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2018 (12) TMI 1211 - AT - Income TaxDeduction u/s 10A/ 10AA in respect of interest income and miscellaneous income - Held that - In the present case it has been claimed that the interest has been owned by the assessee by way of parking of the surplus funds available with the units order from software development the activities temporary in fixed deposits. Therefore, respectfully following the decision of THE COMMISSIONER OF INCOME TAX AND ANOTHER VERSUS M/S. HEWLETT PACKARD GLOBAL SOFT LTD. 2017 (11) TMI 205 - KARNATAKA HIGH COURT we also hold that the interest income earned by the assessee is an income eligible for deduction under section 10A of the income tax act. Therefore the learned assessing officer is directed to ground the deduction under section 10 A of the income tax act to the assessee on the interest income - Decided in favour of assessee. With respect to the miscellaneous income earned by the assessee, no details have been furnished to show that what nature of the income assessee has erred. We have also carefully produce the submissions made by the assessee before the learned Commissioner of income tax appeals placed at page number 130 of the paper book submitted before us. The whole contention raised by the assessee was with respect to only the interest income and there was no details furnished of the miscellaneous income earned by the assessee. In absence of nature of the income earned by the assessee, no adjudication on that aspect can be made. Assessee has also not furnished any evidences before us with respect to the nature of miscellaneous income earned by the assessee.- Decided against assessee.
Issues Involved:
1. Eligibility of interest income for deduction under Section 10A/10AA. 2. Eligibility of miscellaneous income for deduction under Section 10A/10AA. Detailed Analysis: 1. Eligibility of Interest Income for Deduction under Section 10A/10AA: The assessee, engaged in providing IT services, claimed a deduction under Section 10A of the Income Tax Act for the Assessment Year 2009-10. The Assessing Officer (AO) disallowed the deduction on interest income, arguing that it could not be considered as income derived from export-oriented undertakings. The CIT(A) upheld the AO's decision, stating that the interest income did not have an immediate source from the eligible undertaking. The assessee appealed, contending that the issue was covered in their favor by previous decisions, including those from the Karnataka High Court in *Commissioner of Income Tax vs Motorola India Electronics Pvt. Ltd.* and *Principal Commissioner of Income Tax vs American Express India Pvt. Ltd.*, which held that interest income, if treated as business income of the eligible export-oriented unit, is eligible for deduction under Section 10A. The Tribunal referred to the Full Bench decision of the Karnataka High Court in *Commissioner of Income Tax v. Hewlett Packard Global Soft Ltd.*, which clarified that interest income earned by a 100% Export Oriented Unit (EOU) from deposits and loans made from surplus funds is to be construed as income derived from the business of the undertaking. The decision emphasized that the profits of the business of the undertaking include all incidental incomes derived from the business, not just the profits from export sales. The Tribunal concluded that the interest income earned by the assessee from parking surplus funds in fixed deposits is eligible for deduction under Section 10A, aligning with the Karnataka High Court's interpretation. Thus, the AO was directed to grant the deduction on the interest income of INR 24,306,435. 2. Eligibility of Miscellaneous Income for Deduction under Section 10A/10AA: For the miscellaneous income of INR 1,281,527, the assessee did not provide sufficient details or evidence to demonstrate the nature of the income. The Tribunal noted that the assessee's submissions before the CIT(A) focused solely on the interest income, with no mention or details of the miscellaneous income. In the absence of specific information about the nature of the miscellaneous income, the Tribunal upheld the lower authorities' decision to exclude it from the deduction under Section 10A. The assessee's failure to furnish necessary evidence precluded any adjudication on this aspect. Conclusion: The Tribunal partly allowed the appeal. The interest income of INR 24,306,435 was deemed eligible for deduction under Section 10A, while the miscellaneous income of INR 1,281,527 was not. The order was pronounced in the open court on 20/12/2018.
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