Per N.L. Kalra, Accountant Member. - The revenue has filed an appeal against the order of learned CIT(A)-I, Bangalore dated 11-12-2008.

2. The grounds of appeal raised by the revenue are as under :—

"(i)The learned CIT(A) erred in holding that the gain on forward contracts are eligible for deduction under section 10B of the Income-tax Act, 1961.

(ii)The learned CIT(A) failed to appreciate that the proceeds from hedging foreign currency risk does not constitute income derived from exports and is also not received in convertible foreign exchange and, therefore, the same is not eligible for deduction under section 10B of the Income-tax Act, 1961."

3. During the course of assessment proceedings, the Assessing Officer noticed that profit of forward contracts of Rs. 60,98,362 was netted off against the finance expenses paid and the net finance expenses were debited to the profit and loss account. The Assessing Officer further noticed that the assessee has claimed a deduction under section 10B of the Income-tax Act. As per section 10B, deduction is allowed on such profit and gains as are derived by a 100 per cent export oriented undertaking from the export of articles or things. The Asse