Full Judgment
2. The assessee is a 100 per cent exporter and had shown a profit of Rs. 3,24,747 in its P&L a/c. An equal amount of deduction was claimed under Section 80HHC of the Act by the assessee. The impugned amount was export realisation of export sales effected in earlier years. The AO was of the view that the receipts shown during the year in the guise of export realisation was only to claim benefit of the deduction under Section 80HHC. Accordingly, he denied the deduction to the assessee.
CIT(A) confirmed the disallowance by observing that such export realisation received by the assessee on account of exchange difference does not form part of the total turnover as defined in the Explanation below Section 80HHC.3. It was contended by the learned counsel for the assessee that it was only incentive received by the assessee, freight or insurance which did not form part of the total turnover as defined in Clause (ba) of the Explanation below Sub-section (4-C) of Section 80HHC. It was submitted that the amount received on account of exchange difference did not fall into any of these categories and hence was part of the total turnover only. In support of his contentions, the learned counsel relied on several decisions of the Tribunal. The learned Departmental Representative relied on the orders of the authorities below.
4. On due consideration of the matter, we are of the view that the assessee deserves to succeed. The term "total turnover" has been defined in a negative manner not to include freight, insurance or incentives earned by the assessee. When the definition specifically excludes certain items from the term "total turnover", it automatically follows that the remaining items shall form part of the total turnover.
Even otherwise, the amount received by the assessee on account of exchange difference is nothing but realisation of the goods exported by it and hence, such proceeds have to be construed as the turnover of the assessee only. We find support from the decision of the Delhi Bench of the Tribunal in the case of Sujata Grover v. Dy. CIT (2002) 74 TTJ 347 (Del) wherein it has been specifically held that exchange rate fluctuation difference is nothing but part of sales. It is further observed that under all circumstances the basic character of the receipt of foreign currency remains the same, i.e., it remains attributable to the export effected by the assessee. Whether there is a profit or a loss, it ultimately goes to increase or reduce the figures of export turnover recorded initially by the assessee in its books of account. In view of this position of law, we uphold the claim of the assessee and direct that the assessee be granted deduction under Section 80HHC of the Act.