ACIT vs. Prakash I. Shah (ITAT Mumbai) (Special Bench)

(i) The exchange rate gain difference pertaining to exports is an integral part of the exports and export turnover and cannot be treated as income from other sources.

(ii) However, where such gain relates to exports made in an earlier year, the deduction u/s 80HHC is allowable only in the year in which the exports are made and not in the year of realisation of the gain.

(iii) As it would not be permissible to assess the exchange gain in the year of realisation while allowing s. 80HHC deduction in an earlier year, the AO was directed to exclude the exchange gain from the total income of the current year and to include it in the income of the year of exports and allow deduction u/s 80HHC accordingly.

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