TMI Blog1999 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... not to be excluded from the profits of the eligible business in the hands of the assessee 2. The assessee is a private limited company deriving income from a Steel Mill. The company is also deriving share income from three partnership firms. For the assessment year 1990-91 the assessee claimed deduction under section 32AB of the Income-tax Act at 20% of the income assessed under the head 'Business'. In the assessment order under section 143(3) of the Income-tax Act dated 27-4-1992 the assessee's claim for deduction under section 32AB was allowed at 20% of the income from business, including the share income from the partnership firms. The Assessing Officer later felt that the assessee was not eligible for deduction under section 32AB on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the share income from the firms was not correct. Shri C.D. Nair also made the submission that the C.B.D.T. had issued a clarification in Circular No. 461 dated 9-7-1986 to the effect that the deduction under section 32AB is not allowable on the share income from partnership firms. 4. It is not disputed that the assessee is getting share income from three partnership firms, apart from the income from own business in running the Steel Mill. There is no dispute that in respect of the profit from own business the assessee is entitled to the deduction under section 32AB. The dispute is as to whether the deduction could be allowed on the entire income assessed under the head 'Business', including the share income from the partnership fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 32AB(1)(ii) that the deduction is allowable on a sum equal to 20% of the profits of eligible business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5). Sub-section (2)(i) defines eligible business or profession as under : (i) "eligible business or profession" shall mean business or profession, other than --- (a) the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule carried on by an industrial undertaking, which is not a small-scale industrial undertaking as defined in section 80HHA; (b) the business of leasing or hiring of machinery or plant to an industrial undertaking, other than a small-scale industrial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness income. The share of the partner in the taxable profits of the registered firms liable to be included under section 23(5)(a)(ii) in his total income is still received as income from business carried on by him." In view of the decision of the Supreme Court it is to be held that the income front the partnership firms was income from the business carried on by the assessee and the same formed part of its business income. We have already seen that the businesses carried on by the firms were not any of the non-eligible businesses within the meaning of the expression in sub-section (2)(i). Hence, in computing the deduction allowable under section 32AB(1), we have to take into account the profits of the businesses of the assessee, includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of new machinery or plant and in computing the deduction under section 32AB on that basis the computation is to be made on 20% of the profits of the eligible business, which includes the share of profit from the partnership firms also. 6. In this connection, we may also refer to another contention raised by the learned representative of the assessee that the Assessing Officer was not justified in passing the impugned order under section 154 of the Income-tax Act for rectification as if there was a mistake apparent on record. In this connection Shri Satyanarayanan submitted before us that the assessee bad raised the ground of appeal before the CIT(Appeals) against the validity of the rectification proceedings in view of more than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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