The Madras High Court held that the interest on bank deposits is also eligible to be included in profits of 100% Export Oriented Unit (EOU) for claiming deduction under Section 10A or 10B of the Income Tax Act.
The assessee, M/s.Sankhya Technologies Pvt Ltd. was denied set off of income from other sources against business loss under section 10A unit. The Assessing Officer in the reassessment proceedings has segregated the business loss separately and allowed exemption under section 10A and made addition of interest more than 23,60,578/- under income from other sources.
The CIT(A) upheld the action of the Assessing Officer and concluded that there should be nexus between the income earned in respect of the industrial undertaking.
On an appeal to the tribunal, it was held that the assessee company is eligible for set-off of business loss against other income including interest under the same head. And the Assessing Officer is directed to allow set-off of the other income with business loss determined u/s 10A of the Act.
The issue raised in this case was whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessee company is eligible for setoff 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.
The court took notice of the decision of the Karnataka High Court wherein it was held that the interest on bank deposits is also eligible to be included in the profits of 100% Export Oriented Units for the purpose of claiming deduction under Section 10A / 10B of the Income Tax Act.
The division bench of Justice Vineet Kothari and Justice Abdul Quddhose while answering the substantial question of law in the favour of the assessee held that the Respondent assessee was entitled to 100% exemption or deduction under Section 10-A of the Act.
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