Rental income from house property qualifies for Section 32AB deduction when part of unified business operations

The Bombay HC ruled that rental income assessed under "Income from house property" qualifies for deduction under Section 32AB. The court held that rental income forms part of the same business when there is unified accounting, common management, and single profit/loss statements. The absence of the phrase "chargeable to profits and gains of business" in Section 32AB(3) supports inclusion of all eligible business income except specifically excluded items. The dichotomy between printing income and rental income was deemed unwarranted, allowing deduction on entire business income including house property income.

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Issues Involved:
1. Whether the rental income assessed under the head "Income from house property" qualifies for deduction under Section 32AB of the Income Tax Act, 1961.

Summary:

Issue 1: Deduction u/s 32AB for Rental Income
- The appellant contested the ITAT's judgment denying deduction u/s 32AB for rental income assessed under "Income from house property."
- The Assessing Officer restricted the deduction to Rs. 2,85,024/- against the appellant's claim of Rs. 76,97,918/-, excluding Rs. 1,27,11,742/- rental income from the computation.
- The CIT(A) and ITAT upheld this view, stating rental income does not qualify as "profits of eligible business or profession" for Section 32AB.

Appellant's Arguments:
- The term "eligible business or profession" in Section 32AB (2)(i) includes all activities resulting in profits except those specified.
- The rental income's assessment under "Income from house property" does not alter its inherent character as business income.
- Cited precedents: Commissioner of Income Tax V/s. Diners Club India Ltd. and Apollo Tyres Ltd. V/s. Commissioner of Income Tax, supporting the inclusion of such income for Section 32AB deduction.

Respondent's Arguments:
- Section 32AB pertains specifically to "profits and gains of business or profession," excluding income from house property, capital gains, and other sources.
- The computation of business income must adhere strictly to Sections 28 to 44D, and deductions under Section 32AB cannot extend to other income heads unless explicitly provided.

Court's Analysis:
- The court examined Sections 32AB (1), (2), and (3) of the Act, noting the requirement for income to be chargeable under "profits and gains of business or profession."
- The court emphasized the broad definition of "eligible business or profession," which includes various business activities beyond manufacturing or production.
- The appellant's accounts, prepared per the Companies Act, included rental income as business income, aligning with the definition of eligible business.
- The court rejected the dichotomy between rental and business income for Section 32AB purposes, noting the unified management and accounting treatment.

Conclusion:
- The court ruled that rental income, as part of business income, qualifies for deduction under Section 32AB.
- The question of law was answered in the negative, favoring the appellant's claim for deduction on rental income.

Disposition:
- The appeal was disposed of accordingly, allowing the rental income assessed under "Income from house property" to qualify for deduction under Section 32AB.

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