100% exporter: s.80HHC(3)(a) treats entire business income, including interest, as export profits eligible for deduction

HC held that for a 100% exporter s.80HHC(3)(a) applies, treating entire business income as profits from export; interest income thereby falls within business income and is eligible for deduction. Distinguishing s.80HHC(3)(b) for composite businesses with local sales, the court ruled the assessee's entire profits, including interest, qualify for deduction. Appeals dismissed with costs.

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Issues involved: Interpretation of deduction under section 80HHC for interest income in relation to export business.

The judgment of the court, delivered by S. H. Kapadia J., jointly disposed of three appeals dealing with common questions of fact and law. The assessee, a 100% exporter, included interest income in the profit and loss account for the assessment year 1989-90 while calculating the deduction under section 80HHC. The Assessing Officer reduced the interest income from business profit, stating it cannot be considered profit from exports. The Commissioner of Income-tax (Appeals) and the Tribunal found the assessee to be a 100% exporter, thus section 80HHC(3)(a) applied, and the interest income was deemed part of business profit. The Department appealed under section 260A, arguing interest income should not be treated as profit from exports and hence not eligible for deduction under section 80HHC.

The court rejected the Department's contentions, noting the vague grounds of appeal and discrepancies in the statement of facts. It was clarified that the interest income, though not from exports, was still considered business income for a 100% exporter under section 80HHC(3)(a). The court emphasized that since the assessee was wholly engaged in export business, the interest income was part of the business income eligible for deduction. Section 80HHC(3)(a) applied to a 100% exporter, entitling the entire business income to be deemed profit derived from export of goods, including interest income. The court dismissed the appeals with costs, affirming the inclusion of interest income in the deduction under section 80HHC for the assessee as a 100% exporter.

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