DCIT CIR 2(2), MUMBAI V. THE INDIAN HIOTELS COMPANY LTD, MUMBAI

ITA 5963/MUM/2010

• Counselvise Citation: 596319914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2000-2001
• Appeal Filed On: 30-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T C TEJPAL
• Assessee Lawyers: ALP ANA SAKSENA
• Keywords: Business income; Residential status; Wrong claim
• Section: 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I : MUMBAI BEFORE SHRI D. K. AGARWAL, (JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.5963/MUM/2010 ASSESSMENT YEAR : 2000-01 ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2), AAYKAR BHAVAN, MUMBAI-400020. ..( APPELLANT ) VS. M/S. THE INDIAN HOTELS COMPANY LTD. MANDLIK HOUSE, 3 RD FLOOR, MANDLIK ROAD, COLABA, MUMBAI-400 001. P.A. NO. (AAACT 3957 G ) ..( RESPONDENT ) ITA NO.5964/MUM/2010 ASSESSMENT YEAR : 2001-02 ASST. COMMISSIONER OF INCOME TAX CIRCLE-2(2), AAYKAR BHAVAN, MUMBAI-400020. ..( APPELLANT ) VS. M/S. THE INDIAN HOTELS COMPANY LTD. MANDLIK HOUSE, 3 RD FLOOR, MANDLIK ROAD, COLABA, MUMBAI-400 001. P.A. NO. (AAACT 3957 G ) ..( RESPONDENT ) APPELLANT BY : SHRI T. C. TEJPAL RESPONDENT BY : MS. ALP ANA SAKSENA DATE OF HEARING : 04.10.2011 DATE OF PRONOUNCEMENT : 14 TH OCTOBER, 2011 ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 2 O R D E R PER RAJENDRA SINGH (AM). THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDERS BOTH DATED 31.5.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2000- 01 AND 2001-02. SINCE THE DISPUTE RAISED IN BOTH THE APPEALS ARE IDENTICAL, THESE ARE BEING DISPOSED OF BY A SINGLE CONSO LIDATED ORDER FOR THE SAKE OF CONVENIENCE. THE COMMON DISPUTES RAISED IN THESE APPEALS RELATE TO CLAIM OF DEDUCTION UNDER SECTION 80 HHD AND LEGAL VALIDITY OF RE-OPENING OF THE ASSESSMENT. 2. WE FIRST TAKE UP THE DISPUTE REGARDING ALLOWABILIT Y OF DEDUCTION UNDER SECTION 80 HHD IN RELATION TO CREW PAYOUTS AND FORE IGN EXCHANGE EARNED FOR PROVIDING SERVICES TO THE CREW MEMB ERS OF FOREIGN AIRLINES. THE LD. AR FOR THE ASSESSEE AT THE V ERY OUTSET CLAIMED THAT THE ISSUE WAS COVERED BY THE DECISION OF THE TRIBU NAL. SECTION 80 HHD ALLOWS DEDUCTION IN CASE OF AN INDIAN CO. OR A PERSON (OTHER THAN A COMPANY) RESIDENT OF INDIA WHO IS ENGAGED IN THE BU SINESS OF HOTEL OR OF A TOUR OPERATOR OR TRAVEL AGENT, IN RESPECT OF INCOME IN FOREIGN EXCHANGE RECEIVED IN OR BROUGHT INTO INDIA WITHIN A SP ECIFIED PERIOD FROM THE END OF THE RELEVANT PREVIOUS YEAR, ON ACCOUNT OF SERVICES PROVIDED TO FOREIGN TOURISTS. THE QUANTUM OF DEDUCTIO N AVAILABLE IS REQUIRED TO BE COMPUTED UNDER SECTION 80 HHD(3) ON THE B ASIS OF ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 3 PROFITS AND GAINS OF BUSINESS OR PROFESSION IN THE RATIO OF RECEIPTS FROM SUCH SERVICES IN CONVERTIBLE FOREIGN EXCHANGE TO THE TOTAL RECEIPTS OF THE BUSINESS. 2.1 THE ASSESSEE IS IN THE BUSINESS OF HOTEL INDUSTRY. IN THE RELEVANT YEARS THE ASSESSEE HAD RECEIVED SUMS OF RS.1,87,13,518/- AND RS.2,89,30,153/- AS REIMBURSEMENT IN FOREIGN EXCHANGE F ROM VARIOUS FOREIGN AIRLINES IN RESPECT OF ADVANCES GIVEN BY THE A SSESSEE TO CREW MEMBERS OF THOSE AIRLINES IN INDIAN CURRENCY. THE ASSESSE E HAD NOT INCLUDED THESE RECEIPTS EITHER IN THE NUMERATOR OR DEN OMINATOR OF COMPUTATION OF DEDUCTION UNDER SECTION 80 HHD ON THE GROU ND THAT THERE WAS NO INCOME ELEMENT INVOLVED SINCE AMOUNTS REPRE SENTED ONLY REIMBURSEMENT OF PAYMENTS. THE ASSESSEE EXPLAINED TO THE AO THAT THE ISSUE WAS COVERED BY THE DECISION OF THE TRIBUNAL I N ITS OWN CASE IN ASSESSMENT YEAR 1996-97 IN WHICH THE TRIBUNAL IN THE ORD ER DATED 19.1.2006 HAD HELD THAT SUCH RECEIPTS ARE REQUIRED TO B E EXCLUDED BOTH FROM THE FOREIGN EXCHANGE RECEIPTS AND TOTAL BUSIN ESS RECEIPTS. THE SAME VIEW HAD BEEN TAKEN BY THE TRIBUNAL IN CASE O F PIEM HOTELS LTD., A SISTER CONCERN OF THE ASSESSEE IN ASSESSMENT YEAR 1996 -97.THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIG H COURT OF BOMBAY IN THE CASE OF CIT VS. SUDERSHAN CHEMICALS LTD (24 5 ITR 769) AS PER WHICH THE RECEIPTS WHICH DO NOT HAVE AN ELEMENT OF PROFIT HAD ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 4 TO BE EXCLUDED FROM THE TURNOVER. THE AO DID NOT ACCE PT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT THE AMO UNTS HAD BEEN RECEIVED FROM THE CREW OF FOREIGN AIRLINES WHICH A RE NOT FOREIGN TOURISTS AND, THEREFORE, AMOUNTS COULD NOT BE TREATED A S FOREIGN EXCHANGE RECEIPTS, FOR THE PURPOSE OF DEDUCTION UNDER SECT ION 80 HHD. HE THEREFORE, REDUCED THE AMOUNT FROM NUMERATOR BUT I NCLUDED THE SAME IN THE TOTAL BUSINESS RECEIPTS AS A PART OF DENOMINAT OR IN THE COMPUTATION OF DEDUCTION. 2.2 THE ASSESSEE HAD ALSO RECEIVED SUMS OF RS.14,40,11,529/- AND RS.13,47,22,068/- FOR ASSESSMENT YEARS 2000-01 AND 2001-0 2 RESPECTIVELY IN FOREIGN EXCHANGE FROM SERVICES RENDERED T O CREW MEMBERS OF FOREIGN AIRLINES. THE ASSESSEE CLAIMED DEDUCT ION U/.S 80 HHD IN RESPECT OF SUCH RECEIPTS ON THE GROUND THAT THE FOR EIGN AIRLINE CREW MEMBERS WERE FOREIGN TOURISTS TO WHICH SAID SECTION WAS APPLICABLE. IN RESPONSE TO QUERY BY AO ASSESSEE SUBMITTED THAT THE FOREIGN AIRLINE CREW MEMBERS WERE TOURISTS IN VIEW OF T HE CIRCULAR NO. F.NO.2(J)/2002-MRD DATED 20.12.2002 WHEREIN THE FOREIGN TOURIST HAS BEEN DEFINED AS A PERSON VISITING INDIA ON FOREIGN PASS PORT WHETHER FOR PLEASURE OR FOR BUSINESS, OR FOR FAMILY MEETINGS. FURTH ER ACCORDING TO WORLD TOURISM ORGANIZATION, THE ARRIVAL AND DEPARTUR E AND EXPENDITURE OF CREW MEMBERS SHOULD BE CONSIDERED AS PART OF INTERNA TIONAL ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 5 TOURISM. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SUNN-SAND HOTEL P . LTD. IN ITA NO.2488/M/97 IN WHICH IT WAS HELD THAT DEDUCTION UNDE R SECTION 80 HHD WAS ALLOWABLE IN RESPECT OF INCOME EARNED IN FOREIGN EXCHANGE FROM SERVICES PROVIDED TO CREW MEMBERS OF FOREIGN AIRLIN ES. THE AO HOWEVER DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSE RVED BY HIM THAT THE DECISION OF THE TRIBUNAL IN CASE OF SUN-N-SAND HOTELS (SUPRA), HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND FURTHER AP PEALS HAD BEEN FILED. HE, THEREFORE, REDUCED THE AMOUNTS FROM T HE FOREIGN EXCHANGE RECEIPTS BUT INCLUDED THE SAME IN THE TOTAL BUSI NESS RECEIPTS WHILE COMPUTING DEDUCTION UNDER SECTION 80HHD. AGGRIEVED BY THE DECISION OF AO THE ASSESSEE FILED APPEAL BEFORE CIT(A) WH O AFTER DETAILED EXAMINATION AND AFTER CONSIDERING THE DECISIO NS OF THE TRIBUNAL, ALLOWED THE CLAIMS OF THE ASSESSEE AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. AR FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND POINTED OUT TH AT BOTH THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL. IT WAS ALSO POINTED OUT THAT IN THE EARLIER YEARS, EIT HER THE AO HIMSELF ITSELF ALLOWED THE CLAIM OR CLAIMS WERE ALLOWED BEFORE CIT(A) AND NO APPEALS WERE FILED BY REVENUE. IT WAS, THEREFORE, URG ED THAT THERE WAS ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 6 NO JUSTIFICATION IN DENYING THE CLAIM. THE LD. DR PLA CED RELIANCE ON THE ORDERS OF AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWA BILITY OF DEDUCTION UNDER SECTION 80 HHD IN RESPECT OF CREW PAYOUTS A ND FOREIGN EXCHANGE INCOME RECEIVED FROM THE SERVICES PROVI DED TO CREW MEMBERS OF FOREIGN AIRLINES. THE CREW PAYOUTS REPRESEN TED REIMBURSEMENT IN FOREIGN EXCHANGE RECEIVED BY THE ASSESSEE FROM THE FOREIGN AIRLINES IN RESPECT OF THE ADVANCES GIVEN BY THE ASSESSEE TO THE FOREIGN AIRLINES CREW MEMBERS IN INDIAN RUPEES. THE RE IMBURSEMENT OF THE AMOUNTS GIVEN BY THE ASSESSEE DID NOT CONTAIN AN Y PROFIT ELEMENT AND, THEREFORE, FOLLOWING THE JUDGMENT OF HO N'BLE SUPREME COURT IN THE CASE OF LAXMI MACHINE WORKS (290 ITR 667) SUCH RECEIPTS SHOULD NOT BE TAKEN INTO ACCOUNT IN COMPUTATION OF DED UCTION UNDER SECTION 80HHD. IN OTHER WORDS, THE AMOUNTS ARE REQUIRED T O BE EXCLUDED FROM FOREIGN EXCHANGE RECEIPTS AS WELL AS TOTAL BUSINESS RECEIPTS WHILE COMPUTING DEDUCTION UNDER SECTION 80HHD. WE ALSO FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF THE TRIBUNAL IN CASE OF PIEM HOTELS LTD. IN ITA NO. 3477/MUM/2010 FOR THE ASSESSMENT YEAR 1996-97. MOREOVER, IN THE EARL IER YEARS, THE ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 7 DEPARTMENT HAD ITSELF ALLOWED THE CLAIMS OF THE ASSESSEE. THEREFORE, DISALLOWANCE OF CLAIM BY THE AO IS NOT JUSTIFIED. 4.1 SIMILARLY, IN RESPECT OF FOREIGN EXCHANGE EARNED B Y THE ASSESSEE FROM THE SERVICES RENDERED TO CREW MEMBERS OF FOREIGN AI RLINES THE CLAIM OF DEDUCTION UNDER SECTION 80 HHD HAS BEEN DISALLOWE D BY THE AO ON THE GROUND THAT CREW MEMBERS OF THE FOREIGN AIR LINES ARE NOT TOURISTS. THIS ISSUE IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF SUN-N-SAND HOTELS PVT. LTD. IN ITA NO.2488/2459/MUM/1997 IN WHICH THE TRIBUNAL NOTED TH AT AS PER CIRCULAR NO. F.NO.2(J)/2002-MRD DATED 20.12.2002 OF THE DEPARTMENT OF TOURISM, ANY PERSON VISITING INDIA ON FOREIGN PASSPO RT WHETHER FOR PLEASURE, LEISURE, BUSINESS OR FAMILY VISIT WILL BE TREAT ED AS FOREIGN TOURIST. THE TRIBUNAL ALSO NOTED THAT AS PER THE WORL D TOURISM ORGANIZATION, ARRIVAL AND DEPARTURE AS WELL AS EXPEND ITURE OF CREW MEMBERS OF FOREIGN AIRLINES HAS TO BE CONSIDERED AS PART OF INTERNATIONAL TOUR. THE TRIBUNAL THEREFORE, ALLOWE D THE CLAIM OF THE ASSESSEE TREATING THE CREW MEMBERS OF FOREIGN AIRLINES AS FOREIGN TOURISTS. WE ALSO NOTE THAT, IN EARLIER YEARS, IN ASSESSE ES OWN CASE, CLAIMS WERE ALLOWED EITHER BY AO HIMSELF OR BY CIT(A) AGAINST WHICH NO APPEAL WAS FILED BY THE DEPARTMENT. THIS YEAR, AO DISALLOWED THE CLAIM ON THE GROUND THAT THE DECISION OF THE TRIBUNAL IN CASE OF SUN-N- ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 8 SAND HOTEL (SUPRA), HAS NOT BEEN ACCEPTED. EVEN IF DE PARTMENT HAS NOT ACCEPTED THE DECISION OF THE TRIBUNAL AND FILED APP EAL BEFORE THE HONBLE HIGH COURT, THE DECISION OF THE TRIBUNAL HAS TO BE FOLLOWED. THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF THE TR IBUNAL (SUPRA), HAS THEREFORE, TO BE ALLOWED. 4.2 IN VIEW OF THE FOREGOING DISCUSSION, WE, SEE NO IN FIRMITY IN THE ORDER OF CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE BOTH IN RELATION TO CREW PAYOUTS AND FOREIGN EXCHANGE INCOME IN RESPECT OF SER VICES PROVIDED TO CREW MEMBERS OF FOREIGN AIRLINES. THE ORD ERS OF CIT(A) ARE ACCORDINGLY UPHELD IN BOTH THE YEARS. 5. THE ASSESSEE HAS ALSO CHALLENGED THE RE-OPENING OF THE ASSESSMENT IN THE TWO ASSESSMENT YEARS UNDER REFERENCE. IN T HE ORIGINAL ASSESSMENTS, THE CLAIMS OF THE ASSESSEE HAD BEEN A LLOWED UNDER SECTION 143(3) IN THE ORDER DATED 28.2.2003 FOR ASSESSMENT YEAR 2000-01 AND IN THE ORDER DATED 22.3.2004 FOR T HE ASSESSMENT YEAR 2001-02. SUBSEQUENTLY, THE AO HAD RE-OPENED THE ASSESSMENTS ON THE GROUND OF WRONG CLAIM OF DEDUCTION UNDER SECTION 80HHD BY ISSUE OF NOTICES UNDER SECTION 148 ON 10.3.2006 AND 8.3.2 006 RESPECTIVELY FOR TWO YEARS. IN THE REASSESSMENT, THE AO D ISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80 HHD IN RESPECT OF CR EW ITA NO.5963 & 64/M/10 A.Y:00-01 & 01-02 9 PAYOUTS AND FOREIGN EXCHANGE INCOME RECEIVED FROM SERVIC ES PROVIDED TO CREW MEMBERS OF FOREIGN AIRLINES. WE HAVE ALREADY CONSIDERED THE CLAIM OF THE ASSESSEE ON MERIT AND HAVE IN THIS ORDER E ARLIER HELD THAT THE CLAIMS OF THE ASSESSEE ARE ALLOWABLE AND THE SAME HAVE BEEN ALLOWED. WE, THEREFORE, DO NOT CONSIDER IT NECESSARY TO GO INTO THE LEGAL VALIDITY OF RE-OPENING OF THE ASSESSMENT AND THE GROUNDS RELATING THERETO WHICH ARE DISMISSED AS BEING ONLY ACADEMIC. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 14.10.2011. SD/- SD/- (D. K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14.10.2011. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.