IMPORTANT POINT
In the facts and circumstances of the case the assessee is not entitled to claim deduction from tax in respect of deoiled cakes exported or sold to exporters by it in Assessment Years 1966-67 and 1967-68.

JUDEMENT

B.P. Jeevan Reddy, J.-These appeals are preferred by the assessee against the judgment of the Gurjarat High Court answering the two questions referred to it, at the instance of the Revenue, in favour of the Revenue and against the assessee. The two questions stated for the opinion of the High Court under Section 256(1) are:

"(1) Whether on the facts and in the circumstances of the case, the assessee was entitled to claim deduction from tax in respect of deoiled cakes exported or sold to exporters by it under section 2(5) (a) (ii) and (iii) and Section 2(5) (c) of the Finance Act, 1966 read with item No. 28 of the First Schedule to the Industries (Development and Regulation) Act, 1951 for the assessment year 1966-67 ?

(2) Whether on the facts and in the circumstances of the case the assessee was entitled to claim deduction from income-tax in respect of deoiled cakes exported or sold to exporters by it under section 2(4) (a) (ii) and (iii) and section 2(4) (c) of the Finance Act, 1967 read with Item No. 28 of the First Schedule to the Industries (Development and Regulation) Act, 1951 for the assessment year 1967-68?"

2. With a view to encourage export of industrial goods, the Finance Acts of 1966 and 1967 provided an additional incentive. A person engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (I.D.R. Act) and who has exported such articles out of India or has sold the said atricles to an exporter was entitled, to an additinal deduction specified in sub-clauses (ii) and (iii) of clause (a) of Section 2(5) of the Finance Act, 1966 and Section 2(4) of the Finance Act, 1967. The relevant provisions in both the Finance Acts are identical. It would suffice if we refer to the provisions in the Finance Act, 1966. Insofar as relevant, the provisions in Section 2(5) read as follows :

"2(5) (a) In respect of any assessment for the assessment year commencing on the Ist day of April 1966, in the case of an assessee being a domestic company or an assessee other than a company. -

(i) where his total income includes any profits and gains derived from the export of any goods or merchandise out of India, he shall be entitled to a deduction, from the amount of income-tax with which he is chargeable, of an amount equal to the income-tax calculated at one-tenth of the average rate of income-tax on the amount of such profits and gains included in his total income.

(ii) where he is engaged in the manufacture of any articles in an industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (LXV of 1951), and has, during the previous year, exported such articles out of India, he shall be entitled, in addition to the deduction of income-tax referred to in sub-clause (i), to a further deduction, from the amount of income-tax with which he is chargeable for the assessment year, of an amount equal to the income-tax calculated at the average rate of income-tax on an amount equal to two per cent, of the sale proceeds receivable by him in respect of such export;

Explanation - x x x x x x x

(iii) where he is engaged in the manufacture of any articles in an industry specified in the said First Schedule and has, during the previous year, sold such articles to any other person in India who himself has exported them out of India, and evidence is produced before the Income-tax Officer of such articles having been so exported, the assessee shall be entitled to a deduction, from the amount of income-tax with which he is chargeable for the assessment year of an amount equal to the income-tax calculated at the average rate of income-tax on a sum equal to two percent of the sale proceeds receivable by him in respect of such articles from the exporter.

(b) x x x x x x x x

(c) Nothing contained in sub-clause (ii) or sub-clause (iii) of clause (a) shall a