Question 5 (d)

Short note: presumptive income of goods carriages under section 44AE (as set, 1961 Act, AY 2022-23)

5.5 marks

Time to write: About 11 minutes

From an older CBCS paper

Question

Question 5 (d) · 5.5 marks

Write short notes on any two of the topics given below:

Presumptive income under section 44AE.

Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2022-23 (previous year 2021-22), with the dates as printed. No marks are printed for this part; 5.5 inferred (two of four notes carry 11 marks).

Reworded from the university paper; 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

11 minfor 5½ marks

Read from the question

any twoThe paper asks for any 2, and this is one of them. Only 2 are marked: a third earns nothing.
section 44AEThe section is named: open with what it says, then explain or apply it.
short notesA note opens with the meaning, then two or three key points. No long introduction.

Write it in this order

Read; underline the asks; jot your points 1 min
1 Who is covered 1 mark 2 min
2 The deemed income per vehicle 2 marks 3 min
3 Deductions, firms, written down value, books 1½ marks 2 min
4 Lower income and example 1 mark 2 min
Check: every ask answered, key terms underlined 1 min

1234

Short on time? Trim steps 2 and 3 evenly rather than skip one: each is capped at its own marks. End with step 4 in a line or two.

Try it first. About 11 minutes for 5.5 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.

1. Who is covered

Section 44AE applies to any assessee (individual, firm, company or other) who is engaged in the business of plying, hiring or leasing goods carriages and whose fleet of owned goods carriages never goes above ten at any point in the previous year (section 44AE(1)). The goods carriage, gross vehicle weight and unladen weight have their meanings in the Motor Vehicles Act, 1988 (Explanation).

2. The presumptive income

The income from each goods carriage is deemed to be (section 44AE(2)):

Goods carriage	Deemed income for every month or part of a month it is owned in the year
Heavy goods vehicle (gross vehicle weight above 12,000 kg)	₹1,000 per ton of gross vehicle weight (or unladen weight)
Any other goods carriage	₹7,500

or the amount the assessee claims to have actually earned from it, if higher. The total for all his carriages is his business income from this activity.

3. Consequences

Deductions deemed allowed. All deductions under sections 30 to 38, including depreciation, are treated as already given; nothing more is deducted (section 44AE(3)).
Firms. A firm may still deduct salary and interest paid to its partners, within the conditions and limits of section 40(b) (proviso to section 44AE(3)): remuneration only to a working partner; remuneration and interest only if authorised by and in accordance with the partnership deed, and not for a period before the deed's date unless an earlier deed covered it (an earlier deed cannot reach back before its own date); interest within 12% simple a year; and remuneration within the limits on book profit (section 40(b)(i)-(v)).
Written down value. The written down value of every asset used in this business (not only the vehicles) is computed as if depreciation had been claimed and allowed every year (section 44AE(4)).
Books and audit. Sections 44AA and 44AB do not apply to this business, and its receipts or income are left out in working out the limits under those sections (section 44AE(5)).

4. Claiming lower income

The assessee may declare lower income than the presumptive amount only if he keeps the books of account and other documents required by section 44AA(2) and gets his accounts audited under section 44AB (section 44AE(7)): the audit by an accountant must be done before the specified date, and the audit report, in the prescribed form, signed and verified by the accountant, must be furnished by that date (section 44AB(c)).

5. Example

Example (our own): Ms. Simran owns, throughout 2021-22, two light trucks and one heavy truck of 15 tons gross vehicle weight, and buys a third light truck on 10 November 2021. Deemed income: two light trucks ₹7,500 × 12 × 2 = ₹1,80,000; the third light truck, November to March (5 months, part of November counting as a month) ₹37,500; the heavy truck ₹1,000 × 15 × 12 = ₹1,80,000. Total ₹3,97,500, unless she shows a higher actual income.

Where the 5.5 marks sit

#	Component	Marks
1	Who is covered	1
2	The deemed income per vehicle	2
3	Deductions, firms, written down value, books	1.5
4	Lower income and example	1
	Total	5.5

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