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2016 (8) TMI 97 - HC - Income TaxMethod of computation of deductions under Section 80HHC(3) - ITAT directing AO not to deduct the amount in respect of disclaimer certificate issued by the assessee under the proviso to sub-section (1) of Section 80HHC of the Act and directing the Assessing Officer to allow the assessee s claim for deduction - Held that - Cconsidering the decision of the Honble the Supreme Court in the case of Jeyar Consultant and Investment Pvt. Ltd (2015 (4) TMI 195 - SUPREME COURT ), the question, which is raised in the present appeal is required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as in the case of Jeyar Consultant and Investment Pvt. Ltd (Supra) it is held by Hon ble the Supreme Court that if there is net profit from the export business, after adjusting the losses from one type of export business against profits from another type of export business, the benefit of the provision would be granted. The Tribunal is justified in deducting the loss from the gross profit and the benefit is rightly granted on the basis of net profit. Since the supporting manufacturer has made loss, there is no question of claim being made by assessee. Accordingly, the question is answered against the appellant revenue and in favour of the assessee.
Issues:
Interpretation of Section 80HHC for deduction of export turnover and treatment of losses in export business. Analysis: 1. The primary issue in this case revolves around the interpretation of Section 80HHC of the Income Tax Act concerning the deduction of export turnover and the treatment of losses in the export business. The appellant, the revenue, challenged the Tribunal's order directing the Assessing Officer not to deduct a specific amount in respect of a disclaimer certificate issued by the assessee under Section 80HHC(1). The Tribunal partially allowed the appeal, upholding the disallowance of a certain loss and instructing against deducting another amount in relation to the disclaimer certificate. 2. The assessee, a recognized Export House, had exported trading goods purchased from the open market and supporting manufacturers during the relevant accounting period. The Assessing Officer disallowed a loss incurred by the assessee for the export of certain goods and restricted the issuance of a disclaimer certificate under Section 80HHC(4A). The CIT (Appeals) upheld this decision. 3. On appeal before the Tribunal, the Tribunal partially allowed the appeal, maintaining the disallowance of a specific loss and directing against deducting another amount concerning the disclaimer certificate issued by the assessee under Section 80HHC(1). 4. The legal representatives for both parties presented arguments based on the interpretation of Section 80HHC. The revenue contended that the Tribunal erred in its decision, emphasizing the clear provisions of the section. The assessee's representatives cited a Supreme Court decision, Jeyar Consultant and Investment Pvt. Ltd. vs. Commissioner of Income Tax, to support their position. The Supreme Court's ruling highlighted the treatment of losses and profits in export businesses for the application of Section 80HHC. 5. The Court, after considering the arguments and the Supreme Court's decision, ruled in favor of the assessee. The Court emphasized that if there is a net profit from the export business after adjusting losses, the benefit of the provision should be granted. Since the supporting manufacturer incurred a loss, the Court concluded that there was no basis for the revenue's claim. Consequently, the Court upheld the Tribunal's decision and dismissed the Tax Appeal. 6. In conclusion, the Court's judgment confirmed the Tribunal's order, highlighting the importance of considering net profits and losses in export businesses when applying Section 80HHC of the Income Tax Act.
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