Independent export unit accounts can support section 80HHC deduction where export profits are separately identifiable.

Section 80HHC relief may be computed with reference to a separately maintained 100 per cent export-oriented unit when its accounts are independent and export profits are identifiable. Where there is no interlacing of funds or intermingling of expenditure, the export unit need not be aggregated with the assessee's other business units for deduction purposes. The existence of another profitable business unit does not by itself defeat the claim for full deduction on the export unit's profits. On the stated facts, the Bangalore export unit was treated independently and was entitled to deduction under section 80HHC(3)(a).

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Issues: Whether a 100 per cent export oriented unit maintained as an independent unit with separate books of account is entitled to deduction under section 80HHC of the Income-tax Act, 1961 independently of the assessee's other business units.

Analysis: The deduction under section 80HHC is available only where the assessee has positive gross total income after the statutory computation, but the provision does not compel a consolidated treatment of distinct business units in every case. Where the export unit maintains separate accounts, there is no interlacing of funds or intermingling of expenditure, and the export profits are identifiable, the export unit can be treated independently for the purpose of computing the relief. The earlier decisions of the Court on similar facts consistently accepted that the existence of other units with different business activities does not by itself defeat the claim for full deduction in respect of a separately maintained export unit. On the facts found, both units had profit and the Bangalore unit was a purely export oriented unit with independent accounts.

Conclusion: The Bangalore unit was entitled to deduction under section 80HHC(3)(a) on its export profits, and the assessee's claim could not be rejected merely because it also carried on other business through another unit.

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