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2015 (4) TMI 195 - SC - Income TaxCorrect method of computation of deductions under Section 80HHC(3) - in the present case, the domestic income in respect of which benefit is sought is from dividend income, interest income, profit or sale of shares and fees received from arranging finance for the assessee's clients, thus no income from indigenous business which, in no case, be described as "turnover" and be part of "total turnover" as held by revenue Held that:- The mode and mechanics of computing the deduction admissible to an assessee falling under Section 80HHC(3)(b) clearly proceeds on the basis that in trading transactions profit, or, as the case may be, loss is embedded in the gross turnover. The most significant conclusion that flows from the said provision is that when Section 80HHC(3) talks of turnover, it talks of trading receipts and not of receipts which are of the nature of income to start with. It should, therefore, follow that the aggregate sum of dividend income, interest income, profit or sale of shares and fees received from arranging finance for the assessee's clients cannot be regarded as turnover, and that by the same token, it should be left out of reckoning for purposes of computing deduction admissible to the assessee under Section 80HHC. In the first instance, it has to be satisfied that there are profits from the export business. That is the pre-requisite as held in IPCA [2004 (3) TMI 9 - SUPREME Court] and A.M. Moosa [2007 (9) TMI 24 - SUPREME COURT OF INDIA] as well. Sub-section (3) comes into picture only for the purpose of computation of deduction. For such an eventuality, while computing the "total turnover", one may apply the formula stated in clause (b) of sub-section (3) of Section 80HHC. However, that would not mean that even if there are losses in the export business but the profits in respect of business carried out within India are more than the export losses, benefit under Section 80HHC would still be available. In the present case, since there are losses in the export business, question of providing deduction under Section 80HHC does not arise and as a consequence, there is no question of computation of any such deduction in the manner provided under sub-section (3). This would mean that the deduction admissible to the assessee under Section 80HHC would be nil, especially in view of the fact that the export business of the assessee has resulted in a loss. But a manufacturer may not invariably be able to export, in their entirety, the goods or merchandise manufactured. He may export a part of them and sell the rest in India. Given the paramount need to give fillip to exports, Parliament clearly intended that the benefit of Section 80HHC should not be denied in such cases. But the difficulty in such cases is that the profits attributable to exports cannot be ascertain with precision. This is because not only the manufacturing activities but also the selling activities (including the activities connected with exports) from a continuous, integrated whole. Even so, the intention of Parliament, was to extend the benefit of Section 80HHC to the extent of the profits generated by exports. With this end in view, Parliament incorporated a rule of thumb in Section 80HHC(3)(b). As long as the assessee has cleared profits in a particular year of account, export profits are computed by applying to total profits the ratio which export turnover bears to total turnover . We are in agreement with the this view of the Tribunal. Therefore, even otherwise, the formula as sought to be applied by the appellant does not become applicable on the facts of this case. - Decided against assessee.
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