Can a Partner Claim Presumptive Taxation under Section 44ADA? ITAT Delhi Settles a Long-Running Controversy
Section 44ADA of the Income-tax Act, 1961 was introduced with a simple and taxpayer-friendly objective: to reduce compliance burden for small professionals by offering a presumptive taxation regime. Yet, despite its clear wording, the provision has become a fertile ground for unnecessary litigation—particularly where professionals earn income as partners in a firm. A recent and well-reasoned decision of the Income Tax Appellate Tribunal, Delhi Bench in Ranu Gupta v. ACIT (ITA No. 2224/Del/2025, order dated 02.06.2025) finally brings much-needed clarity to this issue.
The Controversy: Partner’s Remuneration and Section 44ADA
Section 44ADA applies to a “person carrying on a profession” and permits presumptive taxation at the prescribed percentage of gross receipts. Despite this, Revenue authorities have repeatedly taken the stand that a professional receiving remuneration as a partner is not eligible for section 44ADA, on the premise that such income is not from “independent professional practice” or that no expenditure has been claimed. These objections, though frequently raised, find no explicit support in the statutory text.
Facts of the Case
The assessee in the present case was a Chartered Accountant and a working partner in a professional firm. During Assessment Year 2018–19, he received ₹27,00,000 as partner’s remuneration. He opted for presumptive taxation under section 44ADA and declared income at the prescribed rate. The Assessing Officer denied the benefit on two grounds: first, that the assessee was not carrying on an independent profession, and second, that no expenditure had been claimed. The CIT(A) confirmed this view, forcing the assessee to approach the Tribunal.
No Requirement of Independent Professional Practice
The Tribunal dismantled the Revenue’s first objection at the threshold. It categorically held that section 44ADA does not require a professional to carry on an independent or solo practice. A partner rendering professional services through a partnership firm continues to be a professional for the purposes of the Act. The statute does not recognise, nor does it permit, any artificial distinction between professional income earned individually and professional income earned as a partner. Once the assessee satisfies the description of a professional and receives professional income, section 44ADA automatically comes into play.
Expenditure Claim Is Statutorily Irrelevant
Equally important was the Tribunal’s rejection of the second objection. Referring directly to section 44ADA(2), the Tribunal held that once income is offered on a presumptive basis, all deductions under sections 30 to 38 are deemed to have been allowed. Claiming actual expenditure is neither required nor relevant. To insist on proof or existence of expenditure defeats the very purpose of presumptive taxation. The absence of an expenditure claim cannot, therefore, be used as a ground to deny the benefit of section 44ADA.
Revenue Cannot Import Extra-Statutory Conditions
In a particularly significant observation, the Tribunal noted that the Revenue was attempting to import concepts from sections 28(v) and 40(b)—which govern taxation of partner’s remuneration and its allowability in the firm’s hands—into section 44ADA. This approach was held to be legally impermissible. Each provision operates in its own field, and conditions applicable to one cannot be read into another unless the statute expressly says so.
Relying on the Constitution Bench judgment of the Supreme Court of India in Commissioner v. Dilip Kumar & Co. (2018) 9 SCC 1, the Tribunal reiterated two fundamental principles: taxing provisions must be applied strictly as written, and authorities cannot deny relief by adding words or conditions to the statute. Interpretation cannot become legislation.
Clear Operative Conclusion
The Tribunal left no room for ambiguity when it concluded: “There is no such precondition in section 44ADA either to claim the corresponding expenditure (in light of sub-section (2) thereto) nor is the assessee supposed to carry out his independent professional activities other than as a partner in any establishment.” Accordingly, the Assessing Officer was directed to assess the assessee under section 44ADA.
Why This Decision Matters
This ruling is a major relief for professionals who operate through partnership firms and receive remuneration for their services. It restores section 44ADA to its intended simplicity and prevents its dilution through administrative overreach. More importantly, it reinforces a critical rule of tax interpretation: beneficial presumptive provisions cannot be neutralised by importing conditions that Parliament never enacted.
Final Takeaway
The decision in Ranu Gupta v. ACIT settles the debate decisively—partner’s remuneration received for professional services is eligible for presumptive taxation under section 44ADA. Neither independent practice nor actual expenditure is a statutory prerequisite. For professionals and practitioners alike, this judgment is not just a win on facts, but a reaffirmation that in tax law, words matter—and only the words written in the statute count.
The copy of the order is as under:
