Opinion Of Eminent Legal Luminaries On Controversial Issues

Presumptive taxation-Eligible assessee

QUERY: Assessee falls under the definition of “eligible assessee” as provided in Explanation (a) to section 44AD. His turnover is not exceeding one crore rupees (taking into consideration positive & negative figures). Assessee maintains regular books of account. Assessee has incurred speculation loss of Rs. 5,00,000/- on share trading, which he wants to carry forward and assessee has incurred business loss of Rs. 3,00,000/- in an eligible transaction in respect of trading in derivatives as provided in section 43(5)(d) & (e), which he wants to set-off against income from other sources. In this connection assessee has the following question,
(i) Will speculation business & business carried out in eligible transaction in respect of trading in derivatives as provided in section 43(5)(d) & (e) be treated as “eligible business” as provided in Explanation (b) to section 44AD.
(ii) If yes, will it be necessary to carry out Audit u/s. 44AD to carry forward speculation loss & set-off business loss in the case of above facts?
ANSWER: As per Explanation 2 of section 28 of the Act, the speculative business is distinct from any other business. So speculation business is a separate business from eligible transaction as defined in Explanation 2 to section 43(5).
Further, from the fact, it is clear that an assessee is “eligible assessee” and therefore if he is carrying on “eligible business” as defined in Explanation (b) to the section 44AD and his turnover is less than rupees two crores then he can claim benefit of section 44AD.
If he does not show the profit of 8% of the gross turnover or receipt then he is required to keep books of account and get them audited if he has income chargeable to tax.
In this case, a loss from speculation business, can be carried forward for four years and can set-off only against profits of speculation business.
In case of loss, though assessee may maintain the books of account, he need not get them audited, as income is not chargeable to tax. However, if he wants to claim carry forward of loss, he has to file the return of income before the due date as mentioned in section 139(1) r. w. s. 80 of the Act.

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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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