Section 44ADA Benefit Cannot Be Denied to CA Merely for Being a Partner: Rules ITAT

ITAT Delhi held that remuneration received by a working CA partner for professional work is eligible for presumptive taxation under Section 44ADA, even if the profession is carried out through a partnership firm, and allowed the assessee’s appeal.

The present appeal has been filed by a taxpayer named Sh. Ranu Gupta in the ITAT Delhi, challenging an order dated February 06, 2025, passed by the CIT(A)/NFAC Delhi under Section 143(3) of the Income Tax Act, 1961. The case is related to the Assessment Year 2018-19.

The assessee here in the current case is a working partner in a CA firm and also a Chartered Accountant (CA). The key dispute in the case is whether the remuneration received by the CA should be taxed under the presumptive taxation scheme of section 44ADA of the Income Tax Act.

The assessee had received remuneration amounting to Rs. 27 lakh as a partner of M/s SARC and Associates Chartered Accountants. The assessee offered 50% of the remuneration for taxation under section 44ADA of the Income Tax Act. However, the AO rejected the claim of the assessee, holding that the remuneration was received as a working partner of the firm and not for being an independent professional practice.

Citing CBDT Circular No. 3 of 2017, dated October 20, 2017, the AO claimed that the aim of introducing the presumptive taxation scheme of section 44ADA was meant to reduce the compliance burden on small taxpayers earning income from their profession and to ease doing business; remuneration earned for being a partner of a firm cannot be treated as professional gross receipts under Section 44ADA.

The assessee argued that he fulfils all the conditions mentioned in the said scheme, is a qualified chartered accountant (CA), also possesses a valid certificate of practice, and received remuneration for professional work.

When the tribunal heard the arguments of both sides and deeply analysed the provisions of section 44ADA, it noted that the section does not require the assessee to carry on a profession independently or to necessarily claim expenses separately. Additionally, nowhere is it mentioned in the section that a professional partner of a firm is ineligible to claim section 44ADA merely because the professional activity is carried out through a partnership firm.

Based on the aforesaid findings, the tribunal rejected the claim of the AO and ruled that the assessee is entitled to enjoy relief under section 44ADA. Accordingly, the Assessing Officer was directed to apply section 44ADA while computing the income. As a result, the appeal of the assessee was allowed by setting aside all the lower authorities’ rulings.