M.M. Kumar, J. - (1.) The Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, 'the Tribunal '), by exercising its power under Sec. 256(1) of the Income Tax Act, 1961 (for brevity, 'the Act ') has referred the following questions of law, which are stated to have emerged from order dated 26.3.1999, in I.T.A. No. 1105(ASR)/1994, in respect of assessment year 1992 -93: 1. Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in dismissing the appeal of the Revenue and upholding the order of the Ld. DCIT (Appeals) that the term 'profit ' in proviso to Sub -section (3) of Sec. 80HHC of the Income Tax Act, 1961 can be stretched to include the term 'loss ' whereby directing to allow the deduction as claimed by the assessee firm?
(2.) Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in dismissing the appeal of the Revenue and upholding the order of the Ld. DCIT (A) whereby directing that the deduction Under Sec. 80HHC of the I.T. Act, 1961 was fully admissible as claimed by the assessee firm? 2. Brief facts of the case are that the assessee in respect of assessment year 1992 -93 declared its total income of Rs. 15,824/ -, which was derived from exports of lady suits, garments and hosiery items etc. Total turnover of exports has been declared at Rs. 5,64,453/ - and G.P. of Rs. 1,56,472/ -, which included cash assistance, duty draw back and import licence premium. The assessee claimed deduction of Rs. 80,306/ - under Sec. 80HHC of the Act. The Assessing Officer rejected the claim on the ground that under Sec. 80HHC of the Act claim is to be calculated on the 'profit ' made out of exports but in the case of the assessee, it has incurred loss from the export of goods. It was further concluded by the Assessing Officer that if the direct and indirect cost is compared with the total turnover of imports, then there is loss on account of export of goods at Rs. 62,111/ - excluding incentives of Rs. 1,58,242/ - but the assessee had claimed deduction under Sec. 80HHC of the Act by adding 90% of the total amount of incentives of Rs. 1,58,242/ -, which comes to Rs. 1,42,417/ - after adjusting business loss of Rs. 62,111/ -, resulting into plus figure of Rs. 80,306/ - claimed as deduction under Sec. 80HHC
(3.) The assessee preferred an appeal against the order of the Assessing Officer before the CIT (A). The CIT (A) allowed the appeal by observing as under: 2.3. I have gone through the facts of the case as well as the submissions made by the Ld. AR for the assessee. The issue involved in this case is whether the assessee is entitled to deduction Under Sec. 80HHC(iii) if there is apparently business loss by excluding export incentives. The Assessing Officer has interpreted the word 'Profit ' and the profit 'increased ' in the strict sense of the English Grammar. But in my opinion, this kind of interpretation of the word will lead to wrong calculation. In an accountancy, we have to adopt the arithmetical and mathematical interpretation of figures. Whether if a plus figure is added to a minus figure, there will be a plus answer or a minus answer, which means there should be plus income or a negative income. Whether the negative income is termed as 'loss ' and plus income is termed as 'profit ', but both of them are calculated, considered and computed under the head profits and gains from Business and Profession. It was never the intention of the Legislature that only the assessee who derives purely profit from the exports excluding incentives will be entitled to deduction Under Sec. 80HHC(iii). If that version is accepted, then the exporters, who sells their at a very competitive rates and makes profits only with the help of the actual incentives, will have to pay Income Tax. Moreover, the export field is like such that when the assessee fixes its selling price, he takes into account all the incentives which he is supposed to get from the Govt. in lieu of that export. That is why he is able to make entry in the International Field and he is able to sell his goods at a very very competitive rate in the International Market, which alternatively means that incentives are also considered who (sic?) the selling prices are fixed and it automatically becomes part of the profit. Keeping in view my these observations and the observations of the Ld. CIR (A) in the case of Popular Engg. Co. Loha Mandi Road, Phagwara in the order dt. 6 -12 -1993, I hold that the assessee is fully entitled to deduction Under Sec. 80HHC. The A.O. is, therefore, directed to allow the same according to law.;