2017 (1) TMI 1299 - AT - Income Tax

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 ... Deduction under Section 10A - whether the unrealized export proceeds, if any, in foreign currency has to be included in the total turnover for computing deduction under Section 10A? - AO has excluded the sale proceeds, which was not realized from the total turnover - Held that:- As in Galaxy Granites (P.) Ltd. v. CIT [2012 (9) TMI 68 - MADRAS HIGH COURT ] while considering the claim under Section 80HHC of the Act, found that unrealized sale proceeds should be included in total turnover for the purpose of computing allowable deduction under Section 80HHC of the Act. The assessee now claims before this Tribunal that on the basis of very same analogy, for the purpose of allowing deduction under Section 10A of the Act, the unrealized sale proceeds should be included in the total turnover. As rightly submitted by the Ld. D.R., the Assessing Officer or the TPO had no occasion to consider this judgment of Madras High Court in Galaxy Granites (P.) Ltd. (supra). Therefore, this Tribunal is of the considered opinion that the Assessing Officer has to first consider this judgment of Madras High Court. Accordingly, the orders of the authorities below are set aside in respect of inclusion of unrealized sale proceeds in the export turnover and remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue in the light of the judgment of Madras High Court in Galaxy Granites (P.) Ltd. (supra) and thereafter decide the issue, in accordance with law, after giving an opportunity to the assessee. 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.