(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, 2 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 3 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;
4 (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 5 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 5 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, 6 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 5 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.
4 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
assesseeutilises 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 7
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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1. Ins. by Act 14 of 1982, s. 18 (w.e.f. 1-4-1983).
2. Subs. by Act 10 of 2000, s. 32, for "a deduction from such profits and gains
of an amount equal to fifty per cent. thereof" (w.e.f. 1-4-2001).
3. Subs. by Act 17 of 2013, s. 4, for "the Foreign Exchange Regulation Act, 1973
(46 of 1973)" (w.e.f. 1-4-2013).
4. Ins. by Act 27 of 1999, s. 45 (w.e.f. 1-6-1999).
5. Subs. by Act 10 of 2000, s. 33, for "fifty per cent. of the profits and gains
referred to in sub-section (1)" (w.e.f. 1-4-2001).
6. Subs. by Act 27 of 1999, s. 45, for certain words (w.e.f. 1-6-1999).
7. Subs. by Act 4 of 1988, s. 2, for "Income-tax Officer" (w.e.f. 1-4-1988).
Section 80HHB Deduction in respect of profits and gains from projects outside India
Section 80HHBA Deduction in respect of profits and gains from housing projects in certain cases
Section 80HHC Deduction in respect of profits retained for export business
Section 80HHD Deduction in respect of earnings in convertible foreign exchange
Section 80HHE Deduction in respect of profits from export of computer software, etc
Section 80IAC Special provision in respect of specified business