The main legal point established in the judgment is that the deduction under Section 32AB is allowable only on the basis of profit from 'business or profession' and not from income from other sources.

1. IN this application under Section 256(1) of the INcome-tax Art, 1961, the Tribunal has referred the following question :

"Whether, on the facts and in the circumstances of the case and on a proper interpretation of Section 32AB, the assessee was eligible for the deduction in respect of the dividend income ?"

2. THE assessee is the owner of 13 tea gardens. All these are situated in upper Assam. THE assessee derives income from these tea gardens. In addition to that, the assessee has also received dividend income and claimed the benefit of Section 32AB of the Act on the dividend income also. That has been denied by the Assessing Officer. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) also found that the assessee is not entitled for deduction under Section 32AB on the dividend income. In appeal before the Tribunal, it is recorded that Section 32AB(3) says what the profits of the business of an assessee for the purpose of Sub-section (1) are and according to the said sub-section, the profits shall be an amount arrived at after deducting an amount equal to the depreciation as per Section 32(1) from the profits computed as per the requirements of Parts II and III of Schedule VI to the Companies Act, 1956. And as the assessee has shown these dividends as part of the business profits in the profit and loss account prepared as per the requirements of the Companies Act, the assessee is entitled for deduction under Section 32AB, on the dividend income also. Some Tribunal decisions were also referred to wherein a similar view has been taken by the Tribunal.

None appeared for the assessee. Heard learned counsel for the Revenue, Mr. Agarwal, submits that the issue is squarely covered by the decision of the Gauhati High Court in CIT v. Dinjoye Tea Estate (P.) Ltd. [1997] 224 ITR 263, wherein the view has been taken that dividend does not come under the heading "Profits and gains of business or profession". Therefore, the benefit of Section 32A cannot be extended to the dividend income.

3. SUB-section (1) of Section 32AB provides that a sum equal to 20 per cent. of the profits of business or profession as computed in the accounts of the assessee audited in accordance with SUB-section (5) is allowable. Even in the section itself, as quoted above, the words are given, "Profits and gains of the business or profession". From a perusal of the records it shows that the assessee is the owner of the tea gardens and it derives income from selling tea leaves. The investment in the shares is not a business of the assessee. The deduction under Section 32AB is allowable only on the basis of profit from "business or profession" and not from the income from other sources. When investment in shares is neither a business nor a profession of the assessee, the dividend income received from those shares on account of shares held by the assessee cannot be treated as income from the "businesss or profession". In view of the facts in the case in hand, the Tribunal has committed a mistake in directing to allow the deduction to the assessee under Section 32AB, on the dividend income.

4. IN the result, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee. The reference so made is disposed of accordingly.

All parties are to act on a xerox signed copy of this dictated order.