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of <h1>Court exempts interest income from tax, rules in favor of assessee under Section 10B</h1> <h3>The Commissioner Of Income Tax And The Assistant Commissioner Of Income Tax, Circile – 12 (4) Bangalore Versus M/s Rajesh Exports Ltd</h3> The Commissioner Of Income Tax And The Assistant Commissioner Of Income Tax, Circile – 12 (4) Bangalore Versus M/s Rajesh Exports Ltd - TMI Issues:1. Taxability of interest income under 'Income from Business' or 'Income from Other Sources'.2. Allowability of deduction under Section 10B for interest income earned from fixed deposits.Issue 1: Taxability of Interest Income:The High Court addressed the issue of whether interest income earned by the assessee from fixed deposits should be taxed under the head 'Income from Business' or 'Income from Other Sources'. The Tribunal had held that the interest income was liable to tax under 'Income from Business'. The Court referred to a previous case where it was established that interest received or consideration received from the sale of import entitlement should be construed as income of the business, leading to a direct nexus between this income and the business of the undertaking. The Court concluded that the interest derived from the fixed deposit should also be exempted from tax, in line with Section 10B of the Act. Consequently, the substantial question of law was answered in favor of the assessee, resulting in the dismissal of the appeal.Issue 2: Allowability of Deduction under Section 10B:The second issue involved the claim of deduction under Section 10B for a specific sum of interest income earned from fixed deposits. The Tribunal had to determine whether this interest income was an allowable deduction as it was attributable to the assessee's business. The Court's analysis in a previous case highlighted that certain income, including interest derived from deposits, should be exempted from tax under Section 10B if it is related to the business of the undertaking. Based on this interpretation, the Court concluded that the claim of deduction for the interest income in question was valid. Therefore, the substantial question of law was resolved in favor of the assessee, leading to the dismissal of the appeal by the revenue.In summary, the High Court of Karnataka addressed the taxability of interest income from fixed deposits under 'Income from Business' and the allowability of deduction under Section 10B. By referring to relevant precedents and interpreting the provisions of the Act, the Court ruled in favor of the assessee, concluding that the interest income was exempted from tax and the deduction claimed under Section 10B was valid.
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