Special provisions for computing profits and gains of business of plying, hiring or leasing goods carriages [Section 44AE] :
(i) This section provides for estimating business income of an owner of goods carriages from the plying, hire or leasing of such goods carriages;
(ii) The scheme applies to persons owning not more than 10 goods vehicles at any time during the previous year;
(iii) The estimated income from each goods vehicle, whether heavy goods vehicle or other than heavy goods vehicle, will be deemed to be Rs 7,500 for every month or part of a month during which such vehicle is owned by the assessee for the previous year. The assessee can also declare a higher amount in his return of income. In such case, the latter will be considered to be his income;
(iv) The assessee will be deemed to have been allowed the deductions under sections 30 to 38. Accordingly, the written down value of any asset used for the purpose of the business of the assessee will be deemed to have been calculated as if the assessee had claimed and had actually been allowed the deduction in respect of depreciation for each of the relevant assessment years.
(v) The assessee joining the scheme will not be required to maintain books of account under section 44AA and get the accounts audited under section 44AB in respect of such income.
An assessee may claim lower profits and gains than the deemed profits and gains specified in subsection (1) of that section subject to the condition that the books of account and other documents are kept and maintained as required under sub-section (2) of section 44AA and the assessee gets his accounts audited and furnishes a report of such audit as required under section 44AB.
Illustration
An assessee owns a light commercial vehicle for 9 months 15 days, a medium goods vehicle for 9 months and a medium goods vehicle for 12 months during the previous year. Compute his income applying the provisions of section 44AE.
Solution
His profits and gains from the 3 trucks shall be deemed to be Rs 7,500 × 10 + Rs 7,500 × 9 + Rs 7,500 × 12 = Rs 2,32,500.
Illustration
Mr. X commenced the business of operating goods vehicles on 1.4.2015. He purchased the following vehicles during the P.Y.2015-16. Compute his income under section 44AE for A.Y.2016-17.
| Type of Vehicle | Number | Date of purchase | |
| (1) | Light Goods Vehicles | 2 | 10.4.2015 |
| 1 | 15.3.2016 | ||
| (2) | Medium Goods Vehicles | 3 | 16.7.2015 |
| 1 | 2.1.2016 | ||
| (3) | Heavy Goods Vehicles | 2 | 29.8.2015 |
| 1 | 23.2.2016 |
Would your answer change if the two light goods vehicles purchased in April, 2015 were put to use only in July, 2015?
Solution
Since Mr. X does not own more than 10 vehicles at any time during the previous year 201 5-16, he is eligible to opt for presumptive taxation scheme under section 44AE. Rs 7,500 per month or part of month for which each goods carriage is owned by him would be deemed as his profits and gains from such goods carriage.
| (1) | (2) | (3) | (4) |
| Number of Vehicles | Date of purchase | No. of months for which vehicle is owned | No. of months × No. of vehicles [(1) × (3)] |
| 2 | 10.4.2015 | 12 | 24 |
| 1 | 15.3.2016 | 1 | 1 |
| 3 | 16.7.2015 | 9 | 27 |
| 1 | 2.1.2016 | 3 | 3 |
| 2 | 29.8.2015 | 8 | 16 |
| 1 | 23.2.2016 | 2 | 2 |
| 10 | Total | 73 |
Therefore, presumptive income of Mr. X under section 44AE for A.Y.2016-17 is Rs 5,47,500, being 73 × Rs 7,500.
The answer would remain the same even if the two vehicles purchased in April, 2015 were put to use only in July, 2015, since the presumptive income of Rs 7,500 per month has to be calculated per month or part of the month for which the vehicle is owned by Mr. X.