ACIT, CHENNAI V. M/s. Sterling Agro Products Processing (P) Ltd., CHENNAI

ITA 2090/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64602 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 20-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM JT
• Keywords: Business income
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO.2090/MDS/2012 ASSESSMENT YEAR : 2003-04 THE ACIT COMPANY CIRCLE VI(4) CHENNAI VS M/S STERLING AGRO PRODUCT PROCESSING PVT. LTD STERLING TOWERS 327, ANNA SALAI CHENNAI 600 006 [PAN AACCS8707R] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JT. CIT RESPONDENT BY : NONE DATE OF HEARING : 6-12-2012 DATE OF PRONOUNCEMENT : 7-12-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-V, CHENNAI, DATED 30.9.2011. 2. AT THE TIME OF HEARING, THE DR SUBMITTED THAT THE ONLY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS THAT THE CIT(A) ERRED IN DELETING THE EXCLUSION OF 90% OF FOREIGN EXCHANGE F LUCTUATION GAIN IN THE COMPUTATION OF DEDUCTION U/S 80HHC OF THE ACT. I.T.A.NO. 2090/2012 :- 2 -: 3. HE SUBMITTED THAT THE ASSESSING OFFICER HAS OBSERV ED IN HIS ORDER THAT A PERUSAL OF THE PROFIT & LOSS ACCOUNT S HOWS THAT THE ASSESSEE HAS CREDITED A SUM OF ` 17,44,376/- TOWARDS FOREIGN EXCHANGE FLUCTUATION GAIN. ACCORDING TO THE ASSESS ING OFFICER, THIS AMOUNT WAS NOT DERIVED FROM THE ACTIVITY OF EXPORT OF THE ASSESSEE AND THEREFORE, CANNOT BE CONSIDERED AS BUSINESS INC OME. ACCORDING TO HIM, IT WAS AN INCOME INCIDENTAL TO THE BUSINESS AN D DO NOT FORM PART OF ELIGIBLE BUSINESS INCOME FOR DEDUCTION U/S 80H HC OF THE ACT. THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY VS CIT, 113 I TR 84, WHEREIN IT WAS HELD THAT THE FOREIGN EXCHANGE FLUCTUATION GAIN S IS NOT AN INCOME DERIVED FROM EXPORTS. 4. ON APPEAL, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF CHANGEPONO TECHNOLOGIES (P) LTD VS ACIT, 119 TTJ 18, AND THE D ECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS PRAKASH L SHAH, 115 ITD 167, WHERE IT WAS HELD THAT GAIN DUE TO FLUCTUATION IN THE FOREIGN EXCHANGE RATE EMANATING FROM EXPORT IS ITS INTEGRAL PART AND CANNOT BE DIFFERENTIATED FROM THE EXPORT PROCEE DS SIMPLY ON THE I.T.A.NO. 2090/2012 :- 3 -: GROUND THAT THE RATE HAS INCREASED SUBSEQUENT TO SA LE BUT PRIOR TO REALIZATION. 5. THE DR RELIED ON THE GROUNDS OF APPEAL TAKEN BY THE REVENUE. NONE APPEARED ON BEHALF OF THE ASSESSEE AND THE ADJOURNMENT PETITION DATED 5.12.2012 WAS REJECTED B Y THE BENCH AS THE REASON BEING NOT A PLAUSIBLE ONE. 6. WE HAVE HEARD THE SUBMISSIONS OF THE DR AND PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAD SHOWN FOREIGN EXCHANGE FLUCTUATION GAI N OF ` 17,44,376/- ON ACCOUNT OF EXPORT SALES/RECEIVABLE. THE ASSESSING OFFICER DENIED THE CLAIM FOR DEDUCTION U/S 80HHC T O THE ASSESSEE AS IN HIS OPINION, THE SAME WAS NOT DERIVED FROM THE E XPORT ACTIVITY OF THE ASSESSEE. HE HAS PLACED RELIANCE ON THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTR IAL CO. LTD. VS CIT, 113 ITR 84. 7. ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASS ESSEE FOLLOWING THE DECISION OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS PRAKASH L SHAH (SUPRA) AND TH E DECISION OF THIS I.T.A.NO. 2090/2012 :- 4 -: TRIBUNAL IN THE CASE OF CHANGEPONO TECHNOLOGIES (P) LTD VS ACIT (SUPRA). 8. WE FIND THAT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD VS CIT, 113 ITR 83, THE HON'BLE SUPREME COU RT WAS DEALING WITH DEDUCTION U/S 80E OF THE ACT AND THE ISSUE IN VOLVED IN THAT APPEAL WAS WHETHER THE BALANCE RESULTING FROM SALE OF OLD MACHINERY WAS A RECEIPT ATTRIBUTABLE TO BUSINESS OF PRIORITY INDUSTRY TO BE RECKONED FOR COMPUTING DEDUCTION U/S 80E OF THE A CT. IN THAT CASE, THE HON'BLE SUPREME COURT HAS NOT CONSIDERED THE I SSUE OF EXCHANGE FLUCTUATION GAIN. THEREFORE, THE RELIANCE PLACED B Y THE ASSESSING OFFICER ON THE ABOVE DECISION IN DISALLOWING THE CL AIM OF THE ASSESSEE IS MISPLACED. 9. WE FIND THAT THE ISSUE WAS CONSIDERED AND DECIDED B Y THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS PRAKASH L SHAH (SUPRA) WHEREIN IT WAS HELD THAT THE GAIN DU E TO FLUCTUATION IN FOREIGN EXCHANGE RATE EMANATING FROM EXPORT IS ITS INTEGRAL PART AND CANNOT BE DIFFERENTIATED FROM THE EXPORT PROCEEDS S IMPLY ON THE GROUND THAT THE RATE HAS INCREASED SUBSEQUENT TO SA LE BUT PRIOR TO REALIZATION. NO CONTRARY DECISION COULD BE BROUGHT TO OUR NOTICE BY THE DR. SINCE THE ORDER OF THE CIT(A) FINDS SUPPORT FR OM THE DECISION OF I.T.A.NO. 2090/2012 :- 5 -: THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL QUOTED ABO VE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). IT IS CONFIRMED AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 07 TH OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 07 TH DECEMBER, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR