2010 (12) TMI 451

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....The assessee herein is in the business of export of jewellery. In these two assessment years, namely, 2005-06 and 2006-07, it was found by the Assessing Officer that the assessee had taken a huge amount as loan on which interest was paid. It was also found that the assessee had converted the said loans in the FDRs and interest was received on the said FDRs. It so happened that the interest earned ....

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....ness". The assessee filed an appeal against this order before the Commissioner of Income-tax (Appeals) who deleted the addition and allowed the deduction of interest paid by the assessee to the bank on the borrowed funds under section 57(iii) of the Income-tax Act. This order of the Commissioner of Income-tax (Appeals) has been affirmed by the Tribunal.   2. In order to deal with this issu....

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....of rate of interest in India as against the interest rate outside India which was payable, i.e., LIBOR rate (London Interbank Offered Rate). It was because of this peculiar nature of the transaction and the scheme of the Government of India for the benefit of exporters that the assessee earned more interest on the FDRs than the interest payable to the bank on the borrowed funds. It is not in dispu....