Commissioner of Income Tax vs Amber Exports (India)

The substantial question of law as framed in the appeal memo is as 1 follows:

(a) The substantial question of law arises in the present appeal is regarding the true scope and correct interpretation of Section 80HHC of the Income Tax Act, 1961, and other provisions and whether on the facts and circumstances of the case and in law the Hon''ble Tribunal is right in rejecting the appeal of the revenue and holding that the receipt by way of exchange rate fluctuation is includible in the total turnover of the Assessee for computing deductions u/s 80HHC ?

The above question has been answered by the Gujarat High Court in the case of CIT v. Amba Impex (2006) 282 ITR 144 (Guj).The Gujarat High Court has observed as under (headnote):

Under Sub-section (2) of Section 80HHC of the Income Tax Act, 1961, sale proceeds of goods or merchandise exported out of India and received in convertible foreign exchange become entitled to the deduction subject to the 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 the 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. The Legislature in its wisdom has taken into consideration the fact that in the 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.

On the aforesaid reasoning the Gujarat High Court accepted the contention that the amount received by way of exchange rate fluctuation cannot be considered to be "any other receipt" as stipulated in Clause (bba) of the Explanation to Section 80HHC(4C). The reasoning is that once the 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 to exports, it would not be open to the revenue to raise such a contention. We respectfully concur with the findings of the Gujarat High Court.

In this view of the matter, the question as framed does not arise and consequently, appeal stands summarily dismissed.