The DCIT, Circle-4(1)(2), Ahmedabad V. M/s. Zydus Hospira Oncology Pvt. Ltd., Ahmedabad

ITA 81/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7838 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JIGAR M PATEL
• Keywords: Business income; Depreciation
• Section: 10AA; 80HHC; 10

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.81/AHD/2016 / ASSTT. YEAR: 2011-2012 DCIT, CIR.4(1)(2) AHMEDABAD. VS. M/S.ZYDUS HOSPIRA ONCOLOGY P.LTD. PLOT NO.3, PHARMEZ SARKHEJ BAVLA HIGHWAY TAL. MATODA, AHMEDABAD PIN : 382 213. PAN : AAACZ 2327 A / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI PRASOON KABRA, SR.DR ASSESSEE BY : SHRI JIGAR M. PATEL ! / DATE OF HEARING : 21/06/2018 '#$ ! / DATE OF PRONOUNCEMENT: 9 /07/2018 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-8, AHMEDABAD DATED 9.11.2015 PASSED FOR T HE ASSESSMENT YEAR 2011-12. 2. IN THE GROUNDS OF APPEAL, REVENUE HAS MAINLY RAI SED TWO GROUNDS, WHICH READ AS UNDER: 1. WHETHER THE CIT(A) IS ERRED IN LAW AND ON FACTS IN ALLOWING DEPRECIATION @60% ON COMPUTER SOFTWARE PURCHASED SE PARATELY ITA NO.81/AHD/2016 2 (SAP SOFTWARE) AGAINST 25% APPLICABLE TO INTANGIBLE ASSETS IGNORING THE FINDING OF THE AO. 2. WHETHER THE CIT(A) IS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION U/S.10AA OF THE A CT ON EXCHANGE FLUCTUATION GAIN, WHICH IS NOT OF FIRST DE GREE AND NOT DERIVED FROM EXPORT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING DRUGS AND PHARMACE UTICALS. IT HAS FILED RETURN OF INCOME ON 19.11.2011 DECLARING TOTA L INCOME AT RS.80,99,180. THE RETURN WAS PROCESSED UNDER SECTI ON 143(1), AND THEREAFTER SELECTED FOR SCRUTINY ASSESSMENT BY ISSU ANCE OF NOTICE UNDER SECTION 143(2) UPON THE ASSESSEE. DURING THE ASSES SMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS CLAI MED DEPRECIATION OF RS.54,14,319/- AT THE RATE OF 60% ON BLOCK OF ASSET S VIZ. COMPUTER AND SOFTWARE. THE LD.AO DOUBTED THE CLAIM OF THE ASSES SEE AND ISSUED A SHOW CAUSE NOTICE ASKING AS TO WHY DEPRECIATION ON SOFTWARE BE NOT RESTRICTED TO 25% INSTEAD OF 60% CLAIMED BY THE ASS ESSEE. ASSESSEE FILED A REPLY DATED 27.2.2015 WHICH WAS BEEN REPROD UCED BY THE AO IN THE ASSESSMENT ORDER. ASSESSEE SUBMITTED THAT THE CLAIM OF THE ASSESSEE WAS AS PER APPENDIX-I OF THE INCOME TAX RU LE 5 WHEREIN DEPRECIATION IS ALLOWABLE AT 60% ON COMPUTER INCLUD ING COMPUTER SOFTWARE. REPLY OF THE ASSESSEE WAS NOT FOUND CONV INCING TO THE AO. THE LD.AO IN THE ASSESSMENT ORDER DISCUSSED ABOUT T HE TECHNICALITY OF SOFTWARE AND TRIED TO DICHOTOMIZE SOFTWARE INTO SYSTEM SOFTWARE AND APPLICATION SOFTWARE SO AS TO TREAT THESE TWO ITE MS AS SEPARATE AND MUTUALLY EXCLUSIVE FROM THE CLAIM OF DEPRECIATION A T 60%. HE WAS OF THE VIEW THAT SAP BEING AN APPLICATION SOFTWARE AND BEING AN INTANGIBLE ASSET MERELY A LICENCE TO USE, DID NOT QUALIFY FOR 60% DEPRECIATION, AND THEREFORE, LD.AO RESTRICTED THE CLAIM OF DEPRECIATI ON AT 25%. ITA NO.81/AHD/2016 3 4. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.FIRST APPELLATE AUTHORITY AFTER A DETAILED DISCUSSION ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT NEITHER THE INCOME TAX ACT NOR JUDICIAL PRONOUNCEMENTS DIFFERENTIATE B ETWEEN THE COMPUTER AND COMPUTER SOFTWARE AND LICENCE TO USE THE SAME. THE LD.CIT(A) HELD THAT AS PER TABLE OF RATE OF DEPRECIATION AT SERIAL NO.5 NAME OF THE ASSET IS COMPUTER INCLUDING COMPUTER SOFTWARE. ACCORDI NG TO THE NOTE APPENDED TO THE TABLE, COMPUTER SOFTWARE MEANS ANY COMPUTER PROGRAM RECORDED ON ANY DISK, TAP, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE. THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 5. AGGRIEVED REVENUE IS IN APPEAL BEFORE THE TRIBUN AL. 6. THE LD.DR SUPPORTED THE ORDER OF THE LD.AO. THE LD.COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT SIMILAR I SSUE AROSE IN THE ASSESSMENT YEAR 2010-11, WHEREIN THE ORDER OF THE L D.CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE OF DEPRECIATION AT 60% WA S CHALLENGED BY THE REVENUE. THE TRIBUNAL HAS HEARD ARGUMENTS IN ITA N O.2788/AHD/2014 ON 18.6.2018. BOTH THE REPRESENTATIVES AGREED THAT SAME VIEW BE ADOPTED IN THIS YEAR AS WELL. THE TRIBUNAL HAS PRO NOUNCED THE ORDER ON 2.7.2018 AND FROM THE WEBSITE COPY IS BEING TAKEN A ND PLACED ON RECORD. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD. WE ARE OF THE VIEW THAT TREATMENT OF THE SOFTWARE BY THE AO AS AN INTANGIBLE ASSET DISTINCT FROM THE GROUP PROV IDED IN LIST OF TANGIBLE ASSETS FOR RATE OF DEPRECIATION CANNOT BE JUSTIFIED . AS PER THE LIST OF TANGIBLE ASSETS IN THE TABLE OF RATE OF DEPRECIATIO N SOFTWARE HAS BEEN GROUPED AS ELIGIBLE FOR CLAIM OF DEPRECIATION AT 60 %. INCOME TAX ACT HAS NOT CATEGORIZED OR DISTINGUISHED SOFTWARE INTO SYSTEM SOFTWARE AND APPLICATION SOFTWARE FOR CLAIMING DEPRECIATION IN THE TABLE OF ASSETS FOR ITA NO.81/AHD/2016 4 APPLICATION OF RATE OF DEPRECIATION AS ATTEMPTED BY THE LD.AO IN THE PRESENT CASE. FURTHER, SAP (SYSTEM, APPLICATIONS A ND PRODUCTS IN DATA PROCESSING) IS A BUSINESS SYSTEM WHEREBY ALL AREAS OF BUSINESS ACTIVITIES ARE DESIGNED, INTEGRATED AND EXECUTED IN ONE DEDICA TED SAP SYSTEM BY SHARING COMMON BUSINESS INFORMATION WITH EVERYONE C ONCERNED. DEPLOYMENT OF SAP ITSELF CAN ALSO INVOLVE A LOT OF TIME AND RESOURCES AND HAVING LONG TERM BUSINESS PERSPECTIVE. IT CANNO T BE COMPARED WITH APPLICATIONS LIKE MS OFFICE OR TALLY ETC. AS TRIED TO MAKE OUT BY THE LD.AO, WHICH IS LIKE COMPARING A MOUNTAIN WITH A MO LE. ASSESSEE HAS IMPLEMENTED SAP SYSTEM IN THEIR VARIOUS BUSINESS TA SKS, AND IS PART OF ITS INTEGRATED COMPUTER SYSTEM, AND THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION AT THE RATE OF 60% AS PROVIDED IN THE LIST OF ASSETS IN THE TABLE OF RATES OF APPLICATION DEPRECIATION. IT IS PERTINENT TO NOTE THAT SIMILAR ISSUE AGITATED BY THE REVENUE BEFORE THE TRIBUNAL IN ASSTT.YEAR 2010-11 HAS BEEN DISMISSED AND THE CLAIM OF THE ASSESSEE WAS ALLOWED. WE FIND THAT TR IBUNAL HAS RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. ZYDUS INFRASTRUCTURE P.LTD. (2016) 72 TAXMANN.COM 199 (AH D-TRIB) AND HELD THAT LICENCED SOFTWARE ARE ALSO SUBJECTED TO DEPREC IATION AT THE RATE OF 60%. TRIBUNAL ALSO OBSERVED THAT EVEN IF DEPRECIAT ION IS LOWERED, THEN THERE WOULD NOT BE ANY CHANGE IN TAXABLE INCOME OF THE ASSESSEE, AS THE ASSESSEE-COMPANY IS A UNIT ELIGIBLE FOR DEDUCTI ON UNDER SECTION 10A OF THE INCOME TAX ACT, AND THEREFORE, IN EITHER WAY , THE ENTIRE EXERCISE WOULD BE REVENUE NEUTRAL AND ADJUDICATION BECOMES M ERELY AN ACADEMIC. CONSIDERING ALL THESE ASPECTS, WE REJECT THE GROUND OF APPEAL OF THE REVENUE AND CONFIRM THE ORDER OF THE LD.CIT( A) ALLOWING THE CLAIM OF THE ASSESSEE OF DEPRECIATION AT THE RATE O F 60% ON COMPUTER AND SOFTWARE. ITA NO.81/AHD/2016 5 8. NEXT GROUND OF APPEAL OF THE REVENUE IS ALLOWANC E OF CLAIM OF DEDUCTION UNDER SECTION 10AA OF THE ACT ON EXCHANGE FLUCTUATION GAIN BY THE LD.CIT(A). 9. BRIEF FACTS OF THE CASE IN THIS REGARD ARE THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 10A OF RS.2,20,47,238/- UND ER THE HEAD OTHER INCOME ON ACCOUNT OF EXCHANGE RATE FLUCTUATION GAI N. THE LD.AO SOUGHT JUSTIFICATION FROM THE ASSESSEE FOR NOT EXCL UDING THE FOREX INCOME EARNED FROM THE EXPORT TURNOVER AND PROFITS OF THE BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF CALCULATING EXEMPTI ON UNDER SECTION 10AA OF THE ACT. ASSESSEE SUBMITTED THAT AS PER SE CTION 10AA(7) THE PROFITS OF THE BUSINESS OF UNDERTAKING INCLUDES THE PROFITS FROM EXPORT OF ARTICLES AS WELL AS ALL OTHER INCIDENTAL INCOME DER IVED FROM THE BUSINESS OF THE UNDERTAKING; AND THAT THERE WAS A DIRECT NEX US BETWEEN EXCHANGE FLUCTUATION GAIN AND INCOME OF THE BUSINES S OF THE UNDERTAKING. IT WAS SUBMITTED THAT FOREX GAIN WAS DERIVED FROM THE CONSIDERATION REALIZED FROM EXPORT AND RELATABLE TO PROFITS OF THE BUSINESS OF THE UNDERTAKING. THE LD.AO, HOWEVER, F OUND THE SUBMISSIONS OF THE ASSESSEE UNACCEPTABLE, AND HELD THAT GAIN OR PROFIT ARISING OUT OF EXCHANGE FLUCTUATIONS NOTHING TO DO WITH SALE/EXPORT OF GOODS AND NOT PART OF PROFIT OF BUSINESS OF AN UNDE RTAKING, AND THE SAME WAS TO BE TREATED AS SEPARATE INCOME FOR CLAIM ING DEDUCTION UNDER SECTION 10AA OF THE ACT. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE AND RECOMPUTED ELIGIBLE DEDUCTION. ISSUE WAS AGITATED BEFORE THE LD.FIRST APPELLATE AUTHORITY BY THE ASSE SSEE. THE LD.CIT(A) CONSIDERED THE ISSUE ELABORATELY AND AFTER RELYING UPON VARIOUS CASE LAWS, ALLOWED THE CLAIM OF THE ASSESSEE. 10. DISSATISFIED WITH THE ORDER OF THE LD.CIT(A), T HE REVENUE IS BEFORE THE TRIBUNAL. ITA NO.81/AHD/2016 6 11. BEFORE US BOTH PARTIES AGREED THAT IDENTICAL IS SUE WAS HEARD BY ITAT IN A.Y.2010-11 ON 18.6.2018 AND ORDER IS RESER VED. THE VIEW ON THIS POINT, LIKELY TO BE TAKEN BY THE ITAT BE ADOPT ED HERE. AS OBSERVED EARLIER, WE HAVE CALLED FOR THE ORDER IN ITA NO.278 8/AHD/2014 DATED 2.7.2018 AND PERUSED THE SAME. WE HAVE ALSO GONE T HROUGH THE RECORD. 12. WE FIND THAT THE LD.CIT(A) HAS APPRECIATED THE FACTS IN RIGHT PERSPECTIVE AND ARRIVED AT A JUST CONCLUSION BY ALL OWING THE CLAIM OF THE ASSESSEE. WE MAKE IT A POINT TO NOTE THE RELEVANT FINDINGS OF THE LD.CIT(A) ON THIS ISSUE WHICH READS AS UNDER: AFTER GOING THROUGH THE FACTS OF THE CASE AND THE DETAILS SUBMITTED BY THE AR AND ALSO THE FINDINGS GIVEN BY THE CIT(A) IN THE APPELLANT'S OWN CASE FOR THE A.Y.2010-11, IT IS NOTICED THAT THE APPELLANT HAS REDUCED THE GAINS DUE TO FOREIGN EXCH ANGE RATE FLUCTUATION FROM THE EXPORT TURN OVER NUT NOT FROM THE PROFIT AND BUSINESS INCOME AS PER THE PROVISIONS OF SECTION 10 AA(7) OF THE I. T. ACT BUT THE AO IN HIS WORKING HAS REDUCED SUCH G AIN FROM THE BUSINESS PROFIT ALSO. THIS WORKING OF THE AO WHERE HE HAS COMPLETELY EXCLUDED THE SAID GAIN FROM DEDUCTION U/ S.LOAA IS NOT JUSTIFIED UNDER THE PROVISION OF INCOME TAX ACT NOR IS SUPPORTED BY LEGAL POSITION INTERPRETED BY VARIOUS JUDICIAL PRON OUNCEMENT WHICH ARE DISCUSSED IN DETAILED BY THE CIT(A) IN THE APPE AL ORDER IN THE CASE OF APPELLANT FOR THE A.Y.2010-11. AS I HAVE NO REASON TO DIFFER WITH THE FINDING GIVE N BY THE CIT(A) IN THE A.Y.2010-11,1 RESPECTFULLY FOLLOW THE CONCLUSION AS DECIDED IN CASE LAWS RELIED UPON BY THE APPELLANT A ND QUOTED BY THE CIT(A) IN HIS ORDER MENTIONED ABOVE AND HON'BLE ITAT AHMEDABAD A BENCH IN THE CASE OF M/S. ZAVERI & CO. P. LTD. V. CIT-4, AHMEDABAD IN ITA NO.L395/AHD/2013 AND ITA NO.L396/AHD/2013 IN ITS ORDER DATED 07.05.2014 WHIC H STATES AS UNDER: 'SINCE THE FOREIGN EXCHANGE FLUCTUATION GAIN OR LOS S IS IN INDIAN RUPEES BEING REALIZED AS PER EXCHANGE RATE, PROVISIONS OF SECTION 10AA (7) OF THE ACT WHICH PRO VIDE THE MANNER IN WHICH THE PROFITS DERIVED FROM 'EXPORT OF ARTICLES ITA NO.81/AHD/2016 7 OR THINGS OR SECURITIES IS TO BE COMPUTED FOR THE P URPOSE OF 10AA DEDUCTION REFLECT THAT - 'THE PROFITS OF THE BUSINESS OF THE UNDERTAKING ARE TO BE COMPUTED AS PER THE PROVISIONS OF CHAPTER IV D OF T HE ACT AND THE ONLY ADJUSTMENT -WHICH IS PERMITTED BY THE LEGISLATURE TO BE MADE TO SUCH PROFITS OF THE BUSIN ESS IS TO APPORTION THE SAME IN THE PROPORTION OF EXPORT TURN OVER OF THE ELIGIBLE SERVICES TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE ASSESSEE. IT IS SIGNIFICANT TO NO TE HERE THAT THE SPECIFIC PROVISIONS LIKE EXPLANATION (BAA) OF S ECTION 80HHC OF THE ACT WHICH PROVIDE FOR EXCLUSION OF 90% OF INTEREST INCOME FROM THE PROFITS OF BUSINESS TO ARR IVE AT THE PROFITS OF THE BUSINESS HAS NOT BEEN PROVIDED BY TH E LEGISLATURE IN SECTION I0AA OF THE ACT.' I ALSO AGREE WITH THE FINDING OF THE CIT(A) IN THE ORDER OF A.Y.2010-11 THAT, - 'THE APPELLANT IS FOLLOWING A CONSISTENT METHOD OF ACCOUNTING SUCH FOREIGN EXCHANGE FLUCTUATION AS PER ACCOUNTING STANDARD AS-// AND TAX AUDITOR HAS NOT M ADE ANY ADVERSE REMARKS. THE APPELLANT SUBMITTED (HAT I T FULFILLED ALL THE ELIGIBLE CONDITION TO CLAIM DEDUC TION U/S.10AA OF THE ACT FOR ITS ELIGIBLE UNIT IN SPECIAL ECONOMI C ZONE(SEZ). THE APPELLANT THOUGH REDUCED SUCH GAIN F ROM THE EXPORT TURN OVER BUT THE SAME WAS INCLUDED AS B USINESS INCOME / PROFIT OF ELIGIBLE UNDERTAKING THEREBY COR RECTLY FOLLOWED THE PROVISIONS. AS PER PROVISIONS IT IS PR OFIT & GAINS OF ELIGIBLE UNIT AT SEZ FROM THE EXPORT OF GOODS/ARTICLE/SERVICES AND THE SAME BE REALIZED IN FOREIGN EXCHANGE. IT IS UNDISPUTED THAT ON ACCOUNT OF DAY T O DAY FLUCTUATION OF FOREIGN EXCHANGE, SUCH VARIATION IN REPORTING OF SALE AS PER INVOICE AND REALIZATION OF SUCH EXPO RT BEING IN TWO DIFFERENT TIME FRAMES WILL RESULT INTO SUCH GAI N OR LOSS. I AM INCLINED WITH APPELLANT THAT AS PER THE RATIO OF HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF PRIYANKA GEMS UPHOLDING THE HON'BLE /TAT, AHMEDABAD ORDER IN THE SAME CASE, SUCH GAIN AND LOSS ARE PART AND PARCEL OF THE SALE OF EXPORT. I AM ALSO INCLINED WITH APPELLANT THAT HON' BLE BOMBAY HIGH COURT FOR SAME ISSUE AND IN SIMILAR FAC TS (DEDUCTION U/S.10A OF THE ACT) FOLLOWING ITS JUDGEM ENT IN THE CASE OF CIT VS. AMBER EXPORT (INDIA) & HON'BLE GUJARAT HIGH COURT JUDGEMENT IN THE CASE OF CIT VS. AMBA IM PEX (2006) 282 /TR 144 HELD IN FAVOUR OF ASSESSEE FOR L ARGE ITA NO.81/AHD/2016 8 AMOUNT REALIZED IN TERMS OF INDIAN RUPEES AS A RESU LT OF A FOREIGN EXCHANGE FLUCTUATION THAT TOOK PLACE IN THE COURSE OF THE EXPORT TRANSACTION. SIMILARLY HON'BLE MUMBAI /T AT IN THE CASE OF RENAISSANCE JEWELLERY (P)LTD. (SUPRA) AFTER CONSIDERING RATIO OF VARIOUS CASE LAWS HELD THAT - 'THERE IS NO MATERIAL DIFFERENCE BEBVEEN THE REQUIR EMENT OF SECTION 80HHC AND SECTION 10A. THE PROFIT ON ACCOUN T OF FOREIGN EXCHANGE GAIN IS DIRECTLY REFERABLE TO THE ARTICLES AND THINGS EXPORTED BY THE ASSESSEE. SUCH PROFITS A RE, THEREFORE, IN THE SAME NATURE AS THE SALE PROCEEDS AND THERE IS NO REASON WHILE DEDUCTION UNDER SECTION 10 A SHOULD NOT BE ALLOWED IN RESPECT OF SUCH EXCHANGE GAIN.' TWO IMPORTANT ASPECTS IN THIS REGARDS REQUIRED TO B E CONSIDERED. (A) THE INTENTION OF LEGISLATURE WITH PURPOSE OF THIS SECTION IS TO PROMOTE EXPORT AND FOREIGN EXCHANGE EARNINGS. (B) THERE MAY BE VARIOUS ACCOUNTING STANDARD TO RECORD A PARTICULAR TRANSACTION IN THE BOOKS OF ACCOUNTS BUT ULTIMATE NATURE OF SUCH TRANSACTION WILL BE CONSIDE RED FOR THE PHRASE DERIVED FROM. IN THIS REGARD, IT IS UNDISPUTED THAT APPELLANT REA LIZED FOREIGN EXCHANGE ON ACCOUNT OF EXPORT FROM ELIGIBLE UNIT AT SEZ. FURTHER IN VALUE TERMS THERE ARE TWO ENTRIES I.E. ENTRY OF SALE ON THE DATE OF EXPORT AS PER INVOICE AND ENTRY OF GAIN / LOSS O N ACCOUNT OF REALISATION OF SUCH SALE. THERE IS NO OTHER ACTIVIT Y OF SALE OR SERVICES BUT IT IS ON ACCOUNT OF TWO DIFFERENT VALU E OF FOREIGN CURRENCY FOR TWO DIFFERENT TIME FRAMES RELATED TO O NE SALE, HENCE SUCH GAIN /LOSS IS PART AND PARCEL OF SALE AND, PRO FIT/INCOME OF THE ELIGIBLE UNIT ENTITLED FOR DEDUCTION U/S.10AAOFTHEA CT.' IN CONSENSUS WITH MY PREDECESSOR CIT(A), IN THIS YE AR ALSO THE AO IS DIRECTED NOT TO REDUCE AMOUNT OF RS.2,20,47,238/ - FOREIGN EXCHANGE RATE FLUCTUATION GAIN FROM PROFITS OF BUSI NESS WHILE COMPUTING DEDUCTION U/S.10AA OF THE ACT. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED AND T HE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS.1,24,18,4 39/- U/S.10AA AND TO ALLOW THE DEDUCTION AS CLAIMED BY THE APPELL ANT. ITA NO.81/AHD/2016 9 13. SIMILARLY, THE TRIBUNAL REJECTED THE APPEAL OF THE REVENUE FOR THE ASSTT.YEAR 2010-11 ON SIMILAR ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL RE AD AS UNDER: 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS ON THE ISSUE AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. WE HAVE NO HESITATION IN ENDORSING THE VIEW OF THE CIT(A) IN T HIS REGARD. THE ISSUE IS SUBSTANTIALLY COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE C ASE OF PRIYANKA GEMS (SUPRA) AND CIT VS. GEM PLUS JEWELLERY INDIA L TD. [2010] 194 TAXMAN 192 (BOM.). THE ISSUE IS ALSO SETTLED IN FAVOUR OF THE ASSESSEE BY LONG LINE OF JUDICIAL PRECEDENTS WHERE A CONSISTENT VIEW HAS BEEN TAKEN THAT FOREIGN EXCHANGE GAINS ARI SING OUT OF THE FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE CAN NOT BE DIVESTED FROM THE EXPORT BUSINESS OF THE ASSESSEE. ONCE EXPO RT IS MADE, THE FOREIGN EXCHANGE GAINS/LOSS MAY OCCUR DUE TO VA RIETY OF REASONS AT THE TIME OF REMISSION OF EXPORT SALE PRO CEEDS. IN THIS VIEW OF THE MATTER, THE FOREIGN EXCHANGE FLUCTUATIO N GAINS REQUIRED TO BE TAKEN AS INTEGRAL PART OF THE BUSINE SS PROFITS DERIVED FROM EXPORTS. EVEN, INDEPENDENTLY, IN SO FA R AS SECTION 10AA OF THE ACT IS CONCERNED, SUB-SECTION 7 THEREOF EXPLICITLY EXPLAINS THE TERM 'PROFIT DERIVED FROM THE EXPORT O F ARTICLES OR THINGS' TO MEAN THE AMOUNT WHICH BEARS TO BE 'PROFI TS OF THE UNDERTAKING', THE SAME PROPORTION AS THE EXPORT TUR NOVER BEARS TO THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY TH E UNDERTAKING. THUS, WHAT IS REQUIRED TO BE DETERMINED IS 'PROFITS OF THE BUSINESS OF THE UNDERTAKING' WHICH IS OSTENSIBLY WIDER THAN 'PROFITS & GAINS DERIVED BY THE UNDERTAKING'. IN SHORT, THE PROFITS DERIVED FROM EXPORT HAVE BEEN EQUATED WHEN BUSINESS PROFITS OF T HE UNDERTAKING IN VIEW OF THE FORMULA PROVIDED IN SECT ION 10AA(7) OF THE ACT. IN VIEW OF THE AFORESAID DISCUSSION, WE DO NOT SEE ANY INFIRMITY IN THE CONCLUSION DRAWN BY THE CIT(A) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE, THUS, DECLINE TO INTERFERE. 14. CONSIDERING SIMILARITY OF FACTS AND CIRCUMSTANC ES OF THE CASE AND THE PROPOSITION LAID DOWN BY THE CO-ORDINATE BENCH PASSED IN THE ASSTT.YEAR 2010-11 IN THE ASSESSEES OWN CASE (SUPR A), WE ARE INCLINED TO FOLLOW THE ABOVE ORDER OF THE TRIBUNAL, AND ACCO RDINGLY CONFIRM ORDER OF THE LD.CIT(A). THIS GROUND OF APPEAL OF REVENUE IS REJECTED. ITA NO.81/AHD/2016 10 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 9 TH JULY, 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 09/07/2018