Income tax act section 44 AD and 43C

1. COMPUTATION OF INCOME ON ESTIMATED
BASIS IN THE CASE OF TAXPAYERS
ENGAGED IN CERTAIN BUSINESS

2. The provision of section 44AD are given below------
 ELIGIBLE ASSESSEE – the assessee should be an eligible assesse.
Eligible assessee for this purpose is a Residential Individual , a
Resident Hindu Undivided Family or a Resident Partnership Firm
 HAS NOT CLAIMED ANY OTHER DEDUCTION u/s 10A 10AA 10BA
80HH to 80RRB in the relevant assessment year
 ELIGIBLE BUSINESS – the assesse should be engaged in any
business (whether it is retail Or wholesale trading or civil
construction or any other business).

3. However, the following persons are not eligible to avail benefit u/s
44AD
 A person carrying on profession referred to in section 44AA(1)
 A person earning income in the nature of commission or
brokerage
 A person carrying on any agency business
 A person who is in the business of plying, hiring or leasing
goods carriage
 TURNOVER – total turnover/gross receipt in the PY of the
eligible business should not exceed Rs 1 crore

4. If the above are satisfied , the income from
the eligible business is estimated at 8% of
the gross receipt or turnover

5.  The assesse can voluntarily declare a higher income in his
return
 All deductions under sections 30 to 38 , including
depreciation and unabsorbed depreciation or deemed to
have been already allowed and no further deduction is
allowed under these section.
 However in the case of firm, the normal deduction in the
respect of salary and interest to partners u/s 40(b)shall be
allowed . The written down value is calculated , where
necessary, as if depreciation as applicable has been allowed.
Moreover , it will be assumed that disallowance, if any u/s
40, 40A, and 43B has been considered while calculating the
estimated income @8 %

6.  An assesse opting for the above scheme shall be exempted
from payment of advance tax related to such business
 An assesse opting for the above scheme shall be exempted
from maintenance of books of a/c related to such business as
required u/s 44AA
 An individual/HUF opting for the above scheme can submit
his/it return of income [*]-45’(which is simplified return
form)

7. A tax payer can declare his income to be lower than the
deemed profits and gains as stated above. The following
consequences are applicable if the taxpayer declares his
income which is lower than the deemed profit and gains
as stated above
 The taxpayer has to maintain the books of account as per as
section 44AA(irrespective of income or taxpayer)if his total
income exceeds the exemption limit
 The taxpayer has to get his book of account audited under
section 44AB (irrespective of turnover) if his total income
exceeds over exemption limit

8. Section 43C deals with Special provision for
computation of cost of acquisition of
certain assets.
Section 43C is applicable in following two
Cases :--
Amalgamation
Transfer under gifts, will etc

9. For a merger to qualify as an amalgamation for the purpose of
income tax act. It has to satisfy the following conditions
 All the properties of the amalgamating company immediately
before the amalgamation should become the property of the
amalgamated company by virtue of the amalgamation
 All liabilities of the amalgamating company immediately before
the amalgamation should become the liabilities of the
amalgamated company by virtue of the amalgamation
 Shareholders holding not less than 3/4th of the shares in
amalgamating company (other than shares already held by the
amalgamated company or by its nominee) should become
share holders of the amalgamated company by virtue of
amalgamation

10. Where an amalgamating company transfer a capital assert as
stock in trade to the amalgamated company and such stock is
in trade is sold by amalgamating company then the cost of
acquisition of stock in trade shall be the aggregate of the
following
 Cost of acquisition of the said asset to the amalgamating
 Expenditure on improvement of the said asset incurred by the
amalgamating company and amalgamated company
 Expenditure incurred wholly and exclusively in connection
with the amalgamating company

11. Where a capital asset is transferred as stock in trade under a
gift, will, irrevocable trust or on partition of HUF and such stock
in trade is sold, then the cost of acquisition in stock and trade
shall be aggregated of the following
 Cost of acquisition of the said asset to the transferor
 Expenditure on improvement of the said asset incurred by
transferor and transferee
 Expenditure incurred wholly and exclusively in connection
with the transfer by the transferor including any gift tax,
probate fees, expenditure incurred to effect the partition of
HUF or to create a trust

12. Thank You