Section 10B exemption confined to manufacture or production income; training fees of export unit fall outside the statutory scope.

Training fee receipts earned by a 100% export-oriented undertaking were held not to fall within the exemption under Section 10B because the provision covers only profits and gains derived from manufacture or production of an article or thing. Fees charged for training outsiders or non-employees were treated as commercial receipts, not income derived from software production or other qualifying output. The Software Technology Park scheme and customs circulars could not expand the statutory scope of the Income-tax Act. Applying strict construction to the exemption, relief was denied for the relevant year, and the later-year Revenue appeals were allowed.

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Issues: Whether receipts from training activity conducted by a 100% export oriented unit were eligible for exemption under Section 10B of the Income-tax Act.

Analysis: Section 10B, as applicable to the relevant assessment years, granted exemption only to profits and gains derived by a hundred per cent export-oriented undertaking engaged in the manufacture or production of an article or thing. The training receipts in question were fees charged for imparting training to outsiders or trainees who were not employees, and the receipts were not profits arising from manufacture or production of software or any other article or thing. The Software Technology Park scheme and customs circulars recognising training for import or customs purposes could not enlarge the scope of the exemption under the Income-tax Act. An exemption provision must be construed strictly, and unless the receipts clearly fall within the statutory language, relief cannot be granted.

Conclusion: The training receipts were not eligible for exemption under Section 10B; the assessee's appeal for the relevant assessment year was dismissed, while the Revenue's appeals for the later assessment years were allowed.

Final Conclusion: The decision holds that training fee income of the export oriented unit did not qualify for exemption under Section 10B, and the statutory exemption could not be extended by reference to the industrial scheme or customs circulars.

Ratio Decidendi: An exemption under Section 10B is available only for profits and gains derived from manufacture or production by a qualifying export-oriented undertaking, and receipts from commercial training of non-employees do not fall within that scope.

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