1984 (7) TMI 123

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..... 1 ('the Act'), due to the assessee. The assessee manufactures silk in a backward area qualifying for relief under section 80HH. The place of manufacture is organised as a branch having its own branch accounts. The goods produced were sold by the head office. The head office maintains a separate account. There is a very small portion of purchase and sale by the head office apart from the sale of the goods received from the branch. The dispute in this appeal does not relate to the question as to whether the assessee is entitled to the relief under section 80HH. Admittedly, the assessee is entitled to such relief and the same was being given to the assessee in the earlier years. Again, there is no dispute about the fact that relief under secti .....

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..... nghania, the learned representative for the assessee, took me through the orders of the ITO as well as the Commissioner (Appeals) and explained the facts as recorded above. He also took me through the provisions of section 80HH and pointed out that the relief under that section is to be granted on 'profits and gains derived from an industrial undertaking'. He urged that the profits and gains of a business are to be understood in the normal commercial sense, especially when it has not been specifically defined in the Act. According to him, the profits of the manufacturing unit can be calculated in the commercial sense after deducting only the actual expenses incurred for export markets development. The notional deduction given under section .....

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..... ing, only the actual expenses are deducted. Notional expenses are not deducted. This is the accountancy principle followed in the commercial world. Hence, profits of an undertaking can mean only the amount arrived at after deduction of actual expenses only and without the deduction of the notional expenses like the relief under section 35B. This relief has been given for encouraging exports. This is really not an expense that goes out of the pocket of the assessee. Hence, this amount cannot go to reduce the commercial profit, though it may reduce the taxable profit. As has been held in the case of Cloth Traders (P.) Ltd., once a reference to 'the profits and gains of the business' is made, then it should mean the gross figure and not the ne .....

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