[CIT v. Morgan Stanley Advantage Services Pvt. Ltd. (Bom.), ITA No. 4027 of 2010, dated 30-8-2011]
The assessee was entitled to deduction u/s.10A of the Income-tax Act, 1961. For the A.Y. 2004-05, for availing benefit u/s.10A, the assessee was required to realise the export proceeds by 30-9-2004. The assessee received export proceeds of Rs.2.20 crores in December 2004. On 7-10-2004, the assessee had made an application to the RBI seeking extension of time for realisation of the export proceeds. Reminders were sent on 24-1-2007 and 30-3-2007. By its letter dated 25-4-2007, the RBI confirmed the realisation of the amount under the provisions of FEMA. There was no separate approval under the provisions of the Income-tax Act, 1961. The Assessing Officer disallowed the claim for deduction of the said amount of Rs.2.20 crores u/s.10A of the Act. The Tribunal held that once the assessee has applied for extension and has completed all the formalities and in response the RBI has taken the remittance on record, then non-issuance of a formal letter of approval by the RBI cannot be held against the assessee for none of its fault. The Tribunal further held that in the facts of the present case, it must be held that the extension has been granted in substance and, therefore, the benefit of section 10A has to be allowed to the assessee on the ground that the extension is deemed to have been granted.
On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:
“(i) In our opinion, no fault can be found with the decision of the Tribunal. In the present case, the note appended to the RBI’s letter dated 25-4-2007 no doubt records that the approval granted by the RBI is under FEMA and the said approval should not be construed as approval by any Authority or Government under any other laws/regulations. The question is, whether the extension of time for realisation of the export proceeds by the Competent Authority under FEMA can be said to be the approval granted by the Competent Authority u/s.10A(3) of the Income-tax Act, 1961.
(ii) ‘Competent Authority’ in section 10A means the RBI or such other Authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Admittedly, RBI is the Competent Authority under FEMA which regulates the payments and dealings in foreign exchange. Thus, what section 10A(3) of the Act provides is that the benefits u/s.10A(1) would be available if the export proceeds are realised within the time prescribed by the Competent Authority under FEMA. In the present case, the competent authority under FEMA, namely, the RBI, has granted approval in respect of the export proceeds realised by the assessee till December, 2004. Therefore, the approval granted by RBI under FEMA would meet the requirements of section 10A of the Income-tax Act, 1961. In other words, once the competent authority under FEMA which regulates the payments and dealings in foreign exchange has approved realisation of the export proceeds by the assessee till December 2004, then it meets the requirements of section 10A(3) and consequently the assessee would be entitled to the benefits u/s.10A(1) of the Act.
(iii) Moreover, in the present case, the RBI which is the Competent Authority under FEMA as also u/s.10A of the Income-tax Act, 1961 has neither declined nor rejected the application made by the assessee seeking extension of time u/s.10A of the Act. Therefore, the decision of the Income Tax Appellate Tribunal in holding that the approval granted under FEMA constitutes a deemed approval granted by the RBI u/s.10A(3) of the Act cannot be faulted.”
