The assessee firm which is engaged in the business of manufacturing and exporting honey. It claimed deduction under S. 80-IB(11A) in respect of benefit received under Vishesh Krishi and Gram Udyog Yojana (VKGUY).  AO denied the deduction on the ground that the VKGUY scheme is part of Foreign Trade Policy 2009-14 framed by the Government of India, Ministry of Commerce and Industry.  Tribunal also up held the view of the AO. On appeal high Court held that perusal of the scheme would suggest that the objective of the scheme was to promote export of agricultural produce and their value added products, minor forest produce and their value added variants, Gram Udyog products, forest based products and other produces as maybe notified. In relation to exports of such products, benefits in the form of incentives would be granted at the prescribed rate. The objective behind granting such benefit was in order to compensate high transport cost and to offset other disadvantages. In clear terms, thus, the Government of India realized that the products such as agricultural produce, minor forest produce and Gram Udyog products as also forest based products would have high transport cost and would be accompanied by various other disadvantages. In order to make the export of such products viable, the Government of India decided to grant certain incentives under the said scheme. The clear objective behind the scheme was, thus, to reduce the cost of its procurements and to neutralize certain inherent disadvantages attached to such products. Accordingly the court held that the assessee’s claim of deduction under section 80IB(11A) in relation to the benefits received by the assessee under VKGUY scheme upon the export of its agro products was to be allowed.  (AY. 2009-10)