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2015 (7) TMI 983 - ITAT DELHI

2015 (7) TMI 983 - ITAT DELHI - TMI - Re-compute the deduction u/s 10A - disallowance made by the AO was allowed ignoring the facts that the foreign exchange fluctuation gain received has not been earned by the assessee through export of software - Held that:- There is no dispute as the assessee engaged in the business of software development realized a higher sale price on account of foreign exchange fluctuation. The assessee by way of a revised return included this gain also in its claim of ex .....

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xed Deposits yielding "interest income". The increase in sale price as a result of currency fluctuation impacts the sale price on which the exemption is to be calculated.

The issue under consideration was whether on the ECB loan (external borrowings) which yielded a gain as a result of foreign exchange fluctuation was a capital receipt or a Revenue receipt. Considering the principle laid down by the Apex Court in Woodward Governor (2009 (4) TMI 4 - SUPREME COURT), it was held that it .....

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) TMI 36 - DELHI High Court) can be considered to be arising on account of additional sale proceeds. The view is also supported by the decision of the Madras High Court. Decided against revenue. - ITA No. 838/Del/2013 - Dated:- 30-6-2015 - Diva Singh, JM And J. S. Reddy, AM,JJ. For the Appellant : Ms Y Kakkar, DR For the Respondent : Sh Bharat Beriwal, Adv ORDER Per Diva Singh,JM By the present appeal filed by the Revenue, the correctness of the order dated 21.11.2012 of CIT(A)-IV, New Delhi per .....

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ound(s) of appeal at any time before or during the hearing of this appeal." 2. The relevant facts as per the assessment order are that the assessee company as in the past continued to derive income from the business of software development. The AO in the course of the assessment proceedings required the assessee to explain why foreign exchange gain and interest income may not be excluded for the purposes of section 10A. Considering the explanation of the assessee and relying upon various ju .....

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ambay Electric Supply Industrial Company Ltd. vs CIT (1978) 113 ITR 84 [v] Cement Distributors Ltd. (1994) 208 ITR 35; [vi] CIT vs Buildwell Assam Pvt.Ltd. (1996) 220 ITR 577 (Gauhati High Court). 3. Aggrieved by this, the assessee went in appeal before the First Appellate Authority. Supporting its claim and assailing the assessment order, it was argued that the basic character of the receipt would not change on account of foreign exchange fluctuation as any fluctuation in the foreign exchange w .....

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ssessee and relying upon the decision of the ITAT in the case of Sony India Pvt. Ltd. vs DCIT [2009] 315 ITR (AT) 0150 and the decision of the Jurisdictional High Court in the case of FAB India vs CIT 130 ITR 143, the CIT(A) directed the AO to re-compute the deduction u/s 10A. 5. Aggrieved by this, the Revenue is in appeal before the Tribunal. The ld. Sr. DR, Ms. Y.Kakkar vehemently relying upon the assessment order and the decisions cited in the assessment order submitted that the impugned orde .....

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the case ofQualcomm India Pvt. Ltd. vs DCIT [2013] 37 Taxmann. Com 17 (Tribunal) wherein the said issue has been considered in the specific paras 25.1 to para 27. Referring to the said decision, it was her submission that the Co-ordinate Bench of the Tribunal therein has considered and discussed the impact of the latest judgement of the Apex Court the case of Woodward Pvt. Ltd. [2009] 312 ITR 254 and has held that if loss suffered on account of foreign exchange fluctuation is allowable as Revenu .....

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ed is supported by decisions of the ITAT Jurisdictional High Court as referred to in the impugned order and also to decision of the Madras High Court in the case of CIT vs Pentasoft Technologies Ltd.[2012] 347 ITR 578 (Mad.). On the contrary it was argued that the decision of the Tribunal rendered on 21.02.2013 stated to having considered the most recent decision, it was submitted is entirely distinguishable on facts. 7. We have heard the rival submissions and perused the material available on r .....

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ourts mandates that there must be direct connection with the activity and did not contemplate that exemption can be allowed to gains arising from foreign exchange fluctuation. The CIT(A) considering the Jurisdictional High Court s decision in the case of FabIndia Overseas Ltd. (cited supra) and the decision of the Co-ordinate Bench in the case of Sony India Pvt. Ltd. allowed the claim of the assessee which is under challenge. In the aforementioned peculiar facts and circumstances, considering th .....

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ale price as a result of currency fluctuation impacts the sale price on which the exemption is to be calculated. The facts before the Co-ordinate Bench in the case of Qualcomm India P. Ltd. (cited supra) specific paras 25.1 to para 27 of the same which have been relied upon by the Ld. Sr. DR are entirely distinguishable. In the facts of that case, we find that the issue under consideration was whether on the ECB loan (external borrowings) which yielded a gain as a result of foreign exchange fluc .....

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o foreign exchange fluctuation is in the sale price and not on account of external borrowing. The gain following the principle of FabIndia Overseas Ltd.(cited supra) can be considered to be arising on account of additional sale proceeds. The view is also supported by the decision of the Madras High Court. The following extract stated judgements brings out the crux of the issue:- "In order to allow a claim under section 10A of the Act, what all is to be seen is whether such benefit earned by .....

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