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TMI Blog2004 (5) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of the court was delivered by P.K. Misra J.- The following questions have been referred to the High Court pursuant to the order dated September 13,1996, in T.C.P. No. 42 of 1996: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to deduction under section 80HHC of the Income-tax Act, even though the export business resulted in a loss of Rs. 6,372? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that commission and brokerage for procuring export contracts for other exporters is exempt under section 80HHC of the Act on the ground that the same is export profits?" The matter relates to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is necessary to notice the relevant provisions applicable at the relevant time. The relevant portion of section 80HHC is extracted hereunder: "80HHC.(1) Where an assessee, being an Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise; (proviso is not quoted as unnecessary)... (3) For the purposes of sub-section (1), profits derived from the export of goods or merchandise out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire income has to be exempted notwithstanding the fact that there was loss in respect of the exported items. Learned counsel appearing for the assessee has relied upon the decisions of the Kerala High Court and the Bombay High Court, respectively, reported in CIT v. A.V. Thomas and Co. Ltd. [1997] 225 ITR 29 and CIT v. Shirke Construction Equipments Ltd. [2000] 246 ITR 429. He has submitted that the real intention of the Legislature was to encourage export, and therefore, irrespective of the profit in the export itself, exemption is to be granted. To combat the aforesaid submission, learned counsel appearing for the Department on the other hand has relied upon another decision of the Bombay High Court reported in IPCA Laboratori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any. Thus the word "profit" has the same meaning in section 80HHC(1) and (3)". It is of course true that the Supreme Court was considering a case where sub-section (3) had been amended with effect from April 1, 1992. However, the observation of the Supreme Court that the word "profits" has the same meaning in section 80HHC(1) and (3) is very significant, which means that such profit must be taken to be "positive profit" and not "loss". The observation of the Supreme Court would be equally applicable in the present case wherein there being a loss from export business, the question of getting deduction of the income derived from other business would not arise. As a matter of fact, any other construction would give rise to an absurd situ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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