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TMI Blog2016 (12) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... ails were called for and on perusal of the details filed by the assessee, the AO observed that the gain is from reinstatement of balance in EEFC A/c. Observing that keeping the funds in EEFC a/c is not compulsory, the AO held that the gain is not derived from the business of export. Therefore, he treated the income as "income from other sources" and restricted the claim of deduction u/s 10A of the Act to the export turnover only. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the AO and the assessee is in second appeal before us. 4. The learned Counsel for the assessee submitted that the assessee has received consideration on export of software in the form of foreign exchange which has been deposited in the EEFC A/c and the valuation of the forex at the end of the relevant A.Y has resulted in the forex gain. Therefore, according to him, the gain is inextricably linked to the export consideration and therefore, such income is eligible for deduction u/s 10A of the Act. In support of his contention, he placed reliance upon the following decisions: a) Income Tax Appellate Tribunal Bangalore in the case of M/s. Wipro Ltd vs. Dy.CIT in ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge rate is more it results into income from the exchange rate fluctuations and in the reverse case, it becomes loss on that account. Under all circumstances, the basic character of the receipt of the foreign currency remains the same, i.e., it remains attributable to the export effected by the assessee. It also held that the expression "any other receipt of a similar nature" as used in Expln. (baa) to s. 80HHC(4B) should mean only such items which do not directly add to the export turnover. The foreign exchange fluctuation income is related to the exports effected earlier and there cannot be any doubt that amount representing foreign exchange rate fluctuations income in relation to exports effected cannot be considered for exclusion to the extent of 90 per cent for computing "profits of the business". The items which are excluded under Expln. (baa) below s. 80HHC are independent receipts and are in the nature of income and not turnover or its part. Be that as it may, there is even no exception in s. 10B like that in Expln. (baa) to s. 80HHC. In the case of Renaissance Jewellery (P) Ltd. (supra), the Tribunal, following the aforesaid decision in the case of Smt. Sujata Grover (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Rs. 19,721 is with regard to exchange gain on import payment. Therefore, the assessee would be entitled to the deduction under s. 10B with regard to exchange gain of Rs. 15,31,518 only which is the gain on the day of deposit of US dollars in the EEFC account. In my opinion, therefore, the assessee should be granted deduction under s. 10B of the Act with regard to exchange gain of Rs. 15,31,518. I hold accordingly". Therefore, respectfully following the above decision, we hold that the forex gain as on the date of deposit into EEFC A/c only is part of the export turnover as held by the Hon'ble Third Member in the above case. 7. In the result, assessee's appeal is dismissed. ITA No.3221/Hyd/2016 A.Y 2010-11 8. In this appeal, the assessee has raised the following grounds of appeal: "1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant. 2. The learned Commissioner of Income-Tax (Appeals) erred in holding that the foreign exchange gain derived of Rs. 92,l4,74l/- is not eligible for exemption u/s 10A of the I.T.Act. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of such contract has been considered at length by the Coordinate Bench of this Tribunal at Chennai in the case of Majestic Exports (cited Supra) at Para No. 7 to 9 which is reproduced hereunder for ready reference: "7. We have heard both the parties and perused the material on record. In this case, the assessee was engaged in the business of manufacturing and export of hosiery garments. During the course of export, the assessee entered into derivative contract. The assessee incurred loss in this transaction. The assessee claimed it as business loss. According to the Assessing Officer this loss was not business loss and it is a speculative loss and this transaction is speculative in nature as such the loss incurred on this transaction cannot be set off against business income of the assessee. According to the ld. Authorised Representative for assessee, the derivative transaction cannot fall under sec.73. Explanation to sec.73 creates a deeming fiction by which among the assessee, who is a company, as indicated in the said Explanation dealing with the transaction of share and suffer loss, such loss should be treated to be speculative transaction within the meaning of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case M/s. Aishwarya & Co P. Ltd in ITA No.860/Mds/2014, dated 29.05.2015, wherein they followed the judgment of the Calcutta High Court in the case of M/s. Baljit Securities Pvt. Ltd. (88 CCH 313) wherein held as under:- "Clause (d) of Section 43(5) became effective with effect from 1st April, 2006. Therefore, prior to 1st April, 2006 any transaction in which a contract for the purchase or sale of any commodity including stocks and shares was periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrip was a speculative transaction. Subsection 1 of Section 73 provides as follows: '(1) Any loss, computed in respect of a speculation business carried on by the assessee, shall not be set off except against profits and gains, if any, of another speculation business.' The resultant effect was that any loss arising out of speculative transaction could only have been set off against profits arising out of speculative transaction. In the present case, the assessee, as already indicated, has been dealing in shares where delivery was in fact taken and also in shares where delivery was not ultimately taken. In other words, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed above, was within the umbrella of speculative transaction. There was, as such, no bar in setting off the loss arising out of derivatives from the income arising out of buying and selling of shares. This is what the learned Tribunal has done." 9. From the above decision of the Calcutta High Court in the case of Baljit Securities Pvt. Ltd. cited supra, the issue stands covered in favour of the assessee. However, we make it clear that total transaction considered for determining this business loss from derivative transactions cannot be more than the total export turnover of the assessee for the assessment year under consideration and if the derivative transaction is in excess of export turnover, then that loss suffered in respect of that portion of excess transactions to be considered as speculative loss only as that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. This ground is allowed as indicated above". 14. Respectfully following the same, this ground of appeal of the assessee is allowed. 15. As regards Ground No.4, the facts are that the assessee company received an amount of Rs. 31,83,463 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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