Income Tax Act, 1961
Section 80HHB- DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM PROJECTS OUTSIDE INDIA.
(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, a deduction from such profits and gains of an amount equal to fifty per cent thereof :
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” 1057a means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), 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 1058 duly signed and verified by such accountant;
(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 fifty per cent of the profits and gains referred to in sub-section (1) 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 fifty per cent of the profits and gains referred to in sub-section (1) is brought by the assessee in convertible foreign exchange into India, in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder, within a period of six months from the end of the previous year referred to in clause (ii) or, within such further period as the competent authority may allow in this behalf.
