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TMI Blog2006 (12) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of deduction under section 80HHC, gross amount of interest has to be deducted while excluding 90% of interest income earned by the assessee except interest received from customers on account of late payment, which is to be considered as business income?" 2. With the consent of learned counsel for the parties, we have taken the appeal for final disposal for determination of above referred substantial question of law. 3. The Assessing Officer held that Income of interest received by the assessee from customers was liable to be reduced from income for calculating relief under section 80HHC of the Income Tax Act, 1961 (for short, 'the Act'). Stand of the assessee was that only 90% of the net amount of interest could be reduced fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss carried on by the assessee; (c) where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods, the profits derived from such export shall,- (i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and (ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods: Provided that the profits computed under clause (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "total turnover" shall have effect as if it also excluded any sum referred to in clause (iiia), (iiib) and (iiic) of section 28; (baa) "profits of the business" means the profits of the business as computed under the head "Profits and gains of business or profession" as reduced by - (1) ninety per cent of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India;" 6. Reference to the above provisions shows that the assessee is entitled to deduction to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed as business income. It is at the time of determination of profits of business for the purpose of clause (baa) as referred to above, that the interest component added therein is to be excluded to give effect to the provisions in its true letter and spirit.
9. Accordingly, the substantial question of law referred to above is answered in favour of the revenue and against the assessee and it is held that even the interest which is received from the customer on account of delay in payment, even if assessed as business income but will have to be reduced therefrom for the purpose of calculation of profits of business to calculate the relief admissible under section 80 HHC of the Act.
10. The appeal is accepted. X X X X Extracts X X X X X X X X Extracts X X X X
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