Section 80HHE allowed an Indian company, or a person (other than a company) resident in India, engaged in exporting computer software (or transmitting it from India by any means) or in providing technical services outside India for developing or producing computer software, a deduction of a share of the profits from that business. Sub-section (1A) extended the deduction to a supporting software developer that sold software to an exporting company which issued a certificate in its favour.
Under sub-section (1B) the deduction was eighty per cent of the profits for assessment year 2001-02, seventy per cent for 2002-03, fifty per cent for 2003-04 and thirty per cent for 2004-05, "and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year". Profits derived from on-site development of software outside India were deemed to be export profits.
Operative consequences
The consideration had to be received in, or brought into, India in convertible foreign exchange within six months from the end of the previous year or a further period allowed by the competent authority (sub-section (2)).
Qualifying profits were business profits multiplied by export turnover over total turnover (sub-section (3)); "profits of the business" excluded ninety per cent of brokerage, commission, interest, rent and similar receipts and the profits of branches outside India.
An accountant's report in the prescribed form had to accompany the return; a supporting developer also needed the exporting company's certificate, certified by that company's auditor (sub-sections (4), (4A)).
Profits allowed under this section could not be deducted again under any other provision for any year (sub-section (5)).
Status
Not operative for assessment year 2026-27: the section expired after assessment year 2004-05 under sub-section (1B). The Finance Act, 2026 does not amend this section.
The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act has no corresponding provision. Under s. 536(2) of the 2025 Act, the repeal does not affect the previous operation of the 1961 Act or anything duly done under it.
Case Laws & Commentary
SECTION 80HHE — DEDUCTION IN RESPECT OF PROFITS FROM EXPORT OF COMPUTER SOFTWARE, ETC.
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Deduction in respect of profits from export of computer software, etc.
Section 80HHE allowed an Indian company, or a resident person, engaged in the business of export out of India of computer software, or its transmission from India by any means, or the provision of technical services outside India in connection with the development or production of computer software, a deduction in respect of the profits derived from that business, computed through an export-turnover / total-turnover proportionate formula analogous to section 80HHC, subject to repatriation of the consideration in convertible foreign exchange. The deduction has been phased out (the software-export incentive having migrated to sections 10A / 10AA / 10B).
A. SECTION COMMENTARY
A.1 Structural position
Section 80HHE was the software-export analogue of section 80HHC. The software-export incentive was largely carried by the section 10A / 10B (and later 10AA-SEZ) exemptions; section 80HHE is spent.
A.2 Provision taxonomy
A proportionate-formula deduction (export turnover of software / total turnover x profits), with the convertible-foreign-exchange repatriation condition and the Explanation (baa)-type adjustments analogous to section 80HHC.
A.3 Core doctrinal themes
The section 80HHC computational jurisprudence — netting, the meaning of 'total turnover' (excise/sales tax excluded), and the treatment of independent income — applies by analogy. The additional questions concern the meaning of 'computer software' and 'export/transmission' and the repatriation condition.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 1991; phased out as the section 10A / 10B / 10AA regime took over the software-export incentive. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Apply the section 80HHC computational principles by analogy (netting, total turnover, baa-type exclusions). (2) Confirm convertible-foreign-exchange repatriation. (3) Relevant only for open legacy assessments; current software exporters look to sections 10AA / earlier 10A-10B.
B. FA 2026 IMPACT NOTE
Section 80HHE is NOT amended by the Finance Act, 2026 and is spent.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Section 80HHC principles applied by analogy
Facts: Section 80HHE uses an export-turnover / total-turnover formula and adjustments analogous to section 80HHC.
Issue: How the turnover and independent-income questions are resolved for section 80HHE.
Held: The section 80HHC authorities apply by analogy: excise duty and sales tax are excluded from total turnover (Lakshmi Machine Works), and only 90 per cent of the net independent income is excluded (ACG Associated Capsules); the profit must be positive after the formula.
Ratio: Section 80HHE follows the section 80HHC computational template.
Relevance: Avoids duplicating settled law; the section 80HHC line controls the computation.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. These sections are spent / phased out for current assessment years but carry heavy legacy litigation; the digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR) and remain the governing law for the open assessments and for the cognate 'derived from' / netting principles applied across Chapter VIA.
Function in the statutory architecture
Section 80HHE allowed an Indian company, or a person (other than a company) resident in India, engaged in exporting computer software (or transmitting it from India by any means) or in providing technical services outside India for developing or producing computer software, a deduction of a share of the profits from that business. Sub-section (1A) extended the deduction to a supporting software developer that sold software to an exporting company which issued a certificate in its favour.
Under sub-section (1B) the deduction was eighty per cent of the profits for assessment year 2001-02, seventy per cent for 2002-03, fifty per cent for 2003-04 and thirty per cent for 2004-05, "and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April, 2005 and any subsequent assessment year". Profits derived from on-site development of software outside India were deemed to be export profits.
Operative consequences
Status
Not operative for assessment year 2026-27: the section expired after assessment year 2004-05 under sub-section (1B). The Finance Act, 2026 does not amend this section.
The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act has no corresponding provision. Under s. 536(2) of the 2025 Act, the repeal does not affect the previous operation of the 1961 Act or anything duly done under it.
Case Laws & Commentary
SECTION 80HHE — DEDUCTION IN RESPECT OF PROFITS FROM EXPORT OF COMPUTER SOFTWARE, ETC.
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Deduction in respect of profits from export of computer software, etc.
Section 80HHE allowed an Indian company, or a resident person, engaged in the business of export out of India of computer software, or its transmission from India by any means, or the provision of technical services outside India in connection with the development or production of computer software, a deduction in respect of the profits derived from that business, computed through an export-turnover / total-turnover proportionate formula analogous to section 80HHC, subject to repatriation of the consideration in convertible foreign exchange. The deduction has been phased out (the software-export incentive having migrated to sections 10A / 10AA / 10B).
A. SECTION COMMENTARY
A.1 Structural position
Section 80HHE was the software-export analogue of section 80HHC. The software-export incentive was largely carried by the section 10A / 10B (and later 10AA-SEZ) exemptions; section 80HHE is spent.
A.2 Provision taxonomy
A proportionate-formula deduction (export turnover of software / total turnover x profits), with the convertible-foreign-exchange repatriation condition and the Explanation (baa)-type adjustments analogous to section 80HHC.
A.3 Core doctrinal themes
The section 80HHC computational jurisprudence — netting, the meaning of 'total turnover' (excise/sales tax excluded), and the treatment of independent income — applies by analogy. The additional questions concern the meaning of 'computer software' and 'export/transmission' and the repatriation condition.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 1991; phased out as the section 10A / 10B / 10AA regime took over the software-export incentive. Not amended by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Apply the section 80HHC computational principles by analogy (netting, total turnover, baa-type exclusions). (2) Confirm convertible-foreign-exchange repatriation. (3) Relevant only for open legacy assessments; current software exporters look to sections 10AA / earlier 10A-10B.
B. FA 2026 IMPACT NOTE
Section 80HHE is NOT amended by the Finance Act, 2026 and is spent.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Section 80HHC principles applied by analogy
Applied authorities: Lakshmi Machine Works (2007) 290 ITR 667 (SC); ACG Associated Capsules (2012) 343 ITR 89 (SC)
Facts: Section 80HHE uses an export-turnover / total-turnover formula and adjustments analogous to section 80HHC.
Issue: How the turnover and independent-income questions are resolved for section 80HHE.
Held: The section 80HHC authorities apply by analogy: excise duty and sales tax are excluded from total turnover (Lakshmi Machine Works), and only 90 per cent of the net independent income is excluded (ACG Associated Capsules); the profit must be positive after the formula.
Ratio: Section 80HHE follows the section 80HHC computational template.
Relevance: Avoids duplicating settled law; the section 80HHC line controls the computation.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. These sections are spent / phased out for current assessment years but carry heavy legacy litigation; the digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR) and remain the governing law for the open assessments and for the cognate 'derived from' / netting principles applied across Chapter VIA.