COMMISSIONER OF SERVICE TAX vs. M/S MOTOR WORLD

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 14th DAY OF OCTOBER 2014

PRESENT

THE HON’BLE MR JUSTICE N. KUMAR

AND

THE HON’BLE MR JUSTICE B. MANOHAR

ITA NO.1/2009

BETWEEN:

C R BUILDING, QUEENS ROAD,

BANGALORE.

INCOME TAX, CIRCILE – 12(4)

C R BUILDING, QUEENS ROAD

BANGALORE.

.. APPELLANTS

(BY SRI K V ARAVIND, ADV.)

AND:

M/S RAJESH EXPORTS LTD NO.4, BATAVIA CHAMBERS K K ROAD, KUMARA PARK WEST BANGALORE – 560 001.

.. RESPONDENT

(BY SRI S PARTHASARTHI, ADV.)

THIS APPEAL IS FILED UNDER SECTION 260-A OF THE IT ACT, 1961 ARISING OUT OF ORDER DATED 14.8.2008 PASSED IN ITA NO.51/BNG/2008, FOR THE

2 ASSESSMENT YEAR 2004-2005 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT BANGALORE IN ITA NO.51/BNG/2008, DATED 14.8.2008 CONFIRM THE ORDERS OF THE APPELLATE COMMISSIOENR AND ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE – 12(4), BANGALORE.

THIS APPEAL COMING ON FOR HEARING THIS DAY, N KUMAR J., DELIVERED THE FOLLOWING:

JUDGMENT

The revenue has preferred this appeal challenging the order passed by the Tribunal.

i) Whether the Tribunal was correct in holding that a sum of Rs.62,57,04,427/- interest income earned by the assessee from fixed deposits were liable to tax under the head ‘Income from Business’ and not under the head ‘Income from Other Sources’ as held by the Assessing Officer and confirmed by the Appellate Commissioner?

ii) Whether the Tribunal was correct in holding that the claim of deduction under Section 10B of the Act, in respect of a sum of

3 Rs.32,89,72,927/- interest income earned from fixed deposits was an allowable deduction as the same is attributable to assessee’s business?

1.THE COMMISSIONER OF INCOME TAX, BANGALORE, 2. THE DEPUTY COMMISSIONER OF INCOME TAX, BANGALORE vs M/S MOTOROLA INDIA ELECTRONICS PVT. LTD reported in 2014-TIOL-87-HC- KAR-IT where it was held the interest received or the consideration received by sale of import entitlement is to be construed as income of the business of the undertaking, then there is a direct nexus between this income and the income of the business of the undertaking. Though it does not par take the character of a profit and gains from the sale of an article. In view of the definition of ‘Income from Profits and Gains’ incorporated in Subsection (4), the assessee is entitled to the benefit of exemption of the said amount as contemplated under Sectiofn 10B of the Act. Therefore,

4 the interest derived from the said deposit is also exempted from payment of tax.

Sd/- JUDGE

Sd/-

JUDGE Brn