation from time to time. Based on the examination, the AO concluded that the assessee was rendering global ranking services to educational institutions. The services rendered include providing advisory support ranking services coordination with stakeholders and consultancy for institutional ranking improvement and undertaking other allied activities as stipulated in the respective agreements and held that the nature of services rendered involved specialized knowledge and professional expertise and therefore constituted professional consultancy services rather than ordinary business activities. Consequently, the AO rejected the claim of sec.44AD of the Act and estimated the income of the assessee at 70% of the gross receipts by passing an order u/s.143(3) of the Act dated 31.12.2025 determining total income at Rs.51,33,445/- as against the returned income of Rs.9,45,850/-, thereby making an addition of Rs.41,87,595/-.

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee submitted that the AO has erred in estimating the income from profession at 70% of the receipts treating the business carried on by the assessee as profession by invoking sec.44ADA of the Act instead of sec.44AD of the Act. Further, the assessee submitted that they have spent a revenue expenditure of Rs.36,59,284 in the normal course of business and hence estimating income at 70% is baseless and unsustainable in law. These expenses have been spent through banking

Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. The ld.AR for the assessee submitted that the authorities below have misinterpreted the nature of services provided by the assessee as professional services and wrongly invoked the sec.44ADA of the Act. The ld.AR contended that the assessee is engaged in composite activities involving facilitation, coordination, reporting, implementation and operational functions, which are in the nature of substantial execution. Further, the ld.AR stated that the assessee is not carrying on any profession as stated u/s.44AA(1) of the Act like legal, medical, engineering, architectural, accountancy, technical consultancy or interior decoration, nor falls within other professions specifically notified by the CBDT like film artists or authorized representatives. Further, the services provided by the assessee do not require any statutory or recognized professional qualification. Therefore, the income is assessable u/s.44AD of the Act instead of wrongly recognized by the revenue as income liable to be taxed u/s.44ADA of the Act. In support of the above arguments, the ld.AR relied on the recent decision of the Mumbai Benches of the Tribunal in the case of Manoj Rajaram Sharma v. ITO (2026) ITA No.8313/Mum/2025, wherein the Tribunal

Further, the ld.AR submitted that sec.44AD(6) of the Act applies only to the persons carrying on the agency business, which is not the present case, therefore, the assessee’s activities of advisory and facilitation based business services, and not a pure agency model. Therefore, the application of sec.44AD(6) of the Act to the entire turnover is arbitrary and not justified in law. The ld.AR also submitted that the assessee has been carrying on the similar business activity consistently and are being declared u/s.44AD of the Act in the preceding assessment years and the same has been accepted by the department in the regular course of assessment. Further, in respect of the :-7-:

Per contra, the ld.DR for the Revenue relied on the orders of the authorities and submitted that the entire TDS shown in Form 26AS clearly shows that the assessee is carrying on the profession and hence liable to be assed u/s.44ADA of the Act. Therefore, the ld.DR prayed for confirming the order of the ld.CIT(A).

We have heard the rival submissions, perused the material available on record and carefully gone through the judicial precedents, cited supra, and also the orders of the authorities below. The principal issue arising for our consideration is whether the activities carried on by the assessee-firm in providing global ranking advisory, facilitation and coordination services to educational institutions constitute a profession falling within the ambit of section 44AA(1) of the Act, so as to attract the presumptive taxation scheme u/s.44ADA of the Act, or whether the same are in the nature of business activities eligible for consideration u/s.44AD of the Act.

The undisputed facts are that the assessee is a partnership firm engaged in providing advisory, facilitation and coordination services to educational institutions under contractual arrangements relating to global rankings. The assessee filed its return of income for the assessment year under consideration declaring total income of Rs.9,45,850/- by adopting the presumptive taxation

At the outset, we observe that the applicability of section 44ADA cannot be determined merely on the basis of the terminology employed in the agreements or the fact that the services involve a degree of knowledge, skill or experience. Section 44ADA specifically applies to an assessee engaged in a profession referred to in section 44AA(1) of the Act, subject to the prescribed conditions. Section 44AA(1) identifies particular professions, including legal, medical, engineering, architectural, accountancy, technical consultancy and interior decoration, together with other professions notified by the Board. Thus, the relevant test is whether the nature and substance of the activities carried on by the assessee fall within the scope of a profession covered by the said provision. The mere description of an activity as consultancy or advisory services does not automatically bring it within the ambit of section 44ADA.

On examination of the nature of services described in the material placed before us, we find that the assessee's primary activity is to assist educational institutions in maintaining, improving and strengthening their positions in global rankings vis-à-vis other comparable institutions. Such activities involve the compilation and organisation of institutional data, coordination with relevant stakeholders, assistance in reporting and performance evaluation, benchmarking of institutional parameters and providing operational guidance for improving the institution's ranking performance. The object of these activities

In our considered view, the aforesaid activities, when considered in their entirety, are in the nature of institutional support, commercial facilitation, coordination and business consultancy services. The fact that the assessee may analyse institutional performance, assist in compiling data or provide guidance regarding ranking parameters does not, by itself, establish that the assessee is rendering technical consultancy within the meaning of section 44AA(1) of the Act. There is a material distinction between services involving ordinary business support, coordination and performance improvement and professional technical consultancy requiring specialised scientific or technological expertise falling within the statutory provision. The lower authorities have principally relied upon the advisory nature of the activities without establishing how the services actually rendered by the assessee constitute a specified profession within the meaning of section 44AA(1).

We further note that the assessee's activities do not involve the rendering of legal, medical, engineering, architectural, accountancy or interior-decoration services. Nor has the Revenue identified any specific notification issued by the CBDT under which the assessee's activity of providing ranking facilitation and institutional coordination services is covered as a notified profession. Further, the material on record does not establish that the services are dependent upon a prescribed professional qualification or a recognised qualification in science or technology of the kind relevant to the technical consultancy category relied upon by the Revenue. The absence of a prescribed professional qualification is not, by itself, conclusive of the classification of an activity. Nevertheless, when considered together with the actual contractual functions performed by the assessee, the commercial objective of those functions and the absence of material demonstrating that the activities fall within a specified profession, it :-10-:

We find support for the aforesaid reasoning from the decision of the Mumbai Bench of the Tribunal in Manoj Rajaram Sharma v.ITO (2026) - ITA No.8313/Mum/2025, dated 20.03.2026, wherein the Tribunal examined the applicability of sections 44AD and 44ADA. Similarly, Mumbai Bench of the Tribunal in in Vishnu Dattatraya Ponkshe v. CPC, ITA No. 1570/Mum/2023, dated 29.08.2023, wherein the Tribunal considered the applicability of sections 44AD and 44ADA to receipts from consultancy-related activities on which tax had been deducted under section 194J of the Act. The Tribunal held that the receipts could not be brought within section 44ADA merely on the basis of the TDS treatment where the assessee's activities did not fall within the professions contemplated u/s.44AA(1). The said decision supports the proposition that the nature of the activity and its statutory classification must be examined independently, rather than determining eligibility for presumptive taxation solely on the basis of the section under which the payer deducted tax.

We are, therefore, unable to accept the contention of the Revenue that the deduction of tax at source u/s.194J is sufficient to establish the professional character of the assessee's receipts. The provisions relating to tax deduction at source govern the withholding obligations of the payer, whereas the applicability of sections 44AD and 44ADA must be determined in accordance with the substantive provisions governing the computation of income of the recipient. Even where the payer has categorised a payment as being subject to section 194J, the tax authorities are required to examine the actual nature of the services rendered before determining whether the receipts constitute income from a specified profession. We further observe that section 44AD(6) excludes from its operation persons carrying on a profession referred to in section 44AA(1), persons earning income in the nature of commission or brokerage,

Having regard to the overall nature of the activities, we find that the assessee undertakes commercial and institutional support functions aimed at helping educational institutions maintain and improve their rankings among similar institutions. The activities are directed towards coordination, performance benchmarking, data organisation, reporting and facilitating institutional improvement. They do not, on the material available on record, constitute the rendering of a specified professional service contemplated u/s.44AA(1). We accordingly hold that the impugned receipts cannot be treated as professional receipts merely because the agreements use expressions such as advisory services, consultancy or global ranking services.

The next issue concerns the estimation of income at 70% of gross receipts. We find that the AO adopted the said rate principally on the ground that the assessee was carrying on professional activities and that section 44ADA was applicable. However, once the foundational premise regarding the applicability of section 44ADA is found to be unsustainable, the estimation made solely on that basis cannot survive. Section 44ADA prescribes a presumptive framework for eligible specified professions; it does not authorise the AO to adopt an arbitrary rate of 70% merely because the receipts arise from advisory

In view of the foregoing discussion, we hold that, on the facts and material available on record, the assessee's activity of providing global ranking support, institutional facilitation and coordination services is in the nature of business activity and has not been established to constitute a specified profession covered u/s.44AA(1) of the Act. Consequently, the invocation of section 44ADA and the consequential estimation of income at 70% of gross receipts are unsustainable. The income returned by the assessee u/s.44AD is accordingly directed to be accepted by setting aside the order of the ld.CIT(A).

As regards the assessee's claim for credit of tax deducted at source, we direct the Jurisdictional Assessing Officer (JAO) to verify the assessee's Form 26AS and allow the credit of TDS in accordance with law.

In the result, the appeal of the assessee is partly allowed for statistical purposes.