The deduction stands reduced and ultimately eliminated from the assessment year 2005-06 but the benefit is relevant till 2004-05.

An important issue concerning such tax benefit came up for consideration of the Karnataka High Court . The condition of being outside India physically was challenged by the assessee before the court. The revenue department argued that the section made it clear that the benefit was available only in the event of a service physically rendered outside by a government servant or a technician. The court did not accept the department’s view.

Referring to various previous court decisions in India, the court upheld that travel outside India for earning the income to claim deduction is not necessary and that there was no warrant in Section 80RRA to limit the benefit to only salaries received by employees, the coverage of the section being much wider.

The court said in these days of technological development, one could render service without physically going outside India in terms of Section 80RRA. Section 80RRA only provided for deduction for any service rendered by him outside India. Rendering service outside India need not be a service physically rendered outside.

Thus a person can claim the benefit of Section 80RRA without going outside India provided other conditions in regard to remittance of foreign exchange are complied with.