2016 (11) TMI 719 - HC - Income Tax

Quantum of deduction available - exclusion of foreign exchange receipts taken into account for the purpose of deduction under section 80HHD of the Income-tax Act, 1961 from the total turnover for the purpose of calculation of deduction under section 80HHC - Held that - It was not the intention of the Legislature that the benefit under section 80HHC is to be regulated by the turnover of the hotel business to which section 80HHD is applicable. Sections 80HHC and 80HHD are two different channels. They provide for benefit of two different characters. The benefit receivable under section 80HHC is not regulated by the benefit received or receivable by the assessee under section 80HHD. Similarly, the benefit received or receivable under section 80HHD by the assessee is not regulated by the benefit received or receivable under section 80HHC. Income-tax Appellate Tribunal did not erred in upholding the views of the Commissioner of Income-tax (Appeals) who had directed the Assessing Officer to exclude foreign exchange receipts taken into account for the purpose of deduction under section 80HHD of the Income-tax Act, 1961 from the total turnover for the purpose of calculation of deduction under section 80HHC - Decided against revenue

Summary

Issues:
Interpretation of provisions under section 80HHD and section 80HHC for deduction calculation.

Analysis:
The judgment pertains to an appeal challenging the order of the Income-tax Appellate Tribunal regarding the treatment of foreign exchange receipts for deduction under sections 80HHD and 80HHC of the Income-tax Act, 1961 for the assessment year 2004-05. The main issue revolved around whether foreign exchange receipts should be excluded from the total turnover for calculating the deduction under section 80HHC. The Commissioner of Income-tax (Appeals) and the Tribunal had ruled in favor of the assessee, directing the exclusion of such receipts to maintain parity between the numerator and denominator for the deduction calculation. The Tribunal cited judicial pronouncements emphasizing the need to restrict turnover to receipts with profit elements from export of goods. The Tribunal upheld the Commissioner's order based on these principles.

The appellant-Revenue contended that the deduction under section 80HHD cannot be subject to any deduction under Chapter VI-A of the Income-tax Act, including section 80HHC. However, the court disagreed, highlighting the distinct nature of deductions under sections 80HHC and 80HHD. The court clarified that the assessee, engaged in both hotel business and export, was entitled to deductions under both sections. It emphasized that the benefit under section 80HHC should not be influenced by the turnover of the hotel business, to which section 80HHD applies. The court affirmed the Tribunal's judgment from a previous case, stating that the benefits under sections 80HHC and 80HHD are independent and not interrelated.

The Department's attempt to challenge the Tribunal's decision with a delayed appeal was dismissed due to lack of sufficient cause for condonation of the significant delay. The court upheld the Tribunal's order, finding no legal infirmity or substantial question of law in the appeal. Consequently, the court answered the reformulated question against the Revenue and dismissed the appeal.