M/S.SARAF TRADING CORPN.COCHIN-3. vs. DY.COMMR.OF INCOME TAX,EKM

I.T. Appeal No.117 of 2002 relates to the assessment year 1993-1994. I.T. Appeal No.123 relates to the assessment year 1992-1993. The appellant is a partnership firm engaged in the business of Tea Export. Appellant had received interest on certain bank deposits maintained by him. Likewise the appellant had certain godowns in connection with the export business. But he used to rent out the godown on certain occasions. He used to derive rent therefrom. The appellant raised claim under Section 80 HHC of the Income Tax Act, 1961. The appellant claimed benefit of the interest from the bank deposits and also rental income from the warehouse as aforesaid under Section 80 HHC. That is to say, for computing its business income (export income) the appellant sought to add the rental income as also interest income as aforesaid. Authorities have found that the said income is to be assessed under Section 56 as income from other sources. Under Section 80HHC the appellant is entitled for deduction from the total income as provided therein. The questions of law which is raised in these appeals are as follows : 1. “Whether on the facts and in the circumstances of the case, the appellate tribunal was justified in treating the interest on the bank deposits an income from other sources”? 2. “Whether on the facts and in the circumstances of the case, the appellate tribunal was justified in treating the warehouse charges received as income from other sources”?

Whether the appellate tribunal was justified in not adjusting the depreciation on godown building and rent paid for godown taken on lease from the warehousing charges received by the appellant”?

We heard the learned counsel for the appellant and the learned standing counsel for the Income Tax Department. The learned standing counsel for the Income Tax Department would point out that as far as the question of claiming interest on bank deposit is concerned, it is directly covered by the Division Bench decision of this court. He cited before us the decisions reported in Commissioner of Income Tax v. Cochin Refineries Ltd.

As far as the question relating to the interest is concerned, we take notice of the judgment in Nanji Topanbhai and Co. v. Assistant Commissioner of Income-Tax and Others (243 ITR page 192). We find that the said Bench was concerned directly with the issue relating to Section 80HHC and the question considered was interest received by the assessee from the fixed deposit. The court, inter alia, held as follows : “Under section 80HHC of the Income-tax Act the assessee who is engaged in export business is allowed in computing the total income a deduction out of the income derived by the assessee from the export of such goods, etc. Therefore, unless the assessee is able to show that the income received by way of interest from the fixed deposit is income derived from the export business, it will not be entitled to claim deduction under section 80HHC. We are in full agreement with the Tribunal that in the nature of the business carried on by the assessee, namely, export business, the interest received by it from the fixed deposit cannot be treated as business income. This aspect has been considered by a Bench decision of this court in CIT v. Cochin Refineries Ltd. [1985] 154 ITR 345. In that case the claim was under section 80-I of the Income-tax Act. The following observation in the above judgment is very relevant (page 352) : “Profits and gains are well understood to mean only the business income, and not any other income. So long as the company has no business of lending money, and so long as the admitted case of the company is that the income derived is only on account of the peculiar situation arising from the time schedule for repayment of loans, it cannot be stated that the income yielded by the deposits or investments was received in the course of the company's business so as to be treated as a business profit”. The earlier decision of this court in Collis Line Pvt. Ltd. v. ITO [1982] 135 ITR 390 was referred to and approved”.

Therefore as far the question relating to interest earned from bank deposit is concerned, we are in agreement with the view taken by the Division Bench. We answer the question against the assessee. Next question raised is regarding the rent received by the appellant for the years in question from the warehouse maintained. There is no direct decision as such on the point. We think that, having regard to the principles which are found analogous to the principles we found in the decision of the Division Bench in Nanji Topanbhai's case (cited supra), the said question also must be answered against the assessee. The assessee is doing the business of exports. The rental income, which the assessee derives by renting out the warehouse, when he does not warehouse his own goods, can by no stretch relate to the business income (export) of the assessee. It can only come under the income from other sources. If that be so, the appellant cannot claim to have the said income he has received from other source to be treated as under Section 80HHC. Therefore, we answer the said question also against the appellant. The appeals are without merit and they are dismissed. K.M.JOSEPH, JUDGE K.HARILAL, JUDGE RKM ////