Export profits deduction claim under s. 80HHC, and whether s. 80HHC(3)(b) allows proportionate disallowance; taxpayer wins. The dominant issue was whether the taxpayer was entitled to deduction under s. 80HHC on export net profits, particularly the scope of disallowance under ...
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Export profits deduction claim under s. 80HHC, and whether s. 80HHC(3)(b) allows proportionate disallowance; taxpayer wins.
The dominant issue was whether the taxpayer was entitled to deduction under s. 80HHC on export net profits, particularly the scope of disallowance under s. 80HHC(3)(b). The HC held that s. 80HHC(3)(b) permits proportionate disallowance only where the whole deduction claimed cannot be treated as export-related; it is not attracted when the income is wholly attributable to exports. As the record contained sufficient, undisputed documentary material establishing that the claimed income arose entirely from exports, the deduction was allowable. The reference was answered in favour of the taxpayer and against the Revenue.
The High Court of Madras ruled in favor of the assessee, stating that the Appellate Tribunal was correct in allowing the deduction under section 80HHC of the Income-tax Act in its entirety. The Tribunal found that the assessee maintained separate accounts for export and domestic sales, and there was no need to disallow any portion of the export earnings. The purpose of the relevant section is to disallow a part of the deduction only when it cannot be clearly linked to exports, which was not the case here.
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