Law:

Section:

Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1991-92 - Whether interest accrued to assessee on bank deposits was not profit derived from export of goods or merchandise and hence, assessee would not be entitled to deduction under section 80HHC in respect of interest income - Held, yes - Whether when assessee did not account any turnover of sale of machinery for which it received commission, said commission would not constitute part of business income of assessee and assessee would not be entitled to deduction under section 80HHC in respect thereof - Held, yes FACTS The assessee-company was engaged in the business of running a textile mill. For the relevant year, while claiming deduction under section 80HHC, it included bank interest and interest on income-tax refund and commission received on sale of machinery and cotton under the head 'Business income'. The assessing authority did not agree with the claim and assessed all the items under the head 'Income from other sources'. On appeal, the Commissioner (Appeals) held that the various interest receipts should be assessed as income from 'other sources'. With regard to commission income, it was held that the activity of procuring business by canvassing had been part of the assessee's business and thus, the income was to be assessed under the head 'Income from business or profession'. On further appeal, the Tribunal confirmed the order passed by the Commissioner (Appeals) in respect of interest accrued on bank deposits, refund of income-tax and other receipts. However, regarding the Commission receipt, the Tribunal reversed the order of the Commissioner (Appeals) and, held that the assessee was not entitled to deduction under section 80HHC in that respect. On reference : HELD Deduction under section 80HHC is allowable only on the profit from the export of goods or merchandise. Interest accrued to the assessee on bank deposits is not profit derived from the export of goods or merchandise. Since the immediate source of interest was the deposit and not the business, it could not be considered as derived from the export business making it eligible deduction under section 80HHC.…

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