TamilNadu Tourism Development Corporation Limited, CHENNAI V. ACIT, CHENNAI

ITA 534/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4066 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: J CHANDRASEKARAN
• Keywords: Business income; Question of law
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDD Y , JUDICIAL MEMBER I.T.A.NO S . 5 34 AND 535/MDS/2017 ASSESSMENT YEAR S : 200 7 - 0 8 & 2012 - 13 TAMIL NADU TOURISM DEVELOPMENT CORPORATION LTD., NO. 2, WALLAJA ROAD, CHENNAI 600 002. [PAN: A A ACT3453H ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , CORPORATE C IRCLE 3 ( 1 ) , CHENNAI 600 034. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI J. CHANDRASEKARAN, C.A. / RESPONDENT BY : SHRI V. NANDAKUMAR , JCIT / DATE OF HEARING : 2 7 . 0 6 .201 7 / DATE OF P RONOUNCEMENT : 10. 0 7 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 13 , CHENNAI , BOTH DATED 2 9 . 1 2 .201 6 RELEVANT TO THE ASSESSMENT YEAR S 20 0 7 - 0 8 AND 2012 - 13 . IN BOTH THE APPEALS, THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE FRANCHISE FEES CLAIMED UNDER SECTION 24 OF THE INCOME TAX ACT, 1961 [ A CT IN SHORT]. ITA NO S . 534 & 535 /M/ 1 7 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30.10.2007 FOR THE ASSESSMENT YEAR 2007 - 08 ADMITTING A TOTAL INCOME OF .2,97,35,950/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 11.02.2009. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT DATED 31.03.2014 BY RECORDI NG REASONS FOR REOPENING OF THE ASSESSMENT. BASED ON THE SUBMISSIONS MADE BY THE ASSESSEE AND AFTER VERIFICATION OF MATERIALS AVAILABLE ON THE RECORDS, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE ACT DETERMININ G THE TOTAL ASSESSED INCOME OF THE ASSESSEE AT .3,64,39,241/ - BY MAKING VARIOUS ADDITIONS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND RAISED VARIOUS GROUNDS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE . 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE CONFIRMATION OF DISALLOWANCE OF FRANCHISE FEE CLAIMED UNDER SECTION 24 OF THE ACT. SIMILAR GROUND WAS RAISED IN THE ASSESSMENT YEAR 2012 - 13. 5. BOTH THE PARTIES HA VE CONCEDED THAT THE ISSUE INVOLVED IN BOTH THE APPEALS IS SQUARELY COVERED AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2005 - ITA NO S . 534 & 535 /M/ 1 7 3 06 AND 2006 - 07, WHICH WAS FOLLOWED BY THE AUTHORITIES BELOW TO DECIDE THE ISSUE AGAINST THE ASSESSEE. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A SSESSING O FFICER HAS NOT ICE D FROM THE STATEMENT OF INCOME TAX THA T ASSESSEE H AS RECEIVED SUM OF .1,97,94,431/ - AS FRANCHISE FEE AND SAME WAS TREATED AS INCOME FROM HOUSE PROPERTY AND C LAIMED DEDUCTION U NDER SECTION 24 @ 30% TO THE TUNE OF .59,38,329 / - . THE ASSESSEE HAS SUBMITTED FRANCHISE AGREEMENTS MADE WITH VARIOUS PARTIES BEFORE THE ASSESSING O FFICER . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF HON'BLE HIGH COURT IN THE ASSESSEE'S OWN CASE, THE ASSESSING OFFICER DISALLOWED .59,38,329/ - AND BROUGHT TO TAX. ON APPEAL, BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE, THE LD. CIT(A) CONFIRMED THE ADDITION MADE ON THIS ACCOUNT, WHEREIN, THE HON BLE HIGH COURT HAS OBSERVED AS UNDER: '13. AS IS EVIDENT FROM THE VARIOUS CLAUSES IN THE ABOVE AGREEMENT, THE ASSESSEE HAS NOT LEASED OUT THE PROPERTY MERELY AS A LAND AND BUILDING, BUT ALSO WITH FURTHER CONDITIONS AS TO HOW THE BUSINESS OF THE LESSEES/ FRANCHISEES SHOULD BE CONDUCTED WITH REGARD TO THE HOTEL INDUSTRY ONLY. THE SPECIAL CONDITIONS OF CONTRACT MAKE IT CLEAR THAT THE NAME OF THE ASSESSEE SHOULD CLEARLY, IN FACT, PROMINENTLY BE INDICATED IN THE NAME BOARD AND THE NAME OF THE FRANCHISEE SHOULD BE BELOW THE NAME OF TTDC, THEREBY, MAKING IT CLEAR THAT THE TTDC CONTINUES TO BE OPERATING THEIR BUSINESS THROUGH THEIR FRANCHI SEES. THUS THE SPECIAL CONDITIONS MAKE IT CLEAR THAT THE ASSESSEE CORPORATION CONTINUES TO BE IN THE BUSINESS OF TOURISM ACTIVITIES, THOUGH NOT DIRECTLY BUT THROUGH THE FRANCHISEES AND HAS RECEIVED INCOME AS FRANCHISEE FEE AND THAT CANNOT BE LOST SIGHT OF WHILE DETERMINING THE NATURE OF INCOME. ITA NO S . 534 & 535 /M/ 1 7 4 14. WE ALSO FIND MUCH FORCE IN THE FINDINGS OF THE TRIBUNAL THAT THE PROPERTIES LET OUT BY THE ASSESSEE ARE BUSINESS ASSETS OF THE ASSESSEE CORPORATION, AS THEY HAVE NOT TREATED THE LEASED OUT PROPERTIES AS NON - BU SINESS ASSETS OF THE ASSESSEE - CORPORATION. IT IS RELEVANT TO STATE THE DEFINITION OF THE WORD 'FRANCHISEE' MENTIONED THE DICTIONARY, WHICH READS AS FOLLOWS: 'ANY SPECIAL RIGHT, PRIVILEGE, OR EXEMPTION GRANTED BY THE GOVERNMENT, AS TO BE A CORPORATION, OPERATE A PUBLIC UTILITY, ETC.' 15. IN THE DECISION REPORTED IN (2008) 300 ITR 118 (MAD) (KEYARAM HOTELS ( P ) LTD. V. ASSISTANT COMMISSIONER OF INCOME TAX) WHILE DEALING WITH THE INCOME EARNED BY THE ASSESSEE THEREIN BY LETTING OUT THE PROP ERTY, THIS COURT HELD AS FOLLOWS: 'BEFORE THE AUTHORITIES UNDER THE ACT AS WELL AS THE TRIBUNAL, THE ASSESSEE HAS NOT PLACED ANY MATERIALS TO SUPPORT ITS CASE THAT THE PROPERTY FROM WHICH INCOME HAS BEEN DERIVED WAS USED AS BUSINESS PROPERTY AND THE EXP LOITATION OF THE PROPERTY WAS IN THE NATURE OF THE BUSINESS OF THE ASSESSEE COMPANY.' 16. IN THIS CASE, WE FIND THAT THE ASSESSEE HAS GIV EN A SPECIAL RIGHT OR PRIVILEGE TO THE FRANCHISEES TO UNDERTAKE A PARTICULAR BUSINESS IN THE PROPERTY OF THE ASS ESS EE ON RECEIPT OF FRANCHISEE F EE. THEREFORE, THE INCOME IS CLEARLY I N THE NATURE OF BUSINESS INCOME AND NOT INCOME FROM HOUSE PROPERTY. HENCE, THE DECISION REPORTED IN (2008) 300 ITR 118 (MAD)(KEYARAM HOTELS ( P ) LTD. V. ASSISTANT COMMISSIONER OF INCOME TAX) DOES NOT APPLICABLE TO THE FACTS OF THE CASE. 17. WE FIND THAT THE REASONING OF THE TRIBUNAL IS JUSTIFIED IN THE FACTS OF THE CASE. ACCORDINGLY, WE FIND NO QUESTION OF LAW MUCH LESS ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION, IN THE ABOVE TAX CASE (APPEALS). ' 6.1 RESPECTFULLY FOLLOWING THE DECISION OF MADRAS HIGH COURT IN THE ASSESSEE'S OWN CASE T.C.( APPEAL ) NO S . 341 AND 34 2 OF 2014 AND MP NO.1 OF 2014 M/ S . TAMIL NADU TOURISM DEVELOPMENT CORPORATION LTD. VS. DCIT DT.24.9.2014, THE DEDUCT ION CLAIMED BY THE ASSESSEE UNDER SECTION 24 OF THE ACT AGAINST THE FRANCHISE FEE OF .59,38,329 / - WAS DISALLOWED BY THE A SSESSING O FFICER IN THE ITA NO S . 534 & 535 /M/ 1 7 5 ASSESSMENT YEAR 2007 - 08 AND .1,13,22,307/ - WAS DISALLOWED IN THE ASSESSMENT YEAR 2012 - 13, WHICH WAS RIGHTLY C ONFIRMED BY THE LD. CIT(A). HENCE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) FOR BOTH THE ASSESSMENT YEARS. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IN BOTH THE ASSESSMENT YEARS IS DISMISSED. 7 . IN THE RESULT, BOTH THE APPEAL S FIL ED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 10 TH JU LY , 201 7 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 10 . 0 7 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.