1997 (8) TMI 96 - AT - Income Tax

Summary

Issues:
- Deduction under section 80HHC for export business profits

Analysis:

The judgment pertains to an appeal by the assessee against the order of the CIT(A) regarding the deduction of Rs. 73,570 under section 80HHC for the assessment year 1989-90. The assessee conducted silver business under one name and export business under another. The dispute centered around the eligibility of the assessee for the deduction under section 80HHC for the profit derived from the export business. The Assessing Officer (AO) allowed a proportionate deduction of Rs. 73,670 based on the total business turnover, which was contested by the assessee.

The first appellate authority upheld the AO's decision, stating that the assessee's export business and other business were not entirely separate, leading to the application of the proportionality rule under section 80HHC. The authority emphasized that even if separate accounts were maintained for the export business, the rule of proportionality had to be applied. The assessee argued that the export business was distinct and exclusive, with separate accounts and should be eligible for full deduction under section 80HHC.

Upon review, the Tribunal found that the assessee's export business was conducted separately, with no interconnection with the other business. Separate books of accounts were maintained, and the audit report supported the claim for deduction under section 80HHC. The Tribunal noted that the income from the export business was exclusively derived from pharmaceutical machinery exports and warranted the benefit under section 80HHC without the need for proportionate calculation based on total turnover.

Therefore, the Tribunal partially allowed the assessee's appeal, directing the full allowance of the deduction claimed under section 80HHC for the profit derived from the exclusive export business of pharmaceutical machinery conducted under a separate entity.