2006 (10) TMI 113 - HC - Income Tax

Summary

Issues involved:
The judgment involves the interpretation of provisions of section 80HHC of the Income-tax Act in relation to the exclusion of certain income items from business profits for the purpose of quantifying relief under the said section.

First Issue - Interest Income:
The assessing authority included interest income while quantifying relief under section 80HHC, holding that interest cannot be treated as business income. The appellate authority accepted the assessee's contention regarding interest income, but the Revenue's appeal to the Tribunal was accepted. The Tribunal held that unless there is a relationship of interest income to the export business, the appellant is not entitled to deduction under section 80HHC. The High Court agreed with the Tribunal, stating that no nexus or link was shown by the assessee for the purpose of deduction under section 80HHC. The judgment cited a previous case where a deposit amount related to export transactions was considered for relief under section 80HHC, but the facts in the current case were deemed different. Therefore, the High Court upheld the Tribunal's decision regarding the interest income.

Second Issue - Job Tailoring Receipts and Nomination Profit:
The Appellate Commissioner found a link or nexus for job tailoring receipts and nomination profit in terms of section 80HHC, but the Tribunal did not consider this link for the purpose of benefit under the section. The High Court concluded that a fact-finding is necessary for these two items and remanded the matter back to the Tribunal for re-decision. The High Court partly accepted the appeal, answering the first question of law in favor of the Revenue regarding interest income and leaving the questions of law regarding job tailoring receipts and nomination profit unanswered. The matter was directed to be reconsidered by the Tribunal in light of the Commissioner's order and section 80HHC, without being influenced by previous decisions. Both parties were instructed to appear before the Tribunal for further proceedings.

In conclusion, the High Court's judgment clarified the application of section 80HHC of the Income-tax Act concerning the exclusion of interest income and the need for further examination of job tailoring receipts and nomination profit for the purpose of quantifying relief under the said section.