TaxTMI 
TaxTMI 
2016 (1) TMI 368
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....t appreciating the fact that rejection of deduction u/s. 80IC(2) was not based just on failure 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 facts not to appreciate the fact that ecotourism is the condition 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 facts in holding that deduction should be allowed if the assessee satisfies the following conditions: a) It is a Hotel, b) It has a valid License, c) NOC from the Pollution Control Board has not been denied to it. 4. That the order of the ld. CIT(A) be set aside and that of the AO be restored." 3. The grounds raised in the Assessee's Appeal No. 2417/Del/2013 (AY 2010-11) read as under:- "1 That the learned Commissioner of Income Tax (Appeals)-I, Dehradun has grossly erred both in law and on facts in holding that subsidy of Rs. 29,23,251/- received by the appellant from the Government under the Central Capital Investment Subsidy Scheme, 2003 was revenue receipt and not capital rece....
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.... assessment year 2009-10. 5. The brief facts of the case are that the assessee filed its e-return on 11.9.2009 declaring total income of Rs. 2,120/- after claiming deduction u/s. 80IC(2) of the I.T. Act, 1961 amounting to Rs. 33,07,273/-. The case was selected for scrutiny through CASS. Accordingly, Notice u/s. 143(2) of the I.T. Act, 1961 dated 19.8.2010 was issued and served upon 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. cash book, ledger, copies of bank statements and bills and vouchers of expenses produced which have been examined on test check basis. The Assessee's Authorised Representative has filed the written submissions and requisite details during the course of assessment proceedings which were duly considered by the Assessing 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.....
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....essee filed the application for consent to operate its newly constructed hotel on 26.07.20106, to the office of Uttaranchal Environment Protection & Pollution Control 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 from 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 after deposit of requisite fee for all the financial years came between the aforesaid consent application dated 26.07.2006 and got the consent to operate vide letter dated 22.11.2012 for F.Y. 2012-13. Copy of consent letter has also been enclosed. All documents are being submitted for your kind perusal." 9. On the contrary, Ld. Counsel for the Assessee has relied upon the order of the Ld. CIT(A). He filed two Papers Books one is containing pages 1 to 163 having the details of copy of computation of income alongwith 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, ITAT in the case of Sh....
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....ng licence to operate hole. In fact in the case of Bidi Chand Singhal (Supra) for AY 2006-07) the Tribunal has held that there was no material on record to show that eco-tourism status has been granted to another 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 Himachal 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 eligible 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 assessee and as such the assessee is entitled to deduction. Moreover, in any case, that once there is no violation of pollution norms even otherwise there remains no justification to allege that, assessee is not eligible for deduction. In fact, it has not even been show that assessee was required to specifically obtain certificate from Pollution Control Board, or which has been obtained by other hotel and, not by the assessee. Therefore....
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....les/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 assessee'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 qualified by the main term 'ecotourism'. He referred to the concept of ecotourism and its various definitions and reached the conclusion that ecotourism involved travel to areas of natural 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 ecotourism project or constitutes an ecotourism unit by itself, it would not qualify for the said deduction. According to him, the assessee's hotel did not satisfy this benchmark. Without prejudice to that, he observed that the assessee did 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....
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.....01.2003 vide the same file number, which announced the package of incentives for Uttarakhand and other special category states. When the parameters are the same and hotels are getting Capital Investment Subsidy as hotels, there is no reason why different criteria should be adopted 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 facts and circumstances are the same, consistency requires that the benefit should be allowed now also. (Reliance has been placed on a number of decisions of the ITAT and Courts of law in support of this contention). VI. The assessee is observing various environment and pollution control norms and is also providing employment to local people, directly and indirectly, in substantial number. VII. Receiving NOC from the Pollution Control Board is not an essential condition for setting up or operation of a hotel in the state of Uttarakhand. A person interested in setting up a hotel has to apply for registration under the Sarai Act which is granted by the District Administration after getting clearances from the following departments/agen....
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....of the said entry in Schedule-XIV (Part-C, Entry 15) are possible and, if yes, whether the AO's interpretation of the AO and that of the assessee are equally appealing. 1.4.3 The proposition that, when the word 'includes' is used while defining a term in law, it has the effect of extending the normal meaning of the term so as to cover the other terms which may not normally be covered within its meaning but which are included within the definition, 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 contains a narration of the activity which is eligible 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 same package of fiscal incentives and the former is being given without any fuss (of the kind made by the AO), the latter should also be given in the same manner, is app....
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....ds 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 industrial sector will be worked out for the Special Category States including Uttranchal. The industries eligible for such incentives will be environment friendly with potential for local employment generation and use of local resources.' (emphasis added) 2. In pursuance of the above announcement, discussion on Strategy and Action Plan for Development of Industries and generation of employment in the states of Uttranchal and Himachal Pradesh were held with the various related Ministries/agencies on the issue, inter-alia, infrastructure, development, financial concessions and to provide easy market access, The new initiatives would provide the required incentives as well as an enabling environment for industrial development, improve availability 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 state....
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....tourism and other forms of sustainable travel have their origins with the environmental movement of the 1970s. Ecotourism itself did not become prevalent as a travel concept until the late 1980s. During that time, 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 as sustainable tourism and responsible tourism are rooted 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 that "meets the needs of present tourists and host regions while protecting and enhancing opportunities for the future." While "nature-based tourism" simply improves travel to natural places, ecotourism is a type of naturebased tourism that benefits....
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....and fair social order." (emphasis added) 1.9 This shows that even the National Tourism Policy recognizes that ecotourism is not simply tourism and its parameters are broader than even nature tourism. Chapter 3 of the Policy document deals with "Tourism Development Goals, Objectives and Strategies". One of the 'Key Objectives' is: Improving India's existing tourism products and expanding these to meet new market requirements". In 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. The paragraph dealing with 'ecotourism' reads as below: India is a region of the world's greatest bio-diversity,....
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....ess on maintenance of environmental integrity. Ecotourism (also known as ecological tourism) is responsible travel to fragile, pristine, and usually protected areas that strives to be low impact and (often) small scale. It purports to educate the traveler, provide funds for ecological conservation, directly benefit the economic development and political empowerment of local communities, and foster respect 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 principles 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 sociocultural characteristics of the local community; and ....
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....ndia. For evolving Sustainable Tourism Criteria for India and for development of indicators subsequently, the Global Sustainable Tourism Criteria developed by the Tourism Sustainability Council and other practices in the world were considered. The Ministry has since constituted a Steering Committee with representatives from all the sectors of the tourism and hospitality industry of India. The Steering Committee deliberated at length to formulate the Sustainable Tourism Criteria. The Committee has finalized the Sustainable Tourism Criteria and Indicators for the Hotel Sector and the Tour Operator 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 industry 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 of the Central Government. It is, ....
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....) In matter of tax relief it is for the legislature to decide where to given special benefits. It is not possible for the court to place an elastic interpretation and enlarge the scope of the provision .... (Page-94) In fact, an exemption provisions is like any exception 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 state revenue. But once exception or exemption becomes applicable no rule or principles requires it to be constructed strictly. Truly speaking liberal and strict constructions of an exemption provision are to be invoked at different stages of interpreting it. When the question is whether a subject falls in the notification 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 the notification, then full play should be given to it calls for a wider and liberal construction .... (Page-95) Even throug....
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....egislatures, and if no exemption is granted, it is a matter for the legislatures alone to deal with. Taxation 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 construed 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 enlarge 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 reasons underlie this construction: First exemption from taxation is an exception to the general rule that all property is liable to tax and consequently those whom claim under an exception must brings themselves within its terms. Second, exemption laws are in derogation of equal rights. Third, tax being the....
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.... the prescribed conditions, he cannot claim that he should still be allowed the benefit. These conditions lay down the rules of the game and, if these rules are not followed, it would become free-for-all, which cannot be permitted in law. It is also to be kept in 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-vis the other tax payers I. who had to satisfy the conditions for getting the 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 has satisfied such non-existent criteria. The environmental 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 t....
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.... used the term 'ecotourism including hotels ... ', it 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 also. 1.18 For running a hotel, the entrepreneur has to seek a license from the State Government; he has also to seek 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 from 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 assessee for the deduction, it would amount to rewriting the 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 for an income tax authority. On the other hand, if a hotel is considered to be eligible for the deduction otherwise, it need not be denied the benefit simply because it does not have the said NOC. A hotel without the NOC does not cease t....
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.... for related services and scope to develop niche markets, apart from traditional investment opportunities". (emphasis 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 allowed by the State Government under its Tourism Policy: I. Rebate/deferment facility in respect of luxury tax to new tourism units for a period of 5 years from the 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 III. Exemption from payment of entertainment tax to new amusement parks for a period of 5 years from the date of commencement It is noted that, even though the State Government recognizes that eco-tourism is a specialized kind of tourism, the incentives provided by it are to 'tourism'; not 'ecotourism'. In fact, it recognizes 'tourism' as a thrust industry as against 'Eco-tourism .... 'recognized as such by the Central Government. Incentives have been given by it to hotels, treating the latter as 'tourism units'....
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....ases 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 eligible for deduction u/s 8O-IC. It has been brought to my notice that, in the State of Uttarakhand, license to 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 basis 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 apply 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 Hotels (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 a....
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....o have been given for the past also. But, that question would 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 ratio of the decisions of the Hon. ITAT (supra) is that the 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 the assessee satisfied the following conditions: 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 Anchal Hotels (supra) that the assessee should be given the benefit of deduction u/s 80-IC of the ITAct. In this connection, it needs to be put on record that, while deciding an appeal earlier (Appeal No.27/HDR/2009-10: Mr. Sunder Lal Semwal: AY 2007-08), I had held that, if the assessee did not have the NOC, the deduction should not be allowed to it. But,....
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....ee deserves to succeed, since the revenue had accepted this claim even in the 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 Prakashan 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 Industries Ltd. 10.3 Respectfully following the precedents as aforesaid, we uphold the order of the Ld. CIT(A) on the issue of allowing the deduction Rs. 33,07,273/- and Rs. 48,90,836/- u/s. 80IC of the Act for Asstt. Years 2009-10 & 2010-11 respectively and dismiss both the Appeals filed by the Revenue. Assessee's Appeal No. 2417/Del/2013 (AY 2010-11) 11. With regard to ground no. 1 to 1.2 relating to subsidy received by the assessee from the Government under the Central Capital Investment Subsidy Scheme 2003 was revenue receipt and not capital receipt and hence, not assessable to tax. 11.1 On the issue in dispute Ld. Counsel for the assessee has stated tha....