AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 17
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....h is engaged in the business of development and export of software. The return of income for the AY 2003-04 was filed on 01.12.2003 showing a loss of Rs. 6,70,90,209/-. Against the said return of income, the assessment was completed by the Asst. Commissioner of Income Tax, Company Circle-III (2), Chennai-34, hereinafter called as "the AO") vide order dated 29.03.2006 passed u/s.143(3) of the Income Tax Act, 1961, at a total income of Rs. 6,35,53,935/-. While doing so, the AO made several disallowances which includes, inter alia, following additions with which we are concerned: 1. Notional loss due to foreign exchange fluctuation of `24,54,725/-. 2. Restricting the deduction u/s.10B in respect of export of sale proceeds not received with....
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....ged the correctness of the order of the Ld.CIT(A) before this Tribunal in ITA No.2427/Chny/2007. 5. This Tribunal vide order dated 14.08.2008 while confirming the decision of the Ld.CIT(A) in reducing the value of export turnover in respect of which the sale proceeds were not received in convertible foreign exchange within the stipulated period confirming the action of the Ld.CIT(A) in directing to reduce the same from export turnover and total turnover, reversed the findings of the Ld.CIT(A) in respect of reducing the depreciation on cost of imported software, which is claimed to have been used for domestic sale purpose, while calculating the eligible profit for deduction u/s.10B by holding that the Commissioner had ignored the findings o....
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....enue before the Tribunal for fresh adjudication in accordance with law. That is how; the matter had arisen before us in the present appeal. 7. The Ld.DR submitted that the loss on account of foreign exchange fluctuation rate is only notional. Further, he submitted that the loss should be computed in accordance with the provisions of Rule 115 of IT Rules, 1962. As regards to, the exclusion of depreciation on the cost of imported software, she submitted that the assessee had not raised any objection before the AO and therefore, the assessee is barred from agitating the same before the appellate authorities. 8. On the other hand, the Counsel for the assessee, Mr. R.Vijayaraghavan, submitted that the sale proceeds which were not received in ....
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.... questions surviving for determination are :- (i) that when the Assessee maintained their accounts on mercantile system of accounting and there was no finding by the Assessing Officer on the correctness or completeness of the account and that the Assessee had complied with the accounting standards, laid down by the Central Government, can the "loss" suffered by it on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet be allowed as expenditure under Section 37(1) of the Act notwithstanding the fact that the liability had not been actually discharged in the year in which the fluctuation in the rate of foreign exchange had occurred and (ii) whether on account of fluctuation in the rate of exchange at the end....
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....accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation. Applying these factors on the facts of that case, it was held that the "loss" suffered by the Assessee, maintaining accounts regularly on mercantile system and following accounting standards prescribed by the Institute of Chartered Accountants of India (ICAI), on account of fluctuation in the rate of foreign exchange as on the date of balance-sheet was an item of expenditure under Section 37(1) of the Act, notwithstanding that the liability had not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred. 11.We are of the opinion....
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....able only to the items of exclusion at issue before the Supreme Court and cannot be extended to the question of unrealised sale proceeds, which is the issue in the present case. 23. We see no valid distinction as sought to be pointed out before us. The components of the total turnover/denominator in the formula would be the quantum of export turnover/numerator plus proceeds from domestic sales. Thus what is 'export turnover' for the purpose of the numerator would have to be the 'export turnover' for the purpose of denominator as well and 'export turnover' cannot assume two different characteristics for two parts of the same formula. 14. In the light of the above legal position and facts, we do not find any reason ....