Interest and dividend income do not qualify as business income for deductions under Section 80HHC of the Income Tax Act.

1. The assessee is an individual engaged in various business activities such as processing and export of sea foods, in the construction and sale of flats, shipping agency business and is also deriving income in the form of interest, dividend, etc. The assessments involved in these two cases are for the assessment years 1990-91 and 1991-92. There is only one issue involved in ITA No. 60 of 2001 which is for the assessment year 1990-91 and the substantial question formulated by us for decision in the appeal is the following:
Whether, on the facts and in the circumstances of the case, the interest income and dividend on SBI Magnum units totalling to Rs. 11,62,980/- is entitled to be assessed under the head business income" and eligible for deduction under S.80HHC of the Income Tax Act?

2. In the Income Tax Reference, I.T.R. No. 111 of 1997, the Tribunal has referred the following four questions for decision of this Court:
1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that interest received by the assessee from fixed deposit and Magnum deposit with the bank is eligible for deduction under S.80HHC?
2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the words total turnover for S.80HHC can only have reference to the turnover by way of sales and cannot take in its stride the gross receipts received?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of deduction under S.80 HHC the turnover of the construction division should be adopted at Rs. 61,26,097/- being the difference between gross amount of Rs. 4,65,50,906/- received from the owners of the flats and the corresponding expenses thereto as against Rs. 4,65,50,906/- being the gross amount received and adopted in the assessment?
4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that in working out the proportionate income eligible for deduction under S.80HHC allowable on the export income the turnover of the business under Explanation (c) to S.80HHC(1) should include only net receipts after allowing construction expenses as against gross amounts received from flat owners and adopted in the assessment?
The sole question in the appeal case for the assessment year 1990-91 and the first question in the Reference case for the assessment year 1991-92 relate to the same matter, and the question is whether the interest income received by the assessee from fixed deposits in the bank and the dividend received from the SBI Magnum constitute business income for the purpose of computation of eligible deduction on export profits under S.80HHC of the Income Tax Act.

3. The balance three questions referred by the Tribunal to this Court for the assessment year 1991-92 are on the manner of computation and the extent of relief available to the assessee as a deduction on export profits provided under S.80HHC of the Income Tax Act. In order to decide the controversy we feel that questions deserve to be redrafted to reflect the issues arising in the case. However, prior to redrafting the questions, we find it necessary to state the facts, the claim made by the assessee, the way the authorities approached and decided the issues, and the way the issues arise in the case before us.

4. The various figures available are the following:

Total turnover adopted by the assessee without including the amount of Rs. 4,04,24,809/- being the cost of flats constructed and given to customers for the purpose of computation of eligible export profit under S.80HH