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Issues:
- Whether interest income should be included while calculating the deduction under section 80HHD. Analysis: The dispute in this case revolves around the treatment of interest income for the purpose of computing deduction under section 80HHD of the Income-tax Act. The Assessing Officer had reduced the total assessed business income by the interest income earned by the assessee, resulting in a lower deduction. However, the ld. CIT(A) held that interest income, assessed as business income, should not be disregarded while calculating the deduction. The key contention of the Revenue was that interest income is not related to services provided to foreign tourists and should be excluded from the deduction calculation under section 80HHD. The assessee argued that interest income, already assessed under business income, should be considered for determining the deduction. The Tribunal analyzed the provisions of section 80HHD, which allows deduction for profits derived from services to foreign tourists, and concluded that interest income assessed as business income cannot be treated as non-business income for deduction calculation purposes under section 80HHD. The Tribunal upheld the ld. CIT(A)'s decision, emphasizing that interest income, once assessed under business income, cannot be reclassified for deduction computation. The Tribunal highlighted the specific conditions under section 80HHD for claiming deductions related to services provided to foreign tourists. It clarified that the interest income, though not directly linked to services for foreign tourists, had already been assessed as business income. The Tribunal distinguished various case laws cited by both parties, emphasizing that the interest income, assessed under the head 'Profits & gains of business or profession,' cannot be reclassified as 'income from other sources' for deduction calculation under section 80HHD. The Tribunal noted that the interest income's connection to foreign exchange earnings or services provided to foreign tourists was not the primary consideration for deduction calculation under section 80HHD. Instead, the Tribunal focused on the legal implications of assessing the interest income under the business income category. Referring to the Bombay High Court's decision in a similar context, the Tribunal affirmed that interest income assessed as part of business profits cannot be treated as non-business income for deduction calculation purposes. Consequently, the Tribunal upheld the ld. CIT(A)'s decision, confirming that interest income assessed as business income must be considered for determining the deduction under section 80HHD. In conclusion, the Tribunal's detailed analysis and interpretation of the provisions of section 80HHD, along with relevant case laws, led to the confirmation of the ld. CIT(A)'s decision regarding the inclusion of interest income in the deduction calculation. The Tribunal's ruling clarified that once interest income is assessed under business income, it cannot be reclassified as non-business income for the purpose of computing deductions under section 80HHD.
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