ITO v. Induflex Products (P) Ltd.
INCOME TAX ACT, 1961
Deduction under section 80HHC- Computation of export profit-Negative profit i.e. loss
Assessee was engaged in the business of export and claimed benefit of section 80HHC. A declaration was made by it that its profits out of export of trading goods were 'negative' i.e. it incurred loss. AO allowed impugned benefit, while making assessment under section 143(3). CIT issued a notice to the assessee on the premise that the said order of assessment was erroneous and prejudicial to revenue by exercising his power under section 263 thereof and directed AO to withdraw the said relief. Held: It was evident that the profits derived from the export of goods, which would be subject matter of exemption there under must be the profits out of the business carried on by the assessee. The expression 'profits' used in the aforementioned provision connotes positive profit. It is a profit earned from the said business, alone which can be the subject matter of exemption. A fortiori if a profit is not earned, the question of claiming exemption would not arise. The submission that even when the profits are to be reduced by the losses in cases where an export house has disclaimed its turnover in favour of a supporting manufacturer, the turnover of the exporter gets reduced to the extent disclaimed opining that in computing total income the entire turnover is taken into account even though there is a disclaimer, was repelled. Further, the submission of the assessee that even loss was a negative profit was not acceptable. The assessee submitted that though it earned export profit, it resulted in the negative figure owing to the provisions in section 80HHC(3), the profit should be taken at nil and relief should be allowed having regard to the export incentives (viz., advance licences) and section 80HHC is benefit giving section, so it should be liberally construed and that the assessment order is not erroneous. Therefore, to consider this aspect of the matter as to whether the assessee had shown any positive profit or not as such clear finding does not appear to have been arrived at by the High Court.
Income Tax Act, 1961 Sections 80HHC(1) & 80HHC(3)
Case Law Analysis:Referred:IPCA Laboratory Ltd. v. Dy. CIT (2004) 12 SCC 742, A.M. Moosa v. Asstt. CIT, Tribunal, Cochin Bench, ITA No. 498/Coch/1995
Decision: In favour of Revenue.
A.Y. 1994-95