D.K. Seth, J. - (1.) The relevant assessment year involved in this case is 1988-89. The question that has arisen has to be answered on the basis of the law, as it stood for the previous year relevant for the assessment year. The question raised in this case relates to the eligibility of deduction under section 32AB of the Income-tax Act, 1961. Having regard to section 32AB as it stood then whether the income derived under the head "Income from business or profession" only would be eligible for deduction under section 32AB(l)(ii) or this deduction would be allowable on the income of the eligible business contemplated under sub-section (3) of section 32AB. In other words, whether this 20 per cent. income is to be allowed on the income of the eligible business contemplated under sub-section (3) of section 32AB irrespective of the fact that it might include income from sources 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).
(2.) 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(l)(a)(b)/ then the eligibility of deduction under section 32AB(l)(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 to section 32AB(3) clearly indicates the extent of the eligibility criteria for deduction, something distinct from the qualification for being eligible to deduction. According to him, the decision of the Gauhati High Court in CIT v. Dinjoye Tea Estate (P.) Ltd. [1997] 224 ITR 263 and that of the Calcutta High Court in CIT v. Warren Tea Ltd. are distinct and contrary to the ratio laid down in Apollo Tyres Ltd. v. CIT and CIT v. Nawn Estate P. Ltd.
(3.) According to Dr. Pal, once the assessee is eligible by satisfying the condition that he has qualified on account of the deposit in terms of sub-section (1) of section 32AB, he would be entitled to the deduction contemplated under clauses (i) and (ii) of section 32AB(1) as computed on the basis of sub-section (5) thereof. According to him, the profits of eligible business cannot be equated to the profits of the business chargeable under the head "Profits and gains of the business". Profits of the eligible business would be an amount arrived at after deduction of the amounts of depreciation from the amount of profits contemplated in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act in terms of sub-section (3). The computation of the profits of the eligible business cannot be made in accordance with the provisions of the Income-tax Act. The bifurcation of the profits of the business into different heads like "profits and gains of business and profession" is not relevant for the purpose of computation of income eligible for deduction under Part II and Part III of Schedule VI to the Companies Act. He relied on the decision of the Division Bench in Assam Brook Ltd. v. CIT [2004] 267 ITR 121 rendered by the Calcutta High Court following Apollo Tyres Ltd. He also elaborately referred to the ratio decided in Apollo Tyres Ltd. and led us through the said decision. He had also drawn our attention between comparison of the provisions of section 32AB and those of section 115J for the purpose of referring to book profit and support his contention with regard to the distinction sought to be made by him in the matter of qualification and eligibility.;