The Commissioner of Income TaxChennai v. M/s. Pentasoft Technologies Ltd.25

In the High Court of Judicature at MadrasDated : 13.07.2010Coram :-THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HON'BLE MR.JUSTICE M.M.SUNDRESHTax Case (Appeal) No.599 of 2010 The Commissioner of Income TaxChennai... Appellant vs.M/s. Pentasoft Technologies Ltd.25, I Main Road, United India ColonyChennai-600 024. .. RespondentPrayer: Tax Case Appeal filed under Section 260-A of the Income TaxAct, 1961, against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, dated 14.03.2008 passed in I.T.A.No.228/Mds/2007against ITA.No.330/04-05 dated 30.11.2006 on the file of the Commissioner of Income Tax (Appeals)-VI, Chennai againstPA.No./S.I.No.AAACP.1895r/34104-p dated 31.3.2004 on the file of the Deputy Commissioner of Income-Tax, Central Cricle III(4) Chennai -34.For Appellant : Mr.K.Subramanian Sr. Standing Counsel for Income-tax Judgment(Judgment of the Court was delivered by F.M.IBRAHIM KALIFULLA,J.)The Revenue has come forward with this appeal and the question of law raised reads as under: "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that gains on account of foreign exchange fluctuation held to have direct nexus with the export sales of the assessee and hence, is eligible for deduction under Section 10Aof the Income Tax Act, 1961, is valid in law?"

The short question that arises for consideration is 'whetherdue to diminish in Rupee value, the respondent-assessee gained a https://hcservices.ecourts.gov.in/hcservices/ higher sum in Rupee value while earning foreign exchange and the said difference in Rupee value was allowable as a deduction under Section10A of the Income-Tax Act, 1961.

In order to allow a claim under Section 10A of the Act, what all is to be seen is whether such benefit earned by the assessee was derived by virtue of export made by the assessee. The exchange value based on upward or downward of the Rupee value is not in the hands of the assessee. In other words, the assessee does not determine the exchange value of the Indian Rupee. It has to be remembered but for the fact that the assessee is an export house, there was no question of earning any foreign exchange. Therefore, when the fluctuation in foreign exchange rate was solely relatable to the export business of the assessee and the higher Rupee value was earned by virtue of such exports carried out by the assessee, there is no reason why the benefit of Section 10(A) should not be allowed to the assessee.

Viewed in that respect, the conclusion of the Tribunal, as held above, cannot be held to be illegal. We, therefore, do not find any question of law, much less substantial question of law, to beconsidered in this appeal. The appeal, therefore, fails and the same is rejected. Consequently, connected M.P.No.1 of 2010 is also dismissed. Sd/Asst. Registrar/true copy/Sub Asst. RegistrarATR https://hcservices.ecourts.gov.in/hcservices/ To1. The Asst. Registrar, Income Tax Appellate Tribunal Madras 'B' Bench Madras.2. The Commissioner of Income Tax (Appeals)-VI No.121, Mahathma Gandhi Road, Chennai 600034.3. The Deputy Commissioner of Income Tax Central Circle III(4), Chennai 600 034.4.The Commisioner of Income Tax, Chennai.1 cc To Mr.K.Subramanian, Advocate, SR.50255TC (A) No.599 of 2010klt(co)pmk.28.7.2010