TMI Blog2006 (1) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... should also be treated as exempt under the said provision and thereby deleting the addition of Rs. 2,24,213 being interest earned on FDRs?" - interest on the said FDR was exempted under section 10(4)(ii) – both question are answered against the appeallant-revenue - - - - - Dated:- 25-1-2006 - Judge(s) : A. K. PATNAIK., R. K. GUPTA. JUDGMENT The judgment of the court was delivered by A.K. Patnaik C.J.- This is an appeal under section 260A of the Income-tax Act, 1961 (for short "the Act"), filed by the Commissioner of Income-tax, Bhopal, against the order dated December 11, 2000, of the Income-tax Appellate Tribunal, Indore Bench, Indore, passed in IT(SS) No. 66/Ind/1997. The facts briefly are that search and seizure operations un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formulated the following two substantial questions of law for decision in this case: "(i) Whether, on the facts and circumstances of the case and the provisions of sections 158BB(1) and 158BB(1)(c), the learned Tribunal was justified in holding that if the total income in those assessment years in which the return was not filed before the search was conducted, is below the taxable limit after claiming deduction under section 80L of the Act, the income of that year shall not be considered as part of the undisclosed income? (ii) Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in applying the provisions of section 10(4)(ii), to hold that interest on FDRs, made out of withdrawal from NRE accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear that only if moneys are deposited with any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 and the rules made thereunder, any income by way of interest on such moneys will not be included in the total income of the previous year of a person. He submitted that in the present case it cannot be said that the FDRs made by the respondent were moneys deposited with the bank in accordance with the Foreign Exchange Regulation Act, 1973, and, therefore, the income by way of interest on such FDRs were not exempt under section 10(4)(ii) of the Act. Mr. A.P. Shrivastava, learned counsel for the respondent, on the other hand, relied on the reasons given by the Tribunal in paragraphs 68 to 70 of the impugned order and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee on interest on Indian fixed deposits for all the assessment years, i.e., 1987-88 till 1996-97 cannot be allowed. When the respondent carried the matter in appeal, the Tribunal held that admittedly the respondent has deposited the foreign currency brought from his NRE account and out of the NRE account, the FDRs were prepared in his name and so long as the foreign currency remains with the bank in any account, the interest earned thereon should be allowed to be exempted from income-tax as per the provisions of section 10(4)(ii) of the Act because the object of the introduction of the provision is to encourage non-resident Indians to bring foreign currency into India and earn interest thereon without paying any income-tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the individual. The Assessing Officer has found that the original source of the FDR of Rs. 2,39,463 was money deposited by the respondent in the NRE account. The Assessing Officer has not recorded a finding that the money was lying in the said NRE account out of which the FDR of Rs. 50,000 was initially prepared on July 28,1982 was not deposited in accordance with the Foreign Exchange Regulation Act, 1973 and the rules made thereunder. He has held that section 10(4)(ii) does not exempt interest on fixed deposit made out of NRE account in Indian rupee. What the Assessing Officer has failed to appreciate is that the FDR of Rs. 2,39,463 comprised of Rs. 50,000 which was lying in deposit in the NRE account of the respondent and the accumulate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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