The Income Tax Appellate Tribunal (ITAT), Pune bench has held that an Export Oriented Unit ( EOU ) is eligible to claim the deduction under Section 10A of the Income Tax Act in respect of interest earned on fixed deposits.
In the instant case, the assessee was 100% Export Oriented Unit. For the year under consideration, the assessee had furnished return of income declaring total income of Rs. 7,170/-. On scrutiny of returns, it was revealed that the assessee being a 100% EOU duly approved by Software Technology Park of India (STPI), had claimed deduction under section 10A of the Act at 20,05,769/-. It was also noted that the assessee during the year under consideration had received interest on fixed deposits of Rs. 3,43,708/-, which was shown as business income and had claimed as deductible under section 10A of the Act.
The Assessing Officer was of the opinion that the interest earned on fixed deposits was to be treated as ‘Income from other sources’ and was not eligible to claim deduction under section 10A of the Act. The deduction claimed by the assessee under section 10A of the Act was, therefore, restricted by Assessing Officer.
On the second appeal, the Tribunal recalled its earlier decision relying on the decision of the Karnataka High Court and held that the assessee is entitled to benefit of deduction under section 10A of the Act on the interest earned in fixed deposits.
Based on the same, the Tribunal directed the Assessing Officer to re-compute deduction under section 10A of the Act, since the assessee is entitled to claim the aforesaid deduction under section 10A of the Act on interest from fixed deposits.
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