Law:

Section:

Section 32AB of the Income-tax Act, 1961 - Investment deposit account - Assessment year 1988-89 - Whether, having regard to section 32AB, as it stood prior to amendment by the Finance Act, 1989, deduction of 20 per cent was allowable on profits of eligible business computed under sub-section (3) in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956, irrespective of fact as to under what head a particular income would fall for purpose of computation of income under Income-tax Act - Held, yes FACTS In the instant case, the Tribunal had held against the assessee that for the assessment year 1988-89, the income derived under the head 'profits and gains of business or profession' only would be eligible for the said deduction under section 32AB. On appeal, the question for consideration was as to whether having regard to section 32AB as it stood then, the income derived under the head 'Income from business or profession' only would be eligible for deduction under section 32AB(1)(ii) or the deduction would be allowable on the income of the eligible business contemplated under section 32AB(3), irrespective of the fact that it might include income from sources other than income from business or profession. HELD ELIGIBILITY TO DEDUCTION VIS-A-VIS ELIGIBILITY OF DEDUCTION Section 32AB(1) specifically provides the particular deposit of amount or utilisation of amount for the purposes mentioned in clauses (a ) and (b) made out of the income under the head "Profits and gains of business and profession". Once the assessee is qualified under section 32AB(1)(a ) and (b), then the income will be eligible for deduction as contemplated in clauses (i ) and (ii), whichever is less. [Para 9] The qualification clause in sub-section (1)(a) and (b ) refers to profits and gains of business and profession. The eligibility criterion provided in sub- section (1) governs the rest of the said sub-section and any contradiction thereto could have been ignored on the principle of interpretation of statute unless the Legislature had intended otherwise through a clear expression making a distinction between the first part of eligibility criterion for being entitled to…

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