DCIT, CHENNAI vs. SHASUN PHARMACEUTICALS LTD., CHENNAI

This appeal of the Revenue was disposed of by this Tribunal earlier by an order dated 06.08.2015. However, the assessee filed a Miscellaneous Petition in M.P. No.209/Mds/2015 on the ground that the issue raised by the Revenue as ground No.3 was not disposed of.

Smt. E. Sulochana, the Ld. Departmental Representative, submitted that ground No.3 relates to computation of deduction under Section 80HHC of the Income-tax Act, 1961 (in short "the Act") after reducing the foreign exchange gain of `89,46,150/-.

The Ld. Departmental Representative, submitted that the Assessing Officer reduced the foreign exchange gain of `89,46,150/- while computing deduction under Section 80HHC of the Act. According to the Ld. D.R., in this case, the foreign exchange gain does not relate to export of goods. According to the Ld. D.R., for the purpose of deduction under Section 80HHC of the Act, only income derived from export of goods or merchandise has to be taken into consideration. The foreign exchange gain does not arise out of export of goods, therefore, according to the Ld. D.R., the same cannot be considered for the purpose of deduction under Section 80HHC of the Act.

On the contrary, Sh. A.S. Sriraman, the Ld. counsel for the assessee, submitted that the Assessing Officer disallowed the claim of the assessee only on the ground that foreign exchange gain was not derived from export of goods. According to the Ld. counsel, the assessee is engaged in the business of export activity. Therefore, foreign exchange fluctuation was directly related to the export of the assessee. The CIT(Appeals) by placing reliance on the judgement of Madras High Court in CIT v. Pentasoft Technology Ltd. [Tax Case (Appeal) No.599 of 2010 dated 13.07.2010], allowed the claim of the assessee. Since the CIT(Appeals) has followed the decision of the Madras High Court, according to the Ld. counsel, there cannot be any grievance for the Revenue.

We have considered the rival submissions on either side and perused the relevant material available on record. The only issue arises for consideration is whether foreign exchange fluctuation, which resulted in profit to the assessee, has to be reduced for the purpose of deduction under Section 80HHC of the Act or not? The foreign exchange fluctuation was due to export sales made by the assessee. The assessee earned more profit due to foreign exchange fluctuation. Therefore, this Tribunal is of the considered opinion that the foreign exchange fluctuation was directly related to export sales made by the assessee. Hence, the same is eligible for deduction under Section 80HHC of the Act. Therefore, the CIT(Appeals) has rightly directed the Assessing Officer to compute deduction without reducing the foreign exchange gain from the export business. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

It is made clear that the order of this Tribunal dated 06.08.2015 in respect of other issues remain as such.