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2017 (9) TMI 167 - HC - Income TaxTotal turnover in Section 80 HHC - turnover relating to the export business of the assessee OR a turn over relating to other businesses of the assessee - Assessee was running two units - ITAT held that the Assessee would be entitled to deduction under Section 80 HHC only if after the setting off brought forward losses and unabsorbed depreciation, the Assessee was left with any income and the deduction under Section 80 HHC should be worked out on the basis of the turnover of the garments division only - Held that - The judgment of the Supreme Court in IPCA Laboratories vs. Dy. Commissioner of Income Tax, Mumbai, (2004 (3) TMI 9 - SUPREME Court) where it has been categorically held that a plain reading of Section 80-HHC makes it clear that in arriving at profits earned from export of both sel-fmanufactured goods and trading goods, the profits and losses in both the 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 80-HHC (1) . Thus the question framed is answered in the negative, i.e. in favour of the Revenue and against the Assessee.
Issues: Interpretation of Section 80 HHC of the Income Tax Act for deduction calculation
1. Facts and Circumstances of the Case: The case involved an appeal by the Revenue against an order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 1995-96. The core issue was whether the total turnover considered for deduction under Section 80 HHC of the Income Tax Act should include all business units or only specific divisions. 2. Assessment by Assessing Officer (AO): The Assessee operated two units, a brewery unit, and a garments export unit, claiming a deduction under Section 80 HHC. The AO considered the total turnover of both units for deduction calculation. The AO's assessment resulted in the Assessee being entitled to a reduced deduction amount. 3. Decision of CIT (A): The Commissioner of Income Tax (Appeals) allowed the Assessee's appeal, stating that the export divisions should be treated separately for turnover computation under Section 80 HHC. Consequently, the entire deduction claimed by the Assessee was allowed. 4. ITAT's Decision: The ITAT held that the Assessee could claim deduction under Section 80 HHC only if there was income left after adjusting losses and depreciation. However, the ITAT agreed with the Assessee that the deduction should be based on the turnover of the garments division only. The ITAT set aside the CIT (A) order and directed the AO to calculate the deduction accordingly. 5. Supreme Court Precedent: The Revenue cited the Supreme Court judgment in IPCA Laboratories vs. Dy. Commissioner of Income Tax, emphasizing that profits and losses from all trades must be considered for Section 80 HHC deduction calculation. If a positive profit remains after adjustments, the assessee is entitled to the deduction. 6. Judgment: Based on the Supreme Court precedent, the High Court answered the question framed in favor of the Revenue, indicating that the total turnover for Section 80 HHC deduction should include profits and losses from all business activities. Consequently, the appeal by the Revenue was allowed. This detailed analysis of the judgment highlights the interpretation of Section 80 HHC of the Income Tax Act concerning the calculation of deductions based on turnover and profits from different business units.
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