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Issues Involved:
1. Exclusion of dividend income while computing deduction under section 32AB. 2. Exclusion of house property income while computing deduction under section 32AB. 3. Alternative contention regarding net income from house property. Issue-wise Detailed Analysis: 1. Exclusion of Dividend Income: The primary issue in this appeal pertains to the exclusion of dividend income amounting to Rs. 13,41,200 while computing the deduction admissible under section 32AB of the Income Tax Act. The assessee argued that the dividend was earned on units of the Unit Trust of India (UTI), which were acquired to facilitate borrowed capital for the business. The assessee relied on multiple judgments, including the Supreme Court's decision in Apollo Tyres Ltd. v. CIT, where dividend income from UTI units was considered eligible for deduction under section 32AB. However, the Departmental Representative contended that the Apollo Tyres case was not applicable since the assessee was not engaged in the business of buying and selling UTI units. The Tribunal noted that the Supreme Court in Apollo Tyres Ltd. emphasized that only income derived from an "eligible business" qualifies for deduction under section 32AB. Since the assessee was not in the business of trading UTI units, the dividend income could not be treated as business income for section 32AB purposes. Consequently, the Tribunal upheld the CIT(A)'s decision to exclude the dividend income from eligible business profit. 2. Exclusion of House Property Income: The second issue involved the exclusion of house property income amounting to Rs. 2,40,000 while computing the deduction under section 32AB. The assessee contended that this income should be included as business income. However, the Tribunal referred to the Supreme Court's ruling in Apollo Tyres Ltd., which clarified that only income from an "eligible business" qualifies for deduction under section 32AB. Since the house property income did not derive from an eligible business, the Tribunal upheld the CIT(A)'s decision to exclude it from eligible business profit. 3. Alternative Contention Regarding Net Income from House Property: The assessee raised an alternative contention that if house property income was to be excluded, the Assessing Officer should exclude only the net income, not the gross rent received. The Tribunal found merit in this contention and directed the Assessing Officer to reduce the actual expenditure incurred by the assessee for earning the rent from the gross rental income of Rs. 2,40,000 and exclude only the net income for the purpose of computation under section 32AB. Conclusion: The appeal was partly allowed. The Tribunal upheld the exclusion of dividend and house property income from eligible business profit for the purposes of section 32AB but directed that only the net house property income, after deducting actual expenses, should be excluded.
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