INCOME TAX OFFICER, BANGALORE versus M/S. INDUFLEX PRODUCTS (P) LTD.

Citation: [2005] SUPP. 5 S.C.R. 693 · Decided: 08-12-2005 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

INCOME TAX OFFICER, BANGALORE 
A 
v. 
MIS. INDUFLEX PRODUCTS (P) LTD. 
DECEMBER 8, 2005 
[S.B. SINHA AND R.V. RA VEENDRAN, JJ.] 
B 
Income Tax Act, 1961-Section 80HHC-Export business-Declaration 
by assessee incurring loss in the export of trading goods-Claiming benefit 
under the provision-Benefit allowed by Assessing Officer but denied by the C 
Commissioner-Tribunal as well as High Court allowed the benefit-In appeal, 
held: In order to avail benefit u/s 80 HHC profit must be shown to be positivt; 
profit-Benefit is not available in the event loss is incurred-Since it has not 
been found by High ·Court whether the assessee had shown any positive 
profit, matter remitted to High Court to consider this aspect. 
Respondent-assessee was engaged in the business of export. It declared 
that its profits out of export of trading goods were 'negative' i.e. it incurred 
loss and therefore, it claimed benefit of Section 80 HHC of Income Tax Act, 
1961. Assessing Officer allowed the benefit. Commission issued a notice to 
D 
the assessee on the premise that the order of assessment was erroneous and 
prejudicial to Revenue and directed the Assessing Officer to withdraw its E 
order. Appeal of the assessee thereagainst was allowed by the Appellate 
Tribunal. The appeal of the Revenue against the order of Tribunal was 
dismissed by High Court. Hence the present appeal. 
Allowing the appeal and remitting the matter to High Court, the Court F 
HELD: 1. The provisions under Section 80 HHC{l) and (3) of Income 
Tax Act, 1961 was brought in the statute book for the purpose of providing 
incentive to export houses but the same would not mean that even if the 
assessee incurs a loss instead of profit, he would be entitled to the benefit 
thereof. [697-C, DJ 
G 
2. The expression "profits" used in Section 80 HHC connotes positive 
profit. It is a profit earned from the said business alone which can be subject 
matter of exemption. A fortiori if a profit is not earned, the question of 
claiming exemption would not arise. [697-El 
693 
H 
694 
SUPREME COURT REPORTS [2005] SUPP. 5 S.C.R. 
A 
3. 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 self-manufactured goods and the trading goods and the profits 
and losses in both the trades have, thus, to be taken into consideration. In the 
event, if it is found that a loss has occurred, sub-section (3) of Section 80 
B UPC will have no application. However, it does not appear from the rrcords as 
to whether such an exercise was undertaken or not The Appellants themselves 
averred that for the assessment year in question, the Respondent had earned 
profit in its export business. Yet again in the order passed by the 
Commissioner oflncome Tax, the contention of the assessee was noticed that 
though the assessee earned export profit, it resulted in the negative figure. It 
C may, therefore, be necessary to consider this aspect of the matter as to whether 
the Appellant had shown any positive profit or not; as such a clear finding 
does not appear to have been arrived at by the High Court (698-B-G] 
D 
IPCA Laboratory Ltd v. Dy. Commissioner of Income Tax, Mumbai, 
(2004] 12 sec 742, relied on. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7307 of2005. 
From the Judgment and Order dated 12.8.2003 of the Kamataka High 
Court in LT.A. No. 14 of2003. 
E 
Mohan Parasaran, Additional Solicitor General, T.V. Ratnam and B.V. 
F 
Balaram Das for the Appellant. 
The Judgment of the Court was delivered by 
S.B. SINHA, J. Leave granted. 
The Respondent is an assessee of Income Tax. It is engaged in the 
business of expert. It claimed benefit of Section 80HHC of the Income Tax Act, 
1961 (Act). A declaration was made by it that its profits out of export of 
trading goods were 'negative' i.e. it incurred loss. The said benefit having 
been allowed by the assessing officer while making assessment under Section 
G 143(3) of the Act, the Commissioner of Income Tax in exercise of his power 
conferred upon him under Section 263 thereof issued a notice to the assessee 
on the premise that the said order of assessment was erroneous and prejudicial 
to revenue. Upon hearing the assessee, by an order dated 3 .3 .1999; a direction 
was issued to the assessing officer to withdraw the said relief. The Respondent 
H preferred an appeal thereagainst before the Income Tax Appellate Tribunal, 
INCOME TAX OFFI

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