ITO, Rishikesh V. M/s Ganga Beach Resorts, Uttrakhand

ITA 2628/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2884 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F , NEW DELHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 2628 /DEL/201 6 A.Y. 20 07 - 08 ITO, WARD 1(4)(1) RISHIKESH VS . M/S GANGA BEACH RESORTS POST SHIVANAND NAGAR TAPOVAN DIST. TEHRI GARHWAL UTTARAKHAND PAN: AAGFG0354H (APPELLANT) (RESPONDENT) APPELLANT BY SH. ATIQ AHMED, SR.D.R. RESPONDENT BY NONE DATE OF HEARING 14.03.2018 DATE OF PRONOUNCEMENT 16.03.18 ORDER PER BEENA PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 04/02/2016 PASSED BY LD.CIT(A), DEHRADUN, FOR ASSESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS OF APPEAL: 1 . THE LD. CIT ( APPEALS) HAS ERRED I N LAW AND ON FACTS IN ALLOWING THE CLAIM OF DEDUCTION U/S 80 I C OF THE I . T . ACT , 1961 WITHOUT APPRECIATING THE FACT THAT REJECTION OF DEDUCTION U/S 80 - IC(2) WAS NOT BASED JUST ON FAILURE TO OBTAIN NOC FROM THE POLLUTION CONTROL BOARD B UT IT WAS BASED ON OTHER FACTS. 2 . THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON FACTS I N NOT APPRECIATING THE FACT THAT ECO - TOURISM IS THE ' CONDITION PRECEDENT' TO BE COMPLIED WITH FOR HOTELS FOR CLAIMING DEDUCTION U/S 80 - IC OF THE INCOME TAX ACT , 1961 . ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 2 3 . THE LD . CIT ( APPEALS) HAS ERRED I N L AW AND ON FACTS I N HO L D I NG T HAT DED U C T IO N SHOULD BE ALLOWED IF ASSESSEE SATISFIES THE FOLLOWING CONDITIONS : - A . IT IS A HOTEL B . IT HAS A VALID LICENSE C . NOC FROM POLLUTION CONTROL BOARD HAS NOT BEEN DENIED TO IT . 4 . THE ORDER OF LD . CIT ( APPEALS) , DEHRADUN BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE RUNS A HOTEL AND HAD CLAIMED DEDUCTION UNDER SECTION 80 IC OF THE A CT AMOUNTING TO RS. 67,19,225/ - . LD. AO WAS OF THE OPINION THAT ASSESSEE HAS NOT OBTAINED NOC FROM POLLUTION CONTROL BOARD AND THEREFORE IS NOT ELIGIBLE FOR DEDUCTION CLAIMED UNDER SECTION 80 IC OF THE A CT. 2.1. LD. AO ACCORDINGLY DISALLOWED THE SUM OF RS .67,19, 2 2 5/ - SHOWN AS PROFIT FROM HOTEL. AGGRIEVED BY THE ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO ALLOWED THE CLAIM OF ASSESSEE BY OBSERVING THAT ASSESSEE IS A HOTEL WITH A VALID LICENCE AND NOC FROM P OLLUTION C ONTROL B OARD HAS N OT BEEN DENIED TO ASSESSEE IN ANY MANNER. 2.2. AGGRIEVED BY THE ORDER OF LD. CIT (A) THE REVENUE IS IN APPEAL BEFORE US NOW. 2.3. LD. DR PLACED RELIANCE UPON THE ORDER OF LD.AO. 2.4. ON THE CONTRARY LD. AR SUPPORTED THE OBSERVATIONS AND FINDINGS BY LD.CIT(A ). HE SUBMITTED THAT THERE IS A CATEGORICAL FINDING BY LD.CIT(A) REGARDING APPLICATION SUBMITTED BY ASSESSEE TO POLLUTION CONTROL BOARD, STATING THAT THE SAME HAS BEEN APPLIED WHICH HAS NOT BEEN DENIED TILL DATE. 2.5. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 3 2.6. IT IS VERY MUCH RELEVANT TO OBSERVE THE FINDINGS OF LD. CIT (A) WHICH IS REPRODUCED HEREUNDER: 14. I HAVE DULY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE. THE MOST IMPORTANT ISSUE IS TO DECIDE AS TO WHAT EXACTLY THE EXEMPTION HAS BEEN GRANTED IN RESPECT OF BY THE SCHEDULE AND NOTIFICATIONS. IN THE XIVTH SCHEDULE IN ITEM NO. 15 OF PART C IT READS 'ECO - TOURISM INCLUDING HOTEL, RESORTS, SPAS, ENTERTAI NMENT/AMUSEMENT PARKS AND ROPEWAYS.' IT IS IMPORTANT TO UNDERSTAND WHAT THIS MEANS. IT IS OBSERVED THAT IN THE CASE OF CIT VS. TAJ MAHAL HOTEL (1971) 82 ITR 44 (SC), THE HON'BLE SUPREME COURT HAS CLEARLY DEFINED THAT 'THE WORD INCLUDES IS OFTEN USED IN INT ERPRETATION CLAUSES IN ORDER TO ENLARGE THE MEANING OF THE WORD OR PHRASE OCCURRING IN THE BODY OF THE STATUTE AND WHEN I T WAS SO USED, THESE WORDS AND PHRASES MUST BE CONSTRUED AS COMPREHENDING NOT ONLY SUCH THINGS AS THEY SIGNIFY ACCORDING TO THEIR NATUR E AND IMPORT BUT ALSO THOSE THINGS WHICH INTERPRETATION CLAUSE DECLARES THAT THEY SHALL INCLUDE'. WHILE THE ASSESSING OFFICER MAY BE RIGHT IN DEFINING ECO - TOURISM IN THE WAY THAT HE HAS IN A PLAIN UNDERSTANDING OF ENGLISH LANGUAGE, WHEN IT HAS BEEN DEFINE D IN AN INCLUSIVE MANNER IN THE XIVTH SCHEDULE, IT WAS NOT CORRECT FOR THE ASSESSING OFFICER TO, IGNORE THAT DEFINITION AND ADOPT A NARROWER INTERPRETATION OF THE TERM. IN THE X I VTH SCHEDULE IN ITEM NO. 15 OF PART C, IT READS 'ECO - TOURISRN INCLUDING HOTELS , RESORTS, SPAS, ENTERTAINMENT/AMUSEMENT PARKS AND ROPEWAYS'. THUS, AS PER THE SCHEDULE SETTING UP A HOTEL COULD QUALIFY AS A ECO - TOURISM. THIS IS CONFIRMED BY THE FACT THAT IN COLUMN (4) SUB CLASS UNDER NIC CLASSIFICATION 1998 IT IS WRITTEN 55101, WHILE COLUMN 3 AND 5 ARE BLANK. SUB CLASS 55101 OF THE NIC CLASSIFICATION 1998 MENTIONS ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 4 'HOTELS AND MOTELS' WORDS ONLY. THUS I NC LUSIO N OF SUB CLASS 55101 IN THE SCHEDULE ITSELF MEANS STANDALONE HOTELS AND ALSO QUALIFY FOR DEDUCTION. FROM THE SCHEDULE IT IS CLEAR THAT NOT ONLY ECO - HOTELS, RESORTS, SPA, ENTERTAINMENT - AMUSEMENT PARK AND ROPE WAYS ARE ELIGI BLE FOR DEDUCTION U / S 80IC(2)(B)(II). FURTHERMORE, IN THE NOTIFICATION NO. 1(10)/2001 LAYING DOWN NEW INDUSTRIAL AREA AND OTHER CONCESSION OVER THE STATE OF UTTARAKHAND AND HIMACHAL PRADESH UNDER CLAUSE 3 FROM (I) TO (III), IT HAS BEEN STATED THAT THRUST SECTOR INDUSTRY AS PER ANNEXURE 2 ARE ENTITLED TO CONCESSION, EVEN THOUGH MAY BE LOCATED IN THE ENTIRE STATE OF UTTARAKHAND WITHOUT ANY AREA RESTRICTIONS. T HE ECO - TOURISRN HOTELS, RESORTS, SPAS, ENTERTAINMENT/AMUSEMENT PARKS AND ROP EWAYS ARE MENTIONED IN ANNEXURE 2. ACC ORDINGLY, SINCE THE SCHEDULE HAS EXPLA I NED THE DEFINITION OF TERM IN AN INCLUSIVE MANNER, THE NARROWER DEFINITION OF, ECO - TOURISRN AS ADOPTED BY THE ASSESSING OFFICER CANNOT BE HELD AS FEASIBLE FOR THE PURPOSE OF ALLOWING DEDUCTION U/ S 80IC(2). FURTHERMORE, IN VIEW OF THE FACT THAT NOTIFICATION NO . 1(10)/2001 LAYING DOWN NEW INDUSTR IAL AREA AND OTHER CONCESSIONS OVER THE STATE OF UTTARAKHAND AN D HIMACHAL PRADESH, PERMITS THRUST AREA INDUSTRIES TO BE SETUP ANYWHERE IN THE STATES OF UTTARAKHAND A ND HIMACHAL PRADESH, A BROADER VIEW OF THIS TERM HAS TO BE TAKEN THAT PROVIDES FOR ALLOWING CONCESSION TO HOTEL/RESORTS LOCATED WITHIN URBAN AREAS, AS IT APPEARS TO BE THE INTENTION OF THE GOVERNMENT. THE HON'BLE ITAT IN THE CASE OF SHRI BIDHI CHAND SINGHAL VS. ITO, RUDRAPUR HAS INTERPRETED ECO - TOURISRN IN A MANNER TO HOLD THAT THE HOTELS THAT OBTAINS NO - OBJECTION FROM THE POLLUTION DEPARTMENT AND LOCATED W ITHIN THE STATE OF UTTARAKHAND IS A HOTEL ENGAGED IN ECO - TOURISRN. IN THE CASE ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 5 OF M / S ANCHAL HOTELS (P) LTD. VS. ACIT, CIRCLE - 2, DEHRADUN, HON'BLE IT AT GONE A STEP FURTH E R. IT HAS STATED THAT ONCE THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE POLLUTION DEPARTMENT OF GOVERNMENT HAS NOT GIVEN NOC TO THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE IS RUNNING HOTEL WHICH IS OUTSIDE THE NORMS PRESCRIBED BY THE POLLUTION DEPARTMENT. ACCORDINGLY IN BOTH THE CASES, THE HON'BLE ITAT HAD HELD THAT STAND ALONE HO TEL LOCATED IN URBAN AREAS OF UTTARAKHAND ARE ENTITLED FOR DEDUCTION U / S 80 I C. THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HOTEL HAS ALSO NOT RECEIVED AN NOC FROM THE POLLUTION CONTROL DEPARTMENT NOR APPLIED FOR THE SAME. HOWEVER IT IS SEEN THAT IT HAS APPLIED FOR THE SAME AND THE SAME HAVE NOT BEEN REFUSED TO IT TILL DATE. IN FACT IT CONTINUES TO PERFORM OPERATIONS WITHOUT ANY RESTRICTIONS FROM THE POLLUTION CONTROL BOARD. THIS IS BECAUSE TO OPEN A HOTEL IN UTTARAKHAND THE ONLY REQUIREMENT IS REGIS TRATION UNDER THE SARAI ACT AND FOR SUCH REGISTRATION, NO POLLUTION CONTROL CE RT IFICATE IS REQUIRED BECAUSE THIS IS A THRUST AREA INDUSTRY AND IT IS ALLOWED TO BE SET UP IN ANY PART OF UTTARAKHAND DUE TO A PRESUMPTION THAT THRUST AREA INDUSTRIES ARE POLLUT ING INDUSTRIES. FINALLY THE CASE OF THE ASSESSEE HAS BEEN EXAMINED UNDER SECTION 1 43(3) ON NUMEROUS OCCASIONS 'IN THE PAST AND IT HAS FOUND E L IGIBLE TO CLAIM DEDUCTION UNDER SECTION 80 IC. THERE DOES NOT SEEM TO BE ANY REASON THEREFORE TO DISALLOW THE E XEMPTION FOR THIS YEAR ONLY ON ACCOUNT OF THE FACT THAT THE AO HAS DEVE LOPED A NEW UNDERSTANDING OF THE MEANING OF THE WORD ECO TOURISM, PARTICULARLY W HEN THERE IS NO SUCH RESTRICTIVE PROVISION IN THE ACT, SCHEDULES OR NOTIFICATIONS. IN THE CIRCUMSTANCES IT IS HELD THAT, IN VIEW OF THE ABOVE, THE ASSESSEE HOTEL MAKES THE CUT FOR THE ECO - ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 6 TOURISM AS DEFINED IN VARIOUS SCHEDULES/NOTIFICATION OF THE INCOME TAX ACT & GOVERNMENT AND AS EXPLAINED BY VARIOUS JUDGEMENT OF THE HON'BLE ITAT. IT IS, T HERE FORE, ELI G IBLE TO CL A IM DEDUCTION U/S 80 IC OF THE I. T. ACT,1961, ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS HELD TO BE UNSUSTAINABLE AND IS DELETED . 2.7. LD. CIT (A) S OBSERVATION REGARDING NO INTERRUPTION THAT HAS BEEN CAUSED BY THE P OLLUTION C ONTROL B OARD IN THE FUNCTIONING OF THE HOTEL IS THE ONLY REASON TO COME TO A CONCLUSION THAT THERE EXISTS A DEEMED APPROVAL BY THE B OARD AND THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IC. IT IS ALSO OBSERVED THAT LD. CIT WHILE DECIDING THE ISSUE HAS REFERRED TO THE DECISION OF THIS TRIBUNAL IN THE CASE OF SH. BIDHI CHAND SINGHAL VS. ITO IN ITA NO. 3419/DEL/2009 FOR ASSESSMENT YEAR 2006 - 07 ORDER DATED 04/11/2010, WHEREIN THIS T RIBUNAL INTERPRETED COURT RESERVE IN A MANNER TO HOLD THAT HOTEL THAT OBTAINS NO OBJECTION FROM THE P OLLUTION DEPARTMENT AND LOCATED WITHIN THE STATE OF UTT A RAKHAND IS A HOTEL ENGAGED IN ECO - TOURISM . LD. CIT (A) FURTHER OBSERVED THAT IN THE CASE OF M/S AANCHAL HOTELS PVT. LTD. VS. ACIT THE T RIBUNAL HAS AL LOWED THE DEDUCTION ON THE GROUND THAT IN THE ABSENCE OF DEFINITION OF ECOTOURISM, HOTEL WAS TO BE CONSTRUED AS A HOTEL IN RESPECT OF WHICH THERE WAS NO NOC FROM P OLLUTION C ONTROL B OARD WHEN IT HAS BEEN APPLIED BY THE ASSESSEE. 2.8. AT THIS JUNCTURE WE DRA W REFERENCE TO THE DECISION OF HON BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VERSUS AANCHAL H OTELS P RIVATE LTD. REPORTED IN (2016) 70 TAXMANN.COM 330 WHEREIN HON BLE C OURT HELD THAT AN ASSESSEE WHO SETS UP HOTEL IN UTTARANCHAL, IT COULD NOT AVAIL DEDUC TION ON HOTEL INCOME MERELY ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 7 ON THE BASIS OF N O O BJECTION C ERTIFICATE FROM P OLLUTION CONTROL DEPARTMENT BUT ONLY SUCH HOTELS WHICH WERE SET UP AS ECOTOURISM UNITS WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 80 IC OF THE A CT. ON A DETAILED PERUSAL OF THIS DECISION BY HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ASSESSEE, IT IS OBSERVED THAT HON BLE HIGH COURT HAS SET ASIDE THE ISSUE BACK TO LD. AO FOR DUE VERIFICATION OF THE FACT WHETHER ASSESSEE HAS BEEN DECLARED AS AN ECOTOURISM UNIT BY THE STATE. HON BLE C OURT HAS ALSO OBSERVED THAT THE DEDUCTION CANNOT BE DENIED TO ASSESSEE OR ALLOWED TO ASSESSEE MERELY ON THE BASIS OF NON - AVAILA BILITY /AVAILABILITY OF THE NOC FROM THE P OLLUTION C ONTROL BOARD BUT THE NECESSARY CRITERI A OF AN ECO - TOURIST UNIT BE FULFILLED BY ASSESSEE IN ORDER TO AVAIL DEDUCTION U/S 80 IC OF THE ACT. 2.9. THUS RESPECTFULLY FOLLOWING THE SAME WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE MUST ALSO BE REMANDED BACK TO LD. A.O., WHO WILL AFFORD AN OPPO RTUNITY TO THE ASSESSEE AND PASS FRESH ORDERS TAKING NOTE OF THE OBSERVATIONS BY HON BLE JURISDICTIONAL HIGH COURT RECORDED IN CIT VS. ANCHAL HOTELS (SUPRA). ASSESSEE IS DIRECTED TO PRODUCE RELEVANT INFORMATION AS PER SEC.80 IC OF THE ACT. 2.10. WITH THE ABOVE DIRECTIONS, GROUNDS RAISED BY REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. 3. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 . 0 3 . 2 0 1 8 . S D / - S D / - ( N. S .SAINI ) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 6 T H MARCH, 201 8 . MV COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT ITA 2628/DEL/2016 A.Y. 2007 - 08 ITO VS. GANGA BEACH RESORTS 8 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI