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TMI Blog2009 (12) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... and not as profits and gains of business or profession. 2. The Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in reducing the appellant s claim under section 80HHB by Rs. 81,17,303 in respect of interest income derived from overseas projects. 3. The Commissioner of Income-tax (Appeals) erred in upholding the action of the Assessing Officer in not considering deputation charges of Rs. 2,26,328 as business income and in reducing 90 percent thereof while computing profits of the business for the purpose of deduction under section 80HHC. 4. The learned Commissioner of Income-tax (Appeals) erred in ignoring the appellant s revised claim for deduction under section 80HHC at Rs. 53,31,535. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther interest (deduction under section 80HHC) (a) Interest on bank fixed deposits (Vision Investment Co. Ltd.) 2,83,000 (b) Interest on bank fixed deposits 20,08,000 (c) Interest on income-tax refunds 10,96,000 (d)Interest on inter-corporate deposits 3,67,000 1,49,20,303 The Assessing Officer taking note of the fact that the interest had primarily been earned from temporary surplus funds meant for various overseas projects, which the company had temporarily parked in bank fixed deposits, treated the same as income from other sources. He also treated other interest earned by the assessee on whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. [2006] 287 ITR 479. The learned Departmental representative submitted that admittedly surplus funds were invested in fixed deposits and, therefore, the interest income earned therefrom was income from other sources. He submitted that idle funds were required for business purposes and, therefore, there was no nexus with the business of the assessee. He referred to pages 11 to 17 of paper book, which contains separate profit and loss account in relation to four projects to demonstrate that in all the profit and loss accounts, there were surplus funds. He relied on the decision of the hon ble Supreme Court in the case of Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278, CIT v. Samir Diamonds Exports Ltd. [2000] 245 ITR 548 (Bom), CIT v. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from business or was a case of surplus funds per se being invested in fixed deposits for earning interest income. In the case of Indo Swiss Jewels Ltd. [2006] 284 ITR 389, inter-corporate deposits were made by the assessee from the surplus fund that was set apart for payment for importing machinery. It was held that the interest earned on the short-term deposits of the money kept apart for the business purposes had to be treated as income earned from business and not as income from other sources. In our opinion, the facts of the present case are akin to the facts as obtaining in the case of Indo Swiss Jewels Ltd. [2006] 284 ITR 389. Further, in the case of Lok Holdings [2009] 308 ITR 356, the facts were that the assessee firm was engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ihar, Orissa and West Bengal. The assessee was required to provide finance and performance bank guarantees to the Department of Telecommunications. In the backdrop of these facts, it was held that the deposit of margin money by the assessee was inextricably linked with the furnishing of bank guarantees by the assessee to the Department of Telecommunication for obtaining a licence. In the present case also, interest has been received on margin money kept with bank for availing of credit facilities. Thus, the interest was inextricably linked to the execution of foreign project and hence, in view of the decision in the case of Koshika Telecom Ltd. [2006] 287 ITR 479 (Delhi), the interest was assessable as business income. We, accordingly, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T [2009] 317 ITR 218. In the present case, the interest is not derived from the project but from the fixed deposits kept with the bank. Thus, admittedly the immediate source of interest is fixed deposits and not from the foreign project. Learned counsel for the assessee has pointed out that in case deduction under section 80HHB is not to be allowed then only net interest is to be excluded. We find considerable force in the alternate argument of learned counsel for the assessee and, accordingly, direct the Assessing Officer to exclude only the net interest income as we have held that interest income is assessable as business income. Ground No. 2 is partly allowed. The other grounds raised in this appeal were not pressed, therefore, they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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