Madras HC: For claiming Deduction the Interest on Bank Deposits is also eligible to be included in profits of 100% EOU.

According to the judgement of Madras High Court, the earnings form the Interest on Bank Deposits of the Export Oriented Unit (EOU) that has claimed deduction under Section 10A or 10B of the Income Tax Act, will get added up in the profits.

M/s.Sankhya Technologies Pvt Ltd. is the assessee in this case who has denied set off of Income from Other Sources against business loss under section 10A unit. In the Re-assessment proceedings, the Assessing Officer (AO) has separated the business loss and allowed exemption under section 10A in the addition of interest for more than Rs.23,60,578 under the heading income from other sources.

In the appeal to the commissioner of income-tax (CIT(A)) the actions of the Assessing Officer were upheld and it was concluded that there should be nexus between the income earned in respect of the industrial undertaking.

And in the Appeal to the Tribunal, it was also decided that the assessee company is eligible for set-off of business loss against other income including interest under the same head. The Assessing Officer was also ordered to allow set-off of the other income with business loss determined u/s 10A of the Act.

So in the present case, an issue was raised that the judgement given by the Tribunal was based on the facts that were the assessee company eligible for a set-off of business loss under Section 10A against the other income like interest income etc., by applying the provision of Section 70 when the assessee itself had returned business loss under section 10A or not.

Therefore the division bench of Justice Vineet Kothari and Justice Abdul Quddhose gave the decision in the favour of the assessee it was entitled to 100% exemption or deduction under Section 10-A of the Act.

With Warm Regards,

CL Bureau.