2023 (4) TMI 901

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....Singh, Adv. Mrs. Gargi Khanna, Adv. Mr. Rupesh Kumar, Adv. Mr. Sundeep Pandhi, Adv. ORDER This common order and judgment will dispose of these appeals by the appellant/assessee - M/s. Magnum International Trading Company (P) Ltd., which relate to assessment years 1989-1990, 1990- 1991 and 1991-1992. The question raised pertains to computation of deduction under Section 80-HHC of the Income tax Act, 1961 For short, '1961 Act', as applicable to the aforesaid assessment years. At the outset, we may observe that this Court in P.R. Prabhakar v. Commissioner of Income Tax, Coimbatore (2006) 6 SCC 86 has held that the amendments made to Section 80-HHC(3) of the 1961 Act vide Finance (No. 2) Act, 1991, substituting sub-section (3) to Se....

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.... 1961 Act in terms of the proportionality formula prescribed under sub-section (b) to Section 80-HHC(3) of the 1961 Act, which reads thus: "80-HHC. Deduction in respect of profits retained for export business.- *** (3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of India shall be,- *** (b) in a case where the business carried on by the assesse does not consist exclusively of the export out of India of the goods or merchandise to which this section applies, the amount which bears to the profits of the business (as computed under the head "Profits and gains of business or profession") the same proportion as the export turnover bears to the total ....

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....ngs given by the assessing officer on the ground that the surplus funds had been utilized for earning interest income. He held that surplus funds were 'transitory surplus funds' and utilization of the same for earning interest income cannot take away the character of 'business income' from such interest. In our opinion, this finding is fallacious and wrong. The surplus funds, when deposited in a bank or otherwise to earn interest, are not taxable under the head 'income from business', but under the head 'income from other sources'. This income does not have direct nexus nor earned by way of business activity. Accordingly, the interest income is not to be treated as 'income from business' for computation of the deduction in terms of clause (....