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Issues:
Deduction under section 80HHC. Analysis: The case involved a dispute regarding the deduction under section 80HHC for the assessment year 2003-04. The appellant, a 100% exporter, exported goods but could not realize the full sale proceeds. The Assessing Officer reduced the unrealized sale proceeds from the total export value and deducted the direct and indirect costs to compute eligible profits under section 80HHC(3). The appellant contested that only costs related to unrealized proceeds should be deducted. However, both parties disagreed on which costs should be considered. The Tribunal analyzed section 80HHC(3) which outlines the determination of profits from export of trading goods and the treatment of direct and indirect costs. The Tribunal highlighted that the legislative intent was to deduct the entire direct and indirect costs from the sale proceeds realized in convertible foreign exchange to calculate export profits accurately. The Tribunal referred to the definition of "export turnover" and emphasized that for the purpose of section 80HHC(3), export turnover should be the sale proceeds realized in convertible foreign exchange. It was clarified that the deduction under section 80HHC(1) would not be available if the profits from export business, as computed under section 80HHC(3), were negative. The Tribunal cited a Supreme Court decision to support the view that only positive profits would entitle the assessee to a deduction under section 80HHC(1). Therefore, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) confirming the reduction of entire direct and indirect costs to determine export profits under section 80HHC(3). In conclusion, the Tribunal dismissed the appeal filed by the assessee, emphasizing that the entire direct and indirect costs should be deducted from the sale proceeds realized in convertible foreign exchange to accurately compute export profits under section 80HHC(3). The decision aligned with the legislative intent and previous judicial interpretations, ensuring that only positive profits would qualify for deduction under section 80HHC(1).
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