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TMI Blog2018 (7) TMI 745X X X X Extracts X X X X X X X X Extracts X X X X ..... sale or services but it is on account of two different value of foreign currency for two different time frames related to one sale, hence such gain /loss is part and parcel of sale and, profit/income of the eligible unit entitled for deduction u/s.10AA of the Act. AO is directed not to reduce foreign exchange rate fluctuation gain from profits of business while computing deduction u/s.10AA - ITA No.81/Ahd/2016 - - - Dated:- 9-7-2018 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER For The Revenue : Shri Prasoon Kabra, Sr.DR For The Assessee : Shri Jigar M. Patel ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-8, Ahmedabad dated 9.11.2015 passed for the assessment year 2011-12. 2. In the grounds of appeal, Revenue has mainly raised two grounds, which read as under: 1. Whether the CIT(A) is erred in law and on facts in allowing depreciation @60% on computer software purchased separately (SAP software) against 25% applicable to intangible assets ignoring the finding of the AO. 2. Whether the CIT(A) is erred in law and on facts in allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 5. Aggrieved Revenue is in appeal before the Tribunal. 6. The ld.DR supported the order of the ld.AO. The ld.counsel for the assessee at the outset submitted that similar issue arose in the assessment year 2010-11, wherein the order of the ld.CIT(A) allowing the claim of the assessee of depreciation at 60% was challenged by the Revenue. The Tribunal has heard arguments in ITA No.2788/Ahd/2014 on 18.6.2018. Both the representatives agreed that same view be adopted in this year as well. The Tribunal has pronounced the order on 2.7.2018 and from the website copy is being taken and placed on record. 7. We have considered rival contentions and gone through the record. We are of the view that treatment of the software by the AO as an intangible asset distinct from the group provided in list of tangible assets for rate of depreciation cannot be justified. As per the list of tangible assets in the table of rate of depreciation software has been grouped as eligible for claim of depreciation at 60%. Income Tax Act has not categorized or distinguished software into system software and application software for claiming depreciation in the table of assets for application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under section 10AA of the Act. Assessee submitted that as per section 10AA(7) the profits of the business of undertaking includes the profits from export of articles as well as all other incidental income derived from the business of the undertaking; and that there was a direct nexus between exchange fluctuation gain and income of the business of the undertaking. It was submitted that forex gain was derived from the consideration realized from export and relatable to profits of the business of the undertaking. The ld.AO, however, found the submissions of the assessee unacceptable, and held that gain or profit arising out of exchange fluctuations nothing to do with sale/export of goods and not part of profit of business of an undertaking, and the same was to be treated as separate income for claiming deduction under section 10AA of the Act. The AO accordingly disallowed the claim of the assessee and recomputed eligible deduction. Issue was agitated before the ld.First Appellate Authority by the assessee. The ld.CIT(A) considered the issue elaborately and after relying upon various case laws, allowed the claim of the assessee. 10. Dissatisfied with the order of the ld.CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted by the legislature to be made to such profits of the business is to apportion the same in the proportion of export turnover of the eligible services to the total turnover of the business carried on by the assessee. It is significant to note here that the specific provisions like explanation (baa) of Section 80HHC of the Act which provide for exclusion of 90% of interest income from the profits of business to arrive at the profits of the business has not been provided by the legislature in section I0AA of the Act. I also agree with the finding of the CIT(A) in the order of A.Y.2010-11 that, - the appellant is following a consistent method of accounting such foreign exchange fluctuation as per accounting standard AS-// and tax auditor has not made any adverse remarks. The appellant submitted (hat it fulfilled all the eligible condition to claim deduction u/s.10AA of the Act for its eligible unit in Special Economic Zone(SEZ). The appellant though reduced such gain from the export turn over but the same was included as business Income / profit of eligible undertaking thereby correctly followed the provisions. As per provisions it is profit gains of eligible unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n currency for two different time frames related to one sale, hence such gain /loss is part and parcel of sale and, profit/income of the eligible unit entitled for deduction u/s.10AAoftheAct. In consensus with my predecessor CIT(A), in this year also the AO is directed not to reduce amount of ₹ 2,20,47,238/- foreign exchange rate fluctuation gain from profits of business while computing deduction u/s.10AA of the Act. Accordingly, this ground of appeal is allowed and the AO is directed to delete the disallowance of ₹ 1,24,18,439/- u/s.10AA and to allow the deduction as claimed by the appellant. 13. Similarly, the Tribunal rejected the appeal of the Revenue for the asstt.year 2010-11 on similar issue and allowed the claim of the assessee. The relevant findings of the Tribunal read as under: 11. We have carefully considered the rival submissions on the issue and perused the orders of the authorities below. We have no hesitation in endorsing the view of the CIT(A) in this regard. The issue is substantially covered in favour of the assessee by the decision of the Hon'ble Gujarat High Court in the case of Priyanka Gems (supra) and CIT vs. Gem Plu ..... 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