Defective return for 44ADA NOB

Defective return for 44ADA NOB

An assessee works on a contractual basis as a consultant providing marketing and promotion related services with TDS being deducted u/s 194J. He had filed ITR4 and shown income u/s 44ADA (as a technical consultant) with nature of business as consultancy service, code 703. Now he received a defective return notice saying the following-

Error code is 89- The provisions of Section 44ADA not applicable to the taxpayer. The nature of business code in Sch NOB is not a profession, and the income disclosed under Section 44ADA income is more than zero. Hence the provisions of Section 44ADA is not applicable to the taxpayer. Probable resolution given is : The provisions of Section 44ADA is applicable only to Professionals with nature of business codes of 601 to 607.Taxpayer is requested to furnish correct Return Form type,i.e.ITR- 3 or ITR- 5 as applicable. If the Income has been disclosed under incorrect Section, the correct Section of the Schedule BP may be filled. If the Nature of Business code entered in the Return filed is not correct, the correct nature of business Code may be entered in the Sch NOB and the Corrected Return may be filed.

Now should he use the code 607 as professional others or should he file return u/s 44AD? The assessee is a masters graduate in marketing and PR and does not hold any professional qualification.

Asked 7 years ago in Income Tax

as per income tax act following profession covered under section 44ADA as professionals

1 Legal

2 Medical

3 Engineering

4 Architectural Profession

5 profession of Accountancy

6 Technical Consultancy

7 Interior Decoration

Thus please file Itr 3

Lalit Bansal

CA, Delhi

776 Answers

61 Consultations

Talk to Lalit Bansal

It is debatable to classify your services as technical consultancy. And this, 44ADA can't be claimed for. You should revise the return and file ITR 3.

However, on an aggressive mode, you can consider such classification and file the return under 44 ADA choosing business code as 607. It is probable that any further enquiry can come up in this case.

Feel free to contact in case further assistance is required for revision.

Lakshita Bhandari

CA, Mumbai

5687 Answers

943 Consultations

Talk to Lakshita Bhandari

If you believe that the services rendered are technical consultancy in nature, then you can claim the benefit of section 44ADA. The onus will be on the Assessee to prove the same.

If this is not the case, then you’ll have to file a revised return.

Regards,

Keerthiga Padmanabhan

M.Com., CA, LL.B

Keerthiga Padmanabhan

CA, Greater Mumbai

784 Answers

27 Consultations

Talk to Keerthiga Padmanabhan

Section 44ADA is one of the most debatable section. Deabte is as to whether your services can be classified as technical consultancy.

On a conservative basis, if you have maintained accounts, you should revise the return in response to the defect notice and file ITR 3.

However, taking aggressive view, you can consider technical consultancy as logible profession and file the return under 44 ADA choosing business code as 607.

Please feel free to contact us in case you need any assistance in responding to the defect notice.

Thanks and regards

Abhishek Dugar

CA CS B.Com