Chitra Venkataraman, J.:— The assessee preferred the above appeals as against the order of the Tribunal relating to three assessment years, viz., 1995-96, 1996-97 and 1997-98. The assessee is engaged in the business of manufacturing and sale of silk fabrics. It has two units. One unit is situated at Bangalore which is engaged in manufacturing silk fabrics and exporting the same. In other words, the unit at Bangalore is a 100 per cent, export oriented unit. The other unit is at Ramnagaram, which is engaged in manufacturing silk fabrics, catering to the domestic market as well as exporting the manufacturing goods form this unit.

2. Initially, the assessee claimed exemption in respect of the Bangalore unit under section 10B of the Act for the assessment years 1989-90 to 1993-94. Thereafter, for the assessment years under consideration, the assessee claimed deduction under section 80HHC in respect of the Bangalore unit. It is seen from the orders of the assessment that the Assessing Officer aggregated the profit in respect of the two units and computed the relief under section 80HHC in respect of the net income. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals), contending that when the profits from the export unit at Bangalore was identifiable, the assessee would be entitled to 100 per cent, deduction for the said profits. The assessee pointed out that the units at Bangalore and Ramnagaram are independent units having separate work force. Even though there was a centralised management, they are keeping separate set of books of account for the two units, having separate bank accounts. There is no inter-dependency between these units. Consequently, the assessee prayed for grant of full relief in respect of the 100 per cent, export oriented unit at Bangalore. The claim of the assessee was, however, rejected by the Commissioner of Income-tax, holding that there was no scope for working out the deduction under section 80HHC in respect of 100 per cent, export oriented unit separately and even if the accounts of 100 per cent, export oriented unit are maintained separately indicating the export profits, the assessee would not be entitled to deduction under section 80HHC. Aggrieved, by the same, the assessee preferred appeals before the Tribunal. A reading of the order of the Tribunal shows that it went by the decision of the apex court reported in IPCA Laboratory Ltd. v. Deputy CIT, [2004] 266 ITR 521 (SC), to hold that the relief under the provisions of section 80HHC is controlled by section 80AB. The Tribunal held that the “gross total income” means the total income computed under the provisions of the Income-tax Act. Hence, merely because the assessee is having two independent and separate units, it cannot be said that the assessee is entitled to ignore the loss incurred in one unit. Apart from that, what is eligible for deduction under section 80HHC is the aggregate income of the assessee in respect of all the units of the assessee. Hence”, there was no justification in the claim of the assessee that the Bangalore unit should be considered separately for the purpose of deduction under section 80HHC. The sum and substance of the order of the Tribunal is, going by the methodology of computation of the gross' total income, the relief under section 80HHC also has to follow the same method. Aggrieved by the same, the assessee preferred the above appeals before this court.

3. It is made clear that the issue raised before this court is as regards 100 per cent, export oriented unit situated at Bangalore. The assessee never made any claim as regards the other unit which had export as well’ as local sale.

4. Learned counsel appearing for the assessee placed reliance on the decision of this court, reported in:

(i) Commissioner Of Income-Tax v. Macmillan India Ltd., [2007] 295 ITR 67 (Mad)

(ii) CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad)

(iii) CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad); and

(iv) CIT v. M. Gani and Co., [2008] 301 ITR 381 (Mad).

only to point out that the assessee has maintained separate accounts for export business and the domestic business and when the gross total income was a positive one, there was no warrant for disallowing any portion of the export earnings.

5. Learned counsel for the assessee placed emphasis on the decision reported in CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad), and pointed out that when the accounts maintained by the assessee relating to the export business was independent of the other unit business; that there was no intermingling of expenditure or interlacing of funds of any kind whatsoever, and the assessee had also complied with the legal requirements by filing Form No. 10CCA in support of his claim, the question of rejecting or restricting the claim in respect of the 100 per cent, deduction did not arise.

6. He further pointed out that the decision reported in Waterfall Estates Ltd. v. Commissioner Of Income-Tax, Madras (No. 1) (No. 1), [1981] 131 ITR 207 (Mad) approved by the apex court in the decision reported in Waterfall Estates Ltd. v. Commissioner Of Income-Tax, Madras (No. 1), [1996] 219 ITR 563 (SC), wherein it was held that when the assessee carried on various activities, even though there may be centralised accounts maintained, yet, so long as there is no interlacing, inter connection on inter dependence of the various units, the various activities carried on by the assessee has to be treated as separate and distinct activities.

7. Learned counsel for the assessee also brought to our attention the decision of the apex court reported in L.M Chhabda and Sons v. CIT, [1967] 65 ITR 638 (SC), wherein it was held that there is no such general principle that where an assessee carried on business ventures of the same character at different places, it must be held, as a matter of law, that the different units are parts of a single business. Going by the said decision, particularly, the decisions reported in Commissioner Of Income-Tax v. Macmillan India Ltd., [2007] 295 ITR 67 (Mad), CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad) and CIT v. M. Gani and Co., [2008] 301 ITR 381 (Mad), which have reached finality in point of law as regards the grant of relief under section 80HHC, the Tribunal committed a serious error in not adverting to the claim of the assessee in the proper perspective, to grant the relief. He made particular reference to the decision of the apex court reported in IPCA Laboratory Ltd. v. Deputy CIT, [2004] 266 ITR 521 (SC) and pointed out that there is no dispute as far as the principle of law laid down by the apex court therein is concerned, that the deduction under section 80HHC could be permitted only if there is positive profit in the exports. He also emphasised that it is an admitted fact that the Bangalore unit as well as the unit at Ramnagaram are profit-making units and the computation of the gross total income of the assessee is a positive one. As such, the question of rejecting the claim based on the decision reported in IPCA Laboratory Ltd. v. Deputy CIT, [2004] 266 ITR 521 (SC) does not arise. In the circumstance, he prayed for setting aside the order of the Tribunal.

8. Per contra, learned senior standing counsel for the Revenue pointed out to the decision of the apex court reported in Synco Industries Ltd. v. Assessing Officer (Income-tax), [2008] 299 ITR 444 (SC), and contended that given the fact that the gross total income of the assessee has to be computed taking into account both the units, the relief granted under Chapter VI-A has to be worked out by taking note of the export turnover of both the units. Hence, the question of granting 100 per cent, relief in respect of the Bangalore unit separately did not arise.

9. Heard learned counsel for the assessee as well as the learned senior standing counsel appearing for the Revenue.

10. We have perused the orders of the Tribunal and the decisions of this court relied on by the assessee. Admittedly, the issue of grant of relief under section 80HHC in respect of the assessee having export business as well as local sales has to be decided and the decisions reported in Commissioner Of Income-Tax v. Macmillan India Ltd., [2007] 295 ITR 67 (Mad), CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad) and CIT v. M. Gani and Co., [2008] 301 ITR 381 (Mad) have not been challenged by the Revenue and had reached finality. Hence, we are satisfied that principally these decisions conclude the issue in favour of the assessee.

11. The facts herein are not in dispute. Before considering the legal arguments of the assessee, it is but necessary that we draw our attention to the decisions of this court relied on by the assessee.

12. The decision reported in CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad), relates to a case of an assessee engaged in the manufacture and sale of jewellery and gold ornaments in Chennai. They also exported diamonds and precious stones from Bombay. In respect of the assessment year 1997-98, the assessee claimed Rs. 49.75 lakhs as deduction under section 80HHC by treating the export unit as a separate business. The Assessing Officer restricted the claim by calculating the deduction on the basis of the total turnover of all the business of the assessee. The Revenue filed an appeal before this court, raising the question that the provisions of section 80HHC(3) were not applicable to the assessee's case. This court pointed out to the decisions reported in CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), and held that when the export business was an independent business, the assessee was entitled to the relief. This court held that the assessee therein had maintained trading receipts and profit and loss accounts separately for export sales and domestic sales and that there were sufficient materials supported by all the necessary documents to show that the deduction claimed was entirely due to export. Hence, there was no warrant for disallowing any portion of the export earnings pro rata by invoking clause (b) of sub-section (3) of section 80HHC of the Income-tax Act, 1961. This court pointed out that the section would operate to disallow a part of the allowance under that section only when the entire deduction claimed could not be regarded as being relatable to exports. Thus, going by the fact that the export business was independent of his other business and that the assessee was maintaining separate accounts, there was no intermingling of expenditure or interlacing of funds of any kind whatsoever and that the assessee had also complied with the legal requirements by filing Form No. 10CCA in support of his claim, the Revenue was not justified in rejecting the claim of the assessee.

13. In the decision reported in Commissioner Of Income-Tax v. Macmillan India Ltd., [2007] 295 ITR 67 (Mad), this court followed the decision reported in CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), and held that there was no warrant for disallowing any portion of the export earnings, particularly, when the export business at Bangalore had separate accounts on the export turnover. The fact, that the assessee had business at Madras for local business, would (not?) justify the Revenue rejecting the claim for 100 per cent, export oriented unit for deductions in respect of the export oriented unit.

14. In the decision reported in CIT v. M. Gani and Co., [2008] 301 ITR 381 (Mad), again following the decision of CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), this court allowed the case of the assessee by holding that in the absence of ambiguity, as regards the maintenance of separate books of account, the assessee's claim for deduction under section 80HHC for 100 per cent, relief could not be rejected.

15. Thus the consistent view of this court is that even in cases where the assessee had different units of business, so long as there is no intermingling of expenditure or interlacing of funds of any kind whatsoever and that the assessee had maintained accounts separately which revealed the export business and’ that the Claim was supported by a chartered accountant certificate in compliance with the statutory provisions, the claim of the assessee under section 80HHC to have deductions at 100 per cent, on the export made by the unit, engaged 100 per cent, in exports, could not be denied merely on the score that the assessee had various units, some of which had export and some had export as well as local sales.

16. As far as the decision of the apex court reported in IPCA Laboratory Ltd. v. Deputy CIT, [2004] 266 ITR 521 (SC) is concerned, we do not find that the statement of law declared by the apex court could, in any way stand, in the way of this court accepting the plea of the assessee herein that the claim in respect of 100 per cent, export unit merited to be considered, independent of other units in terms of section 80HHC(3). Before considering the decision herein, the provisions of section 80HHC(3) merit to be seen, which read as follows:

“(3) For the purposes of sub-section (1), —

(a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee;

(b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export;

(c) where the export out of India is of goods or merchandise manufactured or processed by the assessee, and of trading goods, the profits derived from such export shall, —

(i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and

(ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to export of such trading goods:

Provided that the profits computed under clause (a) or clause (b) or clause (c) of this sub-section shall be further increased by the amount which bears to ninety per cent, of any sum referred to in clause (iiia) (not being profits on sale of a licence acquired from any other person), and clauses (iiib) and (iiic) of section, 28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.”

17. Referring to the provisions, the apex court pointed out that sub-section (3)(a) deals with the case where the export is only of self-manufactured goods, sub-section (3)(b) deals with the case where the export is only of trading goods, and sub-section (3)(c) deals with the cases where the export is of both self-manufactured goods as well as trading goods. The only condition that governs the grant of relief under section 80HHC is that the assessee having positive profit alone would be entitled to have the deduction under section 80HHC. In. other words, if there is a loss then no deductions could be claimed under the provisions of section 80HHC in arriving at the positive profit. The apex court held that profits and loss of the business have to be considered in arriving at the gross total income, and income from various units have to be calculated and if one of the units indicated a loss, then going by the said provisions available, the gross total income will have to be arrived at and ultimately if the net figure is also a loss, the claim of the assessee for deductions would be rejected. The apex court further pointed out that section 80HHC(3) provides for working out the computation of total income and for the purpose of such computation, both profits and loss have to be taken into account. Thus, section 80HHC, both in sub-section (1) and in sub-section (3), means a positive profit worked out after taking into consideration the losses, if any. Dealing with the meaning of gross total income, in the decisions reported in Synco Industries Ltd. v. Assessing Officer (Income-tax), [2008] 299 ITR 444 (SC), the apex court pointed out that gross total income would be arrived after making the computation as follows (headnote):

“(i) making deductions under the appropriate computation provisions;

(ii) including the incomes, if any, under sections 60 to 64 in the total income of the individual;

(iii) adjusting intra-head and/or inter-head losses; and

(iv) setting off brought forward unabsorbed losses and unabsorbed depreciation, etc. Only if the gross total income so determined is positive the question of allowing the deductions under Chapter VI-A would arise, not otherwise.”

18. The apex court pointed out that in arriving at a figure of positive profit, both the profits and loss have to be considered. If the net figure is a positive profit, then the assessee would be entitled to a deduction, but if the net figure is a loss, then the assessee would not be entitled to a deduction. A reading of the judgment of the apex court reported in Synco’ Industries Ltd. v. Assessing Officer (Income-tax), [2008] 299 ITR 444 (SC) shows that the assessee therein had more than one unit. The claim of the assessee is that each unit should be treated separately and the losses suffered in the earlier years were not adjustable against the profits of the other unit. But since the gross total income was nil, the Assessing Officer rejected the plea of the assessee for the benefit of deductions under Chapter VI-A. The Appellate Tribunal and the High Court affirmed the view of the officer. On further appeal, the apex court held that in determining the gross total income, the assessee has to compute the income from each one of the units. When one unit suffered loss and other unit earned profit, after setting off loss, if the gross total income worked out shows profit, the assessee would be entitled to deduction under Chapter VI-A. On the other hand, if the gross total income is a negative income, then the claim of the assessee could not be considered for any benefit under Chapter VI-A. In the light of the law thus laid down by the apex court, it is clear that only in the case of gross total income being a profit, the claim of the assessee for deduction merited to be considered.

19. Coming to the facts herein, it is not disputed by the Revenue that both the units of the assessee are profit-making units and the gross total income was computed in the manner as given under the Act and that there was a positive income of profit. Going by the decisions referred to above and the same when applied to the facts of the case herein, the assessee would be entitled to deduction under Chapter VI-A. In the light of this fact, we do not find any justification in the view of the Tribunal, rejecting the plea of the assessee for deduction under Chapter VI-A.

20. A reading of the order of the Tribunal shows that it misconstrued the decision of the apex court reported in IPCA Laboratory Ltd. v. Deputy. CIT, [2004] 266 ITR 521 (SC), to reject the case of the assessee. Applying the said decision and the decision reported in Syrico Industries Ltd. v. Assessing Officer (Income-tax), [2008] 299 ITR 444 (SC), to the facts herein that the assessee had profit and the decisions of this court cited supra, viz., Commissioner Of Income-Tax v. Macmillan India Ltd., [2007] 295 ITR 67 (Mad), CIT v. Rathore Brothers, [2002] 254 ITR 656 (Mad), CIT v. Suresh B. Mehta, [2007] 291 ITR 462 (Mad) and CIT v. M. Gani and Co., [2008] 301 ITR 381 (Mad), as regards the grant of 100 per cent, relief to the unit engaged in export activity and the books of account maintained by the assessee for the export unit-to other units are independent, we have no hesitation in holding that the assessee's unit at Bangalore, being 100 per cent, export unit, is entitled to have the deduction in terms of section 80HHC(3). Quite apart from that, following the decisions of this court on the aspect of grant of relief, it is relevant to note here that section 80HHC contemplates three situations, viz., sub-section (3)(a) dealing with the case where the export is only of self-manufactured goods, sub-section (3)(b) dealing with the case where the export is only of trading goods, and sub-section (3)(c) dealing with the cases where the export is of both self-manufactured goods as well as trading goods. Apart from this, the section nowhere deals with the situation of an assessee having more than one unit of business and one of the units being purely 100 per cent, export oriented unit and the other unit, a partially export unit. Even though the Act does not provide for dealing with such a situation, yet, being a beneficial provision, we feel that, in fitness of things, the assessee is entitled to the relief in respect of 100 per cent, export oriented unit. Consequently, even in respect of the computation as given in Explanation (baa) to section 80HHC, the consideration for grant of relief must follow the decisions of the apex court reported in L.M Chhabda and Sons v. CIT, [1967] 65 ITR 638 (SC) as well as Waterfall Estates Ltd. v. Commissioner Of Income-Tax, Madras (No. 1), [1996] 219 ITR 563 (SC). The case of each of the units have to be considered independently for the purpose of working out the relief under section 80HHC. This would depend upon the facts to show that each of the unit had maintained their accounts independently and there was no interdependency or interlacing of funds to treat them as one consolidated unit. Going by the facts recorded therein, we have no hesitation in accepting the plea of the assessee that the income earned from the export goods from the Bangalore unit merited to be considered for 100 per cent, relief, as one failing under section 80HHC(3)(a) ‘of the Act.

21. In the decision reported in CIT v. Parry Agro Industries Ltd., [2002] 257 ITR 41 (Ker), the Kerala High Court considered a similar issue and held that section 80HHC(3) does not cover the situation where the assessee had export as well as domestic trade. The said situation is not covered under any of the limbs of sub-section (3) to section 80HHC. The manner as to how the profit from export of goods has to be ascertained is indicated in subjection (3) of section 80HHC and section 80HHC provides that in a case where the assessee is engaged wholly in the business of export out of India of any goods deductions must be granted in accordance with section 80HHC(1): In, the absence of any specific provision, the assessee was not entitled to have the relief granted in respect of 100 per cent, export oriented unit. We do not think that we need to deal with this aspect at length, since in the decision of this court cited supra in similar situation, this court had taken the view that so. long as the export details of the unit engaged in exports are separately maintained, the assessee could not be denied of the benefit in respect of section 80HHC with reference to the export unit. The decisions. thu, s taken by this court in the said decisions have attained finality too, as ‘there was no appeal filed by the Revenue.

22. In the light of the consistent view taken by this court in the decisions cited supra, we have no hesitation in setting aside the order of the Tribunal, thereby answering the question in favour of the assessee. Accordingly, the tax case appeal is allowed. No costs. Consequently, connected TCMPS are closed.