Section 80RR deduction applies only to net foreign income after expenses, not gross foreign receipts.

Deduction under section 80RR was confined to the net foreign professional income actually derived and included in gross total income, not the gross foreign receipts remitted into India. The expenses incurred in earning the foreign income had to be deducted first to determine the eligible income base, because the deduction scheme distinguishes gross receipts from taxable income. The assessee's claim for deduction on the full foreign remittance was rejected as inconsistent with that scheme, and the Revenue's view that only net income qualified was upheld.

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Issues: Whether deduction under section 80RR was to be computed on the gross foreign receipts brought into India in convertible foreign exchange or only on the net foreign income after reducing the expenses incurred in earning that income.

Analysis: Section 80RR grants deduction in respect of professional income from foreign sources, but the income eligible for deduction has to be the income actually derived and included in the gross total income. The foreign receipts claimed by the assessee were not treated as the gross amount for deduction purposes, because the expenses connected with earning that income had first to be deducted to ascertain the net foreign income. The reasoning adopted by the assessee that deduction should be allowed on the full remittance brought into India was rejected as inconsistent with the scheme of deduction provisions and the distinction between gross receipts and net income.

Conclusion: Deduction under section 80RR is allowable only on the net foreign income after deduction of expenses, not on the gross foreign receipts; the assessee's claim failed and the Revenue succeeded.

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