Law:

Section:

Section 80HH of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings, etc., in backward areas - Assessment year 1986-87 - Assessee derived interest on deposits made with bank for opening letters of credit for purpose of import of material - Whether such interest cannot be regarded as income derived from industrial undertakings, as direct and proximate link is with deposit in bank and not with industrial undertaking and, hence, would not qualify for computing deductions under sections 80HH and 80-I - Held, yes - Whether since such interest had been included in computation and assessed under head 'Profits and gains of business or profession', it had to be regarded as having being derived from export effected by assessee, and, hence, would qualify for deduction under section 80HHC - Held, yes CASES REFERRED TO CIT v. Jameel Leathers & Uppers [2000] 246 ITR 97 (Mad.) [Para 2]. U. Nareshkumar for the Applicant. M.P. Senthilkumar for the Respondent. JUDGMENT R. Jayasimha Babu, J. - The question referred to us, at the instance of the Revenue, for our consideration is, "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that interest on amount deposited as guarantee fund forms part of profit derived from the export business and should be included in the profit of the assessment for computing deductions under sections 80HH, 80HHC and 80-I ?" The assessment year is 1986-87. 2. The interest that the assessee derived on the deposits that it had made with the bank, which deposits had been made for the purpose of opening the letters of credit for the purpose of import of material, has been held by the Tribunal to be an amount which is not derived from the industrial undertaking for the purpose of sections 80HH, 80HHC and 80-I. While that decision is correct insofar…

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