2000 (7) TMI 42 - HC - Income Tax

Summary

Issues involved:
The classification of interest income as business income or income from other sources for the assessment year 1989-90, and its impact on the deduction under section 80HHC.

Judgment Details:

Assessment Year 1989-90:
- The assessee received Rs. 35,000 as interest on fixed deposits during this year.
- The Department treated the interest income as income from other sources, while the Tribunal included it in the business profits for the purpose of claiming deduction under section 80HHC.
- The court referred to previous cases where receipts unrelated to export activities were excluded from business profits calculations.
- The court highlighted the introduction of clause (baa) in the Explanation to section 80HHC from April 1, 1992, excluding receipts without nexus to export activities.
- Emphasized that interest income from fixed deposits cannot be considered as part of business profits.
- Reiterated that even before April 1, 1992, receipts lacking nexus with export activities should not be included in business profits calculations.
- The Assessing Officer found the interest income to be from other sources, which cannot be included in business profits under section 28 to section 44D of the Income-tax Act.
- The court held that the interest income, if considered business income, still could not be included in business profits.
- Ultimately, the appeal was allowed as the interest income was deemed taxable as income from other sources, not falling under profits and gains of business.

Conclusion:
The appeal was allowed with no costs, emphasizing that the interest income from fixed deposits could not be included in business profits for the assessment year 1989-90.