TaxTMI 
TaxTMI 
2012 (7) TMI 932
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.... profits and gain derived by them u/s 10A of the Income-tax Act, 1961. 3. The grounds of appeal taken by the revenue read as under :- "1. The Ld. CIT(A) has erred in facts and in law by directing the AO to include the gains of Rs. 72,96,422/- on account of fluctuation in foreign exchange rates in the eligible profits for computing deduction u/s 10A of the Act, ignoring that the gains from fluctuation in foreign exchange rates is only attributable to and is not derived from the export activities of the assessee. 2. The Ld. CIT(A) has erred on facts and in law by setting aside to the file of the AO the issue of verification of additional evidence in connection with claim of payment of compensation of Rs. 45,88,500/-, ignoring that : (i) The powers of Ld. CIT(A) to set aside issues decided in scrutiny assessment have been curtailed with effect from 1.6.2001. . (ii) By not calling for a remand report from the AO on the issues set aside for verification, the Ld. CIT(A) has not decided the appeal in accordance with the Board's Circular No.14 dated 12.12.2001 on the issue. (iii) The condition laid down for admitting additional evidence under Rule 46A are not satis....
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....nclude the gain in the eligible profits, total turnover and also the export turnover." 6. We have heard both the sides on this issue in detail. We agree with CIT (A) that foreign exchange fluctuation gain when it is from sale proceeds then it is part of total turnover and export turnover also. This issue is also covered by various decisions in favour of the assessee wherein it has been held that foreign exchange fluctuation gain is a part of export turnover and also eligible for deduction u/s 10A of the Income-tax Act, 1961. The foreign exchange fluctuation gain is the part of the sale proceeds and the foreign exchange fluctuation gain is taxable as business profit, as held in various cases. In the case of Sujata Grover vs. DCIT - 74 TTJ 347, ITAT, Delhi held as under :- "A.Y. 1994-95 the gains made from exchange rate fluctuation is part of the export turnover. It is not in the nature of brokerage etc. mentioned in the Explan. (baa). Therefore, the income from foreign exchange fluctuation would be eligible from deduction under section 80HHC." In the case of Sony India (P) Ltd. vs. DCIT - 118 TTJ 865, ITAT, Delhi bench held as under :- "23. While finalizing its books of acco....
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.... related to the sale transaction involving the export of goods of the industrial undertaking. The exchange rate fluctuation between the rupee equivalent of the value of the goods exported and the actual receipts which are realized arises on account of the sale transaction. The difference arises purely as a result of a fluctuation in the rate of exchange between the date of export and the date of receipt of proceeds, since there is no variation in the sale price under the contract. The view which we have taken is also consistent with the view taken by a Division Bench of this Court on 15th December 2009 in the case of Syntel Limited (Income Tax Appeal Nos.1974, 1976 and 1978 of 2009). In the circumstances, we would affirm the judgment of the tribunal in so far as the question of exchange rate fluctuation is concerned." In the case of Sharp Credit Limited vs. DCIT - 83 TTJ 1056, the ITAT, Delhi held as under :- "4. On due consideration of the matter, we are of the view that the assessees deserves to succeed. The term "total turnover" has been defined in a negative manner not to include freight, insurance or incentives earned by the assessee. When the definition specifically exclu....
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....xcluding 90 per cent of the same under s. 80HHE. We accordingly hold that such sum being foreign exchange gain is not to be excluded while computing profit eligible for deduction under s. 10B as well as for computing profits of the business for the purpose of computing deduction under s. 80HHE. The decisions of Tribunal, Delhi Bench in the case of Smt. Sujata Grover vs. Dy. CIT (2002) 74 TTJ (Del) 347 and the decision of Tribunal, Bangalore in the case of Infosys Technologies Ltd. vs. Asstt. CIT (ITA No. 471/Bang/2003), relied by learned counsel for assessee, is squarely applicable". In the case of Changepond Technologies (P.) Ltd. vs. ACIT - 119 TTJ 18, the ITAT, Chennai held as under :- "6. We have considered the rival contentions as well as the material on record. In the case of Renaissance Jewellery (P.) Ltd. (supra) the Mumbai Bench of this Tribunal has held as under: "26. We have carefully considered the submissions made before us by both the sides and have gone through the provisions of law and the precedents relied upon by learned counsel for the assessee. In our view, this issue is covered in the assessee's favour by several cases relied upon by learned counsel f....
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....herein liability written back of Rs. 85,328/- in respect of NOIDA unit and Rs. 7,56,482/- in respect of Bangalore unit have not been considered to be included in the total turnover of the units eligible for deduction u/s 10A. The misc. income (recovery of notice period, writing off of provisions for internet expenses and refund of sales-tax from STP1) of Rs. 79,791/- in respect of NOIDA unit and Rs. 5,93,909/- in respect of Bangalore unit has not been considered to be eligible to include in the total turn over and eligible for deduction u/s 10A. These items of income have been treated as not eligible for deduction u/s 10A in the light of jurisdictional High Court in the case of CIT vs. K. Ravindranathan Nair reported in 295 ITR 228. Relevant para of CIT (A) order read as under :- "13.3 Interest Income: Rs.1,549/ - from Noida Unit The AR admitted that interest income is not from the business activity of the eligible industrial undertaking. The AO is hereby directed to exclude this from eligible profits of the undertaking. At the same time, the amount cannot be included in total turnover. 13.4 Excess liability 85,328/- 7,56,482/- Noida Unit Bangalore Unit Misc....
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....reign exchange within the period of 6 months from the end of the previous year or within such further period as the competent authority may allow. A remission of the liability which is treated as the profit & gains of the business by applying the provisions of section 41(1) of the Act is not on account of sales proceeds. A perusal of the audit report as filed before us clearly shows that the auditors have also categorically given a certificate that the sale proceeds have been received in India within the prescribed 6 months period. The remission of the liability being considered as profit & gains of business is on account of legal fiction provided in Section 41(1) of the Act. The remission of liability is not by payment or return of money paid by he assessee. The remission of liability is normally done by book entry. In these circumstances as the remission of liability itself is not a part of sales proceeds, the conditions specified in section 10B(3) do not apply to the remission of liability and the treatment of the same as profits & gains of the business under the provisions of Section 41 (1) of the Act. In these circumstances, we are of the view that the findings of Ld. CIT(A) o....
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....sing Officer. The CIT (A) has dealt this issue in paras 17 to 19.2 of the order which read as under :- "17. The AO disallowed the compensation of Rs. 45,88,500/- paid to Agilent Technologies mainly on the ground that there was no proof of FIR and whether Mr. T.S. Shiv Kumar is authorized to do services and for the other reasons mentioned in the assessment order. 18. The following are the documents which are led as additional evidence: * Copy of the employment letter of Mr. Shiv Kumar * Copy of the termination letter issued to Mr. Shiv Kumar * An email sent to the directors and other senior employees about theft of information 19.1 After careful consideration of the facts, these documents are crucial to decide the issue on hand. Accordingly, these documents mentioned above are admitted as additional evidence. In view of these facts & circumstances, the issue is set aside to the file of the AO for the limited verification and if the AO is satisfied with the genuineness of documents & explanation of the AR, no addition is called for. 19.2 The alternate plea of the assessee may be addressed by the AO while giving effect to this order in the light of decision given w....