TMI Blog2012 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year 2004-05. 2 The assessee has filed concise grounds as under: I. The Learned Commissioner of Income-tax erred in passing order uls.263 of the Act without appreciating that the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of revenue and hence, order passed uls.263 of the Act is bad-in-law and liable to be quashed. 2. The Ld. CIT failed to appreciation that issue of deduction u/s.8OHHC of the Act was examined and verified in detail by the Assessing Officer and thereafter reduced claim of deduction more particularly considering the issue of interest received and hence, the order passed u/s.263 directing the Assessing Officer to verify is without any justification and liable to be quashed. 3. The Ld. CIT failed to appreciate that exchange gain on forward contract transaction of Rs.80,72,500/- was never forming part of export turnover and hence, directing the Assessing Officer to verify and reduce the same from export turnover is unjustified, and liable to be quashed. 3 Ground nos 1 2 regarding deduction u/s 80HHC on interest receipt. 3.1 The assessment in this case was completed u/s 143(3) vide order dated 29.12.2006. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer has applied his mind and taken one of the possible views, then the CIT has no jurisdiction to take a different view. 4.1 On the other hand, the ld DR has submitted that on the date when the Assessing Officer has passed the assessment order, the issue was settled by various decisions of the Hon ble High Courts as well as Hon ble Supreme Court. Therefore, the Assessing Officer was bound to follow the settled judicial pronouncements on the issue and by not following the same, the Assessment order is erroneous and prejudicial to the interest of the revenue. He has relied upon the decision of the Hon ble Jurisdictional High Court in the case of CIT vs Damodar Mangallji Mining Co reported in 326 ITR 437. 5 We have considered the rival contention as well as the relevant material on record. It is settled proposition of law that if the Assessing Officer has taken one of the possible views, then CIT cannot take a different view. The issue regarding the deduction u/s 80HHC on interest received on the deposits was already considered and decided by the Tribunal in assessee s own case for the AY 2000-01, 2001-02 and 2002-03. The Assessing Officer reduced 90% of the interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same in the export turnover. However, the said receipt cannot be considered as derived from the export sales; therefore, the said translation cannot be considered as part of the turnover. 7.2 After considering the reply of the assessee, the CIT has held that the claim of the assessee on account of forward contract translation has been part of export turnover is incorrect accordingly, the order of the Assessing Officer allowing such claim is erroneous and prejudicial to the interest of revenue and requires modification. 8 Before us, the ld AR of the assessee has submitted that the CIT has proceeded under a wrong impression that the exchange gain on forward contract translation is part of the export turnover and accordingly, directed to exclude the same from the export turnover. He has submitted that the exchange gain on forward contract was not included in the export turnover of the assessee; therefore, there is no question of reducing the same. He has referred the details of computation of deduction u/s 80HHC at pages 22 23 of the paper book and submitted that the assessee has not included the exchange gain on forward contract in the export turnover. Therefore, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be excluded from the export turnover by applying clause (baa) of Explanation to sec. 80HHC. 9.3 In reply to the notice, the assessee has submitted before the CIT as under: In the year under consideration exchange gain of Rs. 80.73 lacs on account of translation of the amount involved in forward contract is considered as part of export turnover. Mechanism of forward contracts in the foreign currency helps entity to protect itself from undue loss to the sustained because of fluctuating exchange rates. These forward contracts hedge the translation risk on account of export sales the amount of which is not realised at the end of the financial year. Since these contracts are against export receivables, the gain on the same has direct nexus to sales and the same are required to be included in the export turnover. In view of this, the gains on forward contract are not covered under explanation (baa) to sec 80HHC. Thus, for calculating deductions u/ s80HHC the gain on forward contact cannot be excluded from the turnover. 9.4 From the reply of the assessee, it is clear that the assessee took a stand that the exchange gain on forward contract has direct nexus to the sales and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be taken into account. All four variables were required to be given weight age. The substitution of section 80HHC(3) secures pro-fits derived from the exports of eligible goods. Therefore, if all the four variables are kept in mind, it becomes clear that every receipt is not income and every income would not necessarily include element of export turn-over. This aspect needs to be kept in mind while interpreting clause (baa) to the said Explanation. The said clause stated that 90 per cent. of incentive profits or receipts by way of brokerage, commission, interest, rent, charges or any other receipt of like nature included in business profits, had to be deducted from business profits computed in terms of sections 28 to 44D of the Income-tax Act. In other words, receipts constituting independent income having no nexus with exports were required to be reduced from business profits under clause (baa). A bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges, etc., formed part of gross total income being business profits. But for the purposes of working out the formula and in order to avoid distortion of arriving at the expor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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