Export- Hotel business- Deduction u/ss. 80HHC and 80HHD of I. T. Act, 1961- A. Y. 2004-05- Computation- Deduction for export earnings not to be affected by computation of deduction for hotel business- Assessee entitled to deduction on both- Total turnover for computation of deduction of profits from export to be taken excluding foreign exchange receipts from hotel business

Assessee was engaged in the business of hotel and export of goods with receipts in foreign exchange. For the A. Y. 2004-05, the Assessing Officer allowed the deduction u/s. 80HHD of the Income-tax Act, 1961 on the income of the hotel business and in arriving at the income earned by the assessee from export business for computing the deduction u/s. 80HHC, he was of opinion that the turnover of the hotel business had to be taken into account, i.e., he included it in the total turnover, thus reducing the percentage of profit available for deduction. The Tribunal held in favour of the assessee following its own earlier judgment wherein it had held that the turnover has to be restricted to such receipts which had an element of profit derived from the export of goods and that the total turnover had to be reduced by the amount of gross receipts from the hotel business in order to keep the parity between the numerator and the denominator.

On appeal by the Revenue, the Calcutta High Court upheld the decision of the Tribunal and held as under:

“i)    The assessee was entitled to deductions both u/s. 80HHC and s. 80HHD of the Act. The assessee had income from convertible foreign exchange which arose from its hotel business in India and income from its export business. It was not the legislative intent that the benefit u/s. 80HHC was to be regulated by the turnover of the hotel business to which section 80HHD was applicable.  

ii)    The reasons advanced by the Tribunal in its earlier judgments were proper.”