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The judgment involves the issue of whether interest income earned by the assessee on funds retained in Exchange Earners Foreign Currency Account represents income derived from the business of exports and should be taxed under the head "Income from other sources" or not. Facts and Arguments: The assessee, a 100% Export Oriented Unit engaged in manufacturing and exporting jewelry, earned interest income on funds retained in EEFC Account. The Assessing Officer assessed this interest income under "Income from other sources," stating it was not directly generated from the business activities. The assessee argued that the interest income was earned during the ordinary course of its export business. The CIT(A) held that while part of the interest income was assessable under "Profits and gains of business or profession," the remaining amount should be taxed under "Income from other sources." The assessee contended that both interest incomes were earned in the ordinary course of business and should not be separated from the exempt export income under section 10B. Decision: The Tribunal held that the interest income earned on funds in the EEFC Account was not derived from the export activities of the assessee's 100% EOU. Even if the interest income was assessed under "Profits and gains of business or profession," it would not qualify for exemption under section 10B. Citing the judgment in Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278, the Tribunal upheld the CIT(A)'s order, dismissing the appeal. The Tribunal emphasized that the interest income was earned because the funds were retained in the EEFC Account, not due to the manufacturing and export activities. The Tribunal concluded that the interest income could not be considered as export income of the assessee's EOU.
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