2009 (4) TMI 37 - HC - Income Tax

Eligibility for deduction u/s 80HHC in case of export of both self manufactured goods and trading goods - A plain reading of section 80HHC makes it clear that, in such casesthe profits and losses in both trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under Section 80HHC(1). If there is a loss the assessee would not be entitled to deduction

Summary

Issues:
1. Eligibility for deduction under Section 80HHC without giving an opportunity to the appellant.
2. Correctness of confirming the order with reference to the computation of deduction under Section 80HHC.

Issue 1:
The appellant, a seafood export company, filed a return for the assessment year 2000-2001 claiming deduction under Section 80HHC. The Assessing Officer disallowed the deduction, considering a negative figure after adjustments. The Commissioner of Income Tax(Appeals) allowed the deduction by ignoring the loss. The Revenue contended that 90% of export incentives should be excluded, resulting in a negative profit figure, making the appellant ineligible for deduction. The Tribunal ruled in favor of the Revenue. The appellant argued for an opportunity to present the case and claimed to be a profit-earning concern entitled to the deduction.

Issue 2:
The Commissioner(Appeals) computed the deduction under Section 80HHC, considering various disallowances, resulting in a negative profit figure. The Tribunal held that the relief under Section 80-HHC should be allowed by ignoring the loss and granting relief only on export incentives. The Tribunal proceeded to adjudicate the matter on merit after finding that the appellant did not avail the opportunity to be heard. Referring to the Supreme Court decision in IPCA Laboratories Vs. Deputy Commissioner of Income Tax, the Tribunal decided the matter based on merit and ruled that the wording of Section 80HHC must be interpreted clearly without conferring benefits not available. The plain reading of Section 80HHC indicates that both profits and losses from export of goods must be considered, and only positive profits are eligible for deduction.

In conclusion, the High Court dismissed the appeal, stating that if there is a loss, no deduction would be available under Section 80HHC. The court emphasized that only positive profits can be considered for the deduction under Section 80HHC, as per Circular No.636 dated August 31, 1992. The judgment reaffirmed that the interpretation of the section must align with its wording, and benefits not explicitly provided cannot be conferred through misinterpretation.