9911796707
TMI Blog2005 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee are "eligible businesses" within the meaning of section 32AB of the Act. It is not in dispute that the assessee had maintained separate accounts for the above two units and a separate profit and loss account and balance sheet for each of the units were drawn up in accordance with Parts II and III of Schedule VI to the Companies Act, 1956, based on the separate accounts maintained by the assessee. During the previous year relevant to the assessment year 1990-91, net profits of the paper division after making adjustments computed under sub-clauses (i) to (vi) of sub-section (3) of section 32AB came to Rs. 4,42,22,227. Similarly, the agro division, after making the necessary adjustments, disclosed a loss of Rs. 97,80,642. During the previous year relevant to the assessment year 1990-91, the assessee had spent a sum of Rs. 1.42 crores for purchase of new machinery for the paper division. The assessee in its return of income had claimed deduction under section 32AB in respect of the amounts utilised on acquisition of plant and machinery. As the deduction under section 32AB is available on the amount spent on new plant and machinery or 20 per cent, of the profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ', has, out of such income,- (a) deposited any amount in an account (hereafter 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), in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of- (i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised ; or (ii) a sum equal to twenty per cent, of the profits of eligible business or profession as computed in the accounts of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or are not available, be such amount which bears to the total profits of the business or profession of the assessee after allowing depreciation in accordance with the provisions of sub-section (1) of section 32, the same proportion as the total sales, turnover or gross receipts of the eligible business or profession bear to the total sales, turnover or gross receipts of the business or profession carried on by the assessee. (5) The deduction under sub-section (1) shall not be admissible unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (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 sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increased by the aggregate of the items (i) to (vii) specified in section 32AB(3)(a) and further reduced by the amounts withdrawn from reserves or provisions, if such amounts are credited to the profit and loss account. Unlike in section 32AB(3)(b) where the profits of the eligible business are required to be determined on pro rata basis, in section 32AB(3)(a) there is no provision for setting off the loss suffered by the eligible unit. Accordingly, it was submitted that the authorities below were justified in rejecting the contention of the Revenue. In the present case, it is an admitted fact that the assessee had maintained separate accounts in respect of both the eligible businesses and, therefore, deduction under section 32AB(1) at 20 per cent, of the profits of the paper division has to be determined in the manner prescribed under section 32AB(3)(a) of the Act. Determination of the profits of the eligible business under section 32AB(3)(a) involves the following steps: (i) the profits of the eligible business have to be computed in accordance with the requirements of Parts II and III of the Sixth Schedule to the Companies Act, 1956; (ii) from the profits so computed, an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss, it cannot be said that the said loss is to be set off from the profits of the other eligible business. It is pertinent to note that by the Finance Act, 1989 the concept of eligible business and determination of profits of eligible business whose accounts have been maintained separately have been done away with prospectively with effect from April 1, 1991. As a result from April 1, 1991, maintaining separate accounts has no relevance for the purpose of deduction under section 32AB(1) of the Act and what is relevant from April 1,1991 is the profits of business or profession of an assessee and not the profits of each business of the assessee. Therefore, for the assessment year 1990-91 with which we are concerned in this appeal, the deduction under section 32AB(1) of the Act in respect of the profits of the paper division has to be determined from the profits of the paper division as determined under section 32AB(3)(a) of the Act without setting off the loss suffered by the agro division. It is true that under section 70 of the Act, while determining the total income chargeable to tax under the head "Profits and gains of business", the loss from the agro division has to be set of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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