Partner’s Remuneration Under Section 44ADA: Delhi ITAT Opens the Door, But Is the Debate Really Over?
For years, one question has troubled professionals who practice through partnership firms:
Can a working partner claim the benefit of presumptive taxation under Section 44ADA on the remuneration received from the partnership firm?
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has now delivered a taxpayer-friendly ruling in Ranu Gupta v. ACIT (ITA No. 2224/Del/2025) by holding that partner’s remuneration can qualify for presumptive taxation under Section 44ADA.
However, before Chartered Accountants, doctors, architects, lawyers and other professionals celebrate, there is an equally important twist. Another ITAT Bench at Mumbai has recently taken the opposite view, making the controversy far from settled.
What is Section 44ADA?
Section 44ADA was introduced to reduce the compliance burden on specified professionals. If the prescribed conditions are satisfied, a professional can simply declare 50% of the gross professional receipts as taxable income without maintaining detailed books of account or proving actual expenses.
The provision was designed to simplify taxation for professionals rather than complicate it.
The Dispute
The assessee, a Chartered Accountant and partner in a partnership firm, received ₹27 lakh as partner’s remuneration.
Instead of claiming actual expenses, she opted for the presumptive taxation scheme under Section 44ADA and offered 50% of the remuneration as taxable income.
The Income Tax Department rejected the claim.
According to the Assessing Officer:
Partner’s remuneration is received in the capacity of a working partner.
It is not the individual’s independent professional receipt.
Therefore, it cannot be treated as “gross receipts” under Section 44ADA.
The appellate authority (NFAC/CIT(A)) also agreed with the Assessing Officer.
Delhi ITAT’s Important Observations
The Delhi ITAT reversed the assessment and made several significant observations.
1. No Requirement of Independent Practice
The Tribunal noted that Section 44ADA nowhere requires a professional to carry on an independent practice outside the partnership firm.
If the Legislature intended such a condition, it would have specifically stated so.
2. Presumptive Scheme Eliminates the Need to Prove Expenses
The Department argued that no professional expenditure had been claimed.
The Tribunal rejected this argument by observing that the entire purpose of Section 44ADA is to dispense with the need to maintain books and establish actual expenditure.
Once an assessee opts for the presumptive scheme, proving expenses becomes unnecessary.
3. Strict Interpretation of Taxing Statutes
The Tribunal relied upon the Supreme Court’s landmark judgment in Commissioner v. Dilip Kumar & Co. (2018).
It observed that tax authorities cannot introduce conditions that the statute itself does not prescribe.
Since Section 44ADA does not exclude partner’s remuneration, such exclusion cannot be imported by interpretation.
4. Relief Granted
The Tribunal directed the Assessing Officer to assess the remuneration under Section 44ADA in accordance with law and allowed the appeal.
But the Matter Isn’t Settled Yet
Interestingly, the Mumbai ITAT has recently taken a different view in Hemant Kumar Agrawal v. ITO (ITA No. 4728/Mum/2025).
The Mumbai Bench considered itself bound by earlier judicial precedents, particularly:
A. Anand Kumar (Madras High Court)
Perizad Zorabian Irani (Bombay High Court)
Accordingly, it held that partner’s remuneration is not eligible for presumptive taxation under Section 44ADA.
Thus, two different Benches of the Tribunal have now reached opposite conclusions.
Practical Impact for Professionals
The Delhi ITAT ruling is particularly relevant for:
Chartered Accountants
Doctors
Architects
Engineers
Interior Designers
Lawyers
Technical Consultants
Other specified professionals practicing through partnership firms
Professionals located within jurisdictions following the Delhi view may find strong support for claiming Section 44ADA on partner’s remuneration.
However, taxpayers falling under the jurisdiction of High Courts that have already expressed a contrary view should exercise caution before adopting this position.
The Bigger Picture
This controversy highlights a larger issue in tax law.
Partnership firms render professional services through their partners. Working partners are often the very professionals who generate the firm’s income. Whether the remuneration paid to them loses its character as professional receipts merely because it is routed through the partnership firm remains the central legal question.
The Delhi ITAT has answered this in favour of taxpayers by focusing strictly on the language of Section 44ADA.
The Mumbai ITAT, on the other hand, has preferred judicial discipline by following binding High Court precedents.
Final Words
The Delhi ITAT decision is undoubtedly a welcome development for professionals seeking the benefits of presumptive taxation. It reinforces the principle that tax authorities cannot add words or conditions that Parliament has deliberately omitted.
However, the conflicting judicial views mean that the issue is far from settled. Until the Supreme Court or larger High Court benches provide final clarity, professionals should evaluate the legal position applicable in their jurisdiction before claiming the benefit of Section 44ADA on partner’s remuneration.
For now, Section 44ADA has opened one more chapter in India’s ever-evolving tax jurisprudence—and professionals would do well to read the fine print before relying on it.
