In Shri Laxminarain Khetan v. ITO, a division bench of the Allahabad High Court held that the interest received on with the bank in order to avail credit facility for export business is eligible for deduction under s. 80HHC(4C) of the Income Tax Act.
The assesse, who is an exporter of carpets, invested some money in fixed deposit with the bank in order to avail credit facility for export. He claimed 90% deduction of interest earned on such deposits under explanation (baa) to s. 80HHC (4C) of the Income Tax Act. However, the claim was disallowed by the Assessing Officer.
Appellant failed to secure relief from the appellate authorities and approached the High Court for relief.
A bench comprising Justices Pankaj Mittal and Vinod Kumar Misra allowed the appeal and held that the specified percentage of the said interest is deductible from the “profits of business” computed under the head “profits and gains of business and profession” as provided under the explanation (baa) to sub-section (4C) of Section 80HHC of the Act, the interest income as specified is deductible.
The bench held that the interest income earned by the assessee is deductible from the income of the assessee under the head “profits and gains of business and profession” and this would be in addition to the deduction permissible under Section 80HHC(1) in respect of computing the total income in relation to the export business.
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