- (1.) The appellant-assessee has filed this appeal under Section 260A of the Income Tax Act, 1961 (for short, hereinafter referred to as 'Act') being aggrieved by the order of learned Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur dated 20.07.2007 for the Assessment Year 2003-04, whereby the learned ITAT following the decision of Hon'ble Supreme Court in the case of IPCA Laboratory Ltd. Vs. Deputy Commissioner of Income-Tax, Mumbai, 2004 2 BLR 406 held that the deduction under Section 80HHC (3C) can be allowed only, if there is a positive profit or income and if there is a loss in either of two separate Divisions of business then the loss of one Division has to be adjusted against the profit of the other division for the purposes of computing the profit for computing of deduction under Section 80HHC of the Act to the extent prescribed under sub-Section (1B) of Section 80HHC of the Act.
(2.) The assessee, a manufacturer of Granite and Marbles slabs and tiles, during the relevant assessment year 2003-04, has three different units setup. Unit-I is engaged in manufacturing of Granite tiles, while the Unit-II manufactures Granite slabs and Unit-III is again a manufacturer of Marble slabs and tiles. For the assessment year 2003-04 in question, the assessee claimed the income of Rs.4,37,81,709/- exempt under Section 10B with respect of Unit-II. While in other two units, the assessee claimed deduction under Section 80HHC of Act of Rs.2,56,46,746/- in the original return, which eduction claim was revised upwardly to Rs.3,02,97,098/- during the course of assessment proceedings. The assessee claimed deduction in Revised Return only on the profits on export turnover of Granite division (Unit-I), ignoring the loss on export turnover in respect of Marble division (Unit-III).
(3.) The Assessing authority disallowed such revised claim of the assessee and held that the loss of Marble Division (Unit-III) has to be first adjusted against the profit of Unit-I engaged in manufacturing of Granite tiles and only net of the positive profit shall be the "profits of business" as defined under Section 80HHC (4C) (baa) of the Act; and therefore, the benefit of deduction under Section 80HHC of the Act, cannot be given to the extent of increased amount of Rs.3,02,97,098/-. The assessee took the matter further in the first appeal before the learned Commissioner of Income Tax (Appeals), who however, allowed the claim of the assessee following the decision of Bench of Income Tax Tribunal in the case of Easter Leather Products Pvt. Ltd. Vs. DCIT,1999 68 ITD 358, in which a Bench of learned ITAT held that for the purpose of computation under Section 80HHC in respect of leather division engaged in export, loss in the engineering division is not required to be merged with the profit of leather division, as the two divisions are independent and maintain separate books; and therefore, they cannot be combined for the purposes of working out the deduction under Section 80HHC of the Act.;