Bank interest is not eligible for deduction U/s. 80-IB/80HHC

RELEVANT PARAGRAPH

8. It is convenient for us to discuss the issue item-wise as given in the above format.

i) The first item is interest earned on bank deposits amounting to Rs. 1,55,000/-. This interest is in the nature of “unearned income” and cannot be treated as income derived from the unit eligible for deduction under Section 80IB. “Derived of income” connotes “an intimate nexus” which is genetic as well as functional.

The Honourable Supreme Court in the case of Pandian Chemicals Ltd. Vs. CIT, 262ITR 278 has discussed the law on the subject and has held that similar interest income cannot be considered as income derived from the eligible industrial unit. In view of the above, we uphold the decision of lower authorities on this point and hold that the bank interest of Rs. 1,55,000/- is not eligible to be considered for the purpose of section 80IB.

ii) Next item is Duty Draw Back amounting to Rs. 26,43,000/ -This amount also cannot be considered for quantifying the deduction under Section 80IB in view of the recent judgement of die Honourable Supreme Court in the case of Liberty India Ltd. Vs. CIT, 317 !TR 218. The lower authorities have rightly excluded the said amount from the ambit of section 80IB.

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