2008 (11) TMI 50

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....pertaining to the assessment year 2003-04.  2. The Revenue is aggrieved by the impugned judgment, in so far as, the Tribunal held that interest income on fixed deposits earned by the assessee be treated as "business income", as against, "income from other sources". The consequent effect of which would be that the assessee would be required to deduct 90% of such interest from the "profits of the business" under Section 80HHC of the Act. 3. At this stage, it may be noted that we had issued notice in the appeal by our order dated 02.07.2008. As per the service report, the respondent has been served. Despite, service of notice, the respondent has chosen not to put in an appearance before this Court. This has left us with no alternati....

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.... came to the conclusion that the interest income earned on the fixed deposit had to be treated as "income from other sources" and accordingly, deduction under Section 80HHC of the Act, on the interest income, was disallowed. 7. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as the "CIT(A)"]. The CIT (A) in the operative part of its order dated 07.09.2006 held as follows: "Therefore, in view of the facts and the legal position the assessee is not entitled to get deduction u/s 80-HHC on account of interest income generated out of fixed deposits in the bank. However only 90% of such interest is to be deducted from the profits of the business in view of the s....

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.... but also that its ratio has been misconstrued by the Tribunal. This is evident upon reading Paragraphs 35 and 36 at Pages 496-497 of the said judgment. The observations of the Division Bench, in so far as, they are relevant for purposes of disposal of this appeal are extracted below: "We are, therefore, of the view that where surplus funds are parked with the bank and interest is earned thereon it can only be categorized as income from other sources. This receipt merits separate treatment under section 56 of the Act which is outside the ring of the profit and gains from business and profession. It goes entirely out of the reckoning for the purpose of section 80 HHC. To give effect to this position, the Assessing Officer while computing ....