By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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26 (2007) 112 TTJ 754 (Mum.)
Shah Originals v. ACIT
ITA Nos. 3206 (Mum.) of 2006 and 1254 to 1256 and 4065 (Mum.)
of 2007
A.Ys. 2000-01 to 2004-05. Dated : 25-10-2007
S. 80HHC of the Income-tax Act, 1961 — Gain on foreign
exchange fluctuation under EEFC account, interest on EEFC account, interest on
FDRs maintained as guarantee for export business and DEPB credits are eligible
for deduction u/s.80HHC.
For the relevant assessment years, the Assessing Officer
disallowed the assessee’s claim u/s.80HHC in respect of the following incomes :
(a) Gain on foreign exchange rate fluctuation under EEFC
account.
(b) Interest on EEFC account.
(c) Interest on bank FDRs maintained as guarantee for
export business.
(d) Income form DEPB.
The Tribunal allowed the assessee’s claim in respect of all
these incomes. The Tribunal noted as under :
1. In respect of allowability of foreign exchange rate
fluctuation gain, the tribunal relied on the following decisions :
(i) Smt. Sujata Grover v. Dy. CIT, (2002) 74 TTJ 347
(Del.)
(ii) S. S. Industries (ITA No. 2732/Mum./1997, dated 30th
Jan. 2000)
(iii) Mohindra Impex (ITA No. 1492/Del.)
(iv) M. B. Mehta & Co. (ITA No. 4607/Mum./2004 dated 27th
June 2006)
(v) Fountainhead Exports (ITA Nos. 5817 & 5823/Mum./2000)
2. In respect of allowability of interest on EEFC account,
the Tribunal relied on the decision in the case of Fountainhead Exports (supra).
3. In respect of allowability of interest on Bank FDRs
maintained as guarantee for export business, the Tribunal held that since
furnishing of guarantees is closely linked up with the export business, there is
no reason why the interest earned on such FDRs should not be considered as
business income of the assessee.
4. In respect of allowability of DEPB credits, the Tribunal
noted that DEPB credits arise directly out of the export business operations
and, hence, should be considered as business income of the assessee.
