Section 80HHC export deduction requires netting trading losses against self-manufactured export profits before any claim.

Profits and losses from export of self-manufactured goods and trading goods must be aggregated when computing deduction under Section 80HHC. The loss from trading exports cannot be excluded from the calculation; it must be set off against profit from owned goods. Only where the combined computation yields a positive export profit is the deduction available. If the net result is a loss, no deduction can be claimed.

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Issues: Whether loss suffered in export of trading goods can be adjusted against profit derived from export of self-manufactured goods for the purpose of deduction under Section 80HHC.

Analysis: The governing principle is that the profits and losses from export of both self-manufactured goods and trading goods must be taken together while computing the entitlement under Section 80HHC. Only if the combined computation results in a positive profit can the assessee claim the deduction; if it results in a loss, no deduction is available.

Conclusion: The loss from export of trading goods cannot be ignored and must be adjusted against the profit from export of owned goods. The question was answered in the affirmative, against the assessee and in favour of the Revenue.

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