ITO, CHENNAI V. Reynolds Pens India Pvt Ltd, CHENNAI

ITA 2269/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8683 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 31-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-12-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S BALAKRISHNAN
• Keywords: Business income; Transfer pricing; International transaction; Question of law; Benefit of exemption; Revised return
• Section: 143(3); 142(1); 10B

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2269/MDS/2015 / ASSESSMENT YEAR :20 09 - 1 0 THE INCOME TAX OFFICER , COMPANY WARD 5 (1) , 121, UTHAMAR GANDHI SALAI, CHENNAI 600 034. VS. M/S. REYNOLDS PENS INDIA PVT. LTD. PLOT NO. 21, SIPCOT INDL. COMP LEX, IRUNGATTUKOTTAI, PENNALLUR P.O. CHENNAI 602 105. [PAN: A A BCR4412R ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI A.V. SREEKANTH , J CIT / RESPONDENT BY : SHRI S. BALAKRISHNAN, C. A. / DATE OF HEARING : 31 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 29 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) 3 , C HENNAI DATED 15 . 0 9 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 13 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. TH E LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE CLAIM MADE THE APPELLANT U/S. 10B OF THE INCOME - TAX ACT, 1961. I.T.A. NO . 2269 /M/ 1 5 2 3. THE LD CIT(A) HAS ERRED IN HOLDING THAT THE VARIOUS OTHER INCOME SUCH AS REVERSION OF EXCESS PROVISION, SALE OF SCRAP, EXPORT E NTITLEMENTS, DISCOUNT RECEIVED, FIXED CHARGES RECOVERY, EXCHANGE GAIN, INCLUDED IN THE PROFITS OF BUSINESS FOR COMPUTING THE DEDUCTION U/S. 10B. 4. THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE EXPORT INCENTIVES HAS DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE, WHEN THE APEX COURT IN THE CASE OF LIBERTY INDIA HAS HELD THAT THESE ARE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS BUT ARE ONLY ANCILLARY PROFITS. 5 . FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT TH E ORDER OF THE C OMMISSIONER OF I NCOME T AX (A PPEALS ) MAY PLEASE BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF METALLIC TIPS FOR PENS AND FILED ITS R ETURN OF INCOME ON 16.09.2009 DECLARING A TOTAL INCOME OF .2,98,88,520 / - . SUBSEQUENTLY, REVISED RETURN WAS FILED ON 16.09.2010. THE CASE WAS SELECTED FOR SCRUTINY AND ISSUE D NOTICE UNDER SECTION 143(2) AND 142(1) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED THAT THE AS SESSEE HAD INTERNATIONAL TRANSACTIONS EXCEEDING .15 CRORES. THEREFORE, REFERENCE TO THE TRANSFER PRICING OFFICER FOR DETERMINATION OF ARM S LENGTH PRICE IN RESPECT OF THE INTERNATIONAL TRANSACTIONS WAS MADE VIDE HIS LETTER DATED 30.04.2010. HOWEVER, NO AD JUSTMENT HAS BEEN MADE BY THE TPO VIDE HIS ORDER DATED 26.11.2012. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U NDER SECTION 143(3) ON 8.3.2013 I.T.A. NO . 2269 /M/ 1 5 3 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT .5,54 ,19,240 / - BY MAKING VARIOUS ADDITIONS . 3. T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED, THE REVENUE IS IN AP PEAL BEFORE THE TRIBUNAL AGAINST THE ALLOWANCE OF DEDUCTION UNDER SECTION 10B OF THE ACT. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10B OF THE ACT WITH REGARD TO THE FOLLOWING INCOMES AGGREGATING TO .3,32,46,741/ - FROM THE PROFITS OF THE BUSINESS WHILE COMPUTING THE DEDUCTION: (I) REVERSION OF EXCESS PROVISIONS OF .99,32,474/ - (II) SALE OF SCRAP OF .33,48,471 (III) EXPORT ENTITLEMENTS OF .8,88,380/ - (IV) DISCOUNT RECEIVED OF .9,41,087/ - (V) FIXED CHARGES RECOVERY OF .9,15,000/ - (VI) EXCHANGE GAIN OF .1,72,21,329/ - . THE A SSESSING OFFICER HELD THAT THE ABOVE ITEMS OF INCOME CANNOT BE SAID TO BE DERIVED BY THE ASSESSEE FROM THE ELIGIBLE ACTIVITY AND ACCORDINGLY REDUCED FROM THE PROFITS OF BUSINESS FOR THE PURPOSES OF DEDUCTION UNDER SECTION 10B OF THE ACT. I.T.A. NO . 2269 /M/ 1 5 4 5. 1 WITH REGARD (I) AND (VI) REVERSION OF EXCESS PROVISIONS OF .99,32,474/ - AND EXCHANGE GAIN OF .1,72,21,329/ - , D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PLEADED THAT THE I NCOME ON REVERSAL OF EXCESS PROVISION AS ALSO FOREIGN EXCHANGE FLUCTUATION GAIN (NET) MAINLY CONSISTED OF UNADJUSTED EXCHANG E GAIN PERTAINING TO EXPORTS WHICH FORM MANUFACTURING ACTIVITY OF THE EOU A ND HENCE OUGHT TO BE INCLUDED I N THE PROFITS OF THE UNDERTAKING WHILE COMP UTING DEDUCTION UNDER SECTION 10B OF THE ACT . RELIANCE WAS PLACED ON THE DECISION OF DCIT V.WIPRO LTD 34 D T R 493 WHEREIN IT WAS HELD THAT EXCHANGE FLUCTUATION WAS TO BE CONSIDERED AS A PART OF THE UNDERTAKING ELIGIBLE FOR DEDUCTION U NDER SECTION 10A OF THE ACT. THE A SSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE BASED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SHAH ORIGINALS AS ALSO JURISDICTIONAL ITAT IN THE CASE OF DC IT V. ASTRON DOCUMENT MANAGEMENT P LTD 49 SOT 46. 5.2 ADMITTEDLY THE FOREIGN EXCHANGE GAIN ARISEN OUT OF THE IMPORT OF RAW - MATERIALS OR EXPORT OF FINISHED GOODS AND NOT INTEREST FROM EXTERNAL COMMERCIAL BORROWINGS. THE ISSUE REGARDING TAXABILITY OF GAIN OR DEDUCTION OF LOSS ARISING ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE HAS BEEN SUBJECT MATTER OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. WOODWARD GOVERNOR INDIA P LTD . 294 ITR 451 AND ALSO THE HON'BLE I.T.A. NO . 2269 /M/ 1 5 5 SUPREME COURT IN 312 ITR 254. IN TERMS OF THE ABOVE SAID JUDGMENTS THE EFFECT OF EXCHANGE DIFFERENCE IN THE CASE OF REVENUE ITEM HAS TO BE TAKEN INTO ACCOUNT IN THE P&L A/C. AS THE FOREIGN EXCHANGE FLUCTUATION IN THE CASE OF THE ASSESSEE RELATES TO IMPORT OF RAW MATERIAL AND EXPORT OF FINISHED GOODS THE SAME CANNOT BE EXCLUDED AND HAVE TO BE TAKEN IN TO ACCOUNT WHILE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT . ACCORDINGLY, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO AMEND THE ORDER . 5.3 WITH REGARD TO (II) SALE OF SCRAP, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE IS A M ANU F ACTURE R OF TIPS USING NICKEL, BRASS AND STAINLESS STEEL WIRES WHICH ARE EXPORTED. THE PROCESS OF MANUFACTURING THIS METALLIC BALL POINT PEN TIPS ADMITTEDLY INVOLVED CUTTING OF WIRES INTO PIECES, DRILLING A WHOLE, MAKING A COLLAR ETC. THIS PROCESS YIELDS SCRAP. IT CAN BE SEEN THAT THE SCRAP IS DIRECTLY RELATED TO THE PRODUCTION PROCESS. THEREFORE, T HE PROFITS FROM SALE THEREOF CANNOT BE EXCLUDED FROM THE PROFITS OF BUSINESS. 5.4 WITH REGARD TO (III) EXPORT ENTITLEMENTS, THE ASSESSEE COMPANY RECOGNIZES THE DUTY ENTITLEMENT PASS BOOK (DEPB) CREDITS AND THE SAME WAS SHOWN AS EXPORT ENTITLEMENTS UNDER OTHER INCOME IN THE PROFIT AND LOSS ACCOUNT. WITH REGARD TO (IV) DISCOUNT RECEIPT, THE ASSESSEE HAS RECEIVED DISCOUNTS FROM THE SUPPLIER OF MATERIALS PURCHASED AND THE SAME HAS BEEN CREDITED TO PROFIT AND LOSS ACCOUNT. WITH REGARD TO (V) FIXED CHARGES RECO VERY, IT IS NOTHING BUT RECOVERY OF THE EXPENSES INCURRED BY THE COMPANY ON BEHALF I.T.A. NO . 2269 /M/ 1 5 6 OF ITS GROUP COMPANIES. CORRESPONDING DEBITS RELATING TO THESE EXPENSES ARE INCLUDED IN THE RESPECTIVE EXPENSE HEAD AND ALSO INCLUDED IN THE BALANCE SHEET. WHERE A SOURCE OF PARTICULAR INCOME ON WHICH EXEMPTION WAS SOUGHT MUST DIRECTLY EMERGE FROM THE RUNNING OF THAT UNDERTAKING YIELDING PROFITS. ON THAT BASIS THE AMOUNT RECEIVED FROM EXPORT ENTITLEMENT SHOULD BE INCLUDED AS INCOME EARNED OUT OF THE EXPORT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10B OF THE ACT. 5.5 THEREFORE, WITH REGARD TO SCRAP SALE, EXPORT ENTITLEMENTS, DISCOUNT RECEIVED, FIXED CHARGES RECOVERY, THE LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO AMEND THE ORDER BY INCLUDING ALL THE ABOVE RECEIPTS WH ILE COMPUTING DEDUCTION UNDER SECTION 10B OF THE ACT. 5. 6 THE PROVISIONS AS CONTAINED UNDER S ECTION 10 B (1) OF THE ACT PROVIDES FOR DEDUCTION OF SUCH PROFITS AND GAINS AS ARE DERIVED BY A 100% EXPORT ORIENTED UNDERTAKING FROM THE EXPORT OF ARTICLES OR THI NGS OR COMPUTER SOFTWARE FOR A PERIOD OF 10 YEARS. THE PROVISIONS AS CONTAINED IN 10 B (4) PROVIDES FOR THE MANNER IN WHICH THE SAME IS TO BE COMPUTED. IN OTHER WORDS, TO FIND IF AN ITEM OF RECEIPT IS ELIGIBLE FOR BEING CONSIDERED AS PROFITS OF THE BUSINESS FOR THE PURPOSE OF DEDUCTION UNDER SECTION 10B IT HAS TO SATISFY THE TESTS OF BEING DERIVED FROM THE UNDERTAKING IN TERMS OF THE RATIO LAID OUT BY THE HON'BLE SUPREME COURT IN THE CASE OF LIBERTY IND IA CIT 317 ITR 218. AS REITERATED HERE THE WORD DERIVED FROM IS NARROWER AS COMPARED TO THAT I.T.A. NO . 2269 /M/ 1 5 7 OF WORDS 'ATTRIBUTABLE'. BY USING THE EXPRESSION 'DERIVED FROM' IN S ECTION 10B(1) OF THE ACT THE LEGISLATURE INTENDED TO COVER SOURCES NOT BEYOND THE FIRST DEGREE. THEREFORE, WHAT IS TO BE SEEN IS AS TO WHETHER THE GAI N BEARS A DIRECT NEXUS AND WAS ON ACCOUNT OF THE ASSESSEE S EXPORT ACTIVITIES. 5.7 IN THE CASE OF MPS LTD. V. ACIT IN I.T.A. NO. 1972/MDS/2011 DATED 10.12.2013 REPORTED IN 152 ITD 483, WITH REGARD TO FOREIGN EXCHANGE GAINS, THE COORDINATE BENCH OF THE TRI BUNAL HAS OBSERVED AND HELD AS UNDER: 11. GROUND NO. 3.5.1 TO 3.5.5 RAISED BY THE ASSESSEE ARE AGAINST THE ACTION OF THE ASSESSING OFFICER AND THE DRP IN HOLDING THAT FOREIGN EXCHANGE GAIN SHOULD BE EXCLUDED FROM THE EXPORT TURNOVER FOR THE PURPOSE OF AL LOWING DEDUCTION UNDER SECTION 10B OF THE ACT. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT FOREIGN EXCHANGE GAIN IS INEXTRICABLY CONNECTED WITH THE SALES AND THEREFORE THE SAME SHOULD BE CONSIDERED AS PART OF EXPORT TURNOVER. HE PLACES RELIANCE ON THE DECISI ON OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PENTASOFT TECHNOLOGIES LTD. (347 ITR 578) AND CO - ORDINATE BENCH DECISION IN THE CASE OF CHANGEPOND TECHNOLOGIES (P) LTD. VS. ACIT (22 SOT 220). 12. IN THE ALTERNATIVE, THE COUNSEL SUBMIT S THAT SUCH FOREIGN EXCHANGE GAIN WHICH WAS EXCLUDED FROM EXPORT TURNOVER HAS TO BE EXCLUDED FROM THE TOTAL TURNOVER ALSO FOLLOWING THE DECISION OF THE SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SAK SOFT LTD. (SUPRA). 13. THE DEPARTMENTAL RE PRESENTATIVE SUBMITS THAT ONLY THE NET GAIN OR LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION HAS TO BE CONSIDERED FOR THE PURPOSE OF EXCLUSION FROM THE EXPORT TURNOVER AND SUCH GAIN/LOSS CANNOT BE REDUCED FROM THE TOTAL TURNOVER IN COMPUTING DEDUCTION UN DER SECTION 10B OF THE ACT. 14. HEARD BOTH SIDES. PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE DECISIONS RELIED ON. INSOFAR AS GROUNDS 3.5.1 TO 3.5.5 ARE CONCERNED, I.E. IN RESPECT OF FOREIGN EXCHANGE GAIN, WHETHER IT SHOULD BE TAKEN AS PART OF EXPORT TURNOVER OR NOT, WE FIND THAT THE HON BLE I.T.A. NO . 2269 /M/ 1 5 8 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PENTASOFT TECHNOLOGIES LTD. (SUPRA) HAS HELD THAT GAINS DUE TO FLUCTUATION IN FOREIGN EXCHANGE IS DIRECTLY RELATED TO EXPORT SALES OF THE ASSESSEEAND THEREFORE, IT CANNOT BE TREATED AS OTHER THAN PART OF PROFIT FROM EXPORT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GEM PLUS JEWELLERY INDIA P. LTD. (330 ITR 175) (BOM). HERE IN THE CASE OF THE ASSESSEE THE GAIN IN FOREIGN E XCHANGE IS ALSO IN CONNECTION WITH THE EXPORT SALES, RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT, WE HOLD THAT FOREIGN EXCHANGE GAIN HAS TO BE CONSIDERED AS PART OF EXPORT TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCT ION UNDER SECTION 10B OF THE ACT AND AT THE SAME TIME FOLLOWING THE SAME ANALOGY, FOREIGN EXCHANGE LOSS CANNOT BE CONSIDERED AS PART OF EXPORT TURNOVER FOR THE PURPOSE OF SECTION 10B OF THE ACT 15. WITH REGARD TO THE ALTERNATIVE SUBMISSION OF THE COUNSEL FOR THE ASSESSEE THAT FOREIGN EXCHANGE LOSS HAVING EXCLUDED FROM EXPORT TURNOVER IT HAS TO BE EXCLUDED FROM THE TOTAL TURNOVER ALSO, APPLYING THE SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SAK SOFT LTD., (SUPRA) WE ARE OF THE VIEW THAT THE RAT IO OF THE SPECIAL BENCH DECISION HAS NO APPLICATION IN RESPECT OF LOSSES ARISING DUE TO FOREIGN EXCHANGE. THE RATIO OF THE SAID DECISION CAN BE APPLIED ONLY IN CASE WHERE CERTAIN EXPENDITURES ARE INCURRED IN FOREIGN CURRENCY / INDIAN RUPEE AND NOT FOR LOSS ES DUE TO EXCHANGE FLUCTUATION. THEREFORE, GROUNDS 3.4.1 TO 3.4.3 RAISED BY THE ASSESSEE ARE DISMISSED AND THAT OF GROUNDS 3.5.1 TO 3.5.5. 5. 8 FURTHER, W E FIND THAT IN THE CASE OF CIT V. MOTOROLA INDIA ELECTRONICS (P.) LTD. 265 CTR 94, THE HON BLE KARNAT AKA HIGH COURT HAS OBSERVED AS UNDER: 8. IN THE INSTANT CASE, THE ASSESSEE IS A 100% EOU, WHICH HAS EXPORTED SOFTWARE AND EARNED THE INCOME. A PORTION OF THAT INCOME IS INCLUDED IN EEFC ACCOUNT. YET ANOTHER PORTION OF THE AMOUNT IS INVESTED WITHIN THE CO UNTRY BY WAY OF FIXED DEPOSITS, ANOTHER PORTION OF THE AMOUNT IS INVESTED BY WAY OF LOAN TO THE SISTER CONCERN WHICH IS DERIVING INTEREST OR THE CONSIDERATION RECEIVED FROM SALE OF THE IMPORT ENTITLEMENT, WHICH IS PERMISSIBLE IN LAW. NOW THE QUESTION IS WH ETHER THE INTEREST RECEIVED AND THE CONSIDERATION RECEIVED BY SALE OF IMPORT ENTITLEMENT IS TO BE CONSTRUED AS INCOME OF THE BUSINESS OF THE UNDERTAKING. THERE IS A DIRECT NEXUS BETWEEN THIS INCOME AND THE INCOME OF THE BUSINESS OF THE I.T.A. NO . 2269 /M/ 1 5 9 UNDERTAKING. THOUGH IT DOES NOT PAR TAKE THE CHARACTER OF A PROFIT AND GAINS FROM THE SALE OF AN ARTICLE, IT IS THE INCOME WHICH IS DERIVED FROM THE CONSIDERATION REALIZED BY EXPORT OF ARTICLES. IN VIEW OF THE DEFINITION OF INCOME FROM PROFITS AND GAINS' INCORPORATED IN SUB - SECTION (4), THE ASSESSEE IS ENTITLED TO THE BENEFIT OF EXEMPTION OF THE SAID AMOUNT AS CONTEMPLATED UNDER SECTION 10B OF THE ACT. THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN EXTENDING THE BENEFIT TO THE AFORESAID AMOUNTS ALSO. WE DO NOT FIND ANY MERIT IN THE SE APPEALS. THEREFORE, THE FIRST SUBSTANTIAL QUESTION OF LAW RAISED IN IT A NO.428/2007 IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE AND THE FIRST SUBSTANTIAL QUESTION OF LAW IN ITA NO.447/2007 IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. 5.9 IN T HE INSTANT CASE, THOUGH THE INCOME OF THE ASSESSEE DOES NOT PARTAKE THE CHARACTER OF A PROFIT AND GAINS FROM THE SALE OF AN ARTICLE, IT IS THE INCOME WHICH IS DERIVED FROM THE CONSIDERATION REALIZED BY IMPORT OF RAW MATERIALS AND EXPORT OF FINISHED GOODS. THEREFORE, IN VIEW OF THE DEFINITION OF INCOME FROM PROFITS AND GAINS INCORPORATED IN SUB - SECTION (4) OF SECTION 10B OF THE ACT AND IN VIEW OF THE DECISION IN THE CASE OF CIT V. MOTOROLA INDIA ELECTRONICS (P.) LTD. (SUPRA), WE ARE OF THE OPINION THAT THE A SSESSEE IS ENTITLED TO THE BENEFIT OF EXEMPTION OF THE SAID AMOUNT AS CONTEMPLATED UNDER SECTION 10B OF THE ACT. FURTHER, IN THE CASE OF RENAISSANCE JEWELLERY (P.) LTD. V. ITO 101 ITD 380, THE MUMBAI BENCHES OF THE TRIBUNAL HAS ALSO HELD THAT THE PROFIT ON ACCOUNT OF FOREIGN EXCHANGE GAIN IS DIRECTLY REFERABLE TO THE ARTICLES AND THINGS EXPORTED BY THE ASSESSEE AND SUCH PROFITS ARE, THEREFORE, IN THE SAME NATURE AS THE SALE PROCEEDS AND THERE IS NO REASON WHILE DEDUCTION UNDER SECTION 10A SHOULD NOT BE ALLO WED IN RESPECT OF SUCH EXCHANGE GAIN. FURTHER, THE BANGALORE BENCHES OF THE TRIBUNAL IN THE CASE I.T.A. NO . 2269 /M/ 1 5 10 OF WIPRO LTD. 34 DTR 493 AS WELL AS DELHI BENCHES OF THE TRIBUNAL IN THE CASE OF DCIT V. EXLSERVICES.COM INDIA (P) LTD. IN I.T.A. NO. 4459/DEL/2013 ORDER DATED 13.11.2014, HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF M/S. YODEVA PLASTICS PVT. LTD. IN I.T.A. NOS. 1156 & 1157/HYD/2013 & 1234 & 1235/HYD/2013 ORDER DATED 17.06.2015 HAVE ALSO GIVEN SIMILAR FINDINGS WITH REGARD TO RECEIPTS FROM SCRAP SALES, ETC. . I N VIEW OF THE OVERWHELMING JUDICIAL PRONOUNCEMENTS, WE ARE OF THE OPINION THAT VARIOUS RECEIPTS BEAR A DIRECT NEXUS AND WAS ON ACCOUNT OF THE ASSESSEE S EXPORT ACTIVITIES AND THEREFORE, THE LD. CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO AL LOW DEDUCTION UNDER SECTION 10B OF THE ACT WITH REGARD TO THE ISSUES OF SALE OF SCRAP, EXPORT ENTITLEMENTS, DISCOUNT RECEIVED AND FIXE CHARGES RECOVERY AND EXCHANGE GAIN . 5.10 REGARDING FIRST ISSUE I.E., REVERSION OF EXCESS PROVISIONS OF .99,32,474/ - , IF IT IS ALLOWED AS DEDUCTION IN EARLIER ASSESSMENT YEAR WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE AND CONSEQUENTLY REVERSING THE SAME IN THE ASSESSMENT YEAR UNDER CONSIDERATION, IT HAS TO BE CONSIDERED AS PART OF THE BUSINESS PROF IT AND THEREBY THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 10B OF THE ACT. HENCE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY WHETHER THE ORIGINAL PROVISION WAS ALLOWED AS DEDUCTION IN EARLIER ASSESSMENT YEARS AND DECIDE THE ISSUE AFRESH ACCORDING LY AFTER I.T.A. NO . 2269 /M/ 1 5 11 HEARING TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 29 TH JU LY , 20 16 AT CHENN AI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.