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(i) (a) WHETHER "ON-SITE" DEVELOPMENT OF COMPUTER SOFTWARE QUALIFIES AS AN EXPORT ACTIVITY FOR TAX BENEFITS UNDER SECTIONS 10A, 10AA AND 10B OF THE INCOME TAX ACT, 1961; AND
(a) CBDT had earlier issued a Circular (Circular No. 694 dated 23.11.1994) which provided that a unit should not be denied tax-holiday under sections 10A or 10B on the ground that the computer software was prepared 'on. -site', as long as it teas a product of the unit. i.e., it is produced by the unit. However, certain doubts appear to have arisen following the insertion of Explanation 3 to section 10A and 10B (vide Finance Act, 2001) and Explanation 2 to section IAA (vide Special Economics Zones Act, 2005) providing that " the profits and gains derived from on site development of computer software (including services for development of software) outside India shall he deemed to be the profits and gains derived from the export of computer software outside India". and a clarification has been sought on the impact of the Explanation on the tax-benefits as compared to the situation that existed prior to the amendments.