TMI Blog2006 (7) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... de India by the appellant during the said assessment year was Rs. 3,67,600. He claimed a deduction in respect of the aforementioned income in terms of section 80HHC of the Income-tax Act, 1961 (for short "the Act"). Exemption claimed under the aforementioned provision was disallowed by the assessing Officer on the premises that they having incurred loss in respect of export business were not entitled thereto. An appeal preferred there-against was rejected by the Commissioner of Income-tax (Appeals). The Income-tax Appellate Tribunal, however, on further appeal preferred by the appellant opined that the commission received by the appellant from the other exporters is to be taken into consideration for the said purpose. The respondent aggrieved by and dissatisfied with the said decision filed an application for reference to the High Court and by an order dated September 13, 1996, the following questions were referred by the Tribunal: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to deduction under section 80HHC of the Income-tax Act even though the export business resulted in a loss of Rs. 6,37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to the extent of profits, referred to in subsection (1B) derived by the assessee from the export of such goods or merchandise: Provided that if the assessee, being a holder of an Export House Certificate or a Trading House Certificate (hereafter in this section referred to as an Export House or a Trading House, as the case may be), issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this sub-section is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee shall be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods." ... (3) For the purposes of sub-section (1),- (a) where the export out of India is of goods or merchandise manufactured or processed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t turnover in respect of trading goods to the total turnover; (f) 'trading goods' means goods which are not manufactured or processed by the assessee." On a plain reading of the said provisions, it is evident that it applies to the assessee engaged in the business of export out of India including trading of goods. The expression "business of export" must be given its due meaning. It not only speaks of "export out of India" but also includes "trading of goods". Indisputably the Central Board of Direct Taxes issued a circular bearing No. 621 dated December 19, 1991, by way of explanatory notes to the said provision. Paragraph 32 of the said circular provides for modification of provisions relating to exemption of income from exports. The amendment by inserting sub-section (3) in the said provision was carried out so as to compensate the exporter from the comparative disadvantages faced by him in the international market. The formula, as was existing prior to 1991 as stated in the circular, often used to provide a distorted figure of export profits when receipts like interest, commission, etc. which did not have an element of turnover were included in the profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, for the first time with effect from April 1, 1992. The purport and reason for enacting section 80HHC of the Income-tax Act indisputably was to provide incentive to export houses. It is now a well-settled principle of law that although the exemption provisions are to be construed strictly as regards the applicability thereof to the case of the assessee once it is found that the same is applicable, the same are required to be interpreted liberally. It is also trite law that an exemption is to be granted unless it is expressly taken away. The expression "income arising out of business of export" brings within its sweep not only the export of any goods or merchandise manufactured or processed by the assessee but also of trading goods. Parliament, therefore, intended to provide incentive when a positive profit is earned by an exporter. The question again came up for consideration before a Division Bench of this court in ITO v. Induflex Products P. Ltd. [2005] 10 Scale 132; [2006] 280 ITR 1 where it was opined: "It is no doubt true that the term 'profit' implies positive profit which has to be arrived at after taking into consideration the profit earned from export of both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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