Concessional tax treatment under section 115H applies only to income directly derived from a foreign exchange asset, not reinvested interest.

Interest on redeposited or capitalised interest from a foreign exchange asset was held outside the concessional regime under section 115H of the Income-tax Act. The court applied the phrase "derived from" in its ordinary sense and held that the statutory benefit extends only to investment income with a direct source and direct nexus to the specified foreign exchange asset. Interest earned on the original asset could qualify, but interest on reinvested interest did not retain that direct connection. The Revenue's view was therefore upheld, and the reassessed interest income was denied concessional treatment.

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Issues: Whether interest earned on redeposit of interest arising from a foreign exchange asset qualifies for the concessional tax treatment available under section 115H of the Income-tax Act, 1961.

Analysis: Section 115H continues the benefit of Chapter XII-A only in relation to investment income derived from a foreign exchange asset of the specified categories. The expression "derived from" was applied in its ordinary sense, requiring a direct source and direct nexus with the foreign exchange asset. Interest earned on the original foreign exchange asset may qualify, but interest earned on capitalised or redeposited interest does not retain that direct connection merely because it can be traced back to the original investment. The relied-upon Reserve Bank of India circular was held to be inapposite on the facts.

Conclusion: The reassessed interest income was not eligible for concessional treatment under section 115H, and the Revenue's view was upheld.

Final Conclusion: The appeal failed because the statutory benefit was confined to income directly derived from the foreign exchange asset and did not extend to interest on reinvested interest.

Ratio Decidendi: For section 115H, concessional treatment is available only to income directly derived from the specified foreign exchange asset, and not to income on reinvested or capitalised interest lacking a direct nexus with that asset.

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