TaxTMI 
TaxTMI 
2005 (3) TMI 85
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....l the items under the head "Other sources". Aggrieved by the same, the assessee preferred an appeal before the Appellate Assistant Commissioner and contended that interest received on deposit of surplus money earned during the course of business operation for short periods was business income and taxable under the head "Business". With regard to interest on income-tax refunds, it was contended there was a direct business connection between the tax paid and profit and gains of business and the refund of such tax. Regarding commission receipts, the assessee contended that the activity of procuring business by canvassing has been part of the business for the past several years and in the previous years the income was assessed under the head "Income from business or profession". The Commissioner of Income-tax (Appeals), Kochi, by order dated September 28, 1994, held that the various interest receipts should be assessed as income from "other sources". With regard to commission income, the Commissioner held that the activity of procuring business by canvassing has been part of the business and the income was assessed under the head "Income from business or profession". The appellate a....
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....ved by the assessee from the export of such goods or merchandise .... (1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any export house or trading house in respect of which the export house or trading house has issued a certificate under the proviso to sub-section (1), there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction of the profits derived by the assessee from the sale of goods or merchandise to the export house or trading house in respect of which the certificate has been issued by the export house or trading house. (2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into, India by the assessee other than the supporting manufacturer in convertible foreign exchange, within a period of six months from the end of the previous year, or, where the Chief Commissioner or, Commissioner is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons be....
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....otal turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: ... Explanation.- For the purposes of this sub -section,- (a) 'adjusted export turnover' means the export turnover as reduced by the export turnover in respect of trading goods; (b) 'adjusted profits of the business' means the profits of the business as reduced by the profits derived from the business of export out of India of trading goods as computed in the manner provided in clause (b) of sub-section (3).... (f) 'trading goods' means goods which are not manufactured or processed by the assessee. (3A) For the purposes of sub-section (1A), profits derived by a supporting manufacturer from the sale of goods or merchandise shall be,- (a) in a case where the business carried on by the supporting manufacturer consists exclusively of sale of goods or merchandise to one or more export houses or trading houses, the profits of the business; (b) in a case where the business carried on by the supporting manufacturer does not cons....
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....ause (a) of sub-section (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962); (ba) 'total turnover' shall not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962): Provided that in relation to any assessment year commencing on or after the 1st day of April, 1991 the expression 'total turnover' shall have effect as if it also excluded any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28;... (c) 'Export house certificate' or 'trading house certificate' means a valid export house certificate or trading house certificate, as the case may be, issued by the Chief Controller of Imports and Exports, Government of India; (d) 'supporting manufacturer' means a person being an Indian company or a person (other than a company) resident in India, manufacturing (including proceeding) goods or merchandise and selling such goods or merchandise....
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....eld that they are not to be excluded under Explanation (baa) to section 80HHC of the Income-tax Act, 1961. While holding so, the court held that the test to be applied in all such matters is, whether interest, service charges, commission accrued out of the main business activity of the company and whether they were operational income. This court in CIT v. K. Rajendranathan Nair [2004] 265 ITR 35 held that the income earned by processing goods belonging to third persons is not part of the turnover for purpose of section 80HHC of the Income-tax Act. The court held that in order that an amount must be included in the total turnover, it must either be the purchase price or the sale price or something incidental to the transfer of the goods dealt with by the assessee. In other words, the turnover must relate to the purchase or the sale of the goods made by the assessee. Analysing the abovementioned decision, it is difficult to accept the contention of the assessee that interest accrued on bank deposit and interest received by the assessee would be profit derived out of the business. The assessee submitted that the amount was kept in fixed deposit when funds were not readily required ....