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of <h1>Clarification on Amended Section 44D: 20% Deduction Limit for Foreign Companies' Royalties and Fees from June 1, 1976.</h1> The circular clarifies the applicability of the amended Section 44D of the Income-tax Act, 1961, which limits deductions for foreign companies on royalties or fees for technical services to 20% of the gross amount, excluding any lump sum received for information transfer outside India. This amendment, effective from June 1, 1976, applies to the assessment year 1977-78 and subsequent years. The circular addresses an incorrect application of these provisions by an assessing officer, emphasizing that the restrictions apply to the entire previous year for the relevant assessment year. Assessing officers are instructed to ensure correct application and take remedial action if necessary.
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