CIT & Anr. v. Novell Software Development (I) (P.) Ltd.

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The Tax PublishersIT Appeal No. 251 of 2007 2013 TaxPub(DT) 1858 (Karn-HC) : (2013) 053 (I) ITCL 0299 : (2013) 355 ITR 0339 : (2013) 260 CTR 0372 : (2013) 089 DTR 0433 Income Tax Act, 1961 --Deduction under section 80HHC--Profits of business Exclusion of 90 per cent. of gains from foreign exchange rate fluctuations--Assessee, a exporter of software, had claimed deduction under section 80HHC in respect of its export profits. Its export turnover included the amount received in Indian currency due to export of goods and the difference attributable to fluctuation in foreign exchange rate. Assessing officer was of the view that the gains attributable to fluctuation in foreign exchange rate were not precisely derived from the export business but because of the fortuitous circumstance and, therefore, could not be added to export turnover. Accordingly, he reduced 90 per cent of export gains from foreign exchange rate fluctuation from business profits for quantification of deduction admissible under section 80HHC. *Held:* The amount which was sought to be attributed as gain from fluctuation in foreign exchange rate no doubt, might have been due to some fluctuation but as these amounts were received in Indian currency as the total amount that an exporter received ultimately for the export of the goods, it should be taken together with the value of the goods itself in which event, even the amount said to be attributable to the fluctuation in the foreign exchange rate formed part of the value of the export goods and could not be distinguished therefrom. Therefore, there was no occasion to exclude 90 per cent of the amount attributable to export gains from the foreign exchange rate fluctuation. Income Tax Act, 1961, Section 80HHC, Explanation (baa) Income Tax Act, 1961 --Deduction under section 80HHEComputation Profits of business--The issue under consideration was whether or not the business profits should be reduced by unabsorbed depreciation and unabsorbed losses before computing the deduction under section 80HHE. *Held:* In view of decision of Karnataka High Court in J.K. Industries Ltd. v. Assistant CIT 2013 TaxPub(DT) 1362 (Karn-HC) : (2013) 351 ITR 434 (Karn), business profits should be reduced by unabsorbed depreciation and unabsorbed losses before computing the deduction under section 80HHE. Income Tax Act, 1961, Section 80HHE In the Karnataka High Court D. V. Shylendra Kumar & B. S. Indrakala, J.J. CIT & Anr. v. Novell Software Development (I) (P.) Ltd. IT Appeal No. 251 of 2007 10 June, 2013 Revenue by : K. V. Aravind Assessee by : T. Suryanarayana JUDGMENT *D. V. Shylendra Kumar, J.* Appeal by the Revenue under section 260A of the Income Tax Act directed against the order dated 11-8-2006 passed by the Tribunal, Bangalore Bench in ITA No. 2250/Bang/2004. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersIT Appeal No. 251 of 2007
2013 TaxPub(DT) 1858 (Karn-HC) : (2013) 053 (I) ITCL 0299 : (2013) 355 ITR 0339 : (2013) 260 CTR 0372 : (2013) 089 DTR 0433

Income Tax Act, 1961

--Deduction under section 80HHC--Profits of business Exclusion of 90 per cent. of gains from foreign exchange rate fluctuations--Assessee, a exporter of software, had claimed deduction under section 80HHC in respect of its export profits. Its export turnover included the amount received in Indian currency due to export of goods and the difference attributable to fluctuation in foreign exchange rate. Assessing officer was of the view that the gains attributable to fluctuation in foreign exchange rate were not precisely derived from the export business but because of the fortuitous circumstance and, therefore, could not be added to export turnover. Accordingly, he reduced 90 per cent of export gains from foreign exchange rate fluctuation from business profits for quantification of deduction admissible under section 80HHC. Held: The amount which was sought to be attributed as gain from fluctuation in foreign exchange rate no doubt, might have been due to some fluctuation but as these amounts were received in Indian currency as the total amount that an exporter received ultimately for the export of the goods, it should be taken together with the value of the goods itself in which event, even the amount said to be attributable to the fluctuation in the foreign exchange rate formed part of the value of the export goods and could not be distinguished therefrom. Therefore, there was no occasion to exclude 90 per cent of the amount attributable to export gains from the foreign exchange rate fluctuation.

Income Tax Act, 1961, Section 80HHC, Explanation (baa)

Income Tax Act, 1961

--Deduction under section 80HHEComputation Profits of business--The issue under consideration was whether or not the business profits should be reduced by unabsorbed depreciation and unabsorbed losses before computing the deduction under section 80HHE. Held: In view of decision of Karnataka High Court in J.K. Industries Ltd. v. Assistant CIT 2013 TaxPub(DT) 1362 (Karn-HC) : (2013) 351 ITR 434 (Karn), business profits should be reduced by unabsorbed depreciation and unabsorbed losses before computing the deduction under section 80HHE.

Income Tax Act, 1961, Section 80HHE

In the Karnataka High Court

D. V. Shylendra Kumar & B. S. Indrakala, J.J.

CIT & Anr. v. Novell Software Development (I) (P.) Ltd.

IT Appeal No. 251 of 2007

10 June, 2013

Revenue by : K. V. Aravind

Assessee by : T. Suryanarayana

JUDGMENT

D. V. Shylendra Kumar, J.

Appeal by the Revenue under section 260A of the Income Tax Act directed against the order dated 11-8-2006 passed by the Tribunal, Bangalore Bench in ITA No. 2250/Bang/2004.