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2005 (12) TMI 221 - AT - Income TaxDeduction u/s 80HHC in respect of interest income - Interest income from fixed deposit receipts placed as margin money with the bank for the purpose of availing various credit facilities - Taxability of interest income under the head "Income from other sources" or 'business' - HELD THAT:- The source of the interest no doubt continues to be the fixed deposit, but since the fixed deposit, which was either to be treated as pure investment, became converted into an asset utilization for the purpose of the business, which became a commercial asset, and therefore, the interest became taxable as 'business income'. It would be too simplistic a view, to tell that even after the conversion of the fixed deposit (investment) into a commercial asset which was put to use for the purpose of facilitating the assessee's business, the source of the interest still continues to be the investment and not the commercial asset. The characteristic of the asset had changed and the change cannot be ignored while examining the nature of the interest income. We, therefore, hold that the interest income is liable to be assessed as 'business income'. In the result, the grounds are allowed. Deduction u/s. 80HHC in respect of DEPB and DFRC - The DEPB is issued as an optional facility for exporters who do not wish to go through the licensing route. The objects of the DEPB scheme 'is to neutralize incidence of customs duty on the import content of the export product. The neutralization shall be provided by way of grant of duty credit, against the export product'. The credit is given as a percentage of the FOB value of exports made in freely convertible currency. The credit is available against export products and at such rates as may be specified by way of public notice, for import of raw material, intermediates, components, etc. The DEPB is freely transferable subject to the condition that it shall be for import at the port specified by the DEPB, which shall be the port from where exports have been made. The conditions of issue of DFRC and DEPB show that the immediate source of these two receipts is the actual exports of goods out of the country. No person other than an exporter would be eligible for these two receipts. The immediate source of DEPB and DFRC is, therefore, the exports made by the assessee and in that view of the matter, the ratio laid down by the Supreme Court in the case of Hindustan Lever Ltd. vs. CIT [1997 (9) TMI 7 - SUPREME COURT], is also fully satisfied in the sense that the immediate source of the DEPB and DFRC is the exports made by the assessee. Thus, we hold that the assessee is entitled to deduction u/s. 80HHC in respect of DEPB and DFRC. The ground is allowed.
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