Section 80-O deduction applies to net computed income, not gross foreign exchange receipts, after relevant expenses are deducted.

Deduction under section 80-O is computed on income included in gross total income, not on gross convertible foreign exchange receipts. The phrase "the income so received" refers to the income computed under the Act after allowing relevant expenses, including those incurred abroad and in India. Legislative history was treated as showing that the provision aimed to encourage export of technical know-how and foreign exchange inflow, but not to grant a deduction exceeding actual taxable income. Section 80AB reinforces that the relevant income must first be computed in accordance with the Act before deduction is allowed, and was treated as clarificatory of that position.

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Issues: Whether deduction under section 80-O of the Income-tax Act, 1961, was allowable on the gross convertible foreign exchange receipts or only on the net income computed after deducting expenses incurred abroad and in India.

Analysis: Section 80-O forms part of Chapter VI-A, which operates in the computation of total income. The income referred to in section 80-O is income included in the gross total income, and the phrase "the income so received" was held to refer to that computed income and not to gross receipts. The legislative history showed that the provision was intended to encourage export of technical know-how and inflow of foreign exchange, but not to permit a deduction exceeding the income actually computed under the Act. Section 80AB, which applies to deductions under Part C of Chapter VI-A, reinforces that the amount of income of the relevant nature must be computed in accordance with the Act before deduction is allowed, and the provision was treated as clarificatory of the pre-existing position.

Conclusion: Deduction under section 80-O was not admissible on gross foreign exchange receipts and had to be computed only on the net income after deducting the relevant expenses. The issue was decided against the assessee and in favour of the Revenue.

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