COMMISSIONER OF INCOME TAX Vs. RACHNA UDHOG

JUDGEMENT

(1.) THE appeal by the revenue arises out of the judgment of the Income Tax Appellate Tribunal dated 14th October 2008 pertaining to assessment years 20.02.2003 and 20.03.2004. The present appeal relates to assessment year 20.02.2003.

(2.) THE appeal is admitted on the following substantial question of law:

(3.) HOWEVER , in so far as the question of difference in the rate of exchange is concerned, the submission of the assessee before the assessing officer was that exchange rate fluctuation forms part of the sale proceeds eligible for deduction under Section . According to the assessee, the receipt was directly related to the process of carrying on the business of the industrial undertaking. The export invoices were made in US $ terms. When the sale proceeds of goods exported are received in India in convertible foreign exchange, the rupee equivalent of the sale proceeds is liable to vary consequent upon the fluctuation in the rate of foreign exchange between the date when the goods are exported and the date on which the sale proceeds are received in India. In other words, it was the contention of the assessee that the value of the goods exported remains the same but the rupee equivalent is liable to vary due to fluctuation in the rate of foreign exchange. Consequently, a book entry is made in order to ensure that the rupee equivalent of the value of the goods exported out of India is correctly reflected in the books of account, since the books are maintained in rupee terms.