Case Law Details
Delhi High Court held In the case of Principal CIT vs. Universal Precision Screws that interest on fixed deposits has the requisite characteristic of business income and has a nexus to the business activities of the Assessee. Accordingly it will be part of the profit of business while computing profit derived from the export activities. In the present case, the Assessee has stated that the interest on FDRs was received on ‘margin kept in the bank for utilization of letter of credit and bank guarantee limits’. In those circumstances, the decision of the ITAT that such interest bears the requisite characteristic of business income and has nexus to the business activities of the Assessee cannot be faulted.
Facts of the Case
The Assessee is engaged in the manufacture and export of Fasteners. It is a 100% export oriented unit. The assessee filed his return of income for the AY 2009-10 and claimed the deduction under Section 10B (1). In the assessment order dated 19th December, 2011, the AO noted that the Assessee had included as part of its income scrap sales of Rs.31,84,869/-, exchange rate difference amounting to Rs.32,35,700/- and interest received on Fixed Deposit Receipts (FDRs) amounting to Rs.1,60,11,996/-. The AO was of the view that only those profits and gains would be exempted under Section 10B which had direct and proximate relationship with activities relatable to an EOU. Accordingly AO treated sale of scrap and exchange rate difference as part of domestic sale and also exclude the interest on FDs from income from undertaking while applying formula u/s 10(B) (4).
Held by CIT (A)
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