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2008] 304 ITR 322 (Madras) [2009] 185 TAXMAN 51 (MAD.) HIGH COURT OF MADRAS India Comnet International v. Income-tax Officer* P.D. DINAKARAN AND P.P.S. JANARTHANA RAJA, JJ. TAX CASE (APPEAL) NO. 980 OF 2007â-  JULY 4, 2007 Section 10A of the Income-tax Act, 1961 - Free Trade Zone - Assessment year 2002-03 - Whether interest income earned by assessee-company, being a 100 per cent export-oriented unit, on amount of export proceeds kept in foreign currency deposit account as permitted by FERA under Banking Regulations, would qualify for exemption under section 10A - Held, no FACTS The assessee-company was 100 per cent export-oriented unit. While computing exemption under section 10A, the Assessing Officer excluded the interest earned by the assessee on amount of export realization kept in the foreign currency deposit account, as permitted by the FERA under the Banking Regulations. On appeal, the Commissioner (Appeals) as also the Tribunal confirmed the order of the Assessing Officer. On appeal under section 260A : HELD There was no direct nexus between the interest earned and the industrial undertaking. The interest received by the assessee was on deposit made by it in the bank. It was that deposit which was the source of income. Therefore, the assessee was not entitled to relief under section 10A. [Para 5] CASES REFERRED TO CIT v. Menon Impex (P.) Ltd. [2003] 259 ITR 403/ 128 Taxman 11 (Mad.) [Para 3] and CIT v. Baby Marine Exports [2007] 290 ITR 323/ 160 Taxman 160 (SC) [Para 4]. Dr. Anita Sumanth for the Appellant. JUDGMENT P.P.S. Janarthana Raja, J. - This appeal is filed under section 260A of the Income-tax Act, 1961, by the assessee against the order of the Income-tax Appellate Tribunal, Bench "A", Chennai in IT Appeal No. 2512/ Mad./2005 dated December 29, 2006, raising the following substantial question of law: "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the interest income derived by the appellant is not eligible for relief under section 10A of the Income-tax Act ?" 2. The facts leading to the above substantial question of law are as under:- 3. The assessee is a private limited company…

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