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This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - 44, New Delhi dated 05.08.2016 pertaining to assessment year 2011-12.

2. The grievance of the assessee is two-fold - firstly, not assessing the bank interest on short term export surplus deposits as 'Business income', and secondly, the assessee is aggrieved by the disallowance of legal and professional fee of Rs. 1,93,250 and foreign taxes of Rs 51,384/-.

3. Briefly stated, the facts of the case are that the assessee company is engaged into the business of software development and IT enables services, primarily export sales.

4. During the year under consideration, the assessee has declared total interest of Rs. 5,20,16,070/- as under:

[Rs.] Interest on FDRs 3,82,03,086/-

Interest on ICD and other deposits and advances

- Out of surplus from export proceeds 77,83,788/-

Interest on FDRs                                   5,929,196/-

     - Out of IPO Funds [Public Issue, 2006]      52,016,070/-

3. Out of the above, interest on FDR and interest on IPO funds were kept out of the purview of 'business income' and offered for tax as "Income from other sources". During the course of assessment proceedings, the assessee requested the Assessing Officer to rework the interest component and consider the interest on FDR out of surplus from export proceeds amounting to Rs 3,83,03,086/- under the head "Business income" in the light of the provisions of section 10A(4) of the Income tax Act, 1961 [hereinafter referred to as 'the Act']

13. Considering the facts of the case in hand in the light of the judicial decisions discussed hereinabove, we are of the considered view that the interest earned on short term export surplus deposit has to be treated as 'Business income" for the purposes of computation of deduction u/s 10A(4) of the Act. Ground No. 1 is accordingly allowed.

14. Ground No. 2 relates to the disallowance of claim of two expenditures, namely, legal and professional fee of Rs 1,93,250/- and Rs 51,384/- on foreign taxes.