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December 2014

Export profits – Deduction u/s. 80HHC – A. Y. 2003-04 – Gain derived from change in foreign exchange rate is export profit – Gain realised in subsequent year – Entitled to deduction u/s. 80HHC:

By K. B. Bhujle Advocate
Reading Time 2 mins
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CIT vs. Priyanka Gems: 367 ITR 575 (Guj):

The assessee was engaged in the business of export. For the A. Y. 2003-04 the assesseee received net of Rs. 71,23,361/- by way of exchange rate difference on exports made in the earlier year. The assessee claimed deduction of the said amount u/s. 80HHC of the Incometax Act, 1961. The Assessing Officer held that the sum was income from other sources and 90% thereof would be excluded for the purpose of deduction u/s. 80HHC of the Act. The CIT(A) and the Tribunal allowed the assessee’s claim for deduction of the said amount u/s. 80HHC of the Act.

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

“i) The source of the income of the assessee was export. On the basis of accrual, income was already reflected in the assessee’s account on the date of the export at the prevailing rate of exchange. Further, the income was earned merely on account of foreign exchange fluctuation. Such income, therefore, was directly related to the assessee’s export business and could not be said to have been removed beyond the first degree.

ii) The assessee was entitled to deduction u/s. 80HHC.”

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