DCIT, JAIPUR vs. VISHAL GEMS INTERNATIONAL, JAIPUR

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ITA 949/JPR/2016Status: DisposedITAT Jaipur09 March 2017AY 2012-136 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that exchange rate fluctuation profit is derived from export sale proceeds and qualifies for deduction under Section 10AA. It also upheld the addition for freight charges as the assessee had earned a profit on it, which cannot be included in export turnover.

What were the facts?

The revenue appealed against the deletion of disallowance of Rs. 52,16,273/- related to exchange rate fluctuation profit claimed under Section 10AA. The assessee filed a cross-objection against the addition of Rs. 1,04,736/- by excluding freight charges from turnover.

What were the issues?

Whether exchange rate fluctuation profit is eligible for deduction under Section 10AA, and whether freight charges should be included in export turnover for Section 10AA calculation.

Which sections of the Income-tax Act were involved?

Section 10AA

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR

Before: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM

For Respondent: Shri R.A. Verma (Addl.CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vivek Chatter
Hearing: 20/02/2017Pronounced: 09/03/2017

Heard together (2 matters)

ITA No. 949/JP/2016
C.O. No. 45/JP/2016

Read from the judgment's own cause title. This page is filed under one of them.

per the export invoices and as per the definition of export turnover, the

consideration received in respect of the exports, for example, total amount

realized for sale invoices shall form part of export turnover. Therefore, the

total turnover is denominator, which sale also includes the effect of foreign

exchange fluctuation. Therefore, such inclusion of foreign exchange

fluctuation in the profits shall qualify for deduction U/s 10AA of the Act.

Such view has been affirmed by the Hon’ble Bombay High Court.

Accordingly, the appeal of the revenue is hereby dismissed.

6.

In the assessee’s C.O., the only issue involved, is against confirming

the addition of Rs. 1,04,736/- by excluding freight charges from the

turnover and not allowing deduction claimed U/s 10AA of the Act.

ITA 949/JP/2016 & CO 45/JP/2016_ 5 DCIT Vs Vishal Gems International

7.

The ld. CIT(A) has upheld the addition by observing as under:-

“5.3 I have carefully considered the facts of the case, findings of the A.O. and submission of appellant. Regarding disallowance of freight charges the contention of the appellant is that freight and insurance all are part of export turnover eligible for deduction under section 10AA. This could not be accepted for the reason that assessee received Rs. 104736/- as against the payment of Rs 68040/- and thus had net gain of Rs 36,696/-. Assessee contended that if it is not a part of export turnover, it cannot be included in total turnover for which he placed reliance on a decision of Hon’ble Mumbai High Court. However Hon’ble High Court in same judgement held that if freight and insurance “does not have element of profit then it cannot be included in total turnover. In this case assessee itself admitted to have earned profit out of freight and insurance. Therefore, this disallowance is upheld. The Assessee is not eligible for deduction u/s 10AA on freight.”

8.

Now the assessee is in C.O. before us. The ld. AR of the assessee

has reiterated the arguments as made before the authorities below and

prayed to allow the C.O. On the other hand, ld Sr. DR has relied on the

order of the authorities below.

9.

We have heard the rival contentions of both the parties, perused the

material available on the record and also gone through the orders of the

authorities below on this issue. The Hon’ble Bombay High Court in the

ITA 949/JP/2016 & CO 45/JP/2016_ 6 DCIT Vs Vishal Gems International case of CIT Vs. Gem Plus Jewellery India Limited (2010) 194 Taxmann 192 (Bom) has held that receipt such as freight and insurance cannot be included in the total turnover. Therefore, the ld. CIT(A) has rightly decide the issue against the assessee. Accordingly, we uphold the order of the ld. CIT(A) on this issue. 10. In the result, the appeal of the revenue as well as the C.O. of the assessee are dismissed. Order pronounced in the open court on 09/03/2017.

Sd/- Sd/- ¼dqy Hkkjr½ ¼Hkkxpan½ (Kul Bharat) (BHAGCHAND) U;kf;d lnL;@Judicial Member ys[kk lnL;@ U;kf;d lnL;@ ys[kk lnL;@Accountant Member U;kf;d lnL;@ U;kf;d lnL;@ ys[kk lnL;@ ys[kk lnL;@ Tk;iqj Tk;iqj@Jaipur Tk;iqj Tk;iqj fnukad@Dated:- 09th March, 2017 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The D.C.I.T., Circle-7, Jaipur. 1. izR;FkhZ@ The Respondent- M/s Vishal Gems International, Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 949/JP/2016 & CO 45/JP/2016) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

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