Case Law Details
Tech Mahindra Business Services Limited Vs DCIT (ITAT Mumbai)
During the course of assessment proceedings, the assessee was asked to furnish the break-up of foreign exchange gain credited in the profit and loss account amounting to Rs.13,31,38,000/- for which deduction u/s.10A of the Act was claimed by the assessee. The assessee was also asked to explain the reasons for claiming such deduction. The assessee furnished a reply vide letter dated 07/02/2013 that it was maintaining Exchange Earners Foreign Currency (EEFC) bank account in foreign currency for the purpose of enabling its import payments and export receipts and avoid consequential foreign exchange fluctuations thereon. The balance in foreign currency lying in the said EEFC account as on the balance sheet date had to be re-stated by the assessee company in accordance with Accounting Standard Standard-11 issued by Institute of Chartered Accountants of India (ICAI). Pursuant to such re-translation of foreign currency into Indian currency as on the balance sheet date, the assessee earned exchange gain of Rs.5,00,32,074/- which was credited in the profit and loss account and deduction u/s.10A of the Act claimed for the same. The assessee also earned exchange gain on dollar sales of Rs.6,51,34,757/- which was duly credited in the profit and loss account and deduction u/s.10A of the Act claimed for the same. The ld. AO observed that the aforesaid two exchange gains does not fall within the ambit of the expression “derived” used in Section 10A of the Act. Hence, the assessee is not eligible for deduction u/s.10A of the Act for the same. This action of the ld. AO was upheld by the ld. DRP.
We find that this issue is also no longer res-integra in view of the decision of this Tribunal in assessee’s own case for A.Y.2011-12 in ITA No.766/Mum/2016 dated 30/06/2021 wherein it was held that the action of the lower authorities in placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Shah Originals reported in 327 ITR 19 (Bom) was totally misconceived as the said decision was rendered in the context of deduction claimed u/s.80HHC of the Act whereas in the present case, the assessee has claimed deduction u/s.10A of the Act, wherein deduction is available on the profits derived by the assessee on the entire profits and gains derived by the undertaking engaged in the business of export of articles or things. This Tribunal had also placed reliance on the decision of the Hon’ble Karnataka High Court in the case of CIT vs, Motorola India Electronics Pvt. Ltd., reported in 46 Taxmann.com 167 wherein it was held that what is exempted is not merely the profits and gains of the export of articles but also the income from the business of the undertaking. Proceeding further, the Hon’ble High Court also observed that export profits kept in the EEFC account are the income of the business undertaking, hence the assessee would be entitled for deduction u/s.10A of the Act for the same. Respectfully following the aforesaid decision, the ground Nos. 14-16 raised by the assessee are hereby allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No.1326/Mum/2014 for A.Y.2009-10 preferred by the order against the final assessment order passed by the Assessing Officer dated 30/01/2014 u/s.143(3) r.w.s.144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 19/12/2013 for the A.Y.2009-10.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
