TREATMENT OF INTEREST RECEIVED BY INDUSTRIAL UNIT OF SEZ U/S10AA

[KISHOR DATTANI]

EXEMPT OR Taxable interst received from FDR by unit covered U/S 10AA of IT Act. Which is kept as margin againt loan taken from bank and utilised for industrial undertaking.

[Rama Krishana]

What is your query?

[KISHOR DATTANI]

My querry is assessee is manufacturer and exporter of jewellery and unit is situated in SEZ covered U/S 10AA. For obtaining various facilities from bank such as advance Gold loan against export order assessee have to make FDR as margin money against LC.Said FDR is directly related with gold procurment from Bank itself and have direct nexus with business carried on.

ITO wants to treat such interest received against FDR as Income from Other source and not Profit from industrial unit.

Kindly through some light and legal decisions directly related.

 

 CA KISHOR DATTANI

AI Summary

Tax treatment of interest: classification of interest on margin FDRs affects exemption for SEZ unit income. Whether interest on fixed deposits created as margin for bank facilities by an SEZ industrial unit falls within the exemption under section 10AA or constitutes taxable income from other sources; key factual issue is the direct nexus between the FDRs (used to secure advance gold loans and LC for procurement) and the unit's manufacturing and export operations, and whether that nexus renders the interest attributable to the industrial undertaking.