Case Law Details

Case Name : Dun-cans Industries Limited Vs CIT (Calcutta High Court)
Appeal Number : I.T.A. No. 775 of 2004
Date of Judgement/Order : 12/08/2011
Related Assessment Year :

Duncans Industries Limited Vs CIT (Calcutta High Court)- Under S. 80-HHC (1) the deduction is to be given in computing the total income of the assessee. In computing the total income of the assessee both profits as well as losses will have to be taken into consideration. Section 80-AB is relevant. It reads as follows

“80-AB. Where any deduction is required to be made or allowed under any section included in this chapter under the heading “C-Deductions in respect of certain incomes” in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature 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 of that nature which is derived or received by the assessee and which is included in his gross total income.”

Section 80-B(5) is also relevant. Section 80-B(5) provides that “gross total income” means total income computed in accordance with the provisions of the Income-tax Act.

14. Section 80-AB is also in Chapter VI-A. It starts with the words “where any deduction is required to be made or allowed under any section of this Chapter.” This would include S. 80-HHC. Section 80-AB further provides that “notwithstanding anything contained in that section.” Thus S. 80-AB has been given an overriding effect over all other sections in Chapter VIA. Section 80-HHC does not provide that its provisions are to prevail over S. 80-AB or over any other provision of the Act. Section 80-HHC would thus be governed by S. 80-AB. Decisions of the Bombay High Court and the Kerala High Court to the contrary cannot be said to be the correct law. Section 80-AB makes it clear that the computation of income has to be in accordance with the provisions of the Act. If the income has to be computed in accordance with the provisions of the Act, then not only profits but also losses have to be taken into consideration.

15. Another reason why the argument of Mr. Dastur cannot be accepted is that even under S. 80-HHC (3)(c)(i) the profit is to be adjusted profit of business. The adjusted profit of the business means a profit as reduced by the profit derived from business of exports out of India of trading goods. Thus in calculating the profits, under S. (3)(c)(i), one necessarily has to reduce by profits under S. (3)(c)(ii). As seen above the term “profit” means positive profit. Thus if there is loss then those losses in export of trading goods have to be adjusted. They cannot be ignored. We, therefore, hold that a plain reading of S. 80-HHC makes it clear that in arriving at profits earned from export of both self-manufactured goods and trading goods, the profits and losses in both the trades have to be taken into consideration. If after such adjustments there is a positive profit the assessee would be entitled to deduction under S. 80-HHC (i). If there is a loss he will not be entitled to any deduction.
16. Mr. Dastur submitted that the word “profit” in S. 80-HHC must have the same meaning in the entire section. He submitted that as the word “profit” in S. 80-HHC(1) means only positive profit, it will have the same meaning in S. 80-HHC(3)(c). He submitted that thus the word “profit” in S. 80-HHC(3)(c) would not include losses and if there are any losses they are to be ignored. We are unable to accept this submission for more than one reason. Firstly it is not necessary that the word “profit” must have the same meaning. The meaning that the word “profit” will depend on the context in which it is used. In S. 80-HHC(1) it is admittedly used to indicate positive “profit” because the deduction will only be of a positive profit. Section 80-HHC(3) is the sub-section which provides how profits are to be worked out in computing total income. For purposes of such computation both profit and losses have to be taken into account. Thus the word “profit” in S. 80-HHC(3) will mean profits after taking into account losses, if any. More importantly, in our view, the term “profit” in S. 80- HHC both in sub-section (1) and in sub-section (3) means a positive profit worked out after taking into consideration the losses, if any. Thus the word “profit” has the same meaning in S. 80-HHC (1) and (3).”

(Emphasis supplied by us).

The principles mentioned above have been all along followed by the Supreme Court in the subsequent cases of ITO, Bangalore vs. Induflex Products Pvt. Ltd ( (2006) 1 SCC 458) and Commissioner of Income-tax, Pune vs. Shirke Construction Equipment Ltd. (AIR 2007 SC 2089).

In our opinion, in view of the aforesaid principles laid down by the Apex Court there is no scope of advancing any argument that the different business of

the assessee are required to be considered separately for the purpose of calculating the deductions under Section 80 HHC of the Act.

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