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TMI Blog1994 (12) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses were charged against the gross profit derived from the trading in rubber, coconut oil and pepper and the net profit or loss of the entire business was ascertained. The assessee claimed deduction under section 80HHC of the I.T. Act, 1961 in a sum of Rs. 19,22,911. The Assessing Officer in view of the features noticed in the trading account and the profit and loss account and the manner in which the profit was ascertained was of the view that the assessee was not maintaining accounts exclusively for exports and, therefore, the provisions of section 80HHC(3)(b) of the I.T. Act, were attracted to the facts of the case. In this view of the matter, he restricted the deduction to Rs. 13,54,636 as against the claim of Rs. 19,22,911. The assessee's contention that the computation of deduction should not be done under sub-section (3)(b) of section 80HHC, but should rather be done under sub-section (3)(a) of section 80HHC was negatived by the learned CIT (Appeals). According to the CIT (Appeals), the assessee was having common management, common control and common fund and the business in rubber, coconut oil and pepper constituted the same business and, therefore, section 80HHC(3)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head " Profits and gains of business ". That does not mean that each distinct source of business loses its identity. 4. Sri C. Abraham, the learned senior departmental representative submitted that the assessee's business consisted of purchase and sale of raw rubber, coconut oil and black pepper. The assessee is having a common fund and common management. All these features constituted the same business. There, were common expenses attributable to all the three distinct lines of business, but then they were not identified and apportioned to each line of business. Therefore, it cannot be contended that the assessee's business consisted exclusively of exports. Further, even in the case of black pepper, there were local sales though nominal and, therefore, in respect of black pepper, the assessee did not have exclusively an export business. Thus, he supported the order of the authorities. 5. We have thus heard rival submissions and perused the records. In order to qualify for deduction under section 80HHC the assessee should be an Indian company or if it is not a company, it should be a resident in India and should be engaged in the business of export of any goods or merchandise o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (3) of section 80HHC is not attracted to the facts of the case. 7. The next contention of the assessee is that even if clause (b) of sub-section (3) of section 80HHC is applicable to it, it is only the profit from the export business as revealed in the trading account that should be the basis. The other contention is that the total turnover must refer to the turnover of the goods, both export turnover and inland turnover, pertaining to pepper and the authorities erred in including the turnover of rubber and coconut oil, which were not exported at all. We are unable to accept this argument. Similar contentions were raised before the Delhi Bench " D " (Special Bench) of the Tribunal in the case of International Research Park Laboratories Ltd v. Assistant CIT [1994] 50 ITD 37. It was held therein per Hon'ble Ch. G. Krishnamurthy, the then President of the Income-tax Appellate Tribunal as follows : " Section 80HHC(3) is a beneficial section. It was intended to provide incentives to promote exports to earn foreign exchange for the country. The incentive provided is to exempt the profits relatable to exports. Since it is not possible to conceive of an exclusive exporter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportionment of it on the basis of turnover. This is how the CBDT also understood this provision and explained it in its circulars for the benefit and also for the uniform application of this provision throughout the country by all the Assessing Officers. To bring the intention of the Board more clearly to the Assessing Officers, they have given examples and those examples do not suggest that if there is export turnover and local turnover, either the local turnover must be excluded or the aggregation is to be made only when the goods exported outside India happened to be the same as were dealt in India. ** ** ** When sub-section (3) of section 80HHC refers to sub-section (1) and then says that for that purpose 'the profits derived from the export of goods or merchandise outside India' shall have to be ascertained in the manner provided thereafter, one has to see what that sub-section (1) contains. It says if an assessee is engaged in the business of export out of India any goods or merchandise, there shall be, in accordance with the subject to the provisions of that section, allowed in computing the total income a deduction of profits derived by the assessee from the export of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. If clause (a) applies, the entire profit computed in the manner in which the profits under the head 'Profits and gains of business or profession' are to be computed and the whole of it is entitled to deduction. But if clause (b) of sub-section (3) of section 80HHC applies the profit of the entire business has first to be ascertained and then apportioned in proportion the export turnover bears to the total turnover to arrive at the profits derived from the export of goods or merchandise. Therefore, it provides that the profit of the business meaning the entire profit as computed under the head 'Profits and gains of business or profession' has to be ascertained and that profit should be apportioned on the basis of the total turnover of the business carried on by the assessee. Here the reference to the business is not to export business but to the business which consists both of the export out of India of the goods or merchandise or domestic sales. Section 80HHC uses the words 'business carried on by the assessee' and not undertaking. An assessee may have the business of carrying more than one undertaking. All the under-takings put together constitute one single business coming un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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