2020 (4) TMI 783 - AT - Income Tax

Tribunal confirms business income eligibility for deduction under Section 80ID. Revenue appeal dismissed.

The Tribunal upheld the CIT(A)'s decision, confirming that the income was from business operations and eligible for deduction under Section 80ID. The ... Disallowance the deduction u/s 80ID - receipts of the assessee amounts to rental charges from the hotel but not the business income sine the entire hotel operations are conducted by M/s Peppermint Hotel with whom the assessee entered into an agreement for running of the hotel - HELD THAT:- Liquor license issued by the Collector-cum-Excise & Taxation Commissioner is in the name of the assessee and so as the NOC for bar license, sanitary certificate and public performance license. The copy of the bank statement reflects the receipts and payments out of the assessee account. The labour department registration is in the name of the assessee and all the employees are on the role of the assessee firm and PF liable to is also tagged to the assessee being the employee. All the TDS certificates are received in the name of the assessee firm wherever applicable. See JAI MAHAL HOTEL (P.) LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [1997 (1) TMI 132 - ITAT DELHI-E] - The facts of the instant case that the entire material operations are being undertaken by the assessee and all the statutory requirements or complied by the assessee. All the receipts and payments pertaining to the operations of the hotel are being managed through the bank account of the assessee, we hereby hold that the assessee is in the business of running of hotel and accordingly, the provisions u/s 80ID of the Act are applicable to the case of the assessee in the instant year. - Appeal of the revenue is dismissed. Issues Involved:1. Deletion of addition made under the head 'Income from House Property' amounting to Rs. 3,44,40,000/-.2. Allowing deduction claimed under Section 80ID of the Income Tax Act, 1961 amounting to Rs. 2,19,94,920/-.3. Assessment of hotel income under the head 'Income from Business and Profession' instead of 'Income from House Property'.Issue-wise Detailed Analysis:1. Deletion of Addition Made Under the Head 'Income from House Property' Amounting to Rs. 3,44,40,000/-:The Revenue argued that the assessee's receipts were rental charges from the hotel premises leased to M/s Peppermint Hotels India (P) Ltd. (PHPL), not business income. The agreement specified that PHPL would manage and operate the hotel, and the assessee would receive a minimum guarantee fee. The Revenue contended that this arrangement indicated rental income rather than business income. However, the CIT(A) deleted the addition made by the Assessing Officer (AO), concluding that the income was indeed from business operations, not house property.2. Allowing Deduction Claimed Under Section 80ID of the Income Tax Act, 1961 Amounting to Rs. 2,19,94,920/-:The Revenue challenged the deduction claimed under Section 80ID, asserting that the income was from leasing the property, not from business operations. The assessee countered that PHPL provided consultancy and professional services, and all hotel operations, including receipts and payments, were conducted through the assessee's bank account. The CIT(A) allowed the deduction, supporting the assessee's claim that the income was from business activities.3. Assessment of Hotel Income Under the Head 'Income from Business and Profession' Instead of 'Income from House Property':The Revenue argued that the hotel income should be assessed as 'Income from House Property' due to the lease agreement's terms. However, the assessee provided evidence that all statutory registrations, tax returns, and operational controls were in the assessee's name. The Tribunal referred to a similar case (Jai Mahal Hotel Pvt. Ltd.) where the income from a commercial asset exploited through a management agreement was considered business income. The Tribunal found that the assessee maintained control over hotel operations and complied with statutory requirements, thus concluding that the income was from business activities.Conclusion:The Tribunal upheld the CIT(A)'s decision, confirming that the income was from business operations and eligible for deduction under Section 80ID. The appeal by the Revenue was dismissed, and the hotel income was assessed under the head 'Income from Business and Profession.'Order:The appeal of the Revenue is dismissed. The order was pronounced in the Open Court on 21/02/2020.