Interest on Surplus Bank FDs Exempt Under Section 10AA: Karnataka HC

PCIT Vs Allstate India Private Limited (Karnataka High Court)
In the case of PCIT vs. Allstate India Private Limited, the Karnataka High Court addressed whether interest income earned from surplus funds parked in fixed deposits (FDs) by an exporter in a Special Economic Zone (SEZ) qualifies for exemption under Section 10AA of the Income Tax Act. The Principal Commissioner of Income Tax (PCIT) challenged the Income Tax Appellate Tribunal’s (ITAT) decision that had granted the exemption, arguing that such interest income does not arise directly from export activities and therefore should not be eligible under Section 10AA. However, the Court referred to its earlier ruling in the case of CIT vs. Hewlett Packard Soft Limited, where it was held that interest earned on surplus funds in bank FDs by SEZ units is indeed eligible for exemption under Section 10AA.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This appeal is filed questioning the order dated 31.05.2023 passed by the Income Tax Appellate Tribunal, ‘B’ Bench, Bengaluru in ITA No.257/Bang/2023 (Annexure-A). The appeal was admitted to examine the following substantial questions of law raised in the appeal:
i) Whether on the facts and on the circumstances of the case, the Tribunal was justified in holding that interest income earned from surplus funds parked in FD’s of bank are eligible for deduction under Section 10AA of the Act by following decision of this Hon’ble Court in case of CIT Vs. Hewlett Packard Soft Ltd?
ii) Whether the Tribunal was right in law in not appreciating that interest income earned from bank deposits are not derived from export activity of assessee and as such, conditions for granting relief under Section 10AA are not satisfied in present case of facts?”
2. On going through the appeal papers, it is seen that identical questions of law are decided by the Full Bench of this Court in the case of CIT Vs. Hewlett Packard Soft Limited reported in (2017) 87 com 182.
3. As the questions of law raised in this appeal are already answered by the Full Bench of this Court in the decision referred supra, this appeal stands dismissed in terms of the above referred decision.