2004 (8) TMI 93 - HC - Income Tax

Deduction u/s 80HHC - Tribunal held that the Assessing Officer was not wrong in holding that in view of the fact that the assessee had loss from the export of trading goods, computed under sub-section (3) of section 80HHC, the ultimate figure of deduction under sub-section (3) is negative profit (loss) and, therefore, the deduction u/s 80HHC, was not available to the assessee. - Appellant submitted that the appellant has been assessed u/s 115JA and under clause (viii) thereof, the appellant is entitled to deduction u/s 80HHC. - Since the Tribunal did not commit any error in upholding the order of AO wherein it was held that the assessee was not entitled to deductions as specified in section 80HHC, the contention of assessee that he was entitled to benefit of deduction under clause (viii) of section 115JA is misconceived

Summary

Issues: Interpretation of section 80HHC for deduction eligibility based on profit/loss from export of trading goods.

Analysis:
The High Court of BOMBAY heard arguments on the interpretation of section 80HHC of the Income-tax Act, 1961, regarding the deduction eligibility for an assessee based on profit/loss from the export of trading goods. The court considered the appellant's challenge against the Income-tax Appellate Tribunal's decision, which relied on previous judgments. The appellant argued that the loss from export of trading goods should be considered as nil for deduction calculation under section 80HHC. The appellant sought to distinguish previous court judgments and referred to relevant legal dictionaries, circulars, and case laws to support their interpretation. However, the court highlighted the Supreme Court's judgment in a similar case, emphasizing that a positive profit is necessary for deduction eligibility under section 80HHC. The court reiterated the Supreme Court's interpretation that losses cannot be ignored, and deductions are only applicable if there is a positive profit after considering both self-manufactured and trading goods exports.

The court further analyzed the proviso appended to sub-section (3)(c) of section 80HHC, emphasizing that the term "profit" in the proviso carries the same meaning as in the main provision. The court rejected the appellant's argument that negative profit or loss from trading goods export should be considered as nil, stating it was a misconstruction of the proviso. The court also addressed the circular issued by the Central Board of Direct Taxes, aligning with the Supreme Court's interpretation that only positive profits are eligible for deduction under section 80HHC. The court dismissed the relevance of judgments from Delhi High Court and Allahabad High Court, emphasizing that the Supreme Court's decision in a similar case conclusively applies to the present matter.

Ultimately, the court upheld the Income-tax Appellate Tribunal's decision, stating that the appellant was not entitled to deductions under section 80HHC. The court rejected the appellant's claim for benefits under clause (viii) of section 115JA, deeming it misconceived. Consequently, the court dismissed the appeal, affirming the Tribunal's ruling on the deduction eligibility under section 80HHC based on profit/loss from the export of trading goods.