TaxTMI 
TaxTMI 
2021 (2) TMI 421
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....der the head income from business' in the computation of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the assessment of licence income earned under the head 'income from house property' was wrong, erroneous, unjustified, incorrect and not sustainable in law. 4. The CIT (Appeals) failed to appreciate that the misreading of the business structure of the Appellant as well as further misreading of the MOU would vitiate the decision rendered in sustaining the assessment of licence income under the head 'income from house property' and ought to have appreciated that the principles laid down by the Apex Court referred to in her appellate/impugned order were completely distorted while vitiating the tangential findings for sustaining the assessment of licence income under the head 'income from house property'. 5. The CIT(Appeals) failed to appreciate that the consistency of reporting of such income and the assessment of such income in the earlier assessment years was completely overlooked and brushed aside. 6. The CIT(Appeals) failed to appreciate that the entire computation of tax....
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.... the revenue has been shared in terms of percentage of gross revenues derived from running a hotel, the license fees does not include all the streams of revenue earned by M/s.Oriental Hotels Ltd. Therefore, he opined that income derived from licensing the hotel to Oriental Hotels Ltd., is nothing but rental income which is assessable under the head 'Income from House Property' and accordingly by following decision of ITAT, Cochin Bench in the case of Palmshore Hotels (P.) Ltd vs. ACIT, (2012) 28 taxmann.com 156, assessed the income derived from letting out hotel premises under the head 'Income from other sources'. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated its submissions made before the AO and argued that it has licensed a fully furnished five star hotel comprising of 125 guest rooms on revenue sharing basis and hence revenues derived from leasing, to run a hotel is assessable under the head 'Income from business or profession' but not under the head 'Income from house property', as considered by the ld.AO. The assessee further submitted that the decision relied upon by the AO in the....
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....erefore, license fee received for licensing hotel cannot be considered as rental income to be assessed under the head 'income from house property'. In this regard, he relied upon the decision of Hon'ble High Court of Kerala in the case of Palmshore Hotels (P.) Ltd., vs. CIT, (2017) 252 taxman 191 (Kerala). 6. The ld.DR, on the other hand strongly supporting order of the CIT(A) submitted that facts brought out by the authorities clearly indicate that the assessee has leased out hotel premises for an annual rental income which was quantified on the basis of percentage of gross revenue earned by the lessor M/s. Oriental Hotels Ltd., and hence, merely because the nomenclature was changed in the Memorandum of Understanding and license fees was determined in a different manner, the nature of income which is assessable under the head 'income from house property' cannot be changed to another head of income. 7 We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The solitary issue that came up for our consideration from the given facts and circumstance of the case is, whether license received for licensing a ho....
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....the objects of the assessee in determining the nature of income, to consider under which head such income is assessable. Further, after considering the facts of those case, the Hon'ble Supreme court came to the conclusion that if the main object of the assessee is letting out a premises on rent, then such income is assessable under the head 'income from business or profession'. In this case, on perusal of main objects of the assessee, which was extracted by the ld.AO in his order on page 3, we find that clause-3 of main object specifies that the assessee is engaged in the business of 'to build, make construct, purchase, equip, maintain and improve, alter lease and work, etc., which means the main objects clause of the assessee company permits constructing a hotel and leasing them on rent. Even on this count, the conclusion arrived at by the AO and the CIT(A) is contrary to the law laid down by the Hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. Be it as it may. But, the case of the assessee is squarely covered by the decision of the Hon'ble High Court of Kerala in the case of M/s.Palmshore Hotels (P) Ltd vs. CIT, supra, where the Hon'ble High Court of K....
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.... specifically provides that the membership of the hotel in the Federation of Hotel and Restaurant Association of India, Kerala Hotel and Restaurant Association etc. will be in the name of the licensor. Similarly, provision is also made to clarify that the provisions of the agreement shall not be construed as creating a partnership or joint venture or managing/selling agency or any other relationship except a licence. In Article XIV of the agreement, it is specifically provided that during the term of the agreement, the hotel shall be known as and designated by the logo and name Hotel Palmshore, which will be suffixed by the words "An Abad Beach Resort" -along with Abad logo. The provisions of the agreement also indicate that the licensor has the right of supervisory control in the manner in which the hotel is operated. All these, provisions of the agreement would, therefore, indicate that the licence that has been granted is that of a fully established running hotel authorising the licensee to operate the hotel for a specified period subject to the terms and conditions incorporated therein. Therefore, the license granted is that of a business. These facts would, therefore, clearly ....