Law:

Section:

To calculate profits earned from exports under section 80HHC, profits and losses from export of self-manufactured goods as well as trading goods are to be taken into consideration, and if after such adjustments any positive profits come up, then only assessee can claim deduction Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Assessment year 1996-97 - Whether under section 80HHC, in arriving at profits earned from exports of both self-manufactured goods and trading goods, profits and losses in both trades have to be taken into consideration and if after such adjustments there is a positive profit then only assessee will be entitled to deduction, and if there is a loss, he is not entitled to any deduction - Held, yes - Whether section 80HHC would be governed by section 80AB - Held, yes FACTS The appellants were an export house. For the relevant assessment year they filed a return of income declaring Nil income. The taxable income of the appellant before the deduction under Chapter VIA was Rs. 4.39 crores. Against said taxable income the appellants claimed various deductions. One such deduction was under section 80HHC for Rs. 3.78 crores. During the assessment proceedings, it was found that the appellants were exporting goods, which were self-manufactured as well as goods manufactured by supporting manufacturers, i.e.,trading goods. It was found that the sum of Rs. 3.78 crores which had been claimed as a deduction, was the profit from export of self-manufactured goods. It was further found that from the export of trading goods there was a loss of Rs. 6.86 crores. The appellant had issued certificates of disclaimer in favour of the supporting manufacturers in respect of the entire export of trading goods. The Assessing Officer, therefore, held that there was a net loss from export of goods and disallowed the deduction of Rs. 3.78 crores. The High Court dismissed the claim of the appellants. On appeal to the Supreme Court : HELD 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 wordings of this…

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