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2018 (4) TMI 568 - AT - Income TaxDeduction u/s.10A - exclusions from the export turnover and total turnover - reimbursement of telecommunication expenses and Insurance expenses incurred in foreign currency - Held that:- Taking into consideration the decision rendered by the Hon’ble High Court of Karnataka in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT], we are of the view that the order of the CIT(A) directing the Assessing Officer to exclude communication charges and travelling and conveyance expenses both from export turnover and total turnover, is just and proper and calls for no interference. The only grievance of the Revenue is that the decision of Hon'ble High Court of Karnataka in Tata Elxsi (supra) has not attained finality and a SLP by the department is pending before the Hon'ble Supreme Court. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us Excluding interest income derived from fixed deposits from “income from business” while computing deduction u/s.10A - Held that:- Tribunal in Assessee’s own case in AY 2011-12 on identical issue held that interest income arose from fixed deposits that were made out of profits generated from export business and therefore the Assessee was entitled to deduction u/s.10A of the Act on interest income treating the same as part of business income. We are of the view that the source of fixed deposit has to be examined in this AY and since this exercise has not been done by the revenue authorities, we deem it fit to remand the issue to the AO for fresh consideration in the light of the decisions of the Tribunal referred to above. Deduction of loss on account of foreign exchange fluctuation as on the last date of the previous year - addition on the ground that the loss in question was only contingent and hence cannot be allowed - Held that:- a contract has been concluded and a liability has crystallized. In this factual matrix, from the wordings of the Instruction of CBDT, it follows that the loss arising out of the forward contract is not notional. In such a case, the CBDT Instruction requires the Assessing Officer to examine whether such a loss is on account of a speculative transaction as contemplated in section 43(5). As discussed earlier, in the case on hand there has been an existing contract with a binding obligation accrued against the assessee when it entered into for ex forward contracts. The forward contracts are in respect of consideration for exports proceeds, which are revenue items. There is an actual contract for sale of merchandise. In this factual matrix, it is clear that the transaction in question will not qualify to be called as speculative transaction. In view of the facts and circumstances of the case on hand, as discussed above, the provision for losses on derivative contracts is allowable as expenditure. See Quality Engineering & Software Technologies (P) Ltd. [2015 (1) TMI 869 - ITAT BANGALORE]
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