The word "Profession"
Raja
(Querist) 10 October 2010
This query is : Resolved
Define the word Profession w.r.t Sec. 44AB of the Act.
Parthasarathi Loganathan
(Expert) 10 October 2010
Since the query is very generic I can only recall that "A profession is a group of people in a learned occupation, the members of which agree to abide by specified rules of conduct when practicing it". Experts can enlighten me the statutory perceptive attached to it
Raja
(Querist) 10 October 2010
What it the definition of 'Profession' for the purposes of Section 44AB or for any other reference under the Income Tax Act?
In the Act, its only given Profession includes Vocation.
Raja
(Querist) 10 October 2010
Dear Parthasarathi Sir,
May I know, your definition is from which Act/Book ?
Parthasarathi Loganathan
(Expert) 10 October 2010
Section 30 to 36 of Income Tax Act defines Professional Income as under:
‘Professional Income’ is income from exercise of any profession or vocation which calls for an intellectual or manual skill. It covers doctor, lawyers, accountants, consulting engineers, artists, musicians, singers etc.
Hope the ambit of profession is well addressed in this section itself for all of us to interpret.
Raja
(Querist) 10 October 2010
There is no certain deifnition for profession in the Act. However, the Act has given a list of specified profession for Section 44AA. In many cases it happens that people construe that merely trading, manufacturing, etc. in goods and commodities is business and profession is what it involves no sales turnover, but only gross receipts.
I came across a person who is a CF agent for a Cement Company. He doesnot directly deal in cement. He has stock with him but not under his trading. He issues invoices to the customers that too in the name of the Cement Supplier Company. He earns only a commission out of that. His annual commission goes around 20 lakhs. His CA is of view that as he is not trading in cement, and his receipt includes commission only, it is a profession and needs to be audited u/s 44AB. But looking to the activity undertaken by him, it cant be considered as a profession only on the basis that he doesnot have a sales turnover but gross receipts.
Read carefully, it is the view of his CA and not on the basis of billing but on the basis of the nature of receipts. His receipts are not in nature of sales but in nature of commission. On this stand, his CA has considered it as a profession.
But in my view its in the nature of business only.
All the commission agents can not be taken under one roof as "profession". The nature of transactions also need to be considered. In my opinion, the CF Agent for a Cement Company, the person is not a professional. The commission he receives should be considered as business receipts. On the other hand, the receipts of an Insurance agent can be considered as professional receipts. There is no specific thing given in the Act.
THUS, MY QUESTION IS - WHAT IS THE DEFINITION OF "PROFESSION" EXACTLY ? (WITH RESPECT TO "PROFESSION" OR "BUSINESS") AND NOT "PROFESSIONAL INCOME" OR OTHERS.
soumitra basu
(Expert) 10 October 2010
The C.F. Agent can not be a professional due to the following reasons:
1. Section 44AA defines the term profession.
2. Rule 6f states what books of accounts should be maintained by a professional as per income tax.
3. C.& F. Agent can not be a professional. He is earning commission income from his principal which is subject to deduction of tax under section 194H.
4. This is a contract business as defined in Contract Act. LIC Agent is not also a professional.
In view of the above it is submitted that the turnover of C.F. Agent should not be equated with the turnover of a professional such as Doctor, Engineer, CA, Lawyer etc.
In this connection I may refer the following judgment:
G. K. Choksi & Company 295 ITR 376 (SC)
Raja
(Querist) 12 October 2010
Respected Basu and Subramanian Sir,
PARA-1
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Please read what the Sec.44AA says:-
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Section 44AA
MAINTENANCE OF ACCOUNTS BY CERTAIN PERSONS CARRYING ON PROFESSION OR BUSINESS.
(1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified 707 by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall, - (i) If his income from business or profession exceeds one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds ten lakh rupees in any one of the three years immediately preceding the previous year; or
(ii) Where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed one lakh twenty thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed ten lakh rupees, during such previous year; or
(iii) Where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD or section 44AE or section 44AF, as the case may be, and the assessee has claimed his income to be lowerthan the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such previous year, keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.
(3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe, 709 by rules the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form the manner in which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.
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PARA-2
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Section 44AA and Rule 6F says about :
COMPULSORY MAINTENANCE OF ACCOUNTS.
It does not define the term 'Profession'. My question was about the definition of Profession.
PARA-3
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Please see the attached file, where it is said that "Commission Agents are covered under Sec. 44AB".
PARA-4
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IRDA Guideline for Licensing of Corporate Agents dated 14/07/2005, in para 4, has written as 'insurance professionals'. So, we can say, according to IRDA, Insurance business is a Profession ?
Referring to the website of Insurance Institute of India, promoting Insurance Education & Training in the country(http://www.insuranceinstituteofindia.com); qualifying examinations of insurance business has been described as "Professional Exams" and those who hold the said qualification is called an 'Insurance Professional'. All insurance Agents are require to get clear the "pre recruitment test" conducted by III according to IRDA norms.
So, Insurance business is a Profession.
So we can say, LIC Agent is a Professional?
DISCUSSION SOUGHT . . .
Raja
(Querist) 12 October 2010
IRDA Guideline for Licensing of Corporate Agents dated 14/07/2005
