TaxTMI 
TaxTMI 
2004 (6) TMI 23
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....eal is filed by the Department. In I.T.R. No. 179 of 1997, the Income-tax Appellate Tribunal took the view that under section 32AB of the Income-tax Act (hereinafter referred to as the "I.T. Act") for the purpose of deduction of 20 per cent, profit, only the income from business or profession should be taken into account, while in the other three cases, the Income-tax Appellate Tribunal has taken the opposite view and held that any income which is included in the profit and loss account under Parts II and III of Schedule VI to the Companies Act has to be taken into account. Thus the decision of the Tribunal in I.T.R. No. 179 of 1997 conflicts with the decisions in the other three cases. In I.T.R. No. 179 of 1997, the question of law referr....
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....s or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), will be allowed as deduction. "Eligible business" is defined under sub-section (2) of section 32AB of the Income-tax Act. It is as follows: "(i) 'Eligible business or profession' shall mean business or profession, other than- (a) the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule carried on by an industrial undertaking, which is not a small scale industrial undertaking as defined in section 80HHA; (b) the business of leasing or hiring of machinery or plant to an industrial undertaking, other than a small scale industrial undertaking as defined in section 80HHA,....
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....new machinery should come from income chargeable to tax under the head "Profits and gains of business", the definition of "eligible business or profession" is in a sense wide. Deduction is allowable on an amount equal to 20 per cent, of the profits of the eligible business. Clause (i) of section 32AB(2) coins the definition of the expression "eligible business or profession" for the purpose of the assessment years 1987-88 to 1990-91 so as to mean and include business or profession but does not include the business or profession coming in sub-clauses (a) and (b). According to counsel, dividend from companies, interest on deposits and rental income from properties are all incomes credited in the profit and loss account and so all those items ....
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....' as computed in the account of the assessee audited in accordance with sub-section (5). A reading of section 32AB and the Circular No. 461 dated July 9, 1986, makes it clear that the benefit of the said section will be available to all business income derived from whatever sources other than those mentioned in sub-clauses (a) and (b) of clause (i) of sub-section (2) of the said section. Sub-section (1) of section 32AB itself contemplates that the total income of an assessee may consist of other incomes also. When it comes to the deduction part, such a distinction is not made. The deduction available under the said sub-section is an amount equal to twenty per cent, of the profits of the eligible business. So, what is required for fixing the....
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....ess'." Before the Madras High Court, a similar question arose in the decision reported in CIT v. Tamil Nadu Mercantile Bank Ltd. [2002] 255 ITR 205 was held thus: "Section 32AB of the Income-tax Act, 1961, provides a benefit to the assessee. The benefit so provided is an incentive to an assessee who deposits any amount in a development bank before the expiry six months from the end of the previous year or before furnishing the return of his income, whichever is earlier. That incentive is also available if the assessee utilises 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 with a development bank. The benefit is given by way o....