TMI Blog2006 (4) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... rt Turnover as per clause ( a ) of sub-section (2) of section 80HHC of the Income-tax Act, 1961. A plain reading of the provision of clause ( a ) of sub-section (2) of section 80HHC, makes it clear that once the competent authority has extended the time, in a case where it is necessary, or, where the sale proceeds have been received within a period of six months from the end of the previous year, or within extended period then such sale proceeds are directly relatable to the exports made in earlier year and no further inquiry is necessary. The Legislature in its wisdom has taken into consideration the fact that in the case of exports made, sale proceeds are not necessarily realizable immediately within the accounting period in which exports have been made. As a corollary, by the time such sale proceeds are received within the prescribed time, by virtue of exchange rate difference there might be a situation where a larger amount is received than the amount as reflected in the shipping bill. On a reading of entire scheme of allowing deduction u/s 80HHC, it is clear that deduction is to be based upon the actual export sales proceeds realized in Indian Rupees. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer rejected the aforesaid contention of the assessee observing as under: I have carefully considered the assessee s submissions. The exchange difference of Rs. 51,15,047 does not pertain to exports of relevant previous year. In this connection reference is made to rule 115 according to which any gains/loss arising out of fluctuation in the rate of foreign exchange with regards to exports made during the year has to be considered in the relevant assessment year itself. Here it is pertinent to note that all deduction under Chapter VI-A are allowable from Gross Total Income of the relevant year. The assessee is following mercantile system of accounting and therefore income of the year has to be determined on the basis of receivable and payable for the relevant year. The basic idea of rule 115 is to bring finality of all transactions as on the last date of the accounting year in conformity with the mercantile system of accounting. It is also argued by the authorized representative that since the sale proceeds have been received within six months, the same is eligible for deduction under section 80HHC. The legislative intent for allowing deduction under section 80HHC on export sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods or merchandise, other than those specified in clause ( b ), if the sale proceeds of such goods or merchandise exported out of India are [received in, or brought into, India] by the assessee [other than the supporting manufacturer] in convertible foreign exchange [within a period of six months from the end of the previous year or, [within such further period as the competent authority may allow in this behalf] . 8. The ld. D.R. further drew our attention to Form No. 10CCAC, being Report under section 80HHC(4)/80HHC(4A) of the Income-tax Act, 1961 as prescribed by Income-tax Rules, 2003 with effect from 25-9-2003, wherein, the Accountant is required not only to certify but also to enclose the Annexure-A to the said Form containing details of sales proceeds received by the assessee in foreign convertible exchange. The relevant clause No. 2 to Form No. 10CCAC is extracted below : 2. ( a ) I/We certify that the deduction to be claimed by the assessee under sub-section (1) of section 80HHC of the Income-tax Act, 1961, in respect of the assessment year .....is Rs....... which has been determined on the basis of the sale proceeds received by the assessee in convertible foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asstt. CIT [2005] 94 TTJ (Ahd.) 557 1 . ( iii ) ITAT Mumbai in the case of Sanghvi Sons v. ITO [IT Appeal No. 2642 (Mum.) of 2002, dated 11-7-2005]. ( iv ) ITAT Delhi in the case of Mohindra Impex v. Asstt. CIT [2002] 121 Taxman 326 (Mag.). ( v ) ITAT Mumbai in the case of Dy. CIT v. Laxmi Diamond [IT Appeal No. 4936 (Mum.) of 2005, dated 18-8-2005]. 11. To a query from the Bench to produce the copy of the report in the prescribed Form No. 10CCAC as required for claiming deduction under section 80HHC to verify whether in that Report, the figure of export turnover is adopted by the Accountant on the basis of Annexure-A i.e., sales proceeds received in or brought into India, the Counsel submitted that the same is not relevant because the issue is squarely covered in the favour of the assessee by the various decisions of the Tribunal ( supra ). 12. After hearing both the sides, we have carefully gone through the orders of the authorities below. It is pertinent to note that export turnover is defined in clause ( b ) of Explanation to section 80HHC of the Income-tax Act, 1961. In this clause, the phrase (received in or brought into India) was substituted for receivable by the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the specified date ( i.e., year and date) at actual rate at which it is realized and, ( ii ) In respect of income which is yet to be received in or brought into India as on the specified date at the telegraphic buying rate prevalent on that date. 14. There is no dispute that in the impugned order, the Assessing Officer has included the exchange rate difference amounting to Rs. 51,15,047 while computing the profits of business. According to the principles laid down in Accounting Standard 11 of the Institute of Chartered Accountants of India and rule 115R of the Income-tax Rules, 1962, export sales are required to be recorded at the exchange rate prevailing on the date of transaction. The actual amount realized may be lower or more than the actual export sales which is recorded at the exchange rate prevailing on the date of transaction keeping in view AS-11 and rule 115R of Income-tax Rules, 1962. For example, the export sales recorded in the books of account in the year ending 2002-03 is Rs. 100 whereas the actual amount realized on account of fluctuation in exchange rate may be Rs. 90 or Rs. 110. In case the actual amount realized is Rs. 90, in that event, the export turnover w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the definition of Export Turnover contained in clause ( b ) of section 80HHC and provisions contained in clause ( a ) of sub-section (2) of section 80HHC of the Income-tax Act, 1961, provides that such sale proceeds have to be received in convertible foreign exchange within a period of six months from the end of the previous year, or within such further period as the competent authority may allow in this behalf. Thus, a plain reading of the provision makes it clear that once the competent authority has extended the time, in a case where it is necessary, or, where the sale proceeds have been received within a period of six months from the end of the previous year, or within extended period then such sale proceeds are directly relatable to the exports made in earlier year and no further inquiry is necessary. The Legislature in its wisdom has taken into consideration the fact that in the case of exports made, sale proceeds are not necessarily realizable immediately within the accounting period in which exports have been made. As a corollary, by the time such sale proceeds are received within the prescribed time, by virtue of exchange rate difference there might be a situation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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