Duty drawback forms part of eligible profits for section 10B deduction under the statutory export-profit formula.

Duty drawback is includible in the eligible profits for deduction under section 10B because the statutory formula in sub-section (4) computes the deduction by reference to the profits of the business of the eligible undertaking, and section 10B contains no separate exclusion mechanism for such income. The Tribunal treated duty drawback as business income of the undertaking, distinguished Liberty India on the ground that it concerned provisions without this formula, and followed Maral Overseas and Hritnik Export. The assessee was therefore entitled to include duty drawback in the deduction base under section 10B.

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Issues: (i) Whether duty drawback forms part of the eligible profits for deduction under section 10B.

Issue (i): Whether duty drawback forms part of the eligible profits for deduction under section 10B.

Analysis: The deduction under section 10B is computed by applying the statutory formula in sub-section (4), which requires the profits of the business of the undertaking to be apportioned with reference to export turnover. The Tribunal held that once an income forms part of the business income of the eligible undertaking, section 10B does not contain any further exclusion comparable to the specific exclusion mechanism found in other provisions. The decision of the Supreme Court in Liberty India was held inapplicable because it dealt with sections where no such statutory formula existed. The Tribunal also followed the Special Bench view in Maral Overseas and the Delhi High Court decision in Hritnik Export, and held that duty drawback is deemed business income and cannot be excluded from the eligible profits.

Conclusion: Duty drawback is includible in the eligible profits for deduction under section 10B and the assessee succeeds on this issue.

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