Export deduction computation must follow the Act as a whole, with prior losses set off before section 80HHC relief.

Section 80AB governs the computation of deduction under section 80HHC because it applies to deductions under Chapter VI-A and section 80HHC contains no overriding language to displace it. The deduction must therefore be computed in accordance with the Act as a whole. Earlier unabsorbed business losses under section 72 must also be set off before determining the profit eligible for export-linked deduction under section 80HHC, since deductible profit must reflect the statutory income computation. The SC accordingly set aside the impugned judgment and held that section 80HHC is controlled by section 80AB, with prior losses required to be adjusted in the computation.

---

---

Issues: (i) Whether section 80AB applies to section 80HHC of the Income-tax Act, 1961; (ii) whether unabsorbed business losses of earlier years under section 72 are to be set off while determining business profit under section 80HHC.

Issue (i): Whether section 80AB applies to section 80HHC of the Income-tax Act, 1961

Analysis: Section 80AB is a part of Chapter VI-A and opens with a non obstante clause applying to deductions under any section in that Chapter. Section 80HHC contains no overriding language displacing section 80AB. The computation of deduction under section 80HHC therefore has to conform to the statutory mandate of section 80AB, as previously explained in the binding precedent relied upon by the Court.

Conclusion: Yes. Section 80AB governs section 80HHC and applies to the computation of deduction under that provision.

Issue (ii): Whether unabsorbed business losses of earlier years under section 72 are to be set off while determining business profit under section 80HHC

Analysis: For the purpose of export-linked deduction, profit must be real and positive profit arrived at after taking into account the statutory computation of income. Losses cannot be ignored when the statute requires income to be computed in accordance with the Act. Earlier business losses under section 72 are therefore relevant and must be adjusted before arriving at the profit eligible for deduction under section 80HHC.

Conclusion: Yes. Earlier unabsorbed business losses must be set off and cannot be excluded from the computation.

Final Conclusion: The impugned judgment was set aside and the Revenue's appeal succeeded, with the computation under section 80HHC held to be controlled by section 80AB and to require adjustment of earlier losses.

Ratio Decidendi: A deduction under Chapter VI-A must be computed in accordance with the Act as a whole, and a provision granting export incentive cannot override the statutory mandate to account for losses and other relevant adjustments in determining deductible profit.

---