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TMI Blog1998 (3) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Other sources'. (ii) While arriving at the proportionate business profit for working out the relief under section 80HHC processing charges were not included in the total turnover which resulted in excess deduction. The Commissioner of Income-tax set aside the assessment with direction to the Assessing Officer to assess the interest on bank deposits as income under the head 'Other sources' and to include the processing charges in the total turnover in computing the relief under section 80HHC. The assessee is in appeal before the Tribunal challenging the order passed by the Commissioner of Income-tax. 3. The first ground raised by the assessee in this appeal is that the Commissioner of Income-tax was not justified in holding that interest on bank deposits was assessable as income under the head 'Other sources' and not as income from business. On behalf of the assessee, Shri K. L. Kolathu, C.A., submitted before us that the assessee was depositing in banks the surplus business funds not immediately required for business purposes. According to the learned representative, the deposits originated from the business profit and hence the interest received on the term deposits had a di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80HHC deduction is allowable only on profit derived from the export of specified goods and merchandise. He further stated that apart from the export of cashew the assessee was deriving income from transport business and also from the sale of electrical goods, and so it would not be correct to say that the bank deposits had come from the surplus funds of the export business. He also relied on the decision of the Kerala High Court in the case of Collis Line (P.) Ltd. v. ITO [1982] 135 ITR 390 and the decision of the Patna High Court in the case of Bokaro Steel Ltd. v. CIT (No. 2) [1988] 170 ITR 545 for the submission on that interest received on the surplus money kept in term deposits in banks was not income from any business,much less income derived from export of specified goods to become eligible for the deduction under section 80HHC. According to the departmental representative, it was the mistake committed by the Assessing Officer in including the interest in the export profit and allowing relief under section 80HHC that was set right by the Commissioner in the revision order. 5. It is not disputed that interest of Rs. 2,40,787 was earned on the term deposit with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome the business income of the assessee and that it could not be treated as income earned from 'other sources'. In the present case, there is no finding by the Assessing Officer and the CIT (Appeals) that the deposit made by the assessee was capital employed in the business and in that sense the decision relied on by the learned representative is distinguishable on facts. In the other case of Tirupati Woollen Mills Ltd. (supra) relied on by the learned representative there was the finding of the Tribunal that interest arose from utilisation of the commercial assets in the form of surplus funds. It was in view of that finding of fact that the High Court held that interest was part of the business income arising from the utilisation of the commercial assets. In this context, we may refer to the following observation of the Supreme Court in Tuticorin Alkali Chemicals Fertilisers Ltd. v. CIT [1997] 227 ITR 172 / 93 Taxman 502 : "Interest income is always of a revenue nature, unless it is received by way of damages or compensation. If a person borrows money for business purposes but utilises that money to earn interest, however temporarily, the interest so generated will be his inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and distribution of electricity. In this connection, it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the Learned Solicitor-General, it has used the expression 'derived from', as for instance, in section 80J. In our view, since the expression of wider import, namely, 'attributable to', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity." In the case of Cement Distributors Ltd. [1994] 208 ITR 355 the Delhi High Court considered the meaning of the expression 'derived from' in connection with the relief under sections 80HH and 80J and observed as under : "The word 'derived' has to be assigned a restricted meaning as compared to the words 'attributable to' or 'referable to' and, therefore, to avail of a rebate under section 80HH, an assessee must establish that he has derived profits or gains from the industrial undertaking. In other words, the industrial undertaking must itself be the source of that profit and gain and it is not sufficient if a commercial connection is established between the profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. v. CTO [1985] 154 ITR 148 / 22 Taxman 11 he argued that "turnover" means total amount set out in the bill of sale as consideration for sale or purchase of goods. It was contended that in processing the cashew nuts on job work basis, there was no sale or purchase of goods involved and so the processing charges were not includible in the total turnover. He also placed reliance on the Circular No. 564 issued by the Central Board on 5-7-1990. In that circular it is clarified that domestic turnover would consist of only sale of goods or merchandise. According to the learned representative, the turnover criterion is adopted in section 80HHC in a limited sense just for apportionment of profit relatable to exports and not for reducing the benefit under section 80HHC(1). The learned representative of the assessee also relied on various decisions of the Tribunal in Salgaocar Mining Industries Ltd. v. Dy. CIT [1997] 61 ITD 105 (Pune), Nathani Steels Ltd. v. Dy. CIT [1996] 57 ITD 584 (Bom.) and Ashwini Kumar Consultants (P.) Ltd. v. Dy. CIT [1993] 47 ITD 1 (Delhi) for the contention that processing charges were not includible in the total turnover and so the direction given by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as part of the turnover for the purpose of working out the profit derived from export in accordance with the provisions of section 80HHC(3)(a). In the case of Salgaocar Mining Industries Ltd. (supra) relied on by the learned representative of the assessee, the Pune Bench of the Tribunal held that service charges could not be included in the 'turnover'. In that case it was observed as under : "The combined reading of clauses (b) and (ba) to the Explanation does not show that it will include anything which has no nexus with the sale proceeds. The present case was concerned with the receipts having no connection with the goods sold. These were the charges against the services rendered by the assessee in respect of goods belonging to other parties. It would therefore be too extreme to include such service charges with the meaning of turnover." The Bombay Bench of the Tribunal also has taken the same view in Nathani Steels Ltd.'s case (supra). In that case the assessee had earned commission, which had no nexus with the export business. The finding of the Tribunal on the question of inclusion of the commission in the turnover was as under : "The commission earned in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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