Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (7) TMI 983 - ITAT DELHIRe-compute the deduction u/s 10A - disallowance made by the AO was allowed ignoring the facts that the foreign exchange fluctuation gain received has not been earned by the assessee through export of software - Held that:- There is no dispute as the assessee engaged in the business of software development realized a higher sale price on account of foreign exchange fluctuation. The assessee by way of a revised return included this gain also in its claim of exemption u/s 10A. Considering the provision of section 10A(1) of the Act and the decisions referred to by the CIT(A) read along with the decision of the Madras High Court in the case of CIT vs Penatsoft (2010 (7) TMI 75 - MADRAS HIGH COURT ), we find that the Revenue’s challenge has to fail. The gain in the sale price as a result of fluctuation in the foreign currency has a direct nexus and is of the first degree and cannot be equated to situations where surplus funds are parked in Fixed Deposits yielding "interest income". The increase in sale price as a result of currency fluctuation impacts the sale price on which the exemption is to be calculated. The issue under consideration was whether on the ECB loan (external borrowings) which yielded a gain as a result of foreign exchange fluctuation was a capital receipt or a Revenue receipt. Considering the principle laid down by the Apex Court in Woodward Governor (2009 (4) TMI 4 - SUPREME COURT), it was held that it is a Revenue receipt on the principle that if a loss suffered on account of foreign exchange fluctuation is allowable as a Revenue expenditure then the gain on such a receipt would be a revenue receipt. The issue was in the content of utilization of the loan at the relevant point of time. In the facts of the present case, the gain due to foreign exchange fluctuation is in the sale price and not on account of external borrowing. The gain following the principle of FabIndia Overseas Ltd.(1979 (11) TMI 36 - DELHI High Court) can be considered to be arising on account of additional sale proceeds. The view is also supported by the decision of the Madras High Court. Decided against revenue.
|