Section 80HHE of the Income-tax Act, 1961 – Deductions – Profits from export of computer software, etc. – Clarification regarding provisions of section 80HHE of the Income-tax Act, 1961

CIRCULAR NO. 3/2004, DATED 12-2-2004

1. The Board has received references seeking clarification on the period of applicability of the Explanation under section 80HHE(1) of the Income-tax Act, 1961. The Explanation states as under –

“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.”

1.1 The Explanation was inserted by the Finance Act, 2001 w.e.f. 1-4-2001. However, as pointed out by the Ministry of Law on various occasions, the use of the words “for the removal of doubts” in an Explanation normally implies that the Explanation is only clarificatory in nature. As this Explanation under section 80HHE(1) only, clarifies the existing position of law, the Board are of the opinion that the Explanation will be considered to have effect from 1-4-1991, i.e. the date on which section 80HHE came into force.

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