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TMI Blog2004 (8) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, and Mr. K.R. Chaudhary, learned counsel for the respondent-Revenue. The Income-tax Appellate Tribunal by its order dated January 8, 2003, for the assessment year 1997-98 relating to the appellant-assessee relying upon the Division Bench judgment of this court in the case of IPCA Laboratories Ltd. v. Deputy CIT (No.1) [2001] 251 ITR 401, held that the Assessing Officer was not wrong in holding that in view of the fact that the assessee had loss from the export of trading goods, computed under sub-section (3) of section 80HHC, the ultimate figure of deduction under sub-section (3) is negative profit (loss) and, therefore, the deduction under section 80HHC of the Income-tax Act, 1961, was not available to the assessee. Challenging the said order, learned counsel for the assessee submitted that the loss suffered by the assessee from the export of trading goods while computing the deduction under sub-section (3) of section 80HHC was required to be taken as nil. Learned counsel submitted that the proviso to sub-section (3)(c) of section 80HHC is an independent provision unconnected with subsection (3) and in view thereof on the profits earned by the assessee on the export of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (3)(c), the Supreme Court held that "profits from such exports" has to be profits of exports of self manufactured goods plus profits of exports of 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. Beneficially we may refer to the decision of the Supreme Court in IPCA Laboratory Ltd. [2004] 266 ITR 521, wherein the Supreme Court observed thus: "We are unable to accept the submission of Mr. Dastur. Undoubtedly section 80HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision, the interpretation has to be as per the wording of this section. If the wordings of the section are clear then benefits, which are not available under the section, cannot be conferred by ignoring or misinterpreting words in the section. In this case we are concerned with the wordings of sub-section (3)(c) of section 80HHC. As noted earlier sub-section (3)(a) deals with the case where the export is only of self manufactured goods. Sub-section 3(b) deals with the case where the export is only of trading goods. Thus when the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ittedly used to indicate positive 'profit' because the deduction will only be of a positive profit. Section 80HHC(3) is the sub-section which provides how profits are to be worked out in computing the total income. For purposes of such computation both profits and losses have to be taken into account. Thus the word 'profit' in section 80HHC(3) will mean profits after taking into account losses, if any. More importantly, in our view, the term 'profit' in section 80HHC both in sub-section (1) and in sub-section (3) means a positive profit worked out after taking into consideration the losses, if any. Thus the word 'profit' has the same meaning in section 80HHC(1) and (3)." The meaning of the word "profit" occurring in section 80HHC, sub-sections (1) and (3), as held by the Supreme Court is the same and that is positive profit worked out after taking into consideration the losses. The meaning of the word "profit" in the proviso appended to sub-section (3)(c) is no different and in our considered view, carries the same meaning, i.e., the positive profit worked out after taking into consideration the losses. It is true that in the case of IPCA laboratory Ltd. [2004] 266 ITR 521, the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, it was already so provided in sub-sections (3)(a) and (3)(b). Sub-section (3)(c) says that "profit from such exports" has to be profits of exports of self manufactured goods as well as trading goods. The profit has to be calculated in the manner laid down in sub-section (3). The words "profits derived from such exports" together with the word "and" clearly indicate that the profits have to be calculated by counting both the exports. The word "profits" appearing in the proviso appended to sub-section (3)(c) of section 80HHC has to be given that meaning and that clearly indicates that the profits have to be calculated by counting both the exports. The Supreme Court in the case of IPCA Laboratory Ltd. [2004] 266 ITR 521 observed thus: "Another reason why the argument of Mr. Dastur cannot be accepted is that even under section 80HHC(3)(c)(i) the profit is to be the adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus, in calculating the profits, under sub-section (3)(c)(i), one necessarily has to reduce by profits under sub-section (3)(c)(ii). As seen above the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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