TMI Blog2013 (7) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... export goods and cannot be distinguished there from - If the fluctuation in foreign exchange brought down the value, an assessee cannot claim that this amount should be excluded and the export value maintained at a higher figure - there is no occasion to exclude 90% of the amount attributable to export gains from the foreign exchange rate fluctuation - Decided in favour of assessee. Allowance of cross objection - Reduction in business profits unabsorbed depreciation and unabsorbed losses - Held that:- deduction can be claimed only against positive profits and positive profit necessarily implies the adjustments and set off of the depreciation allowance of earlier years and carried forward losses of earlier years and that Judgment having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced by unabsorbed depreciation and unabsorbed loss before computing deduction u/s. 80HHE of the Act? 3. Under the impugned order, the tribunal had dismissed the appeal preferred by the revenue contending that the CIT appeals had committed an error in directing the assessing officer not to exclude 90% of the gains on foreign exchange fluctuations from the business profits while determining the relief under Section 80HHC of the Income Tax Act. 4. In the appeal before the tribunal by the revenue, the assessee filed a cross objection against the very order of the commissioner raising the following issues: Learned CIT(A) has erred in holding that the deduction u/s 80HHE of the Act has to be determined on the basis of business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and therefore cannot be added to the export turnover. Insofar as the deductions are concerned, the assessing officer therefore directed that 90% of the income has to be reduced in arriving at the profits of the business. 8. It so happened that the assessee had only export profit and no other business profit and therefore, this aspect did not make any difference in characterising as business profit or profit from export business, both being the same in the assesses case. 9. The assessee appealed against this order to the CIT (Appeals). The CIT (Appeals) allowed the appeal of the assessee insofar as it related to the deduction of gains from the fluctuation in the foreign currency and the consequent gains from foreign exchange from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving come in for interpretation and noticed by the Supreme Court in the case of LIBERTY INDIA LIMITED vs COMMISSIONER OF INCOME TAX reported in 317 ITR 218 and following its earlier view taken in COMMISSIONER OF INCOME TAX vs STERLING FOODS reported in 237 ITR 579 and having held that the profit should be directly attributable to the export activity and in the instant case it having been attributed directly to the fluctuation in the exchange rate, the assessee could not have got the benefit and the tribunal is in error in answering this issue against the revenue and in favour of the assessee. 12. The distinction made between the words derived from and attributable to is emphasised to submit derived from is a narrow word and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mit that this amount is not the amount which can be said to be derived from the second degree source as pointed out in the very judgment of the Supreme Court in the case of Liberty India Limited Vs Commissioner Of Income Tax, in particular paragraph 14, which is also read upon by the learned counsel for the revenue that as far as the present appeal is concerned, the only activity of the assessee is to produce software and export and assessee has no other business activity or profits and the fluctuation in exchange rate is an incidental aspect but it is the entire amount that is received inclusive of difference attributable to the fluctuation in the foreign exchange rate that is treated as the value of the exports and therefore, no distincti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was correct in allowing the cross objection of the assessee and that the business profits should not be reduced by unabsorbed depreciation and unabsorbed losses is answered in the negative against the assessee and in favour of the revenue, as this question is answered and covered by the view of the decision in the case of J.K Industries Ltd V/s Joint Commissioner of Income Tax reported in 351 ITR 434. 19. In the result, this appeal is allowed in part and the judgment of the tribunal insofar as it relates to the decision on cross objection by the assessee in the main appeal of the revenue is set-aside and the judgment of the tribunal rendered in main appeal of the revenue in ITA 2250/2004 is affirmed and appeal insofar as this aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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