Law:

Section:

Section 32AB of the Income-tax Act, 1961 - Investment deposit account - Assessment year 1989-90 - Whether profit earned by assessee from sale of fixed assets cannot be included in main profit of assessee earned from its business for purposes of calculating deduction under section 32AB - Held, yes FACTS The assessee-company was engaged in the business of the manufacture and sale of the electrodes. For the assessment year 1989-90, the assessee claimed deduction under section 32AB on its profit, which included a profit earned by the assessee by the sale of one of the fixed assets. The Assessing Officer held that a profit of Rs. 18,97,928 earned by the assessee was not a profit nor it could be so regarded as the profit earned by the assessee from its business, but it was a profit earned by the sale of one of the fixed assets and, hence, the profit earned by the sale of such asset could not be included while calculating the deduction available to the assessee under section 32AB. The Commissioner (Appeals) as well as the Tribunal allowed the claim of the assessee. On revenue's appeal : HELD A plain reading of section 32AB would go to show that in order to claim deduction under section 32AB, only the profits and gains of business or profession earned by the assessee are required to be taken into consideration. Any profit earned by sale of fixed assets by an assessee cannot be regarded and/or construed to be in the nature of profits and gains earned from the business which is being carried on by it. In the instant case since the sale of fixed assets was not the business activity of the assessee much less regular business activity, the profit earned by the assessee from such sale would not partake the character of profit earned from its main business so as to entitle it to claim deduction under section 32AB. [Para 8] As rightly urged by the revenue, the case of assessee would fall in section 50 for the purpose of calculating capital gains earned in the case of sale of depreciable assets. In other words, the profit earned by the assessee by sale of fixed assets should have been dealt with for determining the taxing liability by taking recourse to the provisions of…

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