Law:

Section:

Section 80HHD of the Income-tax Act, 1961 - Deductions - Hotels/Tour operators - Whether to qualify for deduction under section 80HHD, profits, derived by assessee should be from services provided to foreign tourists - Held, yes - Assessee-company was tour operator - It arranged tours primarily for Japanese tourists visiting India - It received advances from travelling group prior to group landing in India, in order to make necessary arrangements for their stay, transportation, etc. - Advances received in foreign exchange were deposited in bank(s) in India in short-term deposits on which interest had been earned by assessee - Whether interest earned by assessee could be treated as derived from services provided to foreign tourists so as to be eligible for deduction under section 80HHD - Held, no FACTS The assessee was a tour operator. It arranged tours primarily for Japanese tourists in India. It received advances from the travelling group, in order to make necessary arrangements for their stay, transportation, etc. Advances received in foreign exchange were deposited by the assessee in bank(s) in short-term deposit, on which it had earned interest. The assessee claimed deduction under section 80HHD by apportioning the profits assessable under the head 'Profits and gains of business or professions' including interest income in the ratio of receipts in foreign exchange (excluding interest income) to total receipts of business. The Assessing Officer held that interest income was not derived from the business of providing services to foreign tourist and, therefore, same did not qualify for deduction under section 80HHD. On appeal the Commissioner (Appeals) allowed the deduction. On the revenue's appeal, the Tribunal reversed the order of the Commissioner. On assessee's appeal to the High Court : HELD Section 80HHD gives certain benefits to those engaged in the business of hotel or tour operators. If such assessees make earnings in convertible foreign exchange than to the extent of those earnings deduction is allowed in computing the total income of the assessee in the manner specified in said provision. To qualify for this deduction, it is the pre-condition that…

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