2. The only issue raised through various grounds is against the denial of claim of the assessee for deduction under section 10A on the interest income of Rs. 9,00,961. Briefly stated the facts of the case are that the assessee was carrying on the business of manufacturing and export of stubbed and plain jewellery of gold and platinum. It had its factory at Gem & Jewellery Complex III, SEEPZ, Andheri (East), Mumbai-400 096. Return was filed declaring total income at Rs. 18,02,187. The assessee had claimed deduction under section 10A. On the perusal of the details of bank interest, the Assessing Officer noticed that the assessee had debited interest to the tune of Rs. 95,36,873.46 to its Profit and Loss Account after netting off of interest received on fixed deposits of Rs. 9,00,961 against the bank interest paid at Rs. 1,04,37,835. The assessee was show-caused to explain as to why deduction be not denied under section 10A in respect of interest received on fixed deposit. After considering the assessee’s submission the Assessing Officer observed that the interest income on fixed deposits was in the nature of "income from other sources" as it had no relation with the activity of export of goods and merchandise. Interest paid on packing credit was found to be specifically for exports which were financial cost for export and was liable to be debited fully to arrive at the profit on account of exports of goods and merchandise. After considering several judgments, the Assessing Officer came to hold that the interest received cannot, be said to have been derived from export of goods and merchandise. He took into consideration the distinction between the scope of "derived from" and "attributable to" with the help of certain judgments of the Hon’ble Supreme Court and other High Courts. It was, therefore, held that the assessee was not entitled to deduction under section 10A in respect of interest earned on fixed deposits. No relief was allowed in the first appeal.

3. Before us the learned Counsel for the assessee contended that the assessee had rightly claimed deduction on the interest income as the parking of funds in FDRs was necessitated for availing the benefit of credit facilities from the bank. It was therefore stated that but for the making of FDRs the assessee could not have enjoyed the credit facility from the bank and hence the interest earned on such FDRs be rightly treated as eligible for deduction under section 10A. He also referred to the order in the case of Asstt. CIT v. Motorola India Electronics (P.) Ltd. [2008] 114 ITD 387 (Bang.) in which the assessee was held to be entitled to deduction under section 10A in respect of the interest income. In the opposition the learned Departmental Representative strongly relied on the impugned order. It was submitted that the interest earned on FDRs was neither business income nor eligible for deduction under section 10A.

4. We have heard the rival submissions in the light of material placed before us and precedents relied upon by the parties before us and the departmental authorities below. In order to consider whether or not the deduction is available under section 10A on the interest income, it is apt to note the relevant part of section 10A(1) which reads as under :—

"(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee."

On a careful perusal of the language of this section it is