Dear Madam/Sir,

It has been brought to the notice of the Board that exporters are facing difficulties while calculating the amount of deduction available u/s 80-HHC and 80-HHE of the Income Tax Act, 1961.

2. Accordingly, a Committee, consisting of JS (TPL.I), JS (TPL.II) and JS (FTD.I) as its Members, has been set up by the Board to look into the various issues regarding the interpretation and implementation of the provisions relating to Sec.80-HHC and 80-HHE of the Act. The Committee will examine all issues relating to interpretation and implementation of the provisions of Sec. 80-HHC and 80-HHE of the Act, such as :

• Whether the profit on sale of DEPB is covered by the provision of Sec.28 (IIIa) and hence eligible for computation of deduction u/s 80-HHC;
  
  
• The arithmetical computation and adjustment of negative figure, if any, u/s on Sec.80-HHC (3);
  
  
• Whether the benefit u/s 80-HHE should be legally available to both “off site” as well as “on site” software development services provided out of the country.
  
  
• Any other issue of controversial nature pertaining to Sec. 80-HHC & 80-HHE.

3. The Committee will examine the various representations and court decisions within 3 months and then submit its report to the Board for approval. Thereafter, the Board will consider issuing necessary guidelines so as to reduce litigation/unnecessary tax demand created.

4. It has, therefore, been decided to keep all the appeals in abeyance for three months, which pertain to Sec.80-HHC and 80-HHE, at the level of CIT(A), and not to enforce the collection of demand attributable to such issues. The assessments involving such issues pending at the level of AOs may also be kept in abeyance till 30.11.2003 by which time the decision in these issues is expected to be finalized, unless the matter is getting time-barred.

5. This may please be brought to the notice of all the officers in your region.