Kerala High Court
Nanji Topanbhai And Co. vs Assistant Commissioner Of Income-Tax ... on 19 July, 1999
Equivalent citations: [2000]243ITR192(KER)
JUDGMENT K.K. Usha, J.
1. These appeals are at the instance of the assessee. They arise from a common order passed by the Income-tax Appellate Tribunal, Cochin Bench, in I. T. A. Nos. 262, 263 and 264 (Coch.) of 1998. The relevant assessment years are 1989-90, 1990-91 and 1991-92.
2. The assessee is a partnership firm engaged in the business of purchase and export of hill products like cardamom, coriander seeds, pepper, ginger, etc. The assessments for the abovementioned three years were originally completed under Section 142(1)(a) of the Income-tax Act, 1961, Assessments were subsequently reopened on the ground that the assessee had claimed deduction under Section 80HHC on the interest received from the banks on fixed deposits. The assessee contended that the interest earned on fixed deposit with banks was part of the income from export business and, therefore, the assessee was eligible for deduction under Section 80HHC on the interest income. This contention was rejected by the assessing authority relying on a decision of this court in Collis Line Pvt. Ltd. v.
ITO [1982] 135 ITR 390. The appeals filed before the Commissioner of Income-tax (Appeals) were also dismissed. The Income-tax Appellate Tribunal held that the interest receipts can be treated under "other sources" and, therefore, the assessee's claim for deduction under Section 80HHC on the above income has only to be denied. Reliance was placed by the Tribunal on Collis Line Pvt. Ltd. v. ITO [19821 135 ITR 390 (Ker) as well as CIT v. Cochin Refineries Ltd. [1985] 154 ITR 345 (Ker).
3. It was contended before us by learned counsel that fixed deposit had to be retained in the bank by the assessee in order to offer security for loan transaction which was in connection with its business of export. Therefore, according to the assessee, the interest received from the fixed deposit is to be treated as part of business income. It is seen that the Tribunal had entered a finding that for the assessment years 1988-89 and 1989-90 surplus money had been kept in fixed deposit without availing of any loan facilities. But the contention of the assessee is that for the years 1990-91 and 1991-92 it has availed of loan against collateral security of the deposits. The Tribunal came to the conclusion that in the application for credit facilities the fixed deposits were shown as assets in the balance-sheet and they were taken into account for claiming the credit limits. According to the Tribunal, there is no evidence in the form of a letter from the bank manager insisting on fixed deposits for availing of loan. The Tribunal did not accept the contention of the assessee that the assessee was compelled to make deposits with the bank for availing loan facilities.
4. Learned counsel for the assessee contended that there were materials produced before the Tribunal to show that the fixed deposits were taken into consideration by the bank for the purpose of limiting the loan facility and, therefore, according to learned counsel, at least for the years 1990-91 and 1991-92 its claim under Section 80HHC should have been allowed.
5. Under Section 80HHC of the Income-tax Act the assessee who is engaged in export business is allowed in computing the total income a deduction out of the income derived by the assessee from the export of such goods, etc. Therefore, unless the assessee is able to show that the income received by way of interest from the fixed deposit is income derived from the export business, it will not be entitled to claim deduction under Section 80HHC. We are in full agreement with the Tribunal that in the nature of the business carried on by the assessee, namely, export business, the interest received by it from the fixed deposit cannot be treated as business income. This aspect has been considered by a Bench decision of this court in CIT v. Cochin Refineries Ltd. [1985] 154 ITR 345. In that case the claim was under Section 80-1 of the Income-tax Act. The following observation in the above judgment is very relevant (page 352) :
"Profits and gains are well understood to mean only the business income, and not any other income. So long as the company has no business of lending money, and so long as the admitted case of the company is that the income derived is only on account of the peculiar situation arising from the time schedule for repayment of the loans, it cannot be stated that the income yielded by the deposits or investments was received in the course of the company's business so as to be treated as a business profit."
The earlier decision of this court in Collis Line Pvt. Ltd. v. ITO [1982] 135 ITR 390 was referred to and approved.
6. In the light of the above, we have no hesitation to hold that the income received by the assessee as interest from the fixed deposits with the bank is not business income, but only income from other sources.
7. In the result, we find no merit in the appeals. The appeals stand dismissed.