CIT Vs. JV ELECTRONICS PVT LTD.

JUDGEMENT

(1.) By order dated 21st January, 2003 the following substantial question of law was framed :

(2.) The respondent is a company and the assessment year involved is 1989-90. The respondent during the relevant assessment year was entitled to deduction under Section 80HHC of the Income Tax Act, 1961 (Act, for short). However, while computing the said deduction the respondent had included and treated the rent received, being Rs.1,03,363/-, and interest of Rs.1,76,983/-, as income from profits and gains from business, which is eligible for deduction under the said Section.

(3.) The Assessing Officer in his order dated 30.11.1990 observed that the interest was payable by sundry debtors, Haryana State Electricity Board, on bonds issued by IDBI, on fixed deposits and on account of income tax refund. The fixed deposits had been issued and obtained out of profits earned in the earlier years. The Assessing Officer held that the aforesaid interest cannot be treated as business income and cannot be included for computing the deduction under Section 80HHC. He also rejected the contention that the interest earned should be reduced from interest paid. The Assessing Officer further held that the rent earned should be assessed under the head "income from house property" and cannot be treated as business income.