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2015 (5) TMI 689 - HC - Income TaxEntitled for deduction under section 80 HHC on interest income - Held that:- It is the settled proposition in interpretation of the statutes, that while ascertaining the true scope of a provision in a statute, attention must necessarily be paid not only to the text, but also the context. In Commissioner of Income-Tax Vs. Shri Ram Honda Power Equip(2007 (1) TMI 86 - HIGH COURT, DELHI), the Delhi High Court held that the word "interest" in clause (baa) of the Explanation to Section 80HHC of the Act, is indicative of net interest i.e. gross interest as reduced by expenditure incurred by the assessee in earning such interest.While applying the direct and proximate nexus test, we are of the view that where the interest earned does not have direct and proximate nexus, with the income from the business of export, the interest cannot be deducted as income from export under Section 80HHC (3)(a) of the Act, and has to be given the same treatment for tax, as "income from other sources" under Section 56 of the Act. - Decided in favour of revenue. Affect of amendment in section 80 HHC, by way of insertion of sub-section (4B) excluding interest income for the purpose of deduction under section 80 HHC on the deduction of interest income under section 80 HHC for the period prior to amendment - Held that:- The amendment in Section 80HHC, by way of insertion of sub-section (4B), excluding interest income for the purposes of deduction under Section 80HHC of the Act, will also affect the deduction of interest income under Section 80HHC of the Act, for the period prior to the amendment, inasmuch as the applicability of the principle of direct and proximate nexus to the business income, will apply both, to the provisions of the Act prior to, and after the amendment, which came into effect by the Finance Act, 1992, with effect from 01.04.1992. - Decided in favour of the Revenue. Eligibility for deduction under section 80 HHC assessee is not earning income in convertible foreign exchange by way of an interest on the money advanced - Held that:- The earning of the income convertible from foreign exchange by way of interest, is not necessary so long as the interest is derived from business of export, and has direct and proximate nexus, with the income earned out of the profits retained for the export business. The earning of the income convertible from foreign exchange, is not a test for determining, as to whether deduction is allowable in respect of the income derived from the profits retained for export business. - Decided against the assessee.
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