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Facts
The assessee, a practicing Chartered Accountant and partner in an LLP, received remuneration and claimed presumptive taxation under Section 44ADA by treating 50% of it as income. The AO and CIT(A) disallowed this, contending that remuneration from a firm does not qualify as 'gross receipts' under Section 44ADA.
Held
The Tribunal held that remuneration received by a partner from a firm cannot be treated as 'gross receipt' for the purpose of Section 44ADA. However, such income is taxable under the head 'Profits and gains of business or profession', and expenses incurred for earning this income are deductible.
Key Issues
Whether remuneration received by a partner from a firm is 'gross receipts' for Section 44ADA, and if not, whether related expenses are deductible.
Sections Cited
143(3), 44ADA, 44AA, 28(v), 44AB, 271B
AI-generated summary — verify with the full judgment below
Order under section 254(1) of Income Tax Act PER ARUN KHODPIA, ACCOUNTANT MEMBER: The captioned appeal is filed by the assessee against the orders of CIT(A)/NFAC, Delhi (in short ‘the Ld. CIT(A)’), dated 15.05.2025 for the Assessment Year 2018-19, which in term arises from the order u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 10.03.2021, passed by National E- assessment Centre, Delhi (in short ‘the Ld. AO’). The grounds of the appeal raised by the assessee, reads as under:
“1- On the given facts circumstances and judicial precedents, the assessment order passed by the National Faceless Assessment Centre is without a valid and verifiable Document Hemant Kumar Agrawal Identification Number (DIN), in violation of CBDT Circular No 19/2019 dated 14.08.2019. Such assessment order passed without valid DIN is liable to be Quashed. 2- On the facts and circumstances of the case and in law, the learned CIT (Appeals) erred in denying applicability of provisions of section 44ADA of the Income Tax Act, 1961 on remuneration received from the firm assessee satisfies all conditions as prescribed under the provision. Such denial of applicability of provisions of Section 44ADA is erroneous and bad in law and liable to be allowed. 3- Without prejudice to the above, On the facts and circumstances of the case and in law, the learned CIT (Appeals) erred in denying applicability of provisions of section 44ADA of the Income Tax Act, 1961 on remuneration received by Practicing Chartered Accountant holding Certificate of Practice. Such denial of applicability of provisions of Section 44ADA is erroneous and bad in law and liable to be allowed. 4- The appellant craves leave to add, amend, alter OR delete all OR any of the previously mentioned grounds of appeal
.”
2. Brief facts of the case are that the assessee is a practicing Chartered Accountant working in capacity of the associate full- time partner with a firm M/s Jayesh Sanghrajka and Co. LLP. During the year under consideration the assessee had received remuneration of Rs. 18,00,000/- from the aforesaid LLP and the said remuneration has been shown as gross receipt from the business and profession in ITR. Following the provisions of section 44ADA of the Act, 50% of the income was shown at Rs. 9,00,000/- on presumptive basis. It was the case of Ld.AO that as the special provisions of section 44ADA, to compute the profit and gains on presumptive basis, would be available, in the case Hemant Kumar Agrawal of assessee, being a resident in India, who is engaged in a profession referred to in sub-sec (1) of Sec. 44AA and whose total gross receipts do not exceed Rs. 50 Lakh in the relevant previous year, on account of such profession a sum equal to 50% of the said gross receipts or as the case may be, a sum higher than the 50% of gross receipt claimed to have been earned by the assessee shall be deemed to be profit and gains of such profession chargeable to tax under the head profits and gains of business or profession.
The Ld.AO observed that the assessee is not doing his business on his own independently, he is engaged in the business of Chartered Accountant and is the partner of firm during the work allotted to him. Therefore, the remuneration received by the assessee would not fall within ambit of word “gross receipts”, which pertains to sales turnover and no other meaning can be given to the said words. Accordingly, it is construed by the Ld.AO that remuneration received by the assessee from partnership firm cannot be treated as “gross receipt” within the meaning of provisions of section 44ADA of the Act. In view of such interpretation by the Ld. AO, 50% of the total Hemant Kumar Agrawal remuneration (Rs. 9,00,000/-), being claimed on presumptive basis as expenditure u/s 44ADA was added back to the income of assessee. Thereby the assessee income of the assessee has been determined of Rs. 16,10,480/-
4. Being aggrieved with the aforesaid addition by the Ld.AO, assessee preferred and appeal before the first appellate authority i.e., Ld. CIT(A). However, the contention of assessee qua the receipt from partnership firm in the form of remuneration would characterize as gross receipt within the name of section 44ADA was not concurred with and, therefore, issue was decided against the assessee with the following observations:
“In the ground no. 182, the appellant claimed that "On the given facts and circumstances of the case and judicial propositions, Ld. AO erred in denying the benefit of presumptive scheme of taxation under section 44ADA of the Income Tax Act, 1961 on partnership remuneration received from firm, even though it satisfied all the conditions under the provisions. Such denial of the benefit as opted by assessee is bad in law and liable to allowed. Without prejudice to the above, On the facts and circumstances of the case and judicial proposition, Ld. AO erred in making addition of Rs. 9,00,000/- to the total income of the assessee, by ignoring the fact that assessee is a practicing-chartered accountant holding Certificate of Practice and hence such addition is bad in law and liable to be deleted." But in the Para no. 4 & 4.1 of the assessment order, the Ld. AO has mentioned that The assesseee's contention is incorrect, because, only the firm, M/s. Jayesh Sanghrajka & Co LLP, is 4 Hemant Kumar Agrawal engaged in the business of Chartered Accountancy and the partners of the firm are doing the work allotted to them, collectively. So, the assessee is not doing any business on his own, independently. 4.1 The words used "gross receipts" pertains to Sales turnover and no other meaning can be given to the said words. The remuneration received by the assessee from the firm, is for the services rendered by him which forms the part of the turnover / gross receipts of the partnership firm. Therefore, it cannot be treated as "gross receipts from the business" in the hands of the assessee." Hon'ble Madras High Court in Anandkumar Vs. Assistant Commissioner of Income Tax [AIRONLINE 2020 MAD 2136] had concluded that the Revenue was right in its contention that remuneration and interest from the partnership firm cannot be treated as gross receipt of the assessee. Similar view was taken in the case of PerizadZorablan Irani Vis. Principal Commissioner of Income-Tax (Central)-1 Mumbai & Orsby Hon'ble Bombay High Court[ [2022] 139 taxmann.com 164 (Bombay)] In the appellate stage, I find that the appellant has mentioned the case of Sagar Dutta v/s Commissionerofincome Tax-Kolkata (ITANo. 692/KOL/2012) (ITAT -Kolkata) & Usha A Narayanan v/s Deputy Commissioner of Income Tax - Kolkata (ITA No. 703/KOL/2012) (ITAT - Kolkata). But these two cases are nowhere similar to this case. Moreover, the verdict of the Hon'ble ITAT in the case of Sagar Dutta v/s Commissioner of Income Tax- Kolkata was against the appellant and in favour of the revenue. So, I find no mistake from the part of Ld. AO by adding back the Rs. 9,00,000/- to the total income of the appellant. Hence, this ground of the appeal is dismissed.”
5. To challenge the aforesaid observation of the Ld. CIT(A) the assessee preferred the appeal before the tribunal, which is under consideration before us in the present matter.
6. At the outset Ld. Authorized Representative of the assessee (in short ‘Ld.AR’) submitted that the findings of Ld.AO as well as Ld. CIT(A) are under misinterpretation of the mandate of law. A Hemant Kumar Agrawal written submission is furnished before us to argue on the above issue, which is extracted hereunder for the sake of completeness:
“1. Ground No. 1, pertained to DIN which was not verifiable, during the hearing it was directed to Departmental Representative, to submit the report from AO. Ld. AO has simply mentioned that it is verified without any Screenshot or proof. Assessee in support of the same has also submitted Screenshots wherein it is coming as 'No record Found for the given Document Number' or 'No record found for the given criteria'.
With regards to Ground No. 2 and Ground No.
3. The Issue involved in the Appeal is pertaining to denial of presumptive taxation under section 44ADA on the Partnership Remuneration received by Practicing Chartered Accountant holding Certificate of Practice engaged in handling Statutory Audits and attest function.
3. Provisions of Section 44ADA is reproduced as under:
(1) Notwithstanding anything contained in sections 28 to 43C, 10[in case of an assessee, being an individual or a partnership firm other than a limited liability partnership as defined under clause (n) of sub-section (1) of section 211 of the Limited Liability Partnership Act, 2008 (6 of 2009), who is a resident in India, andļis engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of Hemant Kumar Agrawal such profession chargeable to tax under the head "Profits and gains of business or profession":
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
STAND OF THE ASSESSING OFFICER
4. Ld. AO rejected the contention of the Assessee by holding as under (Para 4 and Para 4.1 of Assessment Order):
The assesseee's contention is incorrect, because, only the firm, M/s. Jayesh Sanghrajka & Co LLP, is engaged in the business of Chartered Accountancy and the partners of the firm are doing the work allotted to them. collectively. So, the assessee is not doing any business on his own, independently.
4.1 The words used "gross receipts" pertains to Sales turnover and no other meaning can be given to the said words. The remuneration received by the assesse from the firm, is for the services rendered by him which forms the part of the turnover / gross receipts of the partnership firm. Therefore, it cannot be treated as "gross receipts from the business" in the hands of the assessee.
OUR SUBMISSION AGAINST THE ABOVE OBSERVATION
As can be seen from the above, he has concluded that Gross receipts means Sales Turnover and since Partnership Hemant Kumar Agrawal Remuneration is not Sales Turnover the provisions of Section 44ADA cannot be applied. Our Counter is as under: a) Section 44ADA only talks about Gross Receipts there is no term 'Sales Turnover used in the Section 44ADA, once that is not the case, it cannot be imported from Section 44AD or 44AB and read into it. b) Partnership Remuneration is actually Gross Receipt which has been received by the Partner from the Firm and hence satisfies all the conditions as mentioned in the Section. c) There is no proviso in the section which states that, it shall not be applicable to Partnership Remuneration and in the absence of express barring provision denying the applicability, it cannot be denied by reading words in the section which does not exist. d) Furthermore, Assessee is a Designated Partner in LLP and LLP is specifically prohibited from Section 44ADA so it cannot be stated that LLP and Partner both would take benefit under the same Section. e) Lastly, once all conditions as prescribed under section is satisfied the same has to be applied to the assessee.
Also, since assesse offered Income under 44ADA, it has not claimed any expenses separately which it has incurred and claimed in previous years in line with Section 44ADA(2). g) Furthermore, it is no longer res integra, that assessee receiving Partnership Remuneration can claim expenses 8 Hemant Kumar Agrawal against the Partnership Remuneration received (Precedents in support of the same have already been submitted vide letter dated 26th December, 2025)
STAND OF COMMISSIONER APPEALS
Commissioner (Appeals) (Para 5 Page 12 of CIT Appeals Order) while deciding the issue simply relies on the decision in case of Madras High Court in case of Anandkumar v/s ACIT wherein, issue involved was allowability of Section 44AD on Partnership Remuneration and in case of Perizad Zorabian Irani v/s Principal Commissioner of Income Tax, wherein issue involved was applicability of Section 44AB on receipt of Partnership Remuneration.
In the appellate stage, I find that the appellant has mentioned the case of Sagar Dutta v/s Commissioner of IncomeTax-Kolkata (ITANo. 692/KOL/2012) (ITAT Kolkata) & Usha A Narayanan v/s Deputy Commissioner of Income Tax Kolkata (ITA No. 703/KOL/2012) (ITAT - Kolkata). But these two cases are nowhere similar to this case. Moreover, the verdict of the Hon'ble ITAT in the case of Sagar Dutta v/s Commissioner of Income Tax-Kolkata was against the appellant and in favour of the revenue. So, I find no mistake from the part of Ld. AO by adding back the Rs. 9,00,000/- to the total income of the appellant. Hence, this ground of the appeal is dismissed.
OUR SUBMISSION AGAINST THE ABOVE OBSERVATIONS
7. Our Submissions against the same is as under Hemant Kumar Agrawal a) As can be seen from the above, Commissioner Appeals relied on the judgments rendered on Section 44AB and Section 44AD, the language of the section is different yet it was relled upon to hold that it is pari materia and what was held in case of those sections shall apply to Section 44ADA as well.
b) The reliance of the assessee on the case of Sagar Dutta was distinguished by the Ld. Commissioner of Income Tax Appeals stating the following:
"But these two cases are nowhere similar to this case" c) However, Ld. Commissioner of Income Tax Appeals himself has relied on Perizad Zorabian Irani v/s PCIT wherein the case was not covered by the provisions of 44ADA. Rather the judgement passed was with respect to provisions of 44AB. d) Principle of Ejusdem Generis, applies which states that, 'the general word shall not extend in its effect beyond subjects' in case of 44AB and 44AD, a. 44AB-the term used is Sales, turnover or gross receipts b. 44AD-term used is Turnover or Gross Receipts c. 44ADA-term used is Gross Receipts
In case of 44AB and 44AD, gross receipts is preceded by words 'sales', 'turnover', whereas in case of 44ADA it is simply 'Gross Receipts' and hence there should be no other meaning except Gross Receipts, which is nothing but 'Receipts' as received by Partner. e) Furthermore, with regards to judgment in case of Sagar Dutta is concerned wherein CIT Appeals held that the judgment was against Assessee it was held as under by Kolkata Tribunal, while confirming 10 Hemant Kumar Agrawal that Tax Audit was applicable relied on the decision in case of Amal Ganguli (Chartered Accountant holding COP in Firm) wherein it was held as under:
During the course of hearing, the Id. A.R. in reply to a query from the Bench admitted that the assessee is holding a certificate of practice to carry on the profession. Therefore, the assessee has received the above amount from the firm as a partner and he is a partner only because he is engaged in the business of Chartered Accountants and is eligible to carry on the profession of Chartered Accountant. Thus, we are of the considered view that the assessee has received the said amount as a professional fee as a partner from the firm There is no dispute to the fact that the amount received by the assessee by way of salary, allowance, commission, interest from the firm is assessable under section 28(v) of the Act under the head "profits and gains of business or profession". Since the receipt of the assessee is more than Rs. 10 lakhs, in the previous year relevant to the assessment year under consideration, we are of the considered view that the assessee is required to get his accounts audited as per section 44AB of the Act and to enclose a copy of the said report in the prescribed form before the specified date. The assessee has admittedly not got his accounts audited under section 44AB of the Act Therefore, we hold that the Id. CIT (A) has rightly confirmed the action of the AO to impose penalty under section 271B of the Act of Rs. 58,719.
Thus, as can be seen from the above, the denial of applicability of Section 44ADA, is based on readings of provisions of section 44AB and 44AD wherein the wordings are different and cannot be applied by simply stating that they are same.
Hemant Kumar Agrawal 9. Furthermore, assessee has satisfied all the conditions mentioned in section 44ADA and hence question of denial does not arise.
On identical facts of the case (Assessee being a Chartered Accountant and Partner in a Firm) and interpretation of Section 44ADA, Hon. Delhi ITAT in case of Ranu Gupta v/s ACIT (ITA No. 2224/Del/2025) has held as under:
"This tribunal finds no merit in the Revenue's instant twin arguments as there is no such precondition in section 44ADA either to claim the corresponding expenditure (in light of sub- section (2) there to) nor he is supposed to carry out his independent professional activities than as a partner in any establishment. I thus, invoke stricter interpretation as per Commissioner Vs. Dilip Kumar (2018) 9 SSC 1 (SC) to reject the Revenue's foregoing arguments. Learned assessing authority is accordingly directed to assess the assessee u/s 44ADA of the Act as per law."
Considering the above facts and circumstances of the case, it is hereby requested that, provisions of Section 44ADA be allowed to the Assessee, and in case if the same is denied then direction be provided to allow actual expenses incurred in these regards.”
The first ground raised by the assessee was regarding validity of DIN mentioned by the Ld.AO on the assessment order. It was stated by Ld.AR that on checking of the validity of DIN mentioned on the assessment order from the E-portal of the department, it is shown on the screen “No record found for the given Document number” (copy furnished before us). The issue is confronted to the respondents (revenue) to verify claim of Hemant Kumar Agrawal assessee from assessment records. On this aspect, the Ld. Senior DR representing the revenue have furnished a report prepared by Ld. AO, Income Tax Officer ward- 42(1)(2), Mumbai, who confirmed that the DIN number ITBA/AST/S/143(3)/2020- 21/1031399694(1) mentioned in the assessment order dated 10.03.2021 is to be correct as verified from assessment case history from ITBA System. Once the subject DIN, is verified by the concerned revenue authority and found correct on record of the department, the contention raised by the assessee qua the error in validation of assessment order by an invalid DIN does not survive, the same thus stands rejected.
8. Coming to the second contention of the Ld.AR that the remuneration received by the assessee being a practicing Chartered Accountant from an LLP, where in the assessee is a full-time partner, the same would characteristics as gross receipt within the meaning of provision of Section 44ADA. The Ld.AR elaborate that, the decisions relied upon by the assessee passed by ITAT, Kolkatta in the case of Sagar Dutta Vs Commissioner of Income-Tax, Kolkatta (ITA No. 692/KOL/2012) are not considered by the Ld. CIT(A) in its totality, he just picked the result which was against the assessee, whereas the analogy drawn from the said decisions was for definition of the gross turnover u/s 44AB for the purpose of tax audit, according to which the gross receipt of a taxpayer being a chartered accountant in the form of remuneration, salary, interest on capital etc., if exceeds the threshold limits specified u/s 44AB, the tax payer is liable to tax audit. A broad interpretation of the Hemant Kumar Agrawal said judgment, impliedly states that what should be considered for the purpose of gross receipts u/s 44AB, would be the gross receipt for section 44 ADA also.
Ld. AR further submitted that in case the remuneration received by a partner is not considered as gross receipt u/s 44ADA, then the same would be considered as business income of the assessee, on which related expenses shall be allowed, reliance placed on the following judgments:
a. CIT vs. Ramniklal Kothari (SC) 74 ITR 57: Held that share of profit received from partnership firm is business income and expenditure incurred for purpose of earning that income and appropriate allowances are deductible therefrom in determining the taxable income of partner. b. Atul Kumar Gupta Vs. ITO (2025) 180 Taxmann.com 120 (Delhi-Trib) : Where assessee-partner, a chartered accountant, received remuneration from a partnership firm and claimed business-related expenses against such salary, such remuneration is to be treated as business income under section 28(v) and any expenditure incurred wholly and exclusively for earning such income, including depreciation, is allowable under sections 32 and 37, especially when consistently allowed in past years.
10. Per contra Ld Sr. DR from department strongly supported the decision of revenue authorities.
Hemant Kumar Agrawal 11. We have considered the rival contentions, perused the marital on record and case laws relied upon. To understand and interpret the issue regarding working of “gross receipt” within the meaning of section 44ADA, the relevant provision from Act is culled out as under:
[Special provision for computing profits and gains of profession on presumptive basis. 44ADA. (1) Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the assessee, shall be deemed to be the profits and gains of such profession chargeable to tax under the head "Profits and gains of business or profession".
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed.
(3) The written down value of any asset used for the purposes of profession shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) Notwithstanding anything contained in the foregoing provisions of this section, an assessee who claims that his profits and gains from the profession are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (1) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.]
Undoubtedly the assessee, being a chartered accountant, engaged in a profession referred to in sub-section (1) of section 44AA of the act. To find out the gross receipt within the meaning of section 44ADA, following ingredients are supposed to be present in the income received by the assessee:
a. total gross receipts do not exceed fifty lakh rupees in a previous year Hemant Kumar Agrawal b. the total gross receipts of the assessee in the previous year should be on account of such profession
From the facts of present case the income of assessee was from his professional endeavors but in the form of remuneration from the LLP. Section 44ADA envisaged that the income should from professional engagement referred to in section 44AA, it should be on account of such profession and should not exceed Rs. 50 Lakh. The intent to bring in the aforesaid special provision was to extend ease of presumptive taxation to professionals, though there was no mention about the way in which such income would be earned, only requirement is that, the income should be on account of profession so far as the character of income is concerned to qualify for computation u/s 44ADA. A partner of chartered accountancy firm (LLP) can only be a chartered accountant, so the engagement of assessee in profession can not be doubted. As per Ld. AR, there was no finding either by the AO or Ld. CIT(A) that the income shown by assessee as remuneration from partnership have any element of income other than from the profession entitled u/s 44AA. Therefore, some support from the decision of ITAT Kolkata in the case of Sagar Dutta Vs. Commissioner of Income tax (supra)
Hemant Kumar Agrawal can be drawn, to the extent income pertains to professional work by the assessee to bring it within ambit of section 44ADA to treat it “gross receipt” so as to compute the taxable income @50%. However, the reliance of Ld. CIT(A) on the decisions by Hon’ble Madras High Court in case of Anandkumar v/s ACIT(supra) and Hon’ble Bombay High Court in case of Perizad Zorabian Irani v/s Principal Commissioner of Income Tax (supra), wherein issue involved having question of allowability of Section 44AD on Partnership Remuneration and applicability of Section 44AB on receipt of Partnership Remuneration with reference to presumptive taxation u/s 44AD has been deliberated upon, enlightens that remuneration and interest received by the assessee from the partnership firm cannot be termed to be the turnover of the assessee, thus, following the principle laid by Hon’ble High Courts in the case of Anandkumar v/s ACIT(supra) and in case of Perizad Zorabian Irani v/s Principal Commissioner of Income Tax (supra), which are referred to and relied upon by the Ld. CIT(A), we are unable to subscribe and persuade to the reasoning assailed by the Ld. AR, having support of orders of benches of ITAT. We, thus, are of the considered view that, the key requirement of presumptive taxation u/s 44ADA, Hemant Kumar Agrawal could not be satisfied by the assessee in present case, as the remuneration received by the assessee cannot be treated as turnover, to be qualified for ‘gross receipt’ within the meaning of section 44ADA.
Further, the alternate contention of the Ld. AR can be accepted, that such remuneration received from partnership firm / LLP would qualify to be treated as income under the head ‘business and profession’ and expenditure, if any, incurred for the purpose of earning of such income can be allowed as deduction, as held by Hon’ble Apex Cout in the case of CIT Vs. Ramniklal Kothari (supra). Support with the decision of ITAT Delhi, in the case of Atul Kumar Vs. ITO (supra).
We, thus, in terms of our observations are of the considered opinion that the income of assessee, being a practicing-chartered accountant, earned as remuneration on account of professional engagements, from a chartered accountancy partnership firm / LLP working as a partner would not be entitle to be included in turnover as “gross receipt” for the purpose of section “44ADA”. However, the income from remuneration shall be taxed as Hemant Kumar Agrawal income from Business and Profession, so the expenses, if any, having direct nexus for earning of such income shall be allowed as deductible expenses as per provisions of the Act. Resultantly ground no. 2 & 3 of present appeal are disposed of partly in favour of the assessee.
In result the appeal of assessee is partly allowed, in terms of our aforesaid observations.
Order pronounced in open court on 30.01.2026.