High Court Of Calcutta
Raghunath Exports (P) Ltd. vs. CIT
Section 80HHC
Kalyan Jyoti Sengupta & Kanchan Chakraborty, JJ.
IT Ref. No. 88 of 2002
1st July, 2010
Counsel Appeared :
J.P. Khaitan, for the Appellant : L.K. Chatterjee, for the Respondent
JUDGMENT
By the court :
The instant appeal was admitted on the following substantial questions of law by this Court by an order dt. 4th Sept., 2002 :
“(i) Whether in a case where export invoices are raised and realised in foreign currency, the difference between the Indian currency equivalent at the time of raising of the invoices and the Indian currency equivalent at the time of their realisation due to fluctuation in foreign exchange rates is part and parcel of the export turnover and total turnover of the business for the purposes of s. 80HHC of the IT Act, 1961 ?
(ii) Whether the Tribunal was justified in law in holding that the sum of Rs. 10,61,326 was not integral part of the appellant’s export turnover/sale proceeds and its purported findings in this behalf are arbitrary, unreasonable and perverse ?”
On a bare reading of the two questions as above, it appears to us that the answer to question No. 1 is depending upon the answer of question No. 2.
In this appeal, the basic question is whether a gain of Rs. 10,61,326 because of fluctuation in foreign exchange rate in the course of export of the goods can be treated to be an export turnover in order to get the benefit of exemption under s. 80HHC of the IT Act (hereinafter referred to as the “said Act”).
4. The fact of the case is that the assessee company had exported tea and on the date of shipment, the value of the said goods was less than what was actually realised later on. The export was made in terms of the foreign currency undisputedly. However, the export proceeds was received at a later date when the foreign exchange rate varied in an upward direction so far as the Indian currency is concerned. The AO held that the said amount of Rs. 10,61,326 in Indian currency cannot be said to be an export turnover. It is observed that a portion of the export proceeds was not received within the time mentioned in the said section.
5. In view of the aforesaid fact, it has now to be examined as to what are the preconditions to get the benefit of deduction under s. 80HHC of the said Act in respect of export turnover. Sub-s. (2)(a) of s. 80HHC provides as follows :
“(2)(a) This section applies to all goods or merchandise, other than those specified in cl. (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into, India by the assessee (other than the supporting manufacturer) in convertible foreign exchange within a period of six months from the end of the previous year or, where the Chief CIT or CIT is satisfied (for reasons to be recorded in writing) that the assessee is, for reasons beyond his control, unable to do within the said period of six months, within such further period as the Chief CIT or CIT may allow in this behalf.”
6. It has been explained therein the meaning of “export turnover” which reads as follows : “‘Export turnover’ means the sale proceeds received in, or brought into India by the assessee in convertible foreign exchange in accordance with cl. (a) of sub-s. (2) of any goods or merchandise to which this section applies and which are exported out of India, but does not include freight or insurance attributable to the transport of the goods or merchandise beyond the customs station as defined in the Customs Act, 1962.”
7. It appears from the records that the AO had observed that a portion of Rs. 5,61,098 was not received in India within time. It was held by the AO correctly and in principle that the aforesaid surplus amount received by the assessee because of fluctuation of foreign exchange rate cannot be treated to be an export turnover. The appellant-assessee took this matter to the appellate authority being the CIT(A) who held that the said sum of Rs. 10,61,326 was an export realisation and was required to be included as export turnover as well as total turnover. Hence, the said amount was deductible under s. 80HHC of the said Act.
8. The Revenue being dissatisfied with the said order approached the learned Tribunal who held otherwise. The learned Tribunal held that the said amount cannot be regarded as an integral part of the turnover, since the same accrued to the assessee due to time gap between the export bill and realisation of the foreign currency.
9. It is appropriate to mention that the Tribunal has not held whether the export bill was realised within the time or not.
10. Mr. J.P. Khaitan, senior advocate, appearing for the appellant, submits that export was made in terms of foreign currency. Had it been realised at a later point of time because of the fluctuation of the foreign exchange rate fortuitously the appellant company would get the amount out of the said export. He further clarified that the said amount of Rs. 5,61,098 as observed by the AO is relatable to some other item which is not the subject- matter and in any event, due and proper extension had been granted. He also pointed out that this surplus owing to fluctuation of foreign exchange rate in connection with export is always treated to be an export turnover within the meaning and, as such, is deductible. He has cited a judgment of the Gujarat High Court in the case of CIT vs. Amba Impex (2006) 201 CTR (Guj) 409 : (2006) 282 ITR 144 (Guj). Mr. L.K. Chatterjee, appearing for the Revenue, on the other hand, contends that it has been recorded by the AO that the entire turnover includes the export turnover which was not realised within the stipulated period as mentioned in s. 80HHC of the said Act which is a precondition of getting benefit of exemption.
We have considered the contentions of the learned advocates for the parties and checked the records. It is not disputed that tea was exported and payment was received in foreign currency and it is also admitted that when realisation of the export was made there has been fluctuation of foreign currency, as such, there was a surplus realisation in terms of Indian currency. The question is whether the aforesaid surplus realisation of Rs. 10,61,326 can be treated to be a part of export turnover or not. In our view, going by the definition of the export turnover, the aforesaid amount was realised in connection with the export followed by payment of the price, by the foreign buyer. Unless there has been an export the aforesaid surplus would not have been realised. Hence, this surplus realisation is certainly relatable to the export. Therefore, we hold that this is an export turnover. Here, the payment was made in foreign currency, not in terms of the Indian currency. According to us, consideration of export turnover has to be considered in the context of mode of payment being made by foreign buyers, not in the mode of convertible exchange. However, the legislature in its wisdom has cleared that in case of convertible foreign exchange, a time-limit of six months has been prescribed. Therefore, this aspect cannot be ignored. Factually, neither the CIT(A) nor the Tribunal has gone into the question whether the export turnover was realised beyond six months or not. Hence, we do not think that this question should be decided by us as no such point has been formulated by this Court, nor any cross-appeal has been filed in this case. We are of the view that this amount received in a year or subsequent year by virtue of exchange rate difference cannot be said to be unrelatable to the export made. The same view has also been taken by the Gujarat High Court in the case of Amba Impex (supra) and it has been held almost on the identical fact that “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”.
We, therefore, hold that the learned Tribunal erred in upsetting the decision of the CIT(A). Accordingly, we restore CIT(A)’s order. We, therefore, answer question No. 1 in favour of the assessee appellant and in the affirmative. Question No. 2 is also held in favour of the assessee and in the negative. We allow the appeal. We, accordingly, direct the AO to act in terms of the judgment and order of the CIT(A).
There will, however, be no order as to costs.
[Citation : 330 ITR 57]
