48 Export business – Special deduction u/s. 10B – A. Y. 2008-09 – Gains derived from fluctuation in foreign exchange rate – Receipt on account of export – Is in nature of income from export – Entitled to deduction u/s. 10B

For the A. Y. 2008-09, the Assessing Officer disallowed the deduction u/s. 10B of the Act, on profits arising due to the foreign exchange rate fluctuation on the ground that it was not income derived from the Industrial undertaking. The Commissioner (Appeals) deleted the disallowance and the deletion was confirmed by the Tribunal.

On appeal by the Revenue, the Gujarat High Court upheld the decision of the Tribunal and held as under:

“i)    The income or loss due to fluctuation in the exchange rate of foreign currency that arose out of the export business of the assessee did not lose the character of income from assessee’s export business. Deduction u/s. 10B was permissible if profit and gains were derived from export. The exact remittance in connection with such export depended on the precise exchange rate at the time when the amount was remitted.

ii)    The receipt was on account of the export made, and therefore, the fluctuation thereof must also be said to have arisen out of the export business. Merely because of fluctuation in the international currencies, the income did not get divested of the character of income from export business.
iii)    Therefore, the Tribunal did not commit any error in deleting the addition made on account of fluctuation in foreign exchange rates from the deduction u/s. 10B. No question of law arose.”