Just a moment...

Report
FeedbackReport
Bars
Logo TaxTMI
>
×

By creating an account you can:

Feedback/Report an Error
Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
TMI Blog
Home / RSS

2008 (3) TMI 706

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ome of Rs. 10,01,320, which inter alia included a claim of deduction under s. 80-IA of the Act amounting to Rs. 4,29,135. The assessee is engaged in the business of running of a banquet hall/ marriage palace. In an assessment finalized on 20th Dec., 1999 under s. 143(3) of the Act, the deduction under s. 80-IA of the Act was restricted to Rs. 3,59,100 for the reason that miscellaneous incomes, hire charges and interest income etc. earned by the assessee were not found eligible for the s. 80-IA benefits. Subsequently the CIT acting under s. 263 of the Act cancelled the assessment on the ground that it was erroneous and prejudicial to the interests of the Revenue for it allowed s. 80-IA benefits to which the assessee was not eligible in view of a later judgment of the Supreme Court of India in the case of Indian Hotels Co. Ltd. vs. ITO (2000) 162 CTR (SC) 310: (2000) 245 ITR 538(SC). Consequently the AO framed a fresh assessment under s. 143(3) r/w s. 263 of the Act on 31st Dec., 2002 whereby the deduction allowed under s. 80-IA originally at Rs. 3,59,100 was also denied. Penalty proceedings under s. 271(1)(c) were also initiated by the AO. The AO vide order dt. 30th May, 2006 has he....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....he return for the assessment year under consideration and passing the original order on 20th Dec., 1999 there was diversion of opinion amongst different High Courts on the issue as to whether the hotel business was trading activity or business of manufacturing or production. The issue has been finally decided by the Hon'ble Supreme Court in the case of Indian Hotels (supra), which judgment was delivered much after on 20th Aug., 2000. Therefore, the contention of the appellant that the claim was made on the basis of a legal issue and that the penalty under s. 271(1)(c) cannot be imposed in respect of addition made on the basis of such legal issue, is not without force. The decision of Hotel Belle Vue (P) Ltd. vs. CIT (supra), which has been mentioned by the learned counsel was available at the time of filing of return and that as per this decision the hotel business was an industrial undertaking being engaged in the manufacturing of food stuff, etc. Therefore, in view of the settled position of law, I am inclined to agree with the learned counsel that penalty under s. 271(1)(c) could not be imposed in respect of addition made on the basis of legal issue. In view of the various d....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the meaning of s. 80-IA of the Act. It is further submitted that the CIT(A) has erred in deleting the penalty by relying on the case law which are not applicable to the facts of the present case. The learned Departmental Representative has relied upon the following decisions : (i) Sturdy Industries Ltd. vs. Asstt. CIT, of the Chandigarh Bench (ITA No. 833/Chd/2006, dt. 13th June, 2007); (ii) A.M. Shah & Co. vs. CIT (1998) 150 CTR (Guj) 1 : (1999) 238 ITR 415 (Guj); (iii) K.P. Madhusudhanan vs. CIT (2001) 169 CTR (SC) 489 : (2001) 251 ITR 99 (SC); (iv) Thirupathy Kumar Khemka & Anr. vs. CIT (2007) 210 CTR (Mad) 287: (2007) 291 ITR 122(Mad). 5. On the other hand the learned counsel for the respondent contended that the assessee had made a bona fide claim, in the original return of income on the basis of the judgment of the Hon'ble Gujarat High Court in the case of Hotel Belle Vue (P) Ltd. (supra) wherein it was held that the hotel business was an "industrial undertaking" being engaged in manufacture of foodstuff. It was pointed out that apart from scaling down the claim in relation to miscellaneous income etc. the AO in the original assessment proceedings has accepted th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ed to Rs. 3,59,100 in the assessment proceedings under s. 143(3) dt. 20th Dec., 1999 by denying the benefit in relation to miscellaneous income, etc. The nature of the business of the assessee is running of a banquet hall/marriage palace. The income thereof was, in principle, found to be eligible for the benefits under s. 80-IA by the AO in the original assessment proceedings. It was only subsequently after the CIT invoked his powers under s. 263 of the Act and held that the business of running of banquet hall/marriage palace would not qualify for relief under s. 80-IA that the AO by way of order dt. 31st Dec., 2002 has denied the entire deduction claimed by the assessee. The action of the CIT was guided by the judgment of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd. (supra) rendered on 20th Aug., 2000. At this stage a reference is necessary to the recent decision of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra). According to the Hon'ble apex Court in matters concerning 'concealment of income' and 'furnishing of inaccurate particulars' it is essential to infer deliberateness on the part of the assessee. According to ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... its own and therefore the assessee was in the knowledge that its business of running of banquet hall/marriage palace did not qualify for deduction under s. 80-IA of the Act. The learned Departmental Representative has also emphasized before us that the claim of the assessee was erroneous even in the absence of the Supreme Court decision in the case of Indian Hotels Co. Ltd. (supra) since the major income was by way of rental charges for the banquet hall/marriage palace. The Supreme Court decision applied only to the question whether preparing food packets and selling or preparing foodstuff for serving in a hotel could constitute manufacture or production whereas in the instant case the income of the assessee from catering of food was only incidental to the renting out of banquet hall/marriage palace. We have given our anxious thoughts to this issue. 8. The assertion of the assessee is that it relied upon the Gujarat High Court decision in the case of Hotel Belle Vue (P) Ltd. (supra) to stake a claim for deduction under s. 80-IA, which was available at the time of the filing of the return of income. We find that the said decision has been rendered on 7th Feb., 1996. The fact that ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

..... 271(1)(c) of the Act. In the result following the ratio of the judgment of the Supreme Court in the case of Dilip N. Shroff (supra) we find justification for the CIT(A) having deleted the penalty. 9. Another ground on which the penalty has been deleted by the CIT(A) is with reference to the judgment of the jurisdictional High Court in the cases of Manoj Ahuja (supra) and Deep Tools (P) Ltd. (supra). We have perused the said decisions and find that the reliance placed by the CIT(A) on these decisions is well founded. In the case of Deep Tools (P) Ltd. (supra) the issue related to penalty under s. 271(1)(c) of the Act levied with respect to denial of deduction under s. 80HHC of the Act. The facts found showed that the claim was made in the return of income on the basis of a certificate issued by the chartered accountant in accordance with s. 80HHC(4) of the Act and there was no collusion. Therefore the cancellation of penalty by the Tribunal under such circumstances was held justified. In the instant case apart from the fact that the claim of the assessee was based on the audit report of chartered accountant, it also emerges that such claim has been accepted by the AO himself duri....