CIT Vs. HIGH POLYMER LABS LTD

JUDGEMENT

(1.) IN this appeal which pertains to assessment year 1996 -97, the following two substantial questions of law were framed vide order dated 22.08.2006 :

(2.) HIGH Polymer Labs Ltd., the respondent -assessee is a company, which is engaged in exports. For the assessment year in question they had claimed deduction under Section 80HHC of the Act and for the purpose of computation had included (i) interest earned on FDRs which had been deposited with the bank to obtain credit facilities for the purpose of export and (ii) receipts from group companies/firms for use of computers called EDP receipts as income derived from exports.

(3.) THE aforesaid finding recorded by the Assessing Officer were affirmed in the first appeal by the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) further held that the income by way of interest was not income derived from exports and even netting of interest income for the purpose of Explanation (baa) to Section 80HHC was not permissible. He held that EDP receipts cannot form part of business income and should be treated as 'income from other sources'.