TaxTMI 
TaxTMI 
1995 (10) TMI 75
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....,936 loss 2. Factory at Noida in free trade zone (+) 1,22,83,008 3. Head Office Unit (+) 98,92,848 -------------------- Total Profit : (+) 2,06,85,920 -------------------- The learned CIT on consideration of relevant provisions of section 32AB held that deduction under the said section was permissible only out of "eligible business" income of the concern. He treated factory at 99-A, Noida as a separate industrial undertaking and "eligible business" in terms of sub-sections (1) and (2) of section 32AB. As this unit had no profit, the deduction u/s 32AB, in his view, was wrongly allowed. In reaching this conclusion, learned CIT referred to provision of section 32AB with particular reference to definition of "eligible business". The case of CIT v. Shantilal Agarwalla [1983] 142 ITR 778 (Pat.) relied upon by the assessee was held to be not applicable to the facts of the case. Similarly, the other decision in the case of CIT v. Canara Workshops (P.) Ltd. [1986] 161 ITR 320 (SC), was held as not supporting the case of the assessee. The CIT accordingly held that deduction of Rs. 20,98,332 was wrongly allowed to the assessee and the assessment to the above extent should b....
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....87. Under the provision out of its total income chargeable under the head "profits and gains of business", the assessee was to deposit or utilise out of above income to get deduction @ 20% of eligible income. 6. The provision of section 32AB as applicable in the relevant assessment year is as follows :--- " 32AB. (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head 'profit and gains of business or profession', 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) utilise 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 the section referred to as the scheme) to be framed by the Central Government, or if the assessee is carryi....
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....ed; (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 receipt 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 to have been audited by an acco....
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....clutory clauses. Any business not falling in said exclutory clauses is automatically treated as an "eligible business". There is no justification to restrict meaning of "eligible business" to the unit where machinery is installed though the same is not covered by exclutory clauses referred to above. The "eligible business" as per the definition has wider import--- only thing to be seen being whether it falls within the activities covered by clauses (a) and (b) of the definition. We, therefore, see nothing in the definition or any other portion of the section to suggest that deduction is to be allowed only out of the profit of a unit or undertaking where machinery is installed and not out of the profits of the assessee. 9. We have further compared provision of section 32AB with other provisions like sections 10A, 80E, etc., granting incentives to the assessee. In all such sections, the Legislature specifically stated that deduction is to be computed with reference to profits derived by an industrial undertaking and not by an assessee. Reference is also invited to the case of Canara Workshop (P.) Ltd., the decision of Supreme Court referred to by learned CIT. In that case, the Hon....