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TMI Blog2016 (12) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for deduction u/s 10A of the Act. See Majestic Exports vs. JCIT [2015 (7) TMI 936 - ITAT CHENNAI ] Amount received from its AE towards the reimbursement of the expenditure - ALP adjustment - Held that:- Having regard to the rival contentions and the material on record, we find that the reimbursement of the expenditure by the AE to the assessee is also on international transaction. The TPO u/s 92CA of the Act, has not made any ALP adjustment to the reimbursement of expenditure which only shows that the genuineness of the transaction has been accepted. When there is no impact on the profit of the assessee by the said transaction, we agree with the contention of the assessee that it does not have any impact on the computation of income of the assessee. Levy of interest u/s 234A - Held that:- As assessee submitted that in the relevant A.Y, the CBDT has extended the time for filing of the returns till 15.11.2011 and the assessee had filed its return of income on 13.11.2011 itself and therefore, the interests u/s 234A of the Act is not chargeable. Since these facts need verification, we deem it fit and proper to remit the issue to the file of the AO for verification of the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore in the case of M/s. Wipro Ltd vs. Dy.CIT in ITA No.972/Bang/2011 dated 15.06.2012. b) Hon'ble Karnataka High Court in the case of CIT vs. M/s. Kshema Technologies Ltd in ITA No.703/2009, dated 8.1.2016. 5. The learned DR, however, supported the orders of the authorities below and submitted that the export consideration has been deposited in the EEFC A/c in foreign exchange and there was no prohibition from withdrawing the said amount for its business purposes. It is submitted that the export comes to an end when the sale consideration is deposited into the EEFC A/c and the forex gain or loss on the date of deposit alone is part of export turnover and thereafter if there is any gain on fluctuation of such foreign exchange on the date of conversion, it cannot be considered as business income but has to be treated as income from other sources. 6. Having regard to the rival contentions and the material on record, we find the export turnover is always brought into India by way of foreign exchange deposited into the EEFC A/c. The assessee has kept the foreign exchange in the EEFC A/c as it did not require the same immediately for its business purposes. By vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , following the aforesaid decision in the case of Smt. Sujata Grover (supra) and the Tribunal decision in the case of Priyanka Gems vs. Asstt. CIT (2005) 94 TTJ (Ahd) 557, held that profit on account of foreign exchange gain is directly referable to the articles and things exported by the assessee and such profits are therefore in the same nature as the sale proceeds and there is no reason while deduction under s. 10A should not be allowed in respect of such exchange gain. It had also observed that there is no difference in the language of ss. 10A and 80HHC in regard to the treatment of foreign exchange gain. In the case of Shah Originals (supra), the Tribunal held that gain on foreign exchange rate fluctuation under EEFC account is to be included in the profits of export business for the purposes of deduction under s. 80HHC. In the present case, the receipt of the sale consideration is in US dollar. It was credited/deposited in EEFC account of the assessee to be retained in US dollar as per guidelines for operating this account. In this account, the receipts may be kept in foreign currency instead of converting it to Indian rupee. The gain accounted for by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for exemption u/s 10A of the I.T.Act. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in excluding ₹ 92,l4,74l/- from the eligible profits for exemption u/s l0A of the I.T.Act on the ground that the said amount was derived out of forward contracts and that such income represents income from other sources . 4. The learned Commissioner of Income-Tax (Appeals) erred in holding that an amount of ₹ 3l,83,463/- is not eligible for exemption u/s l0A of the I.T.Act without considering the explanation that the said amount represents reimbursement of expenses. 5. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that there was no delay in filing the return of income and, therefore, the interest u/s 234A is not chargeable. 6. The learned CIT (A) ought to have seen that interest u/s 234B and u/s 234C is not chargeable and ought to have directed the AO to delete interest charges u/s 234B and 234C of the I.T. Act . 9. As regards Ground No.2, for the detailed reasons given by us in this order of even dated in the assessee s own case for the A.Y 2009-10 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the said Explanation dealing with the transaction of share and suffer loss, such loss should be treated to be speculative transaction within the meaning of sec.73 of the Act, notwithstanding the fact that the definition of speculative transaction mentioned in sec.43(5) of the Act, the transaction is not of that nature as there has been actual delivery of the scrips of share. As per the definition of sec.43(5), trading of shares which is done by taking delivery does not come under the purview of the said section. Similarly, as per clause (d) of sec.43(5), derivative transaction in shares is also not speculation transaction as defined in the said section. Therefore, both profit/loss from all the share delivery transactions and derivative transactions are having the same meaning, so far as sec.43(5) of the Act is concerned. Again, in view of the fact that both delivery transactions and derivative transactions are nonspeculative as far as sec.43(5) is concerned, it follows that both will have the same treatment as far as application of Explanation to sec.73 is concerned. Therefore, aggregation of the share trading profit and loss from derivative transactions should be done befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the assessee, as already indicated, has been dealing in shares where delivery was in fact taken and also in shares where delivery was not ultimately taken. In other words, the assessee has been dealing in actual selling and buying of shares as also dealing in shares only for the purpose of settling the transaction otherwise than by actual delivery. The question arise whether the losses arising out of the dealings and transaction in which the assessee did not ultimately take delivery of the shares or give delivery of the shares could be set off against the income arising out of the dealings and transactions in actual buying and selling of shares. An answer to this question is to be found in the explanation appended to Section 73 which reads as follows: Explanation: where any part of the business of a company other than a company whose gross total income consists mainly of income which is chargeable under the heads interest on securities , or a company the principal business of which is the bu9siness of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds Ground No.4, the facts are that the assessee company received an amount of ₹ 31,83,463 from its AE towards the reimbursement of the expenditure. The AO observed that the assessee company has not included this amount in the P L A/c on the ground that the same is only reimbursement of actual expenditure incurred and therefore, has no bearing on the computation of profit/income of the company. The AO was not convinced with the said contention and held that the expenses were incurred for its AE and reimbursed by the AE and therefore, they have to be passed through the P L A/c and for the correct picture of the transaction, they have to be presented in the financial statements. Therefore, he disallowed the claim of the deduction u/s 10A of the Act on such reimbursed expenditure. The CIT (A) confirmed the disallowance and the assessee is in appeal before us. 16. It is the case of the assessee that since it is only a reimbursement of the expenditure, the same was not carried into the P L a/c as it would have no effect on the profit/income earned by the assessee. He also submitted that none of the authorities have disputed the genuineness of the transaction but have made the di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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