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TMI Blog2009 (10) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... D of Rs.35,28,323/-, under the Income Tax Act. The Assessing Officer found that the assessee has claimed the deduction under Section 80 HHD on room rent also, which according to him, is not permissible under the said Section. He was of the view that under Section 80 HHD, only such deductions will be admissible which relate to the service provided to the foreign tourists. He was of the view that since the assessee has charged the room rent separately for a particular room and for particular period, the charging of such room rent is not service provided to foreign tourists. The claim of the assessee that the room rent was charged at the rate of Rs.1,000/- per day mainly for the luxuries provided in the form of various facilities, such as air-conditioning, T.V. and video facilities, highly comfortable furnitures and fixtures, telephone and room service and many more luxuries, was not accepted. The case of the assessee was that a simple room with the same dimension would merely fetch 1/100 of the room tariff if acquired in the open market. The Assessing Officer was of the view that on true and correct interpretation of the sub-clause B of sub-section 3 of Section 80 HHD an assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in writing) that the assessee is, for reasons beyond his control, unable to do so within the said period of six months, within such further period as the Chief Commissioner or Commissioner may allow in this behalf. (3) For the purposes of sub-section (1), profits derived from services provided to foreign tourists shall be - (a) in a case where the business carried on by the assessee consists exclusively of services provided to foreign tourists resulting in receipt in convertible foreign exchange, the profit of the business as computed under the head "Profit and gains of business or profession"; (b) in a case where the business carried on by the assessee does not consist exclusively of services provided to foreign tourists resulting in receipt in convertible foreign exchange, the amount which bears to the profit of the business ( as computed under the head "Profit and gains of business or profession") the same proportion as the receipts in convertible foreign exchange bears to the total receipt of the business carried on by the assessee. (4) The amount credited to the reserve account under clause (b) of sub-section (1), shall be utilized by the assessee before the expiry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in clause (a) of the Explanation to section 80HHC. (c) services provided to "foreign tourists" shall not include services by way of sale in any shop owned or managed by the person who carries on the business of hotel or of a tour operator or of a travel agent." The said section was inserted by clause -16 of the Direct Tax Laws Amendment Bill, 1988 w.e.f. 1st of April, 1989. The sole point mooted in the appeal is whether the charges for room rent, fall in the ambit of "Services provided to foreign tourists or not, within the meaning of Section 80HHD". A plain reading of the said section would show that all assessees are not eligible for deduction therein. Only such assessee who is either an Indian Company or a person other than a company resident in India, is eligible for deduction provided such an assessee is engaged in the business either of a hotel or of a tour operator, or a travel agent approved by the Prescribed Authority in this behalf . Sub-section (2) provides that the receipts by such assessee in convertible foreign exchange in respect of services provided to foreign tourists would make him entitled to claim for deduction. An Explanation is there at the bottom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, whether such a service constitutes a sale of food stuff or not. In this background, in para 4 of the report, the Apex Court has observed that a hotelier is like an inn-keeper. It noticed that it is a common law that an inn-keeper was a person who received travelers and provided lodging and necessaries for them and the attendants and employed servants for this purpose and for the protection of the travelers' lodging in his inn and of their goods. It noticed paragraph 932 from Halsbury's Laws of England and proceeded to consider certain decisions of English Courts and reproduced the following paragraph in the judgment from " Inn-keepers and Hotels" by Professor Beale; "An inn-keeper does not lease his rooms, so he does not sell the food he supplies to the guest. It is his duty to supply such food as the guest needs, and the corresponding right of guest is to consume the food he needs, and to take no more. Having finished his meal, he has no right to take food from the table, even the uneaten portion of food supplied to him, nor can he claim a certain portion of food as his own to be handed over to another in case he chooses not to consume it himself. The title to food ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the tariff/room rent. The dimensions of a room is not so important. Its location, the view from the room, quality of furniture and fixtures, facilities such as air conditioning, T.V., video conferencing, telephone and the other luxuries are important factors. In the present day, hotels also provide swimming pool, bar facility, conference room, indoor and out-door game facilities etc.. These services provided by the hotelier are included in the room rent and are not charged separately. It may be noted that by Explanation to clause (c) thereof, services by way of sale in any shop owned or managed by the person who carries on the business of hotel has been excluded. In other words, it follows that all other services including providing of room facility to a foreign tourist are liable to be taken into consideration for the purposes of profits derived from the services for the purposes of Sub-section (1) where an assessee receives convertible foreign exchange as per Sub-section (3) of Section 80HHD. The purpose and idea of enacting of Section 80HHD is to earn convertible foreign exchange from the foreign tourists. The said section finds place in Chapter VI A of the Income Tax Act wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming a hindrance in the interpretation of the same. Keeping the above principle of interpretation relating to interpretation of Explanation, the case on hand clearly falls under the clauses (c) and (d). Dominant object of Section 80HHD is to provide certain deductions from the profits of an assessee specified therein including an assessee who is a hotelier. If the room rent is excluded from the consideration for the purposes of Section 80HHD, the object of enactment of Section 80HHD would become meaningless and it will fail to achieve its purpose. In addition, a contemporaneous exposition of the purport of Section 80 HHD is contained in the Circular No.559 dated 4th of May, 1989 issued by the CBDT. The Circular clarifies the purport, scope and object of clause (c) of the Explanation in the following manner:- "Clause (c) of the Explanation also clarifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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