Eligibility of 100% EOU to get the exemption u/s 10 B

[Adoni Raghavendra]

Dear All, I have an doubt to clarify about the deduction U/s 10B of Income Tax Act, 1961. for the export made through 100% EOU. A 100% EOU has an contractual agreement with third party[MMTC], as a service buyer, that the 3rd party [MMTC]has to complete the export sale with the foreign buyer located by the 100% Export oriented unit. The contract entered between MMTC & 100% EOU and the price are INR equivalent to the USD [$] as on the date of sale realization received by the service buyer. The Seller[100% EOU] raise the invoice on Service Buyer in USD[$] after the completion of the shipment. The payment has been released by the service buyer in INR equivalent to the total USD[$] as per invoice raised by 100% Export oriented unit. I feel that the foreign exchange conversion done by the service buyer since he received the foreign exchange. Further in the shipping bill the service buyer given the declaration that 100% EOU is the manufacturer & Exporter. Please clarify the doubts whether the 100% EOU is eligible to get the exemption u/s 10B a) As 100% Export b) As Deemed Export Kamal Kumar Bagaria.

[Surender Gupta]

There was a concept of disclaimer certificate u/s 80HHC for the purpose of allowance of deduction to supporting manufacturer. In this case also, the status of 100% EOU appears to be a supporting manufacturer which is attracting the provisions of section 10B. There is corresponding provision u/s 10B which allowed exemption on the basis of disclaimer certificate.

[RadheyShyam Mangal]

There is no concept of deemed export in sec. 10B of income tax act, 1961. in case of third party export made by 100% EOU, the benefit under 10B is not available. though such deemed export is counted towards fulfilment of export obligation/NFE under para 6.9 of the FTP.

AI Summary

Exemption under section 10B denied for third party exports by fully export oriented units; supporting manufacturer certificate debated. Whether a 100% EOU can claim the exemption for export profits under section 10B when exports are completed by a third party service buyer: one perspective treats the EOU as a supporting manufacturer eligible for exemption on the basis of a disclaimer/supporting manufacturer certificate, while the opposing perspective states that section 10B has no deemed export concept and disallows the benefit for third party exports, though such exports may count toward FTP export obligations.