TMI Blog2010 (8) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... Power Equip’s case (2007 (1) TMI 86 - HIGH COURT, DELHI) itself, netting has to be allowed by the adjustment of aforesaid interest received against the interest paid by the assessee to the bank on the credit facilities availed as is clear from the conclusion No. 8 in the judgment. We, accordingly, concur with the aforesaid view of the ITAT and thus, answer the question in favour of the assessee and against the revenue. - IT APPEAL NO. 106 OF 2009 - - - Dated:- 6-8-2010 - A.K. SIKRI AND MS. REVA KHETRAPAL, JJ. For the Appellant : Ms. Prem Lata Bansal. For the Respondent : M.P. Rastogi and Deepak K. Malik. PER : A.K. Sikri Admit. 2. The question which arises in this appeal is as under: "Whether ITAT was correct in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while determining the "profits of the business", the Assessing Officer has to undertake a two-step exercise in the following sequence. He has to first "compute" the profits of the business under the head "Profits and gains of business or profession." In other words, he will have to compute business profits, in terms of the Act, by applying the provisions of sections 28 to 44 thereof. (iii)In arriving at profits of the business by the above method, the Assessing Officer will exclude all such incomes which partake of the character of "income from other sources" which in any event are treated under sections 56 and 57 of the Act and are therefore not to be reckoned for the purposes of section 80HHC. The Assessing Officer will apply the law a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est, rent, charges or any other receipt of a similar nature included in such profits; and (c )Profits of any branch, office, warehouse or any other establishment of the assessee situated outside India. (viii)The word "interest" in clause (baa) of the Explanation connotes "net interest" and not "gross interest". Therefore, in deducting such interest, the Assessing Officer will take into account the net interest i.e., gross interest as reduced by expenditure incurred for earning such interest. The decision of the Special Bench of the Income-tax Appellate Tribunal in Lalsons [2004] 8 ITR 25 (Delhi) to this effect is affirmed. In holding as above, we differ from the judgments of the Punjab and Haryana High Court in Rani Paliwal [2004] 268 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources and not the business income. 8. Thus, insofar as earning of interest on fixed deposit is concerned, the determinative test is as to whether such interest has "immediate nexus" with the export business. 9. In the present case, the interest is earned from certain fixed deposit receipts. These fixed deposit receipts were not, as a result of some surplus funds available to the assessee which was parked with the bank and the interest earned thereon. It has been found, as a fact, that the money was deposited in the bank and the fixed deposit receipt was taken by the assessee for the purposes of giving bank guarantees to enable the assessee to procure quota for export. Certain other fixed deposit receipts were of EEFC Account. Such re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... da Power Equip s case (supra) this court specifically affirmed the judgment of Special Bench of the Tribunal in Lalsons Enterprises v. CIT [2004] 89 ITD 25 (Delhi) and particularly the following observations which were extracted by this Court as under: "if the interest received is found to have a nexus with the business, still it remains to be excluded from the profits of the business by virtue of Explanation (baa )(1), but the claim is that the quantum of such interest income to be excluded must be determined in accordance with the computation provisions relating to business by allowing expenditure by way of interest which bears a nexus with the interest receipt. The computation provisions included section 37(1) under which any expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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