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TMI Blog2018 (12) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court in Pandian Chemicals Ltd. v. C.I.T., [2003] 262 ITR 278, ought not the Tribunal have found the interest income earned by the assessee; from the fixed deposits for opening the letter of credits and for retention of margin money, to be income from other sources and not profits and gains of business ? II) Whether on the facts and in the circumstances of the case the assessee is entitled to set off the un-absorbed depreciation against the income from other sources ? 2. On facts suffice it to notice that the assessee is a ship building company, who inter-alia enters into contracts with foreign purchasers, for construction of sea going vessels. On such contracts being awarded, the assessee also purchases goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld point out from K.Ravindranathan Nair that in a similar case of deposits made for opening of letters of credit, the Court found that it cannot be said to be a profit derived from exports. The position herein is identical, insofar as the assessee having claimed deposits made for opening letters of credit in the name of the foreign buyers. The assessee also has made deposits in pursuance of the contracts, the interest income of which is not a contract receipt and can only be considered as an income from other sources. Reliance is placed on Pandian Chemicals Ltd. to argue that in the case of deposits made before the Electricity Board; though power was a necessary requirement for the business of manufacturing of the assessee, the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. The Supreme Court held that it can only be income from other sources. Here it is otherwise as we will presently demonstrate. Here, the benefit to the assessee is insofar as the present income by way of interest when treated as part of profits and gains of business, then depreciation is permitted to be set off as against such income. If not, as we earlier noticed, the depreciation cannot be set off as against income from other sources. 7. As has been pointed out by Sri.Raja Kannan, K.Ravindranathan Nair is on a totally different footing. Therein, Section 80HHC provided a deduction of the profits derived by the assessee from the export of goods and merchandise dealt with by the assessee. The Court found that the expression 'derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the present case is concerned, we are adjudicating upon which head the 'income' could be assessed to tax; whether it can be under profits and gains of business or income from other sources. We agree with the learned Senior Counsel that the interest income, does not change its character as interest, but however, for the purposes of assessment, one has to look at; which head it would fall under. 9. We turn to Govinda Choudhury, wherein the Hon'ble Supreme Court was concerned with a similar issue. Therein, the assessee had an arbitration award, which also granted interest. The Department took a stand that the interest as awarded by the Arbitrator would be taxed as income from other sources. The Hon'ble Supreme Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as "income from other sources". The second question is, therefore, answered in favour of the assessee and against the revenue." (underlining by us for emphasis) 10. Respectfully following the aforesaid dictum, we are of the opinion that here also the deposits made are in pursuance of the contract and but for the contract, there was no warrant for making the deposits or earning income by way of interest. As we already stated, the deposit and the income generated by way of interest, are intrinsically connected with the contract, the business en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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