Can a CA Claim Section 44ADA on Remuneration Received as a Working Partner? ITAT Delhi Says Yes
Partner remuneration of ₹27 lakh can qualify for presumptive taxation under section 44ADA where the assessee is a qualified professional
Can a Chartered Accountant who is a working partner in a CA firm claim presumptive taxation under section 44ADA on remuneration received from the firm?
This question has significant practical relevance for professionals who receive remuneration from partnership firms.
The Delhi Bench of the Income Tax Appellate Tribunal has answered the question in favour of the assessee.
In Ranu Gupta v. ACIT, ITA No. 2224/Del/2025, order dated 2 June 2025, the ITAT held that remuneration received by a CA as a working partner could be assessed under section 44ADA.
The Tribunal rejected the Revenue’s argument that a partner must independently practise the profession outside the partnership to claim section 44ADA.
The ruling is particularly interesting because it deals with the intersection of sections 28(v), 40(b) and 44ADA.
The case: ₹27 lakh remuneration received by a CA
The assessee was a Chartered Accountant and a working partner in a CA firm.
During the relevant year, he received approximately ₹27 lakh as remuneration from the partnership firm.
Being a member of the Institute of Chartered Accountants of India (ICAI) and holding a valid Certificate of Practice, the assessee considered the remuneration to be professional income.
He therefore opted for the presumptive taxation scheme under section 44ADA.
He offered 50% of the remuneration, i.e. approximately ₹13.50 lakh, as taxable professional income.
The balance was effectively treated as the presumptive expenditure component permitted under section 44ADA.
The Assessing Officer, however, did not accept the claim.
Why did the AO reject section 44ADA?
The AO’s reasoning was based primarily on the nature of partner remuneration.
According to the Revenue, remuneration received by a partner from a firm is specifically dealt with under section 28(v).
Further, the deductibility of such remuneration in the hands of the firm is governed by section 40(b).
Therefore, according to the AO, the remuneration was not income arising from the assessee’s independent professional practice.
The Revenue’s argument can be summarised as:
Partner remuneration is partnership income governed by section 28(v), not professional receipts of an independently practising CA.
The CIT(A) agreed with this approach.
The Revenue’s argument: A partner is not independently practising
The Revenue essentially drew a distinction between two situations.
Situation 1: Independent CA practice
A CA provides professional services in his individual capacity and receives professional fees from clients.
There is little difficulty in considering such receipts for section 44ADA, subject to the statutory conditions.
Situation 2: Working partner
A CA is a partner in a firm and receives remuneration from the firm.
According to the Revenue, the professional services are being rendered through the partnership firm and not independently by the partner.
Therefore, the remuneration cannot be treated as professional receipts for section 44ADA.
This distinction formed the central controversy before the ITAT.
What does section 44ADA provide?
Section 44ADA provides a presumptive taxation scheme for certain specified professionals.
Broadly, where the statutory conditions are satisfied, 50% of the gross receipts can be deemed to be the taxable professional income.
The provision is intended to simplify taxation for specified professionals by avoiding the need to maintain detailed expenditure records for the purpose of determining professional income.
The assessee argued that he satisfied the basic professional qualification requirement.
He was:
• A Chartered Accountant;
• A member of ICAI;
• Holding a Certificate of Practice; and
• Receiving remuneration for his professional services as a working partner.
Therefore, according to him, there was no statutory reason to exclude such remuneration from section 44ADA.
The important question before ITAT
The Tribunal had to examine a fairly narrow question:
Does section 44ADA contain a requirement that a professional must independently carry on a profession outside the partnership firm before the presumptive scheme can be claimed?
The ITAT found that it does not.
And this became the key to the decision.
ITAT: Where is the condition requiring independent practice?
The Tribunal examined the statutory language of section 44ADA.
It found no express precondition that:
• The professional must have independent clients;
• The professional must maintain a separate professional establishment;
• The professional must earn professional fees directly from clients; or
• The professional must carry on professional activity outside the partnership firm.
This was important.
The Revenue was effectively seeking to introduce an additional condition into section 44ADA.
But tax statutes are generally interpreted according to their language.
If Parliament has not imposed a particular condition, the tax authority cannot simply add one through interpretation.
Strict interpretation of taxing statutes
The ITAT relied upon the principle laid down by the Supreme Court in Commissioner of Customs v. Dilip Kumar & Company.
The Supreme Court has emphasised the principle of strict interpretation of taxing statutes.
Where the language of a taxing provision is clear, courts and authorities cannot expand or restrict it by importing conditions that are not contained in the statute.
Applying this principle, the Delhi ITAT found that section 44ADA did not contain the alleged requirement of independent professional practice.
Therefore, the Revenue’s attempt to read such a restriction into the provision could not be accepted.
No requirement to claim expenditure
Another interesting argument considered by the Tribunal concerned expenditure.
The Revenue’s approach suggested that remuneration received from a partnership firm could not properly fit into section 44ADA because the remuneration was separately governed under section 28(v).
The ITAT, however, noted that section 44ADA does not impose a condition that the assessee must separately claim professional expenditure.
The whole purpose of the presumptive scheme is precisely to deem a specified percentage of eligible gross receipts as income.
Therefore, the absence of a separate expenditure claim cannot by itself prevent the assessee from using the presumptive scheme.
What about section 28(v)?
This is perhaps the most technically interesting part of the judgment.
Section 28(v) specifically deals with amounts received by a partner from a firm by way of:
• Salary;
• Interest;
• Bonus;
• Commission; or
• Remuneration.
Such amounts are taxable as business income in the hands of the partner.
The Revenue relied heavily upon this provision.
But the ITAT’s reasoning indicates that the fact that section 28(v) determines the head and character of the income does not automatically answer whether section 44ADA can be applied.
The two provisions have different functions.
Section 28(v) tells us how the remuneration is to be taxed in the partner’s hands.
Section 44ADA provides a presumptive mechanism for determining taxable income from eligible professional receipts.
The Tribunal therefore did not accept the proposition that section 28(v), by itself, excludes section 44ADA.
And what about section 40(b)?
Section 40(b) deals with the allowability of remuneration and interest paid by a partnership firm to its partners while computing the firm’s business income.
Again, the Revenue relied on this provision to argue that partner remuneration has a special statutory treatment.
But the ITAT effectively separated the two sides of the transaction.
Section 40(b) operates in determining the firm’s allowable expenditure.
Section 28(v) determines the taxability of remuneration in the partner’s hands.
The question whether the partner can adopt the presumptive scheme under section 44ADA is a separate issue.
Therefore, merely referring to sections 40(b) and 28(v) does not automatically answer the section 44ADA question.
Madras High Court decision relied upon by Revenue
The Revenue also relied upon a judgment of the Madras High Court in Anand Kumar.
According to the Revenue, partner remuneration and interest could not be treated as “turnover” or “gross receipts” for the purpose of presumptive taxation.
This was used to support the proposition that partner remuneration should not qualify for the presumptive scheme.
However, the Delhi ITAT did not consider that reasoning sufficient to deny the assessee’s claim in the present case.
The Tribunal focused on the statutory language of section 44ADA and the absence of an express restriction excluding remuneration received by a qualified professional from a partnership firm.
A crucial distinction: 44AD vs 44ADA
This issue also highlights why professionals need to distinguish between section 44AD and section 44ADA.
Section 44AD is the presumptive taxation scheme for eligible businesses.
Section 44ADA specifically deals with specified professions.
Chartered accountancy is one of the recognised professions covered by the professional presumptive scheme, subject to the applicable statutory conditions.
Therefore, the nature of the taxpayer’s profession remains important.
A CA does not become ineligible for section 44ADA merely because the professional services are carried out through a partnership structure.
Does the partnership structure change the professional character?
The Revenue’s argument effectively suggested that the partnership structure changes the character of the partner’s activity.
The ITAT was not persuaded by this proposition.
A working partner of a professional firm may personally perform professional functions for the firm.
The fact that the professional activity is organised through a partnership does not necessarily mean that the individual ceases to be a professional.
The assessee remained a qualified CA holding a Certificate of Practice.
The Tribunal therefore found no statutory basis for automatically excluding his remuneration from section 44ADA.
The ₹13.50 lakh consequence
The practical tax consequence of the decision is significant.
The assessee received approximately:
₹27 lakh — remuneration from the CA firm
Under section 44ADA:
50% = ₹13.50 lakh
could be treated as presumptive taxable professional income.
Thus, instead of determining taxable income by separately claiming actual professional expenditure, the assessee could rely upon the presumptive mechanism.
For professionals receiving substantial partner remuneration, this can have a meaningful impact on tax liability.
But is 50% always compulsory?
The ruling should be understood carefully.
Section 44ADA contains a statutory presumptive mechanism.
Where the conditions are satisfied, the prescribed percentage is generally deemed to be the professional income.
However, the exact tax computation should always be examined in light of the applicable year’s provisions, total receipts, statutory thresholds and other relevant facts.
The judgment does not mean that every amount received by every partner automatically qualifies for 44ADA.
The taxpayer must first fall within the statutory framework.
What about interest received by a partner?
This is where caution becomes particularly important.
The case concerns remuneration received by a qualified CA as a working partner.
It should not automatically be extrapolated to conclude that every amount received from a firm—such as partner interest, bonus, commission or other payments—will necessarily qualify for section 44ADA.
The precise character of the receipt and the statutory language applicable to the relevant year must be examined.
Therefore, professionals should not simply apply the ruling mechanically to every partner-related receipt.
What should CAs receiving partner remuneration examine?
Chartered Accountants who are working partners in firms may consider reviewing the following:
1. Professional qualification
Are you a qualified professional covered by section 44ADA?
2. Certificate of Practice
Does the professional hold the necessary professional credentials?
3. Nature of receipt
Is the receipt actually remuneration for professional services as a working partner?
4. Partnership deed
Does the partnership deed clearly provide for remuneration?
5. Computation under section 28(v)
Has the amount been correctly treated as taxable business income in the partner’s hands?
6. Firm-level treatment
Has the firm complied with the requirements of section 40(b) for claiming deduction of the remuneration?
7. Presumptive computation
Does the partner satisfy the applicable conditions and limits for section 44ADA for the relevant assessment year?
The bigger question: Can a taxpayer choose the simpler tax route?
The case raises a broader principle.
Where Parliament creates a presumptive scheme for a particular category of professionals, the tax authority should be slow to introduce additional conditions that are not found in the statutory language.
The purpose of presumptive taxation is simplification.
If a CA qualifies as a specified professional and receives eligible professional receipts, the Revenue cannot deny the scheme merely because the professional operates through a partnership structure unless the statute itself creates such a restriction.
That was essentially the ITAT’s approach.
A word of caution for professionals
Although the ruling is favourable, taxpayers should not treat it as a blanket permission to claim section 44ADA on every receipt from a professional firm.
The issue remains legally nuanced.
There may be other judicial decisions taking a different view on the character of partner remuneration for presumptive taxation.
Therefore, where the amount involved is substantial, the taxpayer should examine:
• The exact partnership arrangement;
• Nature of services;
• Partnership deed;
• Relevant assessment year;
• Gross-receipt threshold;
• Applicable version of section 44ADA;
• Jurisdictional judicial precedents; and
• Whether the receipt is genuinely attributable to professional services.
The key takeaway
The Delhi ITAT ruling in Ranu Gupta v. ACIT gives a favourable answer to an important question for working partners who are qualified professionals.
The Tribunal held that there is no express statutory requirement in section 44ADA that a CA must independently practise outside the partnership firm in order to claim presumptive taxation.
Nor does section 44ADA require the professional to separately demonstrate actual expenditure before opting for the presumptive mechanism.
The Tribunal applied the principle of strict interpretation of taxing statutes and directed the AO to assess the CA’s remuneration under section 44ADA.
The larger lesson is worth remembering:
A condition which Parliament has not written into a taxing provision cannot ordinarily be inserted by the tax authority through interpretation.
So, for CAs receiving remuneration as working partners, the question is worth asking:
Are you claiming section 44ADA—or are you paying tax as if the presumptive scheme does not exist?
Case discussed: Ranu Gupta v. ACIT, ITA No. 2224/Del/2025, ITAT Delhi, order dated 2 June 2025.
The copy of the order is as under:ITA No. 2224-Del-2025
