TaxTMI 
TaxTMI 
2007 (9) TMI 251
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....following question of law under section 256(1) of the Income-tax Act, 1961 (for short "the Act"), for the assessment year 1988-89: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the case of the assessee was covered under section 80HHC(3)(a) and not under section 80HHC(3) (b) of the Income-tax Act, 1961, and that the Commissioner of Income-tax was not justified in withdrawing the deduction of Rs. 8,84,660 ?" 2. Briefly noticed, the facts are that the original assessment was made on June 19, 1989, by the Assessing Officer and deduction under section 80HHC of the Act was allowed at Rs. 17,12,765 as per the audit report. The Commissioner of Income-tax ("the C....
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....Indian company or a person (other than a company) resident in India, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction equal to the aggregate of- (a) four per cent. of the net foreign exchange realisation; and (b) fifty per cent. of so much of the profits derived by the assessee from the export of such goods or merchandise as exceeds the amount referred to in clause (a): Provided that the deduction under this sub-section shall not exceed the profits derived by the assessee from the export of such goods or merchandise: Provi....
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.... 5. A plain reading of clause (a) of sub-section (3) of section 80HHC of the Act shows that for the purposes of sub-section (1), profits derived from the export of the eligible goods or merchandise out of India in a case where business carried on by the eligible assessee consists exclusively of the export out of India of the goods or merchandise shall be the profits of the business as computed under the head "Profits and gains of business or profession". However, in a case where the business carried on by the eligible assessee did not consist exclusively of export out of India of the goods or merchandise but includes domestic sales as well as, then clause (b) of sub-section (3) it shall be the amount which bears to the profits of the busi....
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....tion under clause (b) of sub-section (3) of section 80HHC of the Act. 8. In order to be fair to learned counsel for the assessee, we refer to the judgment of the Madras High Court in CIT v. Rathore Brothers [2002] 254 ITR 656 on which the assessee had placed reliance. In the said case the assessee was not carrying on exclusively export business and was maintaining separate hooks of account for the domestic trade and for the export business. The assessee was held entitled for 100 per cent. deduction in respect of export business and disallowance on a pro rata basis by invoking clause (b) of sub-section (3) of section 80HHC was held to be unjustified. 9. A plain reading of the section 80HHC(3)(b) shows that the thrust of the opening cla....