Section 80HHB of Income Tax Act "Deduction in respect of profits and gains from projects outside India"
80HHB. (1) Where the gross total income of an assessee
being an Indian company or a person (other than a company)
who is resident in India includes any profits and gains
derived from the business of-
(a) the execution of a foreign project undertaken by the
assessee in pursuance of a contract entered into by him, or
(b) the execution of any work undertaken by him and forming
part of a foreign project undertaken by any other person in
pursuance of a contract entered into by such other person,
with the Government of a foreign State or any statutory or
other public authority or agency in a foreign State, or a
foreign enterprise, there shall, in accordance with and
subject to the provisions of this section, be allowed, in
computing the total income of the assessee, a deduction from
such profits and gains of an amount equal to-
(i) forty per cent thereof for an assessment year beginning
on the 1st day of April, 2001;
(ii) thirty per cent thereof for an assessment year
beginning on the 1st day of April, 2002;
(iii) twenty per cent thereof for an assessment year
beginning on the 1st day of April, 2003;
(iv) ten per cent thereof for an assessment year beginning
on the 1st day of April, 2004,
and no deduction shall be allowed in respect of the
assessment year beginning on the 1st day of April, 2005 and
any subsequent assessment year :
Provided that the consideration for the execution of such
project or, as the case may be, of such work is payable in
convertible foreign exchange.
(2) For the purposes of this section,-
(a) "convertible foreign exchange" means foreign exchange
which is for the time being treated by the Reserve Bank of
India as convertible foreign exchange for the purposes of
the Foreign Exchange Management Act, 1999 (42 of 1999), and
any rules made thereunder;
(b) "foreign project" means a project for-
(i) the construction of any building, road, dam, bridge or
other structure outside India ;
(ii) the assembly or installation of any machinery or plant
outside India ;
(iii) the execution of such other work (of whatever nature)
as may be prescribed.
(3) The deduction under this section shall be allowed only
if the following conditions are fulfilled, namely :-
(i) the assessee maintains separate accounts in respect of
the profits and gains derived from the business of the
execution of the foreign project, or, as the case may be, of
the work forming part of the foreign project undertaken by
him and, where the assessee is a person other than an Indian
company or a co-operative society, such accounts have been
audited by an accountant as defined in the Explanation below
sub-section (2) of section 288 and the assessee furnishes,
along with his return of income, the report of such audit in
the prescribed form duly signed and verified by such
accountant;
(ia) the assessee furnishes, along with his return of
income, a certificate in the prescribed form from an
accountant as defined in the Explanation below sub-section
(2) of section 288, duly signed and verified by such
accountant, certifying that the deduction has been correctly
claimed in accordance with the provisions of this section ;
(ii) an amount equal to such percentage of the profits and
gains as is referred to in sub-section (1) in relation to
the relevant assessment year is debited to the profit and
loss account of the previous year in respect of which the
deduction under this section is to be allowed and credited
to a reserve account (to be called the "Foreign Projects
Reserve Account") to be utilised by the assessee during a
period of five years next following for the purposes of his
business other than for distribution by way of dividends or
profits ;
(iii) an amount equal to such percentage of the profits and
gains as is referred to in sub-section (1) in relation to
the relevant assessment year is brought by the assessee in
convertible foreign exchange into India, in accordance with
the provisions of the Foreign Exchange Management Act, 1999
(42 of 1999), and any rules made thereunder, within a period
of six months from the end of the previous year referred to
in clause (ii) or, within such further period as the
competent authority may allow in this behalf :
Provided that where the amount credited by the assessee to
the Foreign Projects Reserve Account in pursuance of clause
(ii) or the amount brought into India by the assessee in
pursuance of clause (iii) or each of the said amounts is
less than such percentage of the profits and gains as is
referred to in sub-section (1) in relation to the relevant
assessment year, the deduction under that sub-section shall
be limited to the amount so credited in pursuance of clause
(ii) or the amount so brought into India in pursuance of
clause (iii), whichever is less.
Explanation.-For the purposes of clause (iii), the
expression "competent authority" means the Reserve Bank of
India or such other authority as is authorised under any law
for the time being in force for regulating payments and
dealings in foreign exchange.
(4) If at any time before the expiry of five years from the
end of the previous year in which the deduction under
sub-section (1) is allowed, the assessee utilises the amount
credited to the Foreign Projects Reserve Account for
distribution by way of dividends or profits or for any other
purpose which is not a purpose of the business of the
assessee, the deduction originally allowed under sub-section
(1) shall be deemed to have been wrongly allowed, and the
Assessing Officer may, notwithstanding anything contained in
this Act, recompute the total income of the assessee for the
relevant previous year and make the necessary amendment; and
the provisions of section 154 shall, so far as may be, apply
thereto, the period of four years specified in sub-section
(7) of that section being reckoned from the end of the
previous year in which the money was so utilised.
(5) Notwithstanding anything contained in any other
provision of this Chapter under the heading "C.-Deductions
in respect of certain incomes", no part of the consideration
or of the income comprised in the consideration payable to
the assessee for the execution of a foreign project referred
to in clause (a) of sub-section (1) or of any work referred
to in clause (b) of that sub-section shall qualify for
deduction for any assessment year under any such other
provision.
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