Tax Case(Appeal) v. The Income-Tax Officer, Company Ward-Ii(1)

IN THE HIGH COURT OF JUDICATURE AT MADRAS Coram The Honourable Mr. Justice K. RAVIRAJA PANDIAN and The Honourable Mr. Justice P.P.S. JANARTHANA RAJA Tax Case(Appeal) No.943 of 2008M/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 TaxAct,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/2007against 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 theorder 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 dated11.1.2008 passed in I.T.A. No.844/Mds/2007. The relevant assessmentyear is 2003-2004. 2. The appellant is a Company registered under the CompaniesAct, operating an Undertaking for development and export of softwarein the Madras Export Processing Zone. In respect of assessment year2003-2004, the appellant filed a return of income, claiming exemptionunder Section 10A of the Income-Tax Act to an extent ofRs.3,09,65,597/-. The return was processed under Section 143(1) ofthe Income-Tax Act, wherein and whereby the Assessing Authoritydisallowed the claim of relief in respect of interest income receivedby the appellant to an extent of Rs.45,83,024/-. It is contendedthat the interest income represented the interest received by theappellant in respect of the deposit of the export sale proceeds inthe foreign currency account. The amounts were kept in deposit tomeet exigencies of export by the undertaking. The deposit was madeas part of the business activities of the appellant relating to 10Aunit and not with a view to earn interest from other sources. Theclaim of the appellant as above has been rejected by the AssessingOfficer, which finding has been confirmed by the Commissioner ofIncome-tax (Appeals). When the matter was taken on appeal, theIncome-tax Appellate Tribunal confirmed the order of the AssessingAuthority. The correctness of the same is now put in issue in thiscase, raising the following substantial questions of law:-"(i) Whether on the facts and in thecircumstances of the case, the Tribunal is rightin law in holding that the appellant is noteligible for relief under Section 10A of theIncome Tax Act in respect of interest incomeamounting to Rs.45,83,024? (ii) Whether on the facts and in thecircumstances of the case, the Tribunal is rightin law in not considering that the appellant hadonly one Undertaking which was covered under Sec10A of the Income Tax Act and for which the entireincome including interest income had been derivedand consequently the interest on deposits in theforeign currency account representing export saleproceeds is income from business and eligible forrelief under Section 10A of the Act?" 3. Heard. Learned counsel appearing for the appellantfairly submitted that in respect of the very same assessee, for theassessment 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.980of 2007, wherein it was held as follows:- (ii) Whether on the facts and in thecircumstances of the case, the Tribunal is rightin law in not considering that the appellant hadonly one Undertaking which was covered under Sec10A of the Income Tax Act and for which the entireincome including interest income had been derivedand consequently the interest on deposits in theforeign currency account representing export saleproceeds is income from business and eligible forrelief under Section 10A of the Act?" 3. Heard. Learned counsel appearing for the appellantfairly submitted that in respect of the very same assessee, for theassessment 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.980of 2007, wherein it was held as follows:- "4.Heard the counsel. In this case, theinterest income was earned out of the exportrealisation and kept in Foreign Currency DepositAccount, as permitted by FERA under BankingRegulations. Hence, it is clear that there is nodirect nexus between the interest earned and theIndustrial Undertaking. The interest received bythe assessee is of deposit made by it in thebanks. It is that deposit which is the source ofincome. Therefore the assessee is not entitled torelief under Section 10A of the Act. In the caseof Commissioner of Income-tax Vs. Menon Impex P.Ltd. [2003] 259 ITR 403 (Mad), this Courtconsidered the scope of Section 10A of the Act andheld as follows:- "In this case the interest receivedby the assessee was on deposits made byit in the banks. It is that depositwhich is the source of income. The merefact that the deposit made was for thepurpose of obtaining letters of creditwhich letters of credit were in turnused for the purpose of the business ofthe industrial undertaking does notestablish a direct nexus between theinterestandtheindustrialundertaking." The Tribunal followed the principles enunciated bythis Court's judgment cited supra and came to thecorrect conclusion that the interest income ofRs.92,06,602/- does not qualify for exemptionunder Section 10A of the Act. Also it is seenfrom the records that the said amount was assessedunder the head "income from other sources". Thereasons given by the Tribunal are based on validmaterials and evidence and there is a concurrentfinding that it is not the export income and thatthe said interest was rightly assessed under thehead "income from other sources". The assessedalso had not brought to our notice any contrajudgment or any other valid materials or evidence,to take a different view, except relying on theSupreme Court judgment in the case of Commissionerof Income-tax Vs. Baby Marines [2007] 290 ITR 323 (SC), wherein it was held that exemption andbeneficial provisions should be construedliberally. There is no quarrel regarding theproposition and the earlier judgment of this Courtcited supra, had interpreted Section 10A of theAct after hearing the arguments and held thatthere is no direct nexus between the interest andthe Industrial Undertaking and hence the assesseeis not entitled to relief under Section 10A of theAct. In the present case, the assessee receivedthe export proceeds and the same was deposited inthe bank and the income was derived from the saiddeposit and hence here also there is no directnexus between the interest and the IndustrialUndertaking. Hence, this Court judgment in thecase of Commissioner of Income-tax Vs. Menon ImpexP. Ltd., cited supra, is squarely applicable tothe facts of the present case. 5.Under the circumstances, we find noerror or legal infirmity in the order of theTribunal so as to warrant interference. Hence,no substantial question of law arises forconsideration of this Court and accordingly, thetax case is dismissed. No costs. 4. As the questions of law raised by the assessee havealready been decided against it in the aforesaid judgment, followingthe same, this tax case appeal is also dismissed. /true copy/ ssa. To 5.Under the circumstances, we find noerror or legal infirmity in the order of theTribunal so as to warrant interference. Hence,no substantial question of law arises forconsideration of this Court and accordingly, thetax case is dismissed. No costs. 4. As the questions of law raised by the assessee havealready been decided against it in the aforesaid judgment, followingthe same, this tax case appeal is also dismissed. /true copy/ ssa. To 1. The Income-tax Officer, Company Ward-II(1), 121, Nungambakkam High Road, Chennai – 600 034. 2. The Assistant Registrar, Income-tax Appellate Tribunal, Bench "A", Income-tax Appellate Tribunal, Bench "A", Chennai. 3. The Commissioner of Income-tax (Appeals) III,Income-tax (Appeals) III, Chennai-34. 4. The Assistant Registrar, Income Tax Appellate tribunal, Rajaji Bhavan,III Floor, Besant Nagar, Chennai. 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.