IN THE HIGH COURT OF JUDICATURE AT MADRAS Date:- 09.07.2008 Coram The Honourable Mr. Justice K. RAVIRAJA PANDIAN and The Honourable Mr. Justice P.P.S. JANARTHANA RAJA Tax Case(Appeal) No.943 of 2008 M/s. India Comnet International (P) Limited ... Appellant ..vs.. The Income-tax Officer, Company Ward-II(1), 121, Nungambakkam High Road, Chennai – 600 034. ... Respondent This Tax Case(Appeal) filed U/s 260A of the Income Tax Act,1961 against the order of the Income-tax Appellate Tribunal "A" Bench, Chennai dated 11.1.2008 passed in I.T.A. No.844/Mds/2007 against the order of the Commissioner of Income Tax(Appeals)-XII, Chennai-600 034 in I.T.A.No146/06-07 dated 20.11.2006 and against the order of the Income-Tax Officer in GIR/R.A.No.IX 1020/AAA CI 8019E, dated 15.2.2006. For Appellant : Mr. N. Muthukumar JUDGMENT (Judgment was delivered by K. RAVIRAJA PANDIAN, J.) The assessee, M/s. India Comnet International (P) Limited , Chennai filed the above appeal under Section 260A of the Income-Tax https://hcservices.ecourts.gov.in/hcservices/ Act against the order of the Income-tax Appellate Tribunal dated 11.1.2008 passed in I.T.A. No.844/Mds/2007. The relevant assessment year is 2003-2004. 2. The appellant is a Company registered under the Companies Act, operating an Undertaking for development and export of software in the Madras Export Processing Zone. In respect of assessment year 2003-2004, the appellant filed a return of income, claiming exemption under Section 10A of the Income-Tax Act to an extent of Rs.3,09,65,597/-. The return was processed under Section 143(1) of the Income-Tax Act, wherein and whereby the Assessing Authority disallowed the claim of relief in respect of interest income received by the appellant to an extent of Rs.45,83,024/-. It is contended that the interest income represented the interest received by the appellant in respect of the deposit of the export sale proceeds in the foreign currency account. The amounts were kept in deposit to meet exigencies of export by the undertaking. The deposit was made as part of the business activities of the appellant relating to 10A unit and not with a view to earn interest from other sources. The claim of the appellant as above has been rejected by the Assessing Officer, which finding has been confirmed by the Commissioner of Income-tax (Appeals). When the matter was taken on appeal, the Income-tax Appellate Tribunal confirmed the order of the Assessing Authority. The correctness of the same is now put in issue in this case, raising the following substantial questions of law:- " (i) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the appellant is not eligible for relief under Section 10A of the Income Tax Act in respect of interest income amounting to Rs.45,83,024? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not considering that the appellant had only one Undertaking which was covered under Sec 10A of the Income Tax Act and for which the entire income including interest income had been derived and consequently the interest on deposits in the foreign currency account representing export sale proceeds is income from business and eligible for relief under Section 10A of the Act?" 3. Heard. Learned counsel appearing for the appellant fairly submitted that in respect of the very same assessee, for the assessment year 2002-2003, this Court, by its order dated 4.7.2007, non-suited the appellant, by dismissing the appeal in T.C.(A) No.980 of 2007, wherein it was held as follows:- https://hcservices.ecourts.gov.in/hcservices/ "4. Heard the counsel. In this case, the interest income was earned out of the export realisation and kept in Foreign Currency Deposit Account, as permitted by FERA under Banking Regulations. Hence, it is clear that there is no direct nexus between the interest earned and the Industrial Undertaking. The interest received by the assessee is of deposit made by it in the banks. It is that deposit which is the source of income. Therefore the assessee is not entitled to relief under Section 10A of the Act. In the case of Commissioner of Income-tax Vs. Menon Impex P. Ltd. [2003] 259 ITR 403 (Mad), this Court considered the scope of Section 10A of the Act and held as follows:- "In this case the interest received by the assessee was on deposits made by it in the banks. It is that deposit which is the source of income. The mere fact that the deposit made was for the purpose of obtaining letters of credit which letters of credit were in turn used for the purpose of the business of the industrial undertaking does not establish a direct nexus between the interest and the industrial undertaking." The Tribunal followed the principles enunciated by this Court's judgment cited supra and came to the correct conclusion that the interest income of Rs.92,06,602/- does not qualify for exemption under Section 10A of the Act. Also it is seen from the records that the said amount was assessed under the head "income from other sources". The reasons given by the Tribunal are based on valid materials and evidence and there is a concurrent finding that it is not the export income and that the said interest was rightly assessed under the head "income from other sources". The assessed also had not brought to our notice any contra judgment or any other valid materials or evidence, to take a different view, except relying on the Supreme Court judgment in the case of Commissioner of Income-tax Vs. Baby Marines [2007] 290 ITR 323 https://hcservices.ecourts.gov.in/hcservices/ (SC), wherein it was held that exemption and beneficial provisions should be construed liberally. There is no quarrel regarding the proposition and the earlier judgment of this Court cited supra, had interpreted Section 10A of the Act after hearing the arguments and held that there is no direct nexus between the interest and the Industrial Undertaking and hence the assessee is not entitled to relief under Section 10A of the Act. In the present case, the assessee received the export proceeds and the same was deposited in the bank and the income was derived from the said deposit and hence here also there is no direct nexus between the interest and the Industrial Undertaking. Hence, this Court judgment in the case of Commissioner of Income-tax Vs. Menon Impex P. Ltd., cited supra, is squarely applicable to the facts of the present case. 5. Under the circumstances, we find no error or legal infirmity in the order of the Tribunal so as to warrant interference. Hence, no substantial question of law arises for consideration of this Court and accordingly, the tax case is dismissed. No costs. 4. As the questions of law raised by the assessee have already been decided against it in the aforesaid judgment, following the same, this tax case appeal is also dismissed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar ssa. To 1. The Income-tax Officer, Company Ward-II(1), 121, Nungambakkam High Road, Chennai – 600 034. https://hcservices.ecourts.gov.in/hcservices/ 2. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "A", Chennai. 3. The Commissioner of Income-tax (Appeals) III, Chennai-34. 4. The Assistant Registrar, Income Tax Appellate tribunal, Rajaji Bhavan,III Floor, Besant Nagar, Chennai. 5.The Secretary Central Board of Revenue, New-Delhi. 1 CC To M/s Anitha Srinivasan,Advocate, SR NO.36065. 1 CC To Mr.Pushya Sitaraman,Sr.Standing Counsel for IT Dept., Chennai, SR NO.36638. T.C.(A) No.943 of 2008. ra(co) pmk/4.8.2008. https://hcservices.ecourts.gov.in/hcservices/