Itxa/257/2012 Of Ramu S. Deora v. The Deputy Commissioner Of Income Tax Circle -12 (3)

*1* IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.257 OF 2012 Ramu S. Deora ..Appellant -Versus-The Deputy Commissioner of Income-TaxCircle – 12(3)..Respondent ...........Mr. Nishit Gandhi i/b. Sameer G. Dalal for the Appellant............ CORAM: S.C. DHARMADHIKARIAND B.P. COLABAWALLA, JJ. DATE :- 11[th] June, 2014 P.C.: 1]This appeal is directed against the order of the Income Tax Appellate Tribunal dated 29[th] July, 2011 in Income Tax Appeal No.7523/MUM/2007. The assessment year in question is 1997-98. 2]The appellant before us is the assessee. He is claiming that he is an individual engaged in the business of manufacturing, trading and export of pharmaceutical items and bulk drugs. It is his claim that in order to conserve the stock of foreign currency, Reserve Bank of India introduced a scheme of opening and maintaining Export Earner Foreign Currency Account. The exporter can open this account in any foreign currency and 1/5 the credit to this account will be only by way of export sales realization. The amount lying to the credit of this account can be used for specific need of export business, by the account holder as per the guidelines of the Reserve Bank of India. On this money so placed in the account, pending utilization, for the purpose above mentioned, the account holder earns nominal amount of interest. 3]The contention before us is that the deduction under section 80HHC of the Income Tax Act, 1961 as claimed has been denied erroneously. It is submitted that the Assessing Officer, the Commissioner of Income Tax(Appeals) and the Tribunal have relied upon a decision in the case of Commissioner of Income Tax V/s. Shah Originals rendered by Division Bench of this Court reported in 2010 (327) ITR 19. However, there is a conflict between the views taken by the Division Bench in the case of Shah Originals and a prior Division Bench in the case of Commissioner of Income Tax V/s. Bangalore Clothing Co. reported in 2003 (260) ITR 371. 4]Reliance is also placed on the judgment in the case of Commissioner of Income Tax V/s. Rachna Udhyog in Income Tax Appeal No.2394 of 2009 decided on 13[th] January, 2010. 5]We are unable to agree with the learned counsel appearing for the assessee in support of this appeal that the same raises any substantial question of law. The concurrent findings of fact is that the claim under Section 80HHC was regarding interest. That was stated to be earned by the assessee from the EEFC account amounting to Rs.67,80,738/-. Implicit and inherent in the submission of learned counsel appearing for the assessee is the fact that this amount, termed as interest is pending the utilization of the said Account for the purpose of export. That was not any receipt or income derived from export and which was deposited in the account and on which the interest was earned. It is this distinction which has been made throughout to deny the claim of the assessee. We do not find that this approach of the Tribunal or that of the Commissioner and the Assessing Officer is in any way perverse or vitiated by any error of law apparent on the face of the record. Even before us, it has not been disputed that pending utilization of the money in the account, the account holder earned nominal amount of interest. However, the argument is that the principle intention for opening and operating this account is to be seen and that is to ensure that import obligations of a businessman in foreign currency are met directly from the export realizations in foreign currency. We do not find that such case made out to claim the deduction. In these circumstances, the view taken concurrently does not suffer from any legal infirmity. infirmity. 6]We do not find that there is any conflict in the views taken by the Division Benches of this Court. In the case Bangalore Clothing, the Division Bench held that the items of income have got to be seen in the context of the business activity of the assessee. That was involving the receipts by way of brokerage, commission, interest, rent, labour charges etc. The illustrations given by the Division Bench would show that in case assessee carrying on the business of financing the interest income which accrues to the assessee will have the element of turnover and in such a case, receipts like interest, will not attract explanation (baa). The Division Bench rendering the judgment in the later case namely Shah Originals found that the assessee admittedly received the entire proceeds of the export transaction. The proceeds of the EEFC account are to be utilized for bona fide payments by the account holder subject to the limits and the conditions prescribed. It is in these circumstances, that the interest which had arisen as a result of the deposits maintained in the EEFC account, cannot be regarded as representing the business income of the assessee. The business of the assessee consists of manufacture and export of garments. The interest income which was generated from the deposits held in the EEFC account would not fall for classification as income under *5* 16.itxa257.12 the head of business and profession but would fall for classification as income from other sources. It is this judgment which has been applied to the facts of the present case. We do not see any conflict in the view taken by the Division Benches. In the context of the facts before the Division Benches and pointing out that every time and on an every occasion, the claim of the present nature cannot be disallowed but must be seen in the backdrop of the business of the assessee that we are of the opinion that the present appeal does not raises any substantial questions of law. 7]As a result of the above discussion, the appeal fails and it is dismissed. (B.P.COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.) wadhwa 5/5