TMI Blog2004 (7) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... ing income of Rs. 54,95,161, was excluded by the AO while computing the deduction under s. 80HHC and as a result, it was found that there is a loss to the assessee both from export from trading goods as well as export of manufactured goods. And these losses were in excess of the export incentives which was available to the assessee as per proviso to s. 80HHC(3); and hence, no deduction under s. 80HHC was allowed by the AO as against the claim of the assessee for allowing deduction under s. 80HHC for Rs. 27,79,685. Being aggrieved, the assessee carried the matter in appeal to learned CIT(A). It was contended before the learned CIT(A) that the no interest income of Rs. 4,83,777, 90 per cent of which has been excluded by the AO on page No. 3 of the assessment order, has been calculated by the assessee by excluding proportionate expenses of Rs. 54,95,161 in connection with interest income from bill discounting amounting to Rs. 59,78,938. But the AO has deducted 90 per cent of this amount of proportionate expenses of Rs. 54,95,161 also from the business income as appearing on page No. 3 of the assessment order. This calculation of expenses amounting to Rs. 54,95,161 and net interest inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,777 is the net interest income on the bill discounting as per calculation given on page Nos. 5 and 6 of the learned CIT(A)'s order. If the contention of the assessee is correct, then the amount of Rs. 49,45,645 being 90 per cent of Rs. 54,95,161 reduced by the AO while working out profit from export of manufactured goods is not correct. It is relevant here to mention that as per the order of the Special Bench of the Tribunal in the case of Lalsons Enterprises, it was held by the Tribunal that while reducing 90 per cent of the receipt by way of interest, only 90 per cent of the net interest remaining after allowing set off of interest paid, which has a nexus with interest received, has to be considered. But, we find that even if the contention of the assessee is correct, that 90 per cent of Rs. 54,95,161 has been wrongly deducted by the AO while working out the profit from export of manufactured goods, the profit from manufactured goods still stands at Rs. 11,39,103 and there is a loss of Rs. 21,89,948 from the export of trading goods. This is a settled position now as per the judgment of the Hon'ble apex Court in the case of IPCA Laboratories and also as per Tribunal order in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held by the co-ordinate Bench of the Tribunal in this order as reproduced below being para No. 42 of that Tribunal order: "In view of the above. We hold as under: (i) Deduction under s. 80HHC(1) is available to an assessee who has derived a positive profit from the export of specified goods or merchandise. In other words, deduction under s. 80HHC is not available to an assessee who has suffered a loss from the export or, in other words, not derived a positive profit from the export. (ii) Deduction under s. 80HHC(1) is available on positive profit alone after adjusting the losses. Losses suffered by the assessee from the export of specified goods or merchandise can neither be ignored nor treated as nil for computation of the deduction under s.80HHC. (iii) The export incentives alone are not sufficient to form the basis for deduction under s. 80HHC(1) but shall be eligible only for further increasing the profits derived from the export and compute in the manner laid down in sub-s. (3), in terms of the proviso thereto." 8. In sum and substance, it was held by the Tribunal in this order that incentive as per the proviso to s. 80HHC(3) can be added to positive profit, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT vs. Smt. T.C. Usha (2003) 185 CTR (Ker) 256 : (2003) 266 ITR 497 (Ker) were overruled. As per s. 80AB, only net income from exports as computed in accordance with the provisions of this Act (before making any deduction under this chapter) shall alone be deemed to be the amount of income from exports, which is derived or received by the assessee and which is included in his gross total income. 10. In this view of the matter, even after holding that the amount of incentive as per the proviso to s. 80HHC(3) as amount eligible for deduction under s. 80HHC after ignoring losses computed prior to the proviso, for the purpose of calculating actual deduction allowable under s. 80HHC r/w s. 80AB, we have to calculate actual export income included in the gross total income of the assessee and this can be done only by reducing the losses computed prior to the proviso from the amount of incentive allowable as per the proviso. We find that the amount of incentive eligible as income from export business as calculated under the proviso to s. 80HHC(3) by the AO on page No. 3 of assessment order is Rs. 27,79,685 and the losses before the proviso as calculated by the AO is Rs. 21,89,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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