The amount of deduction available under section 33AB of the Income Tax Act, 1961 is the lesser of the following:
- .The amount deposited in the specified account with NABARD 40% of the profits of the business computed under the head “Profits and gains of business or profession” before making any deduction under this section.
For example, let’s say a tea plantation deposits ₹10 lakh in a specified account with NABARD. The plantation’s profits for the year are ₹20 lakh. In this case, the plantation can claim a deduction of ₹8 lakh, which is the lesser of the two amounts.
EXAMPLES:
- Kerala: 50% of the amount deposited in the specified account.
- Tamil Nadu: 40% of the amount deposited in the specified account.
- West Bengal: 35% of the amount deposited in the specified account.
- Assam: 30% of the amount deposited in the specified account.
- Karnataka: 25% of the amount deposited in the specified account.
The actual amount of deduction that an assesses is eligible for will depend on the state in which they are located and the type of business they are engaged in. For example, an assesses who is engaged in the cultivation of tea in Kerala would be eligible for a deduction of 50% of the amount deposited in the specified account, while an assesses who is engaged in the manufacturing of coffee in Karnataka
would be eligible for a deduction of 25% of the amount deposited in the specified account.
- Case laws
- Goodricke Group Ltd. v. Commissioner of Income-Tax (No. 1) (2011) 334 ITR 228 (Cal): The Calcutta High Court held that the amount of deduction under section 33ABof the Income Tax Act is to be computed on the basis of the profits of the business of growing and manufacturing tea, and not on the basis of the total profits of the assesses.
- M/s. Singlo (India) Tea Ltd. v. Commissioner of Income Tax (2016) 382 ITR 140 (Cal): The Calcutta High Court held that the amount of deduction under section 33ABof the Income Tax Act is to be computed on the basis of the profits of the business of growing and manufacturing tea, even if the assesses also has other businesses.
- CIT v. Mahavir Plantations Ltd. (2003) 263 ITR 274 (Delhi): The Delhi High Court held that the amount of deduction under section 33ABof the Income Tax Act is to be computed on the basis of the profits of the business of growing and manufacturing tea, even if the assesses has incurred losses in other businesses.