High Court allows notional loss as expenditure under Section 37(1) Act, upholds deduction of export sale proceeds. The High Court remanded the matter for fresh adjudication regarding the disallowance of notional loss due to foreign exchange fluctuation, ultimately ...
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High Court allows notional loss as expenditure under Section 37(1) Act, upholds deduction of export sale proceeds.
The High Court remanded the matter for fresh adjudication regarding the disallowance of notional loss due to foreign exchange fluctuation, ultimately allowing the loss as expenditure under Section 37(1) of the Act. The Tribunal upheld the CIT(A)'s direction to deduct export sale proceeds not received on time from turnover. The Tribunal remanded the issue of excluding depreciation on imported software for further examination by the AO. The Revenue's appeal was partly allowed for statistical purposes by the Tribunal.
Issues: 1. Disallowance of notional loss due to foreign exchange fluctuation 2. Restriction on deduction u/s.10B for export sale proceeds not received within due date 3. Allocation of common expenditure between STP and non-STP divisions 4. Exclusion of depreciation on imported software for deduction u/s.10B
Analysis: 1. The matter was remanded by the High Court. The AO disallowed notional loss due to foreign exchange fluctuation. The CIT(A) partly allowed the loss. The Tribunal reversed the CIT(A)'s decision, restoring the addition. The High Court framed questions of law and remanded the matter for fresh adjudication. The loss on account of foreign exchange fluctuation was held to be allowable as expenditure under Section 37(1) of the Act by following the decision of the Supreme Court. The Tribunal dismissed the ground challenging the disallowance of the loss.
2. The CIT(A) directed to deduct export sale proceeds not received within the stipulated period from both export turnover and total turnover. The Tribunal upheld this decision citing relevant case laws. The Tribunal dismissed the ground challenging this decision.
3. The CIT(A) excluded depreciation on imported software from eligible profits for deduction u/s.10B. The Tribunal directed the matter to be adjudicated by the AO to determine if the imported software was exclusively used in domestic sales. The Tribunal partly allowed the ground for statistical purposes, remanding the issue for further examination by the AO.
4. The appeal filed by the Revenue was partly allowed for statistical purposes. The Tribunal pronounced the order on 26th February, 2020 in Chennai.
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