N.R.S. Ganesan, Judicial Member. - (1.) BOTH the appeals of the assessee relate to the assessment years 2001-02 and 2000-01. Since common issue arises for consideration in both the appeals, we heard the same together and disposing of the same by this common order.
(2.) Mr. R. Vijayaraghavan, the learned counsel for the assessee, submitted that the issue arises for consideration in this appeal is regarding grant of deduction in respect of interest income received by the assessee from the bank to the extent of Rs. 5,31,125 and provision no longer required which is written back in the books of' account of the assessee to the extent of Rs. 11,60,048 and also sales tax refund received by the assessee to the extent of Rs. 1,16,212. The learned counsel for the assessee further submitted that the assessee also claimed deduction under section 80HHC in respect of resale value of Special Import License to the extent of Rs. 7,494. The learned counsel further submitted that section 10B has undergone a vast change. It is now that the assessee is entitled for deduction and not exemption. According to the learned counsel, originally the assessee was entitled for exemption. The learned counsel further submitted that the profit for deduction under section 10B has to be computed by multiplying the business profit by the export turnover divided by total turnover. This method of computation for the purpose of claiming deduction under section 10B is almost similar to section 80HHC. The learned counsel further submitted that there is no clause as contained in Explanation (baa) to section 80HHC to exclude 90 per cent of the interest and miscellaneous income. Therefore, according to the learned counsel, the profit has to be computed by taking into account all the business profit received by the assessee. The learned counsel for the assessee further submitted that the assessee is 100 per cent export-oriented unit and, therefore, eligible for deduction under section 10B. In the course of its business, the assessee deposited money in the bank in order to obtain guarantee in favour of the Government of India as per the Notification issued by the Customs department. According to the learned counsel, unless and until the assessee deposits the money and obtain guarantee in favour of the Government of India, the assessee will not be permitted to import goods free of duty for the purpose of manufacturing and re-export. If the guarantee is not provided, the assessee has to pay customs duty on import. So the deposit made by the assessee reduces the expenditure incurred by the assessee in exporting goods. Therefore, the learned counsel submitted that the interest income received from the bank is directly connected with the business of the assessee. The learned counsel placed his reliance on the judgment of the Apex court in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. (2000) 243 ITR 21 (SC) and submitted that interest received from bank deposit which is made to procure letter of credit for purchase of machinery was held to be a business income. The learned counsel also placed his reliance on the judgment of the Madras High Court in the case of CIT v. N.S.C. Shoes (2002) 258 ITR 749 (Mad) and submitted that the High Court held that interest from bank deposit for obtaining letter of credit is business income and should be taken into account for the purpose of relief under section 80HHC even though not allowable under section 80HHC. The learned counsel further invited our attention to the notification issued by Mumbai Commissioner of Customs and submitted that the assessee has to furnish 5 per cent of the bond amount as bank guarantee or any other approved Government security for the purpose of carrying on its business. Therefore, there is a next is between the deposit made by the assessee and the interest received by the assessee. Since the deposit is admittedly made for the purpose of business, the interest received by the assessee has to be treated as business income. The learned counsel has also filed the bond extract filed before the Assistant Commissioner of Central Excise to show that the bank guarantee issued by the Punjab National Bank, Mylapore Branch.
(3.) COMING to the provision made which was written back in the books of account as no longer required is also to be treated as business income. The learned counsel for the assessee submitted that the assessee had provided excess amount towards incentives and bonus for the earlier years aggregating to Rs. 11,60,048. These provisions are now reversed and credited in the books of account. These amounts were not claimed in the earlier years. Since the provision made was reversed, the assessee is entitled for deduction under section 10B. According to the learned counsel, the observation of the first appellate authority that the provision was not deducted in the earlier years and the amount was allowed under section 10 B is wrong as relief under section 10 B is on income and not deductions. In any event, according to the learned counsel, that issue is not relevant as the amount is not at all taxable in this year and so exemption under section 10 B is irrelevant. According to the learned counsel, the provision which is written back in the books of account is connected with the business of the assessee. Therefore, the assessee is entitled for deduction in respect of the provision also.;