TMI Blog1996 (8) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... securities amounting to Rs. 1,29,09,407 and income from rent amounting to Rs. 6,264. The accounting year of the assessee was year ending 31-12-1987. During this year, it had deposited Rs. 3,60,000 with IDBI and claimed deduction under section 32AB of the Income-tax Act, 1961. The deduction was computed by the assessee at Rs. 3,44,386. The Assessing Officer rejected the claim of the assessee on the ground that income chargeable under the head 'Profits and gains of business or profession' was a negative figure, i.e., loss. According to the Assessing Officer, the income by way of interest on securities was assessable under the separate head, i.e., Interest on securities and, therefore, could not be treated as income under the head 'Profits an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee would be entitled to deduction under section 32AB. He therefore, pleaded that the lower authorities have wrongly rejected the claim of the assessee. He also relied upon the decision of the Tribunal, Pune Bench in the case of Maharashtra Scooters Ltd. in ITA Nos. 519 (Pune) of 1991 and 1197 (Pune) of 1993 wherein it has been held that the dividends and income by way of interest on N.S.C. were to be included in the profit and loss account for the purpose of sub-section (3) of section 32AB. 4. On the other hand, the learned departmental representative Shri Hari Krishan opposed the contention of the assessee. He took us through sub-section (1) of section 32AB which provides that deposit with IDBI must be made out of the income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re an assessee, whose total income includes income chargeable to tax under the head 'Profits and gains of business or profession' has, out of such income,--- (a) deposited any amount in an account (hereinafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income; whichever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a).... the assessee shall be allowed a deduction (such deduction being allowed before the loss, if any, brought forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions prescribed under sub-section (1) are fulfilled. If the assessee fails to fulfil such conditions, the question of applying the provisions of sub-section (3) does not arise. The most important condition under sub-section (1) is that the deposit must be out of the income which is chargeable to tax under the head 'Profits and gains of business or profession'. That means there must be some positive income out of which the deposit with IDBI could be made or the amount could be utilised for the purchase of assets mentioned in the section. In the course of hearing, the learned counsel for the assessee had submitted that the word 'income' includes loss also, as held by various Courts. There cannot be any quarrel with such proposition i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court in the case of United Commercial Bank. Therefore, this part of the income has been rightly assessed by the Assessing Officer under the head 'Interest on securities'. If this income is excluded from the total income assessed then the income chargeable to tax under the head 'Profits and gains from business or profession' comes to a negative figure, ie., loss of Rs. 1,05,59,220 as is apparent from the order of the assessment. Since there is no positive income out of which any amount can be deposited, the assessee is not entitled for any deduction under section 32AB. 8. The contention of the assessee that business or profit has to be computed in accordance with the provisions of sub-section (3) of section 32AB even where inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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