TMI Blog2016 (11) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration i.e. Assessment Year 1988-89 the assessee shall be entitled to the deduction under Section 32AB of the Act equal to 20% of the profits of Patel Detergents (Manufacturing Division) being the profits of `eligible business', and therefore, the Tribunal has committed a grave error in holding that the deduction under Section 32AB of the Act is allowable with reference to the profit of the business as a whole and not in respect of the profit of any particular unit. The present appeal succeeds and is allowed. The impugned judgment and order passed by the learned ITAT confirming the calculation made by the Assessing Officer confirmed by the learned CIT(A) with respect to the deduction under Section 32AB of the Act by holding that the deduction under Section 32AB of the Act is allowable with reference to the profit of the business as a whole and not in respect of profit of any particular unit is hereby quashed and set aside and it is held that the assessee shall be entitled to the deduction under Section 32AB of the Act with reference to the profits of Patel Detergents (Manufacturing Division) as claimed and granted by the Assessing Officer while passing the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in respect of the profit of any particular unit? 3. However, while admitting the present appeal, the Division Bench of this Court framed only one substantial question of law, namely, whether in the facts and circumstances of the case, the ITAT was right in law in holding that the deduction u/s. 32AB of the Act is allowable with reference to the profits of the business as a whole and not in respect of the profit of any particular unit?. It appears that thereafter the assessee preferred O.J. Civil Application No.619 of 2014 with a request to formulate/frame other proposed substantial questions of law namely with respect to the initiation of reassessment proceedings more particularly proposed initial substantial questions of law No.1, 2 and 3. The Division Bench of this Court vide order dated 11.11.2014 allowed the said application and permitted the applicant to raise the initial proposed substantial questions of law No.1, 2 and 3 as additional questions of law, however, subject to the rights of the department to object the new ground and even ground of limitation. 4. Mr. S.N. Soparkar, learned counsel appearing on behalf of the assessee and Mr. M.R.Bhatt, learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing Division) has calculated 20% of the profit as per the books of accounts of Patel Detergents (Manufacturing Division) are claiming the deduction under Section 32AB of the Act. Against disallowance of the expenses of ₹ 2,03,05,962/passed by the Assessing Officer, the assessee appealed to the CIT(A) and the CIT(A) vide order dated 14.11.1992 partly allowed the appeal of the assessee, as a result of which, the income of the assessee was reduced to ₹ 11,99,00,05,570/. The relief allowed to the assessee included the deduction on account of interest of ₹ 1,99,12,300/being interest paid by the assessee trust to its beneficiaries. 5.2 Subsequently, a notice under Section 148 of the Act was issued on 19.3.1993 and served upon the assessee on the same day, which was within four years from the end of the assessment year under appeal. The reasons recorded for issuance of notice under Section 148 of the Act reads as under: It is noticed that assessee in its return of income has claimed deduction u/s.32AB, ₹ 2,50,00,000/and the same has been allowed also, while passing order u/s.143(3) of the I.T.Act dt.27.3.91. However, after further verification it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto account as a whole. The Assessing Officer accordingly calculated the deduction under Section 32AB of the Act at ₹ 2,14,24,749/as against ₹ 2,50,00,000/allowed in the original assessment and the excess deduction of ₹ 35,75,251/came to be withdrawn. 5.5 Feeling aggrieved and dissatisfied with the assessment/reassessment order passed by the Assessing Officer, the assessee appealed to the CIT(A). The CIT(A) confirmed the deduction under Section 32AB of the Act at ₹ 2,14,24,749/. 5.6 Feeling aggrieved and dissatisfied with the order passed by the CIT(A) confirming the calculation of the deduction made under Section 32AB of the Act at ₹ 2,14,24,749/, the assessee preferred further appeal before the Income Tax Appellate Tribunal, and by impugned judgment and order, the Income Tax Appellate Tribunal has dismissed the said appeal preferred by the assessee and confirmed the calculation of the deduction made under Section 32AB of the Act by the Assessing Officer. 5.7 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT in holding that Section 32AB of the Act is allowable with reference to the profits of the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded in income for the purpose of calculating the deduction under Section 32AB of the Act or not. It is submitted that therefore the learned Tribunal has wrongly considered and relied upon the decision of the Gauhati High Court in the case of Dinjoye Tea Estate (P.) Ltd. (supra). 6.2 Mr.Soparkar, learned counsel appearing on behalf of the assessee has heavily relied upon the decision of Delhi High Court in the case of Commissioner of Income Tax v. Kelvinator of India Ltd. [[2015] 60 Taxmann.com 78 (Delhi)]. It is submitted that identical question came to be considered by the Delhi High Court, and considering the provisions of Section 32AB of the Act prevailing at the relevant time i.e. prevailing prior to 1.4.1991, the Delhi High Court has specifically observed and held that the assessee is eligible to get the deduction under Section 32AB of the Act of 20% of the profits of the eligible business or profession, increases and decreases permitted, did not contemplate the loss of another eligible unit. It is submitted that, while holding so, the Delhi High Court has relied upon the decision of Bombay High Court in the case of CIT v. Pudumjee Agro Industries Ltd. [(2006) 285 ITR 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,962/. It is submitted that therefore the assessee cannot be permitted to take contradictory stand. It is submitted that therefore if the loss of other units are considered, in that case the assessee shall be entitled to deduction under Section 32AB of the Act at ₹ 2,14,24,749/only. Thus the assessee was allowed ₹ 35,75,251/in excess, as deduction under Section 32AB of the Act. Making the above submissions, it is requested to dismiss the appeal. 8. Heard the learned counsels for the respective parties at length. 9. The short question which is posed for consideration before this Court is whether the learned ITAT was justified in confirming the deduction under Section 32AB of the Act calculated by the Assessing Officer confirmed by the CIT(A) considering the profits of the business of the assessee as a whole and not in respect of the profit of Patel Detergents (Manufacturing Division). The assessee claimed deduction of ₹ 2.50 crores under Section 32AB of the Act being 20% of the profits of the business i.e. profit of Patel Detergents (Manufacturing Division). However, according to the department, for the purpose of calculation of deduction under Section 32AB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Eleventh Schedule carried on by an industrial undertaking, which is not a smallscale 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 smallscale industrial undertaking as defined in section 80HHA, engaged in the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule; (ii) new ship or new aircraft includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the date of such acquisition owned by any person resident in India; (iii) new machinery or plant includes machinery or plant which before the installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely: (a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below subsection (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant: Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this subsection if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this subsection. 11. At this stage it is required to be noted that Section 32AB of the Act has been amended and the word `eligible' has been deleted by Finance Act, 1989, with effect from 1.4.1991. In the present case, the dispute is with respect to Assessment Year 1988-89. Therefore, considering the provisions of Section 32AB of the Act prevailing at the relevant time, assessee is entitled to the deduction under Section 32AB of the Act equal to 20% of the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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