Section 80HHC deduction denied for supplies treated as deemed exports, as statutory export and foreign exchange conditions were not met.

Deduction under section 80HHC was confined to goods exported out of India with sale proceeds receivable in convertible foreign exchange, so supplies to ONGC and Oil India Ltd. did not qualify as exports for this purpose. A Ministry of Commerce circular treating such supplies as deemed exports applied only for that ministry's limited purpose and could not satisfy the statutory conditions. In the absence of a CBDT notification bringing such supplies within the provision, the deduction claim failed and was rejected.

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Issues: Whether deduction under section 80HHC of the Income-tax Act, 1961 was allowable in respect of supplies made to ONGC and Oil India Ltd. on the footing that such supplies were deemed exports.

Analysis: The relief under section 80HHC is available only where goods or merchandise are exported out of India and the sale proceeds are receivable in convertible foreign exchange. The supplies in question were not exports out of India. A Ministry of Commerce circular treating such supplies as deemed exports operated only for that Ministry's limited purpose and could not by itself satisfy the statutory requirement under section 80HHC. In the absence of a notification by the CBDT under sub-section (2)(b) bringing such supplies within the ambit of the provision, the deduction could not be granted.

Conclusion: The claim for deduction under section 80HHC failed and was rejected.

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