2009 (3) TMI 640 - AT - Income Tax

Summary

Issues Involved:
The judgment involves the exclusion of a specific amount from the export turnover for computing deduction u/s 10A of the Income-tax Act, 1961.

Exclusion of Amount from Export Turnover:
The assessee, engaged in software development and IT services, claimed exemption u/s 10A. The Assessing Officer found that a certain amount was not received in foreign exchange within the stipulated time. The contention was that since the foreign exchange was remitted within six months from the date of invoice, the condition u/s 10A(3) was satisfied. The Tribunal held that the export proceeds should be realized within six months from the end of the previous year, not from the date of export. The assessee received the proceeds in December 2004, not within the required timeframe. The Tribunal emphasized that permission from the Reserve Bank of India or designated authority was necessary for an extension of time, which was not obtained in this case.

Grant of Extension by Competent Authority:
The Tribunal analyzed the requirement of realizing sale proceeds within the extended time by the competent authority. It clarified that the Reserve Bank of India is the competent authority for granting extensions related to export proceeds. The Tribunal noted letters from the assessee to the Reserve Bank of India requesting an extension, but emphasized the lack of formal approval for the purposes of section 10A. Despite the Reserve Bank taking the remittances on record, the Tribunal held that a formal letter of approval was essential. However, considering the completion of formalities by the assessee and the Reserve Bank's actions, the Tribunal deemed the extension to have been granted. Citing legal precedents, the Tribunal concluded that the assessee was entitled to the deduction under section 10A for the excluded amount.

Conclusion:
The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to recompute the exemption under section 10A accordingly. The judgment highlighted the importance of adhering to statutory requirements and obtaining formal approvals for extensions, while also considering the practical implications and actions taken by the parties involved.