Section 80HHE of Income Tax Act "Deduction in respect of profits from export of computer software, etc"
80HHE. (1) Where an assessee, being an Indian company or
a person (other than a company) resident in India, is
engaged in the business of,-
(i) export out of India of computer software or its
transmission from India to a place outside India by any
means;
(ii) providing technical services outside India in
connection with the development or production of computer
software,
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 to the extent of
the profits, referred to in sub-section (1B), derived by the
assessee from such business :
Provided that if the assessee, being a company, engaged
in the export out of India of computer software, issues a
certificate referred to in clause (b) of sub-section (4A),
that in respect of the amount of the export specified
therein, the deduction under this sub-section is to be
allowed to a supporting software developer, then the amount
of deduction in the case of an assessee shall be reduced by
such amount which bears to the total profits derived by the
assessee from the export, the same proportion as the amount
of the export turnover specified in such certificate bears
to the total export turnover of the assessee.
Explanation.-For the removal of doubts, it is hereby
declared that the profits and gains derived from on site
development of computer software (including services for
development of software) outside India shall be deemed to be
the profits and gains derived from the export of computer
software outside India.
(1A) Where the assessee, being a supporting software
developer, has during the previous year, developed and sold
computer software to an exporting company in respect of
which the said company has issued a certificate under the
proviso to sub-section (1), 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 of
the profits derived by the assessee from the developing and
selling of computer software to the exporting company in
respect of which the certificate has been issued by the said
company to such extent and for such years as specified in
sub-section (1B).
(1B) For the purposes of sub-sections (1) and (1A), the
extent of deduction of profits shall be an amount equal to-
(i) eighty per cent of such profits for an assessment year
beginning on the 1st day of April, 2001;
(ii) seventy per cent thereof for an assessment year
beginning on the 1st day of April, 2002;
(iii) fifty per cent thereof for an assessment year
beginning on the 1st day of April, 2003;
(iv) thirty 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.
(2) The deduction specified in sub-section (1) shall be
allowed only if the consideration in respect of the computer
software referred to in that sub-section is received in, or
brought into, India by the assessee in convertible foreign
exchange, within a period of six months from the end of the
previous year or, within such further period as the
competent authority may allow in this behalf.
Explanation 1.-The said consideration shall be deemed to
have been received in India where it is credited to a
separate account maintained for the purpose by the assessee
with any bank outside India with the approval of the Reserve
Bank of India.
Explanation 2.-For the purposes of this sub-section, 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.
(3) For the purposes of sub-section (1), profits derived
from the business referred to in that sub-section shall be
the amount which bears to the profits of the business, the
same proportion as the export turnover bears to the total
turnover of the business carried on by the assessee.
(3A) For the purposes of sub-section (1A), profits derived
by a supporting software developer shall be,-
(i) in a case where the business carried on by the
supporting software developer consists exclusively of
developing and selling of computer software to one or more
exporting companies solely engaged in exports, the profits
of such business;
(ii) in a case where the business carried on by a supporting
software developer does not consist exclusively of
developing and selling of computer software to one or more
exporting companies, the amount which bears to the profits
of the business, the same proportion as the turnover in
respect of sale to the respective exporting company bears to
the total turnover of the business carried on by the
assessee.
(4) The deduction under sub-section (1) shall not be
admissible unless the assessee furnishes in the prescribed
form, along with the return of income, the report of an
accountant, as defined in the Explanation below sub-section
(2) of section 288, certifying that the deduction has been
correctly claimed in accordance with the provisions of this
section.
(4A) The deduction under sub-section (1A) shall not be
admissible unless the supporting software developer
furnishes in the prescribed form along with his return of
income,-
(i) the report of an accountant, as defined in the
Explanation below sub-section (2) of section 288, certifying
that the deduction has been correctly claimed on the basis
of the profits of the supporting software developer in
respect of sale of computer software to the exporting
company; and
(ii) a certificate from the exporting company containing
such particulars as may be prescribed and verified in the
manner prescribed that in respect of the export turnover
mentioned in the certificate, the exporting company has not
claimed deduction under this section :
Provided that the certificate specified in clause (b) shall
be duly certified by the auditor auditing the accounts of
the exporting assessee under the provisions of this Act or
under any other law.
(5) Where a deduction under this section is claimed and
allowed in respect of profits of the business referred to in
sub-section (1) for any assessment year, no deduction shall
be allowed in relation to such profits under any other
provision of this Act for the same or any other assessment
year.
Explanation.-For the purposes of this section,-
(a) "convertible foreign exchange" shall have the meaning
assigned to it in clause (a) of the Explanation to section
80HHC;
(b) "computer software" means,-
(i) any computer programme recorded on any disc, tape,
perforated media or other information storage device; or
(ii) any customised electronic data or any product or
service of similar nature as may be notified by the Board,
which is transmitted or exported from India to a place
outside India by any means;
(c) "export turnover" means the consideration in respect of
computer software received in, or brought into, India by the
assessee in convertible foreign exchange in accordance with
sub-section (2), but does not include freight,
telecommunication charges or insurance attributable to the
delivery of the computer software outside India or expenses,
if any, incurred in foreign exchange in providing the
technical services outside India;
(ca) "exporting company" means a company referred to in
sub-section (1) making actual export of computer software;
(d) "profits of the business" means the profits of the
business as computed under the head "Profits and gains of
business or profession" as reduced by-
(1) ninety per cent of any receipts by way of brokerage,
commission, interest, rent, charges or any other receipt of
a similar nature included in such profits; and
(2) the profits of any branch, office, warehouse or any
other establishment of the assessee situate outside India;
(e) "total turnover" shall not include-
(i) any sum referred to in clauses (iiia), (iiib) and (iiic)
of section 28;
(ii) any freight, telecommunication charges or insurance
attributable to the delivery of the computer software
outside India; and
(iii) expenses, if any, incurred in foreign exchange in
providing the technical services outside India;
(ea) "supporting software developer" means an Indian company
or a person (other than a company) resident in India,
developing and selling computer software to an exporting
company for the purposes of export.
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