TMI Blog2007 (7) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Respondent. JUDGMENT The judgment of the court was delivered by P. D. DINAKARAN, J. - The vexed substantial question of law, as raised by the Revenue, arises for consideration is, "Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that deduction under section 80HHC shall be granted before setoff of the unabsorbed depreciation, unabsorbed business loss and unabsorbed investment allowance of the earlier years before grant of depreciation ?" under the following facts and circumstances of the case. 2. The relevant assessment year is 1996-97. The assessee is an exporter of leather footwear. Originally, a 'Nil' return of income was filed by the assessee and the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal by the Revenue raising the substantial question of law, referred to above. 4. Heard both sides. 5. When an identical issue came up for consideration before this Court in Asvini Cold Storage P. Ltd. v. Commissioner of Income-tax [(2007) 290 I.T.R. 183], a Division Bench of this Court, while rejecting the case of the assessee therein, who placed reliance on the decision of the Bombay High Court in Commissioner of Income-tax v. Shirke Construction Equipments Ltd. [(2000) 246 I.T.R. 429 (Bom.)], followed the decision of the Apex Court in IPCA Laboratory Ltd. v. Deputy Commissioner of Income-tax [(2004) 266 I.T.R. 521 (SC)], and held as hereunder (page 187):- " ... Section 80 HHC of the Income-tax Act, 1961, provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under this Chapter), shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income". It may be seen that the provisions of section 80AB contemplate that the gross total income has first to be computed in accordance with the provisions of the Act. When it comes to a deduction, section 80AB further provides that for the purpose of deduction under any of the sections in Chapter VI-A, the amount of income of that nature has to be computed in accordance with the provisions of the Act, which means, necessarily for the purpose of deduction, the income of that nature computed for deduction must have a working in accordance with the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deduction and if the net figure is a loss then the assessee will not be entitled to deduction. A plain reading of sub-section (3)(c) shows that profits from such exports has to be profits of exports of self-manufactured goods plus profits of exports of trading goods. The opening words profit derived from such exports together with the word and clearly indicate that the profits have to be calculated by counting both the exports. Deduction can be permitted under section 80HHC(1) only if there is a positive profit in the exports of both self-manufactured goods as well as trading goods. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not correct in holding that the unabsorbed depreciation, unabsorbed business loss and unabsorbed investment allowance of earlier years cannot be deducted before granting deduction under section 80 HHC of the Act and that the provisions of section 80AB of the Act cannot be applied while determining the business profits under section 80HHC." 8. To both the above decisions of this Court, viz., Asvini Cold Storage P. Ltd. v. Commissioner of Income-tax [(2007) 290 I.T.R. 183] and T.C.No.62 of 2004 (between Commissioner of Income Tax-III v. M/s. Sharon Vaneers P. Ltd. ) [2007] 294 ITR 18, one of us was a party ( P.D.DINAKARAN, J .). 9. That apart, the view taken by the Bombay High Court in Commissioner of Income-tax v. Shi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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