9911796707
TMI Blog1993 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be certified by an auditor, which has been so provided in sub-s. (5) of s. 32AB. He pleaded that, the appellant company, has purchased a new machinery at a cost of Rs. 1,95,376. The profit of the eligible business, as certified by the auditor, is Rs. 2,32,117. The figure of profit as computed as per the provisions of the Act, before allowing of any deduction under s. 32AB, is computed at Rs. 72,670. The deduction is therefore to be allowed with reference to this profit of Rs. 72,670. The amounts that needs to be compared, for allowing of deduction under this section are Rs. 72,670 and 20% of Rs. 2,32,117 and the amount that is lesser of the two, has to be deducted from the computed profit of Rs. 72,670. The amount of 20% of Rs. 2,32,117, being Rs. 46,423 is positively lower, and hence deduction was allowed to that extent. He thus supported the order of the CIT(A). 3. The rival contentions on the above issue, have been very carefully considered. The ground as raised by the Revenue is reproduced for the sake of facility. "On the facts and in the circumstances of the case, the CIT(A) has erred in allowing deduction under s. 32AB at Rs. 46,423 which could not be purchased out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever amount is less. He also observed that even where the cost of the machinery that has been purchased, is greater than the 20% of the profits of the eligible business, the entitlement to deduction is limited to 20% of the profits of the eligible business. On the calculation of the profits of the eligible business, he rejected the contention of Asstt. CIT, by observing that no defect had been pointed out. 4. We shall reproduce the relevant portion of the s. 32AB for the sake of facility and for appreciating the controversy in the instant case. "32AB.(1) Subject to the other provisions of this section, where an assessee whose total income includes income chargeable to tax under the profits and gains of business or profession has out of such income, (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 cl. (a), in accordance with, and the purposes specified in a scheme (hereinafter in this section referred to as the scheme) to be framed by the Central Govt. or if the assessee is carrying on the business of growing and manufacturing tea in India, to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is claimed have been audited by an accountant as defined in the Explanation below sub-s. (2) of s. 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:" The reading of the section indicates that the deduction is permissible only if the total income as computed under the provisions of the IT Act from the business or profession and that the income from business or profession should be a positive figure. The second condition is that the amount deposited or utilised must be from the income from business or profession, which is chargeable to tax. The third condition is that the amount utilised or deposited would be compared with twenty per cent of the profits of the eligible business, as computed in the accounts. The fourth condition is the derived one, i.e., the extent of deduction allowable, which would be lesser of the amount utilised or 20% of the profits of the eligible business. In the instant case, the appellant company has a total income of Rs. 72,667 which is entirely from business and the whole of such income is chargeable to tax. The first of the condition of the sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining separate books of accounts, as indicated in the report of the auditor issued under sub-s. (5) of s. 32AB, in col. No. 3 which has been reproduced earlier, since, it is not the case of the Asstt. CIT that, separate books of accounts are not maintained of the eligible business. The sub-s. (3) clearly provides that, profit of the eligible business to mean that profit as is computed in the accounts of the assessee, audited according to sub-s. (5) of the Act. It further provides for the items to be added and reduced from this profit and the final derived profit figure, would be the profit of the eligible business, which would be relevant for this sub-s. (1) of s. 32AB of the Act. The starting point is the profit as shown in the P L a/c, prepared as per parts II and III of Schedule VI of the Companies Act, 1956. The amounts that are to be deducted from this profit are (a) depreciation as allowable under s. 32(1) of the IT Act; and (b) amounts withdrawn from provisions of reserves, if credited to P L a/c. The amount so arrived at, we shall call for the sake of convenience as 'profit plus'. The amounts that are permitted to be added to the 'profit plus' are those amounts that are de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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