TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 983
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the foreign exchange fluctuation gain received has not been earned by the assessee through export of software. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." 2. The relevant facts as per the assessment order are that the assessee company as in the past continued to derive income from the business of software development. The AO in the course of the assessment proceedings required the assessee to explain why foreign exchange gain and interest income may not be excluded for the purposes of section 10A. Considering the explanation of the assessee and relying upon various judgements, the AO held that the foreign ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the case of Sony India Pvt. Ltd. vs DCIT [2009] 315 ITR (AT) 0150 and the decision of the Jurisdictional High Court in the case of FAB India vs CIT 130 ITR 143, the CIT(A) directed the AO to re-compute the deduction u/s 10A. 5. Aggrieved by this, the Revenue is in appeal before the Tribunal. The ld. Sr. DR, Ms. Y.Kakkar vehemently relying upon the assessment order and the decisions cited in the assessment order submitted that the impugned order deserves to be set aside as the issue of "derived from" was well settled by the Apex Court in the case of CIT vs Sterling Foods Ltd. (cited supra) and Cambay Electric Supply Industrial Company Ltd. (cited supra) which view has continuously been followed by various Courts as referred to by the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2013 stated to having considered the most recent decision, it was submitted is entirely distinguishable on facts. 7. We have heard the rival submissions and perused the material available on record. As far as the facts of the case are concerned there is no dispute as the assessee engaged in the business of software development realized a higher sale price on account of foreign exchange fluctuation. The assessee by way of a revised return included this gain also in its claim of exemption u/s 10A. The record shows that the AO denied the claim relying upon the various decisions referred to in para 2 of this order holding that the term "derived from" as interpreted by various Courts mandates that there must be direct connection with the activi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... laid down by the Apex Court in Woodward Governor (cited supra), it was held that it is a Revenue receipt on the principle that if a loss suffered on account of foreign exchange fluctuation is allowable as a Revenue expenditure then the gain on such a receipt would be a revenue receipt. The issue was in the content of utilization of the loan at the relevant point of time. In the facts of the present case, the gain due to foreign exchange fluctuation is in the sale price and not on account of external borrowing. The gain following the principle of FabIndia Overseas Ltd.(cited supra) can be considered to be arising on account of additional sale proceeds. The view is also supported by the decision of the Madras High Court. The following extrac....