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Judgment
ITA No. 539/2009 pertains to the Assessment Year 2003-04. In this year, the assessee had claimed deduction u/s 80HHD of the income tax Act qua convertible foreign exchange earned during the year, which was rejected by the Assessing Officer holding that these receipts do not qualify for the deduction under the aforesaid provision, which is available for the earning of foreign exchange from providing services to the foreign tourists as prescribed in the said Section, whereas the assessee company included the foreign exchange encashed by it as money changer licensee in the total foreign exchange earning. The CIT (A), however, allowed this claim only in respect of commission receipt of Rs. 8,75,603/- from M/s LKP Merchant Finance Company holding that it was covered by the decision in respect of Assessment Year 2001-02, which is upheld by the Income Tax Appellate Tribunal as well. On perusal of the decision of the ITAT pertaining to the Assessment Year 2001-02, we find that the ITAT had directed this receipt to be treated as business income.
On that basis, while computing the deduction u/s 80HHD of the Act, as per the formula contained therein, this commission was treated as "profits of the business". There cannot be any dispute that the income from the money exchange business is a business income as the assessee has, by the said activity, earned profits. It is clear that the assessee had never claimed the aforesaid income as income entitled to deduction u/s 80HHD of the Act. The only effect of that was to treat it as part of the profits of the business so that this component is included in the profits of business in the formula provided u/s 80HHD of the Act for the purpose of calculating deduction under the said provision which provides as under:-
Profit of business x Foreign exchange receipts over total receipts of business.
In view of this clarification, Learned Counsel for the Revenue submits that as there is no grievance left of the department, as the only apprehension of the Department was that this income derived from the money exchange business be not treated as the income which qualifies for deduction u/s 80HHD of the Act.
This appeal is accordingly disposed of.