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M/s. Dhanraj Dhadda Exports Versus DCIT, Range 16 (3) , Mumbai

2016 (7) TMI 1181 - ITAT MUMBAI

Claim for deduction u/s. 80HHC in respect of the gains arising on maturity of foreign contracts - Held that:- As by following the decision of Hon’ble jurisdictional High Court rendered in the case of M/s Shah Originals (2010 (4) TMI 216 - BOMBAY HIGH COURT ), we hold that the Ld CIT(A) was justified in holding that the income arising from foreign exchange forward contract is not eligible for deduction u/s 80HHC of the Act, since it cannot be considered to be an income derived from export of good .....

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uction u/s. 80HHC of the Act in respect of the gains arising on maturity of foreign contracts. 3. Learned counsel appearing for the assessee submitted that the assessee is a diamond exporter and it had entered into foreign exchange forward contracts in relation to specific export invoice. The assessee earned profits upon maturity of foreign exchange contract and claimed deduction thereon u/s. 80HHC of the Act treating the same as income derived from export activity. The Assessing Officer held th .....

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contract is eligible for deduction u/s. 80HHC of the Act. CIT Vs. Mitsu Limited (Tax Appeal No. 658 of 2009 dated 19.3.2014) CIT Vs. Veer Gems (Tax appeal No. 1051 of 2007 dated 21.7.2015) CIT Vs. Priyanka Gems (367 ITR 575) 5. On the contrary, learned Departmental Representative submitted that the Mumbai bench of the Tribunal in following cases has held that deduction u/s. 80HHC is not allowable in respect of gains realised on foreign currency forward contract. a) DCIT Vs. Intergold (I) Ltd. (2 .....

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, gains realised on maturity of forward contract hence the same is intricately linked with export activity. Accordingly he submitted that the assessee is entitled for deduction us/. 80HHC of the Act in respect of gains realised on foreign exchange forward contract. 7. We heard the rival contentions and perused the record. We notice that the Ld A.R has placed reliance on the decisions rendered by Hon ble Gujarat High Court. However, as pointed out by Ld D.R, the jurisdictional Hon ble Bombay High .....

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e proceeds of the account are to be utilized for bona fide payments by the account holder subject to the limits and the conditions prescribed. An assessee who is an exporter is not under an obligation of law to maintain the export proceeds in the EEFC Account but, this is a facility which is made available by the Reserve Bank. The transaction of export is complete in all respects upon the repatriation of the proceeds. It lies within the discretion of the exporter as to whether the export proceed .....

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e completion of the export activity and does not bear a proximate and direct nexus with the export transaction so as to fall within the expression "derived" by the assessee in sub-section (1) of section 80HHC. Both the Assessing Officer and the Commissioner of Income-tax (Appeals) have made a distinction, which merits emphasis. The exchange fluctuation, as both those authorities noted, arose subsequent to the transaction of export. In other words, the exchange fluctuation was not on ac .....

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