TMI Blog2004 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... s year relevant for the assessment year. The question raised in this case relates to the eligibility of deduction under section 32AB of the Income-tax Act, 1961. Having regard to section 32AB as it stood then whether the income derived under the head "Income from business or profession" only would be eligible for deduction under section 32AB(1)(ii) or this deduction would be allowable on the income of the eligible business contemplated under sub-section (3) of section 32AB. In other words, whether this 20 per cent, income is to be allowed on the income of the eligible business contemplated under sub-section (3) of section 32AB irrespective of the fact that it might include income from sources other than income from business or profession. The Tribunal had held against the assessee that the income derived under the head "Profits and gains of business or profession" only would be eligible following the decision in Northern India Theatre P. Ltd., 56 ITD 42 (TM) and CIT v. Dinjoye Tea Estate (P.) Ltd. [1997] 224 ITR 263 (Gauhati). Appellant's contention: Dr. Pal, appearing on behalf of the assessee/appellant, had pointed out that section 32AB has two components in sub-section (1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Division Bench in Assam Brook Ltd. v. CIT [2004] 267 ITR 121 rendered by the Calcutta High Court following Apollo Tyres Ltd. [2002] 255 ITR 273 (SC). He also elaborately referred to the ratio decided in Apollo Tyres Ltd. [2002] 255 ITR 273 (SC) and led us through the said decision. He had also drawn our attention between comparison of the provisions of section 32AB and those of section 115J for the purpose of referring to book profit and support his contention with regard to the distinction sought to be made by him in the matter of qualification and eligibility. Dr. Pal in his erudite style had elaborated his submission in order to explain the situation with utmost clarity. Department's contention: Mr. Agarwal, we must admit, appearing on behalf of the Commissioner of Income-tax, had ably and aptly clarified his stand. According to him, the factors that are to be examined for the present purpose for applying the tests in relation to section 32AB are to be found out from the scheme of the Act as c contemplated in Chapter IV. The provisions comprised in Chapter VI-A cannot be read in isolation and without reference to Chapter IV. Since the qualification clause provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 273 (SC) and Assam Brook Ltd. [2004] 267 ITR 121 (Cal) has no manner of application. With regard to the comparison of the provisions of section 32AB(3) and those of sections 115J and 115JA, he contended that the Explanation in sections 115J and 115JA to the effect that the book profit means the net profit as laid down therein whereas under section 32AB the word "means" is conspicuously absent. Therefore, it is only the amount of the profits eligible under sub-sections (1) and (2), which could be computed in accordance with the requirement of the relevant provisions of the Companies Act as stipulated in subsection (3) of section 32AB. Sub-section (3) of section 32AB is only a manner of computation of the eligible income. It does not qualify the eligible business. Therefore, this appeal should fail. Section 32AB as it stood for the assessment year 1988-89: In order to find the answer, we are to depend on the provisions of section 32AB as it stood and applicable to the assessment year 1988-89. In order to appreciate the situation, we may better quote the said provision as applicable in the assessment year 1988-89 so far as it is necessary for our present purpose. "32AB. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggregate of- (i) the amount of depreciation; (ii) the amount of income-tax paid or payable, and provision therefor; (iii) the amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (iv) the amounts carried to any reserves, by whatever name called; (v) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; (vi) the amount by way of provision for losses of subsidiary companies; and (vii) the amount or amounts of dividends paid or proposed, if any debited to the profit and loss account; and as reduced by any amount or amounts withdrawn from reserves or provisions, if such amounts are credited to the profit and loss account; and (b) in a case where such separate accounts are not maintained 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 prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deduction. The Legislature has not used the same expression in the part governing eligibility to deduction (qualification part) and eligibility of deduction (the deduction part). In the qualification part, it is referred to the deposit or utilisation of amount out of the income under the head "Profits and gains of business and profession", whereas in the deduction part, the deduction is allowed on the profits of eligible business or profession as computed in the return of the assessee audited by an accountant in terms of sub-section (5). This has been made clear in sub-section (2) where eligible business or profession has been defined. The definition is exclusionary, it excludes the business mentioned in clauses (a) and (b) of sub-section (2)(i). This is further supported by sub-section (3) which provides that profits of eligible business or profession for the purpose of sub-section (1) shall be as provided in clauses (a) and its sub-clauses and (b), namely, in accordance with the requirements of Part II and Part III of the Sixth Schedule to the Companies Act, 1956, as indicated in the sub-clauses, viz., clause (a), where separate accounts were maintained, and clause (b) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation under the Income-tax Act, but on sub-section (3). The eligibility to and eligibility of have been made distinct by reason of these provisions when read with sub-section (2)(i) and sub-section (3)(a) and (b), the omission whereof by the Finance Act, 1989, is a clear expression of the legislative intendment in removing the distinction. Precedents Citation and its application: We may note that such a view was taken by the Calcutta High Court in Nawn Estate P. Ltd. [1972] 86 ITR 300, wherein it was held that the rental income of the assessee-company can also be taken into consideration for the purpose of deduction claimed under section 32AB of the Income-tax Act. This view can find support from the decision in O.RM.M.SP.SV. Firm v. CIT [1967] 63 ITR 404 (SC). To support our above contention, we may also depend on the ratio decided in CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR B 306 (SC) cited by Dr. Pal. There it was held that: "though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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