TaxTMI 
TaxTMI 
2020 (4) TMI 783
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....ase & in law, the Ld. CIT(A) is not justified in directing the AO to assess the hotel income under the head income from business and profession instead of Income from House Property by ignoring the definition of 'business' provides in section 2(13) of the Act without considering the one of the agreement conditions whereby minimum guarantee fees would be received by the assessee." 3. The moot issue relates to disallowance the deduction claimed by the assessee u/s 80ID of the Income Tax Act, 1961 on the grounds that the 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. 4. The facts and arguments of the case in appeal are as under: The assessee has entered into an agreement with M/s Peppermint Hotels India (P) Ltd. (PHPL) as per which PHPL was to render professional services to the assessee for running the hotel as per copy of agreement enclosed in the paper book. That as per the agreement, the assessee was to pay Base Management Fee to PHIPL and further Incentive Management Fee after PHIP....
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....pert on or before the Opening Date, a disaster management plan/safety manuals which include details of the plans and procedures to be exercised in emergency situations aimed at reducing the loss of life and property. The details of the disaster management plan shall be specifically designed to adapt and comply with the requirements of the Hotel in an emergency situation and the Operator shall put in place policies aimed at ensuring that the employees of the Hotel are fully trained in accordance with the disaster management plan to handle emergency situations. Operator shall cause the Hotel to participate in and comply with all risk management, compliance and audit programs and procedures as applicable to the Hotel and generally similar to the ones adopted in other hotels owned or managed by the Operator. Operator shall always keep Owner indemnified from all risks and consequences including third party claims, all liabilities, civil, criminal or financial including all prosecutions arising out of any act of omission and commission by the Operator in execution, operation, management or supervision of the Hotel. 8. The Operator would ensure that at all times the Actual Expens....
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.... are received through the complex method of calculation of the same which has been camouflaged to show as business receipt." 8. The ld. DR concluded that what the assessee received was only the rental amounts for utilization of the property and compensation towards short fall in the gross operating profit. 9. On the other hand, the ld. AR argued that what PHPL providing is primarily in the nature of consultancy and professional services and it cannot be deemed that the entire operations have been relegated to PHPL. It was argued that all the receipts of the hotel from guests are credited to the bank account of the assessee, the cheques, credit cards and other receipts. All expenses are paid from the bank account in the name of the assessee. All sale invoices also reflect the name of the assessee. He relied on the Article 12 of the agreement which state that during the term of the agreement the hotel shall .....be known and designated as Peppermint Hotel, Gurgaon or such name selected by the owner from time to time... It was argued that the service tax registration, VAT registration, Labour department registration, PF registration and ESIC registration are all in the nam....
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....ercial asset was exploited by letting out the same to others. For this purpose it will have to be ascertained whether the business of the assessee was entirely closed or the letting out of the commercial asset for a temporary period was made for profitable mode of exploitation of the said commercial assets. The intention of the parties, either expressed or gathered from the circumstances may provide a guiding test in the matter. If in giving commercial assets of a business by way of a licence to other party, the intention of the licensorowner is to go out of the business altogether, it will not be assessable as income from business. But if the intention of the licensor-owner is to continue in the said business, the income would be assessable as income from business. Whether a particular letting is business has to be decided on the facts and circumstances of each case. Each case has to be looked at from the businessman's point of view to find out whether the letting was the exploitation of commercial assets in a more profitable manner or such a letting out of the commercial assets resulted in a permanent closure of assessee's business. 14. We will, therefor....
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....aranteed business profits whichever is higher as per the aforesaid clause. It is evident from the aforesaid clause that the appellant-company while ensuring minimum guaranteed business profits had also retained the right to receive 1 per cent share in the gross operating profit, if it is more than the minimum guaranteed business profit. The termination clauses authorises the appellant-company to terminate this agreement by giving 30 days notice of termination in a situation prescribed under cl. 14.1. The said agreement also provides that on the expiry of this agreement by efflux of time, the entire property including the immovable assets, fixed assets including electrical wiring, water services, sanitary fittings, all fittings attached to the building etc. introduced by the IHC will revert back to JMHL automatically without payment of any compensation whatsoever to IHC. These clauses indicate that the appellant company entered into a long-term business agreement with IHC to ensure that their hotel is managed and run in a profitable manner by a company which possesses rich experience in this line and which has an established name in the field of running five star h....