Tribunal affirms deduction calculation for travel agent under section 80HHD

The tribunal upheld the decision of the ld. CIT(A) regarding the calculation of deduction under section 80HHD for a travel agent and tour operator. It was held that amounts payable to hotels for boarding and lodging of foreign tourists should be reduced from both numerator and denominator to accurately calculate the deduction, resulting in a higher deduction amount. The tribunal emphasized the need for consistency in calculation methods to avoid absurd results and concluded that the deduction should be granted only in respect of net receipts in foreign currency. The revenue's appeals were dismissed in favor of the assessee.

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Issues:
Calculation of deduction under section 80HHD for a travel agent and tour operator.

Analysis:
The appeals were filed by the revenue against the orders of the ld. CIT (Appeals) regarding the correct method of calculation of deduction under section 80HHD for the assessee, a travel agent and tour operator, for assessment years 1996-97 and 1998-99. The dispute arose from the treatment of amounts payable to hotels for boarding and lodging of foreign tourists in the assessee's gross receipts in convertible foreign exchange. The Assessing Officer did not reduce these amounts from the total receipts of the business, resulting in a lower deduction under section 80HHD. The ld. CIT(A) held that these amounts should be reduced from both the numerator and denominator to calculate the deduction accurately, leading to a higher deduction amount. The revenue contended that there was no requirement to reduce total business receipts by the amounts for which certificates were issued. However, the assessee argued that reducing foreign exchange receipts logically necessitated a reduction in total business receipts as well, citing various judgments and decisions in support of their position.

During the hearing, the assessee's representative relied on judgments in similar cases and argued that the reduction of foreign exchange receipts should also reflect in the total business receipts. The representative emphasized the need for consistency in calculating the deduction to avoid absurd results. The tribunal considered the arguments and analyzed the legal position, noting that the exclusion of payments to hotels was provided for in the statute itself under sub-section (2A) of section 80HHD for tour operators. The tribunal found that the amounts payable to hotels did not belong to the tour operator and should not be considered part of the total business receipts. It was concluded that the deduction should be granted only in respect of net receipts in foreign currency, and the method adopted by the ld. CIT(A) was upheld to ensure a correct and uniform calculation. The tribunal dismissed the appeals filed by the revenue, affirming the decision in favor of the assessee.

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