Export profit requirement governs section 80HHC deduction, and a loss from exports bars relief entirely.

Section 80HHC deduction is available only where export activity yields profits derived from export of goods or merchandise. On the facts stated, the assessee had no export profit during the relevant assessment year and had suffered a loss, so no deduction could be claimed under the provision. Section 80AB did not alter that position because the basic condition of export profit was absent. The result was that the assessee was not entitled to any deduction under section 80HHC.

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Issues: Whether the assessee was entitled to deduction under section 80HHC of the Income-tax Act, 1961 where no profit had been earned from export activity and a loss had been suffered.

Analysis: The deduction under section 80HHC is confined to profits derived from the export of goods or merchandise. On the facts found, the assessee had not earned any export profit during the relevant assessment year, but had incurred a loss. In such a situation, no deduction could arise under the provision, and the computation under section 80AB did not alter that result.

Conclusion: The assessee was not entitled to any deduction under section 80HHC; the question was answered against the assessee and in favour of the Revenue.

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