ITO, Uttrakhand V. M/s. Hotel Vasundhara Palace, Uttrakhand

ITA 2592/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2713 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: DEL; GAUTAM JAIN ITA NOS
• Keywords: Charitable institution; Rule of consistency; Retrospective amendment; Procedural lapse; Capital receipt; Benefit of exemption
• Section: 143(3); 142(1); 234B; 147

Judgement Text

ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 767/DEL/2013 A.Y. : 200 9 - 10 INCOME TAX OFFICER, WARD - 2 , ROOM NO. 210, 1 ST FLOOR, INCOME TAX OFFICE BUILDING, IDPL, VEERBHADRA, RISHIKESH, UTTARAKHAND 249202 VS. M/S HOTEL VASUNDHARA PALACE, KAILASH GATE, MUNI KI RETI, DISTRICT TEHRI GARHWAL, UTTRAKHAND (PAN: AADHF5808G) I.T.A. NO. 2417/DEL/2013 A.Y. : 2010 - 11 M/S HOTEL VASUNDHARA PALACE, KAILASH GATE, MUNI KI RETI, DISTRICT TEHRI GARHWAL, UTTRAKHAND (PAN: AADHF5808G) VS. INCOME TAX OFFICER, WARD-2, ROOM NO. 210, 1 ST FLOOR, INCOME TAX OFFICE BUILDING, IDPL, VEERBHADRA, RISHIKESH, UTTARAKHAND 249202 I.T.A. NO. 2592 /DEL/201 3 A.Y. : 2010 - 11 INCOME TAX OFFICER, WARD - 2 , ROOM NO. 210, 1 ST FLOOR, INCOME TAX OFFICE BUILDING, IDPL, VEERBHADRA, RISHIKESH, UTTARAKHAND 249202 VS. M/S HOTEL VASUNDHARA PALACE, KAILASH GATE, MUNI KI RETI, DISTRICT TEHRI GARHWAL, UTTRAKHAND (PAN: AADHF5808G) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) DEPARTMENT BY : SH. T. VASANTHAN, SR. DR ASSESSEE BY : SH. GAUTAM JAIN, ADVOCATE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 2 DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 15 1515 15- -- -12 1212 12- -- -201 201 201 2015 55 5 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 04 0404 04- -- -1 11 1- -- -201 201 201 2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THESE ARE THREE APPEALS, TWO OF THEM FILED BY THE REVENUE AND, REMAINING ONE HAS BEEN FILED BY THE ASSESSEE RELATING TO ASSE SSMENT YEARS 2009-10 & 2010-11, AGAINST THE SEPARATE IMPUGNED ORDERS PASS ED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, DEHRADUN. SINCE THE ISS UES INVOLVED IN THESE APPEALS ARE IDENTICAL AND COMMON, HENCE, THESE APPEALS ARE BEING CONSOLIDATED AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF C ONVENIENCE. 2. THE COMMON GROUNDS RAISED IN BOTH THE REVENUES APPEALS NO. 767/DEL/2013 (AY 2009-10) & 2592/DEL/2013 (AY 2010 -11) READ AS UNDER:- 1. WHETHER LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN ALLOWING THE CLAIM OF THE ASSESSEE NOT APPRECIATING THE FACT THA T REJECTION OF DEDUCTION U/S. 80IC(2) WAS NOT BASED JUST ON FAILUR E TO OBTAIN NOC FROM THE POLLUTION CONTROL BOARD BUT IT WAS BASED ON THE FACTUAL FACTS. 2. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS NOT TO APPRECIATE THE FACT THAT ECOTOURISM IS THE CONDITIO N PRECEDENT, TO BE COMPLIED WITH FOR HOTELS FOR CLAIMING DEDUCTION U/S . 80IC OF THE I.T. ACT, 1961. 3. WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON F ACTS IN HOLDING THAT DEDUCTION SHOULD BE ALLOWED IF THE ASSESSEE SATISFI ES THE FOLLOWING CONDITIONS: A) IT IS A HOTEL, ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 3 B) IT HAS A VALID LICENSE, C) NOC FROM THE POLLUTION CONTROL BOARD HAS NOT BEE N DENIED TO IT. 4. THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AN D THAT OF THE AO BE RESTORED. 3. THE GROUNDS RAISED IN THE ASSESSEES APPEAL NO. 2417/DEL/2013 (AY 2010-11) READ AS UNDER:- 1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-I, DEHRADUN HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN HOLDING THAT SUBSIDY OF RS. 29,23,251/- RECEIVED BY THE APPELLAN T FROM THE GOVERNMENT UNDER THE CENTRAL CAPITAL INVESTMENT SUB SIDY SCHEME, 2003 WAS REVENUE RECEIPT AND NOT CAPITAL RECEIPT AND HEN CE NOT ASSESSABLE TO TAX. 1.1 THAT FINDING OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) THAT SINCE THE SUBSIDY WAS RECEIVED AFTER COMMENCEM ENT OF PRODUCTION AND THERE WAS NO REQUIREMENT THAT THE AMOUNT HAD TO BE .USED TO ACQUIRE NEW PLANT AND MACHINERY FOR FURTHER EXPANSION OF IT S MANUFACTURING CAPACITY AND AS SUCH INCENTIVE WAS GIVEN NOT FOR MA KING INVESTMENT BUT FOR DOING BUSINESS AND THEREFORE THE SAME IS OF REVENUE NATURE IS BASED ON MISCONCEPTION OF FACTS, PROVISIONS OF LAW AND HENCE UNSUSTAINABLE. 1.2 THAT THE LEARNED COMMISSIONER OFLNCOME TAX (AP PEALS) HAS MISCONSTRUED THE JUDGMENTS OF APEX COURT IN THE CAS E OF CIT VS. P.J. CHEMICALS REPORTED IN 210 ITR 830 AND SAHNEY STEEL & PRESS WORKS LTD. VS. CIT REPORTED IN 228 ITR 253 AND OVERLOOKED THE JUDGMENT OF JAMMU & KASHMIR HIGH COURT IN THE CASE OF SHREE BALAJI ALLO YS VS CIT REPORTED IN ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 4 333 ITR 335 WHEREIN IN ALMOST IDENTICAL CIRCUMSTANC ES FOLLOWING THE JUDGMENT OF APEX COURT IN THE CASE OF CIT VS PONNI SUGARS AND CHEMICALS LTD. REPORTED IN 306 ITR 392 IT WAS HELD THAT THE S UBSIDY IN CAPITAL RECEIPT. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS' FURTHER ERRED, BOTH IN LAW AND ON FACTS IN DIRECTING THE AO TO INITIATE PROCEEDING U/S 147 READ WITH SECTION 150(1) AND 153(3) OF THE ACT FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SUB SIDY WAS RECEIVED. THE DIRECTION IS WITHOUT JURISDICTION AND CONTRARY TO L AW AND UNSUSTAINABLE. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EAL) HAS ALSO ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWA NCE OF DEDUCTION U/S 80LC OF THE ACT IN RESPECT OF PROFITS DERIVED FROM SALE IN THE RESTAURANT TO NON-RESIDENT CUSTOMERS WITHOUT APPRECIATION THAT EV EN SUCH PROFIT IS EL IGIBLE FOR DEDUCTION U/S 80LC OF THE ACT. IT IS THEREFORE, PRAYED THAT IT BE HELD THAT SUBSID Y RECEIVED REPRESENTS CAPITAL RECEIPT AND DIRECTIONS TO INITIA TE PROCEEDINGS U/S 147 READ WITH SECTION 150(1) AND 153(3) OF THE ACT ARE WITHOUT JURISDICTION. IT IS FURTHER PRAYED THAT DISALLOWANCE OF CLAIM OF DEDUCT ION UNDER SECTION 80LC OF THE ACT MAY ALSO BE DELETED AND APPEAL OF THE AP PELLANT BE ALLOWED. REVENUES APPEALS (ASSESSMENT YEARS 2009 REVENUES APPEALS (ASSESSMENT YEARS 2009 REVENUES APPEALS (ASSESSMENT YEARS 2009 REVENUES APPEALS (ASSESSMENT YEARS 2009- -- -10 & 2010 10 & 2010 10 & 2010 10 & 2010- -- -11) 11)11) 11) 4. SINCE COMMON GROUNDS HAVE BEEN RAISED IN BOTH THE REVENUES APPEALS, FOR THE SAKE OF CONVENIENCE, WE ARE DEAL ING WITH THE CASE RELATING TO ASSESSMENT YEAR 2009-10. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS E-RETURN ON 11.9.2009 DECLARING TOTAL INCOME OF RS. 2,120/- AFT ER CLAIMING DEDUCTION U/S. 80IC(2) OF THE I.T. ACT, 1961 AMOUNTING TO RS. 33,0 7,273/-. THE CASE WAS ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 5 SELECTED FOR SCRUTINY THROUGH CASS. ACCORDINGLY, N OTICE U/S. 143(2) OF THE I.T. ACT, 1961 DATED 19.8.2010 WAS ISSUED AND SERVED UPO N THE ASSESSEE. NOTICE U/S. 142(1) OF THE I.T. ACT, 1961 DATED 22.6.2011 ALONGWITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAME, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME. AO HAS EXAMINED THE COMPUTERIZED BOOKS OF ACCOUNTS I.E. CA SH BOOK, LEDGER, COPIES OF BANK STATEMENTS AND BILLS AND VOUCHERS OF EXPENSES PRODUCED WHICH HAVE BEEN EXAMINED ON TEST CHECK BASIS. THE ASSESSEES AUTHOR ISED REPRESENTATIVE HAS FILED THE WRITTEN SUBMISSIONS AND REQUISITE DETAILS DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WERE DULY CONSIDERED BY THE ASSES SING OFFICER. 5.1 THE ASSESSEE, IS A PARTNERSHIP FIRM, UNDER THE NAME AND STYLE OF M/S VASUNDHARA PALACE HOTELS AT TAPOVAN, TEHRI GARHWAL. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IC OF THE I.T. ACT, 1971 FROM THE AY 2007-08 AND THIS THE THIRD YEAR FOR CLAIMING DEDUCTION U/S. 80IC OF THE I.T. A CT, 1961. THIS DEDUCTION WAS CLAIMED UNDER CLAUSE 15, ECO TOURISM INCLUDING HOTE LS, RESORTS, SPA, ENTERTAINMENT/ AMUSEMENT PARKS AND ROPEWAYS OF SCHE DULE FOURTEENTHS OF THE I.T. ACT, 1961. THE AO HELD THAT SINCE THE ASSESSEE S HOTEL HAS NOT BEEN GRANTED NOC FROM THE POLLUTION CONTROL DEPARTMENT, THEREFOR E, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IC AMOUNTING TO RS. 3 3,09,393/- AND ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT ON A TOTAL INCOME O F RS. 33,09,393 (INCLUDING INFORM OF RS. 2,120/- AFTER DISALLOWING DEDUCTION U /S. 80IC AMOUNTING TO RS. 33,07,723/- VIDE ASSESSMENT ORDER DATED 29.12.2011 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 6. AGAINST THE AFORESAID ASSESSMENT ORDER DATED 29. 12.2011, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED O RDER DATED 31.12.2012 HAS ALLOWED THE APPEAL OF THE ASSESSEE. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 6 7. NOW THE REVENUE IS AGGRIEVED AGAINST THE IMPUGNE D ORDER AND FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 8. AT THE TIME OF HEARING LD. DR RELIED UPON THE O RDER OF THE AO AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. HE STATED THAT SINCE THE ASSESSEES HOTEL HAS NOT BEEN GRANTED NOC FROM THE POLLUTION CONTROL DEPARTMENT, THEREFORE, THE ASSESS EE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IC AMOUNTING TO RS. 33,09,393/-. ACCORDING LY, HE REQUESTED THAT APPEALS OF THE REVENUE MAY BE ALLOWED. HE FILED A COPY OF LETTER DATED 19.11.2015 WRITTEN BY SH. RC NAINWAL, ITO, WARD 1( 4)(1), RISHIKESH ADDRESSED TO THE JCIT (DR), ITAT, NEW DELHI. THE RELEVANT CONT ENTS OF THIS LETTER IS REPRODUCED BELOW:- SUB:- HEARING IN THE CASE OF MIS HOTEL VASUNDHARA PALACE, (PAN AADFH5808H)- ITA NO 767,2417,2592/DEL/2013 FOR A.Y. 2010- 11- REGARDING- KINDLY REFER TO YOUR OFFICE LETTER F.NO. SR. DR/ITA T/C- BENCH/2015-16/127 DATED 12.10.2015, ADDRESSED TO TH E PR. COMMISSIONER OF INCOME TAX, DEHRADUN, AND COPY ENDO RSED TO THIS OFFICE. AS DESIRED BY YOUR GOODSELF, THE ASSESSEE NAMELY MI S HOTEL VASUNDHARA PALACE, RISHIKESH, HAS BEEN ASKED FOR SU BMISSION OF THE FATE OF ITS APPLICATION DATED 26.07.2006 TO THE UTT ARANCHAL POLLUTION CONTROL BOARD. WRITTEN EXPLANATION OF THE COUNSEL FOR THE ASSESSEE , RECEIVED IN THIS OFFICE ON 19.11.2015, ALONGWITH OTHER DETAI LS. AS PER VERSION OF THE ASSESSEE, THE ASSESSEE FILED THE APPLICATION FOR CONSENT TO ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 7 OPERATE ITS NEWLY CONSTRUCTED HOTEL ON 26.07.20106, TO THE OFFICE OF UTTARANCHAL ENVIRONMENT PROTECTION & POLLUTION C ONTROL BOARD, DEHRADUN, WITH REQUISITE FEE AND DOCUMENTS. IT HAS FURTHER BEEN INTIMATED THAT AFTER THAT THEY HAD NOT RECEIVED ANY NOTICE OF ACCEPTANCE OR REJECTION OF THE SAID APPLICATION FRO M THE OFFICE OF UEPPCB FOR MANY YEARS. IT HAS FURTHER BEEN INTIMATED THAT THE ASSESSEE HAD APPLIED FOR THE CONSENT TO OPERATE FOR THE F.Y. 2012-13 AFT ER DEPOSIT OF REQUISITE FEE FOR ALL THE FINANCIAL YEARS CAME BETW EEN THE AFORESAID CONSENT APPLICATION DATED 26.07.2006 AND GOT THE CO NSENT TO OPERATE VIDE LETTER DATED 22.11.2012 FOR F.Y. 2012- 13. COPY OF CONSENT LETTER HAS ALSO BEEN ENCLOSED. ALL DOCUMENT S ARE BEING SUBMITTED FOR YOUR KIND PERUSAL. 9. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE H AS RELIED UPON THE ORDER OF THE LD. CIT(A). HE FILED TWO PAPERS BOOKS ONE IS CO NTAINING PAGES 1 TO 163 HAVING THE DETAILS OF COPY OF COMPUTATION OF INCOME ALONGW ITH AUDITED FINANCIAL STATEMENT FOR THE FY 2008-09; COPY OF REPLIES FILED BEFORE THE AO ALONGWITH ITS ENCLOSURES; COPY OF DECISION OF THE DELHI BENCH, IT AT IN THE CASE OF SHRI BIDHI CHAND SINGHAL VS. ITO IN ITA NO. 3419/D/2009 AY 200 6-07 ETC. AND IN ANCHAL HOTELS (P) LTD. VS. ACIT VIDE ORDER DATED 7 .10.2011 IN ITA NO. 1800 & 1801/D/2010 FOR AY 2005-06 TO 2006-07 AND ITA NO. 3 637/D/2011 (AY 2007-08) WHEREIN THE TRIBUNAL FOLLOWED THE DECISION OF THE COORDINATE BENCH IN THE CASE OF SHRI BIDHI CHAND SINGHAL VS. ITO (SUPRA ) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE SECOND PAPER BOOK CONTA INING THE PAGES 164 TO 254 HAVING THE COPY OF NOTIFICATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY; COPY OF LETTER FROM DIRECTOR ATE OF INDUSTRIES, UTTRANCHAL; ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 8 COPY OF SUBMISSION FILED BEFORE CIT(A) FOR AY 2009- 10 AND COPY OF VARIOUS JUDGMENT OF THE SUPREME COURT; VARIOUS HIGH COURTS AND THE TRIBUNAL. HE FURTHER STATED THAT THE PRESENT ISSUES INVOLVED IN THE REVE NUES APPEALS IS SQUARELY COVERED BY THE ITAT DECISION IN THE CASE OF BIDHI C HAND SINGHAL IN ITA NO. 3419/D/2009 FOR AY 2006-07. HE FURTHER STATED IT I S A SETTLED LAW THAT, A DEDUCTION ONCE GRANTED CANNOT BE RE-EXAMINED IN THE SUCCEEDING ASSESSMENT YEARS. IT WAS STATED THAT CLAIM OF DEDUCTION BY TH E ASSESSEE HAD BEEN EXAMINED IN THE AY 2006-07 AND ONCE SUCH CLAIM STOOD ACCEPTE D, IT WAS INCUMBENT UPON THE REVENUE TO ALLOW SUCH CLAIM IN THE SUCCEEDING A SSESSMENT YEARS. IT WAS FURTHER STATED THAT NO ADVERSE FINDING WAS RECORDED IN THE INITIAL ASSESSMENT YEAR I.E. 2006-07. - 123 ITR 669 (GUJ) CIT VS. SAURASHTRA CEMENT & C HEMICALS - 355 ITR 14 (DEL) CIT VS. DELHI PRESS PATRA PRAK ASHAN LTD. - 216 ITR 548 (BOM) CIT VS. PAUL BROTHERS. 9.1 LD. COUNSEL OF THE ASSESSEE HAS STATED THAT EV EN OTHERWISE, ON APPLYING THE RULE OF CONSISTENCY, THE CLAIM OF THE ASSESSEE DESERVES TO SUCCEED, SINCE THE REVENUE HAD ACCEPTED THIS CLAIM EVEN IN THE ASSESSM ENTS FRAMED U/S. 143(3) FOR THE AY 2006-07. HE SUPPORTED THIS VIEW BY THE FO LLOWING JUDGMENTS:- - 308 ITR 161 (SC) CIT VS. JK CHARITABLE TRUST - 193 ITR 321 (SC) RADHA SAOMI SATSANG VS. CIT - 355 ITR 14 (DEL) CIT VS. DELHI PRESS PATRA PRA KASHAN LTD. - 327 ITR 570 (DEL.) CIT VS. MODI INDUSTRIES LTD. - 259 ITR 570 (DEL) CIT VS. LAGAN KALA UPVAN ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 9 - 38 TAXMANN.COM 100 (SC) CIT VS. EXCEL INDUSTRIE S LTD. 9.2 LD. COUNSEL FOR THE ASSESSEE FINALLY STATED THA T THERE IS NO REQUIREMENTS UNDER THE ACT TO OBTAIN NOC FROM POLLUTION CONTROL DEPARTMENT FOR GRANTING LICENCE TO OPERATE HOLE. IN FACT IN THE CASE OF BID I CHAND SINGHAL (SUPRA) FOR AY 2006-07) THE TRIBUNAL HAS HELD THAT THERE WAS NO MA TERIAL ON RECORD TO SHOW THAT ECO-TOURISM STATUS HAS BEEN GRANTED TO ANOTHE R HOTEL AND WHICH STATUS ASSESSEE DOES NOT HAVE. IT WAS FURTHER HELD THAT, IN THE ABSENCE OF DEFINITION OF ECO-TOURISM THOUGH THE HOTEL IS ADDED INTO ITEM NO. 15 OF PART C IS TO BE CONSTRUED TO BE HOTEL SITUATED IN THE STATE OF HIMA CHAL PRADESH OR THE STATE OF UTTARANCHAL HAVING VALID LICENSE ON THE BASIS OF NO OBJECTION FROM THE POLLUTION DEPARTMENT WHICH CAN BE TREATED TO BE HOTEL ELIGIBL E FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. IN VIEW OF THE ABOVE, HE STATED THAT THE ABOVE OBSERVATION OF THE TRIBUNAL CLEARLY SUPPORTS THE CLAIM OF THE ASSE SSEE AND AS SUCH THE ASSESSEE IS ENTITLED TO DEDUCTION. MOREOVER, IN ANY CASE, T HAT ONCE THERE IS NO VIOLATION OF POLLUTION NORMS EVEN OTHERWISE THERE REMAINS NO JUS TIFICATION TO ALLEGE THAT, ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION. IN FACT, IT HAS NOT EVEN BEEN SHOW THAT ASSESSEE WAS REQUIRED TO SPECIFICALLY OBTAIN CERTIF ICATE FROM POLLUTION CONTROL BOARD, OR WHICH HAS BEEN OBTAINED BY OTHER HOTEL AN D, NOT BY THE ASSESSEE. THEREFORE, HE REQUESTED THAT THE CLAIM OF THE DEDUC TION OF RS. 33,07,273/- AND RS. 48,90,836/- U/S. 80IC OF THE ACT FOR ASSTT. YEA RS 2009-10 & 2010-11 BE ALLOWED AND THE APPEALS FILED BY THE REVENUE MAY KI NDLY BE DISMISSED. 10. WE HAVE HEARD THE BOTH PARTIES AND PERUSED AN D CONSIDERED THE RELEVANT RECORDS AVAILABLE WITH US ESPECIALLY THE I MPUGNED ORDERS PASSED BY THE REVENUE AUTHORITIES; SUBMISSIONS OF BOTH THE PART IES; AND THE CASE LAWS REFERRED HEREINABOVE. WE FIND THAT LD. FIRST APP ELLATE AUTHORITY HAS ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 10 ELABORATELY DISCUSSED THE ISSUE IN DISPUTE BY CONSI DERING THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE AND ADJUDICATED THE I SSUE IN DISPUTE AS UNDER:- 1.1 BEFORE GOING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, IT WOULD BE APPROPRIATE TO REPRODUCE THE RELE VANT PART OF THE PROVISION OF SECTION 80-IC OF THE IT ACT AS BELOW: '(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION(2), THERE SHALL, IN ACCO RDANCE WITH AND SUBJECT TO THE PROVISION~ OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE,- (A) .... (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOUR TEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES AN Y ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHED ULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING- (I) .. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 11 (II) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL. ... (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE- (I) .... (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE R EFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE ( IL) OF CLAUSE (B), OF SUB-SECTION (2), ONE HUNDRED PER CEN T OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PER CENT (OR THIRTY PER CEN T WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS'. THE LIST OF ARTICLES/THINGS/OPERATIONS MENTIONED IN SECTION 80-IC(2), AS APPLICABLE TO THE STATE OF UTTARAKHAND, HAS BEEN GIVEN IN SCHEDULE-XIV (PART C ) TO THE INCOME TAX ACT. IT HAS 18 ENTRIES. THE ASSES SEE'S CASE IS CLAIMED TO BE FALLING UNDER THE ENTRY AT SL .NO.15 WHICH READS AS BELOW: 'ECO-TOURISM INCLUDING HOTELS, RESORTS, SPA, ENTERTAINMENT/AMUSEMENT PARKS AND ROPEWAYS' 1.2 ACCORDING TO THE AO, THE TERM 'HOTEL' IS QUALIF IED BY THE MAIN TERM 'ECOTOURISM'. HE REFERRED TO THE C ONCEPT OF ECOTOURISM AND ITS VARIOUS DEFINITIONS AND REACHED THE CONCLUSION THAT ECOTOURISM INVOLVED TRAVEL TO AREAS OF NATURAL ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 12 BEAUTY IN SUCH A MANNER THAT IT DID NOT DEGRADE THE ENVIRONMENT AND BENEFITTED LOCAL COMMUNITY. HENCE, ACCORDING TO HIM, UNLESS A HOTEL FORMS PART OF AN E COTOURISM PROJECT OR CONSTITUTES AN ECOTOURISM UNIT BY ITSELF , IT WOULD NOT QUALIFY FOR THE SAID DEDUCTION. ACCORDING TO HIM, T HE ASSESSEE'S HOTEL DID NOT SATISFY THIS BENCHMARK. WI THOUT PREJUDICE TO THAT, HE OBSERVED THAT THE ASSESSEE DI D NOT HAVE NOC FROM THE POLLUTION CONTROL BOARD OF UTTARAKHAND . THE DISPUTE IS CENTERED ON THE NATURE AND SCOPE OF THE ABOVEMENTIONED ENTRY AT SI. NO. 15 (SCHEDULE-XIV, P ART C). 1.3 THE ASSESSEES SUBMISSION IN SUPPORT OF ITS C ONTENTION THAT IT IS ELIGIBLE FOR THE DEDUCTION IN QUESTION I S SUMMARIZED BELOW:- I. THE DEDUCTION FORMS PART OF THE PACKAGE OF FISCAL INCENTIVES GIVEN BY THE CENTRAL GOVERNMENT F OR ECONOMIC DEVELOPMENT OF AND CREATION OF EMPLOYMENT IN UTTARAKHAND. SUCH INCENTIVE PROVISIONS NEED TO BE INTERPRETED LIBERALLY. (RELIANCE HAS BEEN PLACED ON A NUMBER OF DECISIONS OF THE ITA T AND COURTS OF LAW IN SUPP ORT OF THIS CONTENTION). II. THE TERM 'ECOTOURISM' HAS NOT BEEN DEFINED ANYWHERE IN THE INCOME TAX ACT NOR HAVE ITS PARAMET ERS BEEN NOTIFIED ELSEWHERE. IF TWO INTERPRETATIONS OF THE TERM ARE POSSIBLE, THE ONE WHICH IS FAVOURABLE TO THE TAX PA YER SHOULD BE PREFERRED. (RELIANCE HAS BEEN PLACED ON A NUMBER OF DECISIONS OF THE ITAT AND COURTS OF LAW IN SUPPORT OF THIS CONTENTION). ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 13 ILL. SCHEDULE-XIV (PART-C, ENTRY 15) LAYS DOWN THE NATURE AND SCOPE OF THE ACTIVITY ELIGIBLE FOR THE D EDUCTION. THE ACTIVITY IS 'ECOTOURISM' WHICH IS SAID TO 'INCL UDE' HOTELS, ETC. WHEN THE WORD 'INCLUDES' IS USED WHILE DEFININ G A TERM IN LAW, IT HAS THE EFFECT OF EXTENDING THE NORMAL MEAN ING OF THE TERM SO AS TO COVER THE OTHER TERMS WHICH MAY NOT N ORMALLY BE COVERED WITHIN ITS MEANING BUT WHICH ARE INCLUDE D WITHIN THE DEFINITION. IN OTHER WORDS, HOTELS ARE INCLUDED WITHIN THE SCOPE OF THE TERM 'ECOTOURISM' DUE TO THE FICTION O F THE SAID ENTRY. (RELIANCE HAS BEEN PLACED ON A NUMBER OF DEC ISIONS OF THE ITAT AND COURTS OF LAW IN SUPPORT OF THIS CONTE NTION). IV. THE PACKAGE OF FISCAL INCENTIVES (OF WHICH DEDUCTION U/S 80IC FORMS A PART) ALSO INCLUDES 'CAP ITAL INVESTMENT SUBSIDY'@15% OF INVESTMENT IN PLANT AND MACHINERY. THIS INCENTIVE IS ALSO GIVEN BY THE CENT RAL GOVERNMENT AND IT IS BEING GIVEN TO ALL THE HOTELS WITHOUT APPLICATION OF CLASSICAL CRITERIA OF ECOTOURISM TO HOTELS. IT IS BEING GIVEN TO ALL HOTELS, TREATING THEM AS A THRUS T SECTOR INDUSTRY. THE INCENTIVE WAS OPERATIONALISED BY THE MINISTRY OF COMMERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POL ICY AND PROMOTION) NOTIFICATION DT. 08.01.2003, ISSUED VIDE F.NO.1 (1 0)/ 2001- NER. THE LIST OF THE THRUST SECTOR INDUST RIES, FOR PURPOSES OF THE INCENTIVE, APPEARS AT ANNEXURE TO T HE NOTIFICATION. THIS LIST IS THE SAME AS THE ONE FOUN D AT ANNEXURE-II TO THE O.M. ISSUED BY THE SAME DEPARTME NT ON 07.01.2003 VIDE THE SAME FILE NUMBER, WHICH ANNOUNC ED THE PACKAGE OF INCENTIVES FOR UTTARAKHAND AND OTHER SPE CIAL ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 14 CATEGORY STATES. WHEN THE PARAMETERS ARE THE SAME A ND HOTELS ARE GETTING CAPITAL INVESTMENT SUBSIDY AS HO TELS, THERE IS NO REASON WHY DIFFERENT CRITERIA SHOULD BE ADOPT ED FOR THE PURPOSE OF DEDUCTION U/S 80LC OF THE IT ACT. V. THE AO HAD HIMSELF ALLOWED THE BENEFIT OF DEDUCTION TO THE ASSESSEE IN THE PAST. SINCE THE FA CTS AND CIRCUMSTANCES ARE THE SAME, CONSISTENCY REQUIRES TH AT THE BENEFIT SHOULD BE ALLOWED NOW ALSO. (RELIANCE HAS B EEN PLACED ON A NUMBER OF DECISIONS OF THE ITAT AND COU RTS OF LAW IN SUPPORT OF THIS CONTENTION). VI. THE ASSESSEE IS OBSERVING VARIOUS ENVIRONMENT AND POLLUTION CONTROL NORMS AND IS ALSO PROVIDING E MPLOYMENT TO LOCAL PEOPLE, DIRECTLY AND INDIRECTLY, IN SUBSTA NTIAL NUMBER. VII. RECEIVING NOC FROM THE POLLUTION CONTROL BOAR D IS NOT AN ESSENTIAL CONDITION FOR SETTING UP OR OPE RATION OF A HOTEL IN THE STATE OF UTTARAKHAND. A PERSON INTERES TED IN SETTING UP A HOTEL HAS TO APPLY FOR REGISTRATION UN DER THE SARAI ACT WHICH IS GRANTED BY THE DISTRICT ADMINISTRATION AFTER GETTING CLEARANCES FROM THE FOLLOWING DEPARTMENTS/A GENCIES: A. LOCAL POLICE B. FIRE DEPARTMENT C. TEHSILDAR D. TOURISM DEPARTMENT E. CHIEF MEDICAL OFFICER ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 15 THE ASSESSEE IS DULY REGISTERED UNDER THE SARAI ACT . SINCE THIS IS THE STATUTORY FRAME-WORK UNDER WHICH THE ASSESSEE IS OPERATING, THE CONDITION THAT IT MUST H AVE NOC FROM THE POLLUTION CONTROL BOARD WOULD BE AN EXTRAN EOUS CONSIDERATION. IN ANY CASE, THE CONDITION IS TOTALL Y IRRELEVANT FOR THE PRESENT PURPOSE SINCE THE INCOME TAX ACT DO ES NOT IMPOSE ANY SUCH CONDITION FOR GRANT OF DEDUCTION U/ S 8OIC. VIII. THE ITAT (DELHI AND CHANDIGARH BENCHES), IN THE FOLLOWING DECISIONS, HAVE CATEGORICALLY HELD THAT A HOTEL IS ELIGIBLE FOR THE DEDUCTION: A. BIDHI CHAND SINGHAL VS. ITO (ITA NO.3419/DEL/2009, DATED 04.11.2010) B. ANCHAL HOTELS (P) LTD. V ACIT (ITA NO.1S0 & 1S01/2010 AND 3637/2011, DELHI, DT.07.10.2011 C. ACIT V RAGHUNATH SINGH THAKUR (ITA NOS.152, 469 & 1144, CHD.). FURTHER, DECISIONS OF A COURT/TRIBUNAL ARE BINDING ON THE LOWER JUDICIAL/QUASI-JUDICIAL AUTHORITIES. (REL IANCE HAS BEEN PLACED ON A NUMBER OF DECISIONS OF THE ITAT AN D COURTS OF LAW IN SUPPORT OF THIS CONTENTION). 1.4.1 THE ASSESSEE'S SUBMISSION HAS BEEN CONSIDERED . BENEFICIAL PROVISIONS OF LAW SHOULD BE INTERPRETED LIBERALLY. BUT, THAT SITUATION ARISES ONLY AFTER IT IS ESTABLI SHED THAT THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION IN THE FIRST PLACE. BASIC ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 16 ELIGIBILITY HAS TO BE DECIDED STRICTLY ON THE TOUCH STONE OF THE PROVISIONS OF LAW. 1.4.2 THE PROPOSITION THAT, IF TWO INTERPRETATIONS OF A TERM/PROVISION ARE POSSIBLE, THE ONE WHICH IS FAVOU RABLE TO THE TAX PAYER SHOULD BE PREFERRED, IS WELL-ESTABLIS HED IN LAW. BUT, IT IS NOT AN ABSOLUTE PRINCIPLE OF INTERPRETAT ION. MOST OF THE LITIGATION IS BETWEEN TWO PARTIES WHO INTERPRET THE SAME PROVISION OF LAW DIFFERENTLY IN SUPPORT OF THEIR RE SPECTIVE POSITIONS. IF THE AFORESAID PROPOSITION WERE AN ABS OLUTE RULE OF INTERPRETATION, ALL LITIGATION SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEES. THAT DOES NOT HAPPEN. THE CORRECT PO SITION OF LAW IS THAT, WHEN TWO EQUALLY APPEALING INTERPRETAT IONS OF A TERM/PROVISION ARE POSSIBLE, THE ONE THAT IS FAVOUR ABLE TO THE TAX PAYER SHOULD BE PREFERRED. HENCE, IT IS TO BE S EEN WHETHER TWO INTERPRETATION OF THE SAID ENTRY IN SCH EDULE-XIV (PART-C, ENTRY 15) ARE POSSIBLE AND, IF YES, WHETHE R THE AO'S INTERPRETATION OF THE AO AND THAT OF THE ASSESSEE A RE EQUALLY APPEALING. 1.4.3 THE PROPOSITION THAT, WHEN THE WORD 'INCLUDES ' IS USED WHILE DEFINING A TERM IN LAW, IT HAS THE EFFEC T OF EXTENDING THE NORMAL MEANING OF THE TERM SO AS TO C OVER THE OTHER TERMS WHICH MAY NOT NORMALLY BE COVERED WITHI N ITS MEANING BUT WHICH ARE INCLUDED WITHIN THE DEFINITIO N, IS ALSO WELL ESTABLISHED. THIS IS CALLED A 'LEGAL FICTION'. HERE, IT IS NOTEWORTHY THAT THE ENTRY IN .SCHEDULE-XIV (PART-C, ENTRY 15) DOES NOT GIVE 'DEFINITION' OF THE TERM 'ECOTOURISM' . IT MERELY ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 17 CONTAINS A NARRATION OF THE ACTIVITY WHICH IS ELIGI BLE FOR THE DEDUCTION U/S 8O-IC. HENCE, THE DECISIONS RELATING TO THE EFFECT OF THE WORD 'INCLUDES' WHILE DEFINING A TERM IN LAW ARE NOT APPLICABLE TO THIS TERM. 1.4.4 THE ARGUMENT THAT, WHEN 'CAPITAL INVESTMENT SUBSIDY' AND DEDUCTION U/S 8O-IC ARE PART OF THE SA ME PACKAGE OF FISCAL INCENTIVES AND THE FORMER IS BEIN G GIVEN WITHOUT ANY FUSS (OF THE KIND MADE BY THE AO), THE LATTER SHOULD ALSO BE GIVEN IN THE SAME MANNER, IS APPRECI ATED. BUT, IF IT IS ESTABLISHED, BY INDEPENDENT ANALYSIS, THAT THE DEDUCTION IS NOT DESERVED, IT COULD BE SAID THAT IT IS THE SUBSIDY WHICH WAS GIVEN WRONGLY. HENCE, THE FACT OF SUBSIDY BEING GIVEN MAY BE A RELEVANT CONSIDERATION WHILE D ECIDING WHETHER THE DEDUCTION SHOULD BE ALLOWED OR NOT. BUT , IT CANNOT BE THE DECIDING FACTOR. 1.4.5 CONSISTENCY IN ASSESSMENT IS DESIRABLE. BUT, SIMPLY BECAUSE A DEDUCTION WAS ALLOWED TO AN ASSESS EE IN THE PAST, IT CANNOT BE SAID THAT THE CLAIM WAS CORR ECT. THE AO MAKES ASSESSMENT BUT HE CANNOT CHALLENGE HIS OWN OR DER. HENCE, IF, BY DEFAULT, HE HAS ALLOWED THE ASSESSEE' S CLAIM FOR DEDUCTION IN THE PAST, HE SHOULD NOT BE PREVENTED F ROM CORRECTING THAT ERROR AT LEAST IN SUBSEQUENT ASSESS MENTS. IT IS MORE APPROPRIATE TO CORRECT AN ERROR THAN TO ALLOW IT TO PERPETUATE AND THEREBY CAUSE RECURRING DAMAGE. IF, ON MERITS, THE AO'S ACTION IS CORRECT, THE FACT THAT I T WAS NOT TAKEN IN THE PAST NEED NOT ACT AS A BAR IN THE PRES ENT. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 18 1.4.6 THE CONTENTION THAT THE ASSESSEE HAS TAKEN VARIOUS STEPS TO PROTECT ENVIRONMENT AND GENERATE EMPLOYMENT IS ALRIGHT. BUT, IT MAY NEED TO BE EXAMI NED WHETHER THESE STEPS, AMOUNT TO ECOTOURISM. 1.4.7 THE CONTENTION THAT THE ASSESSEE HAS BEEN REGISTERED UNDER THE SARAI ACT AND THAT IT IS NOT M ATERIAL, FOR THE PRESENT PURPOSE, THAT IT DID NOT HAVE NOC FROM THE POLLUTION CONTROL BOARD DURING THE PREVIOUS YEAR UN DER CONSIDERATION HAS TO BE EXAMINED IN THE LIGHT OF TH E REGULATORY FRAMEWORK. 1.4.8 THE CONTENTION THAT THE DECISIONS OF THE HON. ITAT RENDERED IN THE ASSESSEES' FAVOUR IN SIMILAR CASES IS BINDING ON ME IS UNEXCEPTIONABLE. NEVERTHELESS, A DISCUSSIO N MAY NOT BE OUT OF PLACE. 1.5 IN ORDER TO GET A CLEARER PICTURE, IT WOULD BE APPROPRIATE TO GO INTO THE HISTORY OF THE LEGISLATI ON. SECTION 8O-IC OF THE I.T.ACT WAS INCORPORATED IN THE INCOME TAX ACT AS PART OF 'FISCAL......CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH- EASTERN STATES, IN ORDER TO GIVE BOOST TO THE ECONO MY IN THESE STATES'. (REF. CBDT CIRCULAR NO.7/2003, DT.05.09.20 03). PRIOR TO THIS, THE CENTRAL GOVERNMENT HAD ANNOUNCED A 'PACKAGE OF INCENTIVES' THROUGH THE MINISTRY OF COM MERCE AND INDUSTRY (DEPARTMENT OF INDUSTRIAL POLICY AND P ROMOTION) OFFICE MEMORANDUM NO.1 (10)/ 2001-NER, DATED ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 19 07.01.2003. THE INTRODUCTORY PART OF THE O.M. READS AS BELOW: 'THE HON'BLE PRIME MINISTER, DURING THE VISIT TO UTTRANCHAL FROM 29' TO 31ST MARCH, 2002, HAD, INTER -ALIA MADE AN ANNOUNCEMENT THAT 'TAX AND CENTRAL EXCISE CONCESSIONS TO ATTRACT INVESTMENTS IN THE INDUSTRIA L SECTOR WILL BE WORKED OUT FOR THE SPECIAL CATEGORY STATES INCLU DING UTTRANCHAL. THE INDUSTRIES ELIGIBLE FOR SUCH INCENT IVES WILL BE ENVIRONMENT FRIENDLY WITH POTENTIAL FOR LOCAL EMPLO YMENT GENERATION AND USE OF LOCAL RESOURCES.' (EMPHASIS A DDED) 2. IN PURSUANCE OF THE ABOVE ANNOUNCEMENT, DISCUSSION ON STRATEGY AND ACTION PLAN FOR DEVELOPM ENT OF INDUSTRIES AND GENERATION OF EMPLOYMENT IN THE STAT ES OF UTTRANCHAL AND HIMACHAL PRADESH WERE HELD WITH THE VARIOUS RELATED MINISTRIES/AGENCIES ON THE ISSUE, INTER-ALI A, INFRASTRUCTURE, DEVELOPMENT, FINANCIAL CONCESSIONS AND TO PROVIDE EASY MARKET ACCESS, THE NEW INITIATIVES WOU LD PROVIDE THE REQUIRED INCENTIVES AS WELL AS AN ENABL ING ENVIRONMENT FOR INDUSTRIAL DEVELOPMENT, IMPROVE AVA ILABILITY OF CAPITAL AND INCREASE MARKET ACCESS TO PROVIDE A FILLIP TO THE PRIVATE INVESTMENT IN THE STATE. 3. ACCORDINGLY, IT HAS BEEN DECIDED TO PROVIDE THE FOLLOWING PACKAGE OF INCENTIVES FOR THE STATES OF U TTRANCHAL AND HIMACHAL PRADESH.' IT CONTAINS LIST OF THE FOLLOWING FISCAL INCENTIVES : ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 20 I. 100% OUTRIGHT EXCISE DUTY EXEMPTION FOR A PERIOD OF 10 YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. II. 100% INCOME TAX EXEMPTION FOR INITIAL PERIOD OF FIVE YEARS AND THEREAFTER 30% FOR COMPANIES AND 25% FOR OTHER THAN COMPANIES FOR A FURTHER PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. ILL. CAPITAL INVESTMENT SUBSIDY @ 15% OF THE INVESTMENT IN PLANT & MACHINERY, SUBJECT TO A CEILING OF RS.30 LAKH. INTRODUCTION OF SECTION 80LC TO THE INCOME TAX ACT WAS IN PURSUANCE OF THIS DECLARED POLICY. THE 'THRUST S ECTOR INDUSTRIES' LISTED AT ANNEXURE-I! TO THE OM ARE FOU ND LISTED AT SCHEDULE- XIV, PART C) OF THE INCOME TAX ACT. THE ENTRY AT SI.NO.15 IN BOTH THESE LISTS IS SUBSTA NTIALLY THE SAME, THOUGH THERE IS A MINOR VARIATION IN THE MANNER IT IS PRESENTED IN THE TWO LISTS. IT CAN BE SEEN AS BELOW: SI.NO. NARRATION 15 O.M. (ANNEXURE-I I) INCOME TAX ACT (SCH EDULE- XIV, PART C) ========================================== ECO-TOURISM ECO-TOURISM INCLUDING HOTELS, HOTELS, RESORTS, SPA RESORTS, SPA, ENTERTAINMENT/ ENTERTAINMENT/AMUSE- AMUSEMENT PARKS AND MENT PARKS AND ROPE- ROPEWAYS ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 21 WAYS. ========================================== . . .. IT IS CLEAR THAT THE THRUST SECTOR IDENTIFIED FOR T HE FISCAL INITIATIVE WAS 'ECOTOURISRN' AND THE SPECIFIC BUSIN ESSES WHICH WERE IDENTIFIED UNDER THE BROAD HEAD OF ECOTOURISM WERE 'HOTELS, RESORTS, SPA, ENTERTAINMENT/AMUSEMENT PARK S AND ROPEWAYS'. 1.6 THIS BRINGS US TO THE CONCEPT OF 'ECOTOURISM'. EVEN THOUGH 'ECOTOURISM' WAS MENTIONED AS A THRUST SECTO R IN THE GOVERNMENT OF INDIA O.M. DATED 07.01.2003 AND WAS A LSO CONSIDERED ELIGIBLE FOR DEDUCTION U/S 80-IC OF THE I.T. ACT, IT HAS NOT BEEN DEFINED EITHER IN THE SAID O.M. OR IN THE I.T. ACT. HENCE, IT IS NECESSARY TO UNDERSTAND THE MEANING OF THE TERM PARTICULARLY IN THE CONTEXT OF THE POLICY PARAMETER S OF THE GOVERNMENT OF INDIA. SOME RESEARCH HAS BEEN DONE IN THIS DIRECTION AND THE UNDERSTANDING THAT EMERGES IS DIS CUSSED BELOW. 1.7 THE MOST WIDELY ACCEPTED DEFINITION OF THE TE RM 'ECOTOURISM' IS THE ONE THAT WAS GIVEN BY THE INTER NATIONAL ECOTOURISM SOCIETY IN 1990 AS BELOW: 'RESPONSIBLE TRAVEL TO NATURAL AREAS THAT CONSERVES THE ENVIRONMENT AND IMPROVES THE WELL-BEING OF LOCAL PEOPLE.' ECOTOURISM AND OTHER FORMS OF SUSTAINABLE TRAVEL HA VE THEIR ORIGINS WITH THE ENVIRONMENTAL MOVEMENT OF TH E ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 22 1970S. ECOTOURISM ITSELF DID NOT BECOME PREVALENT A S A TRAVEL CONCEPT UNTIL THE LATE 1980S. DURING THAT TI ME, INCREASING ENVIRONMENTAL AWARENESS AND A DESIRE TO TRAVEL TO NATURAL LOCATIONS AS OPPOSED TO BUILT UP TOURIST LOCATIONS MADE ECOTOURISM DESIRABLE. SINCE THEN, SEVERAL DIFFERENT ORGANIZATIONS SPECIALIZING IN ECOTOURISM HAVE DEVELOPED AND MANY DIFFERENT PEOPLE HAVE BECOME EXPERTS ON IT. (REF. GEOGRAPHY.ABOUT.COM). LIKE ECOTOURISM, TERMS SUCH A S SUSTAINABLE TOURISM AND RESPONSIBLE TOURISM ARE ROO TED IN THE CONCEPT OF SUSTAINABLE DEVELOPMENT, OR DEVELOPMENT THAT 'MEETS THE NEEDS OF THE PRESENT WITHOUT COMPROMISING THE ABILITY OF THE FUTURE GENERATIONS TO MEET THEIR OWN NEEDS' (BRUNTLAND COMMISSION, 1987). WITH THIS CONCEPT IN MIND, SUSTAINABLE TOURISM WAS DEFINED IN THE 1992 AGENDA 21 FOR THE TRAVEL AND TOURISM INDUSTRY AS TOURISM T HAT 'MEETS THE NEEDS OF PRESENT TOURISTS AND HOST REGIO NS WHILE PROTECTING AND ENHANCING OPPORTUNITIES FOR TH E FUTURE.' WHILE 'NATURE-BASED TOURISM' SIMPLY IMPROV ES TRAVEL TO NATURAL PLACES, ECOTOURISM IS A TYPE OF N ATURE- BASED TOURISM THAT BENEFITS LOCAL COMMUNITIES AND DESTINATIONS ENVIRONMENTALLY, CULTURALLY AND ECONOMICALLY. ECOTOURISM REPRESENTS A SET OF PRINCI PLES THAT HAVE BEEN SUCCESSFULLY IMPLEMENTED IN VARIOUS GLOBAL COMMUNITIES, AND ARE SUPPORTED BY EXTENSIVE INDUSTRY AND ACADEMIC RESEARCH. ECOTOURISM, WHEN ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 23 PROPERLY EXECUTED BASED ON THESE PRINCIPLES, EXEMPLIFIES THE BENEFITS OF SOCIALLY AND ENVIRONMEN TALLY SOUND TOURISM DEVELOPMENT. ECOTOURISM IS ABOUT UNITING CONSERVATION, COMMUNITIES, AND SUSTAINABLE TRAVEL. THIS MEANS THAT THOSE WHO IMPLEMENT AND PARTICIPATE IN ECOTOURISM ACTIVITIES SHOULD FOLLOW THE FOLLOWING ECOTOURISM PRINCIPLES: MINIMIZE IMPACT. BUILD ENVIRONMENTAL AND CULTURAL AWARENESS AND RESPECT. PROVIDE POSITIVE EXPERIENCES FOR BOTH VISITORS AN D HOSTS. PROVIDE DIRECT FINANCIAL BENEFITS FOR CONSERVATIO N. PROVIDE FINANCIAL BENEFITS AND EMPOWERMENT FOR LOCAL PEOPLE. RAISE SENSITIVITY TO HOST COUNTRIES' POLITICAL, ENVIRONMENTAL, AND SOCIAL CLIMATE (REF. ECOTOURISM.ORG) THE FOREGOING ANALYSIS SHOWS THAT 'ECOTOURISM' IS N OT THE SAME AS 'TOURISM' SIMPLICITER; IT IS ALSO NOT T HE SAME AS 'NATURE TOURISM'. 1.8 THE GOVERNMENT POLICY PARADIGM: ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 24 THE GOVERNMENT OF INDIA CAME OUT WITH NATIONAL TOURISM POLICY IN 2002. THE POLICY RESTS UPON CERTA IN BASIC PRINCIPLES. TWO OF THEM WHICH ARE RELEVANT FOR THE PRESENT PURPOSE ARE REPRODUCED BELOW: 'V. SUSTAINABILITY SHOULD SERVE AS A GUIDING STAR F OR THE NEW POLICY. THE DEVELOPMENT AND MANAGEMENT STRATEGI ES SHOULD BE SO WORKED OUT AS TO ENSURE THAT TOURISM L ARGELY ACTS AS A SMOKELESS INDUSTRY AND ITS ECOLOGICAL FOOTPRIN TS REMAIN AS SOFT AS POSSIBLE. NO ONE ENGAGED, DIRECTLY OR IN DIRECTLY, IN THE TOURISM INDUSTRY, SHOULD BE ALLOWED TO SECURE S HORT-TERM GAINS BY RESORTING TO WHAT HAS BEEN CALLED THE DARK ER SIDE OF TOURISM. NEITHER OVER-EXPLOITATION OF NATURAL RESOU RCES SHOULD BE PERMITTED NOR THE CARRYING CAPACITY OF THE TOURI ST-SITES IGNORED. VI. GREATER EMPHASIS SHOULD BE LAID ON ECO-TOURISM WHOSE PARAMETERS SHOULD BE BROADER THAN TOURISM ALO NE. IT MUST HELP IN ELIMINATING POVERTY, IN ENDING UNEMPLO YMENT IN CREATING NEW SKILLS, IN ENHANCING THE STATUS OF WOM EN, IN PRESERVING CULTURAL HERITAGE, IN ENCOURAGING TRIBAL AND LOCAL CRAFTS AND IN IMPROVING OVERALL ENVIRONMENT AND FAC ILITATING GROWTH OF A MORE JUST AND FAIR SOCIAL ORDER.' (EMPHASIS ADDED) 1.9 THIS SHOWS THAT EVEN THE NATIONAL TOURISM POLIC Y RECOGNIZES THAT ECOTOURISM IS NOT SIMPLY TOURISM AN D ITS PARAMETERS ARE BROADER THAN EVEN NATURE TOURISM. CH APTER 3 ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 25 OF THE POLICY DOCUMENT DEALS WITH 'TOURISM DEVELOPM ENT GOALS, OBJECTIVES AND STRATEGIES'. ONE OF THE 'KEY OBJECTIVES' IS: IMPROVING INDIA'S EXISTING TOURISM PRODUCTS AND EXPANDING THESE TO MEET NEW MARKET REQUIREMENTS'. I N THIS CONNECTION, IT TALKS OF VARIOUS TOURISM PRODUCTS AS SUMMARIZED BELOW: CULTURAL TOURISMS BEACH AND COASTAL TOURISM DEVELOPING ISLANDS AS INTERNATIONAL CRUSE DESTINATION CULINARY TOURISM VILLAGE TOURISM WILDLIFE TOURISM ADVENTURE TOURISM RECREATION AND LEISURE TOURISM SETTING UP WORLD CLASS INTERNATIONAL CONVENTION CENTERS ECOTOURISM HOLISTIC HEALING AND REJUVENATION SHOPPING FESTIVALS TRADITIONAL FAIRS AND FESTIVALS BUSINESS TRAVEL. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 26 THE PARAGRAPH DEALING WITH 'ECOTOURISM' READS AS BELOW: INDIA IS A REGION OF THE WORLD'S GREATEST BIO-DIVER SITY, WITH A VARIETY OF UNIQUE NATURAL LOCALES, AND IS TH EREFORE, A PERFECT CANDIDATE FOR ECO-TOURISM. IN THIS CONTEXT, ECO- TOURISM SHOULD BE MADE A PRIORITY TOURISM PRODUCT F OR INDIA WITH THE FOCAL POINTS LOCATED IN THE HIMALAYAS, NOR TH-EASTERN STATES, WESTERN GHATS, JHARKHAND, ANDAMAN & NICOBAR ISLANDS, AND THE LAKSHDWEEP ISLANDS. TOUR OPERATORS NEED TO BE ENCOURAGED TO PROMOTE ECO-TOURISM, WHICH SHOULD ALSO BE MADE A GRASSROOTS, COMMUNITY BASED MOVEMENT, THR OUGH AWARENESS, EDUCATION AND TRAINING OF THE LOCAL COMM UNITY AS GUIDES AND INTERPRETERS. 1.10 THE MINISTRY OF TOURISM, GOVERNMENT OF INDIA H AS BEEN PUBLISHING ITS ANNUAL REPORTS CONTAINING INITI ATIVES TAKEN BY IT YEAR AFTER YEAR. THE ANNUAL REPORT FOR 2010-1 1 CONTAINS CHAPTER 4.7, DEALING WITH 'SUSTAINABLE TOURISM/ECO TOURISM'. IT BEGINS WITH THE FOLLOWING ASSERTION: 'MINISTRY OF TOURISM IN ITS INITIATIVE TO ACHIEVE SUSTAINABLE TOURISM GROWTH IS IN THE PROCESS OF EVOLVING THE SUSTAINABLE TOURISM CRITERIA FOR INDIA . IN RECENT YEARS TOURISM INDUSTRY IN INDIA HAS REGISTER ED A CONSIDERABLE GROWTH. HOWEVER UNCONTROLLED AND UNORGANIZED GROWTH COULD LEAD TO AN IRREVERSIBLE IMPACT ON THE ECOLOGY AND ENVIRONMENT OF THE COUNTR Y. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 27 THIS PARTICULAR INITIATIVE OF MINISTRY OF TOURISM H AS ASSUMED GREATER SIGNIFICANCE IN SUCH A BACKDROP ... . (EMPHASIS ADDED) A STEERING COMMITTEE WITH REPRESENTATIVE FROM ALL T HE SECTORS OF THE TOURISM AND HOSPITALITY INDUSTRY OF INDIA HAS BEEN CONSTITUTED TO DEVELOP DRAFT SUSTAINABLE TOURI SM CRITERIA WHICH WOULD EVENTUALLY BE ADOPTED BY THE D IFFERENT SECTORS OF THE INDUSTRY. IN THE FIRST INSTANCE, AN ATTEMPT HAS BEEN MADE TO DEVELOP THE CRITERIA FOR THE HOTEL AND TOUR OPERATOR SECTOR .... ' ONCE ADOPTED, IT WOULD BE MANDATORY FOR ALL ORGANIZATIONS IN TRAVEL TRADE AND HOSPITALITY INDUS TRY OF INDIA TO ADOPT THE SUSTAINABLE TOURISM CRITERIA.' 1.11 THE ANNUAL REPORT FOR 2011-12 SIMILARLY CONTAI NS A CHAPTER ON 'NEW TOURISM PRODUCTS'. (CHAPTER 4). PAR A 4.1.8 OF THE CHAPTER, DEALING WITH 'ECO TOURISM' READS AS BELOW: 'INDIA WHICH ACCOUNTS FOR NEARLY 1/6TH OF WORLD'S POPULATION HAS ONLY ROUND 2.2 PERCENT OF EARTH'S LANDMASS. THE GROWING TOURIST DEMAND IS ALREADY EXERTING PRESSURE ON OUR NATURAL AND OTHER RESOURCE S. CONSIDERING THE IMPORTANCE OF DEVELOPING TOURISM IN ECOLOGICALLY SUSTAINABLE MANNER, THE MINISTRY HAS B EEN LAYING STRESS ON MAINTENANCE OF ENVIRONMENTAL INTEGRITY. ECOTOURISM (ALSO KNOWN AS ECOLOGICAL TOU RISM) IS RESPONSIBLE TRAVEL TO FRAGILE, PRISTINE, AND USU ALLY ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 28 PROTECTED AREAS THAT STRIVES TO BE LOW IMPACT AND (OFTEN) SMALL SCALE. IT PURPORTS TO EDUCATE THE TRA VELER, PROVIDE FUNDS FOR ECOLOGICAL CONSERVATION, DIRECTLY BENEFIT THE ECONOMIC DEVELOPMENT AND POLITICAL EMPOWERMENT OF LOCAL COMMUNITIES, AND FOSTER RESPEC T FOR DIFFERENT CULTURES AND HUMAN RIGHTS (EMPHASIS ADDED) ECOTOURISM IS HELD AS IMPORTANT BY THOSE WHO PARTICIPATE IN IT SO THAT FUTURE GENERATIONS MAY EXPERIENCE ASPECTS OF THE ENVIRONMENT RELATIVELY UNTOUCHED BY HUMAN INTERVENTION. THE MINISTRY RECOGNIZES FOLLOWING CARDINAL PRINCIPL ES FOR DEVELOPMENT OF ECOTOURISM: .:. IT SHOULD INVOLVE THE LOCAL COMMUNITY AND LEAD TO THE OVERALL ECONOMIC DEVELOPMENT OF THE AREA . :. IT SHOULD IDENTIFY THE LIKELY CONFLICTS BETWEEN RESOURCE USE FOR ECO-TOURISM AND THE LIVELIHOOD OF LOCAL INHABITANTS AND ATTEMPT TO MINIMIZE SUCH CONFLICTS . :. THE TYPE AND SCALE OF ECO-TOURISM DEVELOPMENT SHOULD BE COMPATIBLE WITH THE ENVIRONMENT AND SOCIO - CULTURAL CHARACTERISTICS OF THE LOCAL COMMUNITY; AN D .:. IT SHOULD BE PLANNED AS A PART OF THE OVERALL A REA DEVELOPMENT STRATEGY, GUIDED BY AN INTEGRATED LAND- USE PLAN WHILE AVOIDING INTER-SECTORAL CONFLICTS AND EN SURING ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 29 SECTORAL INTEGRATION ASSOCIATED WITH COMMENSURATE E XPANSION OF PUBLIC SERVICES'. IT DISCUSSES 'ECO - FRIENDLY MEASURES TO BE ADOPTED BY THE HOTELS' AS BELOW: 'THE MINISTRY OF TOURISM HAS LAID DOWN GUIDELINES F OR APPROVAL OF HOTEL PROJECTS AT THE IMPLEMENTATION ST AGE AND ALSO GUIDELINES FOR CLASSIFICATION OF OPERATION AL HOTELS UNDER VARIOUS CATEGORIES. AS PER THESE GUIDELINES, HOTELS AT THE PROJECT STAGE ITSELF ARE REQUIRED TO INCORPORATE VARIOUS ECO-FRIENDLY MEASUR ES LIKE SEWAGE TREATMENT PLANT (STP), RAIN WATER HARVESTING SYSTEM, WASTE MANAGEMENT SYSTEM, ETC. ONCE THE HOTEL IS OPERATIONAL, IT CAN APPLY FOR CLASSIFICATION UNDER A STAR CATEGORY TO THE HOTEL & RESTAURANT APPROVAL CLASSIFICATION COMMITTEE (HRACC) OF THE MINISTRY. DURING THE PHYSICAL INSPEC TION OF THE HOTEL BY THE HRACC COMMITTEE, IT IS ENSURED THAT IN ADDITION TO THE AFORE-MENTIONED MEASURES, OTHER MEASURES LIKE POLLUTION CONTROL, INTRODUCTION OF NON-CFC EQUIPMENT FOR REFRIGERATION AND AIR CONDITIONING, AND MEASURES FOR ENERGY AND WATER CONSERVATION ARE ALSO UNDERTAKEN BY THE HOTEL. UNDE R THE GUIDELINES FOR PROJECT LEVEL & CLASSIFICATION/R E- CLASSIFICATION OF OPERATIONAL HOTELS, IT HAS BEEN PRESCRIBED THAT THE ARCHITECTURE OF THE HOTEL BUILD INGS IN HILLY AND ECOLOGICALLY FRAGILE AREAS SHOULD KEEP IN MIND ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 30 SUSTAINABILITY AND ENERGY EFFICIENCY AND AS FAR AS POSSIBLE BE IN CONFORMITY WITH THE LOCAL ETHOS AND USE LOCAL MATERIAL.' THE PARAGRAPH ON 'SUSTAINABLE TOURISM' READS AS BELOW: 'UNDER THE NEW INITIATIVE TO EVOLVE SUSTAINABLE TOU RISM CRITERIA FOR INDIA, MINISTRY OF TOURISM ORGANISED A TWO DAY NATIONAL WORKSHOP FOR THE TOURISM INDUSTRY STAKEHOLDERS ON 27TH-28TH JULY 2010 IN NEW DELHI. T HE NATIONAL WORKSHOP WAS ATTENDED BY THE PRIVATE STAKEHOLDERS AS WELL AS GOVERNMENT OFFICIALS WHO AR E RESPONSIBLE FOR FORMULATING GOVERNMENT POLICIES. TH E TOURISM AND HOSPITALITY INDUSTRY OF THE COUNTRY WAS WELL REPRESENTED IN THE WORKSHOP. EXPERTS FROM INDIA AND INTERNATIONAL EXPERTS FROM UNITED NATIONS FOUNDATIO N (UNF), UNITED NATIONS ENVIRONMENT PROGRAMMES (UNEP) WERE INVITED AS RESOURCE PERSONS FOR THIS WORKSHOP. IN THIS WORKSHOP IT WAS AGREED THAT THERE WAS A NEED TO HAVE SUSTAINABLE TOURISM CRITERIA FOR INDIA. FOR EVOLVING SUSTAINABLE TOURISM CRITERIA FO R INDIA AND FOR DEVELOPMENT OF INDICATORS SUBSEQUENTL Y, THE GLOBAL SUSTAINABLE TOURISM CRITERIA DEVELOPED B Y THE TOURISM SUSTAINABILITY COUNCIL AND OTHER PRACTI CES IN THE WORLD WERE CONSIDERED. THE MINISTRY HAS SINCE CONSTITUTED A STEERING COMMITTEE WITH REPRESENTATIVES FROM ALL THE SECTORS OF ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 31 THE TOURISM AND HOSPITALITY INDUSTRY OF INDIA. THE STEERING COMMITTEE DELIBERATED AT LENGTH TO FORMULA TE THE SUSTAINABLE TOURISM CRITERIA. THE COMMITTEE HAS FINALIZED THE SUSTAINABLE TOURISM CRITERIA AND INDICATORS FOR THE HOTEL SECTOR AND THE TOUR OPERAT OR SECTOR AS THESE TWO FORM THE MOST IMPORTANT STAKEHOLDERS IN THE TOURISM INDUSTRY. ONCE ADOPTED, IT WOULD BE MANDATORY FOR ALL ORGANIZATIONS IN TRAVEL TRADE AND HOSPITALITY INDUS TRY OF INDIA TO ADOPT THE SUSTAINABLE TOURISM CRITERIA'. 1.12 THE ABOVE ANALYSIS SHOWS THAT THE CLASSICAL DEFINITION OF ECOTOURISM AS A SPECIFIC SEGMENT OF TOURISM WHICH FOCUSES ON TRAVEL TO AREAS OF NATURAL BEAUTY WITHOUT DAMAGING THE ENVIRONMENT AND, IN THE PROCESS, SUPPORTING THE LOCAL COMMUNITY HAS BEEN RECOGNIZED AND INCORPORATED AS SUCH IN THE POLICY O F THE CENTRAL GOVERNMENT. IT IS, HOWEVER, NOTICED THA T THE STANDARDS FOR ECOTOURISM HAVE NOT BEEN CODIFIED . THE CENTRAL GOVERNMENT LAID DOWN 'ECO - FRIENDLY MEASURES TO BE ADOPTED BY THE HOTELS' DURING THE PERIOD 2011-12. BUT, THAT IS A GENERAL REQUIREMENT; IT DOES NOT MAKE A HOTEL A UNIT/PROJECT OF 'ECOTOURISM '. THE SUSTAINABLE TOURISM CRITERIA HAVE BEEN FINALIZE D AT LATE AS THE FINANCIAL YEAR 2011-12. IT IS NOT KNOWN WHETHER THEY HAVE BEEN ADOPTED YET. THIS SHOWS THAT , DURING THE RELEVANT PREVIOUS YEAR, THERE WAS NO ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 32 AUTHORITATIVE AND OBJECTIVE BASIS TO DETERMINE WHIC H HOTEL WAS SATISFYING THE STANDARDS OF ECOTOURISM AN D WHICH NOT. IN FACT, SUCH A BASIS DOES NOT SEEM TO E XIST EVEN TODAY. IT IS, THEREFORE, A SITUATION WHERE FIS CAL INCENTIVE IN THE FORM OF DEDUCTION U/S 8OIC OF THE I.T.ACT WAS GIVEN IN LAW BUT THE BASIS FOR DETERMIN ING THE BENEFICIARIES OBJECTIVELY AND AUTHORITATIVELY REMAINED TO BE DONE. ECOTOURISM APPEARS TO HAVE BEEN MORE OF A VISION THAN A CONCRETE ACTION PLAN. 1.13 THUS, THE FACTUAL POSITION IS AS BELOW: I. THE GOVERNMENT RECOGNIZES THAT 'ECOTOURISM' IS NOT THE SAME AS TOURISM; IT IS NOT EVEN THE SAME AS NATURE-TOURISM. IT MEANS TRAVEL TO AREAS OF NATURAL BEAUTY WITHOUT DAMAGING THE ENVIRONMENT AND, IN THE PROCESS, SUPPORTING THE LOCAL COMMUNITY. II. DEDUCTION U/S SO-IC HAS BEEN PROVIDED FOR 'ECOTOURISM' WHICH MAY INCLUDE ACTIVITIES SUCH AS HOTELS, ETC. ILL. THE TERM 'ECOTOURISRN' HAS NOT BEEN DEFINED I N THE INCOME TAX ACT. THE REGULATORY FRAMEWORK FOR 'ECOTOURISM' DOES NOT EXIST NOR HAVE OBJECTIVE AND LEGALLY-BINDING CRITERIA BEEN LAID DOWN TO DETERMINE WHO IS DOING ECOTOURISM AND WHO NOT. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 33 CONSEQUENTLY, IT CANNOT BE SAID AUTHORITATIVELY WHICH HOTEL IS PART OF 'ECOTOURISRN' AND WHICH NOT. 1.14 IN THIS BACKGROUND, IT MAY BE APT TO HAVE A LOOK AT SOME FUNDAMENTAL RULES OF INTERPRETATION OF STATUES. THE EXTRACTS ARE TAKEN FROM THE SAMPATH IYENGAR'S COMMENTARY ON LAW OF INCOME TAX (11TH EDITION) AND REFERENCE TO PAGE NUMBERS AFTER THE EXTRACTS ARE REFERENCES TO PAGE NUMBERS OF THAT BOO K. 'IN A TAXING ACT, ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMP TION TO TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE U SED .... (PAGE-92) IN MATTER OF TAX RELIEF IT IS FOR THE LEGISLATURE T O DECIDE WHERE TO GIVEN SPECIAL BENEFITS. IT IS NOT POSSIBLE FOR THE COURT TO PLACE AN ELASTIC INTERPRETATION AND ENLARG E THE SCOPE OF THE PROVISION .... (PAGE-94) IN FACT, AN EXEMPTION PROVISIONS IS LIKE ANY EXCEPT ION AND ON NORMAL PRINCIPLE OF CONSTRUCTION OR INTERPRETATION OF STATUTES IT IS CONSTRUED STRICTLY EITHER BECAUSE OF LEGISLATIVE INTENTION OR ONE ECONOMIC JUSTIFICATION OF INEQUITABLE BURDEN OR PROGRESSIVE APPROACH OF FISCAL PROVISION INTENDED TO AUGMENT ST ATE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 34 REVENUE. BUT ONCE EXCEPTION OR EXEMPTION BECOMES APPLICABLE NO RULE OR PRINCIPLES REQUIRES IT TO BE CONSTRUCTED STRICTLY. TRULY SPEAKING LIBERAL AND ST RICT CONSTRUCTIONS OF AN EXEMPTION PROVISION ARE TO BE INVOKED AT DIFFERENT STAGES OF INTERPRETING IT. WHE N THE QUESTION IS WHETHER A SUBJECT FALLS IN THE NOTIFICA TION OR IN THE EXEMPTION CLAUSE THEN IT BEING IN NATURE OF EXCEPTION IS TO BE CONSTRUCTED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT ABOUT APPLICABILITY IS LIFTED AND THE SUBJECT FALLS IN TH E NOTIFICATION, THEN FULL PLAY SHOULD BE GIVEN TO IT CALLS FOR A WIDER AND LIBERAL CONSTRUCTION .... (PAGE-95) EVEN THROUGH A LIBERAL INTERPRETATION HAS TO BE GIV EN TO A BENEFICIAL PROVISION THE INTERPRETATION HAS TO BE AS PER THE WORDING OF THE SECTION. IF THE WORDING OF A SECTION IS CLEAR, THEN BENEFITS WHICH ARE NOT AVAIL ABLE CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION .... (PAGE-96) IN CIT V SUNDARAM IYENGAR & SONS (P) LTD (TV), THE SUPREME COURT WARNED THAT WHERE THE LANGUAGE OF THE STATUTE IS CLEAR AND UNAMBIGUOUS AND TWO INTERPRETATIONS ARE NOT REASONABLY POSSIBLE, THE CO URT SHOULD NOT DISCARD THE PLAIN MEANING OF THE WORDS I N ORDER TO MEET A POSSIBLE INJUSTICE .... (PAGE-99) TECHNICAL WORDS MUST HAVE THEIR TECHNICAL SENSE ASCRIBED TO THEM AND NOT THEIR POPULAR SENSE UTI ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 35 LOQUITOR VULGUS. THE PRINCIPAL IS OF COGENCY WHEN T HE WORDS IN QUESTION REPRESENT LEGAL CONCEPTIONS .... (PAGE-117) THE PLAIN AND UNAMBIGUOUS MEANING OF THE STATUTE SHOULD NOT BE SOUGHT TO BE ALTERED BY THE CONSTRUCT ION SOUGHT TO BE PUT ON IT. IF THE LEGISLATURE WILLFULL Y OMITS TO INCORPORATE SOMETHING OF AN ANALOGOUS LAW IN A SUBSEQUENT STATUTE, OR EVEN IF THERE IS A CASUS OMI SSUS IN A STATUTE, THE LANGUAGE OF WHICH IS OTHERWISE PL AIN AND UNAMBIGUOUS, THE COURT IS NOT COMPETENT TO SUPP LY THE OMISSION BY ENGRAFTING ON IT OR INTRODUCING IN IT, UNDER THE GUISE OF INTERPRETATION BY ANALOGY OR IMPLICATION, SOMETHING WHAT IT THINKS TO BE A GENER AL PRINCIPLE OF JUSTICE AND EQUITY. TO DO SO WOULD BE ENTRENCHING UPON THE PRESERVES OF LEGISLATURE, THE PRIMARY FUNCTION OF A COURT OF LAW BEING JUS DICERE AND NOT JUS DARE. THE UNDERLYING PRINCIPLE IS THAT THE MEANING AND INTENTION OF A STATUTE MUST BE COLLECTE D FROM THE PLAIN AND UNAMBIGUOUS EXPRESSION USED THEREIN RATHER THAN FROM ANY NATIONS WHICH MAY BE ENTERTAINED BY THE COURT AS TO WHAT IS JUST OR EXPE DIENT. ... (PAGE-118) IT IS A WELL SETTLED PRINCIPAL IN LAW THAT THE COUR T CANNOT READ ANYTHING INTO A STATUTORY PROVISION WHICH IS P LAIN AND UNAMBIGUOUS. A STATUTE IS AN EDICT OF THE LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 36 DETERMINATIVE FACTOR OF LEGISLATIVE INTENT. THE FIR ST AND PRIMARY RULE OF CONSTRUCTION IS THAT THE INTENTION OF THE LEGISLATION MUST BE FOUND IN THE WORDS USED BY THE LEGISLATURE ITSELF. THE QUESTION IS NOT WHAT MAY BE SUPPOSED AND HAS BEEN INTENDED BUT WHAT HAS BEEN SAID .... (PAGE-134) THE SUBJECT CAN RECEIVE ONLY SUCH BENEFIT AS IS GIV EN BY THE LEGISLATURES, AND IF NO EXEMPTION IS GRANTED, I T IS A MATTER FOR THE LEGISLATURES ALONE TO DEAL WITH. TAX ATION UNDER THE ACT IS THE RULE, AND EXEMPTION, THE EXCEPTION. THOSE WHO SEEK AN EXEMPTION MUST REST IT ON MORE THAN A DOUBT OR AMBIGUITY. THE PROVISIONS PROVIDING FOR AN EXEMPTION MAY BE PROPERLY CONSTRUE D STRICTLY AGAINST THE PERSON WHO MAKES THE CLAIM OF AN EXEMPTION. IN OTHER WORDS, BEFORE AN EXEMPTION CAN BE RECOGNIZED, THE PERSON OR PROPERTY CLAIMED TO BE EXEMPT MUST COME CLEARLY WITHIN THE LANGUAGE APPARENTLY GRANTING AN EXEMPTION .... (PAGE-175) IN MATTERS OF TAX RELIEF IT IS FOR THE LEGISLATURE TO DECIDE WHERE TO GIVE SPECIAL BENEFITS. IT IS NOT POSSIBLE FOR THE COURT TO PLACE AN ELASTIC INTERPRETATION AND ENLARG E THE SCOPE OF THE PROVISIONS. BUT THE PROVISIONS MUST BE CONSTRUED REASONABLY IN THE CONTEXT OF THE PURPOSE FOR WHICH THE SECTION HAS BEEN INTRODUCED. THREE REASON S UNDERLIE THIS CONSTRUCTION: FIRST EXEMPTION FROM TA XATION IS AN EXCEPTION TO THE GENERAL RULE THAT ALL PROPER TY IS ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 37 LIABLE TO TAX AND CONSEQUENTLY THOSE WHOM CLAIM UND ER AN EXCEPTION MUST BRINGS THEMSELVES WITHIN ITS TERM S. SECOND, EXEMPTION LAWS ARE IN DEROGATION OF EQUAL RIGHTS. THIRD, TAX BEING THE SOLE MEANS BY WHICH TH E STATE CAN MAINTAIN ITSELF, ANY CLAIM ON THE PART OF ANYONE TO BE EXEMPT FROM THE PAYMENT OF HIS FULL SH ARE OF TAXES ON ANY PORTION OF HIS PROPERTY MUST ON THA T ACCOUNT BE CLEARLY DEFINED AND FOUNDED ON PLAIN LANGUAGE. THESE PRINCIPLES OF CONSTRUCTION APPLY AS MUCH TO 'DEDUCTION', AS TO 'EXEMPTION' SINCE THE NE T RESULT IN EITHER CASE IS IMMUNITY FROM TAXATION ... . (PAGE-176) THERE IS NO JUSTIFICATION FOR THE VIEW THAT THE EXE MPTION PROVISION SHOULD BE CONSTRUED WITH SOME LATITUDE OR EVEN WIDER CONNOTATION, BECAUSE EXEMPTION IS AN EXCEPTION TO GENERAL RULE AND IS OPPOSED TO THE NAT URAL TENOR OF THE STATUTE. BUT AT THE SAME TIME, THE COU RTS HAVE HELD THAT IN THE CASE OF INCENTIVES PROVISIONS , THE LAW HAS TO BE INTERPRETED IN THE MANNER IT EFFECTUA TES THE PURPOSE OF THE INCENTIVE. BUT WHERE THE WORDS A RE UNEQUIVOCAL, THEY CANNOT BE STRETCHED, SO AS TO CON FER A BENEFIT OF EXEMPTION.' (PAGE-177): 1.15 IT HAS BEEN HELD IN MANY CASES THAT, IF THERE IS NO MACHINERY SECTION IN ORDER TO OPERATIONALIZE A CHARGING SECTION, THE LATTER ALSO FAILS. PRINCIPLE OF INTERPRETATION OF LAW REMAINS THE SAME, WHETHER IT IS ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 38 APPLIED TO A PROVISION WHICH IS ENACTED IN ORDER TO PROTECT THE INTEREST OF REVENUE OR ONE WHICH IS ENA CTED TO GIVE ANY BENEFIT TO THE TAXPAYER. HENCE, FOLLOWI NG THIS REASONING, THE CONCLUSION THAT EMERGES IS THAT , IF THE PROVISION FOR DEDUCTION HAS BEEN ENACTED BUT TH E MACHINERY PROVISION TO OPERATIONALISE THE SAME HAS NOT BEEN PUT IN PLACE, THE FORMER SHOULD ALSO FAIL. SIM PLY BECAUSE THERE IS A PROVISION FOR DEDUCTION IN LAW, IT SHOULD NOT MEAN THAT IT HAS TO BE GIVEN SOMEHOW TO SOMEONE. TAXATION IS THE NORM; RELIEF IN TAXATION ( BY WAY OF DEDUCTION, ETC.) IS AN EXCEPTION. TAX HOLIDA YS ARE ALLOWED BY THE GOVERNMENT IN ORDER TO ACHIEVE SOCIO-ECONOMIC OBJECTIVES OF PUBLIC POLICY THROUGH PRIVATE PARTICIPATION. THE GAINS BY WAY OF THE ACHIEVEMENT OF SUCH OBJECTIVES ARE CONSIDERED TO MO RE THAN OFFSET THE SACRIFICE BY WAY OF TAX. SUCH BENEF ICIAL PROVISIONS INVARIABLY HAVE CONDITIONS ATTACHED TO T HEM AND THE FULFILLMENT OF THESE CONDITIONS IS THE SINE QUA NON FOR AVAILING OF THE BENEFIT. AS A COROLLARY TO IT, IT CAN BE SAID THAT TAXPAYER HAS NO INHERENT RIGHT TO A DEDUCTION. NO DOUBT, ONCE A SCHEME IS INTRODUCED, I TS BENEFIT IS TO BE ALLOWED TO EVERY ELIGIBLE ASSESSEE WITHOUT DISCRIMINATION. BUT, IF AN ASSESSEE DOES NO T SATISFY THE PRESCRIBED CONDITIONS, HE CANNOT CLAIM THAT HE SHOULD STILL BE ALLOWED THE BENEFIT. THESE CONDI TIONS LAY DOWN THE RULES OF THE GAME AND, IF THESE RULES ARE NOT FOLLOWED, IT WOULD BECOME FREE-FOR-ALL, WHICH ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 39 CANNOT BE PERMITTED IN LAW. IT IS ALSO TO BE KEPT I N MIND THAT, IF THE BENEFIT OF TAX DEDUCTION WERE ALLOWED TO A PERSON WHO HAS NOT SATISFIED THE CONDITIONS FOR THE SAME, IT WOULD AMOUNT TO INTER-SE INJUSTICE VIS-A-V IS THE OTHER TAX PAYERS I. WHO HAD TO SATISFY THE CONDITIONS FOR GETTING T HE BENEFIT II. WHO DID NOT SATISFY THE CONDITIONS AND FORWENT THE CLAIM 1.16 TO BE FAIR TO THE TAXPAYER, IT NEEDS TO BE RECOGNISED THAT, IT CANNOT BE EXPECTED TO SATISFY CRITERIA WHICH HAVE NOT BEEN LAID DOWN. BUT, BY THE SAME TOKEN, IT SHOULD ALSO NOT BE ASSUMED THAT HE H AS SATISFIED SUCH NON-EXISTENT CRITERIA. THE ENVIRONME NTAL NORMS ARE MANY. A PERSON MAY CLAIM THAT HE SHOULD GET THE DEDUCTION BECAUSE HE HAS FOLLOWED A PARTICULAR ENVIRONMENTAL NORM. THE CLAIM MAY BE DENIED (BY THE AO) BECAUSE HE HAS NOT FOLLOWED ANOTHER ONE. BY SUCH SUBJECTIVE CONSIDERATIONS, ANYONE CAN CLAIM THE DEDUCTION AND NO ONE MAY GET IT. UNCERTAINTY IN TAXATION IS THE LEAST DESIRABLE THING. THE LEGISLATURE MAY CONSIDER LAYING DOWN THE CRITER IA FOR 'ECOTOURISM' FOR PURPOSES OF DEDUCTION U/S BO-I C OR LAY DOWN THE SAME FOR GENERAL REGULATORY PURPOSE S AND APPLY THE SAME FOR PURPOSES OF INCOME TAX AS WELL. IT MAY ALSO CONSIDER APPLYING SUCH CRITERIA W ITH ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 40 RETROSPECTIVE EFFECT AND GRANT DEDUCTION TO THOSE W HO ARE FOUND TO BE SATISFYING THE SAME. BUT, UNLESS TH AT HAPPENS, IT MAY NOT BE APPROPRIATE FOR INCOME TAX AUTHORITY TO EITHER ACCEPT OR REJECT THE CLAIM OF DEDUCTION ON THE BASIS OF HIS OWN UNDERSTANDING OF THE TERM 'ECOTOURISM'. THE ASSESSEE'S CLAIM SHOULD FAIL SIMPLY BECAUSE THERE IS NO BASIS ON WHICH IT CAN SUCCEED. 1.17 A SHORT DISCUSSION ON THE HOTEL BUSINESS MAY A LSO NOT BE OUT OF PLACE. HOTEL IS A BUSINESS OF PROVIDI NG BOARDING AND LODGING TO TRAVELERS. THIS BUSINESS MA Y GO WITH OR WITHOUT ECOTOURISM. IN FACT, IT MAY GO E VEN WITHOUT TOURISM ALTOGETHER. THE TERM USED IN SCHEDU LE- XIV (PART-C, ENTRY 15) IS 'ECO-TOURISM INCLUDING HO TELS .... AN INTERPRETATION OF THIS TERM WHICH CONVEYS THAT IT MEANS BUSINESS OF HOTEL (THEREBY RENDERING THE WORD 'ECOTOURISM' REDUNDANT) OR THAT 'ECOTOURISM' AND HO TEL ARE SYNONYMOUS IS FRAUGHT WITH RISKS. SUCH INTERPRETATION, SUGGESTING THAT THE DEDUCTION SHOUL D BE ALLOWED TO HOTELS, WITHOUT ANY CONCERN FOR ECOTOURI SM, MAY ACTUALLY GO AGAINST THE AVOWED POLICY OF PROMOTING ECOTOURISM AS RESPONSIBLE TRAVEL. THAT RECKLESS TOURISM MAY CAUSE HARM TO THE ENVIRONMENT AND BRING MISERY TO THE LOCAL POPULACE NEEDS NO ELABORATION. THAT HOTELS ARE INSTRUMENTS OF RECKLES S TOURISM IN MANY INSTANCES ALSO NEEDS NO PROOF. IF HOTELS, UNDER CERTAIN CIRCUMSTANCES, CAN IN FACT GO ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 41 AGAINST THE PRINCIPLES OF ECOTOURISM, IT NEEDS BE CONSIDERED SERIOUSLY IF THE DEDUCTION WHICH IS MEAN T TO PROMOTE ECOTOURISM CAN BE GIVEN TO A HOTEL SIMPLY BECAUSE THE TERM USED IS 'ECO-TOURISM INCLUDING HOT ELS ...' SECTION 8O-IB(7) OF THE I.T.ACT DEALS WITH DED UCTION TO HOTELS 'LOCATED IN A HILLY AREA OR A RURAL AREA OR A PLACE OF PILGRIMAGE OR SUCH OTHER PLACE AS THE CENT RAL GOVERNMENT MAY, HAVING REGARD TO THE NEED FOR DEVELOPMENT OF INFRASTRUCTURE FOR TOURISM IN ANY PL ACE AND OTHER RELEVANT CONSIDERATIONS, SPECIFY BY NOTIFICATION IN THE OFFICIAL GAZETTE'. IT COULD BE ARGUED THAT, WHEN THE PARLIAMENT DESIRED TO GIVE DEDUCTION TO A HOTEL PER SE, IT USED THE TERM 'HOTEL'. HENCE, WH EN IT USED THE TERM 'ECOTOURISM INCLUDING HOTELS ... ', I T MEANT NOT A SIMPLE HOTEL BUT SOMETHING MORE, IT COULD BE ARGUED. IN FACT, THE A.O. HAS TRIED TO JUSTIFY HIS INTERPRETATION OF SECTION BO-IC FROM THIS ANGLE ALS O. 1.18 FOR RUNNING A HOTEL, THE ENTREPRENEUR HAS TO SEEK A LICENSE FROM THE STATE GOVERNMENT; HE HAS ALSO TO S EEK NOC FROM THE POLLUTION CONTROL BOARD OF THE STATE CONCERNED. THESE ARE BASIC CONDITIONS FOR RUNNING A HOTEL. SIMPLY BECAUSE A HOTEL HAS A VALID LICENSE F ROM THE GOVERNMENT AND NOC FROM THE POLLUTION CONTROL BOARD, IT DOES NOT BECOME AN ECOTOURISM UNIT. IF HAVING THE LICENSE AND THE NOC WERE TREATED AS THE DETERMINANT CRITERION FOR QUALIFICATION OF AN ASSES SEE FOR THE DEDUCTION, IT WOULD AMOUNT TO REWRITING THE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 42 PROVISION OF SECTION 8OIC, SO AS TO MEAN THAT THE DEDUCTION WOULD BE ALLOWED TO HOTELS HAVING A VALID LICENSE AND NOC FROM POLLUTION CONTROL BOARD. IN MY OPINION, THIS COURSE OF ACTION IS NOT PERMISSIBLE F OR AN INCOME TAX AUTHORITY. ON THE OTHER HAND, IF A HOTEL IS CONSIDERED TO BE ELIGIBLE FOR THE DEDUCTION OTHERWI SE, IT NEED NOT BE DENIED THE BENEFIT SIMPLY BECAUSE IT DOES NOT HAVE THE SAID NOC. A HOTEL WITHOUT THE NOC DOES NOT CEASE TO BE A HOTEL. SO MANY OTHER THRUST INDUSTRIES ARE ENJOYING THE BENEFIT OF DEDUCTION U/ S 8OIC; NOC FROM POLLUTION CONTROL BOARD IS NOT A RELEVANT CONSIDERATION FOR THAT PURPOSE. THERE DOES NOT APPEAR TO BE ANY SPECIAL REASON WHY IT SHOULD BE SO IN THE CASE OF THIS SECTOR ALONE. IN OTHER WORDS, WHET HER THE DEDUCTION IS TO BE ALLOWED OR NOT HAS TO BE DECIDED IN THE LIGHT OF WHETHER THE ASSESSEE SATISF IES THE CONDITIONS OF THE INCOME TAX ACT (AND NOT WHETH ER IT HAS GOT THE SAID NOC). 1.19 IN MY CONSIDERED VIEW, MAKING THE DEDUCTION CONTINGENT UPON A VALID LICENSE OR THE NOC SHIFTS T HE FOCUS OF DEBATE FROM THE REAL QUESTION, I.E. WHEN AUTHORITATIVE PARAMETERS TO REGULATE ECOTOURISM AND TO OPERATIONALISE THE DEDUCTION U/S 8O-IC DON'T EXIST, CAN THE DEDUCTION BE ALLOWED TO A HOTEL AT ALL? COU RTS HAVE HELD THAT TAXING STATUTE SHOULD BE INTERPRETED AS IT EXISTS. DEVISING CRITERIA AND TO JUDGE THE ELIGIBIL ITY OF A ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 43 TAXPAYER ON THE BASIS OF SUCH CRITERIA IS NOT PERMI SSIBLE FOR AN INCOME TAX AUTHORITY. 1.20 IT IS ALSO NOTED THAT THERE IS A CRUCIAL DIFFE RENCE BETWEEN THE TOURISM POLICY OF THE CENTRAL GOVERNMEN T AND THAT OF THE GOVERNMENT OF UTTARAKHAND. THE LATT ER CAME OUT WITH A TOURISM POLICY WHICH SIMILAR CLASSIFICATION AND IDENTIFIES 'ECOTOURISM' AS A SPE CIFIC SEGMENT FOCUSING ON PROMOTION OF TOURISM AS WELL AS PRESERVATION OF NATURAL ENVIRONMENT. THE GOVERNMENT HAS ALSO SET UP A TOURISM DEVELOPMENT BOARD TO ACT AS THE APEX ADVISORY BODY TO THE GOVERNMENT IN THE FIE LD OF TOURISM. IT ALSO ACTS AS THE REGULATORY AND LICE NSING AUTHORITY. RECENTLY, THE GOVERNMENT HAS ALSO DECIDE D TO SET UP UTTARAKHAND ECOTOURISM BOARD WITH THE SPECIFIC OBJECT OF SETTING STANDARDS UNDER WHICH DAMAGE TO ENVIRONMENT IN THE EXECUTION OF TOURISM DEVELOPMENT SCHEMES CAN BE AVOIDED. THE INDUSTRIAL POLICY, 2003 ANNOUNCED BY THE STATE GOVERNMENT IDENTIFIED 'TOURISM, HYDRO-POWER, FLORICULTURE, AGR O AND FOOD PROCESSING, HANDLOOM, KHADI AND VILLAGE INDUSTRIES, ETC.' AS 'SECTORS WHERE UTTARANCHAL HAS INHERENT ADVANTAGES.' ITS VISION INCLUDED 'TO PROMO TE TOURISM AS A FOCUS AREA AND DEVELOP UTTARANCHAL AS A PREMIER GLOBAL TOURISM DESTINATION'. IN THE SECTION DEALING WITH NON-FISCAL ADVANTAGES OF UTTARAKHAND, IT MENTIONS AS BELOW: ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 44 'THE STATE HAS A VAST TOURISM POTENTIAL: ADVENTURE, LEISURE, ECO-TOURISM IN ITS WIDEST SENSE, RELIGIOUS/SPIRITUAL, WITH A LARGE POTENTIAL FOR REL ATED SERVICES AND SCOPE TO DEVELOP NICHE MARKETS, APART FROM TRADITIONAL INVESTMENT OPPORTUNITIES'. (EMPHAS IS ADDED). 1.21 ACCORDING TO THE POLICY DOCUMENT, 'TOURISM INDUSTRY HAS BEEN ACCORDED A STATUS OF A THRUST IN THE STATE'. FURTHER, THE FOLLOWING INCENTIVES WERE ALLO WED BY THE STATE GOVERNMENT UNDER ITS TOURISM POLICY: I. REBATE/DEFERMENT FACILITY IN RESPECT OF LUXURY T AX TO NEW TOURISM UNITS FOR A PERIOD OF 5 YEARS FROM T HE DATE OF COMMENCEMENT (EMPHASIS ADDED) II. EXEMPTION FROM PAYMENT OF ENTERTAINMENT TAX TO NEW ROPEWAYS FOR A PERIOD OF 5 YEARS FROM THE DATE OF COMMENCEMENT ILL. EXEMPTION FROM PAYMENT OF ENTERTAINMENT TAX T O NEW AMUSEMENT PARKS FOR A PERIOD OF 5 YEARS FROM TH E DATE OF COMMENCEMENT IT IS NOTED THAT, EVEN THOUGH THE STATE GOVERNMENT RECOGNIZES THAT ECO-TOURISM IS A SPECIALIZED KIND O F TOURISM, THE INCENTIVES PROVIDED BY IT ARE TO 'TOUR ISM'; NOT 'ECOTOURISM'. IN FACT, IT RECOGNIZES 'TOURISM' AS A THRUST INDUSTRY AS AGAINST 'ECO-TOURISM .... 'RECOG NIZED AS SUCH BY THE CENTRAL GOVERNMENT. INCENTIVES HAVE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 45 BEEN GIVEN BY IT TO HOTELS, TREATING THE LATTER AS 'TOURISM UNITS', NOT AS 'ECOTOURISM UNITS'. THAT MAY ALSO EX PLAIN, TO A GREAT EXTENT, WHY 'ECOTOURISM' HAS NOT RECEIVE D ADEQUATE ATTENTION FROM THE STATE GOVERNMENT. BUT, FOR THE SAME REASON, IT WILL NOT BE APPROPRIATE TO BE GUIDED BY THE POLICY AND PROGRAMMES OF THE STATE GOVERNMENT WHILE INTERPRETING AND APPLYING THE PROVISION OF THE INCOME TAX ACT. 1.22 AT THIS STAGE, IT WOULD BE APPOSITE TO REFER T O THE DECISION OF THE HON'BLE ITAT IN THE CASE OF BIDHI C H AND SINGHAL (SUPRA). THE RELEVANT PART OF THE SAME READS AS BELOW: 'FROM THE ABOVE SECTION AND ITEM NO.15 OF PART C OF THE FOURTEENTH SCHEDULE, IT CAN BE OBSERVED THAT WHAT IS ELIGIBLE FOR DEDUCTION IS ECO-TOURISM WHICH INCLUDES INTER ALIA HOTELS. IT HAS BEEN THE CONTENTION OF THE ASSESSEE THAT HIS HOTEL IS APPROVED BY THE GOVERNMENT. THE HOTEL CANNOT BE APPROVED BY THE GOVERNMENT WITHOUT OBTAINING NO OBJECTION FROM THE POLLUTION DEPARTMENT. THERE IS NO MATERIAL ON RECORD TO SHOW THAT POLLUTION DEPARTMENT OF THE GOVERNMENT HAS NOT GIVEN NO OBJECTION TO THE ASSESSEE. IF IT IS SO, THEN, IT CANNOT BE SAID THAT THE ASSESSEE IS RUNNING A HOTEL WHICH IS OUTSIDE THE NORMS PRESCRIBED BY THE POLLUTION ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 46 DEPARTMENT. IF A PLAIN READING IS GIVEN TO ITEM NO.15 REPRODUCED ABOVE, THEN, ECO-TOURISM INTER ALIA INCLUDE HOTELS. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT 'ECO-TOURISRN' STATUS HAS BEEN GRANTED TO ANY OTHER HOTEL AND WHICH STATUS ASSESSEE DOES NOT HAVE. IF THE LOGIC APPLIED BY THE AO AND CIT(A) IS MADE APPLICABLE, THEN, THE HOTELS WHICH ARE NOT HAVING THE ALLEGED 'ECO-TOURISM' STATUS CANNOT BE HELD TO BE ENTITLED TO DEDUCTION U/S 80-IC. IF NONE OF THE HOTELS CAN BE GRANTED DEDUCTION U/S 8O-IC, THEN, THE ITEM NO.15 OF PART C OF THE FOURTEENTH SCHEDULE WILL BE REDUNDANT. THEREFORE, IN OUR OPINION, IN THE ABSENCE OF DEFINITION OF 'ECO-TOURISM' THE HOTEL AS ADDED INTO THE ITEM NO.15 OF PART C IS TO BE CONSTRUED TO BE HOTEL SITUATED IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL HAVING A VALID LICENSE ON THE BASIS OF NO OBJECTION FROM POLLUTION DEPARTMENT WHICH CAN BE TREATED TO BE A HOTEL ELIGIBLE FOR DEDUCTION U/S 8O-IC AS PER PROVISIONS OF SECTION SO-IC. THEREFORE, WE ALLOW THE CLAIM OF DEDUCTION U/S 8O-IC TO THE ASSESSEE AND THE APPEAL OF THE ASSESSEE IS ALLOWED.' ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 47 THIS REASONING WAS FOLLOWED BY THE HON. ITAT IN ITS DECISIONS IN THE CASES OF ANCHAL HOTEL AND OF RAGHUNATH SINGH THAKUR (SUPRA). 1.23 ACCORDING TO THE HON. IT AT, A HOTEL HAVING A VALID LICENSE ON THE BASIS OF NO OBJECTION FROM POLLUTION DEPARTMENT CAN BE TREATED TO BE ONE ELIGI BLE FOR DEDUCTION U/S 8O-IC. IT HAS BEEN BROUGHT TO MY NOTICE THAT, IN THE STATE OF UTTARAKHAND, LICENSE T O SET UP A HOTEL IS ISSUED BY THE DISTRICT ADMINISTRATION UNDER THE SARAI ACT. THIS IS DONE AFTER SEEKING CLEARANCE FROM VARIOUS AUTHORITIES/AGENCIES. POLLUTION CONTROL DEPARTMENT/BOARD IS NOT ONE OF THEM. IN OTHER WORDS , LICENSES ARE NOT IN FACT ISSUED ON THE BASIS OF NO OBJECTION FROM POLLUTION DEPARTMENT. THAT LEADS TO THE QUESTION: IF NO HOTEL HAS LICENSE ISSUED ON THE BAS IS OF NO OBJECTION FROM POLLUTION DEPARTMENT, CAN ANYONE GET THE DEDUCTION? THIS QUESTION CAN BE ANSWERED BY THE HON. ITAT ONLY. SINCE MY BRIEF IS TO SIMPLY APP LY THE RATIO OF THE DECISION (WHICH IS BINDING ON ME), I WOULD DO IT IN THE FASHION IT WAS DONE BY THE HON. ITAT IN THE CASES OF BIDHI CHAND SINGHAL AND ANCHAL HOTE LS (SUPRA). IT HAS BEEN ASCERTAINED FROM THE AOS THAT THERE IS NOTHING ON RECORD TO SUGGEST THAT LICENCES WERE ISSUED TO THOSE ASSESSEES ON THE BASIS OF THE SAID NOCS. IT APPEARS THAT IT WAS ASSUMED BY THE HON. ITAT THAT, IF THE HOTEL HAD A VALID LICENSE, IT WOU LD HAVE THE SAID NOC. SINCE THE FACTS AND CIRCUMSTANCES OF ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 48 THIS CASE ARE THE SAME AND THIS CASE HAS TO BE DECI DED BY APPLYING THE RATIO OF THE IT AT DECISIONS IN THO SE CASES, THE SAME TREATMENT SHOULD BE GIVEN TO THIS ASSESSEE ALSO. FURTHER, THE HON. IT AT OBSERVED THA T THERE WAS NO MATERIAL ON RECORD TO SHOW THAT POLLUT ION DEPARTMENT OF THE GOVERNMENT HAD NOT GIVEN NO OBJECTION TO THE ASSESSEE AND, HENCE, IT COULD NOT BE SAID THAT THE ASSESSEE WAS RUNNING A HOTEL WHICH WA S OUTSIDE THE NORMS PRESCRIBED BY THE POLLUTION DEPARTMENT. IN THIS CASE ALSO, THERE IS NOTHING ON RECORD TO SHOW THAT THE POLLUTION CONTROL BOARD HAS DENIED NOC TO THE ASSESSEE AND, HENCE, BY THAT REASONING, IT CANNOT BE SAID THAT THE ASSESSEE IS RUNNING A HOTEL WHICH IS OUTSIDE THE NORMS PRESCRIB ED BY THE POLLUTION DEPARTMENT. THE TERM 'POLLUTION DEPARTMENT OF THE GOVERNMENT HAS NOT GIVEN NO OBJECTION TO THE ASSESSEE' MEANS THAT IT HAS DENIED THE NOC. THE DENIAL COULD BE ON CONSIDERATION OF AN ASSESSEE'S APPLICATION OR BY WAY OF SUO MOTU ACTION . IF A PERSON HAS NOT APPLIED FOR NOC, HE CAN BE ACCUSED OF A PROCEDURAL LAPSE. BUT, IT CANNOT BE SAID THAT THE NOC HAS NOT BEEN GI VEN TO HIM. IN OTHER WORDS, AS PER THE RATIO OF THE DEC ISIONS OF THE ITAT (SUPRA), THE SIMPLE FACT THAT AN ASSESS EE DID NOT HAVE THE NOC IS NOT SUFFICIENT TO DENY THE BENE FIT OF THE DEDUCTION TO HIM. IT WOULD HAVE TO BE SHOWN THAT THE NOC HAS BEEN DENIED TO IT. FOR THE SAME REASON, ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 49 THE AO'S CONTENTION THAT THE DEDUCTION SHOULD NOT B E ALLOWED TO THE ASSESSEE BECAUSE IT DID NOT HAVE THE NOC (AT THE TIME OF MAKING OF ASSESSMENT) IS REJECT ED. 1.24 IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT THE RE IS NOTHING IN THE IT ACT WHICH WOULD SUGGEST THAT HAVI NG THE NOC IS A NECESSARY CONDITION FOR THE SAID DEDUCTION. IT HAS ALSO BEEN SUBMITTED IN MANY CASES THAT THE ASSESSEES CONCERNED APPLIED FOR THE NOC, OFTEN WITH A RETROSPECTIVE PERIOD (COVERING THE PRE VIOUS YEAR IN QUESTION) AND ALSO GOT THE SAME. IT IS, HOW EVER, NOTICED THAT THE NOCS HAVE BEEN GIVEN SPECIFICALLY SINCE THE DATE OF THE APPLICATION EVEN THOUGH NOC F OR THE PAST PERIOD HAS NOT BEEN DENIED EXPLICITLY NOR HAVE THE FEES PAID FOR THE PAST BEEN REFUNDED BY THE POLLUTION CONTROL BOARD. ACCORDING TO THESE ASSESSE S, IN THIS SITUATION, THE NOC SHOULD BE DEEMED TO HAVE BEEN GIVEN FOR THE PAST ALSO. BUT, THAT QUESTION WO ULD NEED TO BE ANSWERED ONLY IF IT WERE HELD THAT THE EXISTENCE OF THE NOC FOR THE PREVIOUS YEAR NEEDS TO BE ESTABLISHED AS A FACT. AS DISCUSSED ABOVE, THE R ATIO OF THE DECISIONS OF THE HON. ITAT (SUPRA) IS THAT T HE NOC SHOULD NOT HAVE BEEN DENIED. IT IS NEGATION OF NEGATIVE; NOT ASSERTION OF POSITIVE. 1.25 ACCORDING TO MY UNDERSTANDING OF THE RATIO OF THE DECISIONS (SUPRA), DEDUCTION SHOULD BE ALLOWED IF T HE ASSESSEE SATISFIED THE FOLLOWING CONDITIONS: ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 50 I. IT IS A HOTEL II. IT HAS A VALID LICENSE ILL. NOC FROM THE POLLUTION CONTROL BOARD HAS NOT BEEN DENIED TO IT. SINCE, THE ASSESSEE IN QUESTION FULFILS ALL THESE CONDITIONS, IT IS HELD, FOLLOWING THE RATIO OF THE DECISIONS OF THE HON. ITAT IN THE CASES OF BIDHI CHAND SINGHAL AND A NCHAL HOTELS (SUPRA) THAT THE ASSESSEE SHOULD BE GIVEN TH E BENEFIT OF DEDUCTION U/S 80-IC OF THE ITACT. IN THIS CONNECTIO N, IT NEEDS TO BE PUT ON RECORD THAT, WHILE DECIDING AN APPEAL EARLIER (APPEAL NO.27/HDR/2009-10: MR. SUNDER LAL SEMWAL: A Y 2007-08), I HAD HELD THAT, IF THE ASSESSEE DID NOT HAVE THE NOC, THE DEDUCTION SHOULD NOT BE ALLOWED TO IT. BUT , ON A DEEPER APPRECIATION OF THE FACTS AND CIRCUMSTANCES AS WELL AS THE PROVISION OF LAW, I AM OF THE VIEW THAT, IF THE RATIO OF THE DECISIONS OF THE HON. IT AT IS APPLIED PROPERLY , DEDUCTION SHOULD NOT BE DENIED SIMPLY BECAUSE THE ASSESSEE IS UNABLE TO SHOW THAT IT HAS THE NOC FROM THE POLLUTION CONT ROL BOARD. THE AO IS DIRECTED TO ALLOW THE DEDUCTION. 1.26 THE ASSESSEE HAS ALSO CHALLENGED THE CHARGING OF INTEREST U/S 234B AND 234D OF THE I.T. ACT BY THE A O. CHARGING OF INTEREST UNDER THESE SECTIONS, IF THE R EQUISITE CIRCUMSTANCES EXIST, IS MANDATORY. BUT, IF THE TAX LIABILITY CHANGES, THE INTEREST LIABILITY WOULD ALSO CHANGE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 51 CORRESPONDINGLY. THE AO IS DIRECTED TO DO THE NEEDF UL IN THE MATTER. FOR STATISTICAL PURPOSES, THE APPEAL IS TREATED AS ALLOWED. 10.1 IN THE BACKGROUND OF THE AFORESAID DETAILED DISCUSSIONS BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A), BECAU SE THE LD. CIT(A) HAS DECIDED THE ISSUE IN DISPUTE IN FAVOR OF THE ASSESS EE BY HOLDING AFTER APPRECIATING THE EVIDENCE FILED BY THE ASSESSEE AS WELL AS VARIOUS DECISIONS RENDERED BY THE HONBLE SUPREME COURT, HONBLE HIGH COURT AND THE DECISIONS OF THE ITAT. WE FURTHER FIND CONSIDERABLE COGENCY I N THE ASSESSEES COUNSEL SUBMISSIONS THAT THE PRESENT ISSUE INVOLVED IN THE REVENUES APPEALS IS SQUARELY COVERED BY THE ITAT DECISION IN THE CASE OF BIDHI C HAND SINGHAL IN ITA NO. 3419/D/2009 FOR AY 2006-07 AND IN ANCHAL HOTELS (P ) LTD. VS. ACIT VIDE ORDER DATED 7.10.2011 IN ITA NO. 1800 & 1801/D/2010 FOR AY 2005-06 TO 2006-07 AND ITA NO. 3637/D/2011 (AY 2007-08). MORE OVER, IT IS A SETTLED LAW THAT, A DEDUCTION ONCE GRANTED CANNOT BE RE-EXA MINED IN THE SUCCEEDING ASSESSMENT YEARS. HOWEVER, IN THE ASSESSEES OWN C ASE THE CLAIM OF DEDUCTION BY THE ASSESSEE HAD BEEN EXAMINED IN THE AY 2006-07 AND ACCEPTED BY THE REVENUE, THEREFORE, IT WAS INCUMBENT UPON THE REV ENUE TO ALLOW SUCH CLAIM IN THE SUCCEEDING ASSESSMENT YEARS. OUR VIEW IS DULY SUPPORTED BY THE FOLLOWING DECISIONS: - 123 ITR 669 (GUJ) CIT VS. SAURASHTRA CEMENT & C HEMICALS - 355 ITR 14 (DEL) CIT VS. DELHI PRESS PATRA PRAK ASHAN LTD. - 216 ITR 548 (BOM) CIT VS. PAUL BROTHERS. ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 52 10.2 IT IS ALSO A SETTLED LAW THAT REVENUE IS BO UND TO APPLY THE RULE OF CONSISTENCY. IN THE PRESENT CASE THE CLAIM OF THE A SSESSEE DESERVES TO SUCCEED, SINCE THE REVENUE HAD ACCEPTED THIS CLAIM EVEN IN T HE ASSESSMENT FRAMED U/S. 143(3) FOR THE AY 2006-07. OUR VIEW IS ALSO FORTIFY BY THE FOLLOWING JUDGMENTS:- - 308 ITR 161 (SC) CIT VS. JK CHARITABLE TRUST - 193 ITR 321 (SC) RADHA SAOMI SATSANG VS. CIT - 355 ITR 14 (DEL) CIT VS. DELHI PRESS PATRA PRA KASHAN LTD. - 327 ITR 570 (DEL.) CIT VS. MODI INDUSTRIES LTD. - 259 ITR 570 (DEL) CIT VS. LAGAN KALA UPVAN - 38 TAXMANN.COM 100 (SC) CIT VS. EXCEL INDUSTRIE S LTD. 10.3 RESPECTFULLY FOLLOWING THE PRECEDENTS AS AFO RESAID, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF ALLOWING THE DEDU CTION RS. 33,07,273/- AND RS. 48,90,836/- U/S. 80IC OF THE ACT FOR ASSTT. YEARS 2 009-10 & 2010-11 RESPECTIVELY AND DISMISS BOTH THE APPEALS FILED BY THE REVENUE. ASSESSEES APPEAL NO. 2417/DEL/2013 (AY 2010 ASSESSEES APPEAL NO. 2417/DEL/2013 (AY 2010 ASSESSEES APPEAL NO. 2417/DEL/2013 (AY 2010 ASSESSEES APPEAL NO. 2417/DEL/2013 (AY 2010- -- -11) 11)11) 11) 11. WITH REGARD TO GROUND NO. 1 TO 1.2 RELATING T O SUBSIDY RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT UNDER THE CENTRAL CAPI TAL INVESTMENT SUBSIDY SCHEME 2003 WAS REVENUE RECEIPT AND NOT CAPITAL REC EIPT AND HENCE, NOT ASSESSABLE TO TAX. 11.1 ON THE ISSUE IN DISPUTE LD. COUNSEL FOR THE AS SESSEE HAS STATED THAT AO HAS NOT DISPUTED THAT NO SUBSIDY RECEIVED IN THE IN STANT YEAR. HE HAS IN FACT HELD THAT THE ASSESSEE HAD RECEIVED SUBSIDY OF RS. 29,23,251 /- UNDER 15 PERCENT CENTRAL INVESTMENT SUBSIDY SCHEME AS ON 19.2.2007 W HICH HAS SHOWN BY THE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 53 ASSESSEE IN ITS BALANCE SHEET AND REFLECTED AS CAPITAL SUBSIDY AT RS. 29,23,251/- HE FURTHER STATED THAT IN OTHER WORDS, SUBSIDY WAS RECEIVED IN AY 2007-08 AND, NOT INSTANT YEAR. IT WAS ALSO STATED B EFORE US BY HIM THAT THE AO HELD THE SAME TO REVENUE IN NATURE SINCE THE SUBSID Y RECEIVED FOR CAPITAL PURPOSES HAS NOW ACQUIRED THE NATURE OF REVENUE REC EIPT BEING IT IS NOT USED FOR ACQUIRING THE ASSETS IN THE BUSINESS AND IT IS USED BY THE ASSESSEE FOR SMOOTH FUNCTIONING OF BUSINESS. TO SUPPORT THIS VIEW, HE F ILED THE FOLLOWING EVIDENCES:- I) REGISTRATION DATED 18.8.2006 UNDER CENTRAL CAPIT AL INVESTMENT SUBSIDY SCHEME 2003. II) COPY OF NOTIFICATION ISSUED BY THE GOVT. OF IND IA, MINISTRY OF COMMERCE & INDUSTRY. III) COPY OF APPROVAL DATED 19.2.2007 FROM DIRECTO RATE OF INDUSTRIES, UTTRANCHAL IN RESPECT OF 15 PERCENT CENTRAL INVESTM ENT SUBSIDY SCHEME. FINALLY, LD. COUNSEL FOR THE ASSESSEE STATED THAT T HE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE JUDGMENT OF THE HIGH CO URT OF J&K IN THE CASE OF SHRI BALAJI ALLOYS VS. CIT REPORTED IN 333 ITR 3 35 AND ACCORDINGLY, REQUESTED THAT THE SAME RATIO MAY BE FOLLOWED IN TH E PRESENT APPEAL AND ISSUE IN DISPUTE MAY BE ALLOWED IN FAVOUR OF THE AS SESSEE. 11.2 ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AO AS WELL AS LD. CIT(A) AND STATED THAT THEY HAVE PASSED A WELL REAS ONED ORDER WHICH DOES NOT NEED ANY INTERFERENCE, HENCE, THE SAME MAY BE UPHEL D. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE CASE LAW RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. COUNSEL THAT THE ISS UE IS SQUARELY COVERED BY THE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 54 HIGH COURT OF J&K IN THE CASE OF SHRI BALAJI ALLOYS VS. CIT REPORTED IN 333 ITR 335 WHEREIN IT WAS HELD THAT THE FINDING OF THE TRIBUN AL ON THE FIRST ISSUE THAT THE EXCISE DUTY REFUND, INTEREST SUBSIDY AND INSURANCE SUBSIDY WERE PRODUCTION INCENTIVES, HENCE, REVENUE RECEIPT, CANNOT BE SUSTA INED, BEING AGAINST THE LAW LAID DOWN BY HONBLE SUPREME COURT OF INDIA IN SAHN EY STEEL & PRESS WORKS LTD.S CASE REPORTED IN 228 ITR 253 AND CIT VS. PON NI SUGARS & CHEMICALS LTD. REPORTED IN 306 ITR 392. THE FINDING OF THE TRIBU NAL THAT THE INCENTIVES WERE REVENUE RECEIPT IS, ACCORDINGLY, SET ASIDE HOLDING THE INCENTIVES TO BE CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. 12. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE DECIDE THE ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE. 13. WITH REGARD TO GROUND NO. 2 RELATING TO DIRE CTING THE AO TO INITIATE PROCEEDINGS U/S. 147 READ WITH SECTION 150(1) AND 1 53(3) OF THE ACT FOR THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN W HICH THE SUBSIDY WAS RECEIVED. THE DIRECTION IS WITHOUT JURISDICTION AND CONTRARY TO LAW AND UNSUSTAINABLE IS CONCERNED, WE NOTE THAT SINCE THE SUBSIDY RECEIVED BY THE ASSESSEE HAS BEEN TREATED AS CAPITAL RECEIPT, BY US , AS AFORESAID, THE DIRECTIONS TO INITIATE PROCEEDINGS U/S. 147 READ WITH SECTION 150(1) AND 153(3) OF THE ACT ARE NOT MAINTAINABLE IN THE EYES OF LAW, HENCE, THE SA ME IS CANCELLED AND THE GROUND NO. 2 IS DECIDED IN FAVOUR OF THE ASSESSEE. 14. WITH REGARD TO GROUND NO. 3 RELATING TO UPHOLDI NG THE DISALLOWANCE OF DEDUCTION U/S 80LC OF THE ACT IN RESPECT OF PROFITS DERIVED FROM SALE IN THE RESTAURANT TO NON-RESIDENT CUSTOMERS WITHOUT APPREC IATION THAT EVEN SUCH PROFIT IS EL IGIBLE FOR DEDUCTION U/S 80LC OF THE ACT IS CONC ERNED, WE FIND THAT THE PROFITS DERIVE FROM SALE IN THE RESTAURANT TO NON-RESIDENT CUSTOMERS ARE DERIVED FROM THE ITA NOS. 767 & 2592/DEL/2013 & 2417/DEL/2013 55 UNDERTAKING AND AS SUCH PROFIT IS ELIGIBLE FOR DEDU CTION U/S. 80IC OF THE ACT. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENTS: - 317 ITR 218 (SC) LIBERTY INDIA AND ORS. VS. CIT - 317 ITR 353 (SC) CIT VS. DHARAMPAL PREM CHAND L TD. 15. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2016. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - [ [[ [O.P. KANT O.P. KANT O.P. KANT O.P. KANT] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 04/1/2016 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES