Question 3 OR (a)

Presumptive income from goods carriages

12 marks

Time to write
About 24 minutes
Topic
Profits and gains of business or profession
Notes
Crux notes

Question

Question 3 OR (a) · 12 marks

Mr. X own a business of goods carriage. For the tax year 2026-27 he furnishes the following data.

Particulars (on 01/04/2026Heavy goods vehicleLight goods vehicle
Number53
Description of weightage16 ton6 ton

In the tax year he sold a heavy goods vehicle (truck) on 23/5/2026, and on 17/7/2026 he bought another truck of the same capacity. He purchased a light goods vehicle (truck) with a capacity of 6 tons on 10/10/2026.

Other information relevant for the year 2026-27 is given below.

ExpenditureAmountReceiptsAmount
Expenses, operational625000Charges for freight1280000
Expenses, office25000Deposits, interest on (gross)200000
Depreciation165000
Expenses, general40600
Profit624400
Total1480000Total1480000

Mr. X wished to compute his income under the head business or profession under the presumptive income scheme i.e., 44AE. Under section 44AE, you are required to compute his business income. (12)

Paper note: Set under the Income-tax Act, 1961 for assessment year 2024-25 (previous year 2023-24); answered under the Income-tax Act, 2025 for tax year 2026-27, so the year term moves forward by 3 years and every date in the question moves forward by the same 3 years, so that intervals, holding periods and ages are as printed. Every figure and name is as printed. The question names section 44AE of the Income-tax Act, 1961; the answer applies the corresponding provision of the Income-tax Act, 2025. Every date moves by three years, so the months each vehicle is owned are as printed.

Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

24 minfor 12 marks

Read from the question

  • computeHead by head: each income under its head, exempt items marked exempt, then the deductions and the tax.

Write it in this order

  1. Read the data; note exactly what is asked 2 min
  2. 1 Eligibility not more than ten goods carriages; heavy and light vehicles 2 marks 3 min
  3. 2 Months of ownership of each vehicle 3 marks 5 min
  4. 3 Presumptive income computed 4 marks 7 min
  5. 4 Business income as the higher amount; treatment of interest 2 marks 3 min
  6. 5 Notes 1 mark 2 min
  7. Check: arithmetic, units (₹, %), final answer underlined 2 min

Try it first. About 24 minutes for 12 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

Eligibility (section 58(2), Table: Sl. No. 2, formerly section 44AE)

The scheme is open to an assessee owning no more than ten goods carriages at any point in the tax year. Mr. X owns 5 heavy and 3 light goods vehicles at the start of the year, 4 heavy after the sale on 23/5/2026, 5 heavy again from 17/7/2026, and 4 light from 10/10/2026: at most 5 + 4 = 9 at any time. He is eligible.

A heavy goods vehicle is one whose gross vehicle weight exceeds 12,000 kg (section 58(11)(e)); the 16-ton trucks are heavy and the 6-ton trucks are light.

Months of ownership (a part of a month counts as a full month)

VehicleWeightOwnedMonths
4 heavy goods vehicles held all year16 ton each1/4/2026 to 31/3/202712
Heavy goods vehicle sold on 23/5/202616 tonApril and May2
Heavy goods vehicle bought on 17/7/202616 tonJuly to March9
3 light goods vehicles held all year6 ton each1/4/2026 to 31/3/202712
Light goods vehicle bought on 10/10/20266 tonOctober to March6

Computation of presumptive income

ParticularsWorkingRs.
Heavy goods vehicles held all year4 × 16 tons × ₹1,000 × 12 months7,68,000
Heavy goods vehicle sold1 × 16 tons × ₹1,000 × 2 months32,000
Heavy goods vehicle bought1 × 16 tons × ₹1,000 × 9 months1,44,000
Light goods vehicles held all year3 × ₹7,500 × 12 months2,70,000
Light goods vehicle bought1 × ₹7,500 × 6 months45,000
Presumptive income from goods carriages12,59,000

Business income

Under the scheme the business income is the higher of the presumptive income and the profit the assessee claims to have actually earned. The profit from goods carriage shown in the accounts is the net profit of ₹6,24,400 less the interest on deposits of ₹2,00,000, which is not business income: ₹4,24,400. The presumptive income of ₹12,59,000 is higher.

Income under the head Profits and gains of business or profession = ₹12,59,000.

Notes

  1. The interest on deposits of ₹2,00,000 is taxed separately under the head Income from other sources.
  2. No deduction for operational, office or general expenses or depreciation is allowed against the presumptive income (section 58(4)); the written down value of the vehicles is computed as if depreciation had been allowed (section 58(6)).
  3. Mr. X need not keep books of account or get them audited for this business (section 58(10)).

Where the 12 marks sit

#ComponentMarks
1Eligibility (not more than ten goods carriages; heavy and light vehicles)2
2Months of ownership of each vehicle3
3Presumptive income computed4
4Business income as the higher amount; treatment of interest2
5Notes1
Total12
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