Dividend income from UTI units not part of eligible business profits for Section 32AB deduction.

Dividend income from UTI units was not treated as profits of an eligible business for deduction under Section 32AB of the Income-tax Act, 1961. The accounts showed the dividend as income from other sources, and the units were held for earning dividend rather than as part of a business of buying and selling units. In the absence of material showing that the investment activity was carried on as a business or that the dividend income was applied in the manufacturing business, the factual basis required to treat it as business profit was missing. The deduction was therefore not available.

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Issues: Whether dividend income from investment in UTI units formed part of the profits of eligible business for deduction under Section 32AB of the Income-tax Act, 1961.

Analysis: The deduction under Section 32AB is available only where the income forms part of profits of an eligible business. The assessee's accounts showed the UTI dividend as income from other sources, and the units were held for earning dividend rather than as part of a business of buying and selling units. Unlike the precedent where the unit transactions were found to be intertwined with the main business, there was no material to show that the investment activity was treated as a business or that the dividend income was applied in the assessee's manufacturing business. The factual foundation necessary to treat the dividend as business profit was therefore absent.

Conclusion: The dividend income from UTI units did not qualify as profits of eligible business under Section 32AB, and the deduction was rightly denied.

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