2018 (10) TMI 1392 - AT - Income Tax

Exemption/deduction u/s 10A - sale proceeds of convertible foreign exchange as received or brought into India after six months from the end of the financial year but within the extended period allowed by the competent authority namely RBI in terms of Master Circular of general nature - Held that - Sale proceeds of convertible foreign exchange have been received or brought into India after six months from the end of the financial year but within the extended period allowed by the competent authority namely RBI in terms of Master Circular of general nature. A perusal of the Master Circular clearly shows that the competent authority has extended the period of obligation cast upon the exporters to receive and bring convertible foreign exchange in India within twelve months from the date of export. Thus, deduction under s.10A of the Act cannot be denied where the extended parameters for realization of export proceeds as set out by the competent authority has been duly met. Therefore, the claim of the assessee towards exemption/deduction under s.10A of the Act requires to be upheld on first principles. However, it will be open to the AO to verify whether the export proceeds have been received within twelve months from the date of export in tune with Master Circular. The issue is therefore resolved in favour of the assessee on principles. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Denial of deduction under section 10A of the Income Tax Act for failure to receive convertible foreign exchange within the stipulated time frame.

Analysis:
The appeal was filed by the assessee against the order of the CIT(A) concerning the denial of deduction amounting to a specific amount claimed under section 10A of the Act. The issue revolved around the assessee's failure to receive convertible foreign exchange within the prescribed time frame as per section 10A(3) of the Act. The AO had restricted the exemption and denied it on profits attributable to foreign exchange brought into India after the specified period. The CIT(A) upheld this decision in the first appeal. The assessee, engaged in software development and IT services, argued that the period for receipt of sale proceeds could be extended as per the Master Circular issued by the competent authority, the Reserve Bank of India. The assessee claimed to have realized the sale proceeds within the extended period of twelve months from the date of export, as allowed by the Master Circular.

The key contention was whether the assessee was eligible for deduction/exemption under section 10A of the Act despite receiving convertible foreign exchange after the initial six-month period but within the extended timeframe permitted by the competent authority, RBI. The Tribunal noted that the Master Circular extended the period for realizing export proceeds to twelve months from the date of export. Consequently, the Tribunal held that the assessee should not be denied the deduction under section 10A if the extended parameters for realizing export proceeds, as specified by the competent authority, were met. The Tribunal ruled in favor of the assessee, upholding the claim for exemption/deduction under section 10A of the Act based on the compliance with the extended timeline set out in the Master Circular.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing that the denial of exemption/deduction under section 10A of the Act was unwarranted when the extended period for realizing export proceeds, as per the Master Circular, had been adhered to. The Tribunal directed the Assessing Officer to verify if the export proceeds were received within twelve months from the date of export in accordance with the Master Circular.