K.K. BOLIYA, A.M.: ORDER Departmental appeal and assessee s cross-objection arise from order dt. 28th March, 2001 of CIT(A)-XLIV, Mumbai and are disposed of by this common order as under : Appeal No. 3832 2. only ground of appeal raised by Revenue is as under : "On facts and circumstances of case and in law, learned CIT(A) erred in directing AO to include interest receipt while calculating deduction under s. 80HHD." relevant facts, briefly stated, are that assessee is entitled to deduction under s. 80HHD of IT Act. AO computed allowable deduction in following manner : Amount Particulars Amount (Rs.) (Rs.) Total Turnover 64,34,23,313 Foreign Exchange 28,53,58,302 earnings Total assessed 8,81,96,788 business income (Less) Interest 19,92,561 income Assessed business income for 8,62,04,227 purposes of deduction under s. 80HHD = Assessed business income x Deduction under s. foreign exchange earnings 80HHD Total turnover = 8,62,04,227 x 28,53,58,302 64,34,23,313 = Rs. 3,82,31,583 Deduction per cent 50 per cent of above 1,91,15,791 Balance 50 per cent to extent of reserve created of Rs. 1,96,00,000 1,91,15,792 Deduction under s. 80HHD 3,82,31,583 subject-matter of present dispute is reduction of total assessed business income by interest income of Rs. 19,92,561 for purposes of computing deduction. When matter came up before learned CIT(A), he held that interest income earned by assessee was in nature of business income and profits derived from services rendered to foreign tourists would be proportion of receipts in foreign exchange and total receipts of business. learned CIT(A) further observed that it is nowhere mentioned under s. 80HHD that interest income assessed as business income must be disregarded for purposes of computation of deduction. He, therefore, directed AO to recalculate deduction allowable to assessee under s. 80HHD. 3 . learned Departmental Representative contended before us that s. 80HHD allows deduction in respect of earnings in convertible foreign exchange. As per this section, deduction is allowable with regard to profit derived by assessee from services provided to foreign tourists. It is argued that interest income is neither received in convertible foreign exchange nor it is for services provided to foreign tourists. It is, therefore, contended that interest income has to be ignored while computing deduction under s. 80HHD. He relied on following cases : (i)CIT vs. Ravi Ratna Exports (P) Ltd. (2000) 246 ITR 443 (Bom); (ii)CIT vs. Kantilal Chhotalal (2000) 163 CTR (Bom) 476 : (2000) 246 ITR 439 (Bom); (iii)CIT vs. Gimpex (P) Ltd. (2002) 176 CTR (Mad) 112 : (2004) 268 ITR 377 (Mad); (iv)Pandian Chemicals Ltd. vs. CIT (2003) 183 CTR (SC) 99 : (2003) 262 ITR 278 (SC); (v)Nirma Industries Ltd. vs. Asstt. CIT (2005) 95 TTJ (Ahd)(SB) 867 : (2005) 95 ITD 199 (Ahd)(SB). learned counsel appearing on behalf of assessee strongly supported order of learned CIT(A) and contended that for purposes of determining income which is allowable for deduction under s. 80HHD, entire business income of assessee has to be taken into account in terms of provisions of sub-s. (3) of s. 80HHD. learned counsel pointed out that interest income has already been brought to charge of tax by AO as income from business and profession and, therefore, there is no justification, whatsoever, in treating such interest income as business income while computing deduction under s. 80HHD. learned counsel relied on following cases : (i)Alfa Laval (India) Ltd. vs. Dy. CIT (2004) 186 CTR (Bom) 390 : (2004) 266 ITR 418 (Bom); (ii)Wolkem (India) Ltd. vs. Dy. CIT (1999) 65 TTJ (Jp) 68; (iii)Fountain Head Exports(ITA No. 5817/Mum/2000, dt. 26th March, 2004); (iv)Samtex Fashions Ltd. vs. Asstt. CIT (2005) 92 TTJ (Del) 59. 4. We have given careful consideration to rival submissions vis-a-vis relevant facts of case and in light of provisions of law and legal position as emerging from precedents cited before us. deduction under s. 80HHD is available to assessees who are engaged in business of hotel or of tour operators approved by prescribed authority or of travel agents. In respect of assessment year under appeal, such deduction under sub-s. (1) is allowable at rate of 50 per cent of profits derived by assessee from services provided to foreign tourists. Sub-s. (2) further stipulates that this section applies only to services provided to foreign tourists. receipts in relation to which are received in or brought into India by assessee in convertible foreign exchange within period of six months from end of previous year or within such further period as competent authority may allow in this behalf. modality of determining of relevant profit described under sub-s. (3) reads as under : "(3) For purposes of sub-s. (1), profits derived from services provided to foreign tourists shall be amount which bears to profits of business (as computed under head Profits and gains of business or profession ) same proportion as receipts specified in sub-s. (2) as reduced by any payment, referred to in sub-s. (2A), made by assessee bear to total receipts of business carried on by assessee." There is no dispute that assessee fulfils primary conditions stipulated under sub-ss. (1) and (2). only dispute is as to whether while determining quantum of profits allowable for deduction, as per provisions of sub-s. (3), interest income has to be considered as business income or not. cases relied upon by learned Departmental Representative are substantially on issue as to whether any income can be said to be in nature of income derived from industrial undertaking or derived from export of goods or merchandise. Reference to few cases shall suffice. In case ofPandian Chemicals Ltd.(supra), assessee-company received income on deposits with Electricity Board for supply of electricity to industrial undertaking. It was held by Supreme Court that such interest income cannot be said to be derived from industrial undertaking. Supreme Court was concerned about interpretation of s. 80HH of IT Act, which allows deduction in respect of any profits and gains derived from industrial undertaking. In case ofGimpex (P) Ltd.(supra), it was held by Madras High Court that interest earned from fixed deposit by investing surplus fund is income from other sources and not income from business. question of deduction under Chapter VI-A was not involved in this case. In case ofNirma Industries Ltd.(supra), Tribunal, Ahmedabad Special Bench held that interest from delayed payment on sale proceeds and interest on deposits with banks and other companies is not in nature of income derived from industrial undertaking for purposes of allowing deduction under s. 80-I of Act. In our view, cases relied upon by learned Departmental Representative are not relevant for deciding issue which is subject-matter of this appeal. As mentioned above, interest income has already been brought to charge of income-tax by AO as business income. There is no finding that such interest income is assessable as Income from other sources and not as business income and therefore, this is settled issue, which is not further disputed in appeal by either of parties. Therefore, point for adjudication before us is as to whether item of income which has been assessed as business income can be treated as income from other sources only for purposes of computation of deduction under s. 80HHD. Similar question arose before Bombay High Court in case ofAlfa Laval (India) Ltd.(supra), in context of interpretation of s. 80HHC. It was held by High Court that where AO had assessed interest received by assessee as part of business profits under head Profits and gains of business or profession he cannot treat said income as Income from other sources so as to exclude it from business profits while calculating deduction under s. 80HHC. This view is further followed in other cases relied upon by learned counsel for assessee and referred to above. learned Departmental Representative has forcefully argued before us that interest income has no connection whatsoever with services rendered to foreign tourists or are received by assessee in convertible foreign exchange. In our view, this argument is besides point. question is as to whether income as derived by assessee in convertible foreign exchange from services rendered to foreign tourists is relevant for purpose of sub-ss. (1) and (2) of s. 80HHD. However, sub-s. (3) refers to profits of business as computed under head Profits and gains of business or profession for purpose of determining proportion of profits which is eligible for deduction under sub-s. (1). Admittedly, in present case, interest income has been assessed under head Profits and gains of business or profession . Having done this, in our view, AO is legally precluded from treating such interest income as non-business income for purposes of sub-s. (3) of s. 80HHD. In our view, learned CIT(A) has rightly decided issue and therefore, his order on this issue is confirmed. 5 to 15. (These paras are not reproduced here as they involve minor issues). *** ASSISTANT COMMISSIONER OF INCOME TAX v. EASTERN INTERNATIONAL HOTELS LTD.