Gujarat High Court
Commissioner Of Income Tax vs Amba Impex on 20 December, 2005
JUDGMENT D.A. Mehta, J.
1. The appellant-Revenue has proposed the following three questions :
(A) Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in holding that the exchange rate difference pertaining to exports made in earlier years was 'profit of business' within the meaning of Section 80HHC of the Act ?
(B) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the issue was squarely covered by the decision of the jurisdictional High Court in the case of Hindustan Trading Corporation v. CIT when the issue before the High Court in the said case was totally different ?
(C) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that 'any other receipt of a similar nature' as mentioned in Expln. (baa) to Section 80HHC(4B) would not include receipt on account of exchange rate difference ?
2. After hearing Mr. M.R. Bhatt, the learned senior standing counsel for the appellant on 15th Nov., 2005, notice had been issued to the respondent and accordingly Mr. T.P. Hemani appears on behalf of the respondent and has been heard. Considering the fact that the controversy between the parties lies in a narrow compass, and in light of the view that the Court is inclined to take, the appeal is taken up for final hearing and disposal today after order of admission.
3. Admit. The following substantial question of law arises for determination :
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that exchange rate difference pertaining to exports made in earlier years would be "profits of business" within the meaning of Section 80HHC of the IT Act, 1961 ?
4. The assessment year is 2001-02 and relevant accounting period is financial year 2000-01. While framing the assessment order under Section 143(3) of the IT Act, 1961 (the Act), the AO came to the conclusion that the exchange rate difference on export realisation for prior period, i.e., upto 31st March, 2000, being Rs. 13,18,068, was not an allowable deduction. The assessee carried the matter in appeal but did not succeed. Hence, the assessee preferred second appeal before the Tribunal. The Tribunal has upheld the claim made by the assessee on the basis of decision of this High Court in the case of Hindustan Trading Corporation v. CIT by treating the receipt in question as being on revenue account. Tribunal has also placed reliance on various other decisions of different Benches of Tribunal.
5. Assailing the impugned order of Tribunal, Mr. M.R. Bhatt, the learned senior standing counsel for the appellant placed reliance on Expln. (baa) to Section 80HHC of the Act to submit that profits of the business have to be computed and understood as provided in the said clause of the Explanation and no other receipts can be treated as profits of the business. It was further submitted that even if the said receipt, received on account of exchange rate difference, has been shown under the head "Profits and gains of business or profession", the same has to be reduced as required by Sub-clause (1) of Clause (baa) of the Explanation as it amounts to 'any other receipts'. He, therefore, urged that Tribunal had misdirected itself in holding that as the receipt was on revenue account, the same had to be treated as part of the business profits and the Expln. (baa) did not apply to such receipt.
6. As against that Mr. Hemani appearing on behalf of the respondent submitted that the case of the Revenue was restricted to applicability of Clause (baa) of the Explanation and in such circumstances the only dispute was as to whether the amount in question could be treated as other receipts of the nature envisaged by Clause (baa) of the Explanation. According to him all other requirements of the provision stood satisfied and one had to proceed on the presumption that the amount received by way of exchange rate difference was relatable to the exports made by the assessee.
7. The entire case of 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 realisation for exports made upto 31st March, 2000, There is nothing to indicate, and none of the authorities have applied their mind, as to whether the sum of Rs. 13,18,068 is relatable to exports made during only one financial year or more than one financial year preceding 31st March, 2000. This would have a material bearing, taking into consideration the provisions of Sub-section (2) of Section 80HHC of the Act as was applicable during the year under consideration.
8. Under Sub-section (2) of Section 80HHC of the Act, sale proceeds of goods or merchandise exported out of India and received in convertible foreign exchange become entitled to the deduction subject to fulfilment of other requisite conditions. Clause (a) of Sub-section (2) of Section 80HHC of the Act provides that such sale proceeds have to be received in convertible foreign exchange within a period of six months from the end of previous year or, within such further period as the competent authority may allow in this behalf. Thus, a plain reading of the provision makes it clear that once the competent authority has extended the time, in a case where it is necessary, or, where the sale proceeds have been received within a period of six months from the end of the previous year, such sale proceeds are directly relatable to the exports made and no further inquiry is necessary. Therefore, the entire controversy as to whether such receipt amounts to "any other receipt" stipulated in Expln. (baa)(1) need not be taken up for consideration. Once legislature 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 Revenue to raise such a controversy. The legislature in its wisdom has taken into consideration the fact that in case of exports made, sale proceeds are not necessarily realisable 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 year subsequent to the year of export by way of exchange rate difference, it does not necessarily always follow that the same is not relatable to the exports made.
9. As can be seen from the impugned order of Tribunal as well as the orders of CIT(A) and the AO, none of the authorities have approached the issue in light of provisions of Sub-section (2) of Section 80HHC of the Act. No evidence is available on record to establish fulfilment or otherwise, of the conditions stipulated by Sub-section (2) of Section 80HHC of the Act. In these circumstances, it would not be fair and just to either side to resolve the controversy in absence of the relevant facts and evidence being available on record.
10. In light of what is stated hereinbefore, the question is left unanswered and the appeal is restored to the file of the Tribunal only in relation to the issue relatable to deduction under Section 80HHC of the Act without expressing any final opinion on merits of the matter. The Tribunal shall, after hearing both the sides, decide the appeal on this count, after permitting additional evidence on record, if necessary. It would also be open to the Tribunal to restore the issue to the file of the assessing authority to ascertain proper facts in the circumstances.
11. The appeal is accordingly disposed of. There shall be no order as to costs.