Export-linked DEPB receipts and section 80HHC computation favoured the assessee, but unsupported travel was disallowed.

Supporting manufacturer DEPB receipts were treated as integral export-linked business income and deduction under section 80IB was allowed. For computing deduction under section 80HHC, section 80IB deduction was held not to be reduced from business profits where competing views existed, and the interpretation favourable to the assessee was adopted. Foreign travelling expenses were disallowed because the assessee could not substantiate them with bills or vouchers, so that disallowance was upheld. The result was partial relief, with the assessee succeeding on the first two issues and failing on the expenditure claim.

---

---

Issues: (i) Whether DEPB receipts of a supporting manufacturer were eligible for deduction under section 80IB; (ii) whether deduction under section 80IB was to be excluded while computing deduction under section 80HHC in view of section 80IB(13) read with section 80IA(9); and (iii) whether the disallowance of foreign travelling expenses for want of supporting bills and vouchers was justified.

Issue (i): Whether DEPB receipts of a supporting manufacturer were eligible for deduction under section 80IB.

Analysis: The receipts were treated by the assessee as part of export-related business income. The authorities below had held them to be not income derived from the specified business and had relied on decisions taking a restrictive view of the expression "derived from". The Tribunal noticed that in similar cases involving supporting manufacturers, DEPB or export house premium had been treated as forming an integral part of the business receipts and had been held eligible for deduction.

Conclusion: The issue was decided in favour of the assessee and deduction under section 80IB on DEPB receipts was held allowable.

Issue (ii): Whether deduction under section 80IB was to be excluded while computing deduction under section 80HHC in view of section 80IB(13) read with section 80IA(9).

Analysis: Conflicting views were noticed on the manner of computing the deduction, including the effect of the restriction against double deduction. Applying the view favourable to the assessee where two views were possible, and relying on the authority supporting the assessee's position, the Tribunal held that the deduction under section 80IB was not to be reduced from business profits for the purpose of computing deduction under section 80HHC.

Conclusion: The issue was decided in favour of the assessee.

Issue (iii): Whether the disallowance of foreign travelling expenses for want of supporting bills and vouchers was justified.

Analysis: The assessee failed to substantiate the disputed expenditure with bills or vouchers. In the absence of supporting evidence, the disallowance made by the lower authorities was found to be justified.

Conclusion: The issue was decided against the assessee.

Final Conclusion: The assessee succeeded on the first two issues but failed on the disallowance of foreign travelling expenses, resulting in partial relief only.

Ratio Decidendi: Where a supporting manufacturer's export-linked receipt is treated as part of business turnover and two possible views exist on deduction computation, the view favourable to the assessee may be adopted; however, unsupported expenditure is liable to disallowance.

---