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TMI Blog2006 (6) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... was delivered by BILAL NAZKI J.-The question referred in this reference is: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that interest and other income aggregating to Rs. 451.4 lakhs was includible under the head 'Profits and gains of business' and were to be taken into consideration for computing deduction under section 80HHC of the Income-tax Act, 1961?" The Tribunal has allowed the appeal of the assessee and held that the interest and other income aggregating to Rs. 451.4 lakhs was includible under the head "Profits and gains of business" and was to be taken into consideration for computing deduction under section 80HHC of the Income-tax Act, 1961. The Revenue objected to the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000] 243 ITR 192 was considering the question as to whether the interest earned on fixed deposit was income arising out of export or income from other sources. The High Court held (headnote): "Under section 80HHC of the Income-tax Act, 1961, the assessee who is engaged in export business is allowed, in computing the total income, a deduction out of the income derived from the export of such goods. Unless the assessee is able to show that the income received by way of interest from the fixed deposit is derived from the export business, it will not be entitled to claim deduction under section 80HHC in respect of it" In another judgment reported in CIT v. Cochin Refineries Ltd. [1985] 154 ITR 345 the Kerala High Court held: "Profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration under the head 'Income from business' as such interest receipts arose in the normal course of the business transactions of the assessee. The assessee has been borrowing from banks and financial institutions on payment of interest; the funds thus borrowed as well as the funds generated in the course of business were invested for short periods in sister concerns and other institutions for further utilisation in business. Further, the assessee is an existing concern and it is not the case of receipt of interest during the pre-commencement period; nor is it a case of investment of share capital funds in the pre-commencement period. This is a case of investment of funds generated in the business as well as from out of the funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is a judgment by a Division Bench of the Bombay High Court. The facts in this case were that whenever a foreign buyer approached the assessee who himself was not able to supply the diamonds, the assessee would approach other diamond traders. The said traders would, thereafter send the goods to the foreign buyer on approval basis. If the foreign buyer approved the goods, the sale would take place directly between the trader and the foreign buyer for which the assessee would get one per cent. commission named as reassortment. The said reassortment charges were essentially the commission received by the assessee from the local parties in India from their sale. The question before the court was whether these profits could be given the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacture and export of polished diamonds and the amounts collected as service charges when the assessee was not engaged in the activity of manufacture and export, were sought to be given the special deduction under section 80HHC of the Act. The Bombay High Court held that it had no direct nexus with the export activity and therefore could not be taken into account under section 80HHC of the Act. In CIT v. Madras Motors Ltd./M. M. Forgings Ltd. [2002] 257 ITR 60 I the Madras High Court gave the following reason: "Let us now consider the interest earned by the assessee on the belated payments. There can be no doubt that this interest would, however, be directly relatable to the business of the assessee of forgings. If the purchasers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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