Expert Advisory Committee

2.5 Query:

Applicability of section 44AB of the Income Tax Act, 1961.

1. A private limited company, is running a hospital. Its turnover during the previous year, under different heads of income, is as under: -

		Rs.
1)	Bed Charges	4,84,180.00
2)	Diagnosis Receipts	82,325.00
3)	O.T.Charges	5,55,740.00
4)	Consultation Fees	10,10,600.00
5)	E.C.G.Charges	10,790.00
6)	Dressing Charges	5,720.00
7)	Delivery charges	72,500.00
8)	Miscellaneous Receipts	99,293.00
9)	Misc. O.P.D.	66,872.00
10)	Rent of Shop	48,000.00
11)	Outstanding Rent	5,382.00
12)	Canteen Rent	13,200.00
13)	Rent of X-Ray lab.	36,000.00 ___________
		24,90,522.00

2 The querist has stated that the income classified above under different heads is assessable under the Income-tax Act, 1961, under the head ‘Profits and Gains of Business or Profession’.

3. According to the querist, one of the shareholders and one of the directors of the abovesaid company is a practising doctor.

4. The querist has sought the opinion of the Expert Advisory Committee as to whether the company is carrying on business or profession for the purpose of section 44AB the Income-tax Act, 1961.

Opinion May 29,1991

1. The Committee is of the view that question as to carrying on business or profession for the purpose of section 44AB of the Income-tax Act, 1961 is to be determined on the basis of the nature of the activities carried on by the assessee.

2. The Committee notes that in the present case, the receipts of the assessee company from carrying on of medical profession (e.g., Diagnosis receipts, consultation fees etc.) are more than Rs. 10.00 lakhs. The Committee is accordingly of the opinion that since the receipts from carrying on of medical professional are more then Rs. 10.00 lakhs, audit under section 44AB is required in the present case.

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