TaxTMI 
TaxTMI 
2005 (1) TMI 60
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....ther a non-trading company: So far as the second point is concerned, which we were supposed to answer first, it covers the three assessment years 1989-90, 1990-91 and 1991-92. The assessee had claimed itself to be a non-trading company in respect of these three assessment years in order to avail of the benefit of reduced rate of income-tax, negatived by the Assessing Officer since reversed by the Commissioner of Income-tax (Appeals). The learned Tribunal, however, had disagreed with the view taken by the Commissioner of Income-tax (Appeals) and agreed with the view of the Assessing Officer and held that the assessee was a trading company. This difference between trading and non-trading company was available by reason of an amendment effective from April 1, 1989, to the assessee. Mr. Bajoria, learned senior counsel, ably assisted by Mr. J.P. Khaitan, led us through the various materials and had pointed out that admittedly the authorities under the Income-tax Act had found that the assessee was carrying on the principal business of tea broker and auctioneer. Besides which it has some other business activities of agency commission, service charges, dividends, leasing business, cash ....
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....essee was a trading company or not. This was replied to by Mr. Bajoria on the basis of question No. 1 involved in the said decision on the foundation whereof the second question was dependent when the facts are not in dispute. This question seems to be of no relevance in the present case in view of the admitted facts as are appearing from paragraph 9.1 of the decision by the learned Tribunal. If for argument's sake, we may assume that these trade advances, trade debts shown in the breakup given at page 19 of the paper book, were trading activities even then it would not make the company a trading company for the relevant assessment years, since these activities were carried on at least 20 years to 5 years' before the relevant assessment years. There is no material to show that similar activities were being carried on in the relevant assessment years. If at one point of time it had carried on such activities that would not mean that it was also carrying on similar activities in the present assessment years. Be that as it may, the question is dependent not on the heads of the income but on the principal business carried on by the assessee. If in addition to the principal business, ....
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....e reasons noted therein which is also not in dispute. For the relevant assessment year, as, in his usual fairness, Mr. Mullick pointed out, we see no reason to disagree with the view taken by the other Division Bench in the case of J. Thomas and Co. Ltd. [2004] 267 ITR 585 (Cal). The first question: Section 32AB(3): Dividends, interest on securities, income from property: Whether business income: So far as the first question is concerned, it relates to the assessment years 1989-90 and 1990-91. In support of this question, reliance was placed by Mr. Bajoria on the decision in Britannia Industries Ltd. v. Joint CIT [2004] 271 ITR 123 (Cal) wherein a distinction was made between the eligibility for and eligibility to the deduction. Once the assessee has qualified as eligible for the deduction, then the income out of the eligible business would be eligible to deductions irrespective of the heads under which the income is computed in view of the provision contained in sections 32AB(3) and 32AB(5). In the present case, it is contended that the income in respect of which the dispute with regard to the deduction under section 32AB was raised, was that these incomes were derived from the....
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....ome of eligible business is to be computed in view of sub-section (3) according to sub-section (5) of section 32AB. When a particular mode of computation has been provided for which substantially covers widely an area under the Companies Act rather than that being covered by the Income-tax Act, as was pointed out by Mr. Bajoria with reference to section 115J(1) and section 115J(1) of the Income-tax Act relying on the decision of the Bombay High Court in CIT v. Veekaylal Investment Co. P. Ltd. [2001] 249 ITR 597. Therefore, when a special mode of computation has been provided for in sub-section (5), which is to be undertaken and/or adopted for the purpose of sub-section (3) in order to arrive at the eligibility of the income of eligible business, the eligibility to the deduction has to be construed with reference to the said provision and can no more be reverted to the heads of income from business or profession alone. It is rightly pointed out by Mr. Bajoria that the entire amount is being earned as an income out of the eligible business activities carried on by the assessee though may be under different heads but are in effect income from business and profession. Once it qualifies....