TMI Blog2003 (9) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised as to whether difference between the issue price and face value of certificate of deposits should be treated as interest and in which case, it would be liable to deduction of tax at source under s. 194A of the IT Act, 1961, or it should be treated as "discount", which is not liable to deduction of tax at source. It is clarified by the Board that the difference between the issue price and the face value of commercial papers and the certificate of deposits is to be as "discount allowed" and not as "interest paid". Hence, the provisions of IT Act relating to deduction of tax at source are not applicable in the case of transaction in these two instruments. According to the AO, the clarification issued by the Board reconciles the position and the use of word "like" in the circular clarifies the nature of the receipt and the word "etc" extent and scope of the receipts, in which element of turnover is absent and can be considered to be covered by any other receipt of a similar nature to prevent distorted version of export profits. According to the AO, it is covered under any other receipt of similar nature to that of interest, mentioned in Expln. (baa) of s. 80HHC of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir 3rd edition of June, 1995 at p. 16, thereof, which reads as under: "The 90 per cent reduction is with reference to any receipt by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits. It may be noted that the term 'charges' and 'any other receipt of a similar nature' will cover only such receipts as are of a similar nature to commission, interest, rent etc. As such, amounts recovered in respect of bad debts written off earlier, credit balances written off, discount and rebate on purchases etc. cannot be reduced from such profits. Similarly, any other items credited to the P L a/c arising directly on account of the export business also cannot be reduced from such profits." 5. In view of the above, the CIT(A) held that the deduction under s. 80HHC in respect of discounting charges received is not in the nature of interest and therefore, cannot be similar to interest. Consequently, the AO was directed to recompute the deduction as per computation given by the assessee. 6. During the course of hearing before us, the learned Departmental Representative contended that the discount cannot be included in turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt. In support of his contention, he relied upon the decision of Hon'ble Calcutta High Court in the case of CIT vs. Tirupati Woollen Mills Ltd. (1992) 193 ITR 252 (Cal), wherein it is held as under: "The assessee earned income from fixed deposits and other deposits which was sought to be assessed as income from other sources. The Tribunal found that the assessee had utilized its commercial assets, which were lying in the form of surplus cash, for earning interest. Such earning, according to the Tribunal, arising from utilization of commercial assets would be business income. On a reference: Held, that the Tribunal had found that the interest arose from utilization of commercial assets. The funds utilized in making fixed deposits with banks were business funds lying temporarily surplus with the assessee. It was, therefore, assessable as business income and revenue expenditure could be deducted from it." 10. The learned counsel further placed reliance on the decision of Tribunal Jodhpur, SMC Bench, in the case of ITO vs. Gopal Ram Prem Ram (2001) 72 TTJ (Jd) 698, wherein it is held that the interest earned on business fund lying idle and temporarily lent to a private party aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discount on certificate of deposits is not covered by Expln. (baa)(1). The receipt of similar nature as mentioned in the Explanation does not include discount. The "receipt of a similar nature" in the above clause is meant in the company of expressions like 'brokerage', 'commission', rent', 'charges'. If the expression 'receipt of similar nature' is to be applied, then it should be in accommodation of brokerage, commission, interest and charges. Because such income does not have any nexus with any manufacturing or processing or the core business activities, the abovespecified words form the distinct category, inasmuch as, all those items dealt on receipts earned by an assessee other than its regular and principal business activities. In such circumstances, "any other receipt of similar nature" also should be read along with meaning of those specified words forming themselves into a special category. If so, the words 'any other receipt of similar nature' should be confined to those chargers, which do not have anything to do with the business and the related activities carried out by the assessee. In the instant case, the discounts on certificate of deposits credited by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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