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2018 (12) TMI 463

he deposits made by the assessee with the banks had an immediate nexus with the business? - Held that:- The matter requires a fresh adjudication and a fresh look by the AO by thoroughly examining the factual position and bearing in mind the legal position pointed out in the preceding paragraphs. During the course of such proceedings it is open to the assessee to place all their submissions including the submission based on the decision in the case of ACG Associated Capsules (P) Ltd. [2012 (2) TMI 101 - SUPREME COURT OF INDIA]. - The appeal filed by the Revenue is allowed, the order passed by the Tribunal as well as the CIT(A) are set aside, the assessment order dated 31.01.2006, on this particular head alone namely, the entitlement for .....

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Standing Counsel for the appellant/Revenue submits that though the tax effect is less than the threshold limit hit by Circular No. 3 of 2018, it is hit by the exceptional clause mentioned in paragraph 10(c) of the Circular. In the light of the said submission, we took up the appeal for hearing on merits. 6.The short issue, which falls for consideration, is whether the Tribunal was right in holding that the interest income in toto forms part of eligible business profits for the purpose of deduction under Section 80HHC of the Act and only 90% has to be excluded from the business profits by applying Explanation (baa) to Section 80HHC of the Act. 7. The Commissioner of Income Tax (Appeals) [for brevity the CIT(A)], while allowing the assessee&# .....

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assessee for the purpose of its business. 10. More or less, an identical question was considered by this Court, to which, one of us (TSSJ) was a party, in the case of Arul Mariammal Textiles Limited Vs. ACIT [TCA No. 909 of 2008 dated 07.08.2018]. This Court, after taking note of the various decisions on the point, held with the assessee in the said case furnished the fixed deposit, which was a principal condition to enable the assessee to open a Letter of Credit for the purpose of import of critical components for manufacture of windmill and it was not the case of the Revenue that the amount was deposited in fixed deposits solely for the purpose of earning interest nor it was the case of the Revenue that the amount, which was deposited, in .....

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ate nexus with the business. Since the facts are not placed before us, we are of the view that the matter requires to be re-adjudicated afresh, for which purpose, the Assessing Officer should take a fresh look into the matter. 13. The learned counsel appearing for the respondent/ assessee submitted that in the event the matter is being remanded to the Assessing Officer, the assessee should be in a position to canvass the point that 90% of the net interest, which has been included in the profits of the assessee and is computed under head profits and gains of business or profession alone should be taken and not on gross interest to be taken under Clause (1) of Explanation (baa) to Section 80HHC of the Act for determining the profit of the bus .....

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