9911796707
TMI Blog2010 (12) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... is judgment. 2. Appeals were admitted on the following substantial question of law:- "Whether the Income-Tax Appellate Tribunal was justified in law in holding that the interest on a fixed deposits in banks and another interest were not eligible for deduction under Section 80 HHD of the Income-Tax Act, 1961?" 3. The facts which are necessary for deciding the question of law may now be spelled out. 4. The appellant, a private limited company is a tour operator. It is approved by the Department of Tourism, the prescribed authority for the purposes of Section of 80 HHD of the Income Tax Act (hereinafter referred to as the „Act‟). The appellant arranges tours primarily for Japanese tourists visiting the Buddhist Circuit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "profits derived from services provided to foreign tourists" has to be quantified as per the statutory formula prescribed in sub-section (3), viz., by apportioning profits of the business as computed under the head "profits and gains of business or profession in the ratio of receipts in convertible foreign exchange to total receipts of the business carried on by the assessee. The fictional/artificial formula provided in sub-section (3) mandates the manner in which the deduction admissible under Section (1) of Section 80HHD of the Act has to be computed. The formula admits of no deviation/brooks no interference. He referred to and relied upon the special Bench decision of the Tribunal in International Research Park Laboratories Ltd. Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession", must necessarily enter the computation of deduction under section 80HHD of the Act, in terms of the statutory formula contained in Section (3) of the said Section. It needs to be appreciated that the formula is universally applicable and cuts both ways: it may hurt some assessees while causing unintended benefits to some others. The consequences flowing from the application for the statutory formula, in the nature of deeming fiction, should not unnecessarily prejudice the mind of the Court and the statutory fiction enacted as part of law must be taken to its logical conclusion. 8. His concluding submission was that section 80 HHD being a beneficial provision, intended to boost earning precious foreign exchange for the country, mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change by making deposits in banks in India as short term deposits. Whether this interest would qualify as "profits derived from services provided to foreign tourists", is the question. The entire matter has to be examined from this angle leaving aside the technical jargons and legal luances. 11. The expression "derived from" has come up for interpretation in the case of Commissioner of Income Tax Vs. Sterling Foods, Banglore, 237 ITR 579. In that case, it was authoritatively pronounced by the Supreme Court that there has to be a direct nexus between the profits and gains and the industrial undertaking. This view was reiterated by the Apex Court in Hindustan Liver Ltd. Vs. CIT, 239 ITR 297. In a recent judgment pronounced by the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed meaning to the word "derived from", the answer to the question before us becomes too obvious. The interest income is not derived from the foreign tourists. It is the deposit which is made of the advances received from those foreign tourists which is kept in the bank account and interest is received there from. Such an interest cannot be treated to be derived from the services provided to the foreign tourists. This interest income is not the result of services provided to those foreign tourists. Rather, further income is earned from the income generated from the services provided to those foreign tourists which source obviously becomes beyond the first degree. There is another difficulty in the way of the assessee. Such profit derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
