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TMI Blog2016 (7) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... not. In other words, the exchange rate fluctuation gain does not have any first degree nexus with the export sales of the assessee. In the absence of the first degree nexus the ratio laid down by the Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT ] squarely apply. Since the ld. CIT(A) has decided the issue in favour of the assessee, heavily relying upon the decision of Amba Impex (supra) and since we have substantively distinguished the facts of the case in hand with the facts of the case before the Hon’ble High Court (supra). We set aside the findings of the ld. CIT(A) and restore that of the A.O. - Decided in favour of revenue Allowability of depreciation on plant - Held that:- CIT(A) was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... packaging. In the return of income for the year under consideration, the assessee has claimed deduction u/s. 80IB of the Act. 4. While scrutinizing the return of income, the A.O. found that the assessee has claimed deduction u/s. 80IB of the Act in respect of exchange rate difference amounting to ₹ 31,68,717/-. When sought explanation, the assessee heavily relied upon the decision of the Hon ble High Court of Gujarat in the case of Amba Impex 282 ITR 144. However, the claim of the assessee did not find any favour with the A.O. who was of the opinion that the principles laid down by the Hon ble Supreme Court in the case of Sterling Food 237 ITR 579 squarely apply on the facts of the case and accordingly excluded the exchange gain d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of export sales made by the assessee and on sales realization there was a gain because of exchange rate fluctuation which was claimed as eligible for deduction u/s. 80HHC of the Act. As is evident from the aforementioned substantive question of law, the issue was to decide whether exchange rate difference pertaining to exports made in earlier years would be profits of business within the meaning of Section 80HHC of the Act. The relevant findings of the Hon ble High Court read as under:- The entire case of the Revenue is built on the fact that the amount has been received in a year subsequent to the year of exports. As can be seen from the assessment order it talks of export realization for exports made up to March 31, 2000. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has provided for treating a receipt within a period of six months after the end of the previous year, or within further extended period, as sale proceeds relatable exports, it would not be open to the Revenue to raise such a controversy. The Legislature in its wisdom has taken into consideration the fact that in the case of exports made, sale proceeds are not necessarily realizable immediately within the accounting period in which exports have been made. As a corollary, by the time such sale proceeds are received within the prescribed time, by virtue of exchange rate difference, there might be a situation where a larger amount is received than the amount as reflected in the shipping bill. Hence, merely because an amount is received in a yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarity of the facts in as much as in the case of the assessee, the gain has arisen out of the hedging made by the assessee. The assessee has entered into a forward contract and has been benefitted by the fluctuations in foreign exchange irrespective of the fact whether trade agreement exists or not. In other words, the exchange rate fluctuation gain does not have any first degree nexus with the export sales of the assessee. In the absence of the first degree nexus the ratio laid down by the Hon ble Supreme Court in the case of Liberty India 317 ITR 218 squarely apply. 11. Since the ld. CIT(A) has decided the issue in favour of the assessee, heavily relying upon the decision of the Hon ble High Court of Gujarat in the case of Amba Impex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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