2011 (1) TMI 1555 - AT - Income Tax

Summary

Issues Involved:
The appeal involves the entitlement to deduction u/s.10B of the Act on exchange rate fluctuation and whether the gain on foreign exchange fluctuation is attributable to the assessee's export or external factors.

Entitlement to Deduction u/s.10B:
The appeal by the Revenue challenged the order of the Commissioner of Income-tax(Appeals) regarding the assessee's entitlement to deduction u/s.10B of the Act on exchange rate fluctuation. The CIT(A) allowed the deduction, noting that the issue was covered by a previous ITAT order in a similar case. The Tribunal upheld the CIT(A)'s decision based on the principle that exchange fluctuation gain is part of the receipt of sale proceeds converted into Indian rupee, following a precedent set by the Gujarat High Court. The Tribunal emphasized that the gain arose from the change in the rate of exchange after the export sale, resulting in the assessee receiving more sale proceeds and earning exchange fluctuation gain. The Tribunal dismissed the Revenue's appeal, citing the precedent established in the previous assessment year.

Judicial Precedent and Application:
The Tribunal referred to a previous ITAT order in a similar case involving the same assessee in the preceding assessment year, where the Department's appeal was dismissed. The Tribunal held that since the identical ground had already been decided in favor of the assessee in the previous year, the issue was covered against the Revenue. Consequently, the Tribunal dismissed the Revenue's appeal based on the precedent set by the earlier decision.

Conclusion:
Considering the precedent set in the previous assessment year and the Tribunal's decision in a similar case, the appeal was dismissed, affirming the assessee's entitlement to deduction u/s.10B on exchange rate fluctuation. The Revenue's appeal was therefore dismissed, and the order was pronounced in open court on 28th January 2011.