AI Drafter 
TaxTMI 
TaxTMI 
2004 (8) TMI 93
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....A Laboratories Ltd. v. Deputy CIT (No.1) [2001] 251 ITR 401, held that the Assessing Officer was not wrong in holding that in view of the fact that the assessee had loss from the export of trading goods, computed under sub-section (3) of section 80HHC, the ultimate figure of deduction under sub-section (3) is negative profit (loss) and, therefore, the deduction under section 80HHC of the Income-tax Act, 1961, was not available to the assessee. Challenging the said order, learned counsel for the assessee submitted that the loss suffered by the assessee from the export of trading goods while computing the deduction under sub-section (3) of section 80HHC was required to be taken as nil. Learned counsel submitted that the proviso to sub-sect....
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....s not necessary in the light of judgment of the Supreme Court in the case of IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521, which concludes the controversy against the assessee. The question before the Supreme Court was whether the assessee was entitled to deduction under section 80HHC in respect of the sum of Rs. 3.78 crores by ignoring the loss of Rs. 6.86 crores. The Supreme Court had a close look at section 80HHC and held that though section 80HHC has been incorporated in the Income-tax Act, 1961, with a view to provide incentive for earning foreign exchange and a liberal interpretation of such provision may be called for the plain language of the said section being clear, the benefits which are not available cannot be conferred....
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....when the Legislature wanted to take exports from self manufactured goods or trading goods separately, it has already so provided in sub-sections (3)(a) and (3)(b). It would not be denied that the word 'profit' in section 80HHC(1) and sections 80HHC(3)(a) and (3)(b) means a positive profit. In other words if there is a loss then no deduction would be available under section 80HHC(1) or (3)(a) or (3)(b). In arriving at the figure of positive profit, both the profits and the losses will have to be considered. If the net figure is a positive profit then the assessee will be entitled to a deduction. If the net figure is a loss then the assessee will not be entitled to a deduction. Sub-section (3)(c) deals with cases where the export is of both s....
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....y that the word 'profit' must have the same meaning. The meaning that the word 'profit' will depend on the context in which it is used. In section 80HHC(1) it is admittedly used to indicate positive 'profit' because the deduction will only be of a positive profit. Section 80HHC(3) is the sub-section which provides how profits are to be worked out in computing the total income. For purposes of such computation both profits and losses have to be taken into account. Thus the word 'profit' in section 80HHC(3) will mean profits after taking into account losses, if any. More importantly, in our view, the term 'profit' in section 80HHC both in sub-section (1) and in sub-section (3) means a positive profit worked out after taking into consideration....
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.... main provision to which it has been enacted as a proviso and no other. Moreover, the language of the main provision, namely, sub-section (3) of section 80HHC, is very clear and has been held to be so by the Supreme Court, the word "profit" understood in the main provision has to be understood the same way in the proviso appended thereto. The expression "further increased" is no pointer that the proviso is enacted as a separate section. The proviso appended to clause (c) of sub-section (3) of section 80HHC reads that the profit computed, inter alia, under clause (c) of sub-section (3) shall be further increased by the amount which bears to ninety per cent., of any sum referred to in clause (iiia) (not being profits on sale of a licence acqu....
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....rved thus: "Another reason why the argument of Mr. Dastur cannot be accepted is that even under section 80HHC(3)(c)(i) the profit is to be the 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 sub-section (3)(c)(i), one necessarily has to reduce by profits under sub-section (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. We, therefore, hold that a plain reading of section 80HHC makes it clear that in arriving at the profits earned from export of both sel....