TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 566
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....62,225/-. 3. Learned Assessing Officer opined that certain amount of interest earned from bank deposits and some other income on which claim u/s 10A of the Act is made, were not directly related to export business of the assessee, and disallowed exemption on the interest income by treating the same as income from other sources u/s 56 of the Act and passed assessment order dated 31/03/2013, determining the taxable income of Rs. 5,75,94,250/-, thereby allowing the exemption u/s 10A for a sum of Rs. 56,86,87,403/- as against the actual claim of Rs. 62,55,84,569/-. 4. Aggrieved by such an action of the learned Assessing Officer, assessee has filed an appeal before the learned CIT(A) and the learned CIT(A) by order dated 12/01/2016 upheld the addition holding that the interest and other the income are not qualified for exemption u/s 10A of the Act. learned CIT(A), however, directed the learned Assessing Officer to deduct the amount of communication charges of Rs. 95,67,007/- and internet bandwidth and VOIP expenses of Rs. 96,84,078/- from both total turnover and export turnover for the purpose of calculating the claim under section10A of the Act. Consequent thereto, learned Assessing ....
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....xed deposits and Current account with banks is directly relatable to the assessee's export business income and is to be allowed as exemption u/s 10A of the Act. According to him, under Sec 10A of the Act, interest earned on the funds which are surplus and idle and temporarily parked with the banks is directly linked with the assessee's 100% export business activity and the same shall be given exemption u/s 10A of the Act, and that the same cannot be treated as other sources u/s 56 of the Act as if it is unconnected with assessee's business. He, therefore, submits that the income generated by way of bank interest from such activity is directly relatable to the assessee's export business activity and that the same is qualified for exemption u/s 10A of the Act. 8. In support of the above contentions, learned AR placed reliance on the decisions of the Delhi ITAT in the case of Cognizant Technology Solutions India Private Limited vs ITO in ITA No. 6878/DEL/2017 by order dated 30/06/2022, ITAT Mumbai in the case of Tech Mahindra Business Services Limited vs DCIT in I.T.A. No.766/Mum/2016 by order dated 30/06/2021, Karnataka High Court in the case of CIT Vs Hawlett Packar....
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.... case of CIT vs Pandian Chemicals Limited, 262 ITR 278 (SC). 12. Assessee's grievance, therefore, essentially revolves around the classification of interest earned from bank deposits as income from other sources. The core question involved in this appeal is, therefore, whether this interest, derived from parking of the surplus funds in bank accounts, should be treated as profits from an export/oriented business and thus be exempt under Section 10A of the Income Tax Act. learned AR argues that the interest income accrued from fixed deposits made with surplus funds generated by the export business. According to the assessee, the funds were temporarily parked in bank accounts, and the interest income was credited to the profit and loss account. The assessee claims that since the interest earned is directly linked to the export-oriented business activity, it should be eligible for exemption under Section 10A of the Act. This exemption is generally granted for profits derived from the export of goods or services, and the assessee believes that the interest income falls under this category due to its connection to the export business. Therefore, the primary contention is whether the....
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....t these types of interest income should not be treated as income from other sources under Section 56 of the Act. Hon'ble Court further explained that the incidental activities of parking surplus funds or advancing staff loans are integral to the export business operations of such units. These activities are undertaken for commercial expediency and should be considered as part of the export business income. Therefore, the interest income generated from these activities is closely linked to the business's export activity and should not be segregated or taxed separately. As a result, the Court ruled that the assessee was entitled to 100% exemption under Section 10A in respect of the interest income earned from these activities, as the income was incidental to its export business. 16. In the case of Cognizant Technology Solutions India Private Limited vs ITO, the Delhi ITAT dealt with the issue of whether interest income earned by a 100% export-oriented unit (EOU) could be considered as part of its export profits eligible for exemption under relevant tax provisions. In this case, learned CIT(A) observed that the assessee failed to prove that the interest income was derived fro....