9911796707
TMI Blog2017 (12) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India for capitalization of outstanding export sale proceeds. In view of our detailed discussion above, are of the view that assessee is not eligible to claim deduction u/s. 10A on the export sales of ₹ 74,60,891/- as they have not been received in convertible foreign exchange as per the provisions of section 10A(3). Therefore, we set aside the order of CIT(A) and confirm the disallowance made by the Assessing Officer. - IT Appeal No. 78/Lkw/2016 And C.O. NO. 3/lkw./2016 - - - Dated:- 9-6-2017 - MR. S. K. YADAV, JUDICIAL MEMBER AND MR. MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : Harish Gidwani, D.R. For The Respondent : . S.C. Agarwal, Adv. ORDER Manish Borad, Accountant Member This appeal of the Revenue and Cross Objection of the assessee for assessment year 2011-12 are directed against the order of CIT (A)-I, Lucknow dated 30/11/2015 arising out of order u/s. 143(3) of the IT. Act, 1961 (hereinafter referred to Act ) framed on 11/03/2014 by Dy.CIT, Range-2, Lucknow. 2. Briefly stated, the facts as culled out from the record are that the assessee is a limited company engaged in software development and consultancy. E-retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate account maintained for the purpose by the assessee with any bank outside India and also prior approval of the Reserve Bank of India was not obtained which could satisfy the conditions as laid down u/s. 10A(3) of the Act for claim of exemption u/s. 10A of the Act. 2. Appellant craves leave to add or amend the ground of appeal, as stated above as and when need of doing so arises with the prior permission of the Hon ble Bench. 6. Learned Departmental Representative supported the findings of Assessing Officer and submitted that the assessee has not brought on the sale proceeds of ₹ 74,60,891/- in convertible foreign exchange and this fact has been confirmed in the auditor s report in Form 66F. The plea of the assessee before the lower authorities that the due amount from Workflex Solutions LLC has been converted into equity shares and has been approved as capitalization of the amount receivable by the Reserve Bank of India cannot help the assessee because the provision of section 10A(3) does not specify any such possibility. 7. On the other hand Learned counsel for the assessee submitted that there is no negative remark by the auditors whereas the Ld. A.O. has ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication form - Reserve Bank of India ODI approval letter - Share certificate issued by Workflex Solutions LLC 7.1 As per grounds of appeal by the Revenue the Ld. CIT (A) erred in holding that conditions specified under section 10A(3) of Income-tax Act, 1961 read with explanation 2 in relation to sale proceeds ₹ 74,60,891/- in convertible foreign exchange are not fulfilled. 7.2 The assessee company deals in software development and related services. Against amount receivable as export turnover a sum of ₹ 67,93,662/- comprising of the amount of 74,60,891/- as reduced by a sum of ₹ 6,67,229/- which was written off as bad debt was capitalized in the books before 30.09.2011 i.e. within a period of 6 months of the amount of export. This fact is evidenced with reference to books maintained as well as the Joint Venture Agreement with Workflex Solutions LLC USA (Foreign Entity). As the share certificate was issued by Workflex Solutions LLC on 31.12.2011, the auditor made the remark treating the date of share certificate as the date of capitalization of the amount receivable against export by allotment of equity shares as per certificate by the Foreign Entity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in force for regulating payments and dealing in Foreign Exchange. As per Explanation - 2 clause (ii) under the head for purposes of this section convertible Foreign Exchange means Foreign Exchange which is for the time being treated by Reserve bank of India as convertible Foreign Exchange for the purposes of the Foreign Exchange Management Act, 1999 and any Rules made thereunder for the time being in force. Learned counsel for the assessee submitted that a reading of the above explanation makes it clear that the expression competent authority means the Reserve Bank of India regulating payments and dealing in Foreign Exchange. As per the statement of objects of FEMA effective from 01.06.2000 the object is to consolidate and amend the law relating to Foreign Exchange with the objects of facilitating external trade and payments for promoting the orderly development and maintenance of Foreign Exchange market in India. It may also be noted that Reserve Bank of India is the overall controlling authority in respect of FEMA. FEMA envisage that Reserve Bank of India will have a key role in management of Foreign Exchange. It has also been held by the Higher Courts that the Reserve Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods, submit to the Reserve Bank a custom certified copy of the invoice through the branch of an authorised dealer designated by it (3) An Indian Party capitalising exports under Regulation 11 shall, within six months from the date of export, or any further time as allowed by Reserve Bank, submit to Reserve Bank copies of the share certificate/s or any document issued by the Joint Venture or Wholly Owned Subsidiary outside India to the satisfaction of Reserve Bank evidencing the investment from the Indian Party together with the duplicate of GR/SDF/SOFTEX form through the branch of an authorised dealer designated by it. There is no dispute that computer software was exported by assessee company which is a 100% EOU Unit and the export proceeds have been capitalised as per Form ODI dated 24.07.2012 and the same was submitted to RBI by ING Vyasa Bank in connection with acquisition of the JV under automatic route for oversees direct investment in terms of Notification issued by RBI from time to time. Under the automatic route an Indian Party does not require any prior approval from RBI for making direct investment in a JV abroad. The Indian Party should approach the AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks as on 31/03/2011. A plea has been taken that the investment in the equity shares of a foreign company/LLC which if have been done as per the guidelines provided by Reserve Bank of India then the amount of such sum be capitalized as overseas direct investment is to be considered as to have fulfilled the condition of section 10A(3) of the Act relating to receipt of sale consideration in convertible foreign exchange. Learned counsel for the assessee has also referred to the ledger copy of Workflex Solutions LLC, interest subscription agreement, letter of authorized dealer i.e. ING Bank for receiving the application for overseas direct investment, ODI application form, share certificate issued by Workflex Solutions LLC and the letter of Reserve Bank of India issuing Unique Identification Number (UIN) dated 31/08/2012 (which the assessee is referring as Reserve Bank of India ODI approval letter). Before proceeding ahead, we will first like to go though the relevant provisions of section 10A(3) and proviso thereto which is reproduced below: This section applied to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. ING Bank. The normal procedure is that the customer of the bank approaches the bank with overseas direct investment application filling in various details and this application is forwarded to the Reserve Bank of India as an intimation. On receiving such application, Reserve Bank of India issues UIN. The procedure thereafter is that the customer is to provide all necessary details of the foreign company/LLC as well as the certificate from the Chartered Accountant in India about the transaction of investment. All these details and other requirements as required to be fulfilled for the overseas direct investment are to be provided to the banker and these are further forwarded to the Reserve Bank of India. After necessary verification of records, an approval letter is granted certifying the investment in equity shares outside India. 8.2 Learned counsel for the assessee has repeatedly argued that the overseas direct investment in the form of equity shares was from the Reserve Bank of India and it has to be deemed as proper compliance of section 10A(3) of the Act. Learned counsel for the assessee has also submitted that this action of investment in equity shares is to be treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia makes the following Regulations in respect of Manner of Receipt and Payment, namely 1. Short title and commencement : (i) These Regulations may be called the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016. (ii) They shall come into effect from the date of their publication in the Official Gazette. 2. Definitions: In these Regulations, unless the context requires otherwise, - (i) Act means the Foreign Exchange Management Act, 1999 (42 of 1999); (ii) (ii) Authorised Dealer means a person authorized as an authorized dealer under sub-section (1) of Section 10 of the Act (iii) (iii) Authorised Bank means a bank, other than an authorized dealer, authorized by the Reserve Bank to accept deposits from persons resident outside India; (iv) (iv) FCNR/NRE account means an FCNR or NRE account opened and maintained in accordance with the Foreign Exchange Management (Deposits) Regulations, 2016; The words and expressions used but not defined in these Regulations shall have the same meaning respectively assigned to them in the Act. 3. Manner of Receipt in Foreign Exchange: - (1) Every receipt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the directions issued by the Reserve Bank of India to authorized dealers from time to time. (3) Authorised dealers have been permitted to allow receipts for export of goods/software to be received from a Third party (a party other than the buyer) as per the guidelines issued by the Reserve Bank. 4. Manner of Receipts in certain cases: - (1) Notwithstanding anything contained in Regulation 3, receipt for export may also be made by the exporter as under, namely: (i) in the form of a bank draft, cheque, pay order, foreign currency notes/travelers cheque from a buyer during his visit to India, provided the foreign currency so received is surrendered within the specified period to the authorized dealer of which the exporter is a customer; (ii) by debit to FCNR/NRE account maintained by the buyer with an Authorised Dealer or an Authorised Bank in India; (iii) in rupees from the credit card servicing bank in India against the charge slip signed by the buyer where such payment is made by the buyer through a credit card; (iv) from a rupee account held in the name of an Exchange House with an authorized dealer if the amount does not exceed fifteen lakh r ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
