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TMI Blog2013 (3) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... hat benefit of Section 80HHC can be given for Unit-I separately on its profit earned by exports while the loss of Unit-III remains unadjusted against such profit of Unit-I. The purpose of giving benefit of deduction under Section 80-HHC is to encourage the exports and profits derived by the assessee as such during the relevant year would form the basis for determining the extent of such deduction. As decided in IPCA Laboratory Ltd. case (2004 (3) TMI 9 - SUPREME COURT) deduction u/s 80HHC (3) (c) can be allowed only if there is a positive profit income in trading goods and if there is a loss in either of the two, then that loss has to be taken into account for the purposes of computing the profits. Deduction u/s 80HHC (3) (c) can be allowed only if there is a positive profit income in trading goods and if there is a loss in either of the two, then that loss has to be taken into account for the purposes of computing the profits - in favour of Revenue. - Income Tax Appeal No.147/2007 - - - Dated:- 29-1-2013 - Vineet Kothari And V. K. Mathur,JJ. Mr. Sanjay Nahar, for the appellant-Assessee. Mr. K.K. Bissa, for the respondent- Revenue. ORDER 1. The appellant-ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income Tax (Appeals), who however, allowed the claim of the assessee following the decision of Bench of Income Tax Tribunal in the case of Easter Leather Products Pvt. Ltd. Vs. DCIT reported in (1999) 68 ITD 358 (Del.), in which a Bench of learned ITAT held that for the purpose of computation under Section 80HHC in respect of leather division engaged in export, loss in the engineering division is not required to be merged with the profit of leather division, as the two divisions are independent and maintain separate books; and therefore, they cannot be combined for the purposes of working out the deduction under Section 80HHC of the Act. 4. Being aggrieved by these findings of learned CIT (Appeals), the Revenue went up in the present case in a second appeal before the learned ITAT, who allowed the Revenue's appeal on this issue in terms of Hon'ble Supreme Court decision in the case of IPCA Laboratory Ltd. (supra) in the following terms: The short controversy raised before us in this ground is about the setting off of loss in Unit III against the profit of Unit No.1 for the purpose of deduction u/s 80 HHC. The ld. A.R. has relied on the order passed by the Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only, and the question was of adjustment of loss in export towards the profit of trading in manufacturing of the same Unit, and in the present case the two units being the Unit no.1 and 3 have nothing to do with each other except they are owned by one Company? 2. Whether on the facts and in the circumstances of the case the turn over and profits/losses of the two Units being Unit No.1 and 3 could be clubbed together to determine the average profit/proportionate profits for the purpose of computing the deductions u/s. 80 HHC? 6. Learned counsel for the appellant, Mr. Sanjay Nahar,except relying on the findings of learned CIT(A) and the decision of ITAT, Delhi Bench in the case of of Easter Leather Products Pvt. Ltd. (supra) could not successfully urge anything contrary to the binding precedent of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. (supra). 7. On the other hand, Mr. K.K. Bissa, learned counsel for the Revenue submitted that the controversy is no more res-integra and in view of decision of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. (supra), the ITAT was justified in denying the benefit of deduction u/s 80 HHC without adjustment of loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et figure is a positive profit then the assessee will be entitled to a deduction. If the net figure is a loss then the assessee will not be entitled to a deduction. Sub-s. 3(c) deals with cases where the export is of both self-manufactured goods as well as trading goods. The opening part of sub-s. 3 (c) states profits derived from such export shall . Then follows (i) and (ii). Between (i) and (ii) the word and appears. A plain reading of sub-s. (c) shows that profits from such exports has to be profits of exports of self-manufactured goods plus profits of exports of trading goods. The profit is to be calculated in the manner laid down in s. 3 (c) (i) and (ii). The opening words profit derived from such exports together with the word and clearly indicate that the profits have to be calculated by counting both the exports. It is clear from a reading of sub-s. (1) of s.80-HHC (3) that a decision can be permitted only if there is a positive profit in the exports of both self-manufactured goods as well as trading goods. If there is a loss in either of the two then that loss has to be taken into account for the purposes of computing profits. Under s. 80-HHC(1) the deduction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds viz. Granite slabs and tiles in Unit-I and Marble slabs and tiles in Unit-III in the present case before us, does not make separate Units of the same assessee company as separate and different assessable units for the purposes of Income-tax Act, 1961, or for that matter for the purposes of Section 80-HHC of the Act. The assessee, a body corporate, in the present case is one, namely, Madhav Marbles Granites Ltd. Merely because for the purpose of its accounting politices or describing different units for the different goods manufactured and exports by it, the assessee has described the same as Unit, I, II and III in the present case, it does not mean that benefit of Section 80HHC can be given for Unit-I separately on its profit earned by exports while the loss of Unit-III remains unadjusted against such profit of Unit-I. The purpose of giving benefit of deduction under Section 80-HHC is to encourage the exports and profits derived by the assessee as such during the relevant year would form the basis for determining the extent of such deduction. The Hon'ble Supreme Court has put the said controversy of unit-wise profits beyond pale of doubt in the case of IPCA Laboratory Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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