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TMI Blog2003 (7) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of CAIT v. Raja Rajeswari Narikelly Estate [ 1992 (2) TMI 33 - KERALA HIGH COURT] , before the lower authorities. In the said case, proceeds of the coffee estate had been sold to the Coffee Board as was the practice. The price of such coffee was to be determined by the Board in terms of Coffee Point. The assessee, while filing the return of income had estimated the sale proceeds of Coffee at a particular value. Subsequently, long after the accounting period, when the assessment was being made it became known that the Coffee Board had determined the proceeds of the Coffee sold by the assessee company at a much higher figure. The Court directed that the figure determined subsequently by the Board should be taken as the sale proceeds of the year and the fact that the award made by the Coffee Board was now known by the close of the accounting period was of no relevance. While deciding the issue, the Hon ble Kerala High Court has taken into consideration the decision of the Hon ble Supreme Court in the case of A. Gajapathy Naidu [ 1964 (4) TMI 6 - SUPREME COURT] on which the ld. CIT(A) has placed heavy reliance and had distinguished on the facts. In view of the above and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law. 2.2 Your appellant prays that deduction under section 80HHC be allowed as claimed by the appellant. For assessment year 1992-93. - 1. Gains on exchange rate fluctuation of Rs. 84,06,069 1.1 The ld. CIT(A) erred in confirming the addition of a sum of Rs. 84,06,069 in the income of the year under consideration on the facts and circumstances of the case and in law. 1.2 The ld. CIT(A) failed to appreciate that the appellant had received the sale proceeds in respect of export made during the assessment year 1991-92 and had been accounted as such in the accounts for the year ended 31‑3-1991. Merely because, the proceeds were realised in the year under consideration, the same could not be treated as income of the year under consideration. 1.3 The ld. CIT(A) ought to have appreciated that the sale value of the goods exported was to be realised in foreign currency and the actual receipt thereof was converted into Indian currency on realization. Thus, right to receive the sale proceeds arose directly from the sale and the devaluation which took place in between the period of sale and realization of the sale proceeds would not have any bearing on the time of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar in which the fluctuation takes place and the gain is actually received amounts to cash system of accounting. ( ii ) The AR pleaded that the appellant had made exports and the proceeds were received in foreign currency. In such a situation if the amount receivable which is only an estimated figure on the date of sale, is actually received in the subsequent year, it is permitted to record in the books of account of the year in which the sale took place the actual amount received from the foreign customers as sale proceeds. ( iii ) The AR also drew my attention to AS-4 to point out that while accounting for contingencies and events occurring after the balance sheet date it is possible to take into account such profit, gain etc. in the accounts, where the realization of the gain is virtually certain. The AR pleaded that the appellant had an option to follow a particular method of accounting and in view of the above change made in the method of accounting by the appellant to mercantile system was perfectly bona fide . ( iv ) The AR has also referred to the decision of Supreme Court in the case of Arvind Mills Ltd. as done before the Assessing Officer and has referred to the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined the proceeds of the Coffee sold by the assessee company at a much higher figure. The Court directed that the figure determined subsequently by the Board should be taken as the sale proceeds of the year and the fact the award made by the Coffee Board was now known by the close of the accounting period was of no relevance. The Court in this regard had explained the decision of Supreme Court in the case of A. Gajapathy Naidu and had distinguished on the facts. ( viii ) The AR also referred to another decision of Allahabad High Court in the case of CIT v. U.B.S. Publishers Distributors 147 ITR 114. In the said case the assessee company had imported certain books from abroad and the payment for such import was to be made in foreign currency. The imports were made during the previous year ending on 31-5-1966 and subsequently thereafter on 6-6-1966 there was devaluation of Indian currency. The assessee in the final account for previous year 1965-66 had the additional amount representing the additional payments to be made to the foreign suppliers in respect of the books imported till 31-5-1966 on account of devaluation of Indian currency on 6-6-1966. The Court held in the said cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm export turnover means the sale proceeds actually received by the assessee in convertible foreign exchange within six months of the end of the previous year or within such further time as may be allowed by the competent authority in this behalf. The ld. counsel also referred to Assessing Officer s arguments based on the provisions of section 4, read with sections 5 and 28 of the Income-tax Act and submitted that the statute itself makes exception to this rule in certain cases. In this regard, he referred to the provisions of section 43B of Income-tax Act. He also referred to the decision of Hon ble Bombay High Court in the case of CIT v. Shirke Construction Equipments Ltd. [2000] 246 ITR 429 and submitted that section 80HHC is a complete code by itself. 6. The ld. counsel further drew our attention to the provisions of section 155(13) of the Income-tax Act and submitted that as per the provisions of section 155(13), if deduction under section 80HHC has not been allowed on the ground that such income has not been received in convertible foreign exchange and subsequently such income received in India, the Assessing Officer shall amend the order of assessment so as to allow deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before the Assessing Officer and before the ld. CIT(A), the assessee had correctly distinguished the decision of the Hon ble Supreme Court in the case of A. Gajapathy Naidu ( supra ). In the case of A. Gajapathy Naidu ( supra ), the assessee had no legal right to receive the sum in the issue and the said amount was determined as payable by the Government only in the subsequent year by way of compensation for the loss sustained by the assessee in execution of the contract. In the said case, the relevant sum was not payable in terms of the contract. However, in the case of the appellant, the right to receive the sale proceeds had already accrued on the date of sale itself. The receipt of money on account of exchange rate fluctuation is only consequential. It is not the case that the right to receive the amount of Rs. 84.06 lakh accrued only after the end of financial year. What the assessee received is the sale consideration in terms of foreign exchange. Though the sum was received after the end of the financial year, the assessee, while finalizing the accounts has correctly included the amount and has claimed deduction under section 80HHC. The amount receivable was finally quantifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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