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2018 (12) TMI 463

Deduction u/s 80HHC - interest income in toto forms part of eligible business profits for the purpose of deduction u/s 80HHC and only 90% has to be excluded from the business profits - whether the 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 th .....

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gainst the order of the Income Tax Appellate Tribunal Madras 'B' Bench, dated 15.02.2008 in ITA No.1448/Mds/07 for the Assessment year 2003-04. 2.Heard Mrs.R.Hemalatha, learned Counsel for the Revenue and Mr.Vijaya Raghavan for M/s.Subbaraya Aiyar Padmanabhan, the learned Counsel for the respondent. 3.This Appeal have been admitted on 22.08.2008, on the following Substantial Question of Law: "Whether in the facts and in the circumstances of the case, the Tribunal was right in law in .....

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as 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's appeal vide order dated 26.02.2007, stated that the assessee derived income from deposits made with the banks for the purpose of obtaining Letter of Credit, Bank Guarantee and other such related services from the bank. Therefore, the assessee's contention that the interest of income parto .....

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se as to whether the deposits made with the banks were exclusively for the purpose of obtaining Letter of Credit, a principal condition imposed by the bank and that Letter of Credit was required by the 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 decis .....

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as well as in the order passed by the CIT(A). 11. Mrs.R.Hemalatha, places reliance on the Division Bench of Delhi High Court in the case of the CIT Vs. Cosmos International [reported in (2009) 318 ITR 314]. In the said decision, the Delhi High Court relied upon another decision of the same High Court in the case of CIT Vs. Sri Ram Honda Power Equip [reported in (2009) 289 ITR 475], wherein the Court held that whether surplus funds are parked with the bank and interest is earned thereon, it can o .....

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ts 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 business. 14. In this regard, reliance is placed on the decision of the Hon'ble Supreme Court in the case of ACG Associated Capsules (P) Ltd., Vs. CIT [reported in (2012) 247 CTR 0372]. 15. In the light of the findings which we have recorded in the preceding paragraphs, we are of the firm view th .....

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