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2010 (4) TMI 1147 - KARNATAKA HIGH COURT

2010 (4) TMI 1147 - KARNATAKA HIGH COURT - TMI - Interest received on FD - Whether the tribunal was right in treating the interest as an income from other sources? - Held that:- It is not in dispute that the appellant is a 100% Export Oriented Unit which is engaged in export of processed gherkins and during the course of its business it would have to make certain deposits for the purpose of obtaining letter in credit or for bank guarantee when the products which are processed by it have to be ex .....

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not become income from other sources as it has to be seen as to whether the said interest was earned out of business compulsion and as a business income. When in the said case, the Assessee has made deposit in a bank as a condition for obtaining bank guarantee to be given before the Excise Authorities as required under the Excise Rules the interest income which arose out of such transaction was held to be closely connected with the business of the Assessee and hence business income. If the inco .....

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ss. - Decided in favour of the Assessee and against the Revenue - I.T.A NO. 3112/2005 - Dated:- 13-4-2010 - MR. K.L. MNJUNATH, And B.B. NAGARATHNA JJ. APPELLANT BY: SHRI K.P KUMAR, SR. And SHRI ATUL KALUR, ADVOCATE REPONDENTATS BY : SRI K.V. ARBVIND, ADVOCATE JUDGMENT The assesse has preferred this appeal by challenging the order. Dated 12.08.2005 passed in I.T.A. NO.778/Bang/2002 by raising several substantial questions of law. When the appeal came to be admitted, the following substantial .....

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sources? 2. The relevant facts of the case are that the appellant Assessee which is a company and a 100% export of processed gherkins having its factory near Davanagere. For the asseement year 1998-99, it filed its return of income claiming exemption under Section 10B of the Income Tax Act 1961 and the same was accepted by the Assessing Officer by intimation dated 21.10.1999. Subsequently, notice under Section 154 of the Act was issued to the appellant so as to make rectification of intimation d .....

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has to be treated as income from other source thereby raised a demand of ₹ 39,586/-. Being aggrieved by the said order, the Assessee filed and appeal before the Commissioner of Income Tax (Appeals) which was however dismissed, against which the Assessee filed an appeal before the Income Tax Appellate Tribunal. The Tribunal also confirmed the order of the authorities below and being aggrieved by the said order, the present appeal has been filed. 3. We have heard the learned Sr. Counsel on .....

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sit and the authorities have failed to appreciate these aspects of the matter and treated the said income as income from other sources. He has also relied upon two decisions of this Court to contend that when on account of certain business compulsions the amount has to be kept in a fixed deposit which earns interest, then the same has to be treated as business income and not income from other sources. 5. Per contra, learned counsel for the Revenue supporting the order of the Tribunal and other a .....

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oducts which are processed by it have to be exported. In terms of the said letter of credit or bank guarantee, certain deposits are made and such deposits are to be treated as margin amounts and any interest which is earned out of the said deposits has to be treated as business income and not as income earned from other sources, in this context, it would be apposite to refer to two decisions of this Court rendered in I.T.A.No.426/2002 in the case of M/s Hajee Jaffar Shariff v. The Income Tax Off .....

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