2003 (5) TMI 19

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.... allowance under section 33AB of the Income-tax Act, 1961, must be in relation to the income of the business of growing and manufacturing tea, rather than to the taxable portion of such income?" The brief facts necessary for decision of the above question are as follows. The respondent-assessee is a limited company engaged in the cultivation and manufacture of tea. During the accounting period relevant to the assessment year 1986-87, the assessee had deposited a sum of Rs. 18 lakhs under section 33AB(1) of the Income-tax Act, 1961, for short "the Act", and claimed the entire deposit as deduction. The Assessing Officer while taking the profits of the assessee considered only 40 per cent, of the business profit, amounting to Rs. 43,00,846 ....

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.... that going by the provisions of section 33AB of the Act is geared to the business profit from the growing and manufacturing of tea computed under the head "Profits and gains of business or profession" and that both the appellate authorities have rightly found that the deduction allowable under section 33AB of the Act must be geared to the business profit of Rs. 1,06,05,455. In order to appreciate the rival contentions, it is necessary to refer to the provisions of section 33AB of the Act and rule 8 of the Income-tax Rules. Section 33AB of the Act reads as follows: "33AB. (1) Where an assessee carrying on business of growing and manufacturing tea in India has, during the previous year, deposited with the National Bank any amount or am....

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.... or profession" is profit before making any deduction under this section. The profits of such business referred to in clause (b) must necessarily be the profits of the business referred to in the main part of sub-section (1), namely, "business of growing and manufacturing of tea in India". The assessing authority in the instant case has worked out the profits of the business of growing and manufacturing tea in India at Rs. 1,06,05,455. If the deduction as provided under section 33AB(1), clause (b), is computed, it will come to Rs. 21,21,090. However, the sub-section provides that the deduction permissible under the sub-section is the lesser of the two amounts provided under clauses (a) and (b). In that view of the matter, since the assessee....