2018 (12) TMI 463

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... 2.Heard Mrs.R.Hemalatha, learned Counsel for the Revenue and Mr.Vijaya Raghavan for M/s.Subbaraya Aiyar Padmanabhan, the learned Counsel for the respondent. 3.This Appeal have been admitted on 22.08.2008, on the following Substantial Question of Law: "Whether in the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest income in toto forms part of eligible business profits for the purpose of deduction under Section 80HHC and only 90% has to be excluded from the business profits?" 4.The learned counsel for the respondent/assessee submitted that tax effect is less than Rs. 30,000/- and therefore, it is clearly hit by Circular No. 3 of 2018 dated 11.07.2018 issued by Central Boa....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....le Supreme Court in the CIT Vs. Karnal Cooperative Sugar Mills Ltd. [reported in 243 ITR 2], directed the Assessing Officer to exclude 90% of interest income from the assessee's eligible business profits for the purpose of quantification of deduction under Section 80HHC of the Act. 8.The Tribunal confirmed the order passed by the CIT(A) and in doing so, referred to the decision of the Division Bench of this Court in the case of CIT Vs. V.Chinnapandi [reported in (2006) 153 TAXMAN 233]. 9. After hearing the learned counsel for the parties, we are of the view that the CIT(A) did not endeavour to make an exercise as to whether the deposits made with the banks were exclusively for the purpose of obtaining Letter of Credit, a principal....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Court in the case of the CIT Vs. Cosmos International [reported in (2009) 318 ITR 314]. In the said decision, the Delhi High Court relied upon another decision of the same High Court in the case of CIT Vs. Sri Ram Honda Power Equip [reported in (2009) 289 ITR 475], wherein the Court held that whether surplus funds are parked with the bank and interest is earned thereon, it can only be categorized as income from other sources. Further, it was pointed out that the interest earned on fixed deposit for the purpose of having credit facilities from the bank, does not have an immediate nexus with the export business and therefore, has to necessarily be treated as income from other sources and not business income. 12. In the case on hand, the qu....