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2006 (1) TMI 119 - HC - Income TaxInterpretation Of Statutes - Deduction u/s 80HHD - Payment made to hotels - The payment made to the hotels are to be reduced from the amount received by the assessee for services rendered to foreign tourists as well as from the total receipts of the business while computing deduction u/s 80HHD of the Act? - HELD THAT:- The scheme governing section 80HHD has already been adverted to earlier in this judgment in some detail. The primary purpose that spurred the introduction of this provision into the Act with effect from April 1, 1989, is the "encouragement to tourism for augmenting foreign exchange reserves". This purpose continued to inform the continuance of the provision thereafter, at least till the time of the assessment years with which we are concerned. This therefore constitutes one useful aid to interpret the provisions of section 80HHD generally and sub-section (3) thereof in particular. We now turn to the concerned provision itself. It is true that sub-section (3) while setting out the multiplier that is to be applied while determining the profits derived from services rendered to foreign tourists (where this is not the sole business of the assessee) expressly permits the deduction of the FE receipts in respect of which DCs have been issued to other hotels from the total FE receipts (constituting the numerator of the multiplier) but does not provide for such deduction from the total receipts that constitute the denominator of such multiplier. However, a closer reading of sub-section (3) reveals that the 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) as reduced by any payment referred to in sub-section (2A), made by the assessee bear to the total receipts of the business carried on by the assessee". Therefore the words "total receipts" are obviously qualified by the immediately succeeding words, viz., "of the business carried on by the assessee". In other words the total receipts are only those receipts that can be said to relate to the business of the assessee and not that of other hotels for whom the assessee may have collected from foreign tourists FE receipts and in respect of which the assessee has not only made over such FE receipts to the other hotels but has also issued the necessary certificate under sub-section (2A), i.e., in Form No. 10CCAE. This interpretation, in our view, comports with the purpose for which the provision was introduced in the first place. Respectfully adapting the exposition of section 80HHC by the Bombay High Court in CIT v. Sudarshan Chemicals Industries Ltd.[2000 (8) TMI 73 - BOMBAY HIGH COURT], we are of the view that the words "total receipts" in sub-section (3) of section 80HHD have to be read along with the words "of the business carried on by the assessee" and can mean only such receipts that are exclusively from the business of the assessee. Therefore, the words "total receipts of the business of the assessee" appearing in sub-section (3) to section 80HHD, constituting the denominator of the multiplier, have to admit of the same construction as the "FE receipts" of the assessee in the numerator. We accordingly hold that, in so far as the FE receipts of the assessee (for the purpose of the numerator of the multiplier) excludes the FE received on behalf of other hotels and in respect of which the assessee has issued DCs under Form No. 10CCAE, the "total receipts" in the denominator of the multiplier must also exclude the FE received on behalf of other hotels. CIT(A) has rightly computed the profits derived from services rendered by the assessee to foreign tourists by not permitting the deduction of the Nikko Hotel receipts from the total receipts while at the same time permitting the FE receipts on behalf of other hotels (covered by certificates in Form No. 10CCAE) to be so deducted. The concurrent views of both the CIT(A) and Tribunal in this regard require to be upheld. Consequently questions Nos. (a) and (b) are answered in the affirmative and against the Revenue. These appeals are accordingly dismissed with no orders as to costs.
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