2011 (7) TMI 169 - HC - Income Tax

Benefit of Section 80HHC - Loss making unit -Held that - the word profit in sub sections (1) and 3(1) and (b) of section 80HHC of the Act refers to positive profit - Thus, where there is a loss, no deduction would be available under Section (1) or sub-Section (3)(a) or sub-section (3)(b) of Section 80HHC of the Act - Thus, deduction under Section 80HHC can be permitted under Section 80HHC (1) only if there is a positive profit in exports and if the net figure is negative, the assessee could not sustain its claim under Section 80HHC of the Act - Decided against of assessee.

Summary

Issues:
Interpretation of Section 80HHC of the Income Tax Act, 1961 in cases of loss-making units.

Analysis:
The judgment involves the interpretation of Section 80HHC of the Income Tax Act, 1961 in the context of whether the benefit of this section should be granted to an assessee even if they are a loss-making unit. The assessee contended that regardless of profitability, they should be eligible for the deduction under Section 80HHC. The Tribunal, however, rejected the claim stating that the benefit of Section 80HHC does not apply in cases of negative results. The Apex Court's decision in IPCA Laboratory Ltd. v. Deputy Commissioner of Income Tax (2004 Volume 266 ITR 521) was cited, where it was clarified that the deduction under Section 80HHC is only available when there is a positive profit, and in cases of loss, the assessee is not entitled to the deduction.

The Apex Court's ruling emphasized that the term "profit" in Section 80HHC refers specifically to positive profit. Therefore, deductions under Section 80HHC can only be claimed if there is a positive profit in exports. If the net figure is negative, the assessee cannot sustain their claim under this section. The judgment reiterates that deductions under Section 80HHC are contingent upon the presence of positive profits, and in cases of losses, the assessee cannot avail of these benefits. Following this legal interpretation, the High Court confirmed the Tribunal's view and dismissed the Tax Case Appeal without imposing any costs.