Commissioner Of Income Tax vs Asian Hotels Ltd.
2011 Latest Caselaw 635 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+                        ITA NO.656/2009


%                  Date of Decision:     03.02.2011


COMMISSIONER OF INCOME TAX           ....APPELLANT
            Through: Ms.Prem Lata Bansal, Advcoate

                                Versus


ASIAN HOTELS LTD.                               ...RESPONDENTS
              Through:          Mr.M.P. Rastogi and Mr.K.N. Ahuja,
                                Advocates.


CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE M.L.MEHTA


1. Whether the Reporters of local papers                 No
   may be allowed to see the judgment?

2. To be referred to Reporter or not?                    No

3. Whether the judgment should be                        No
   reported in the Digest?


A.K. SIKRI, J. (Oral)

1. The respondent-assessee is in the hotel business. It is not in

dispute that respondent qualifies for benefit under Section

80HHD of the Income Tax Act (hereinafter referred to as "the

Act") as it fulfills all the conditions for claiming that benefit.

The benefit is to be given on the earnings made by the

assessee in convertible foreign exchange. In the assessment

year 1998-99, the assessee had filed return declaring the

income of Rs.20.44 crores under Section 115JA of the Act.

This assessment was originally framed under Section 143(3) of

the Act at an income of Rs.21.78 crores, however, this

assessment was reopened by issuing notice under Section 148

of the Act as, according to the Assessing Officer, benefit under

Section 80HHD was not correctly computed and in the process

income had escaped assessment. It was included on the

following grounds:

(i) The Assessing Officer noticed that the assessee had not

included a sum of Rs.1168.23 lakhs received in money-

changing business in the total turnover.

(ii) Likewise, the assessee had not included sum of

Rs.1433.28 lakhs on account of expenditure tax in the

total turnover while computing deductions under Section

80HHD of the Act.

2. The deductions under Section 80HHD is to be computed on

the basis of the following formula:

Profit of Business x Foreign Exchange Receipts Total Receipts of Business

3. The Assessing Officer included both the aforesaid components

in the total receipts of the business and in this way as the

figure of denominator increased, the deduction which became

available to the assessee under Section 80HHD was reduced.

Reassessment order was passed on that basis. The assessee

challenged this order before the CIT(A) successfully. The

CIT(A) excluded both the receipts from the denominator while

computing deduction under Section 80HHD of the Act on the

ground that when they were not to be included in the

numerator, i.e., in foreign exchange receipts, they could not

be included in total receipts of the business, i.e., "total

turnover" of the assessee as well. The appeal of the Revenue

assailing this order of CIT(A) has failed as the Income Tax

Appellate Tribunal (hereinafter called as "the Tribunal") has

dismissed the same vide impugned order dated 14th

November, 2008.

4. Insofar as non-inclusion of sum of Rs.1168.23 lakhs received

by the assessee as money-changer activity, the Tribunal has

noted that, right from the beginning, the assessee had

provided this facility to its residents/guests on no-profit-no-

loss basis. It is for this reason, the assessee was not even

allowed deduction under Section 80HHD on the foreign

exchange receipts from its money-changing activity. We may

also notice that the contention of the assessee in this behalf

was that the money-changing exercise undertaken by the

assessee for its guests/customers is only a facility for its

guest/customers granted to them and it is for this reason that

the assessee simply converts the money taken in foreign

exchange from its customers by paying them equivalent

money in Indian currency. For this reason, asserted the

assessee, there was no element of profit in these receipts. It

was argued that the assessee collects this amount in fiduciary

capacity and in the interest of its main business by providing

this additional facility to its customers. Otherwise, the

amount so collected in fiduciary capacity is deposited with the

Government. The Tribunal while holding that since the

receipts with the money changer would not be eligible for

computation of the deduction admissible under Section

80HHD and deserves to be excluded from the total turnover

as a whole. The Tribunal has taken recourse to the judgment

of the Supreme Court in CIT v. LAKSHMI MACHINES

WORKS, 290 ITR 667 in support of its view. Learned counsel

for the respondent also brought to our notice that not only in

previous assessment years but even in subsequent

assessment years, the Department itself has been acting in

the same manner. Learned counsel has produced copies of

the assessment orders passed in respect of assessment years

1996-97, 1997-98 as well as 1999-2000 to bolster this

submission. We find from the assessment order passed in

respect of assessment year 1997-98 that while adopting the

same approach, the Assessing Officer, in the rank of Joint

Commissioner of Income Tax, has observed as under:

"From another point of view also, no deduction is allowable on this ground. On perusal of assessee's computation of deduction u/s 80HHD, it is seen that the figure of total receipt of business has been taken at Rs.166,02,44,446/-. This figure does not include the figure of Rs.14,27,73,538/-, being foreign exchange receipts from the business of Money Changing. If one is to add this figure to the total receipts of business, the deduction claimed by the assessee would automatically stand reduced. Even otherwise, it is a common logic that the nominator and the denominator of a equation should have the same set of negotiation. If the assessee is including foreign exchange receipts in the nominator, it should also include this figure in the denominator for the correct answer."

5. As mentioned above, even in the succeeding assessment

year, i.e., 1999-2000, the Assessing Officer has not included

the receipts in foreign exchange in money-changing activity.

6. Going by the aforesaid peculiar facts, it appears in this case

that when there is a reasonable dispute as to whether this

facility of money changer, which is provided on no-profit-no-

loss basis, can even be treated as business activity of the

assessee and thus find part of total turnover, we are of the

opinion that no interference in the order of the Tribunal is

required.

7. As far as issue relating to expenditure tax is concerned,

reading of the order of the Tribunal would demonstrate that

the Tribunal has not even addressed this issue though it was

specifically raised before the Tribunal. We, thus, are of the

opinion that, in the first instance, the Tribunal should bestow

its consideration on this aspect of the matter on merits. We

accordingly remit this appeal to the Tribunal for its decision on

that issue.

8. The appeal is disposed of.

A.K. SIKRI, J.

FEBRUARY 3, 2011                                       M.L. MEHTA, J.
Dev