TaxTMI 
TaxTMI 
2007 (2) TMI 120
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....te Tribunal was right in law in overlooking the fact that in the absence of any "real income" is it permissible to contend that the interest credited is to be set off against interest paid, what is contemplated in Explanation (baa) is, any other interest/ commission income which are otherwise taxable as "business income" like interest earned from money-lending business etc., and not the interests from these fixed deposits? (3) Whether on a correct and proper interpretation of Section 80HHC of the Income Tax Act, 1961 and application thereof to the facts and circumstances of the case, was the Tribunal legally right in holding that the claim for deduction in respect of income from F.D. was not sustainable despite contrary and consistent view....
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....n under Section 80HHC and not the incidental income from the export proceeds. The Tribunal, while holding that the deposits made with the Bank are for the convenience and benefit of the assessee with a view to derive higher income, concluded that the assessee is not entitled to deduction under Section 80HHC on the interest income. Hence, the above appeals by the appellant/assessee raising the substantial questions of law, as referred to earlier. 3. In K.S.Subbiah Pillai and Co. (India) Pvt. Ltd. vs. Commissioner of Income-tax [(2003) 260 I.T.R. 304],(Mad) where the issue raised was whether on a true construction of Explanation (baa) to Section 80HHC of the Act, interest, rent and commission are to be deducted from export....
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....by the Tribunal, on a reference, this Court while answering the question in favour of the Revenue, held as follows:- " the interest paid by the assessee to the bank, was no doubt, an item of expenditure in the computation of its business income. That, however, would not justify taking the income that the assessee received by way of interest on the deposits that it had with the bank, as part of its business income when in reality it was not. The deposit made with the bank was for the convenience and benefit of the assessee with a view to derive higher interest income. It was not a deposit made pursuant to any requirement imposed by the bank at the time of sanctioning of the facilities. The bank's decision to extend t....