AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (9) TMI 90
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....other than income from business or profession. The Tribunal had held against the assessee that the income derived under the head "Profits and gains of business or profession" only would be eligible following the decision in Northern India Theatre P. Ltd., 56 ITD 42 (TM) and CIT v. Dinjoye Tea Estate (P.) Ltd. [1997] 224 ITR 263 (Gauhati). Appellant's contention: Dr. Pal, appearing on behalf of the assessee/appellant, had pointed out that section 32AB has two components in sub-section (1). One component is the eligibility criteria for availing of the deduction contemplated under section 32AB and the second component is the eligibility to deduction after the assessee qualifies under the first component. These two components are different and cannot be intertwined or interlaced. These two components are completely distinct, different and independent of each other. Once the eligibility criteria for deduction is qualified under section 32AB(1)(a)(b), then the eligibility of deduction under section 32AB(1)(i) and (ii) would crop up. This eligibility under clause (ii) is to be computed in the manner contemplated under section 32AB(3) through the process of section 32AB(5). The reference....
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....'s contention: Mr. Agarwal, we must admit, appearing on behalf of the Commissioner of Income-tax, had ably and aptly clarified his stand. According to him, the factors that are to be examined for the present purpose for applying the tests in relation to section 32AB are to be found out from the scheme of the Act as c contemplated in Chapter IV. The provisions comprised in Chapter VI-A cannot be read in isolation and without reference to Chapter IV. Since the qualification clause provides eligibility in respect of the amount deposited or spent out of the income under the head "Profits and gains of business and profession", therefore, the eligibility for deduction within clauses (i) and (ii) has to be read ejusdem generis so as to be applicable in relation to the income under the head "Profits and gains of business or profession" alone. It cannot be stretched to incomes derived by the assessee from other sources like capital gains and income from other sources or dividend income. To support his contention, he had pointed that the manner of computation of profits of business or profession has been laid down in sub-section (1) and sub-section (3) of section 32AB. This would not govern....
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....on of the eligible income. It does not qualify the eligible business. Therefore, this appeal should fail. Section 32AB as it stood for the assessment year 1988-89: In order to find the answer, we are to depend on the provisions of section 32AB as it stood and applicable to the assessment year 1988-89. In order to appreciate the situation, we may better quote the said provision as applicable in the assessment year 1988-89 so far as it is necessary for our present purpose. "32AB. (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head 'Profits 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) utilised 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), . . . shall be allowed a ....
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....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 receipts 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 have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant: Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the acc....
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.... of sub-section (2)(i). This is further supported by sub-section (3) which provides that profits of eligible business or profession for the purpose of sub-section (1) shall be as provided in clauses (a) and its sub-clauses and (b), namely, in accordance with the requirements of Part II and Part III of the Sixth Schedule to the Companies Act, 1956, as indicated in the sub-clauses, viz., clause (a), where separate accounts were maintained, and clause (b) where separate accounts are not maintained or are not avail able. It would be such amount, which bears to the total profits of the business or profession of the assessee after allowing depreciation in accordance with section 32(1) at the same proportion as the total sales turnover or gross receipts of the eligible business or profession bear to the total sales, turnover or the gross receipts of the business or profession carried on by the assessee. Thus, by reason of sub-sections (2) and (3) the eligibility of deduction has been classified to be distinct from the eligibility to deduction. We are not required to answer as to what would be the position after this Finance Act, 1989, which came into force with effect from April 1, 1991.....
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....P.SV. Firm v. CIT [1967] 63 ITR 404 (SC). To support our above contention, we may also depend on the ratio decided in CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR B 306 (SC) cited by Dr. Pal. There it was held that: "though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the trading assets". The Madras High Court in CIT v. Tamil Nadu Mercantile Bank Ltd. [2002] 255 ITR 205 had held that the computation of income under the provisions of the Income-tax Act is of no relevance for the purpose of determining the extent of benefit under section 32AB(1) or (2). The computation under the Income-tax Act is relevant after the ascertainment of the amount of the deposit and the 20 per cent, of the profits of the business calculated in accordance with section 32AB(3) and the amount to be allowed in the computation under the Income-tax Act is the lower of the two figures. In Apollo Tyres Ltd. [2002] 255 ITR 273 (SC), the apex court had held that the dividend income earned by the assessee-company from its investment in t....