Abraham P. George, Accountant Member - These are appeal of the Revenue and cross-objection of the assessee, both directed against order dated 17.3.2008 of Commissioner of Income Tax (Appeals)-III, Chennai, for assessment year 2004-05. Since the issues involved are inter-related, both the appeal and cross-objection are disposed of through this consolidated order.

2. Cross-objection filed by the assessee is delayed by 73 days. Assessee has filed affidavit in which number of reasons have been cited for the delay including the recessionary problems faced by it. No serious objection was raised by the learned D.R. We find the reasons to be acceptable. Delay is condoned.

3. In the appeal filed by the Revenue, there are five grounds out of which, 1 and 5 are general needing no adjudication. Vide its ground No.2, Revenue's grievance is that ld. CIT (Appeals) held gain on account of exchange fluctuation in respect of amounts transferred from EEFC account to Indian Rupee account to be eligible for deduction under Section 10B of Income-tax Act, 1961 (in short "the Act").

4. Short facts apropos are that assessee engaged in the business of export of computer software, had included as part of its business income, Foreign Exchange Realization Gain. From the details furnished by the assessee, Assessing Officer noted that some such gains arose on account of transfer of accumulated foreign exchange in EEFC account to Indian Rupee account. As per the A.O., this was different from a gain arising out of fluctuation in foreign exchange on account of difference in rates as on the date of invoice and as on the date of realization of export proceeds. He held an opinion that gain arising to the assessee on account of exchange rate difference at the point of time of transfer of amounts held in EEFC account to Indian Rupee account could not be considered as profits derived from the export activity. The net result was that on such income, assessee was denied deduction under Section 10B of the Act.

5. In its appeal before ld. CIT (Appeals), argument of the assessee was that the exchange fluctuation on transfer of balance from EEFC account to Indian Rupee current account had to be considered as part of profits eligible for the purpose of deduction under Section 10B of the Act. As per the assessee, such gains were revenue in nature. Reliance was placed by the assessee on the decision of Mumbai Bench of this Tribunal in the case of Rishabh International [IT Appeal No. 2788 & 2789 (Mum.) of 2004 dated 17-1-2007] Ld. CIT (Appeals) was appreciative of this contention. According to him, the EEFC account was opened principally for providing operational flexibility and the funds therein represented export proceeds. Hence, according to him, gains arising therefrom could only be considered as business income. He, therefore, held such foreign exchange fluctuation gain as part of eligible profit of business of assessee for the purpose of deduction under Section 10B of the Act.

6. Now before us, learned D.R., strongly assailing the order of ld. CIT (Appeals), submitted that the amounts in EEFC account represented export proceeds, which had already reached the assessee and at a later point of time, when such amounts lying in said account was transferred to an Indian Rupee account, gains arising on such transfer could not be termed as any way related to the export activity of the assessee. According to him, reliance placed by the assessee on the decision of Mumbai Bench of this Tribunal in the case of Rishabh International (supra) would not be relevant in view of the decision of Hon'ble Bombay High Court in the case of CIT v. Shah Originals [2010] 327 ITR 19/ 191 Taxman 81.

7. Per contra, the learned A.R. supporting the order of ld. CIT (Appeals), submitted that the decision given by the Hon'ble Bombay High Court in the case of Shah Originals (supra) was in the context of Section 80HHC of the Act where conversion of balance in EEFC account to Indian Rupee account had happe