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[2008] 305 ITR 242 (Karnataka) HIGH COURT OF KARNATAKA Commissioner of Income-tax v. Mysodet (P) Ltd.* P. VISHWANATHA SHETTY AND N. KUMAR, JJ. I.T.R.C. NO. 901 OF 1998 APRIL 18, 2006 Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters In order to be entitled to deduction assessee must have derived profit from export The opening words 'profit derived from such exports' together with the word and in section 80HHC clearly indicate that the profits have to be calculated by counting both the exports. Deduction can be permitted under section 80HHC(1) only if there is a positive profit in the exports of both self-manufactured goods as well as trading goods. If there is a loss in either of the two, then the loss has to be taken into account for the purpose's of computing the profits. Where purchased computers and peripherals for Rs. 90,91,063 and exported them and realized export sales of Rs. 90,91,063, as the assessee did not derive any profit from this transaction, the assessee was not entitled to deduction under section 80HHC. CASE REVIEW IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (SC)followed. M.V. Sesachala for the Applicant. S. Parthasarathi for the Respondent. JUDGMENT N. Kumar, J.- At the instance of the Revenue, the Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question of law for our opinion, under section 256(1) of the Income-tax Act, 1961, (for short hereinafter referred to as "the Act"). "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the deduction under section 80HHC is allowable in the hands of the assessee, when the assessee had not derived any profit from the export business?" The facts leading to this reference are as under : The assessee is a limited company. It purchased 105 computers and peripherals for Rs. 90,91,063 and exported them and realised export sales of Rs. 90,91,063. Thus the assessee did not derive any profit from this transaction. The Income-tax Officer allowed the claim of deduction under section 80HHC of the Act at Rs. 15,81,389. The Commissioner of Income-tax, in exercise of his power under section 263 of the Act, held…

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