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Issues involved:
1. Disallowance of interest received from banks for securing export credit facilities u/s 80HHC of the Income-tax Act, 1961. 2. Validity of retrospective amendment act of amending sec. 80HHC and levy of interest u/s 234B based on retrospective amendment. Issue 1: Disallowance of interest received from banks for securing export credit facilities u/s 80HHC of the Income-tax Act, 1961: The Assessee appealed against the order disallowing 90% of the gross interest received from banks on deposits for securing export credit facilities from the purview of 'profits of business' for computing deduction u/s 80HHC. The Tribunal referred to a decision by the Hon'ble Madras High Court in Dollar Apparels v ITO, where it was held that income earned from bank deposits without a nexus to export earnings is assessable under 'income from other sources' and not 'income from business.' Consequently, the Tribunal dismissed the Assessee's ground based on this precedent. Issue 2: Validity of retrospective amendment act of amending sec. 80HHC and levy of interest u/s 234B based on retrospective amendment: The Assessee challenged the retrospective amendment act of amending sec. 80HHC and the validity of levying interest u/s 234B based on this retrospective amendment. The Tribunal cited a previous order in the case of M/s. Well Knit Industries where it was held that the Assessee could not have anticipated the tax implications of the retrospective amendment, invoking the maxim "LEX NON COGIT AD IMPOSSIBILIA," which means the law cannot compel one to do the impossible. The Tribunal concluded that in such a situation, the Assessee cannot be held liable to pay advance tax, and therefore, interest u/s 234B is not applicable. Following this precedent, the Tribunal decided this issue in favor of the Assessee and against the Revenue. In conclusion, the appeal of the Assessee was partly allowed based on the above considerations.
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