TaxTMI 
TaxTMI 
2010 (4) TMI 216
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....ipts on account of Foreign Exchange Fluctuation on EEFC Account and interest on EEFC Account can be treated as part of business income and accordingly included in the profit of business while calculating deduction u/s .80HHC?" 2. The Appeal arises out of proceedings for Assessment Year 2000-01. The order of the Income Tax Appellate Tribunal dated 25 October 2007 is a common order which governs Assessment Years 2000-01, 2001-02, 2002-03, 2003-04 and 200405. The assessee filed a return of income for Assessment Year 2000-01 declaring a total income of Rs.28,25,080/. An order of assessment was passed under Section 143(3) on 25 March 2003 accepting the income as returned. The assessee had claimed a deduction under Section 80HHC in the amount ....
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....d that the assessee had realized the full amount on account of export. If the amount was kept in a rupee account, there would be no receipt on account of foreign exchange fluctuation. The fluctuation was as a result of the assessee keeping a portion of the receipts of export in the EEFC Account. The Assessing Officer noted that this was not a case where there was a delayed realization of export proceeds consequent upon which an exchange fluctuation arose. Consequently, the entire receipt of Rs.26.62 lacs on account of exchange fluctuation was treated as income under the head of income from other sources. The assessee also received interest income of Rs.31.29 lacs from the EEFC Account. This receipt was also treated as income under the head ....
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....unal has simply relied upon its own judgments in certain other cases and following the view of its coordinate benches the appeal filed by the assessee was allowed. 7. Counsel appearing on behalf of the Revenue submits that the transactions pertaining to export stand concluded and the entire quantum of export proceeds was received. Subsequent to the conclusion of the export transaction, the assessee chose to maintain a certain proportion of the proceeds in the form of a convertible foreign exchange, EEFC Account. The exchange fluctuation which arises out of the deposits held in the EEFC Account cannot, it was urged, be regarded as being derived from the export business for the purposes of Section 80HHC. Learned counsel supported the reaso....
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....on applies to all goods or merchandise where the sale proceeds of the export out of India are received in or brought into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf. 10. The resolution of the issues which fall for determination in this appeal must essentially turn on whether the receipts in question on account of exchange fluctuation and of interest earned on deposits held in the EEFC Account can be regarded as being derived from the export of goods or merchandise. Now it is a well settled principle of law that the expression 'derived' is of a narrower connotation than the expression....
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....export transaction. The Reserve Bank of India, has granted a facility to certain categories of exporters to maintain a certain proportion of the export proceeds in an EEFC Account. The proceeds of the account are to be utilized for bonafide payments by the account holder subject to the limits and the conditions prescribed. An assessee who is an exporter is not under an obligation of law to maintain the export proceeds in the EEFC Account but, this is a facility which is made available by the Reserve Bank. The transaction of export is complete in all respects upon the repatriation of the proceeds. It lies within the discretion of the exporter as to whether the export proceeds should be received in a rupee equivalent in the entirety or whethe....
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....posits held in the EEFC Account would not fall for classification as income under the head of business and profession but, would fall for classification as income from other sources. Undoubtedly as counsel appearing on behalf of the assessee submits, in determining under which head, income would fall, the Court must be guided by the principle laid down by the Supreme Court in Nalinikant Ambalal Mody v. S.A.L. Narayan Rao, CIT{(1966) 61 ITR 428 (SC)}. The Supreme Court held that "whether an income falls under one head or another has to be decided according to the common notions of practical men, for the Act does not provide any guidance in the matter". The interest which accrued to the assessee on the deposits held in the EEFC Account cannot....