Court includes interest income in business income for deduction under section 32AB of Income Tax Act, allows relief under sections 80HHA and 80I.

The High Court upheld the Tribunal's decision to include interest income as part of the business income for computing the deduction under section 32AB of the Income Tax Act. The court ruled in favor of the respondent-assessee, stating that the interest income earned due to financial institutions' insistence should be considered business income. Additionally, the court affirmed the Tribunal's decision to allow separate relief under sections 80HHA and 80I, based on a precedent set by the Supreme Court. Both Tax Appeals were dismissed, with judgments favoring the respondent-assessee and against the Revenue.

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Issues Involved:
1. Exclusion of interest income for computing deduction under section 32AB of the Income Tax Act.
2. Allowance of separate relief under sections 80HHA and 80I of the Income Tax Act.

Issue 1: Exclusion of Interest Income for Computing Deduction under Section 32AB

Facts:
The respondent-assessee, engaged in the business of production and sale of chemicals, claimed deduction under section 32AB for the assessment years 1989-90 and 1990-91. The Assessing Officer excluded interest income from the computation of eligible business income for the deduction, treating it as income from other sources.

Contentions:
The assessee argued that the interest income was earned from deposits made due to the insistence of financial institutions and should be treated as business income. The Commissioner (Appeals) accepted this contention, but the Revenue challenged it before the Tribunal, which upheld the assessee's view.

Judgment Analysis:
The High Court examined section 32AB, which allows deductions for amounts deposited in a Development Bank or utilized for purchasing new machinery, provided the income is from eligible business. The court referred to the Kerala High Court's decision in Appollo Tyres Ltd., confirmed by the Supreme Court, stating that all business income, except those specified, qualifies for the deduction.

The court also considered the Delhi High Court's judgment in Jaypee DSC Ventures Ltd., which held that interest earned from deposits made as a performance guarantee should be treated as business income. The High Court concluded that the interest income in the present case, earned due to the financial institutions' insistence, was part of the business income and not income from other sources.

Conclusion:
The Tribunal's decision to include the interest income as part of the business income for computing the deduction under section 32AB was upheld. The question was answered in the affirmative, against the Revenue, and in favor of the respondent-assessee.

Issue 2: Allowance of Separate Relief under Sections 80HHA and 80I

Facts:
In Tax Appeal No.256 of 2000, the Tribunal directed the Assessing Officer to allow separate relief under sections 80HHA and 80I.

Contentions:
The Revenue's counsel acknowledged that the issue was settled against the Revenue by the Supreme Court's judgment in Joint Commissioner of Income Tax v. Mandideep Eng. & Pkg. Ind. P. Ltd.

Judgment Analysis:
The High Court noted that a similar question in another appeal was dismissed by a Division Bench. Given the Supreme Court's ruling, the court affirmed the Tribunal's decision to allow separate relief under sections 80HHA and 80I.

Conclusion:
The question regarding separate relief under sections 80HHA and 80I was answered in the affirmative, against the Revenue, and in favor of the respondent-assessee.

Final Judgment:
Both Tax Appeals were dismissed, with the questions answered in favor of the respondent-assessee and against the Revenue.

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