IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL, VICE PRESIDENT AND GARG,
SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER
ITA Nos.3433/Del/2011 & 3434/Del/2011
Years 2006- 2007-
Assessment Years : 2006-07 & 2007-08
Mrs. (Late) Raj Dulari Jethi, Vs. Income Tax Officer, Through L/H Shri Pradeep Nainital. Kumar Jethi,
C/o Hotel Shivraj,
PAN : AFSPJ8063M.
Appellant by : Shri Ashwani Taneja, FCA. Respondent by : Shri Priscilla Singsit, Sr.DR.
PER G.D.AGRAWAL, VP :
These appeals filed by the assessee are directed against the order dated 14th February, 2011 of learned CIT(A)-II, Dehradun for the AY 2006-07 & 2007-08.
2. The only common ground raised in these appeals by the assessee is against the disallowance of deduction under Section 80IC of the Income-tax Act, 1961.
3. At the time of hearing before us, it is stated by the learned counsel that the Assessing Officer disallowed the deduction under Section 80IC on the ground that the assessee's hotel is not environment friendly and does not qualify for deduction under Section 80IC. That, on appeal, the learned CIT(A) took the view that the assessee has fulfilled the requirement of promoting eco-tourism but, he sustained the disallowance on the ground that the assessee has not 2 ITA-3433 & 3434/Del/2011
started the new hotel during the year under consideration but, it only made substantial expansion. It is submitted by the learned counsel that this issue is also covered in favour of the assessee by the decision of ITAT in the case of M/s Anchal Hotels (P) Ltd. in ITA Nos.1800 & 1801/Del/2010 and 3637/Del/2011. In the said case, the ITAT, vide order dated 7th October, 2011, has held that the assessee would be entitled to claim deduction under Section 80IC even on substantial expansion. He, therefore, submitted that the appeals of the assessee should be allowed.
4. The learned DR, on the other hand, relied upon the order of the Assessing Officer.
5. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the Assessing Officer disallowed the deduction under Section 80IC on the ground that the activities of the assessee's hotel are not environment friendly and, therefore, it does not qualify for deduction under Section 80IC of the Act. The learned CIT(A) did not agree with this finding of the Assessing Officer but, he sustained the disallowance on some other ground. It would be evident from the following finding of the CIT(A):-
"7. The appellant, as stated above, would have been allowed the claimed deduction only if it was a new hotel which is the primary condition specified in clause (b) of sub section (2) of section 80-IC which mandates that the operation of the hotel specified in the Fourteenth Schedule should have begun on the 7th day of January, 2003 and ending before the 1st day of April, 2012 in the State of Himachal Pradesh or the State of Uttaranchal. The hotel of the appellant happens to be an old hotel and in terms of sub-clause (ii) of clause (b) of sub-section (2) of section 80- 3 ITA-3433 & 3434/Del/2011
IC is not entitled to claim the deduction specified u/s 80-IC. To sum up, the disallowance made by the AO on the ground that the hotel does not fulfill the requirements of promoting Eco-tourism etc. is not based on the correct understanding of what Eco-tourism including hotels connotes and the same has now been decided by the Hon'ble ITAT Delhi Bench in Shri Bidhi Chand Singhal vs. ITO in ITA No.3419/Del/2009 which is respectfully followed and the deduction would have certainly been directed to be allowed had the hotel been established or had it commenced its operations beginning from the previous year relevant to A.Y. 2004-05 and undertaken substantial expansion between 07.01.03 and 31.03.2012. The deduction is, therefore, not allowed because the hotel had already commenced its operations before the F.Y. 2003-04. The deduction is thus available only to a new hotel. The disallowance made by the AO is, therefore, upheld albeit on a separate ground that the hotel was an old one. The hotel has though undertaken substantial expansion during the specified period but it has not commenced its operations in F.Y. 2003-04. The conditions are cumulative."
6. The Revenue is not in appeal against the order of the learned CIT(A). Therefore, the limited issue in these appeals before us which remains to be considered is whether the sustenance of disallowance by the CIT(A) on the ground that the assessee did not commence its operations in the period specified under Section 80IC is justified. The learned CIT(A) has categorically recorded a finding that the assessee had undertaken substantial expansion during the aforesaid period. However, in his opinion, the assessee is entitled to deduction under Section 80IC only if the assessee commences its operations during the 4 ITA-3433 & 3434/Del/2011
specified period and not when there was a substantial expansion during the specified period. We find that the ITAT Delhi Bench has considered the identical issue in the case of M/s Anchal Hotels (P) Ltd. (supra), wherein the ITAT held as under:-
"4. We have considered the provision in so far as it is applicable to the facts of the case. In terms of section 80- IC(2)(b), the deduction is admissible if the hotel commences the operation within the period mentioned in the statute. It is also admissible if the hotel commences any operation and undertakes substantial expansion during the period mentioned in the statute. It does appear to us that the words "commences any operation" are rather redundant for the reason that the deduction in such a case is admissible on the basis of language earlier employed in this provision. Therefore, in the case of an existing hotel, the deduction will be admissible if the substantial expansion takes place within the prescribed period. The interpretation sought to be placed by the ld.DR on this provision will lead to a situation where the deduction under the second part of the provision would be admissible only if commencement of operation and substantial expansion takes place within the statutory period. The deduction where the hotel commences any operation within the statutory period is admissible in any case on the basis of the language in the earlier part, therefore, the second part can only be a case where substantial expansion takes place during the statutory period. Accordingly, it is held that the condition mentioned in the aforesaid provision stands satisfied in this case."
5 ITA-3433 & 3434/Del/2011
7. No contrary decision is brought to our knowledge. In view of the above, we, respectfully following the above decision of ITAT, hold that the assessee would be entitled to deduction under Section 80IC of the Act if the substantial expansion had taken place within the prescribed period. In view of the above, we direct the Assessing Officer to allow deduction under Section 80IC to the assessee.
8. In the result, the appeals of the assessee are allowed. Decision pronounced in the open Court on 12th October, 2012.
Sd/- Sd/- (CHANDRA MOHAN GARG)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 12.10.2012
Copy forwarded to: -
1. Appellant : Mrs. (Late) Raj Dulari Jethi, Through L/H Shri Pradeep Kumar Jethi,
C/o Hotel Shivraj, The Mall, Nainital.
2. Respondent : Income Tax Officer,
5. DR, ITAT