TMI Blog2002 (9) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... ) erred in agreeing that donation and contribution to Scientific Research Association are not expenses of the business but only application of income. v. The CIT(A) ought to have considered that contribution to Scientific Research Association and donations are items of expenditure as per Income-tax Act, and these items have to be reduced and on the balance only deduction under section 32AB is allowable. 3. The Assessing Officer passed an order under section 154 dated 14-9-1993 as under:-- "In the intimation dated 14-2-1990, deduction under section 32AB has been worked out after reducing Rs. 2,06,77,000 amount debited to Scientific Research Association, contribution to National Rural Development Fund and donation and also income from other sources have been taken into account while arriving at profit from business. Additional tax was omitted to charge on these items. These mistakes have been brought to the notice of the assessee and the assessee has objected to include these items quoting the case law held in T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR SO (SC) with other points and the assessee has given list of items included in other sources: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 53,60,743 -------------------- Rs. 5,02,13,144 Less Donations Rs. 2,06,77,000 -------------------- Rs. 2,95,36,144 -------------------- 20% of Rs. 2,95,36,144 Rs. 59,07,228 Less: Already allowed Rs. 1,11,14,777 -------------------- Rs. 52,07,549" -------------------- 3.1 The CIT(A) held that except the dividend of Rs. 2,64,903, the balance income of Rs. 50,95,840 should not be deducted from the total income for the purpose of computing deduction under section 32AB of the Act. The CIT(A) also held that the total donations of Rs. 2,06,77,000 is not required to be reduced from the computation of profit computed in accordance with the requirement of Parts II III of Schedule VI of the Companies Act, 1956. The CIT(A) held that as per the accountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is stated to be debatable only for the sake of arguments but no material is placed to show that profit is not computed in accordance with Parts II III of Schedule VI of the Companies Act, 1956. This is a pure arithmetical exercise carried on by the Assessing Officer which is well within the purview of section 154 of the Act. 4. We have considered the rival submission, the relevant facts of the case, the arguments advanced and decisions relied upon. Section 32AB(1)(ii) of the Income-tax Act allow the deduction of a sum equal to 20% of the profits of eligible business as computed in the accounts of assessee audited in accordance with the sub-section (5) of section 32AB. Section 32AB prescribes the procedure for arriving at the eligible profit. For the sake of brevity sub-section is reproduced below: (5) "The profits of eligible business or profession of an assessee for the purpose of sub-section (1) shall-- (a) in a case where separate accounts in respect of such eligible business or profession are maintained, be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with the provisions of sub-section (1) of section 32 from the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 56391 Less: Donations 19121 1556 20671 Profit before 7519 28195 35714 taxation Less: Provision 2900 10800 13700 for taxation Net Profit 4619 17395 22014 ----------------------------------------------------------------------------------------- The dispute therefore centers around the two items (i) inclusion of various income of Rs. 50,93,489 as detailed in ground No.1 above to be treated as income of eligible business, and (ii) Donation of Rs. 2,06,77,000 to be reduced to arrive at the net profit of eligible business, for the purpose of deduction under section 32AB. 5. As regards the first issue of inclusion of various income for purpose of computing net profit, the ld. D.R. fairly conceded that though this income may be taxed under different heads for the purpose of I.T. Act, yet for the purpose of computation of net profit under Schedule VI to the Companies Act, they are definitely forming part of net profit. Since the language of section 32AB(3) requires net profit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is reduced from the net profit. Any other treatment or taking a figure of net profit before reducing such amount will definitely amount to a mistake apparent on record. Since the figure of net profit was taken before reducing the donations given, the Assessing Officer was correct in substituting the figure of net profit after reducing the donations given. This is purely arithmetical mistake correctly rectified by the Assessing Officer. The decision of Hon'ble Supreme Court in Volkart Bros.' case is not applicable to the present set of facts. Hon'ble Supreme Court in the said case has held as under: "A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two options. A decision on a debatable point of law is not a mistake apparent from the record." As can be seen in the present set of facts, the mistake is obvious and patent mistake, which does not require a long drawn process bf reasoning. The issue is also not a debatable point of law. The issue in present set of facts is the computation of eligible profit as mentioned in section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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