TMI Blog2011 (9) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... reliminary expenses in respect of fees paid to the Registrar of Companies and expenditure incurred towards public subscription of shares. Once the condition of Section 35D is fulfilled, the assessee is entitled to the deduction - Decided in favor of the assessee - IT Appeal No. 123 of 2006 - - - Dated:- 14-9-2011 - N. Kumar and Ravi Malimath, JJ G. Kamaladhar for the Appellant. Raghuraman and Chythanya for the Respondent. JUDGMENT N. Kumar, J. This appeal was admitted to consider the following substantial questions of law :- (1) Whether the appellate authorities were correct in holding that for the purpose of computation deduction under Section 80-IA of the Act interest income earned by the assessee after deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the net interest which can be included in the profits. If netting were not to be permitted the result would be that the profits of the exporter would be depressed by an item that: is expenditure incurred on earning interest, which does not form part of the profit at all. This could not have been the intention of the Legislature. Explanation (baa) is relatable only to clause (a) of Section 80HHC(3) and not to clause (b) thereof. These operate in distinct areas and no inter-mixing is contemplated. Hence, the word "interest" in clause (baa) to the Explanation in Section 80HHC is indicative of "net interest", i.e. gross interest less the expenditure incurred by the assessee in earning such interest. To summarise the conclusions: (i) In com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank, does not have an immediate nexus with the export business and, therefore has to necessarily be treated as income from other sources and not business income, (vi) Once business income has been determined by applying accounting standards as well as the provisions contained in the Act, the assessee would be permitted, in terms of section 37 of the Act, to claim as deduction, expenditure laid out for the purposes of earning such business income, (vii) In the second stage, the Assessing Officer will deduct from the profits of the business computed under the head "Profits and gains of business or profession" the following sums in order to arrive at the "profits of the business" for the purposes of section 80HHC(3): (a) 90 per cent of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case is the Delhi High Court judgment in the matter of Shri Ram Honda Power Equip (supra). We say so as that was the case, wherein the direct question posed in this appeal was under consideration and has been answered as such. The reasoning and interpretation employed, therein also appears to be reasonable and plausible." 3. In the light of the aforesaid judgment, as the first substantial question of law involved in this appeal is identical. It is answered in favour of the assessee and against the revenue. 4. In so far as the second substantial question of law is concerned, the claim of the assessee was negatived by the assessing authority relying on the judgment of the Apex Court in the case of Punjab Industrial Development Corpn. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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