TaxTMI 
TaxTMI 
TaxTMI 
2018 (3) TMI 1081
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....aised in all the appeals is as to whether the assessee who is engaged in running of a hotel is entitled to deduction u/s 80IC of the Income-tax Act, 1961 (in short 'the Act') on account of substantial expansion of the unit. For the sake of convenience, ITA No. 374/Chd/2017 for assessment year 2007-08 is taken, as the lead case for discussion of facts. 3. The brief facts of the case are that the assessee, a private limited company is running a hotel at Kala Amb under the name of 'Black Mango Hotel' in District Simour in the State of Himachal Pradesh. During the year under consideration, the assessee company claimed deduction @ 100% of the net profits u/s 80IC of the Act on account of substantial expansion of the unit claimed to be c....
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....o. Activity or article or thing or operation 4/6 digit excise classification Sub-class under NIC classification on1998 ITC (HS) Classification 4/6 digit 1. ............. 15 Eco-tourism including hotels, resorts, spa, entertainment / amusement parts and ropeways - 55101 ......... 4. A perusal of the above provisions reveals that these are special provisions for promotion of certain class of industry in the specific states of Himachal Pradesh and Uttaranchal. The deductions under the provisions of section 80IC of the Act is admissible to an undertaking who has begun or begins to manufacture or produce any article or thing, as specified in XIV schedule or c....
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....0% of the book value. He observed that the expansion in the hotel building, furniture and equipment did not constitute expansion in the plant and machinery. He referring to the definition of 'plant' given u/s 43(3) of the Act, observed that plant excluded building, furniture and fittings. He also referred to the decision of the Hon'ble Supreme Court in the case of 'CIT Vs. Anand Theatres' (2000) 244 ITR 192 (SC) and 'CIT Vs. Abad Hotels India Pvt Ltd' (2000) 119 Taxman 429 (SC) and held that building could not be considered as plant and, therefore, the same would not be a part of the substantial expansion as defined in sub section (8) of section 80IC of the Act. He, therefore, denied the benefit of deduction under the provisions of sect....
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..... 9. The Ld. Counsel for the assessee has relied upon the findings of the Hon'ble Supreme court in the case of 'CIT Vs. Anand Theatres' (supra) wherein the question before the Hon'ble Supreme Court was whether building which was used as a hotel or a cinema theatre could be given depreciation as 'plant'. The Hon'ble Supreme Court referred to the definition of 'plant' as provided u/s 43(3) of the I.T. Act and held that as per the scheme of section 32, separate rate of depreciation for building, machinery and plant, furniture and fittings etc. was provided. The definition of plant was provided u/s 43(3) which nowhere included buildings. That there was different rate of depreciation for each asset and further that for a building us....
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....dertake substantial expansion during the said stipulated period if set up in the special category of States including state of Himachal Pradesh. In our humble view, when a unit like a hotel is established in the special category of states whose main investment is on building, which has been so planned and constructed to serve the assessee's special technical requirements of hotel/ hospitality services including the investment on furniture and fixtures, so specially required for carrying out such activity, and is eligible for deduction on its commencement of activity u/s 80IC of the Act, then under such circumstances, for the purpose of the meaning of 'substantial expansion' the expansion in such building, furniture and fixtures would consti....
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....ise does not involve installation of plant and machinery. If the original investment made for setting up of such unit is eligible for deduction u/s 80IC of the Act, then certainly the further investment in the same infrastructure for the purpose of expansion cannot be denied, merely because the investment does not involve setting up / installment of plant and machinery. Any other or strict definition of word 'substantial expansion' in our view, would defeat purpose for which the special provisions under the section 80IC of the Act have been made. We, therefore, hold that the restrictive meaning given by the lower authorities to deny the deduction u/s 80IC of the Act to the assessee on account of substantial expansion cannot be held to be ju....