Deduction under section 33AB is allowable against composite income and not against only 40% of composite income- A case of un-necessary litigation by revenue in case of Tea Companies . Computation provision:
Section 33AB is a provision relating to allowing deduction from business income. It falls under Part “D” of Chapter IV of the Income-tax Act, 1961. This part consists of various sections from section 28-44DB. As per section 29 the income referred to in section 28 shall be computed in accordance with the provisions ofsections 30 to 43D. Therefore, provisions of section 33AB falls within the scope of computation of income from business and profession and is not under Chapter VI A of the Act which relates to allowing deduction from gross total income of assessee. Crucial words in the Provisions of section 33AB:
For the purpose of ascertaining the basis of computing the amount allowable the following words are crucial: “33AB. (1) Where an assessee carrying on business of growing and manufacturing tea in India has, before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier, deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with the Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board, the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought form earlier years is set off under section 72) of- (a) a sum equal to the amount or the aggregate of the amounts so deposited; or (b) a sum equal to twenty per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section), whichever is less: A reading of the provision clearly shows that it relates to business of growing and manufacturing tea and upper limit of allowable deduction is 20% of profits of such business. There is no ambiguity. However, the revenue is trying to interpret that deduction should be with reference to the 40% of income from such business. The assessees have to face litigation and we find that there have been several cases before High Court.
(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form33 duly signed and verified by such accountant : (3) Any amount standing to the credit of the assessee in 34[the special account or the 35[***] Deposit Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme] or in the circumstances specified below :— (a) closure of business ;
(b) death of an assessee ;
(c) partition of a Hindu undivided family ;
(d) dissolution of a firm ;
(e) liquidation of a company.
36[(4) Notwithstanding anything contained in sub-section (3), where any amount standing to the credit of the assessee in the special account or in the Deposit Account is released during any previous year by the National Bank or withdrawn by the assessee from the Deposit Account, and such amount is utilised for the purchase of— (a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house; (b) any office appliances (not being computers);
(c) any machinery or plant, the whole of the actual cost of which is allowed as a deduction...
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