Prospective amendment to Section 10B exemption did not apply to earlier export-oriented units, preserving eligibility despite lower exports.

Section 10B, as it stood before the Finance Act, 1994 amendment, granted exemption to a hundred per cent export-oriented undertaking approved by the prescribed authority without requiring that 75 per cent of turnover be exported. The later amendment and Circular No. 684 imposed the commencement and export-percentage conditions prospectively from 1 April 1994, so earlier units were not covered by the new restriction. On that construction, an undertaking that began production before 1 April 1994 remained eligible for exemption despite exports below 75 per cent of turnover, and the disallowance by the Assessing Officer was unsustainable.

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Issues: Whether the assessee was entitled to exemption under section 10B of the Income-tax Act, 1961, notwithstanding that production had commenced before 1 April 1994 and exports were less than 75 per cent of turnover.

Analysis: Section 10B, as it stood prior to the amendment effective from 1 April 1994, granted the exemption to a hundred per cent export-oriented undertaking approved by the prescribed authority. The earlier definition did not require the undertaking to export 75 per cent of its turnover. The amendment introduced by the Finance Act, 1994, and explained by Circular No. 684, was aimed at restricting the benefit prospectively to units commencing production on or after 1 April 1994 and exporting at least 75 per cent of turnover. The circular itself made it clear that the restriction was prospective and that earlier units were not governed by the new condition.

Conclusion: The assessee was entitled to exemption under section 10B, and the disallowance by the Assessing Officer was unsustainable.

Final Conclusion: The Revenue's appeals failed, and the common order of the Tribunal granting the exemption was upheld.

Ratio Decidendi: A restrictive amendment to an exemption provision applies prospectively where the statutory text and explanatory circular show that the earlier regime did not impose the new qualifying condition.

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