Case Law Details
IN THE ITAT, SPECIAL BENCH `K’ MUMBAI
ACIT v. Prakash L. Shah
ITA No. 6349/Mum./2004 , August 22, 2008
RELEVANT EXTRACTS :
15. Section 80HHC(1) provides that where an assessee is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall be allowed deduction to the extent of profits derived from the export of such goods or merchandise in accordance with and subject to the provisions of this section. Sub-section (3) prescribes the method for computing the profits derived from export of eligible goods. This sub-section has been, chiefly divided into three segments, dealing with three different situations. viz., where the export out of India is of goods or merchandise manufactured or processed by the assessee where the export out of India is of trading goods and where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods. In this appeal we are concerned with clause (b) of sub-section (3) as the assessee has exported trading goods out of India, The Assessing Officer has also recomputed deduction u/s.80HHC as per Annexure in accordance with this clause, which provides as under:-
(b) where the export out of India is of trading goods, the profits derived from such export shall he the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export. “
16. On a bare perusal of this clause ii emerges that the profits derived from export if trading goods is the difference between the export turnover in respect of such trading goods and the direct and indirect costs attributable such exports. Thus, there are three components of this clause. There is no quarrel regarding the second and third, being the direct costs and indirect costs attributable to the export of trading goods. Hence, the controversy before us relates to the calculation of export turnover in respect of such trading goods. The Assessing Officer has opined that the export turnover shall include the foreign exchange difference recognized in the current years books of account, but shall exclude the amount as is relatable to experts made in the preceding year. In the opposition the case of the assessee is that such foreign exchange gain, as ignored by the AO for the purpose of deduct on, is also includible in the export turnover. In order to resolve this controversy, we will have to look at the definition of the “export turnover” as provided in Explanation (b) below section 80IN1C(4C). It runs as under:-
(b) “export turnover” means the sale proceeds /, received in, or Drought into, India/ by the assessee in convertible foreign exchange tin accordance with clause (a) of sub-section 12)/ of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight an Insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962 (52 of 1962) /”
17. On a cursor)’ glance al ihe definition of export turnover, as enshrined in this Explanation, we observe that it has been defined to mean the sale proceeds received in or brought into India by the assessee in convertible foreign exchange as per clause (a) of sub-section (2) of this section. It is, therefore, imperative to go through clause (a) of sub-section (2), which reads as under:-
“(2)(a) This section applies to aft goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are {received in. or brought into. India] by /the assessee /(other than the supporting manufacturer) ] in convertible foreign exchange / within a period of six months from the end of the previous year or. /within such further period as the competent authority may allow in this behalf/ / “
18. On a conjoint reading of the above extracted relevant provisions it clearly transpires that the export turnover refers to the sale proceeds of the eligible goods or merchandise exported out of India and received in or brought into India by the assessee in convertible foreign exchange within a period of six months from the end of the previous year or within such further period as the competent authority may allow in this behalf. Our ease squarely hills under the first category. Unit is the sale proceeds are received in India in convertible foreign exchange Aim: period of six months from the end of the previous year. As such, the natural corollary which follows is that the amount of export turnover” of the year in which exports are made shall mean the total amount realized by the assessee in convertible foreign exchange in India with in the relevant year and also with in a further period of six months from the end of the year or such further period as extended by the competent authority. So the amount qualifying for export turnover shall be the amount realized during the financial year ending on 31.3.2001 and part thereof as relates to exports made before 31s1 March. 2001. but realized in period upto 30 September. 2001. There is no provision for splitting up of the amount so realized in two parts, viz. the part as recorded in die books of account upto `P’ March, 2001 and the other part and for allowing deduction on the former part and denying the benefit on the later part. The export turnover refers to the entire amount as so realized in convertible foreign exchange in India within the prescribed period of six months from the close of the previous year. Both the components of the export turnover, i.e. the amount recorded in the books account up to 31st March and the subsequent portion coming to surface on the realization of the export invoice would constitute export turnover”. If that be the position, there is hardly any difficulty in coming to the conclusion that the exchange rate difference pertaining to the exports made in the earlier year shall be part of the export turnover of the year in which such export is made provided such sale proceeds of the eligible goods are realized in India within the period of six months from the end of the previous year or within such further period as allowed by the competent authority. The year of realization is immaterial, so long as the amount is received in India in convertible foreign exchange within the period of six months from the end of the previous year or within such period as the competent authority may allow in this behalf. Our view is fortified by the judgment of the Hon’ble Gujarat High Court in the case of AMba Impex (supra) in which it has been held as under:-
..Under sub-s.(2) of s. 8OHHC, sale proceeds of goods or merchandise exported out of India and received in convertible foreign exchange become entitled to the deduction subject to fulfillment of other requisite conditions. Clause (a) of sub-s. (2) of s.80l IHC provides that Such sale proceeds have to be received in convertible foreign exchange within a period of six months from the end of previous year or, within such further period as the competent authority may allow in this behalf Thus, a plain reading of the provision makes it clear that once the competent authority has extended the time, in a case where it is necessary, or, where the safe proceeds have been received within a period of six months from the end of the previous year, such sale proceeds are directly refutable to the ports made and no further inquiry is necessary. Once Legislature has provided far treating a receipt within a period of six months after the end of the previous year, or within further extended period, as sale proceeds relatable to exports, it would not be open to Revenue to raise such a controversy.
The legislature in its wisdom has taken into consideration the fact that in case of exports made, sale proceeds are not necessarily realizable immediately within the accounting period in which exports have been made. As a corollary, by the time such sale proceeds are received within the prescribed time, by virtue of exchange rate difference there might be a situation here a larger amount is received than the amount as reflected in the shipping bill. Hence, merely because an amount is received in a year subsequent to the year of export by way of exchange rate difference, it does not necessarily always follow that the same is not relatable to the exports made. “
