2015 (4) TMI 1274

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....in derived from hotel business to be eligible for deduction as the same is derived from "franchisee Business", because running a business under a franchisee agreement does not change its original character, nature & name of business and be called only a franchisee Business as the franchisee is only a method of doing any business to take the advantage of Brand Name. 2. That it is unjustified to say that income from Saloon section cannot be taken to be profit and gain derived from Hotel Business, because CIT (Appeal) in his order his accepted that Saloon is an integral part of star categories hotel like that of assessee. 3. That it is unjustified to say that the saloon activity is not specifically approved by the prescribed ....

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.... 80IB(7)(a) of the in respect of the related income too. During the assessment proceedings, AO allowed the claim of the assessee. However, on finding the rectifiable mistake the AO initiated rectification proceedings u/s 154 of the Act and passed an order dated 29.09.2009 denying the claim of deduction in respect of receipts from the said saloon activity. 3. The Ld. CIT (A) upheld the decision of the AO in the rectification order. The matter travelled to the Tribunal in the first round and the ITAT remanded the issue to the file of the Ld. CIT (A) for want of a speaking order. In the said speaking order dated 10.02.2011, the Ld. CIT (A) vide para 5.5.3 and para 6 of the impugned order held that the Saloon income of Rs. 4,00,563/- for A.Y....

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....deduction u/s 80IB(7)(a) of the Act, once granted in the initial year of the hotel business, the same cannot be denied in subsequent years. For this proposition he relied upon the basis of the Tribunal namely Aqua Plumbing Pvt. Ltd. 46 SOT 366 Agra and Tata Communication Internet Services Pvt. Ltd. ITA 4214/Del/2010 (Del). 6. On the other hand, Ld. DR for the revenue relied on the order of the Ld. CIT (A) and the rectification order of the AO. Shri Umesh Pathak, Ld. DR for the revenue submitted that the hotel in question was set up prior to March, 2001 and Saloon section started only the year 2006-07. For all the years i.e. prior to the A.Y. 2006-07, the hotel was running without Saloon section. In such circumstances the Saloon section c....

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....ssee. As discussed in the open court about the applicability of the ratio of the judgment of the Hon'ble Supreme Court in the case of Liberty India all the receipts of the undertaking is not eligible for deduction under the relevant provisions. It is the ratio of the Supreme Court in the case of Sterling Foods (supra) that the receipts, which has a direct nexus to the core business activity are only eligible for deduction. With the saloon section, which started functioning in the year 2005-06 only cannot be considered integral part of the hotel business activity of the assessee which started prior to March, 2001. In the given case the core activity of the hotel business include a hiring of rooms, halls, restaurant, bar etc. integral or core....