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of <h1>Interest on guarantee-fund bank deposits vs manufacturing/export profits; deductions denied under 80HH/80-I, allowed under 80HHC</h1> Interest earned on bank deposits maintained as a guarantee fund was held not to be income 'derived from' an industrial undertaking for purposes of ss. ... Deductions - income derived from the industrial undertaking - Whether, the Appellate Tribunal was right in holding that interest on amount deposited as guarantee fund forms part of profit derived from the export business and should be included in the profit of the assessment for computing deductions under sections 80HH, 80HHC and 80-I? - HELD THAT:- The interest received on deposits cannot be regarded as income derived from the industrial undertaking but as it is derived from the deposits made by the assessee with the bank. The direct and proximate link is with the deposit in the bank and not with the industrial undertaking. In so far as section 80HHC is concerned, it stands on a different footing as sub-section (3) of section 80HHC, as it stood during the relevant assessment year, equated the profits derived from the export of goods with the profits of the business as computed under the head 'Profits and gains of business or profession'. As in this case, the interest which the assessee derived from the bank deposits had been included in the computation and had been assessed under the head 'Profits and gains of business or profession', this amount will have to be regarded as having been derived from the export effected by the assessee. The question referred to us is, therefore, answered partly in favour of the assessee, i.e., in relation to the deduction under section 80HHC, and partly in favour of the Revenue in so far as the deductions claimed under sections 80HH and 80-I are concerned. The High Court of Madras ruled on the inclusion of interest on guarantee fund deposits in profit calculations for tax deductions under sections 80HH, 80HHC, and 80-I. The interest on bank deposits for import purposes was not considered derived from the industrial undertaking for sections 80HH and 80-I but was accepted for section 80HHC due to its inclusion in business profit calculations. The judgment favored the assessee for section 80HHC deduction but supported the Revenue for sections 80HH and 80-I deductions.
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