2015 (8) TMI 54 - HC - Income Tax

Exchange rate difference to exports made in earlier years - Whether was profit of business within the meaning of Section 80HHC of the Act? - Held that - Tribunal was justified in holding that the exchange rate difference to exports made in earlier years was profit of business within the meaning of Section 80HHC of the Act. See Commissioner of Incometax-I vs. Friends and Friends Shipping Pvt. Ltd. 2013 (5) TMI 458 - GUJARAT HIGH COURT and Commissioner of Income Tax V. Mitsu Limited 2014 (4) TMI 168 - GUJARAT HIGH COURT CIT v. Badridas Gauridu (P) Ltd. 2003 (1) TMI 61 - BOMBAY High Court and CIT v. Soorajmull Nagarmull (1980 (9) TMI 69 - CALCUTTA High Court) with Commissioner of Income Tax-II vs. Panchmahal Steel Ltd. 2013 (5) TMI 686 - GUJARAT HIGH COURT - Decided in favour of assessee. Profit on cancellation of forward marketing contract - whether is to be treated as export turnover within the meaning of Section 80HHC? - Held that - Tribunal was justified in holding that profit on cancellation of forward marketing contract is to be treated as export turnover within the meaning of Section 80HHC of the Act. See Commissioner of Income Tax V. Mitsu Limited 2014 (4) TMI 168 - GUJARAT HIGH COURT and Commissioner of Income Tax-II vs. Panchmahal Steel Ltd. 2013 (5) TMI 686 - GUJARAT HIGH COURT - Decided against revenue.

Summary

Issues:
1. Interpretation of exchange rate difference as 'profit of business' under Section 80HHC of the Act.
2. Treatment of profit on cancellation of forward marketing contract as export turnover under Section 80HHC of the Act.

Analysis:

Issue 1:
The High Court considered the substantial questions of law framed in the appeal. The Court referred to previous decisions, including Commissioner of Incometax-I vs. Friends and Friends Shipping Pvt. Ltd. and Commissioner of Income Tax V. Mitsu Limited. These decisions established the interpretation of exchange rate difference as 'profit of business' under Section 80HHC of the Act. The Court followed precedents like CIT v. Badridas Gauridu and CIT v. Soorajmull Nagarmull. The Court concluded that the present appeal's question was squarely covered by these decisions. Therefore, the order passed by the Appellate Tribunal was upheld, deciding the substantial question of law against the revenue and in favor of the assessee.

Issue 2:
Regarding the treatment of profit on cancellation of forward marketing contract as export turnover under Section 80HHC of the Act, the Court noted that this issue was addressed in the case of Commissioner of Income Tax III V. Panchmahal Steel Ltd. and Commissioner of Income Tax V. Mitsu Limited. The Division Bench of the Court had previously concluded that the Tribunal did not commit any legal error in its decision. As a result, the Court found no grounds to interfere with the Appellate Tribunal's order. Therefore, the substantial question of law was decided against the revenue and in favor of the assessee, leading to the dismissal of the appeal with no order as to costs.