Section 80HHE:
Deduction in respect of profits from export of computer software, etc.
1(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, 2
a deduction to the extent of the profits, referred to in sub-section (1B),
derived by the assessee from such business:
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* * * * *
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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.
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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 6
to such extent and for
such years as specified in sub-section (1B).
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(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;
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(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,
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within such further period as the competent authority may allow in this behalf.
Explanation9
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.
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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 subsection 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.
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(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.
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(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;
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(b) “computer software” means,—
(i) any computer programme recorded on any disc, tape, perforated media or other
information storage device; or
(ii) anycustomised 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;
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(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;
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(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.
Notes:
1. Ins. by Act 49 of 1991, s. 30 (w.e.f. 1-4-1991).
2. Subs. by Act 10 of 2000, s. 36, for “a deduction of the profits” (w.e.f. 1-4-2001).
3. The proviso omitted by 22 of 1995, s. 18 (w.e.f. 1-4-1996).
4. Ins. by Act 21 of 1998, s.33 (w.e.f. 1-4-1999).
5. Ins. by Act 14 of 2001, s. 42 (w.e.f. 1-4-2001).
6. Ins. by Act 10 of 2000, s. 36 (w.e.f. 1-4-2001).
7. Subs. by Act 14 of 2001, s. 42, for sub-clauses (ii), (iii) and (iv) (w.e.f. 1-4-2002).
8. Subs. by Act 27 of 1999, s.48, for certain words (w.e.f. 1-6-1999).
9. Explanation relettered as Explanation 1 thereof by s. 48, ibid. (w.e.f. 1-6-1999)
10. Ins. by s. 48, ibid. (w.e.f. 1-6-1999).
11. Ins. by Act 21 of 1998, s.33 (w.e.f. 1-4-1999).
12. Subs. by Act 10 of 2000, s. 36, for sub-clause (b) (w.e.f. 1-4-2001).
13. Ins. by Act 21 of 1998, s. 33 (w.e.f. 1-4-1999).