2021 (3) TMI 554

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....er completed u/s 143(3) is illegal and without jurisdiction. 3. That the addition of Rs. 197809/- being the interest on FDR to secure the contract and extricably linked to business of contract was business income and C.I.T. (A) order treating it to be the income from other sources is illegal and arbitrary. 4. That the income from insurance claim at Rs. 210973/- was already included in profit and loss account and subjected to assessment u/s 143(3) already and again to tax it as income from other sources is a double addition and the C.I.T. (A)'s order sustaining it to be added separately is illegal and arbitrary, 5. The appellant craves to add or alter any other ground of appeal as may be warranted. 2. The assessee has received....

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....he course of hearing. 7. Admittedly the assessee is a contractor working for the various government department and for the purpose of getting the contract from them it is essential for the assessee to give bank guarantee and the bank guarantee are issued by the banks on the deposit of like amount in the form of fixed deposit. The assessee in the submissions before the lower authority had categorically mentioned that due to shortage of funds, the assessee has to submit B/G in favour of various departments and as per norms of the bank, the assessee has to provide 25% cash margin in the shape of FDRS. Hence, FDRs have been prepared as per terms of contract and terms of bank guarantee and these are not investment, but are in the shape of secur....

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....ncome has been determined by applying accounting standards as well as the provisions contained in the Act, the assessee would be permitted to, in terms of section 37 of the Act, claim as deduction, expenditure laid out for the purposes of earning such business income. (vii) In the second stage, the Assessing Officer will deduct from the profits of the business computed under the head "Profits and gains of business or profession" the following sums in order to arrive at the "profits of the business" for the purposes of section 80HHC(3) : (a) 90 per cent of any sum referred to in clauses (iiia), (iiib) and (iiic ) of section 28 i.e., export incentives ; (b) 90 per cent of any receipts by way of brokerage, commission, interest, rent, ....

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....re to be shown by the assessee for application of the netting principle." 12. Referring to the aforesaid conclusions, another Division Bench of this Court in CIT v. Shahi Export House [2010] 195 Taxman 163 (Delhi) has held as under:- "7. A conjoint reading of conclusion Nos.1,4, 5 and 6 and particularly No.5 would clearly demonstrate that only in those cases where interest earned on fixed deposits have an immediate nexus with the export business would be treated as income from business and interest earned on fixed deposits which does not have an immediate nexus with the export business, it would be treated as income from other sources. The court opined that when the interest was earned on the fixed deposits for the purposes of availin....