TMI Blog2014 (10) TMI 251X X X X Extracts X X X X X X X X Extracts X X X X ..... evailing exchange rate on the quoted price for the exported goods in the foreign currency rates - There is no distinction possible on the basis of different situations under which foreign exchange fluctuation may result - law permits hedging of foreign exchange fluctuation risk to an importer or an exporter - The exporter may take steps as found commercially prudent to safeguard himself against drastic foreign exchange rate fluctuations and in the process may also limit the possibility of gain in case of favourable currency rate trends - the resultant gain in foreign exchange rate would still be due to the export made by the assessee – order of the Tribunal upheld - Decided against Revenue. Amount received on sale of DEPB licence – Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the amount earned on account of rate difference due to fluctuation of foreign exchange can be considered for the purpose of calculating profits for deductions under section 80HHC of the Income-tax Act, 1961 ? (B) Whether, on the facts and in the circumstances of the case, the amount received on sale of DEPB licence and foreign exchange fluctuation of rate difference can be considered for the purpose of deductions under section 80-IA of the Income-tax Act, 1961 ? So far as question (A) is concerned, this court in Tax Appeal No. 1468 of 2006 and connected appeals, by a judgment dated March 12, 2014 (CIT v. Priyanka Gems [2014] 367 ITR 575 (Guj)), held the issue in favour of the assessee. Such question is, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange cannot be divested from the export business of the assessee. As noted, once export is made, due to variety of reasons, the remission of the export sale consideration may not be made immediately. Under the accounting principles, therefore, the assessee, on the basis of accrual, would record sale consideration at the prevailing exchange rate on the quoted price for the exported goods in the foreign currency rates. If during the same year of the export, the remission is also made, the difference in the rate recorded in the accounts of the assessee and that eventually received by way of remission either positive or negative, would be duly adjusted. May be the accounting standards require that the same may be recorded in separate foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the year during which such sale proceeds were received by the assessee export was not made, would not in any manner change the situation. The assessee being engaged in the business of export and having made the export, mere fact of the remittance being made after 31st of March of the year when export was made, would not change the situation in so far as, relation of such income to the assessee's export business is concerned. Clause (baa) to the Explanation to section 80HHC provides for exclusion of certain incomes for computation of export profit under section 80HHC. Sub-clause (1) of clause (baa) thereof pertains to 90 per cent. of the sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of section 28 or any receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC of the Act. In case of CIT v. Chowgule and Co. Ltd. reported in [1996] 218 ITR 384 (SC), the court held that rule 115 does not lay down that all foreign currencies received by the assessee will be converted into Indian rupees only on the last date of the accounting period. Rule only fixed the rate of conversion of foreign currency. If there is no foreign currency to convert on the last date of accounting period, then no question of invoking rule 115 will arise . . . 29. In case of CIT v. Sterling Foods reported in [1999] 237 ITR 579 (SC), the court held that the facts were that the assessee was engaged in the processing of prawns and sea food and exporting it. In the process the assessee earned import entitlements gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and thereafter, gained due to the foreign fluctuation on the account kept by the assessee in the EEFC account, the court held that such gain cannot be said to have been derived from the assessee's export business. Thus the significant and distinguishing feature of this case is that the assessee had received the entire proceeds of the export sale. The foreign exchange fluctuation gain arose subsequent to the assessee receiving the sale consideration. It was in this background, the Court held and observed as under : 11. The assessee admittedly in the present case received the entire proceeds of the export transaction. The Reserve Bank of India, has granted of facility to certain categories of exporters to maintain a c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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