TaxTMI 
TaxTMI 
2011 (4) TMI 435
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....the Income-tax Act, 1961 (hereinafter referred to as "the Act"). 2. After considering the aforesaid facts, the Assessing Officer excluded the shopping commission from the business profit and also from the total business receipts on the ground that under the provisions of section 80HHD of the Act only the profit derived by the assessee from services provided to the foreign tourists was eligible for deduction. According to the Assessing Officer, such profit cannot include components which were not related to the services rendered to the foreign tourist. In the case of the assessee, shopping commission earned was an amount which was not related to the services rendered to the foreign tourist. In view of the aforesaid, the Assessing Officer excluded the shopping commission and interest income from the total business receipts and business profit for allowing deduction under section 80HHD of the Act. 3. The Commissioner of Income-tax (Appeals), however, reversed the aforesaid order of the Assessing Officer and allowed the appeal filed by the assessee against the Assessing Officer's order holding that the aforesaid shopping commission received by the assessee shall also be el....
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.... in Indian currency as well as business receipts in convertible foreign exchange. It is pertinent to mention here that unlike the provisions of section 80HHC which specifically defines 'profits of the business' under Explanation (baa), according to which 90 per cent. of the receipts in the nature of brokerage, commission, interest, rent etc. is to be excluded from the profits and gains of the business or profession, there is no such pari materia provision in section 80HHD which provides for such exclusion of commission income which is a business receipt. In the instant case, the commission income so earned by the assessee in respect of the purchases effected by foreign tourists is undisputedly its business receipts. Thus, the commission income so earned was the assessee's business income and it cannot be excluded from the 'profits of the business', while computing eligible deduction under section 80HHD. Since such commission income was not received in convertible foreign exchange, therefore, while computing deduction under section 80HHD, such amount of commission is not liable to be included in receipts of income in convertible foreign exchange." 6. Challenging this order....
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.... expression 'competent authority' means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange . . . (3) For the purposes of sub-section (1), profits derived from services provided to foreign tourists shall be the amount which bears to the profits of the business (as computed under the head 'Profits and gains of business or profession') the same proportion as the receipts specified in sub-section (2) as reduced by any payment, referred to in sub-section (2A), made by the assessee bear to the total receipts of the business carried on by the assessee." 8. It is clear from the bare reading of the aforesaid provision that the income which is "derived from the services rendered to foreign tourists" would qualify for deduction under section 80HHD of the Act. However, Mr. Sanjiv Sabharwal, learned counsel appearing for the Revenue submitted that two more conditions need to be fulfilled i.e. (i) Income is to be received by the assessee directly from the foreign tourists which according to him was not satisfied in the instant case as the income was rec....
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....erm 'attributable to' and held that the connotation of the words 'derived from' is narrower as compared to that of the words 'attributable to'. By using the expression 'derived from', Parliament intended to cover sources not beyond the first degree. The apex court further opined that on analysis of sections 80-IA and 80-IB, it becomes clear that any industrial undertaking which becomes eligible on satisfying sub-section (2) would be entitled to deduction under sub-section (1) only to the extent of profits derived from such industrial undertaking after the specified date. Apart from eligibility, sub-section (1) purports to restrict the quantum of deduction to a specified percentage of the profits. This is the importance of the words 'derived from an industrial undertaking' as against 'profits attributable to an industrial undertaking'. On this principle, the court held that DEPB/Duty drawback incentives which flow from the scheme framed by the Central Government or from the provisions of the Customs Act, 1962 cannot be treated as incentive profits from eligible business under section 80-IB of the Act. 12. If one has regard to the aforesaid pronouncement of the apex court, attribu....