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TMI Blog2012 (12) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... sented on behalf of the Revenue and Shri S.R. Chandrasekaran, C.A. represented on behalf of the assessee. 2. The first issue in the grounds of appeal of the Revenue is that the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to include exchange fluctuation gains as part of export turn over for the purpose of computation of deduction under section 10A. 3. The facts of the case are that the assessee is a company engaged in the business of design, manufacturing and sale of electronic components. For the assessment year 2006-07, the assessee filed its return of income on 29.11.2006 declaring income of Rs..33,24,330/-. The return was processed on 31.12.2006 under section 143(1) and assessment was completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10A of the Act. 6. The counsel for the assessee, with regard to foreign exchange fluctuation, submits that on an identical issue, this Tribunal in the case of ACIT vs. Inautix Technologies India (P) Ltd., decided that exchange gains arising out of trading transaction had direct nexus with the business of the assessee and therefore held to be as part of the export turnover. 7. We have heard both sides, perused the materials available on record, orders of lower authorities and the case law relied on by the counsels. The Commissioner of Income Tax (Appeals), on the issue of inclusion of exchange fluctuation gains as part of export turnover for the purpose of computation of deduction under section 10A, held as under: "4.1 The Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd v. ITO, 289 ITR (AT) 65 and Sujata Grover [74 TTJ 347 (Del)]. Reliance was also placed on the decision of Hon'ble High Court at Madras in the case of CIT v. Indo Matsushita Carbon Co. Ltd. 286 ITR 201 where it was held that the interest received by the assessee from its customers on overdue payments on sales was its income derived from industrial undertaking and was accordingly entitled for deduction. On a similar footing, since for-ex gains are inextricably connected to the payment on sales, it was contended that the same also needs to be given a similar treatment and has to be held as 'derived from' the export business of the undertaking. Reliance was also placed on the decision of Hon'ble ITAT Chennai in the case of ACIT v. Inautix T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy transactions are to be recorded at the date of the transactions applying the exchange rate between the reporting currency and the foreign currency as on such date of transaction(s). Thus, according to the Revenue, the sale proceeds should be the value recorded in the books and any increase or decrease in exchange fluctuation on the bill amount is only a subsequent event after the completion of the transaction; it is only an accretion to the amount due to be received by the assessee and not an accretion to the sale price of items exported. In this context, it was argued by the Id. CIT/DR that it may be a treasury income and although this gain arises in the course of export business yet it has no direct nexus with the business of the under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und in favour of the Revenue. This issue is decided in favour of the assessee by dismissing the ground raised by the Revenue." Respectfully following the above decision, the AO is directed to include exchange fluctuation as a part export turnover for computing deduction u/s 10A." 8. The Commissioner of Income Tax (Appeals), following the Coordinate Bench of this Tribunal in the case of ACIT v. Inautix Technologies India (P) Ltd. in I.T.A. No. 1054/Mds/2006, held that foreign exchange gain is part of export turnover for computation of deduction under section 10A. Therefore, we uphold the order of the Commissioner of Income Tax (Appeals). The grounds raised by the Revenue are dismissed. 9. With regard to the gains on income from engi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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