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TMI Blog2022 (7) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected and mode of transport is also said to be through Local Truck and the Vehicle No. is also reflected in the invoice for removing of 4890 KG of loose Heavy MS Scrape. AO simply rejected the invoice on the ground that the scrap is not generated from the EOU unit. The Assessing Officer has not made any attempt to verify the buyer of the scrap namely M/s. Hanuman Traders, whose full address is being given in the invoice with TIN Number and proper VAT tax and Additional VAT taxes were collected on the above sales. Thus, the Assessing Officer without making proper enquiry simply denied the claim of scrap sales eligible for deduction u/s. 10B of the Act, which is in our considered view is not proper in law and unjustified. Therefore, the A.O. is directed to grant the claim of deduction under 10B of the Act on the sale of scraps. - ITA No. 1615/Ahd/2019 - - - Dated:- 22-7-2022 - Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Appellant : Shri Sunil Talati, A.R. For the Respondent : Shri V.K. Singh, Sr.D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- The present appeal has been filed by the Assessee ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O is directed to verify whether the scrap is generated out of die manufacturing activities of the assessee and if found so, then the income generated from the sale of scraps should be treated as eligible for the claim of exemption u/s. 10B of the Act. The assessee is directed to furnish necessary documentary evidences in support of its claim. For this limited purpose of verification, ground no. 3 is treated as allowed for statistical purpose. 14. Ground nos. 4 5 relates to denial of the claim of exemption u/s. 10B deduction u/s. 80IA to the income on account of foreign exchange rate fluctuation. 15. Once again the Ld. the Id. counsel stated that a similar issue was considered by the Tribunal in ITA Nos. 775 2633/Ahd/2013 for A.Y. 2008-09 and has decided this issue in favour of the assessee and against the revenue. 16. I have carefully considered the orders of the authorities below qua the issue. It is true that the assessee has borrowed money in foreign currency. It is equally true that the assessee has made gains during the year under consideration. However, it is not coming out from the record whether foreign currency loan has been taken in revenue account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owances made by the Assessing Officer. 5.1. Aggrieved against the same, the assessee is before us raising the following Grounds of Appeal: 1. The Ld. CIT(A) has erred in confirming the order of A.O. in disallowing the exemption u/s. 10B of the Act amounting to Rs. 36,16,223/- being foreign exchange fluctuation by stating that foreign currency loan was taken for capital purpose, exemption u/s. 10B of the Act is not entitled. It is submitted that, Ld. CIT(A) has erred in interpreting the facts of the case as the said expenditure is revenue in nature. The same be held now. 2. Without prejudice to above, it is submitted that, notional foreign exchange fluctuation Income amounting to Rs. 36,16,223/- was intrinsic part of the Export Income and allowable u/s. 10B of the Act and therefore the disallowance so made by the learned Assessing Officer and confirmed by Ld. CIT(A) by treating the same of Capital Nature be deleted now. 3. Without prejudice to above, alternatively, if Ld. CIT(A) is confirming the Income of capital nature, than simultaneously he has erred in excluding / not allowing such Capital Receipt on account of foreign exchange fluctuation from the chargeabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the rate of foreign exchange cannot be divested from the export business of the assessee. Once export is made, due to a variety of reasons, the remission of the export sale consideration may not be made immediately. Under accounting principles, therefore, the assessee, on the basis of accrual, would record sale consideration at the prevailing exchange rate on the quoted price for the exported goods in the foreign currency rates. If during the year of the export, the remission is made, the difference in the rate recorded in the accounts of the assessee and that eventually received by way of remission either positive or negative, would be duly adjusted. May be the accounting standards require that the same may be recorded in separate, foreign exchange fluctuation account. Nevertheless, any deviation either positive or negative must have direct relation to the export actually made. Payment would be due to the assessee due to the factum of export. Current price of the goods so exported would also be predecided in the foreign exchange currency. The exact remittance in Indian rupees would depend on the precise exchange rate at the time when the amount is remitted. The court was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haracter of income from export business. The Tribunal, therefore, did not commit any error in deleting the addition made on account of fluctuation in foreign exchange rates from the deduction under section 10B of the Act. 9. In the light of the above discussion, it is not possible to state that there is any legal infirmity in the impugned order passed by the Tribunal so as to give rise to any question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is summarily dismissed. 6.1. The Ld. Counsel further submitted that the Hon ble High Court of Madras in the case of CIT vs. M/s. Pentasoft Technologies Ltd. reported in [2012] 342 ITR 578 held as follows: 4. In order to allow a claim under Section 10A of the Act, what all is to be seen is whether such benefit earned by the assessee was derived by virtue of export made by the assessee. The exchange value based on upward or downward of the Rupee value is not in the hands of the assessee. In other words, the assessee does not determine the exchange value of the Indian Rupee. It has to be remembered but for the fact that the assessee is an export house, there was no que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet is an item of expenditure allowable u/s. 37(1) of the Act and the assessee is eligible for deduction under 10B as well as u/s. 80IA of the Act respectively. 8.1. Regarding the scrap sales and claim of deduction u/s. 10B of the Act, as has been rightly argued by the ld. A.R., the assessee being engaged in the business of dies and chemicals, normal wear and tear used to happen on the machineries used for its manufacturing activities, which requires regular replacement. As it can been seen from the invoice, the purchaser s TIN Number. is reflected and mode of transport is also said to be through Local Truck and the Vehicle No. is also reflected in the invoice for removing of 4890 KG of loose Heavy MS Scrape. The Assessing Officer simply rejected the invoice on the ground that the scrap is not generated from the EOU unit. The Assessing Officer has not made any attempt to verify the buyer of the scrap namely M/s. Hanuman Traders, whose full address is being given in the invoice with TIN Number and proper VAT tax and Additional VAT taxes were collected on the above sales. Thus, the Assessing Officer without making proper enquiry simply denied the claim of scrap sales eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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