Karnataka High Court
The Commissioner Of Income Tax ... vs M/S Davanam Jewellers on 21 July, 2010
Bench: N.Kumar, B.V.Nagarathna
IN TH 19: HIGH COURT or KARNATAKA AT i3AN{32XI;Q'f§1f§.,
DATED THIS THE 21.5'? DAY OF JE.II,Y_;"V2v0:1A.T.Q _ 3
PRESENT
THE HONBLE
_.AN-I )_:'~ « '
THE HONBLE Mf"{s,5'JUsfE:'1V:?:E LNAGARATHNA
ITA No.2568'/i>;.od5."& _25'6~a',?'2oo5.
BETWEEN}. '
1 :TheTVCe.:1in1Is§i§161'1 er» I11C:0_1rie--Tax
R._BL111Vd'iVt1g_V 4' _ é ' '
Q:1eensRoad:'~. "
Ba1'j1~g"a1M01'e '
2 "Ike Asst; ..C0mmissior1er of Inc:ome~Tax
" Q5015; Ah. 1[2")».. .....
_ C R Building
" TQ.L1ee;'i~SA Road
B~a:'nga1i:)fre--"' . . .Appe11amt,s
[Commcm 111 both {he appeals]
(By Seshachala. Advoeaie]
*
JV;/s.Da\rana111 Jewekiers. 'I/.
; I
No.'506. Avenue Road,
Bangalore. Respo11dfer1Iy
(Common in both 1s1'1e_;ap'p_ea»}s)
(By Sri Ashankar. Advoeam]
****3I=*$
These E'I'As are filed under:'».§3ec:ri€).1s§
1961, arising out of Order dE'_d,(?d IS-.1'?-200,4] is f.1"2'&
No.IO66 & }06?/sang/2o02--..:{'i~s' 1T.AV._No-..2sss'~,{O5}' for the
assessment year & ITA
N0.1O68/Bang/2002 (:§§_"':;.'1'A.'_'Nsi..:é€5ss/90's}_ for the Assessment
year 1.995~96 praying to F(';-91"1:1s1L'19'ie1:tb.<:"V {Ismss.LI{bst_;111ti.e11 questions of
law stated thereih and 219:3')-{gees} set aside the order
passedy.---b3r__yA"§'1;5e' '-T 'flgzspellate Tribunal, as prayed
thereirr. V 9 'V 9 .9 9
TheVsse_AA a,p1:$eais._ "Ce.i'11ingg on for hearing this day,
l§!:g.;jKli'MAR Vdeliyered the following:
JUDGMENT
9 Theseialspeals are filed by the revenue by challenging the comms_s_":- order dated 13/12/2004 passed in ITA NQ.'.i'O68/B£111g/2002 (I11 1'1'!-\ N02569/2005] and ETA N0s.1066 \>/ and 1067/Bang/2002 (ln ITA l\lo.2568/29005}, by the lncome Tax Appellate Tribunal. Bangalore.
2. The facts of the case leading to t,he_;'l'ili11g'i<he«s_e appeals are that the responderlt--assessee in the business of jewellery. readymade gz-}.1'1r)e11t '-(ma. g;;%tv11__it.eAi.ehe1s manufactured. processed or.*t,raded".t11"'Ir1dia'"a:1nd t',l1ereat't'.ci=/. exported the aforesaid productaVf=._:d'
3. For the assess'0n':ten.t. the assessee filed a return of income" on 29'/1'0,/1"'!9937._dCC'la1rlrtg a total income of Rs.5,'?[5,8100/';0v0'._'vVa1}Vd.0 'toll'-VV__tl3.e _' assessment. year 1994435, the assessee filed a 'ef:ir2e~t3111e on 31/ 10/ 1994 declaring the total incontee of Rs.._7'A,0€108;3ilLO/ --. Contending that the assessee had}-C no-t co1't1p't1tedV the claim of dedttction under 't30_fil*l}2lC of the Act", the Assessing Officer proceeded to teoperl"'the_asSe'ésn1.e111, by iSSl..}il'lg notice under Section 148 of after cronsiderirlg the reply of the assessee, the Assessihg Officer completed the assessment on 3/10/2000 by hold.lngHt:l'1a1. the deduction claimed under Section 80 lll~lC of ll,» the Act was not in ae.eor<:lan(.'.e with the .l(l'f;-(git). Being ag;griexr'ed by the said order. the before the Comrnissioner of En(:on'1e'Ténx4fhfjloeavlgjjil,;'N.:,£§)v T. the appeals by his order" dated aggrieved by the said O!'ClC'1'V.>'.ll'l"t',llt)I'!'(ltll Van' the Appellate Tribunal, urliigzh (?O1'1VAl'Tii"'Il'V'1-éfiifil oeclei""ol' Appellate Commissioner and .13/12/2004. The revenue being gziggijiextecillllljyz has preferred an appeal {TA {I-'i.V"lfl+l'"()'reA l995--96. the respondent'~ on 13/10/1995 declaring the total .iI1COrIll€.. of .R[:--'a.5A;'.33l;'74O/~ as 21 regist,e1'ed firin. The '«ss.ff?§:s1'Y;1§ Qflieer llotzntil that the ela:'1'n made uncier Section 80 Hsl-llC" '(_}1'~«,'g':l"1'L'.:v'l}'1A:iCl("»I1'l€' "Tax Act. 196} (hereinafter, referred to as 'the lAct.'}, '\z§i:;j_1s5; not in aeco1'da.nee with the said Section and '.VthereE"o..re,'«.. the Assessing Offieei' reopened the E18!-5€SSI'1'1€IIf. by ..fi§AsL1li'r1g notice under Section 1.48 of the Act, to which the . asésessee submitted its reply.
5. According tic.) the Assess1'1'1g O'i"1'iee1'. the ('(');:1p:t.x.I;:e1':.ion of deduction under Section 80 1-IHC of the profits and gains of business or p1'0fessio1d1"S'h<)}u}d*h21*2{e been computed by red1.1ein_g 90% of the xx-'ei:;;e%s 'r.e(:eiVx3*ed';' :21.};_)].hi§1.iS£1I "
charges. Fixed Deposit and (uh-r:__1fV irV1i.eV_1*es;t.s asjiihz}IflihhgilihhValldfipa Rs.10."/7.903/» by a1y)plyi11g,>; Section 80 HHC 3(0) of the Act assessment 0113/ 10/2000 Being the assessee P1"9f'31"1"€d 31"3.3Pl:9{€~al be.I'01*C'-""t.he'A¢QO'11'1'1';':--issionel' of Income. Tax (ApP€E2Lh1§}:v 1dhe."V"':;dn1e by his order dated 24/4/2002.. VAs_s2u'd order, revenue preferred an appeal bei"we' L1 A'1_11e'o"11:e Tax Appellatfle T1*ibunal._ who ...tIhe erde-1"' of the AppeIIaf,e COI11l'I'1iSSiO1"1€I' and 1-ejject;e'd.4imewQappeal by its order dated 13/12/2004. The revenue being; aggrieved by the said order has preferred an appeal v""ifAvN0.2569/2005 before this Court.
6. These appeals were admiueci on 9/3/2010 to V. C;OHSid€T the following subs1'.zm1,ia1 q1.1est.i01'1s of lawr
7. We have heard the learned counsel 'io1*"i'h(;*. appe!1ant~1*evenue and Ehe §e.a1*neci (.:oL.s11$e.!~-zlppearing for." 1'espondenE--a:3sessee.
8. It was contended of thVeVb'-1je\{i:¢vtiEi«e' "that {hie receipts namely, the '1Vfeeei'\ifec'E';*»..gipphfaiiseui. Ctleiziiges, Fixed "Deposits and other arnoi;.11i;e case received by the asses-see to of business and that the amending Section 80 HHC Legislature and makes it.
ctltéaraivlllelt' ffom the C()rmniss1'()1'1 which has to for dedu.eieion and not the ne.i_}.&eommissi'onV.A in the said objects and reasons it has been . ' stated as --L_1n~<ier:w V x "ii! is therefore. proposed to clarify that V;5'pro']'it.s of the business" for the purpose of section V"8.OHHC will not include receipts by way of brokerage. Comrnission. interest. rent. charges or any other receipt' of a sinnlar nature. As some expen.di1:ure nfighl" be incurred in earrtmg...ffisggcif incomes, whr'.cI1 in the gerzeraiiI'_z_; of cc:Lses Common expenses. 1'1 is pr()p(J$¢gq'»io pr=:)iI:fci¢':(}1C1'hrafii, 10 per cent", dedu.C1z'on '_]':"(;-in accourufor these experzses
9. Per CO1"1tI"E1..'1§3'.é.iI'l'}_€V.('Zh .'c1p}')oiEA11':1;VVI'1g for the respondent by Tribxmal has brought to o'uii. Bench of this Court, in iCoi1m1ss1oNER op INCOME TAX f.'--ii4/«§."_'(ioifstULDAs EXPORTS in ITA No.25/2003': MATTERS disposed of oii 9.7.2008, {ixiiiigéiii has 'i'oi"1<ii¥;£iid the decision of the Delhi' High « coii_ri5~.,iii: tii«.¢ casoo.f.__COMMISSIONER or INCOME TAX --Vs.- s.;§IPiAiiz_Hoi~;1)A.__PowER EQUIP [(2007) 289 ITR 475)] and t.h'erHefore.,V that the decision of the Division Bench in «V the "of Cokuldas Elxpons may be foiiowed in the ii1sf,ai1t' I r:.ascia'1so "and the appcai be accordingly diS}]1iSS€d. A/.
--: F} :--
E0. In 01'de1' 1.0 a'1pp1't=;*("iz1te this ('..()i]1€I'l[iOI1 it 1'1e(7essa1'y to £00k into the relevz-mi' p1'()visi()ns and the pI'OI'l()1:.1';V1:(V'?-€'?y#'i}@111, of .s 'the various Couns on the point.
11. Section 8OI~~II*1C [4C} {b.a;1y]y"deI'i1'?;es' business means. it reads as L1nde1'r:_g "For the purposes Qf"i}2i* section?-_ 2 {baa} prQffI:'s Q/' the bus1'.nes.s" rneans' ine prQJ'El.s of the business as fCa.r_np1._*l.ed_ Au-:"e,c.;'e.r'Jhe headh 'Profits and gains Qf business or.;ar'afess'irj'nf has reduced by :V<"'.,_1} --. .e 'at'; any sum re erred. to in {fife}. {Hid} and {me} Qf 'LSee.i'1'c):1.'y~.28_ ar". Qf any rece1'p1.s by way Q/' ubrokei"age_,__ycommission. interest, rent. Charges arany other receipt. ofa s1'nu'Iar nature included i:2_sa¢~i1. prams.' and (2). -!''he prafils qf any branch.. Qifice. warehouse or any other esi.a.blishmeni Of the assessee K/a situate ou.i'sid.e India
12. In order to find 0:11. "profits of l3usiI1es;§_._ ' »:,1i'1cl'§:1*""i,Vl1e aforesaid Eérovision, i"ii'si'.. I)1*oi'iis oi'E:l'1e eta:eoliii})'1:ill1iled' i.1I1Clf;'l' the lieaci 'prQfi'.t's and gai'r1s Q_}"'j}rQ;'es_siig)riI '2ii*i*i'\?ed T at. Section 28 deals with pi'oi'it.s.l'zxiiitieV_§e1i.1is'v_--oi"' profession. in arriving at mid si.ipulai,es that the lF}('O_.~~lll('. Seelion shall be computed in accordanctel Sections 30 to 43{d) which in deduciioris to be made out o{__irotal i%i_Co11i'e._: .__S"e-<,j1io.ie1 eiriéals with expenses to be d€duC{€(f,lyVhlClfl'.'aI'i'f,__D01,.pEflfiV'l.'ClG(lHl_'(}'l' in Sections 30 to 36. ll"
pi'ovides_ that,léi:'i'y"-._e;;pendii--.iii'e not. being in the nature of Capital €Xp€If1C"ill,L1l:€ ()li'A}fJ'€1".S':O1'}21l expenses oi' ihe laid out oif expended Axzijtliolly iand exclusively for the purposes of the business' .oi' 'profession shall be allowed in computing the iiitctoiiie under the head 'prQ]"ii.s and gains of busi'fiess._of pr'°o_]"ession'. in this baekgioiind oi' this provision. in ' {he siL1ist.a'm. case the assessee lias income iiom exports. income _ l}?.(ii'r2-- ..;'namifac:i.uri.ng activities within the C0un1.i'_v and also is l.I].ClOI11€ from commission. In so Far as the income from commission is concerneci. if any expenses ii'1 ea1"1'1ii1§ the said income under Sectiori 37 of A(§'j_t.~.: expenses is deduetable and for arrived at would become part. ;1i1d'~ business. 'Fhei'e£.b1'e. the c;1.1es--t,r:i':c3*::1' for while deducting 90% of the C£)Iz11I]1i5' S'i'C}iVt-E11"CtE1l.CLIlét:i'i'1g {:"i>1V§(-/' profits of the business. whether is to be deducted or net CO}'I11}1i5"v9§i.:CV)'1"L._'1'S the def1'r1it'.i0n at Section 4C:__ (beg) ri:i_eiiti()1ied what" is to be deductedwig'"'*.9tj0/ttgagif by way oi' commission "ir1cl1ide§1 l'l'l'.':3AVf,.'Iv.(',v'"i'i'.. it is ciear it is not the receipt oi; '9(§% <)f"'f;'iieA:'eiit'i'ije44commission. it is 90% receipt of comniisvsieii inciuded iii profits and gains of business. In fact \A.}'iiAat',.:t5et'.v1i the Appellaie Authorities have held relying on ism-+'1ja1 "j1ic!gi*ne'13'ts of the V.E11'iOllS Courts Though there appe'ai's..__1"d -be no direct decision in so far as commission is h cQncernee1, .sL:pp0i't is drawn fr()n'1 oitzer jt:c1gme11t's which have _ 'El- bC3'£:'iI1g on the subject"- The Apex Court: in the case of = .C(5MMISSIONER OF INCOME TAX vs LAKSHMI MACHINE 13/ WORKS [ (2007) 290 ITR 667] while d€?£'tI]'11g_...F\;\g" 1 i::'i .é§?(.?vi'i{)i1 SOHHC has held as under : ~ 2 V M i V "The principal reason '_ei-?1aC;i'ir.z:gi formuia under 8. 80H}--{C i.ti:as;"1!"o par: SOHHC concession i.irJ.:en..__ U'1t'.'v"'-g_,'1"'i.[i'I'Ve' evr{¢'d;u<:,z__;f;;;1_.¥ claimed could not be aS~._I'eiiciia.i3ie to exporis. 'I'f1.eref0i'e--,_whiie'"'in.iVer,nr'eiir1g wards "total llunover" in i:'i':!e_fk):*zi1ifiCz} one has to give a sChen_'ia:'l.i<3_ "ii"!Ii;'I']jfe('.af:iQr'2". i0 that expressi'o.n«.':.j"f'aer'e:;A_is for giving schenqqliie 7fi€':"l§3QI:I'OLlS amendments (.0 S. V reéreiprs by way of ir1iei'es1. rent eicn, do not:
j'bi'Tn part.' as they have no nexus uniifi "£:h_eiir1vCi'ii;2'_i.;ijpf i§jg;;§r::s. If inierest or rent was ;1otfega.ura'ed (life legislature as business prq/"iris. .,,€{L£€3S('l'OI1V.'VQf"'i'i'e'aEiI?g the same as part" Qf the A _Vioi_aEv.iVur;f1"0.uer' in the formula did not: arise. In fact. 3 to be amended several times since '' _[oi*r'ni,:'ia on several occasions gave a disI0ri.ed export: pr'Qfii's when. receipts like interest. . ,_I'er1I;' scommission et'C.. which did not have the element Qf i.nrn.over got included in the .P&L a/ C and consequently became enniled I0 deduerion. L This was ciarified. by the amendrnent' to S. .. commencingfrom I5' April. 1992.
Tax under the Act" isgupon't'.nc'on'ie.*.proj3.t§s"
and gains. It is not a tax on grossreceiptsp. '~Und"er"~ S. 2 (24) the word "iri.'cioi'?=ie" I'nc'iitcies_ gains. The charge is noi 'o"ri_V g:'c>Vss on profits and gai.n$'.~.__ 'I'i1e'"cf'iargei'"i.s not' o'n receipts but on pro'f'ii:'s'arct'ci_Vproperly so«caiiea3. Gross receipt:s orsaie ::p1'ocee_cis.."v_ho'ioeoer. inciude =isc?"1en"t.at:ic-x ' " t'i1terpret.at ion for profits. ; " Ti'z'x;{r';_>j'r)r.?;>_! rnakiiigr in-I-3jo'rni.iiEaj-i.n"'S,_ "80i.:I[iIC worlcabie cannot be ri1ie"ci_o'itt*;.:;__iSirir1.iiari:;. 'pu.rpo§efitZ interpretation of S. 8OHH€?~it,3h'i'ci1 has v,.'[lf1-rd!E<)T'gOIVI,{L) so many changes ca-:.m0.t. be 'i'it_§is::>_Ct' part:i.c1.tlarIy. when those l.egis'iC:.tViMiJe c't'.*-_ctrAL-_.i]es«..\firldicate that the Iegisiature iriter1.dedVVto exclude items like commission and in.t'i;'reVSAtmf'r'orn deduction on the ground that". they did _r1"ot._ "possess CU"1_l;' elements of "turnover" even .".r'ti1V()1i_i;'i1 2:roI1cnI1isst'()r'1 and interest. emanated from e.».po,~:es.
T his is because the very basis for computing 8OHI1'C dedi.ict:ion was "business profits" as AA computed under 5.28. a portion ()fi.Ut1i.C}l had to be apportioned in terms of the above ratio of export:
\\/i iurnover 1:0 I'oi;al turnover. Section 8OI--II*IC{3}...r,ii'as'ksirs. ~ beneficial section. II' was intended incentives Io promote exports. iI"zcer"iij1'i~:e::izqoisi. to exempi profits relaizable io V Combined business of an hai,ai;;.g "e.>q2oVr!r' business and d()rIstesi.i'e _'i)~:.isir'res:: VI'.f'1.:;';'f iibegi;§;_irziv':sire:
intended to have CI ']t)r'Ii:i.iEioi Io ase'erI;a'iri ejrporl prqms by appOm1jmj_ng i._l'ze"'I.(>'i.o.:i .bii's.iness fjrojiis on hihe basis of iurnooers.* of profiis on {he basis ofi'iu'noi,ier-uéijisViziecepiecl no method of arriving case of HERO EXPORTS vs COMMISSIGISIEE2 TAX [(2007) 295 ITR 4541511. para 14 heiLi._eisv.und_Cf 2yisse..':.s_iec:v has UUO incomes with "one con1rz1onA"pooI of expenses' and since "principle of 'VCI'CI;ifib_iLIfi5ii.'fiias been retained in the scheme of s. ""2f§OPI.i.IC.'i__hoih in terms ofsecnion 8OHHC (3), cl. {e} to .4'"zi;e"'--'sxpi¢m.aiion to 8OHHC(3){a), {b} and (C) and in s Cl. {boa} to the Explanation to 801--IHC. instead of goiiig into lengthy exercise ofdiviciing such common expenses, the assessee has esiim.ai'ed the reduction ~: I} :-
Q/"export iumooer by 10 per ceni Qf the other ir'u:ome of Rs.1.60,000 {in the above example}. Uii.imat'el.y, ct. {baa} i.o the Explanation is itself" based on the assumption that I 0 per C(--,'i'1I' of the income t,u()u.i'Cl an expense. We make it Clear that we__;af'e ;. 4' reading Expin. (baa) into 8(")P-II--iC?(3){t))V.__ "'W:!'ic'::tA_i'toe M say is as a giudance uait.te/'/'a(,>io'r.~-it) per oeriiV:.oj'ti1ef_ total other income of Rs.1,E§{).O(}O.. A estimate. This gui.dance;valueis "r'1--o1. \]lott~:é--irtaA/torig Ctibaa} but from the sci1e'n1e"Ql's. é3(').EiPIC the Memorandum. to the Ffi_12.(ti1vce 'Apt o/"I991". Take a reverse case. if atLo_oCti_iot1_ is to be done on actual basis. it worttc1.V'i't.ic)i' C).-"'1~l,[_i'.~;>)::€'.".__l'.;'~V'~€.'3I'].j at/_"f'ict.1lt" but ii1._sAof-Vite_eases«.a.et't_ial C_1p})C)fli()r'lI'I'Ier'1l may not be in the 'int:er'es"i: tijie Depari.ment:.
'}"1§'V"I{i.'.'v'S'i.'t']'J"I.'€I.1'V3f3 C()t.:ri. in the Case of COMMISSIONER V' - OF"tIiVCOME.. TAX «vs"KtRAVINDRANATH NAIR [(2007) 295 ITR sh-_e_h:£d_' as! U 1fi_(.1er : ~» 'lay finance Act, 1991 w.e._/1 ise April. 1992. jijrt. the first time. the expression 'profits of i.he V' x business' stood aefi'n.ed to mean the 'profits of the business' as comptiiecl tirtder the head 'Prams and
-: E6 :-
gains Qf business' under 28 io 44D.
be ore giving deduciion under s. 801-1HC{3)[a:}, ii". (C), the gross toiai income of the profiisfrom business had to arr'ii;eci._ai'i Qfcl. (baa) lo the Expla11ciI.i()n:"Hoiioeioerione V needs to be noted, riciirrieiy. iivhiie 'business profits' the sar7'ie°h..od io done ierrns Qfs. 28 to s 4413 atone.
15. The I)_-eihxi Iwlighi to consider a similar proifisiftmx SHRI RAM HONDA £75] where it was held as L111der;§.,_ 1 AV VA "T of is io ensure that the , e;x<porte}' geifs iheiibeniefii of ihe profiis derived from 5":~€)«f}7),iC)I'.'§.,' ar1oi"'noi*'io depress ihe profit further. ' ' -» _V V it can only be ihe net interest' which can in the profits. ifneI'i'ing were noi to be A the resuii would be that the ;:2rQfii:s of ihe would be depressed by an item. that is " 4_ e)ooer1di.tiir"e incurred on eaming inieresi, which widoes noiforni par! of {he profit (ii. ail. This could noi have been the inieniion oflhe Legisiciiure. ab Explanaii.on {baa} is relaiabie only _(:i:.=j__ j"
{(1} Qf seciion 80 HHC{3} aha' no! io.._r:iAe1'tVase~.i,:{}),) ihereq/". These operate in di.si:'ir'ic'::.« §ii~'C(l.'$' «:1i'T<:i_ tit)"
inI.er--mixi.ng is COI'lI.8I7'lf)IC1('€Ci".<' Her'1ee i'i-he .. Vl.i.".C)J'("_1T"'. "
"inieresi" in clause (ba'aJ.___ to the 'E-XpILifi.CiAf';iGI1_VV in} seciion 80 HHC is indicai"'ii1e"Qf' "nei ~1':1i'eresi."V,2:
gross interest Ee'ss,-- {he e,>q3'e.':fi_'i:iLi'e.incurfecl' by the assessee in earning such. i.r*1i.eifes'is--.;"i , is * To _siarnrn0.;fise ' 'gi:"i.e'QCQI1clusibris: (I) In con1pi.iisirig iL§hci_I. the pfrgfi1s_ .cierfi1.:eci "H/T0171 exporisfor iihe piirp{)s'<:?s bf s'eeI;iioiiv--80"; HHC{ 1} read with section HHC{3}*«;ii'e, Ihe"'nexi.is test. has to be av) Eied i0"e;>€e.I1.id._e4"i?1di---- iiihieii does not ariake 0"
prqi/1.i.s"iI1aI' carr~ be said in haiae been derived from the bLisirieVs's_ofexpdfis. {ii} in the spectific context Qf ~'~;.glc:ii1'sev {baci}"'Q,f.T__th,e Expic::maIion to section. 80 HHC. A while deierniining the "pr'o_/'iris Q/" the business Ihe vAsse=ssinfg'.VV.O_[/icer has (0 i.m.d.erI.ake a 1w0--siep is V "'exerCise_ ih ihefolioiving sequence. He has 1.0 first ".e'<§'ny:).iiie" the prqfiis Q/' the business under the . head "Profits and gains Of business or prQfession.". oiher words. he iuiii have (0 Compuie business prqfiis, in ierms Of the ACT. by applying the __;jfaciiiii:'ies forrn ihe bank. does not .'--fron1.b:'.her sources and not.
b' periniuecl. in terms of section 37 of {he Aer, 1. provisions of Seciion 28 {:0 44 thereof. iii:-'; arriviiig ai (he profits of the business by i...--=;:'¢: ciboifiex rneihod. ('he Assessing Officer will eXcl_:.i{,ie such' _ incomes which partake of ihe c}'iarac.:e'r_ cgf "'inc'oin.e H under seciions 56 57 Ex):/"'£di'.I.']}';' Aci"c:.r'ia' are not to be reckoned. for i'iie'i'p_ibii'p_oses' Qgfiseciion. 80 HHC. {iv} Where sii.rplLisjii'iid.s'parlcecivbimih the bank and interest isean only be caiegorisecias ir'1co.rne '--,['ro:_n soiher "s+¢.;';i4"ces. This receipt' rneriisVgsepciraie rineiiiiss .1.i_ijz.aer seciion 56 of i'i1e_..«¢'xc'i ._LUhiTcf;I1 'isjo_iii'rsicie" the ring of projiis and gai_n_s _]'ron'i "i-i'3_i.iVsi:riess_' cir'1a'.---.,pro;'ession. Ii goes from other sources" which in any Eeiaeni. are i.r~'ea«!.e"d;_." '._I.."1c;?:.Fvej"f-CITE":
eniirei_i,r bow', .Q_f"ihe.._rec:ko--nin.g for the purposes of seciionw 80 earned on fixed deposiis fr)!' iiie'..vpu.fiooses of availing of credit have an V" iriiniediaie nexus wiih the export' business and H ":he':e"bre..has to necessariii be ireaifed as income J business income.
'~._[i:i),.__Once' business income has been z:ieI'ermined by agijpijirig accounting siana'a.rds as well as the proiaisions contained in (he Act. ihe woiild 0 claim as d.ediici'ion. experidi'('iire laid. out for ("he \3/.
--: 20 :- the _qr().<3;s' interest less the expertditure incurred for the purposes of earning such intzerest. The nexus between obtaining the loan and paying interest thereon (tatjing out the e.>cpena'iture by interest) for the purpose of earning the t'nz"er'est~ thefixed depostti. to draw an analogy \1'r':»;_{1 '
37. Lwill require to be ShOLL}!i""b_L}'U163:
appti.cat'i.on of the nett"t'ng prii'1_cripl_e's't_ .3
16. in fact... the ai'<)i'esaiE'E»jtitcigtiieiit.héiisv-been followed by a Division Bench Cit)-:it't_'Vi"i.o theiiioeise of THE COMMISSIONER OF INC-om: 'ANOTHER vs M/S. GoKi2_LDAs No. 25/2003 AND CONNECTED MATTERS disvposeacieoi7 §§';';?.2o0s.
3 ».iVi':.__VV'ie\v of the aforesaid settled iegal position. t.he 'A})f§elia_E'e'Authorities we1'e_jt.1s1.ii'ied in axlmwing the cleduction under the head by setting aside the order of the assessing taLtt'horit.y and were of the View that the assessee has to first prove that it. was a trade debt. and secondly. it was V. iFI'€L?()\«'€I"€1b1€' and thirdly. it was ac1.1.::c1IEy \&-"1'i1'1.€1].'..()'l'i_». ThV§'F;€'{l)I"(?, the said sL11)s1amia] questions of law are z-111siv{;§1'e(j1'['ag.:airi:s1[ 111::
1"c>ve1n1r: 21nd in favour 01" the A<:<.?(j'rd_i:1gI'y'. t'E:1es:"; apptmis are dismissed.
*mus