Tribunal Orders Amendment of Assessment for AY 1991-92; Re-compute Deductions and Delete Additions for AY 1992-93.

The Tribunal ruled in favor of the appellant, directing the AO to amend the assessment order for AY 1991-92 to include the exchange rate fluctuation gain of Rs. 84.06 lakh and re-compute the deduction under section 80HHC. Consequently, the addition made in AY 1992-93 was deleted. Both appeals by the assessee were allowed.

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Issues Involved:
1. Gains on exchange rate fluctuation of Rs. 84,06,069 for assessment years 1991-92 and 1992-93.
2. Deduction under section 80HHC for assessment years 1991-92 and 1992-93.

Issue 1: Gains on Exchange Rate Fluctuation of Rs. 84,06,069 for Assessment Year 1991-92

The appellant company, engaged in the business of export of goods, credited Rs. 104.81 crore in the profit and loss account for the assessment year 1991-92, which included Rs. 84.06 lakh received after the end of the financial year due to exchange rate fluctuation. The Assessing Officer refused to assess Rs. 84.06 lakh in the assessment year 1991-92, arguing that it accrued after the end of the financial year, as per rule 115C of the Income-tax Act. The amount was instead assessed in the assessment year 1992-93.

The appellant contended that the right to receive proceeds accrued when the goods were exported, not as a result of devaluation. They argued that the sale proceeds were realized before the accounts were finalized, thus should be included in the income of the year 1991-92. The CIT(A) upheld the Assessing Officer's decision, stating the gain accrued in the subsequent year due to devaluation.

Issue 2: Deduction Under Section 80HHC for Assessment Year 1991-92

The appellant claimed a deduction under section 80HHC, including the exchange rate fluctuation gain. The Assessing Officer disallowed this, stating the gain accrued after the end of the financial year. The appellant argued that the turnover should be based on actual receipts, including the exchange rate fluctuation gain, and thus the deduction under section 80HHC should be allowed as claimed.

Issue 3: Gains on Exchange Rate Fluctuation of Rs. 84,06,069 for Assessment Year 1992-93

The appellant argued that the sale proceeds in respect of exports made during the assessment year 1991-92 were accounted for in the accounts for the year ended 31-3-1991. They contended that the proceeds realized in the subsequent year should not be treated as income of the year under consideration. The CIT(A) confirmed the addition of Rs. 84.06 lakh in the income of the year under consideration.

Issue 4: Deduction Under Section 80HHC for Assessment Year 1992-93

Similar to the previous year, the appellant claimed a deduction under section 80HHC, including the exchange rate fluctuation gain. The Assessing Officer disallowed this, stating the gain accrued after the end of the financial year. The appellant argued that the turnover should be based on actual receipts, including the exchange rate fluctuation gain, and thus the deduction under section 80HHC should be allowed as claimed.

Detailed Analysis:

1. Gains on Exchange Rate Fluctuation of Rs. 84,06,069 for Assessment Year 1991-92:

The appellant contended that the right to receive proceeds accrued when the goods were exported. They argued that the sale proceeds were realized before the accounts were finalized, thus should be included in the income of the year 1991-92. The CIT(A) upheld the Assessing Officer's decision, stating the gain accrued in the subsequent year due to devaluation. The Tribunal observed that the right to receive the sale proceeds had accrued when the goods were exported, and the devaluation did not affect the time of accrual of income. The Tribunal concluded that the amount of Rs. 84.06 lakh should be assessed in the assessment year 1991-92.

2. Deduction Under Section 80HHC for Assessment Year 1991-92:

The appellant argued that the turnover should be based on actual receipts, including the exchange rate fluctuation gain, and thus the deduction under section 80HHC should be allowed as claimed. The Tribunal observed that the term 'export turnover' means the sale proceeds actually received by the assessee in convertible foreign exchange within six months of the end of the previous year. The Tribunal concluded that the deduction under section 80HHC should be allowed, including the exchange rate fluctuation gain.

3. Gains on Exchange Rate Fluctuation of Rs. 84,06,069 for Assessment Year 1992-93:

The appellant argued that the sale proceeds in respect of exports made during the assessment year 1991-92 were accounted for in the accounts for the year ended 31-3-1991. They contended that the proceeds realized in the subsequent year should not be treated as income of the year under consideration. The Tribunal concluded that the amount of Rs. 84.06 lakh should be assessed in the assessment year 1991-92, thus the addition made in the assessment year 1992-93 should be deleted.

4. Deduction Under Section 80HHC for Assessment Year 1992-93:

The appellant argued that the turnover should be based on actual receipts, including the exchange rate fluctuation gain, and thus the deduction under section 80HHC should be allowed as claimed. The Tribunal concluded that the deduction under section 80HHC should be allowed, including the exchange rate fluctuation gain for the assessment year 1991-92, and thus the addition made in the assessment year 1992-93 should be deleted.

Conclusion:

The Tribunal directed the Assessing Officer to amend the order for the assessment year 1991-92 and re-compute the deduction under section 80HHC, including the amount of Rs. 84.06 lakh. Consequently, the addition made in the assessment year 1992-93 was deleted. Both appeals filed by the assessee were allowed.

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