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2023 (1) TMI 1151 - AT - Income TaxDeduction u/s 10AA - interest on FDR along with Forward Premium, Bank Charges and Interest paid - These activities are inextricable part of the business of the assessee or not - CIT (A) treating the income from Fixed Deposit as income from other source where in the nexus of business transaction was already proved - HELD THAT:- The assessee in the ordinary course of business had to furnish fixed deposits on the Import Export transactions to banks for the purpose of availing loans and making payments to the suppliers. A new Fixed Deposit is given to the Banks for each and every import export transaction who after completing all the formalities gives fresh loans to our clients. Thus each and every Fixed Deposit has a corresponding Bank Loan for each and every Import Export trading transactions undertaken by our clients. Therefore none of the Fixed Deposits are independent of business. The Banks charges interest/processing charges etc on all such loans given. Net residue (difference between the Interest Earned and the Finance Loan and other Charges etc) if any, by our clients is nothing but an outcome of undertaking an Import Export Transaction which is in the normal course of trading business of diamonds eligible for exemption u/s. 10AA - The above income can be compared to the Forex Gains which is earned due to Currency Fluctuations. Fluctuations in Forex Gains is considered to be a part of the business activity and is treated as a resultant of the Import Export Activity undertaken, thus exempt u/s. 10AA of the Income Tax Act. On similar lines, since the Interest on Fixed Deposits are attributable and incidental to the trading business carried on by the assessee, the same has rightly been claimed as exempt u/s. 10AA - In the result, the results declared by the assessee after netting off the FDR Interest with interest paid and Forex loss are eligible to be adjusted against Business Profit. Ground raised by the assessee are allowed.
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