Section 80HHC- Deduction in Respect of Profits Retained for Export Business

#section80hhc #profits #gain #export #business #income #incometax #incometaxact1961

The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.

As per Section 80HHC,

(1)If the assessee is a resident of India and an Indian company or a person, is engaged in the business of export out of India of any goods or merchandise to which this section applies, there will, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the export of such goods or merchandise:

Also, if the assessee, being a holder of an Export House Certificate or a Trading House Certificate issues a certificate referred to in clause (b) of sub-section (4A), that in respect of the amount of the export turnover specified therein, the deduction under this subsection is to be allowed to a supporting manufacturer, then the amount of deduction in the case of the assessee will be reduced by such amount which bears to the total profits derived by the assessee from the export of trading goods, the same proportion as the amount of export turnover specified in the said certificate bears to the total export turnover of the assessee in respect of such trading goods.

(1A) Where the assessee, being a supporting manufacturer, has during the previous year, sold goods or merchandise to any Export House or Trading House in respect of which the Export House or Trading House has issued a certificate under the proviso to sub-section (1), there will, in accordance with and subject to the provisions of this section, be allowed in computing the total income of the assessee, a deduction to the extent of profits, referred to in sub-section (1B), derived by the assessee from the sale of goods or merchandise to the Export House or Trading House in respect of which the certificate has been issued by the Export House or Trading House.

(1B) For the purposes of sub-sections (1) and (1A), the extent of deduction of the profits will be an amount equal to—

(i) 11% thereof for an assessment year beginning on the 1 April 2001;

(ii) 70% thereof for an assessment year beginning on the 1 April 2002;

(iii) 50% thereof for an assessment year beginning on the 1 April 2003;

(iv) 30% thereof for an assessment year beginning on the 1 April 2004,

and no deduction will be allowed in respect of the assessment year beginning on 1 April 2005 and any subsequent assessment year.

(2)(a) This section applies to all goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into, India by the assessee (other than the supporting manufacturer) in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.

(b) This section does not apply to the following goods or merchandise, namely:—

(i) mineral oil; and

(ii) minerals and ores (other than processed minerals and ores specified in the Twelfth Schedule).

(3) For the purposes of subsection (1), —

(a) where the export out of India is of goods or merchandise manufactured or processed by the assessee, the profits derived from such export shall be the amount which bears to the profits of the business, the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee;

(b) where the export out of India is of trading goods, the profits derived from such export shall be the export turnover in respect of such trading goods as reduced by the direct costs and indirect costs attributable to such export;

(c) where the export out of India is of goods or merchandise manufactured or processed by the assessee and of trading goods, the profits derived from such export will,—

(i) in respect of the goods or merchandise manufactured or processed by the assessee, be the amount which bears to the adjusted profits of the business, the same proportion as the adjusted export turnover in respect of such goods bears to the adjusted total turnover of the business carried on by the assessee; and

(ii) in respect of trading goods, be the export turnover in respect of such trading goods as reduced by the direct and indirect costs attributable to the export of such trading goods:

Also, the profits computed under clause (a) or clause (b) or clause (c) of this subsection will be further increased by the amount which bears to 90 % of any sum referred to in clause (iiia) (not being profits on the sale of a license acquired from any other person), and clauses (iiib) and (iiic) of section-28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee

Also, in the case of an assessee having export turnover not exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this subsection or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to 90% of any sum referred to in clause (iiid) or clause (iiie), as the case may be, of section-28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee.

Also, in the case of an assessee having export turnover exceeding rupees ten crores during the previous year, the profits computed under clause (a) or clause (b) or clause (c) of this subsection or after giving effect to the first proviso, as the case may be, shall be further increased by the amount which bears to 90% of any sum referred to in clause (iiid) of section-28, the same proportion as the export turnover bears to the total turnover of the business carried on by the assessee if the assessee has necessary and sufficient evidence to prove that,—

(a) he had an option to choose either the duty drawback or the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme; and