Partners can offer income for taxation under section 44AD or 44ADA? – A landmark order by ITAT Delhi

 

In a recent Delhi ITAT (SMC) decision (AY 2018-19), the assessee (a CA & working partner) offered 50% of partner’s remuneration under Section 44ADA. The AO + NFAC (CIT(A)) denied the benefit saying: “remuneration is received as partner, not as “individual professional receipts”, and partner’s remuneration can’t be treated as “gross receipts” for 44ADA.”

Delhi SMC Bench
ITAT Delhi disagreed and allowed 44ADA, directing the AO to assess income u/s 44ADA.

Key reasoning (in simple terms):

– 44ADA doesn’t mandate that the professional must have independent practice apart from the firm.

– No pre-condition that the assessee must first claim/produce expenses-44ADA(2) already provides the deemed deduction framework.

– The Revenue’s “partner ≠ professional receipts” objection was rejected, and the tribunal granted presumptive taxation benefit.

To summarise, if you’re a working partner in a CA/Law/Medical/ Architecture firm and your income is largely partner remuneration, this ruling strengthens the argument that 44ADA can apply (subject to threshold & other conditions).
NFAC relied on Madras HC ruling in A. Anand Kumar (44AD context) to deny presumptive benefit. Delhi ITAT has taken a different view in 44ADA context, so this is a live controversy-good ground for representation/appeal where disallowances are made.

The copy of the order is as under:

1750316251-UdqV2e-1-TO