Section 10A exemption survives prior Section 80HHE relief, with export proceeds and Japan branch software profits also qualifying.

Section 80HHE(5) bars a second deduction only for the same profits already allowed under that provision, and does not create a lifetime disqualification against claiming Section 10A exemption in later years where the statutory conditions are met. Export sales were treated as eligible for Section 10A relief because RBI extension for realisation existed and the proceeds were received within the extended period. Profits of the Japan branch from onsite software development services were also treated as exempt under Section 10A, as Explanation 3 deems such offshore development profits to be derived from export of computer software outside India. On that basis, the additions and disallowances were deleted.

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Issues: (i) whether deduction under Section 10A of the Income-tax Act, 1961 could be denied merely because the assessee had earlier claimed and been allowed deduction under Section 80HHE(5) of the Income-tax Act, 1961 in respect of the same undertaking's profits; (ii) whether export sales could be excluded from Section 10A relief on the ground that foreign exchange realisation within the extended time was not established; and (iii) whether profits derived from the Japan branch from onsite software development services were eligible for exemption under Section 10A of the Income-tax Act, 1961.

Issue (i): whether deduction under Section 10A of the Income-tax Act, 1961 could be denied merely because the assessee had earlier claimed and been allowed deduction under Section 80HHE(5) of the Income-tax Act, 1961 in respect of the same undertaking's profits.

Analysis: The restriction in Section 80HHE(5) operates only to prevent a second deduction in relation to the same profits which have already obtained the benefit of Section 80HHE. The words "such profits" limit the bar to the very profits that were subjected to the earlier deduction. The provision does not create a lifetime disqualification from claiming exemption under another provision for later assessment years where the statutory conditions for Section 10A are otherwise satisfied.

Conclusion: The denial of Section 10A relief on this ground was unsustainable and the issue was decided in favour of the assessee.

Issue (ii): whether export sales could be excluded from Section 10A relief on the ground that foreign exchange realisation within the extended time was not established.

Analysis: The factual finding recorded by the first appellate authority was that the assessee had obtained RBI approval extending the time for remittance and that the export proceeds were brought into India within the extended period. No material was produced to dislodge that finding.

Conclusion: The export sales were rightly treated as export sales for Section 10A purposes and the issue was decided in favour of the assessee.

Issue (iii): whether profits derived from the Japan branch from onsite software development services were eligible for exemption under Section 10A of the Income-tax Act, 1961.

Analysis: Explanation 3 to Section 10A treats profits from onsite development services for computer software outside India as profits derived from export of computer software outside India. The branch activity at Japan was found to fall within that deeming provision, and the Revenue did not controvert the factual basis of that finding.

Conclusion: The Japan branch profits qualified for exemption under Section 10A and the issue was decided in favour of the assessee.

Final Conclusion: The additions and disallowances were deleted, and the Revenue's appeal failed in full.

Ratio Decidendi: Section 80HHE(5) bars a second deduction only in relation to the same profits already allowed under Section 80HHE, and does not disqualify an assessee from claiming Section 10A exemption for later years where the statutory conditions are otherwise met.

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