Export profits rebate depends on statutory computation rules; extraneous material cannot defeat relief.

Export profits rebate under section 2(5)(i) of the Finance Act, 1963 was available where the assessee's total income included profits derived from export of goods, and those profits had to be computed only in the manner prescribed by the statutory rules. Rule 2 of the Income-tax (Determination of Export Profits) Rules, 1963 governed the computation, and rule 2(3) applied where export profits could not otherwise be ascertained. The taxing authority could not reject the claim by relying on isolated remarks in the directors' report or other extraneous considerations inconsistent with the prescribed computation scheme.

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Issues: Whether the assessee was entitled to export profits rebate under section 2(5)(i) of the Finance Act, 1963, and whether the export profits had to be computed strictly under rule 2(3) of the Income-tax (Determination of Export Profits) Rules, 1963.

Analysis: The rebate under section 2(5)(i) applied to an assessee whose total income included profits and gains derived from export of goods. Section 2(5)(vi) required such profits and gains to be computed in accordance with rules made for that purpose. Rule 2 of the 1963 Rules prescribed the method of computation, and where export profits could not be ascertained, rule 2(3) governed the computation on a turnover basis. The rejection of the claim by relying on isolated observations in the directors' report was inconsistent with the statutory scheme, because the taxing authorities were bound to determine the qualifying income only in the manner laid down by the Finance Act and the Rules.

Conclusion: The assessee was entitled to the export profits rebate, and the export profits had to be computed in accordance with rule 2(3) of the Income-tax (Determination of Export Profits) Rules, 1963.

Ratio Decidendi: Where a statute provides that export profits are to be computed by a prescribed rule, the assessing authority must apply that rule and cannot deny the relief on extraneous considerations inconsistent with the statutory computation scheme.

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