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2022 (8) TMI 360 - HC - Income TaxComputation of Deduction u/s 80HHC - as per assessee there were export earnings and hence, the negative profit as 'Nil' should be taken into consideration for computation of deduction under section 80HHC - deduction should be taken as a whole and the loss derived by the assessee from one limb of the business should be set off against the profit of other limb of the business - HELD THAT - As in view was followed in the subsequent decision of the Hon'ble Supreme Court in CIT v. K.Ravindranathan Nair 2007 (11) TMI 10 - SUPREME COURT in which it was categorically stated that for computation of deduction under section 80HHC(3)(c), losses suffered by the assessee in the export of trading goods are to be set off / adjusted against profits from export of manufactured goods and vice versa and the assessee would not be entitled to deduction, if after such adjustments/ set off the net figure is a loss Applying the aforesaid legal proposition to the facts of the present case, this court is of the view that there is no infirmity in the order so passed by the Tribunal, warranting interference. As such, the substantial question of law raised herein is answered in favour of the Revenue.
Issues:
1. Deduction under section 80HHC for assessment years 1993-94 and 1997-98. Analysis: 1. The appellant, engaged in the export business, claimed a deduction under section 80HHC for the assessment year 1993-94, which was initially processed under section 143(1) but later reopened. The Assessing Officer denied the deduction, leading to a reassessment in 2002. 2. For the assessment year 1997-98, a similar scenario unfolded where the appellant's claim under section 80HHC was restricted to nil by the Assessing Officer during reassessment in 2002 after initially accepting the income returned. 3. The appellant challenged these assessment orders before the Commissioner of Income Tax (Appeals)-III, who allowed the appeals. However, the Revenue appealed to the Tribunal, which, in a common order, allowed the Revenue's appeals. Subsequently, the appellant approached the High Court with two appeals. 4. The primary issue revolved around the interpretation of section 80HHC concerning the deduction claim. The appellant argued that a negative profit should be considered as nil for deduction computation, while the Revenue contended that deduction can only be permitted if there is a positive profit after accounting for all export activities. 5. The Tribunal, following Supreme Court precedents, held that a positive profit is necessary for claiming the deduction under section 80HHC. The Court concurred with this interpretation, emphasizing that profits and losses from all export activities must be considered, and losses from one aspect cannot be set off against profits from another. 6. Consequently, the Court found no error in the Tribunal's decision and upheld the judgment in favor of the Revenue, dismissing the appellant's appeals. The substantial question of law was resolved in favor of the Revenue based on the legal precedents and interpretation of section 80HHC. 7. In conclusion, the High Court affirmed the Tribunal's decision, highlighting the importance of positive profits for claiming deductions under section 80HHC and the necessity to consider all export-related profits and losses without offsetting losses against profits from other activities. The appeals filed by the assessee were dismissed, with no costs awarded.
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