2013 (3) TMI 246

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....on for the purposes of computing the profit for computing of deduction under Section 80HHC of the Act to the extent prescribed under sub-Section (1B) of Section 80HHC of the Act. 2. The assessee, a manufacturer of Granite and Marbles Slabs and tiles, during the relevant assessment year 2003-04, has three different units setup. Unit-I is engaged in manufacturing of Granite tiles, while the Unit-II manufactures Granite slabs and Unit-III is again a manufacturer of Marble slabs and tiles. For the assessment year 2003-04 in question, the assessee claimed the income of Rs.4,37,81,709/- exempt under Section 10B with respect of Unit-II. While in other two units, the assessee claimed deduction under Section 80HHC of Act of Rs.2,56,46,746/- in the original return, which eduction claim was revised upwardly to Rs.3,02,97,098/- during the course of assessment proceedings. The assessee claimed deduction in Revised Return only on the profits on export turnover of Granite division (Unit-I), ignoring the loss on export turnover in respect of Marble division (Unit-III). 3. The Assessing authority disallowed such revised claim of the assessee and held that the loss of Marble Division (Unit-III....

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....ofit income in trading goods and if there is a loss in either of the two, then that loss has to be taken into account for the purposes of computing the profits. The ld. A.R. unsuccessfully tried to distinguish its case by contending that clause (a) of sub-section (3) was applicable and not clause (c) of sec.80 HHC (3) as was dealt with by the Hon'ble Supreme Court. In our considered opinion, the Hon'ble Supreme Court has laid down a proposition for adjustment of loss in one unit against the profit of the other unit for allowing deduction by taking into consideration the provisions of sec. 80AB r.w.s. 80B (5). It does not make any difference as to whether the case falls in clause (a) of (c) of sec.80 HHC (3). We, therefore, hold that the ld. CIT (A) failed to take note of the binding judgment of the Hon'ble Supreme Court which was available at the time of passing of his impugned order and erred in accepting the assessee's claim for ignoring the loss in one unit and allowing deduction on the other unit which earned income. We, therefore, set aside the impugned order on this score." 5. Having lost before the ITAT, the assessee has approached this Court by way of present appeal unde....

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....duction under Section 80 HHC has to be a positive profit income and not a loss or negative profit and, therefore, the losses and profits of respective units of the same assessee-company have to be adjusted and if the net result of the same is the positive profit income, then the deduction under Section 80HHC of the Act has to be computed on the basis of such positive profit income only and not otherwise. It would be appropriate to quote the relevant portion of the ratio of Hon'ble Supreme Court decision in the case of IPCA Laboratory Ltd. (supra) as under: "Undoubtedly s. 80-HHC has been incorporated with a view to providing incentive to export houses. Even though a liberal interpretation has to be given to such a provision in the interpretation has to be as per the wordings of this section. If the wordings of the section are clear then benefits, which are not available under the section, cannot be conferred by ignoring or misinterpreting words in the section. Sub-section 3 (a) deals with the case where the export is only of self-manufactured goods. Sub-s. 3(b) deals with the case where the export is only of trading goods. Thus when the Legislature wanted to take exports from....

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....evail over s.80-AB or even any other provision of the Act. Section 80-HHC would thus be governed by s.80-AB. Decisions of the Bombay High Court and the Kerala High Court to the contrary cannot be said to be the correct law. Section 80-AB makes it clear that the computation of income has to be in accordance with the provisions of the Act. If the income has to be computed in accordance with the provisions of the Act, then not only profits but also losses have to be taken into consideration. Even under s.80-HHC (3) (c) (i) the profit is to be adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus in calculating the profits under s. (3) (c) (i), one necessarily has to reduce by profits under s. (3) (c) (ii). As seen above the term "profit" means positive profit. Thus if there is loss then those losses in export of trading goods have to be adjusted. They cannot be ignored. A plain reading of s. 80-HHC makes it clear that in arriving at profits earned from export of both self-manufactured and trading goods, the profits and losses in both the trades have to be taken in....