TMI Blog2011 (4) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... the arrangements for transport, boarding and lodging, hotels, stay, site seeing, providing guides and escorts had also taken tourists for shopping. For the said purposes, the assessee-company had entered into arrangement with various shops to sell merchandise to foreign tourists and in turn received commission from them for sending foreign tourists to their shops to buy goods. During the year under consideration, the assessee-company received a total amount of shopping commission of Rs. 1,31,34,402 from different shops and considered it a part of business receipts in its profit and loss account. At the same time, on this amount, the assessee also claimed deduction under section 80HHD of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). 2. After considering the aforesaid facts, the Assessing Officer excluded the shopping commission from the business profit and also from the total business receipts on the ground that under the provisions of section 80HHD of the Act only the profit derived by the assessee from services provided to the foreign tourists was eligible for deduction. According to the Assessing Officer, such profit cannot include components which were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion income from the total receipt of the business for working out receipts from sources provided to foreign tourists as a numerator of the formula. The total receipts of the business will form the denominator of the formula." 5. The Income-tax Appellate Tribunal has concurred with the aforesaid view of the Commissioner of Income-tax (Appeals) and in the process, furnished the following basis : "Thus, for computing eligible amount of deduction under section 80HHD, we have to find out three things (i) profit of the business of foreign tourists, (ii) receipts in convertible exchange, and (iii) total receipts of business which includes business receipts in Indian currency as well as business receipts in convertible foreign exchange. It is pertinent to mention here that unlike the provisions of section 80HHC which specifically defines 'profits of the business' under Explanation (baa), according to which 90 per cent. of the receipts in the nature of brokerage, commission, interest, rent etc. is to be excluded from the profits and gains of the business or profession, there is no such pari materia provision in section 80HHD which provides for such exclusion of commission income wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived by an assessee, engaged in the business of a hotel or of a tour operator or of a travel agent, in Indian currency obtained by conversion of foreign exchange brought into India through an authorised dealer, from another hotelier, tour operator or travel agent, as the case may be, on behalf of a foreign tourist or group of foreign tourists, shall be deemed to have been received by the assessee in convertible foreign exchange if the person making the payment furnishes to the assessee a certificate specified in sub-section (2A). Explanation 2.-For the purposes of this sub-section, the expression 'competent authority' means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange . . . (3) 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) as reduced by any payment, referred to in sub-section (2A), made by the assessee bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthoritatively 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 Lever Ltd. v. CIT [1999] 239 ITR 297 (SC). In a recent judgment pronounced by the Supreme Court in the case of Liberty India v. CIT [2009] 317 ITR 218 (SC), the principle is revisited in a more lucid manner. The court reiterated the distinction between the expression 'derived from' and considered the expression 'derived from' in contradistinction the term 'attributable to' and held that the connotation of the words 'derived from' is narrower as compared to that of the words 'attributable to'. By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. The apex court further opined that on analysis of sections 80-IA and 80-IB, it becomes clear that any industrial undertaking which becomes eligible on satisfying sub-section (2) would be entitled to deduction under sub-section (1) only to the extent of profits derived from such industrial undertaking after the specified date. Apart from eligibility, sub-section (1) purports to restrict the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a to this court to reconsider the view taken in the said judgment, as according to him section 80HHD of the Act was a complete code in itself. Sub-section (3) thereof provides a formula for calculating the deduction and as per which only requirement was to see as to whether the income was business income or not even if receipts were not in foreign exchange. He further submitted that the provisions of section 80HHC or 80-I of the Act were totally different as relied upon the portion extracted above by the Tribunal. We are, however, not persuaded to take a different view than the view taken in Lotus Trans Travels P. Ltd. v. CIT [2011] 332 ITR 463 (Delhi). Sub-section (3) of section 80HHD provides for the formula for calculating the deduction. However, the said formula is a pre-requisite condition in sub-section (1) thereof and is to be satisfied. Sub-clause (i) of the clause (a) of sub-section (1) permits deduction of "the profits derived from the services provided to foreign tourists". Thus, it is essentially for the assessee to show that the profits earned by him are derived from services provided to foreign tourist. Sub-section (2) makes the position beyond pale of any doubt which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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