Advance Learning on Section 44AE (Practical) · Advance Learning on Section 44AE (Practical) In this advance learning we shall learn various about practical aspects of the provisions

Advance Learning on Section 44AE (Practical)

In this advance learning we shall learn various about practical aspects of the provisions of

section 44AE.

Illustration

Mr. Kumar is engaged in the business of plying, hiring or leasing of goods carriages and

is owning 8 light goods vehicles. He wants to adopt the provisions of section 44AE and

to declare income as per the presumptive taxation scheme. Can he adopt these provisions

even if he is an individual?

**

The provisions of section 44AE can be adopted by every person (i.e., an individual, HUF,

firm, company, etc.). Thus, Mr. Kumar being an individual, if satisfies the other criteria

of the scheme, can adopt the provisions of section 44AE and can declare income on

presumptive basis.

Illustration

Kumar HUF whose Karta is Kumar is engaged in the business of plying, hiring or leasing

of goods carriages and is owning 6 light good of vehicles. The HUF wants to adopt the

provisions of section 44AE and declare income as per the presumptive taxation scheme.

Can it adopt these provisions even if he is a HUF?

**


firm, company, etc.). Thus Kumar HUF, being an HUF, if satisfies the other criteria of

the scheme, can adopt the provisions of section 44AE and can declare income on

presumptive basis.

Illustration

SM Enterprises a partnership firm whose partners are Soham and Mohan is engaged in

the business of plying, hiring or leasings goods carriages and is owning 9 light goods

vehicles. Soham is also running his proprietorship firm in which he carries on the

business of plying, hiring or leasing goods carriages. In this case can the firm as well

Soham both adopt the provisions of section 44AE and declare income as per the

presumptive taxation scheme?

**


firm, company, etc.). There is no restriction of partnership firm and partners both

adopting the provisions of section 44AE. Hence, in this case, both, i.e., SM Enterprise

and Soham can adopt the provisions of section 44AE if they satisfies the other criteria of

the scheme and can declare income on presumptive basis.

Scheme of computation of income

Illustration

(As amended by Finance Act, 2013)source : www.trpscheme.com

Mr. Ramesh engaged in the business of passenger transportation owned 7 mini buses

during the previous year 2012-13. Can he adopt the provisions of presumptive scheme of

section 44AE in respect of this business?

**

The provisions of section 44AE can be adopted by an assessee who is engaged in the

business of plying, hiring or leasing goods carriages and does not own more than ten

goods vehicles at any time during the previous year. In this case Mr. Ramesh is engaged

in the business of passanger transportation which is not eligible for the scheme of section

44AE and, hence, he cannot adopt the provisions of section 44AE.

Illustration

Mr. Kaushal engaged in the business of plying, hiring or leasing goods carriages owned

18 goods vehicles during the previous year 2012-13. He wants to adopt the provisions of

section 44AE in respect of this business. In this case what will be the income as per the

provisions of section 44AE?

**

The provisions of the presumptive taxation scheme can be adopted by an assessee who is

engaged in the business of plying, hiring or leasing goods carriages and does not own

more than ten goods vehicles at any time during the previous year.

In this case Mr. Kaushal owns more than 10 goods vehicles and, hence, cannot adopt the

provisions of section 44AE.

Illustration

Mr. Raja engaged in the business of plying, hiring or leasing goods carriages owned 1

goods vehicle (small goods vehicle) during the previous year 2012-13. The vehicle

remained idle for a period of 4 months during the year. He wants to adopt the provisions

of section 44AE in respect of this business. In this case what will be the income as per the


**

As per the provisions of section 44AE, in respect of heavy goods vehicles other than

heavy goods vehicle income will be computed @ Rs. 4,500 per month or part thereof

during which the goods vehicle is owned by the assessee, during the previous year. In the

present case Mr. Raja owned the goods vehicle during the entire year and, hence, income

will be computed for the entire year (i.e., including the month in which the vehicle

remained idle). The computation will be as follows :

Particulars Rs.

Income per month per goods vehicle 4,500

(×) No. of goods vehicles 1

Monthly income as per the provisions of section 44AE 4,500

(×) No. of months in a year 12

Total income as per the provisions of section 44AE 54,000

Illustration


Miss. Kiran engaged in the business of plying, hiring or leasing goods carriages owned 4

goods vehicles (light goods vehicles) and 5 heavy goods vehicles during the previous

year 2012-13. She wants to adopt the provisions of section 44AE in respect of this

business. In this case what will be the income as per the provisions of section 44AE?

**

As per the provisions of section 44AE, in respect of goods vehicle (other than heavy

goods vehicle) income will be computed @ Rs. 4,500 per month or part thereof during

which the goods vehicle (other than heavy goods vehicle) is owned by the assessee

during the previous year. In respect of heavy goods vehicle income will be computed @

Rs. 5,000 per month or part thereof during which the heavy goods vehicle is owned by

the assessee during the previous year. In the present case Miss. Kiran owned 4 light

vehicles and 5 heavy goods vehicles during the year and, hence, income will be computed

as follows:

Particulars Rs.

Income per month per goods vehicle (other than heavy goods vehicle) 4,500




Total income as per the provisions of section 44AE from goods vehicles

(other than heavy goods vehicles) (A)

2,16,000

Income per month per heavy goods vehicle 5,000

(×) No. of heavy goods vehicles 5



Total income as per the provisions of section 44AE from heavy goods

vehicles (B)

3,00,000

Total income from business of plying, hiring or leasing goods carriages as

per the provisions of section 44AE (A + B)

5,16,000

Illustration





**

In this case Miss Kiran owns more than 10 goods vehicles and, hence, she cannot adopt

the provisions of section 44AE.

Illustration


Miss. Komal engaged in the business of plying, hiring or leasing goods carriages owned 9

goods vehicles (light goods vehicles) and 1 heavy goods vehicle during the previous year

2012-13. She wants to adopt the provisions of section 44AE in respect of this business. In

this case what will be the income as per the provisions of section 44AE?

**



goods vehicles at any time during the previous year. The criteria is 10 goods vehicles in

total and not individually for heavy goods vehicles and other than heavy goods vehicles.

In this case assessee owns 10 goods vehicles in total and hence can opt for provisions of

section 44AE.






the assessee during the previous year. In the present case, Miss. Komal owned 9 light

vehicles and 1 heavy goods vehicle during the year and, hence, income will be computed

as follows:

Particulars Rs.

Income per month per goods vehicle (other than heavy goods

vehicle)

4,500




Total income as per the provisions of section 44AE from goods

vehicles (other than heavy goods vehicles) (A)

4,86,000


(×) No. of heavy goods vehicle 1



Total income as per the provisions of section 44AE from heavy

goods vehicles (B)

60,000

Total income from business of plying, hiring or leasing goods

carriages as per the provisions of section 44AE (A + B)

5,46,000

Illustration

Miss. Kavita engaged in the business of plying, hiring or leasing goods carriages owned 9


2012-13. During the month of May, 2012 she sold the heavy goods vehicle and purchased

light goods vehicle in the month of June, 2012. She wants to adopt the provisions of




**



goods vehicles at any time during the previous year. In this case, she sold one vehicle in

May and purchased another vehicle in June, thus, she did not own more 10 vehicles at

any time during the year, thus, she satisfied the criteria and she can adopt the provisions

of section 44AE.






the assessee during the previous year. In this case, income will be computed as follows:

Particulars Rs.







4,32,000






vehicles (B)

10,000

Total (A + B) 4,42,000

(+) Income in respect of 1 vehicle which is purchased in June for 10

months @ Rs. 4,500 per month (C)

45,000


carriages as per the provisions of section 44AE (A + B+C)

4,87,000

Provisions relating to various allowances/disallowances

Illustration

Mr. Krunal is engaged in the business of plying, hiring or leasing goods carriages. He

owned 6 heavy goods vehicles during the previous year 2012-13 and declared income as

per the provisions of section 44AE. After computing the income @ Rs. 5,000 per month,

he wants to claim further deduction on account of following items :


Salary paid to office administration staff : Rs. 84,000.

Expenditure on account of insurance of goods vehicles Rs. 25,200

Depreciation on office building Rs. 1,84,000

Depreciation on goods vehicle Rs. 48,400.

Can he claim deduction on account of above expenditure?

**

As per the provisions of section 44AE, from the net income computed at the prescribed

rate, i.e., Rs. 4,500 per month/Rs. 5,000 per month, assessee is not permitted to claim any

deduction under sections 30 to 38 (including depreciation or unabsorbed depreciation)

from such income. Thus, in this case Mr. Krunal cannot claim any further deduction on

account of any of the above discussed expenses from the net income computed as per the


Illustration

Essem Enterprise is engaged in the business of plying, hiring or leasing goods carriages.

The firm owned 7 heavy goods vehicles during the previous year 2012-13 and declared

income as per the provisions of section 44AE. After computing the income @ Rs. 5,000

per month, the firm wants to claim further deduction on account of following items :





Remuneration paid to partners Rs. 84,000.

Can the firm claim deduction on account of above expenditure?

**




from such income. Thus, in this case the firm cannot claim any further deduction on

account of any of the above discussed expenses (except remuneration paid to partners)

from the net income computed as per the provisions of section 44AE.

In case of an assessee, being a partnership firm, from the net income computed as per the

provisions of section 44AE further deduction on account of remuneration and interest

paid to its partner within the limit specified under section 40(b) is allowed. Thus, in this

case the firm can claim further deduction on account of remuneration paid to its partners

within the limit specified under section 40(b).

Illustration

SM Enterprise is engaged in the business of plying, hiring or leasing goods carriages. The

firm owned 4 heavy goods vehicles during the previous year 2012-13 and declared







Interest on capital to partners @ 12% amounting to Rs. 84,000


**










case the firm can claim further deduction on account of remuneration and interest paid to

its partners within the limit specified under section 40(b).

Manner of computation of WDV of depreciable assets

Illustration

Mr. Anil is engaged in the business of plying, hiring or leasing goods carriages. He



he wants to claim further deduction on account of depreciation on the goods vehicles

amounting to Rs. 84,000. Can he do so as per the provisions of section 44AE?

**




from such income. Thus, in this case Mr. Anil cannot claim any further deduction on

account of depreciation amounting to Rs. 84,000 from the net income computed as per


Illustration

SM Transport Corporation a partnership firm is engaged in the business of plying, hiring

or leasing goods carriages and owned 7 heavy goods vehicles during the previous year

2012-13 and declared income as per the provisions of section 44AE. The opening WDV

of the block of depreciable asset (machinery 15%) as on 1.4.2012 is Rs. 1,84,000. Since

the firm has opted for the provisions of section 44AE for the year 2012-13 it has not

claimed depreciation. In this case, if in the next year they do not opt for section 44AE in

next year, what will be the WDV on which the firm can claim depreciation?

**

As per the provisions of section 44AE, from the income computed as per the provisions

of section 44AE, further deduction on account of depreciation is not available. However,

the WDV of any asset used in the business covered under the scheme of section 44AE

shall be calculated as if depreciation as per section 32 is claimed and allowed. Thus, even


though no depreciation is claimed by the firm, yet for purpose of computation of the

WDV of the asset, depreciation will be deducted from the value of the block. The WDV

eligible for depreciation will be computed as follows :

Particulars Amount

Opening WDV as on 1.4.2012 1,84,000

(-) Depreciation for the year 2012-13 27,600

Closing WDV for the year 1,56,400

WDV eligible for depreciation for the year 2013-13 1,56,400

Illustration

Mr. Kaushal is engaged in the business of plying, hiring or leasing goods carriages He


per the provisions of section 44AE. In this case will he be liable to maintain the books of

account in respect of aforesaid business?

**

An assessee who adopts the provisions of section 44AE is not required to maintain books

of account (applicable only for business covered by this section). However, it should be

noted that the relief is available only in respect of business covered by the provisions of

section 44AE and not in respect of any other business. Thus, if Mr. Kaushal owns any

other business, then in respect of such business the provisions of section 44AA in respect

of maintenance of books of account will apply.

Provisions relating to maintenance of books of account

Illustration

Mr. Jay is engaged in the business of plying, hiring or leasing goods carriages. He owned

18 heavy goods vehicles during the previous year 2012-13 and wants to declared income

as per the provisions of section 44AE. In this case will he be liable to maintain the books

of account in respect of aforesaid business?

**

As per the provisions of section 44AE, an assessee who adopts the provisions of section

44AE is not required to maintain books of account as per section 44AA (applicable only

for business covered by this section). The presumptive taxation scheme under these

provisions can be opted for by an assessee who is engaged in the business of plying,

hiring or leasing goods carriages and does not own more than ten goods vehicles at any

time during the previous year. In this case Mr. Jay owns 18 goods vehicles and, thus, he

is not eligible for the provisions of section 44AE and, hence, the provisions of section

44AA relating to maintenance of books of account will apply to him and he will be liable

to maintain the books of account as specified under section 44AA.

Illustration

Mr. Kaushal is engaged in the business of plying, hiring or leasing goods carriages and

owned 8 goods vehicles during the previous year 2012-13. He wants to adopt the

provisions of section 44AE for the above business. Apart from the business of plying,


hiring or leasing goods carriages, he is also running a provision shop in which his net

profit is @ 3% of turnover. In this case will he be liable to maintain the books of account

in respect of aforesaid businesses?

**


44AE is not required to maintain books of account as per section 44AA (applicable only

for business covered by this section). It should be noted that the relief is available only in

respect of business covered by the provisions of section 44AE and not in respect of any

other business. Thus, in this case he will not be liable to maintain books of account in

respect of business covered under section 44AE, i.e., business of plying, hiring or leasing

goods carriages but in respect of agency business he will be liable to maintain books of

accounts as provided under section 44AA.

Declaration of lower income/Higher income

Illustration

Mr. Ronak is engaged in the business of plying, hiring or leasing goods carriages and

owned 7 heavy goods vehicles and 2 light goods vehicles during the previous year 2012-

13. His actual income per goods vehicle per month is less than Rs. 5,000. In this case can

he declare income @ Rs. 4,500 per month per light goods vehicle and declare lower (i.e.,

lower than Rs. 5,000 per month) in respect of heavy goods vehicle?

**

The presumptive taxation scheme of section 44AE does not provide any option to declare

income under section 44AE in respect of few goods vehicles and to opt for normal

provisions of section for a few goods vehicles. Thus, in this case Mr. Ronak has no

option to select the vehicle in respect of which he wants to declare income under

provisions of section 44AE. In other words, if he wants to adopt the provisions of section

44AE then he has to adopt the same for all the vehicles owned by him.

However, if he does not adopt the provision of section 44AE, then he can declare income

from aforesaid business at a lower rate (i.e., at less than Rs. 4,500/Rs. 5,000). However,

in this case he has to maintain the books of account prescribed under section 44AA and

has to get the books of account audited.


FAQs

1. To whom the provisions of the scheme of section 44AE apply? Explain with the

help of a few illustrations.

Following illustrations will explain the applicability of the provisions of the scheme of

section 44AE.

Illustration

Mr. Kumar is engaged in the business of plying, hiring or leasing goods carriages and is

owning 8 light goods vehicles. He wants to adopt the provisions of section 44AE and to

declare income as per the presumptive taxation scheme. Can he adopt these provisions

even if he is an individual?

**


firm, company, etc.). Thus, Mr. Kumar, being an individual, if he satisfies the other

criteria of the scheme he can adopt the provisions of section 44AE and can declare

income on a presumptive basis.

Illustration

Kumar HUF whose Karta is Kumar is engaged in the business of plying, hiring or leasing

goods carriages and is owning 6 light goods vehicles. The HUF wants to adopt the

provisions of section 44AE and to declare income as per the presumptive taxation

scheme. Can it adopt these provisions even if he is an individual?

**


firm, company, etc.). Thus, Kumar HUF being an HUF if satisfies the other criteria of the

scheme can adopt the provisions of section 44AE and can declare income on a

presumptive basis.

Illustration

SM Enterprises a partnership firm whose partners are Soham and Mohan is engaged in

the business of plying, hiring or leasing goods carriages and is owning 9 light goods

vehicles. Soham is also running his proprietorship firm in which he carries on the

business of plying, hiring or leasing goods carriages. In this case can the firm as well

Soham, both adopt the provisions of section 44AE and declare income as per the

presumptive taxation scheme?

**


firm, company, etc.). There is no restriction of partnership firm and partners, both

adopting the provisions of section 44AE. Hence, in this case both, i.e., SM Enterprises

and Soham can adopt the provisions of section 44AE if they satisfy the other criteria of

the scheme and can declare income on a presumptive basis.


2. What is the scheme of computation of income as per the provisions of section

44AE? Explain with the help of a few illustrations.

Following illustrations will explain the applicability of the provisions relating to the

computation of income as per the provisions of section 44AE.

Illustration

Mr. Ramesh engaged in the business of passenger transportation owned 7 mini buses

during the previous year 2012-13. Can he adopt the provisions of presumptive scheme of

section 44AE in respect of this business?

**



goods vehicles at any time during the previous year. In this case Mr. Ramesh is engaged

in the business of passanger transport which is not eligible for the scheme of section

44AE and, hence, he cannot adopt the provisions of section 44AE.

Illustration

Mr. Kaushal engaged in the business of plying, hiring or leasing goods carriages owned




**

The provisions of the presumptive taxation scheme can be adopted by an assessee who is

engaged in the business of plying, hiring or leasing goods carriages and does not own

more than ten goods vehicles at any time during the previous year.

In this case Mr. Kaushal owns more than 10 goods vehicles and, hence, cannot adopt the


Illustration

Mr. Raja engaged in the business of plying, hiring or leasing goods carriages owned 1

goods vehicle (small goods vehicle) during the previous year 2012-13. The vehicle

remained idle for a period of 4 months during the year. He wants to adopt the provisions

of section 44AE in respect of this business. In this case what will be the income as per the


**

As per the provisions of section 44AE, in respect of heavy goods vehicle other than

heavy goods vehicle income will be computed @ Rs. 4,500 per month or part thereof

during which the goods vehicle is owned by the assessee during the previous year. In the

present case Mr. Raja owned the goods vehicles during the entire year and, hence,

income will be computed for the entire year (i.e., including the month in which the

vehicle remained idle). The computation will be as follows :

Particulars Rs.



(×) No. of goods vehicle 1



Total income as per the provisions of section 44AE 54,000

Illustration





**






the assessee during the previous year. In the present case Miss. Khushali owned 4 light

vehicles and 5 heavy goods vehicles during the year and, hence, income will be computed

as follows:

Particulars Rs.


vehicle)

4,500






2,16,000


(×) No. of heavy goods vehicles 5




goods vehicles (B)

3,00,000



5,16,000

Illustration






**

In this case, Miss Kiran owned more than 10 goods vehicles and, hence, she cannot adopt


Illustration

Miss. Komal engaged in the business of plying, hiring or leasing goods carriages owns 9




**



goods vehicles at any time during the previous year. The criteria is 10 goods vehicles in

total and not individually for heavy goods vehicle and other than heavy goods vehicle.






the assessee during the previous year. In the present case Miss. Komal owned 9 light

vehicles and 1 heavy goods vehicle during the year and, hence, income will be computed

as follows:

Particulars Rs.


vehicle)

4,500






4,86,000







goods vehicles (B) 60,000



5,46,000

Illustration

Miss. Kavita engaged in the business of plying, hiring or leasing goods carriages owns 9


2012-13. During the month of May, 2013 she sold the heavy goods vehicle and purchased

light goods vehicle in the month of June, 2013. She wants to adopt the provisions of



**



goods vehicles at any time during the previous year. In this case, she sold one vehicle in

May and purchased another vehicle in June, thus, she did not own more 10 vehicles at

any time during the year, thus, she satisfied the criteria and she can adopt the provisions

of section 44AE.






the assessee during the previous year. In this case income will be computed as follows:

Particulars Rs.





Total income as per the provisions of section 44AE from goods vehicles

(other than heavy goods vehicles) (A)

4,32,000






vehicles (B)

10,000

Total (A + B) 4,42,000


(+) Income in respect of 1 vehicle which is purchased in June for 10

months @ Rs. 4,500 per month

45,000

Total income from business of plying, hiring or leasing goods carriages as

per the provisions of section 44AE (A + B)

4,87,000

3. What are the provisions relating to various allowances/disallowances under

section 44AE? Explain with the help of a few illustrations.

Following illustrations will explain the provisions relating to various

allowances/disallowances under the section 44AE.

Illustration

Mr. Krunal is engaged in the business of plying, hiring or leasing goods carriages. He



he wants to claim further deduction on account of following items :





Can he claim deduction on account of above expenditure?

**




from such income. Thus, in this case Mr. Krunal cannot claim any further deduction on

account of any of the above discussed expenses from the net income computed as per the


Illustration

Essem Enterprise is engaged in the business of plying, hiring or leasing goods carriages.

The firm owned 7 heavy goods vehicles during the previous year 2012-13 and declared









**











case the firm can claim further deduction on account of remuneration paid to its partners

within the limit specified under section 40(b).

Illustration

SM Enterprise is engaged in the business of plying, hiring or leasing goods carriages. The

firm owned 4 heavy goods vehicles during the previous year 2012-13 and declared






Interest on capital to partners @ 12% amounting to Rs. 84,000


**










case the firm can claim further deduction on account of remuneration and interest paid to

its partners within the limit specified under section 40(b).

4. What are the provisions relating to computation of WDV of depreciable asset in

case of an assessee opting for the scheme of section 44AE? Explain with the help of a

few illustrations.

Following illustrations will explain the provisions relating to computation of WDV of

depreciable asset in case of an assessee opting for the scheme of section 44AE.

Illustration

Mr. Anil is engaged in the business of plying, hiring or leasing goods carriages. He



he wants to claim further deduction on account of depreciation on the goods vehicles

amounting to Rs. 8,4000. Can he do so as per the provisions of section 44AE?

**





from such income. Thus, in this case Mr. Anil cannot claim any further deduction on

account of depreciation amounting to Rs. 84,000 from the net income computed as per


Illustration

SM Transport Corporation, a partnership firm, is engaged in the business of plying, hiring

or leasing goods carriages and owned 7 heavy goods vehicles during the previous year

2012-13 and declared income as per the provisions of section 44AE. The opening WDV

of the block of depreciable asset (machinery 15%) as on 1.4.2012 is Rs. 1,84,000. Since

the firm has opted for the provisions of section 44AE for the year 2012-13 it has not

claimed depreciation. In this case, if in the next year they do not opt for section 44AE,

what will be the WDV on which the firm can claim depreciation?

**

As per the provisions of section 44AE, from the income computed as per the provisions

of section 44AE, further deduction on account of depreciation is not available. However,

the WDV of any asset used in the business covered under the scheme of section 44AE

shall be calculated as if depreciation as per section 32 is claimed and allowed. Thus, even

though no depreciation is claimed by the firm, yet for purpose of computation of the

WDV of the asset depreciation will be deducted from the value of the block. The WDV

eligible for depreciation will be computed as follows :

Particulars Amount





Illustration

Mr. Kaushal is engaged in the business of plying, hiring or leasing goods carriages He


per the provisions of section 44AE. In this case will he be liable to maintain the books of

account in respect of aforesaid business?

**

An assessee who adopts the provisions of section 44AE, is not required to maintain books

of account as per section 44AA (applicable only for business covered by this section).

However, it should be noted that the relief is available only in respect of business covered

by the provisions of section 44AE and not in respect of any other business. Thus, if Mr.

Kaushal owns any other business, then in respect of such business the provisions of

section 44AA in respect of maintenance of books of account will apply.

5. What are the provisions relating to maintenance of books of account in case of an

assessee opting for the scheme of section 44AE? Explain with the help of a few

illustrations.


Following illustrations will explain the provisions relating to maintenance of books of

account in case of an assessee opting for the scheme of section 44AE

Illustration

Mr. Jay is engaged in the business of plying, hiring or leasing of goods carriages He

owned 18 heavy goods vehicles during the previous year 2012-13 and wants to declare

income as per the provisions of section 44AE. In this case will he be liable to maintain

the books of account in respect of aforesaid business?

**


44AE, is not required to maintain books of account as per section 44AA (applicable only

for business covered by this section). The presumptive taxation scheme under these

provisions can be opted by an assessee who is engaged in the business of plying, hiring or

leasing goods carriages and does not own more than ten goods vehicles at any time

during the previous year. In this case, Mr. Jay owns 18 goods vehicles and, thus, he is not

eligible for the provisions of section 44AE and, hence, the provisions of section 44AA

relating to maintenance of books of account will apply to him and he will be liable to

maintain the books of account as specified under section 44AA.

Illustration

Mr. Kaushal is engaged in the business of plying, hiring or leasing goods carriages owns


section 44AE for the above business. Apart from the business of plying, hiring or leasing

goods carriages, he is also running a provision shop in which his net profit is @ 3% of

turnover. In this case will he be liable to maintain the books of account in respect of

aforesaid businesses?

**


44AE, is not required to maintain books of account as per section 44AA (applicable only

for business covered by this section). It should be noted that the relief is available only in

respect of business covered by the provisions of section 44AE and not in respect of any

other business. Thus, in this case the he will not be liable to maintain books of account in

respect of business covered under section 44AE, i.e., business of plying, hiring or leasing

goods carriages but in respect of agency business he will be liable to maintain books of

account as provided under section 44AA.

6. What are the provisions relating to declaration of lower income as compared to

the limit prescribed under the scheme of section 44AE? Explain with the help of an

illustration.

Following illustration will explain the provisions relating to declaration of lower/higher

income as compared to the limit prescribed under the scheme of section 44AE.

Illustration

Mr. Ronak is engaged in the business of plying, hiring or leasing goods carriages and

owned 7 heavy goods vehicles and 2 light goods vehicles during the previous year 2012-

13. His actual income per goods vehicle per month is less than Rs. 5,000. In this case can


he declare income @ Rs. 4,500 per month per light goods vehicle and declare lower (i.e.,

lower than Rs. 5,000 per month) in respect of heavy goods vehicle?

**

The presumptive taxation scheme of section 44AE does not provide any option to declare

income under section 44AE in respect of a few goods vehicles and to opt for normal

provisions of section for a few goods vehicles. Thus in this case Mr. Ronak has no option

to select the vehicle in respect of which he wants to declare income under provisions of

section 44AE. In other words, if he wants to adopt the provisions of section 44AE then he

has to adopt the same for all the vehicles owned by him.

However, if he does not adopt the provision of section 44AE, then he can declare income

from aforesaid business at a lower rate (i.e., at less than Rs. 4,500/Rs. 5,000). However,

in this case he has to maintain the books of account prescribed under section 44AA and

has to get them audited.


MCQ

Q1. The provisions relating to presumptive taxation scheme applicable to an

assessee engaged in the business of passenger transportation are given in section

________?

(a) 44AE

(b) 44AB

(c) 44AD

(d) No such provisions exist for an assessee engaged in the business of passenger

transportation

Correct answer (d)

Justification of correct answer:

The provisions relating to presumptive taxation scheme applicable to an assessee engaged

in the business of plying, hiring or leasing goods carriages are given in section 44AE.

These provisions are not applicable to an assessee engaged in the business of passenger

transportation.

Thus, option (d) is the correct option.

Comment on incorrect answer: Option (d) is the correct option since it gives the correct

section provisions. All the other options, viz., options (a), (b) and (c) giving incorrect

sections/provision are not correct.

Q2. The provisions relating to presumptive taxation scheme prescribed under

section 44AE are applicable to an assessee engaged in the business of ___________

(a) Plying goods carriages

(b) Hiring goods carriages

(c) Leasing goods carriages

(d) Plying, hiring or leasing goods carriages

Correct answer (d)


The provisions relating to presumptive taxation scheme prescribed under section 44AE

are applicable to an assessee engaged in the business of plying, hiring or leasing goods

carriages.



business. All the other options, viz., options (a), (b) and (d) giving incorrect business are

not correct.


section 44AE are applicable to an assessee engaged in the business of plying, hiring


or leasing goods carriage only if the income from the goods carriage per month is

below Rs. 4,500/Rs. 5,000 as the case may be.

(a) True (b) False

Correct answer (b)



are applicable to an assessee engaged in the business of plying, hiring or leasing goods

carriage. There is no such condition that the provisions can be adopted only if the income

from the goods carriage per month is below Rs. 4,500/Rs. 5,000 as the case may be.

Thus, the statement given in the question is false and, hence, option (b) is the correct

option.

Comment on incorrect answer: The statement given in the question is false. Hence,

option (a) is not correct.



or leasing of carriages if the assessee does not own more than ____ goods vehicles at

any time during the previous year.

(a) 5 (b) 10

(c) 15 (d) 20

Correct answer (b)



are applicable to an assessee engaged in the business of plying, hiring or leasing carriages

if the assessee does not own more than 10 goods vehicles at any time during the previous

year.

Thus, option (b) is the correct option.

Comment on incorrect answer: Option (b) is the correct option since it gives the correct

number of vehicles. All the other options, viz., options (a), (c) and (d) giving incorrect

number of vehicles are not correct.



or leasing of carriages if the assessee does not own more than 10 ____ at any time

during the previous year. (Options c and d are same?)

(a) Heavy goods vehicles

(b) Goods vehicles

(c) Goods vehicle other than heavy goods vehicles

(d) Passenger vehicles

Correct answer (b)




are applicable to an assessee engaged in the business of plying, hiring or leasing of

carriages if the assessee does not own more than 10 goods vehicles at any time during the

previous year.



provisions. All the other options, viz., options (a), (c) and (d) giving incorrect provisions

are not correct.



or leasing of carriages if the assessee does not own more than 10 heavy goods

vehicles and not more than 10 light goods vehicles at any time during the previous

year.

(a) True (b) False

Correct answer (b)



are applicable to an assessee engaged in the business of plying, hiring or leasing carriage

if the assessee does not own more than 10 goods vehicles (heavy or other than heavy

goods vehicles) at any time during the previous year. There is no individual criteria of 10

goods vehicles for heavy and 10 for light vehicles.

Thus, the statement given in the question is false and hence, option (b) is the correct

option.





or leasing carriages if the assessee does not own more than 10 passenger vehicles

(heavy or other than heavy) at any time during the previous year.

(a) True (b) False

Correct answer (b)




carriages if the assessee does not own more than 10 goods vehicles (heavy or other than

heavy goods vehicles) at any time during the previous year. The provisions are not

applicable to an assessee engaged in the business of passenger transportation.


option.






or leasing of carriages if the assessee does not own more than 10 heavy goods

vehicles and 10 passenger vehicles at any time during the previous year.

(a) True (b) False

Correct answer (b)




carriages if the assessee does not own more than 10 goods vehicles (heavy or other than

heavy) at any time during the previous year. These provisions are not applicable to an

assessee engaged in the business of passenger transportation.


option.




section 44AE can be adopted by an assessee engaged in the business of retail trade

whose income from such trade does not exceed Rs. 5,500 per month from heavy

retail business and Rs. 4,500 per month for other than heavy retail business.

(a) True (b) False

Correct answer (b)


An assessee engaged in the business of retail trade cannot adopt the provisions of section

44AE. These provisions can be adopted by an assessee who is engaged in the business of

plying, hiring or leasing of goods carriages.


option.



Q10. Mr. Kumar engaged in the business of plying, hiring or leasing goods carriages

owned 7 goods vehicles during the previous year 2012-13 and 2 passenger vehicles.

Can he adopt the provisions of presumptive scheme of section 44AE in respect of

these businesses?

(a) Yes (b) No

Correct answer (b)




goods vehicles at any time during the previous year. In this case, Mr. Kumar owned 7

goods vehicles during the year. Thus, he can adopt the provisions of section 44AE for his


goods carriage business but he cannot adopt the provisions of section44AE for the

passenger transportation business.



provisions. Other option, viz., option (a) giving incorrect provision is not correct.

Q11. Mr. Krunal engaged in the business of plying, hiring or leasing of goods

carriages owned 11 goods vehicles during the previous year 2012-13 and 7 passenger

transportation vehicles. Can he adopt the provisions of presumptive scheme of

section 44AE in respect of these businesses?

(a) Yes (b) No

Correct answer (b)



business of plying, hiring or leasing of goods carriages and does not own more than ten

goods vehicles at any time during the previous year. In this case Mr. Krunal owns only 11

goods vehicles during the year. Thus, he does not satisfy both the criteria of the scheme

and, hence, he cannot adopt the provisions of section 44AE for his business of plying,

hiring or leasing of goods carriages. As regards the business of passenger transportation

business, the provisions of section 44AE will not apply and, hence, he cannot adopt these

provisions for his passenger transportation business.



provisions. Other option, viz., option (b) giving incorrect provisions is not correct.

Q12. Essem Transport Corporation (a partnership firm) of Soham and Mohan

engaged in the business of plying, hiring or leasing of goods carriages owned 6 goods

vehicles during the previous year 2012-13. The partners also carry their own

individual business of passenger transportation. Can the firm adopt the provisions

of presumptive scheme of section 44AE in respect of this business?

(a) Yes (b) No

Correct answer (a)




goods vehicles at any time during the previous year. These provisions can be adopted by

a partnership firm too. In this case the firm owned only 9 vehicles during the year. Thus,

it satisfied both the criteria of the scheme and, hence, the firm can adopt the provisions of

section 44AE for its business of plying, hiring or leasing goods carriages. There is no

such criteria that a firm cannot adopt the provisions of section 44AE if the partners are

engaged in the business of passenger transportation.

Thus, option (a) is the correct option.

Comment on incorrect answer: Option (a) is the correct option since it gives the correct



Q13. Krunal Transport Corporation owned by Krunal HUF engaged in the business

of plying, hiring or leasing of goods carriages owned 7 goods vehicles during the

previous year 2012-13. Krunal is the karta of the HUF and he is also running a

proprietorship business of goods carriages in which he owns 12 goods vehicles. Can

the HUF adopt the provisions of presumptive scheme of section 44AE in respect of

this business?

(a) Yes (b) No

Correct answer (a)





a HUF too. In this case the HUF owned only 9 vehicles during the year, thus, it satisfied

both the criteria of the scheme and, hence, the HUF can adopt the provisions of section

44AE for its business of plying, hiring or leasing of goods carriages. There is no

restriction that a HUF cannot adopt the provisions of section 44AE if the karta is engaged

in the same business and owns more than 10 goods vehicles in that business.




Q14. SM Transport Corporation (a partnership firm) engaged in the business of

plying, hiring or leasing of goods carriages owned 6 goods vehicles during the

previous year 2012-13. In the month of April, 2013 it purchased 3 passenger

vehicles. Can the firm adopt the provisions of presumptive scheme of section 44AE

in respect of goods transport business?

(a) Yes (b) No

Correct answer (a)





a partnership firm too. In this case, during the year 2012-13, the firm owned only 9 goods

vehicles and 3 vehicles purchased in April, 2013, hence, for the previous year 2012-13 it

satisfied both the criteria of the scheme and, thus, the firm can adopt the provisions of

section 44AE for its business of plying, hiring or leasing of goods carriages.




Q15. Kumar Transport Corporation owned by Kumar HUF engaged in the business

of plying, hiring or leasing goods carriages owned 15 goods vehicles during the

previous year 2012-13. The karta of the HUF is of the opinion that the HUF can

adopt the provisions of section 44AE because in case of HUF the limit prescribed


under section 44AE is 20 goods vehicles. Can the HUF adopt the provisions of

presumptive scheme of section 44AE in respect of this business?

(a) Yes (b) No

Correct answer (b)




goods vehicles at any time during the previous year. The limit of 10 goods vehicles is

applicable in respect of all assessees, viz., individual, HUF, Firm, etc. In this case the

HUF owned 15 vehicles during the year, thus, it did not satisfy the criteria of not owning

more than 10 goods vehicles and, hence, the provisions cannot be adopted in respect of

aforesaid business.



provisions. Other option, viz., option (a) giving incorrect provisions is not correct.

Q16. In case of an assessee who is willing to adopt the provisions of section 44AE,

income will be computed on an estimated basis at the prescribed rate of Rs.

3,500/Rs. 3,000 per month.

(a) True (b) False

Correct answer (b)


In case of an assessee who is willing to adopt the provisions of section 44AE, income

will be computed on an estimated basis at the prescribed rate. The rate is Rs. 5,000 per

month or part thereof in respect of heavy goods vehicle and Rs. 4,500 per month or part

thereof in respect of goods vehicle other than heavy goods vehicle.


option.




income will be computed on an estimated basis at a prescribed rate. The rate is Rs.

5,000 per month in respect of heavy goods vehicle and Rs. 4,500 per month in

respect of goods vehicle other than heavy goods vehicle. Part of the month is to be

ignored only if the assessee produces the proof of part ownership.

(a) True (b) False

Correct answer (b)






thereof in respect of goods vehicle other than heavy goods vehicle. The above rates are

applicable for the month or part of the month as well; the fact remains same even if the

assessee produces the proof of partial ownership.


option.




income will be computed on an estimated basis at the prescribed rate. The rate is

Rs. 4,500 per month in respect of heavy goods vehicle and 4,000 per month in

respect of goods vehicle other than heavy goods vehicle. If the assessee owned a

goods vehicle for a period of 11 months and 4 days then income will be computed by

only considering 11 months.

(a) True (b) False

Correct answer (b)





thereof in respect of goods vehicle other than heavy goods vehicle. Thus, part of month

will be taken as full month and 11 month and 4 days will be considered as 12 months.


option.




income will be computed on an estimated basis @ Rs. 5,000 per month or part

thereof in respect of heavy goods vehicle and Rs. 4,500 per month or part thereof in

respect of goods vehicle other than heavy goods vehicle. In respect of medium goods

vehicle income will be computed @ Rs. 4,000 per month or part of the month.

(a) True (b) False

Correct answer (b)





thereof in respect of goods vehicle other than heavy goods vehicle. There is no separate

rate for medium goods vehicle. The rate of Rs. 4,500 per month or part thereof will apply

to medium goods vehicle as will as light goods vehicle.



option.



Q20. As per the presumptive taxation scheme of section 44AE, in case of heavy

goods vehicle income will be computed @ Rs. 5,000 per half year.

(a) True (b) False

Correct answer (b)





thereof in respect of goods vehicle other than heavy. The rates are per month and not per

half year.


option.



Q21. Mr. Kumar owned 1 heavy goods vehicle during the year 2012-13. If he adopts

the provisions of 44AE then his income as per the provisions of section 44AE from

this business will come to Rs. 60,000.

(a) True (b) False

Correct answer (a)





thereof in respect of goods vehicle other than heavy goods vehicle. In this case he owns

heavy goods vehicle and, hence, income will be computed @ Rs. 5,000 per month,

annual income will amount to Rs. 60,000

Thus, the statement given in the question is true and, hence, option (a) is the correct

option.

Comment on incorrect answer: The statement given in the question is true. Hence,

option (b) is not correct.

Q22. Mr. Kapil owned 1 heavy passenger vehicle during the year 2012-13. If he

adopts the provisions of 44AE then his income as per the provisions of section 44AE

from this business will come to Rs. 60,000.

(a) True (b) False

Correct answer (b)



The provisions of section 44AE cannot be adopted by an assessee engaged in the business

of passenger transportation.


option.



Q23. Kumar HUF owned 1 light goods vehicle during the year 2012-13. If it adopts

the provisions of 44AE then its income as per the provisions of section 44AE from

this business will come to Rs. 60,000.

(a) True (b) False

Correct answer (b)





thereof in respect of goods vehicle other than heavy goods vehicle. In this case it owns

light goods vehicle and, hence, income will be computed @ Rs. 4,500 per month; annual

income will amount to Rs. 54,000.


option.



Q24. Mr. Khush engaged in the business of plying, hiring or leasing of goods

carriages owned 8 goods vehicles (heavy goods vehicles) during the previous year

2012-13. He wants to adopt the provisions of section 44AE in respect of this


(a) Rs. 4,80,000

(b) Rs. 8,40,000

(c) Rs. 4,32,000

(d) Rs. 5,23,000

Correct answer (a)


As per the provisions of section 44AE, in respect of heavy goods vehicle income will be

computed @ Rs. 5,000 per month or part thereof during which the heavy goods vehicle is

owned by the assessee, during the previous year. In the present case Mr. Khush owned 8

heavy goods vehicles during the year and, hence, income will be computed as follows :

Particulars Rs.






Total income as per the provisions of section 44AE 4,80,000



amount of income. All the other options, viz., options (b), (c) and (d) giving incorrect

amount of income are not correct.

Q25. SM Transport Company engaged in the business of plying, hiring or leasing of

goods carriages owned 9 goods vehicles (heavy goods vehicles) during the previous

year 2012-13. The firm wants to adopt the provisions of section 44AE in respect of

this business. In this case what will be the income as per the provisions of section

44AE?

(a) Rs. 4,50,000

(b) Rs. 5,40,000

(c) Rs. 4,86,000

(d) Rs. 4,68,000

Correct answer (b)



computed @ Rs. 5,000 per month or part thereof during which the heavy goods vehicle is

owned by the assessee in the previous year. In the present case the firm owned 9 heavy

goods vehicles during the year and, hence, income will be computed as follows:

Particulars Rs.







Comment on incorrect answer : Option (b) is the correct option since it gives the

correct amount of income. All the other options, viz., options (a), (c) and (d) giving

incorrect amount of income are not correct.

Q26. Mr. Raghu engaged in the business of plying, hiring or leasing goods carriages

owned 7 goods vehicles (other than heavy goods vehicles) during the previous year

2012-13. He wants to adopt the provisions of section 44AE in respect of this


(a) Rs. 3,78,000

(b) Rs. 3,87,000

(c) Rs. 4,20,000

(d) Rs. 2,40,000


Correct answer (a)




which the goods vehicle is owned by the assessee, during the previous year. In the

present case Mr. Raghu owned 7 goods vehicles during the year and, hence, income will

be computed as follows:

Particulars Rs.








amount of income. All the other options, viz., options (b), (c) and (d) giving incorrect


Q27. Essem Transport Company engaged in the business of plying, hiring or leasing

of goods carriages owned 6 goods vehicles (other than heavy goods vehicles) during

the previous year 2012-13. The firm wants to adopt the provisions of section 44AE

in respect of this business. In this case what will be the income as per the provisions

of section 44AE?

(a) Rs. 3,42,000

(b) Rs. 3,60,000

(c) Rs. 6,30,000

(d) Rs. 3,24,000

Correct answer (d)




which the goods vehicle is owned by the assessee, during the previous year. In the

present case the firm owned 6 goods vehicles during the year and, hence, income will be

computed as follows:

Particulars Rs.









amount of income. All the other options, viz., options (a), (b) and (c) giving incorrect


Q28. For the purpose of section 44AE, the expressions "goods carriage” and "heavy

goods vehicle” shall have the meanings, respectively, assigned to them in the

Income-tax Act.

(a) True (b) False

Correct answer (b)


For the purpose of section 44AE, the expressions "goods carriage” and "heavy goods

vehicle” shall have the meanings, respectively, assigned to them in section 2 of the Motor

Vehicles Act, 1988 and not in the Income-tax Act.

Thus, the statement given in the question is false and hence, option (b) is the correct

option.



Q29. AB Transport Corporation, a partnership firm engaged in transportation

business owned 6 heavy goods vehicle during the year 2012-13. The firm paid

remuneration to its partner of Rs. 1,00,000 for the year. In this case taxable income

of the firm from the business as per the provisions of section 44AE will come to Rs.

2,24,000.

(a) True (b) False

Correct answer (a)




which the goods vehicle is owned by the assessee, during the previous year. From the net

income computed as above, assessee, being a partnership firm, can claim further

deduction of remuneration and interest paid to its partners within the limit specified under

section 40(b).

In the present case the firm owned 6 goods vehicles during the year and, hence, income

will be computed as follows:

Particulars Rs.







(-) Remuneration paid to partners (1,00,000)

Income from business 2,24,000


option.



Q30. AB Transport Corporation owned by AB HUF, engaged in transportation

business owned 8 heavy goods vehicle during the year 2012-13. The HUF paid

remuneration to its karta of Rs. 1,00,000 for the year. In this case taxable income of

the HUF from the business as per the provisions of section 44AE will come to Rs.

2,24,000.

(a) True (b) False

Correct answer (b)



computed @ Rs. 5,000 per month or part thereof during which the goods vehicle is

owned by the assessee, during the previous year. From the net income computed as

above, assessee, being a partnership firm, can claim further deduction of remuneration

and interest paid to its partners within the limit specified under section 40(b). This

deduction is available only to a firm and not to any other assessee. In the present case the

firm owned 8 goods vehicles during the year and, hence, income will be computed as

follows:

Particulars Rs.


(×) No. of goods vehicle 8




(-) Remuneration paid to partners (not applicable)


option.



Q31. Mr. Sunil engaged in the business of goods transportation owned 4 goods

vehicles unladen weight of which exceeded 12,000 kilograms. In this case, if he


adopts the provisions of section 44AE then income will be computed @ Rs. 5,000 per

month or part of the month per goods vehicle.

(a) True (b) False

Correct answer (a)


For the purpose of section 44AE, "heavy goods vehicle" means any goods carriage the

gross weight of which or a tractor or a road-roller the unladen weight of which exceeds

12,000 kilograms. In case of heavy goods vehicle income will be computed @ Rs. 5,000

per month or part of the month per goods vehicle.


option.



Q32. For the purpose of section 44AE, any goods carriage the gross vehicle weight of

which, or a tractor or a road-roller the unladen weight of which, exceeds 12,000

kilograms will be treated as heavy goods vehicle and income will be computed @ Rs.

4,500 per month.

(a) True (b) False

Correct answer (b)



gross weight of which, or a tractor or a road-roller the unladen weight of which exceeds

12,000 kilograms. In case of heavy goods vehicle income will be computed @ Rs. 5,000

per month or part of the month per goods vehicle.


option.



Q33. For the purpose of section 44AE any goods carriage the gross vehicle weight of

which, or a tractor or a road-roller the unladen weight of which does exceed 12,000

kilograms will be treated as goods vehicle other than heavy goods vehicle and

income will be computed @ Rs. 4,500 per month.

(a) True (b) False

Correct answer (a)



gross weight of which, or a tractor or a road-roller the unladen weight of which exceeds

12,000 kilograms. In case of goods vehicle other than heavy, i.e., unladen weight less

than 12,000 kilograms of income will be computed @ Rs. 4,500 per month or part of the

month per goods vehicle.




nature of the vehicle, the other option, viz., option (b) giving incorrect nature of the

vehicle is not correct.

Q34. On 25th

April, 2013, Mr. Kapoor started business of hiring of goods vehicle and

purchased 1 light goods vehicle on the same day. The vehicle was purchased on hire

purchase system and entire consideration had be paid in 5 years. In this case income

of Mr. Kapoor as per the provisions of section 44AE will come to Rs. 54,000.

(a) True (b) False

Correct answer (a)


For the purpose of section 44AE, an assessee, who is in possession of a goods carriage,

whether taken on hire purchase or on installments and for which the whole or part of the

amount payable is still due, shall be deemed to be the owner of such goods carriage. In

this case the vehicle is light goods vehicle and, hence, income will be computed @ Rs.

4,500 per month. Thus, annual income will come to Rs. 54,000.


option.



Q35. On 25th

May, 2013, Mr. Anil started business of hiring of goods vehicles and

purchased 2 light goods vehicles on the same day. The vehicles were purchased on

installment system and entire consideration had to be paid in 5 years. In this case

income of Mr. Sunil as per the provisions of section 44AE will come to Rs. 1,08,000.

(a) True (b) False

Correct answer (b)





4,500 per month. The vehicles are purchased in May, 2013 and, hence, income will be

computed for 11 months. Thus, annual income will come to Rs. 99,000.


option.



Q36. On 25th

June, 2013, Mr. Sunil started business of hiring goods vehicle, and


credit and the consideration had to be paid in 36 monthly installments. In this case

income of Mr. Sunil as per the provisions of section 44AE will come to Rs. 1,62,000.

(a) True (b) False

Correct answer (b)






4,500 per month. The vehicles are purchased in June 2013 and, hence, income will be

computed for 10 months. Thus, annual income will come to Rs. 90,000.


option.



Q37. On 3rd

December, 2013, Mr. Raj started business of hiring goods vehicles and

purchased 1 light goods vehicle on the same day. The vehicle was purchased on

installment system (down payment 40%) and entire consideration had to be paid in

3 years. In this case he cannot adopt the provisions of section 44AE because he has

purchased the vehicle on installment system.

(a) True (b) False

Correct answer (b)

Justification of correct answer




this case the assessee shall be deemed to be the owner of such goods carriage and income

will be computed as per the provisions of section 44AE.


option.



Q38. On 3rd

March, 2013, Mr. Roop started business of hiring of goods vehicles and

purchased 1 light goods vehicle on the same day. The vehicle was purchased on

credit basis and the consideration had to be paid in next month. In this case he

cannot adopt the provisions of section 44AE because he has purchased the vehicle

on credit and the entire consideration is not paid.

(a) True (b) False

Correct answer (b)




amount payable is still due, shall be deemed to be the owner of such goods carriage.

Thus, in case where the whole or part of the amount payable is still due the assessee shall

be deemed to be the owner of such goods carriage.


option.




Q39. On 25th

June, 2013, Mr. Sunil started business of hiring of goods vehicles and


credit (40%0 consideration was paid) and the balance consideration had to be paid

in 36 monthly installments. In this case income of Mr. Sunil as per the provisions of

section 44AE will come to Rs. 64,800 being 40% of presumptive income.

(a) True (b) False

Correct answer (b)




this case the vehicle is light goods vehicle and income will be computed @ Rs. 4,500 per

month. The vehicles were purchased in June, 2013 and, income will be computed for 10

months. It should be noted that income will be competed at full rate of Rs. 4,500 even if

40% consideration is only paid.


option.



Q40. Income computed as per the provisions of section 44AE (i.e., @ Rs. 4,500 per

month /Rs. 5,000 per month) will be gross income of the business covered under this

scheme.

(a) True (b) False

Correct answer (b)

Income computed as per the provisions of section 44AE (i.e., @ Rs. 4,500 per month /Rs.

5,000 per month) will be net income for the business covered under this scheme.

From the net income computed as above, assessee is not permitted to claim any deduction

under sections 30 to 38 (including depreciation or unabsorbed depreciation) from such

income.


option.



Q41. Mr. Kapil owned 3 heavy goods vehicles during the year 2012-13. He wants to

adopt the provisions of section 44AE and wants declare income on presumptive

basis @ Rs. 5,000 per month per vehicle. His gross income from this business will

come to Rs. 1,80,000 and net taxable income after claiming deduction on account of

depreciation amounting to Rs. 80,000 will come to Rs. 1,00,000.

(a) True (b) False

Correct answer (b)




5,000 per month) will be net income for the business covered under this scheme. From

the net income computed as above, assessee is not permitted to claim any deduction

under sections 30 to 38 (including depreciation or unabsorbed depreciation).


option.



Q42. Mr. Suraj owned 12 heavy goods vehicle during the year 2012-13. He wants to

adopt the provisions of section 44AE and to declare income on presumptive basis @

Rs. 5,000 per month per vehicle. After declaring income @ Rs. 5,000 per month per

vehicle he will not be claiming any further deduction because in case of an assessee

opting for the provisions of section 44AE, he is not permitted to claim any deduction

under sections 30 to 38 (including depreciation or unabsorbed depreciation) from

the presumptive income. Thus, in this case his income as per the provisions of

section 44AE will come to Rs. 7,20,000.

(a) True (b) False

Correct answer (b)




goods vehicles at any time during the previous year. In this case Mr. Suraj owns more

than 10 trucks and, hence, he cannot opt for the provisions of section 44AE and his

income will be computed in normal manner.


option.



Q43. Mr. Sujal owned 10 heavy goods vehicles during the year 2012-13. He wants to

adopt the provisions of section 44AE and declare income on presumptive basis @

Rs. 5,000 per month per vehicle. As per the provisions of section 44AE, his gross

income from this business will come to Rs. 6,00,000 and net taxable income after

claiming deduction on account of salary to administrative office staff amounting to

Rs. 1,00,000 will come to Rs. 5,00,000.

(a) True (b) False

Correct answer (b)








option.



Q44. Mr. Suraj owned 2 heavy goods vehicles during the year 2012-13. He wants to

adopt the provisions of section 44AE and declare income on presumptive basis @

Rs. 5,000 per month per vehicle. His gross income as per the provisions of section

44AE from this business will come to Rs. 1,20,000 and net taxable income after

claiming deduction on account of un absorbed depreciation amounting to Rs. 20,000

will come to Rs. 1,00,000.

(a) True (b) False

Correct answer (b)







option.



Q45. Income computed as per the provisions of section 44AE (i.e., @ Rs. 4,500 per

month /Rs. 5,000 per month) will be net income for the business covered under this

scheme. From the net income computed as above, assessee is not permitted to claim

any deduction under sections 30 to 38 (including depreciation or unabsorbed

depreciation) but can claim deduction on account of brought forward business loss.

(a) True (b) False

Correct answer (a)





under sections 30 to 38 (including depreciation or unabsorbed depreciation). However,

deduction is available in respect of brought forward business loss.


option.



Q46. Mr. Mohan is engaged in goods transportation business and owns 5 heavy

goods vehicles. He wants to adopt the provisions of section 44AE and declare income

@ Rs. 5,000 per month per goods vehicle. He has brought forward business loss of


Rs. 84,000. In this case his taxable income after applying the provisions of section

44AE will come to Rs. 2,16,000.

(a) True (b) False

Correct answer (a)






deduction is available in respect of brought forward business loss. Thus, in this case,

from the presumptive income of Rs. 3,00,000 (Rs. 5,000 per month per vehicle × 5

vehicles × 12 months), brought forward loss of Rs. 84,000 will be adjusted and the net

income, i.e., taxable income will come to Rs. 2,16,000 (he does not have any other

income).


option.



Q47. Mr. Mohan is engaged in goods transport business and owns 4 light goods

vehicles. He wants to adopt the provisions of section 44AE and declare income @

Rs. 4,500 per month per goods vehicle. He has brought forward loss from house

property of Rs. 84,000. In this case his taxable income after applying the provisions

of section 44AE will come to Rs. 2,16,000.

(a) True (b) False

Correct answer (a)






deduction is available in respect of brought forward business loss. In this case the loss is

brought forward house property loss and not business loss. Brought forward loss from

house property cannot be adjusted against business income and, hence, in this case the

loss of Rs. 84,000 cannot be adjusted against income of Rs. 2,16,00 (Rs. 4,500 per month

per vehicle × 4 vehicles × 12 months). Thus, taxable income will come to Rs. 2,16,000.


option.



Q48. Mr. Kumar is engaged in transportation business and owns only 5 heavy goods

vehicles. He has adopted the provisions of section 44AE and declared income of Rs.

3,00,000. From income of Rs. 3,00,000 declared by him as per the provisions of


section 44AE, the Assessing Officer wants to disallow payment made in cash under

section 40A(3). Is the action of Assessing Officer correct?

(a) Yes (b) No

Correct answer (b)



5,000 per month) will be net income of the business covered under this scheme. From

income computed at the aforesaid rate, no disallowance can be made under sections 40,

40A and 43B. Hence, the action of the Assessing Officer is not correct.




Q49. Mr. Kripal is engaged in transport business and owns only 5 heavy goods



section 44AE, the Assessing Officer wants to disallow payment made to related

parties under section 40A(2). Is the action of Assessing Officer correct?

(a) Yes (b) No

Correct answer (b)









Q50. Mr. Kripal is engaged in transport business and owns only 5 heavy goods



section 44AE, the Assessing Officer wants to disallow unpaid interest on bank loan

under section 43B. Is the action of Assessing Officer correct?

(a) Yes (b) No

Correct answer (b)










Q51. SM Transport Company (a partnership firm) is engaged in transportation

business and owns only 5 heavy goods vehicles. The firm has adopted the provisions

of section 44AE and declared income of Rs. 3,00,000. From income of Rs. 3,00,000

declared by the firm as per the provisions of section 44AE, the Assessing Officer

wants to disallow payment of commission made without deduction of tax. Is the

action of Assessing Officer correct?

(a) Yes (b) No

Correct answer (b)









Q52. Mr. Kapoor is engaged in the business of plying, hiring or leasing of goods

carriages. He owned 8 heavy goods vehicles during the previous year 2012-13 and

declared income as per the provisions of section 44AE. After computing the income

@ Rs. 5,000 per month, he wants to claim further deduction of Rs. 1,00,000 under

section 80C in respect of insurance premium. Can he do so as per the provisions of

section 44AE?

(a) Yes (b) No

Correct answer (a)





from such income. However, there is no restriction on claiming deduction under section

80C to 80U. Thus, in this case Mr. Kapoor can claim deduction under section 80C from

the income computed as per the provisions of section 44AE.




Q53. SM Transport Corporation, a partnership firm, is engaged in the business of

plying, hiring or leasing of goods carriages and owned 6 heavy goods vehicles during

the previous year 2012-13 and declared income as per the provisions of section

44AE. After computing the income @ Rs. 5,000 per month, the firm wants to claim

further deduction on account of remuneration of Rs. 50,000 paid to partners and


interest of Rs. 1,20,000 paid to partners (@12%). Can the firm do so as per the


(a) Yes (b) No

Correct answer (a)





from such income. However, in case of an assessee, being a partnership firm, further

deduction on account of remuneration and interest paid to its partners within the limit

specified under section 40(b) is allowed. Thus, in this case the firm can claim further

deduction on account of remuneration and interest paid to its partners within the limit

specified under section 40(b).



provisions. Other option, viz., option (b) giving incorrect provision is not correct.

Q54. As per the provisions of section 44AE an assessee opting for the presumptive

taxation scheme is not permitted to claim deduction on account of various

expenditures including depreciation, thus, the WDV of any asset used in the

business covered under the scheme of section 44AE shall be calculated as if no

depreciation as per section 32 is claimed and allowed.

(a) True (b) False

Correct answer (b)


As per the provisions of section 44AE an assessee opting for the presumptive taxation

scheme is not permitted to claim deduction on account of various expenditures including

depreciation. However, the WDV of any asset used in the business covered under the

scheme of section 44AE shall be calculated as if depreciation as per section 32 is claimed

and allowed. Thus, even though no depreciation is available separately, yet for purpose of

computation of the WDV of the asset depreciation will be deducted.


option.



Q55. Mr. Kumar is running a transport business and own 5 heavy goods vehicles.

The opening WDV of the block of asset consisting the goods vehicle as on 1.4.2012

was Rs. 8,40,000 (depreciation rate @ 10%). For the year 2012-13 the firm opted for

the provisions of section 44AE and declared income of Rs. 3,00,000. In the next year

the firm plans to opt for the normal provisions and to declare income at lower rate

as compared to Rs. 5,000 per vehicle per month. In this case what will be the WDV

eligible for computing depreciation in the next year, i.e., 2013-14.

(a) Rs. 8,40,000 (b) Rs. 7,14,000

(c) Rs. 7,41,000 (d) Rs. 4,17,000


Correct answer (b)



scheme is not permitted to claim deduction on account of various expenditures, including




computation of the WDV of the asset depreciation will be deducted. Thus, in this case the

WDV eligible for depreciation for the year 2013-14 will be computed as follows :

Particulars Amount (Rs.)


(-) Depreciation for the year 2012-13 1,26,000





amount of WDV. All the other options, viz., options (a), (c) and (d) giving incorrect

WDV are not correct.

Q56. Mr. Sunil is running a transport business and owns 5 heavy goods vehicle. The

opening WDV of the block of asset consisting of office building as on 1.4.2012 is Rs.

1,84,000 (depreciation rate @ 10%). For the year 2012-13 the firm opted for the

provisions of section 44AE and declared income Rs. 3,00,000. In the next year the

firm plans to opt for the normal provisions and to declare income at lower rate as

compared to Rs. 5,000 per vehicle per month. In this case what will be the WDV

eligible for computing depreciation in the next year, i.e., 2013-14.

(a) Rs. 1,84,000 (b) Rs. 1,65,400

(c) Rs. 1,56,400 (d) Rs. 56,400

Correct answer (c)



scheme is not permitted to claim deduction on account of various expenditures, including




computation of the WDV of the asset, depreciation will be deducted. This rule will apply

to all the depreciable assets whether goods vehicle or any other business asset. Thus, in

this case the WDV of building eligible for depreciation for the year 2013-14 will be

computed as follows :

Particulars Amount (Rs.)






Thus, option (c) is the correct option.

Comment on incorrect answer: Option (c) is the correct option since it gives the correct

amount of WDV. All the other options, viz., options (a), (b) and (d) giving incorrect

WDV are not correct.

Q57. As per the provisions of section 44AE an assessee who adopts the provisions of

section 44AE is required to maintain books of account as per section 44AA, but is

granted relief from maintenance of detailed books of account like journal, cash

book, ledger, etc.

(a) True (b) False

Correct answer (a)





option.



Q58. As per the provisions of section 44AE an assessee who adopts the provisions of

section 44AE is not required to maintain books of account as per section 44AA.

However, in respect of such business the provisions of section 44AB (relating to

audit) are applicable.

(a) True (b) False

Correct answer (b)




Further, in respect of such business the provisions of section 44AB (relating to audit) are

also not applicable.


option.



Q59. Mr. Sunil is engaged in passenger transportation business and owns 5 mini

buses. He wants to adopt the provisions of section 44AE and to declare income @


Rs. 4,500 per bus per month. In this case he will not be liable to maintain the books

of account since he is adopting the provisions of section 44AE.

(a) True (b) False

Correct answer (b)


The provisions of section 44AE do not apply to a person engaged in the business of

passenger transportation.


option.



Q60. Mr. Soham is engaged in passenger transportation business and owns 10 heavy

buses. He wants to adopt the provisions of section 44AE and to declare income @

Rs. 5,000 per bus per month. In this case he will not be liable to maintain the books

of account since he is adopting the provisions of section 44AE.

(a) True (b) False

Correct answer (b)





option.



Q61. Mr. Kumar is engaged in passenger transportation business and owns 10

heavy buses. He wants to adopt the provisions of section 44AE and declare income

@ Rs. 5,000 per bus per month. In this case he will not be liable to get his account

audited as per the provisions of section 44AB.

(a) True (b) False

Correct answer (b)





option.



Q62. Mr. Kaushal is engaged in the business of plying, hiring or leasing of goods

carriages. He owned 8 heavy goods vehicles during the previous year 2012-13 and

declared income as per the provisions of section 44AE. In this case he will not be

liable to maintain the books of account in respect of all his businesses, whether

covered under section 44AE or not.


(a) True (b) False

Correct answer (b)


As per the provisions of section 44AE an assessee who adopts the provisions of section

44AE is not required to maintain books of account as per section 44AA. However, it

should be noted that the relief is available only in respect of business covered by the

provisions of section 44AE and not in respect of any other business. Thus, if Mr. Kaushal

owns any other business, then in respect of such business the provisions of section 44AA

in respect of maintenance of books of account will apply.


option.



Q63. Mr. Raj is engaged in the business of plying, hiring or leasing goods carriages.

He owned 18 heavy goods vehicles during the previous year 2012-13. In this case, if

he declares income at the rate of Rs. 5,000 per month then he will be liable to

maintain the books of account of the transportation business but will not be liable to

get these accounts audited.

(a) True (b) False

Correct answer (b)


In this case the provisions of section 44AE cannot be adopted by Mr. Raj because he

owns more than 10 goods vehicles and, hence, he will be liable to maintain books of

account as prescribed under section 44AA in respect of above business and get the

accounts audited.


option.



Q64. Mr. Vasu is engaged in the business of plying, hiring or leasing goods

carriages. He owns 18 heavy goods vehicles. In December, 2013 he sold 10 goods

vehicles. In this case he can adopt the provisions of section 44AE from December

onwards since he owned only 8 goods vehicle there after.

(a) True (b) False

Correct answer (b)




goods vehicles at any time during the previous year. In this case Mr. Vasu owned more

than 10 vehicles till December and, hence, he cannot adopt the provisions of section

44AE for the year 2012-13.



option.



Q65. Mr. Suraj is engaged in the business of plying, hiring or leasing goods

carriages. He owns 8 heavy goods vehicles. In December, 2013 he purchased 10 new

goods vehicles. In this case he can adopt the provisions of section 44AE upto

December, 2013 since he owned only 8 goods vehicle till December.

(a) True (b) False

Correct answer (b)





than 10 vehicles from December onwards and, hence, he cannot adopt the provisions of

section 44AE for the year 2012-13.


option.



Q66. Mr. Soham is engaged in the business of plying, hiring or leasing goods


vehicles. In this case he can adopt the provisions of section 44AE for the year 2013-

14.

(a) True (b) False

Correct answer (b)





than 10 vehicles during the year 2013-14 and, hence, he cannot adopt the provisions of



option.



Q67. Mr. Soham is engaged in the business of plying, hiring or leasing goods


vehicles. In this case he cannot adopt the provisions of section 44AE for the year

2013-14 or any other year since he owned more than 10 goods vehicle at once.

(a) True (b) False


Correct answer (b)





than 10 vehicles during the year 2013-14 and hence he cannot adopt the provisions of



option.

Q68. Mr. Raja is running a transportation business and owned 9 light goods vehicle

during the year 2012-13. His monthly income per vehicle per month is Rs. 3,000. In

this case he cannot declare income of Rs. 3,000 since it is below the limit of Rs. 4,500

as prescribed under section 44AE.

(a) True (b) False

Correct answer (b)


If the actual income from the business covered under section 44AE is lower than the

income prescribed under the presumptive scheme, then the assessee can declare income

from aforesaid business at a lower rate (i.e., at less than Rs. 4,500/Rs. 5,000).

If the assessee declares lower income, then the relief from maintenance of account is not

available and he is required to maintain the books of account as per section 44AA and

further, he has to get such books of account audited.


option.



Q69. Mr. Rupesh is running a transportation business and owned 9 heavy goods

vehicles during the year 2012-13. His monthly income per vehicle is Rs. 13,000. In

this case he cannot declare income of Rs. 13,000 since it is above the limit of Rs.

5,000 as prescribed under section 44AE.

(a) True (b) False

Correct answer (b)


The scheme permits the assessee to declare at his option higher income (i.e., higher rate

than Rs. 4,500/Rs. 5,000).


option.




Q70. Mr. Kamal is engaged in the business of plying, hiring or leasing goods

carriages and owned 9 heavy goods vehicles during the previous year 2012-13. His

actual income per goods vehicle is more than Rs. 5,000 per month. In this case he

can declare income above than the limit prescribed under section 44AE but in this

case he has to maintain regular books of account and get the accounts audited.

(a) True (b) False

Correct answer (b)


The scheme permits the assessee to declare at his option higher income (i.e., higher rate

than Rs. 4,500/Rs. 5,000). If the scheme is adopted and higher income is declared then

there is no need to maintain books of account or to get the accounts audited.


option.



Q71. Mr. Viren is engaged in the business of plying, hiring or leasing of goods

carriages and owned 9 heavy goods vehicles during the previous year 2012-13. His

actual income per goods vehicle is less than Rs. 5,000 per month. In this case, he can

declare lower income as compared to the limit prescribed under section 44AE and

he will not be liable to maintain the regular books of account since he is declaring

lower income.

(a) True (b) False

Correct answer (b)


If the actual income from the business covered under section 44AE is lower than the

income prescribed under the presumptive scheme, then the assessee can declare income

from aforesaid business at a lower rate (i.e., at less than Rs. 4,500/Rs. 5,000).

If the assessee declares lower income, then the relief from maintenance of account is not

available and he is required to maintain the books of account as per section 44AA and

further, he has to get such books of account audited.


option.




Documents

Advance Learning on Section 44AE (Practical) · Advance Learning on Section 44AE (Practical) In this advance learning we shall learn various about practical aspects of the provisions