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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:
THE COMMISSIONER OF INCOME TAX
C R BUILDING, QUEENS ROAD,
BANGALORE.
THE ASSISTANT COMMISSIONER OF
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.
The following substantial questions of law were framed at the time of admission on 12.11.2010:
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?
The said substantial question of law was the subject matter of an appeal before this Court in the case of
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.
In that view of the matter, the substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, appeal is dismissed.
Sd/- JUDGE
Sd/-
JUDGE Brn