ITAT Chennai: Unrealized export proceeds must be included in turnover for Section 10A deduction

The Appellate Tribunal ITAT Chennai allowed the appellant's appeal regarding the deduction claimed under Section 10A of the Income-tax Act, 1961 for the assessment year 2008-09. The Tribunal held that unrealized export proceeds in foreign currency should be included in the total turnover for computing the deduction under Section 10A, citing a judgment of the Madras High Court. The Tribunal set aside the lower authorities' orders and remitted the matter back to the Assessing Officer for reconsideration in line with the Madras High Court judgment. The Tribunal allowed ground No.3 for statistical purposes, maintaining the rest of the earlier order unchanged.

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Issues:
1. Deduction claimed under Section 10A of the Income-tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai pertained to the assessment year 2008-09 and involved the deduction claimed by the assessee under Section 10A of the Income-tax Act, 1961. The appellant contended that the sale proceeds, though initially not realized, were subsequently brought to India within the extended time granted by the competent authority. Citing the judgment of the Madras High Court in Galaxy Granites (P.) Ltd. v. CIT (2012) 27 taxmann.com 31, the appellant argued that unrealized export proceeds in foreign currency should be included in the total turnover for computing the deduction under Section 10A. The appellant challenged the exclusion of the unrealized sale proceeds by the Assessing Officer, contending that the DRP erred in confirming the order. The Departmental Representative, on the other hand, argued that the authorities had not considered the Madras High Court judgment and suggested remitting the matter back to the Assessing Officer.

The Tribunal considered the submissions and the relevant material on record. Drawing an analogy from the Madras High Court judgment regarding Section 80HHC of the Act, which held that unrealized sale proceeds should be included in the total turnover for deduction computation, the Tribunal agreed with the appellant's argument. The Tribunal noted that the Assessing Officer had not considered the Madras High Court judgment in Galaxy Granites (P.) Ltd. and, therefore, set aside the orders of the authorities below. The Tribunal remitted the issue back to the Assessing Officer with directions to reconsider the inclusion of unrealized sale proceeds in the export turnover in light of the Madras High Court judgment. The Assessing Officer was instructed to decide the issue after giving the assessee an opportunity to present their case.

Conclusively, the Tribunal allowed ground No.3 for statistical purposes, clarifying that the rest of the earlier order remained unchanged. The judgment was pronounced on 4th October 2016 in Chennai.

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