Delhi High Court

Asstt. Cit vs Lucky Tour & Travels on 15 September, 2003

Equivalent citations: (2004) 90 TTJ Del 1104

ORDER

Sikander Khan, A.M.:

In this appeal revenue has raised the following grounds :

"On the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred both on facts and in law in directing the assessing officer to allow deduction on gross receipts under section 80HHD despite the fact that it has to be allowed on net receipt."

2. The assessed in this case is a company engaged in the business of booking hotels, tours and ticketing both domestic and international. It claimed deduction of Rs. 2,82,991 under section 80HHD. The total amount received in convertible foreign exchange was Rs. 22,35,280. The assessed had paid US $ 56,000 equivalent to Rs. 17,51,120 to M/s. Oriental Tours, Hongkong, towards expenses of seminar group. The assessing officer worked put the net foreign exchange received and brought in India by the assessed at Rs. 4,84,160 (Rs. 22,35,280 -17,51,120). He observed that deduction under section 80HHD is allowable on the net foreign exchange earning, i.e., gross receipts minus of expenses in foreign exchange, i.e., Rs. 4,84,160 in the present case. He added that the net foreign exchange brought into India was Rs. 4,84,160 only. In this connection the assessing officer relied on Tribunal, Bombay Bench decision, in Tata Unisys Ltd. (Formerly Tata Burroughs Ltd.) v. Dy. CIT (1993) 47 TTJ (Bom) 8 and Delhi High Court decision in the case of CIT v. Marketing Research Corpn. (1987) 61 CTR (Del) 204. Accordingly, he allowed the deduction under section 80HHD on the net convertible foreign exchange brought to India and, as per the assessing officer's calculation, the admissible deduction was worked out at Rs. 14,614 only.

3. Aggrieved, assessed preferred first appeal before the learned Commissioner (Appeals). It was submitted that the calculation of admissible deduction under section 80HHD by the assessing officer was not in accordance with the law. Reference was made to the provisions of sub-sections (2), (2A) and (3) of section 80HHD. It was submitted that in the instant case by adopting the prescription in these sub-sections, the admissible deduction would work out to Rs. 1,34,963 as under :

3,19,875 (Business profit)

22,35,280 (Receipts of foreign bookings of tours and hotels) as computed by assessing officer

Rs. 52,97,813 (Total Business receipts)

Which aggregates to Rs. 1,34,963.

4. It was further submitted that the learned assessing officer had while computing the deductions had reduced the foreign receipts of booking of tours and hotels by Rs. 17,51,120 which was the amount paid by the assessed to book hotels, etc. It was added that here the learned assessing officer had committed an error as there is no such presumption laid down in the aforesaid sub-section of section 80HHD to deduct the amount so paid.

5. As regards the decision relied on by the learned assessing officer, it was submitted that they were not applicable to the facts of the present case because facts are distinguishable and the issues were different. The issue in the case relied on by the assessing officer was of deduction under section 80-0 and not deduction under section 80HHD.

6. Learned Commissioner (Appeals) was satisfied and convinced with the submissions made before him. He allowed resultant relief. He made the following observation in this regards :

"I have considered the arguments of learned counsel of the appellant and also the submissions made by the assessing officer. Sub-section 2 of section 80HHD clearly states that this section applies only to services provided to foreign tourists and receipts in relation to which are received in or brought into India by the assessed in convertible foreign exchange within the period of six months from the end of the previous year etc. Sub-section (3) of section 80HHD further provides that for the purpose of section, profits derived from services provided to foreign tourists shall be the amount which bears to the profits of the business as computed under the head 'profits and gains of business and profession', the same proportion as the receipts specified in sub-section, (2), etc. A perusal of the above legislation clearly reveals that the emphasis is on the receipts in convertible foreign exchange. Nowhere does the Act provides that net convertible foreign exchange has to be considered, as has been done by the assessing officer. The reference to the two case laws cited by the assessing officer relating to section 80-0, would not apply in the instant case since not only section 80-0 relates to the deduction in respect of royalties etc., but also refers to the 'deduction of an amount equal to 50 per cent of the income so received in or brought into India in computing the total income of the assessed'. It has to be noted that section 80-0 refers to calculation of the deduction with reference to income received in or brought into India, whereas section 80HHD refers to receipts as discussed above. As such the interpretation given by the assessing officer does not appear to be in order The submissions made by the appellant have substantial force and are in line with the intent and purpose of provisions of section 80HHD and therefore, the appellant gets the resultant relief."

7. Aggrieved revenue has come up in second appeal before this Tribunal.

8. Learned Departmental Representative relied on the assessing officer's order. Learned authorised representative on the other hand relied on the orders of learned Commissioner (Appeals). He also drew our attention to the calculation of deduction under section 80HHD as per the auditor's report and written submissions filed before the learned Commissioner (Appeals) (copies placed in the paper book). He contended that the claim of deduction of Rs. 2,82,991 was correct and allowable as per the law.

9. We have considered the rival submissions and materials on the files. We are of the view that on the facts and in the circumstances of the case and for the reasons given in the impugned appellate order, learned Commissioner (Appeals) was justified in allowing the relief to the assessed as above. The calculation of admissible deduction under section 80HHD has to be made in accordance with the provisions of section 80HHD. The decision relied on by the assessing officer for the purpose of computing the deduction at Rs. 14,614 was not relevant and applicable because they were in respect of section 80-0 and not under section 80HHD. To appreciate the fact that the assessing officer had not calculated the said deduction in accordance with the provision of section 80HHD and the fact that the learned Commissioner (Appeals) correctly appreciated the provisions of section 80-HHD to allow the relief in question, we must look into the provisions of section 80HHD which are as under :

"80HHD (1) Where an assessed, being an Indian Company or a person (other than a company) resident in India, is engaged in the business of a tour operator, approved by the prescribed authority in this behalf or of a travel agent, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessed, a deduction of a sum equal to the aggregate of -

(a) Fifty per cent of the profits derived by him from services provided to foreign tourists: and

(b) So much of the amount out of the remaining profits referred to in clause (a) as is debited to the P&L a/c of the previous year in respect of which the deduction is to be allowed and credited to a reserve account to be utilized for the purposes of the business of the assessed in the manner laid down in sub-section (4) :

Provided that a hotel or, as the case may be, a tour operator approved by the prescribed authority on or after the 30-11-1989 and before the 1-10-1991, shall be deemed to have been approved by the prescribed authority for the purposes of this section in relation to the assessment year commencing on the 1-4-1989 or the 1-4-1991, if the assessed was engaged in the business of such hotel or as such tour operator during the previous year relevant to any of the said assessment year.

Sub-section (2) ................

Sub-section (3) reads as under

For the purposes of sub-section (1), profits derived from services provided to foreign tourists shall be the amount which bears to the profits of the -business (as computed under the head 'profits and gains of business or profession') the same proportion as the receipts specified in sub-section (2) bear to the total receipts of the business carried on by the assessed.

10. It is clear from the above provisions of law that for the purpose of sub-section (1) the profit derived from services provided to foreign tourists shall be the amount which bears to the profit of the business as computed under the head "profits and gains" of the business or profession, the same proportion as the receipts specified in sub-section (2) bear to the total receipt of the business carried on by the assessed. Thus, to compute the eligible profit from the services provided to the foreign tourists, it is clear first to determine the profits of the business as computed under the head "profit and gains of the business or profession" and thereafter the said profits are required to be apportioned by adopting the same proportion as the receipts specified in sub-section (2) bear to total receipts of the business carried on by the assessed.

Accordingly, in the instant case by adopting above prescription, the position emerges as below :

"3,19,875 (Business profit)

22,35,280 (Receipts of foreign bookings of tours and hotels) as computed by assessing officer

Rs. 52,97,813 (Total Business receipts)

Which aggregates to Rs. 1,34,963.

11. The assessing officer while computing the deduction had wrongly reduced the foreign receipt of booking of tours and hotels by Rs. 17,15,120 which was the amount paid by the assessed to book the hotels, etc. There is no such prescription laid down in sub-section (2) or (3) of section 80HHD to deduct the amount so paid.

12. In the above view of the matter we hold that the learned Commissioner (Appeals) rightly allowed the deduction under section 80HHD at Rs. 1,34,963 as against the amount allowed by the assessing officer Rs. 14,614.

13. In the result the appeal by the revenue is dismissed.