Deduction under section 80HHC of the Income-tax Act, 1961--Clarification regarding

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..... as follows:-- (i) the assessee should be an Indian company or a person (other than a company) resident in India. (ii) he should be engaged in the business of export out of India of any goods or merchandise (other than mineral oils, minerals and ores); (ii) the deduction is also available to a supporting manufacturer who has sold his goods or merchandise to an export house/trading house provided the export house/ trading house has issued a disclaimer certificate in respect of the "export turnover" in Form No.10CCAB. The term "supporting manufacturer" shall, with effect from the assessment year 1991-92, include a processor of goods. Thus, a seafood processor, for example, or any other processing unit exporting goods or merchandise through .....

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..... "export turnover" bears to the "total turnover" of the business carried on by the assessee. 3. Several doubts have been expressed about how the deduction under section 80HHC is to be allowed. Representations received by the Board show that there is lack of uniformity amongst authorities in respect of allowing the aforesaid deduction. 4. Sub-section (3) of section 80HHC statutorily fixes the quantum of deduction on the basis of a proportion of the profits of business under the head "Profits and gains of business or profession" irrespective of what could strictly be described as "profits derived from the export of goods or merchandise out of India". The deduction is computed in the following manner:-- Profit of the business × Export tur .....

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..... turnover" shall exclude cash compensatory support, duty drawback and profit on sale of import entitlement licences. 8. To sum up, the deduction shall be allowed in the following manner:-- Export turnover (sale proceeds actually received in foreign exchange) Profit of the business × (including export incentives) Total turnover (excluding incentives) 9. Thus, in the case of an assessee who is doing export business exclusively, "export turnover" and "total turnover" would be identical, if the entire sale proceeds are brought into India in convertible foreign exchange within the prescribed time limit. In that case, the entire profit under the head "Profits and gains of business or profession" (which will include the three export (incenti .....

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