545. Whether ‘convertible foreign exchange’ does not include remittances from Nepal and Bhutan
1. One of the conditions for allowing deduction under section 80HHB is that the consideration for the execution of a foreign project/work is payable in convertible foreign exchange and at least 50 per cent of the profits and gains derived from the business of execution of foreign project/work is brought into India in convertible foreign exchange within a specified time. Likewise, deduction under section 80HHC is allowed to an exporter only if the sale proceeds are received in or brought into India in convertible foreign exchange. Similarly, one of the conditions for allowing deduction under section 80-O is that the royalty, commission, fees etc., should be brought into India in convertible foreign exchange.
2. The Central Board of Direct Taxes have, from time to time, issued Circulars/Instructions/Press Notes regarding the treatment of the amounts received in non-convertible rupees from bilateral account countries for the purpose of deduction under sections 80HHB, 80HHC and 80-O of the Income-tax Act.
3. With a view to removing any doubts in this regard, it is reiterated that the expression “convertible foreign exchange” in the abovementioned provisions of the Income-tax Act, also includes the amounts received in non-convertible rupees from bilateral account countries and receipts in Indian rupees under Government to Government credit. However, it does not include remittances from Nepal and Bhutan.
Circular : No. 575, dated 31-8-1990.
