IT - Section 80 HHC - Foreign exchange fluctuation gain is part of export turnover of the year in which export is made and not the year of realization
Section 80 HHC seems to be one of the most litigated provisions in the Income Tax Act. Many of us in the Edit Team have become experts in the field just by covering the large number of 80 HHC cases. In our small library of case laws, we have more than a hundred cases on 80 HHC and here is another case with the Special Bench.
In the order we bring you today, the ITAT observed,
Irrespective of the fact that the Indian currency has assumed northward or southward sojourn vis-à-vis the other foreign currency, the amount realized in Indian rupees remains attributable to the exports made in foreign currency.
There is no effect on the computation of deduction in the year of export, whether the difference in export realisation due to fluctuation in the foreign currency rate is received in the same year or within six months from the end of the previous year or within such further period as may be allowed by the competent authority . Once the amount be so received, it would relate to export turnover of the year in which the export was actually made. We further note that when the definition of export turnover was amended by the Finance Act, 1990, by which the words 'received in or brought into India" were substituted for the word "receivable" The effect is that the assessee can claim deduction on the foreign exchange fluctuation gain in the year of export and not the subsequent year in which the income has been realized and recognized in the books of account.