By TIOL News Service

KOLKATA, JULY 15, 2016: THE issue is - Whether when the benefit receivable u/s 80HHC is not regulated by the benefit received or receivable u/s 80HHD, the assessee can still be prevented from claiming deductions under both the beneficial Sections simultaneously. NO is the answer.

Facts of the case

The assessee company is engaged in hotel industry and was also doing export activities. CIT (A) had held in favour of the assessee on the basis of an earlier order of the Tribunal passed on 25th February, 2005 in ITA Nos. 888 and 889 (Kol)/2004. When the matter came up before the Tribunal, it also upheld the order of the CIT for the same reasons assigned by the Tribunal in its judgement and order dated 25th February, 2005. Revenue's counsel had submitted that deduction availed by an assessee under section 80HHD cannot be the subject matter of any deduction under the heading 'C' of Chapter VIA of the Income Tax Act. He contended that section 80HHC is also a part of Chapter VIA under the heading 'C'. It is because of this reason that the profit earned by the assessee from the hotel business was not taken into account but the turnover of the hotel business was taken into account for the purpose of working out the deduction admissible under section 80HHC.

Held that,

++ the assessee before us is engaged both in the business of hotel and in the business of export. The assessee has income in convertible foreign exchange arising from hotel business in India. It also has income from export business. The assessee is, therefore, entitled to deductions both u/s 80HHC and u/s 80HHD. The deduction u/s 80HHD has duly been allowed to him. The question arose with respect to the quantum of deduction available to the assessee. AO was of the opinion that in arriving at the income earned by the assessee from export business the turnover of the hotel business has to be taken into account. In that case the percentage of his profit shall go down. It was not the intention of the legislature that the benefit u/s 80HHC is to be regulated by the turnover of the hotel business to which section 80HHD is applicable. 80HHC and 80HHD are two different channels. They provide for benefit of two different characters. The benefit receivable u/s 80HHC is not regulated by the benefit received or receivable by the assessee u/s 80HHD. Similarly, the benefit received or receivable u/s 80HHD by the assessee is not regulated by the benefit received or receivable u/s 80HHC. Appropriate reasons in that regard were also advanced by Tribunal in its judgment and order dated 25th February, 2005 passed in ITA Nos.888 and 889(Kol)/2004 with which we are in agreement. The department had accepted the judgment of Tribunal. The department subsequently, however, by a second thought made a half-hearted attempt by presenting an appeal with an application for condonation of appeal of 900 days, which was dismissed in limine. For the aforesaid reasons, the question reformulated by us is answered in the negative and against the revenue.

(See 2016-TIOL-1378-HC-KOL-IT)