Interest on Fixed Deposit Receipts classified as "Income from other sources" not "Business Income" under section 80HHC

The High Court determined that interest earned on Fixed Deposit Receipts should be classified as "Income from other sources" and not "Business Income." The Court held that 100% of the interest should be excluded from business profits under section 80HHC. The Tribunal's decision to exclude only 90% of the interest was overturned, ruling in favor of the revenue.

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Issues involved: Classification of interest earned on Fixed Deposit Receipts u/s "Business Income" or "Income from other sources"; Interpretation of section 80HHC of the Income-tax Act, 1961.

Summary:

1. The High Court framed two substantial questions of law for consideration: (1) Whether the interest earned on Fixed Deposit Receipts should be assessed under "Business Income" or "Income from other sources"Rs. (2) Whether the Tribunal was correct in holding that only 90% of the interest should be excluded from business profits under section 80HHC, even if the interest is assessed under "Income from other sources"Rs.

2. The Court noted the absence of the assessee and proceeded with the case. The appeal was heard finally without the filing of paper books.

3. The revenue's counsel referred to a relevant judgment, indicating that the questions raised were covered by it. The Court agreed that the income from Fixed Deposit Receipts should be assessed as income from other sources, falling outside section 80HHC. Consequently, 100% of the interest should be excluded from business profits as per Explanation (baa) to section 80HHC.

4. The Court set aside the Tribunal's order, ruling in favor of the revenue. The appeal was allowed in accordance with the above findings.

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