Table of Contents
- Can A Ca Claim 44ada On Remuneration Received As A Working Partner?
- Background Of The Case
- Core Issue
- Income Tax Dept / Revenue's Contention
- Income Tax Appellate Tribunal Delhi's Findings
- Important Legal Principle On Ca Claim 44ada
- Key Takeaways For Ca Claim 44ada On Remuneration Received As A Working Partner
- Practical Significance On Ca Claim Section 44ada On Remuneration Received As A Working Partner
- Conclusion On 44ada Applicability On Remuneration As A Working Partner
Can a CA Claim 44ADA on Remuneration Received as a Working Partner?
Background of the Case
The assessee, a CA & working partner in a chartered accountant firm, received approximately INR 27 lakh as remuneration from the partnership firm. Being a qualified CA holding a valid Certificate of Practice (COP), he opted for the presumptive taxation scheme U/s 44ADA and offered 50% of the remuneration (INR 13.50 lakh) as taxable income.
The Assessing Officer (AO) and CIT(A) rejected the claim, contending that partner remuneration is taxable U/s 28(v) and cannot be treated as professional receipts eligible for Section 44ADA.
Core Issue
Whether remuneration received by a working partner from a professional partnership firm can be treated as professional receipts eligible for presumptive taxation U/s 44ADA.
Income tax Dept / Revenue's Contention
The Department argued that remuneration received by a partner is specifically covered U/s 28(v), Deductibility of remuneration is governed by Section 40(b) in the firm's hands. The professional services are rendered through the firm and not independently by the partner; therefore, such remuneration is not income from independent professional practice and is not eligible for Section 44ADA.
Income Tax Appellate Tribunal Delhi's Findings
The Income Tax Appellate Tribunal, Delhi, ruled in favor of the assessee & held that:
- A CA working as a partner in a Chartered Accountant firm can claim the benefit of Section 44ADA on remuneration received from the firm.
- Section 44ADA does not contain any condition requiring a professional to Maintain an independent practice; Have separate clients; Run a separate establishment, or Earn fees directly from clients.
- Tax authorities cannot add conditions to a statute that do not exist in the law. Merely because remuneration is taxable U/s 28(v) does not mean Section 44ADA becomes inapplicable. Sections 28(v), 40(b), and 44ADA operate in different fields:
- Section 28(v): Determines taxability of partner remuneration.
- Under Section 40(b): Governs deduction of remuneration in firm's hands.
- Section 44ADA: Provides a presumptive method of computing taxable income for eligible professionals.
Important Legal Principle on CA Claim 44ADA
The Tribunal relied on the Supreme Court decision in Commissioner of Customs v. Dilip Kumar & Company, emphasizing that Tax statutes must be interpreted strictly, and authorities cannot import restrictions that are not expressly provided in the law. Following are Tax Impact of this case
|
Particulars |
Amount (INR ) |
|
Remuneration received from firm |
27,00,000 |
|
Income taxable U/s 44ADA (50%) |
13,50,000 |
|
Presumed expenditure (50%) |
13,50,000 |
Thus, the assessee was allowed to offer only 50% of the remuneration as taxable income under the presumptive scheme.
Key Takeaways for CA Claim 44ADA on Remuneration Received as a Working Partner
A working partner may consider Section 44ADA if He/she is a specified professional covered U/s 44AA, holds a valid professional qualification and certificate of practice, receives remuneration for professional services rendered to the firm, and complies with the turnover/gross receipt limits and other conditions of Section 44ADA.
Practical Significance on CA Claim Section 44ADA on Remuneration Received as a Working Partner
This ruling is highly beneficial for chartered accountant firms, advocates, architects, doctors, consultants, and other professionals operating through partnership firms. It clarifies that a professional does not lose the benefit of Section 44ADA merely because services are rendered through a partnership structure rather than in an individual capacity. Case: Ranu Gupta v. ACIT (ITA No. 2224/Del/2025, ITAT Delhi, Order dated 02.06.2025)
Conclusion on 44ADA applicability on Remuneration as a Working Partner
The Delhi Income Tax Appellate Tribunal held that partner remuneration received by a qualified Chartered Accountant as a working partner qualifies for presumptive taxation U/s 44ADA, as there is no statutory requirement for independent practice outside the partnership firm. Consequently, eligible working partners may offer 50% of such remuneration as taxable income, subject to fulfillment of other conditions prescribed U/s 44ADA.
