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Question ID : 40653

Income tax on lump sum amount received by Advocate.

An advocate, super senior citizen, received a substantial amount in lump sum from 'Advocate Welfare Fund' upon permanently stopping his legal practice. Whether that amount is liable to income tax. If so, the said amount is to be offered under which 'head of income'.

Posted by B.CHACKRAPANI WARRIER on May 20, 2020

Filed Under DIRECT TAXES

Answer ID : 80533

Since this fund is created as a welfare scheme like PF distribution from recognized PF for employees. Hence this should be exempt provided advocate has been in practice for minimum 5 years. I don't have reference of specific section which provides exemption.

Posted by CA Yogesh Kumar on May 23, 2020
Answer ID : 80535

Section 176(4) provides to tax such amount received due to cessation of profession. It is taxable under the head Profits and gains from business or Profession. Receipt from welfare fund does not change taxability as there is no employer employee relationship.

Posted by CA. chunauti dholakia on May 27, 2020
Answer ID : 80537

Section 176(4) attracts only if the amount is received from the discontinued profession. Here the amount is not a professional receipt from the discontinued profession but from "Advocate welfare fund' which cannot be assessed under PGBP.

Posted by B.CHACKRAPANI WARRIER on May 27, 2020
Answer ID : 80539

Seems the amount is to be assessed under LTCG in view of the following observation. * Bar council enrollment (Sannath) is an asset per section 2(14)(a). * Surrendering the enrollment is a transfer per section 2(47(i). * The amount received from Advocate Welfare fund is income per section 45(1). * Cost of acquisition is NIL per section 55(2)(a)(ii).

Posted by B.CHACKRAPANI WARRIER on May 29, 2020