TMI Blog2016 (1) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... uction once granted cannot be re-examined in the succeeding assessment years. However, in the assessee’s own case the claim of deduction by the assessee had been examined in the AY 2006-07 and accepted by the Revenue, therefore, it was incumbent upon the Revenue to allow such claim in the succeeding assessment years. - Decided in favour of assessee Subsidy received from the Government under the Central Capital Investment Subsidy Scheme 2003 - revenue receipt v/s capital receipt - Held that:- We are in agreement with the contention of the Ld. Counsel that the issue is squarely covered by the High Court of J&K in the case of Shri Balaji Alloys vs. CIT reported in [2011 (1) TMI 394 - Jammu and Kashmir High Court ] wherein it was held that “the finding of the Tribunal on the first issue that the Excise Duty Refund, Interest Subsidy and Insurance Subsidy were Production Incentives, hence, revenue Receipt, cannot be sustained, being against the law laid down by Hon’ble Supreme Court of India in Sahney Steel & Press Works Ltd.’s case reported in [1997 (9) TMI 3 - SUPREME Court ] and CIT vs. Ponni Sugars & Chemicals Ltd. reported in [2008 (9) TMI 14 - SUPREME COURT ]. The finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard has not been denied to it. 4. That the order of the ld. CIT(A) be set aside and that of the AO be restored. 3. The grounds raised in the Assessee s Appeal No. 2417/Del/2013 (AY 2010-11) read as under:- 1 That the learned Commissioner of Income Tax (Appeals)-I, Dehradun has grossly erred both in law and on facts in holding that subsidy of ₹ 29,23,251/- received by the appellant from the Government under the Central Capital Investment Subsidy Scheme, 2003 was revenue receipt and not capital receipt and hence not assessable to tax. 1.1 That finding of the learned Commissioner of Income Tax (Appeals) that since the subsidy was received after commencement of production and there was no requirement that the amount had to be .used to acquire new plant and machinery for further expansion of its manufacturing capacity and as such incentive was given not for making investment but for doing business and therefore the same is of revenue nature is based on misconception of facts, provisions of law and hence unsustainable. 1.2 That the learned Commissioner oflncome Tax (Appeals) has misconstrued the judgments of Apex Court in the case of CIT vs. P.J. Chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts i.e. cash book, ledger, copies of bank statements and bills and vouchers of expenses produced which have been examined on test check basis. The Assessee s Authorised Representative has filed the written submissions and requisite details during the course of assessment proceedings which were duly considered by the Assessing Officer. 5.1 The assessee, is a partnership firm, under the name and style of M/s Vasundhara Palace Hotels at Tapovan, Tehri Garhwal. The assessee claimed deduction u/s. 80IC of the I.T. Act, 1971 from the AY 2007-08 and this the third year for claiming deduction u/s. 80IC of the I.T. Act, 1961. This deduction was claimed under clause 15, Eco Tourism including hotels, resorts, spa, entertainment/ amusement parks and ropeways of Schedule Fourteenths of the I.T. Act, 1961. The AO held that since the assessee s hotel has not been granted NOC from the Pollution Control Department, therefore, the assessee is not eligible for deduction u/s. 80IC amounting to ₹ 33,09,393/- and accordingly, the AO completed the assessment on a total income of ₹ 33,09,393 (including inform of ₹ 2,120/- after disallowing deduction u/s. 80IC amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 22.11.2012 for F.Y. 2012-13. Copy of consent letter has also been enclosed. All documents are being submitted for your kind perusal. 9. On the contrary, Ld. Counsel for the Assessee has relied upon the order of the Ld. CIT(A). He filed two Papers Books one is containing pages 1 to 163 having the details of copy of computation of income alongwith audited financial statement for the FY 2008-09; copy of replies filed before the AO alongwith its enclosures; copy of decision of the Delhi Bench, ITAT in the case of Shri Bidhi Chand Singhal vs. ITO in ITA No. 3419/D/2009 AY 2006-07 etc. and in Anchal Hotels (P) Ltd. vs. ACIT vide order dated 7.10.2011 in ITA No. 1800 1801/D/2010 for AY 2005-06 to 2006-07 and ITA No. 3637/D/2011 (AY 2007-08) wherein the Tribunal followed the decision of the Coordinate Bench in the case of Shri Bidhi Chand Singhal vs. ITO (Supra) and decided the issue in favour of the assessee. The Second Paper Book containing the pages 164 to 254 having the copy of notification issued by the Govt. of India, Ministry of Commerce and Industry; Copy of letter from Directorate of Industries, Uttranchal; copy of submission filed before CIT(A) for AY 2009-10 and copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly supports the claim of the assessee and as such the assessee is entitled to deduction. Moreover, in any case, that once there is no violation of pollution norms even otherwise there remains no justification to allege that, assessee is not eligible for deduction. In fact, it has not even been show that assessee was required to specifically obtain certificate from Pollution Control Board, or which has been obtained by other hotel and, not by the assessee. Therefore, he requested that the claim of the deduction of ₹ 33,07,273/- and ₹ 48,90,836/- u/s. 80IC of the Act for Asstt. Years 2009-10 2010-11 be allowed and the Appeals filed by the Revenue may kindly be dismissed. 10. We have heard the both parties and perused and considered the relevant records available with us especially the impugned orders passed by the Revenue Authorities; submissions of both the parties; and the case laws referred hereinabove. We find that Ld. First Appellate Authority has elaborately discussed the issue in dispute by considering the submissions of the Ld. Counsel of the assessee and adjudicated the issue in dispute as under:- 1.1 Before going into the facts and circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel forms part of an ecotourism project or constitutes an ecotourism unit by itself, it would not qualify for the said deduction. According to him, the assessee's hotel did not satisfy this benchmark. Without prejudice to that, he observed that the assessee did not have NOC from the Pollution Control Board of Uttarakhand. The dispute is centered on the nature and scope of the abovementioned Entry at SI. No. 15 (Schedule-XIV, Part C). 1.3 The assessee s submission in support of its contention that it is eligible for the deduction in question is summarized below:- I. The deduction forms part of the package of fiscal incentives given by the Central Government for economic development of and creation of employment in Uttarakhand. Such incentive provisions need to be interpreted liberally. (Reliance has been placed on a number of decisions of the ITA T and Courts of law in support of this contention). II. The term 'ecotourism' has not been defined anywhere in the Income Tax Act nor have its parameters been notified elsewhere. If two interpretations of the term are possible, the one which is favourable to the tax payer should be preferred. (Reliance has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ople, directly and indirectly, in substantial number. VII. Receiving NOC from the Pollution Control Board is not an essential condition for setting up or operation of a hotel in the state of Uttarakhand. A person interested in setting up a hotel has to apply for registration under the Sarai Act which is granted by the District Administration after getting clearances from the following departments/agencies: a. Local Police b. Fire Department c. Tehsildar d. Tourism Department e. Chief Medical Officer The assessee is duly registered under the Sarai Act. Since this is the statutory frame-work under which the assessee is operating, the condition that it must have NOC from the Pollution Control Board would be an extraneous consideration. In any case, the condition is totally irrelevant for the present purpose since the Income tax Act does not impose any such condition for grant of deduction u/s 8OIC. VIII. The ITAT (Delhi and Chandigarh benches), in the following decisions, have categorically held that a hotel is eligible for the deduction: A. Bidhi Chand Singhal vs. ITO (ITA No.3419/Del/2009, dated 04.11.2010) B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.4 The argument that, when 'Capital Investment Subsidy' and deduction u/s 8O-IC are part of the same package of fiscal incentives and the former is being given without any fuss (of the kind made by the AO), the latter should also be given in the same manner, is appreciated. But, if it is established, by independent analysis, that the deduction is not deserved, it could be said that it is the subsidy which was given wrongly. Hence, the fact of subsidy being given may be a relevant consideration while deciding whether the deduction should be allowed or not. But, it cannot be the deciding factor. 1.4.5 Consistency in assessment is desirable. But, simply because a deduction was allowed to an assessee in the past, it cannot be said that the claim was correct. The AO makes assessment but he cannot challenge his own order. Hence, if, by default, he has allowed the assessee's claim for deduction in the past, he should not be prevented from correcting that error at least in subsequent assessments. It is more appropriate to correct an error than to allow it to perpetuate and thereby cause recurring damage. If, on merits, the AO's action is correct, the fact that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment for industrial development, improve availability of capital and increase market access to provide a fillip to the private investment in the state. 3. Accordingly, it has been decided to provide the following package of incentives for the states of Uttranchal and Himachal Pradesh. It contains list of the following fiscal incentives: I. 100% outright excise duty exemption for a period of 10 years from the date of commencement of commercial production. II. 100% income tax exemption for initial period of five years and thereafter 30% for companies and 25% for other than companies for a further period of five years from the date of commencement of commercial production. Ill. Capital investment subsidy @ 15% of the investment in plant machinery, subject to a ceiling of RS.30 lakh. Introduction of section 80lC to the Income tax Act was in pursuance of this declared policy. The 'Thrust Sector Industries' listed at Annexure-I! to the OM are found listed at Schedule- XIV, Part C) of the Income tax Act. The entry at SI.No.15 in both these lists is substantially the same, though there is a minor variation in the manner it is presented in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able tourism was defined in the 1992 Agenda 21 for the Travel and Tourism Industry as tourism that meets the needs of present tourists and host regions while protecting and enhancing opportunities for the future. While nature-based tourism simply improves travel to natural places, ecotourism is a type of naturebased tourism that benefits local communities and destinations environmentally, culturally and economically. Ecotourism represents a set of principles that have been successfully implemented in various global communities, and are supported by extensive industry and academic research. Ecotourism, when properly executed based on these principles, exemplifies the benefits of socially and environmentally sound tourism development. Ecotourism is about uniting conservation, communities, and sustainable travel. This means that those who implement and participate in ecotourism activities should follow the following ecotourism principles: Minimize impact. Build environmental and cultural awareness and respect. Provide positive experiences for both visitors and hosts. Provide direct financial benefits for conservation. provide financial benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... healing and rejuvenation Shopping festivals Traditional fairs and festivals Business travel. The paragraph dealing with 'ecotourism' reads as below: India is a region of the world's greatest bio-diversity, with a variety of unique natural locales, and is therefore, a perfect candidate for eco-tourism. In this context, ecotourism should be made a priority tourism product for India with the focal points located in the Himalayas, North-Eastern states, Western Ghats, Jharkhand, Andaman Nicobar Islands, and the Lakshdweep Islands. Tour operators need to be encouraged to promote eco-tourism, which should also be made a grassroots, community based movement, through awareness, education and training of the local community as guides and interpreters. 1.10 The Ministry of Tourism, Government of India has been publishing its Annual Reports containing initiatives taken by it year after year. The Annual Report for 2010-11 contains Chapter 4.7, dealing with Sustainable Tourism/Eco Tourism . It begins with the following assertion: Ministry of Tourism in its initiative to achieve Sustainable Tourism growth is in the process of evolvin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... habitants and attempt to minimize such conflicts . :. The type and scale of eco-tourism development should be compatible with the environment and sociocultural characteristics of the local community; and .:. It should be planned as a part of the overall area development strategy, guided by an integrated land-use plan while avoiding inter-sectoral conflicts and ensuring sectoral integration associated with commensurate expansion of public services . It discusses Eco - Friendly Measures to be Adopted by the Hotels as below: The Ministry of Tourism has laid down guidelines for approval of Hotel Projects at the implementation stage and also guidelines for classification of operational hotels under various categories. As per these guidelines, hotels at the project stage itself are required to incorporate various eco-friendly measures like sewage treatment plant (STP), rain water harvesting system, waste management system, etc. Once the hotel is operational, it can apply for classification under a Star category to the Hotel Restaurant Approval Classification Committee (HRACC) of the Ministry. During the physical inspection of the hotel by the HRACC Committee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural beauty without damaging the environment and, in the process, supporting the local community has been recognized and incorporated as such in the policy of the Central Government. It is, however, noticed that the standards for ecotourism have not been codified. The Central Government laid down Eco - Friendly Measures to be Adopted by the Hotels during the period 2011-12. But, that is a general requirement; it does not make a hotel a unit/project of 'ecotourism'. The Sustainable Tourism Criteria have been finalized at late as the financial year 2011-12. It is not known whether they have been adopted yet. This shows that, during the relevant previous year, there was no authoritative and objective basis to determine which hotel was satisfying the standards of ecotourism and which not. In fact, such a basis does not seem to exist even today. It is, therefore, a situation where fiscal incentive in the form of deduction u/s 8OIC of the I.T.Act was given in law but the basis for determining the beneficiaries objectively and authoritatively remained to be done. Ecotourism appears to have been more of a vision than a concrete action plan. 1.13 Thus, the factual position i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fted and the subject falls in the notification, then full play should be given to it calls for a wider and liberal construction .... (Page-95) Even through a liberal interpretation has to be given to a beneficial provision the interpretation has to be as per the wording of the section. If the wording of a section is clear, then benefits which are not available cannot be conferred by ignoring or misinterpreting words in the section .... (Page-96) In CIT v Sundaram Iyengar Sons (P) Ltd (TV), the Supreme Court warned that where the language of the statute is clear and unambiguous and two interpretations are not reasonably possible, the court should not discard the plain meaning of the words in order to meet a possible injustice .... (Page-99) Technical Words must have their technical sense ascribed to them and not their popular sense uti loquitor vulgus. The principal is of cogency when the words in question represent legal conceptions .... (Page-117) The plain and unambiguous meaning of the statute should not be sought to be altered by the construction sought to be put on it. If the legislature willfully omits to incorporate something of an analogous law in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim under an exception must brings themselves within its terms. Second, exemption laws are in derogation of equal rights. Third, tax being the sole means by which the state can maintain itself, any claim on the part of anyone to be exempt from the payment of his full share of taxes on any portion of his property must on that account be clearly defined and founded on plain language. These principles of construction apply as much to deduction , as to exemption since the net result in either case is immunity from taxation .... (Page-176) There is no justification for the view that the exemption provision should be construed with some latitude or even wider connotation, because exemption is an exception to general rule and is opposed to the natural tenor of the statute. But at the same time, the courts have held that in the case of incentives provisions, the law has to be interpreted in the manner it effectuates the purpose of the incentive. But where the words are unequivocal, they cannot be stretched, so as to confer a benefit of exemption. (Page-177): 1.15 It has been held in many cases that, if there is no machinery section in order to operationalize a charging sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjective considerations, anyone can claim the deduction and no one may get it. Uncertainty in taxation is the least desirable thing. The Legislature may consider laying down the criteria for 'ecotourism' for purposes of deduction u/s BO-IC or lay down the same for general regulatory purposes and apply the same for purposes of Income tax as well. It may also consider applying such criteria with retrospective effect and grant deduction to those who are found to be satisfying the same. But, unless that happens, it may not be appropriate for Income tax authority to either accept or reject the claim of deduction on the basis of his own understanding of the term 'ecotourism'. The assessee's claim should fail simply because there is no basis on which it can succeed. 1.17 A short discussion on the hotel business may also not be out of place. Hotel is a business of providing boarding and lodging to travelers. This business may go with or without ecotourism. In fact, it may go even without tourism altogether. The term used in Schedule- XIV (Part-C, Entry 15) is 'Eco-tourism including hotels ... . An interpretation of this term which conveys that it means busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it need not be denied the benefit simply because it does not have the said NOC. A hotel without the NOC does not cease to be a hotel. So many other thrust industries are enjoying the benefit of deduction u/s 8OIC; NOC from Pollution Control Board is not a relevant consideration for that purpose. There does not appear to be any special reason why it should be so in the case of this sector alone. In other words, whether the deduction is to be allowed or not has to be decided in the light of whether the assessee satisfies the conditions of the Income tax Act (and not whether it has got the said NOC). 1.19 In my considered view, making the deduction contingent upon a valid license or the NOC shifts the focus of debate from the real question, i.e. when authoritative parameters to regulate ecotourism and to operationalise the deduction u/s 8O-IC don't exist, can the deduction be allowed to a hotel at all? Courts have held that taxing statute should be interpreted as it exists. Devising criteria and to judge the eligibility of a taxpayer on the basis of such criteria is not permissible for an income tax authority. 1.20 It is also noted that there is a crucial difference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment. Incentives have been given by it to hotels, treating the latter as 'tourism units', not as 'ecotourism units'. That may also explain, to a great extent, why 'ecotourism' has not received adequate attention from the State Government. But, for the same reason, it will not be appropriate to be guided by the policy and programmes of the State Government while interpreting and applying the provision of the Income tax Act. 1.22 At this stage, it would be apposite to refer to the decision of the Hon'ble ITAT in the case of Bidhi Ch and Singhal (supra). The relevant part of the same reads as below: From the above section and item no.15 of part C of the Fourteenth Schedule, it can be observed that what is eligible for deduction is eco-tourism which includes inter alia hotels. It has been the contention of the assessee that his hotel is approved by the Government. The hotel cannot be approved by the Government without obtaining No Objection from the Pollution Department. There is no material on record to show that Pollution Department of the Government has not given No Objection to the assessee. If it is so, then, it cannot be said that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gest that licences were issued to those assessees on the basis of the said NOCs. It appears that it was assumed by the Hon. ITAT that, if the hotel had a valid license, it would have the said NOC. Since the facts and circumstances of this case are the same and this case has to be decided by applying the ratio of the IT AT decisions in those cases, the same treatment should be given to this assessee also. Further, the Hon. IT AT observed that there was no material on record to show that Pollution Department of the Government had not given No Objection to the assessee and, hence, it could not be said that the assessee was running a hotel which was outside the norms prescribed by the Pollution Department. In this case also, there is nothing on record to show that the Pollution Control Board has denied NOC to the assessee and, hence, by that reasoning, it cannot be said that the assessee is running a hotel which is outside the norms prescribed by the Pollution Department. The term Pollution Department of the Government has not given No Objection to the assessee means that it has denied the NOC. The denial could be on consideration of an assessee's application or by way of suo mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have the NOC, the deduction should not be allowed to it. But, on a deeper appreciation of the facts and circumstances as well as the provision of law, I am of the view that, if the ratio of the decisions of the Hon. IT AT is applied properly, deduction should not be denied simply because the assessee is unable to show that it has the NOC from the Pollution Control Board. The AO is directed to allow the deduction. 1.26 The assessee has also challenged the charging of interest u/s 234B and 234D of the I.T. Act by the AO. Charging of interest under these sections, if the requisite circumstances exist, is mandatory. But, if the tax liability changes, the interest liability would also change correspondingly. The AO is directed to do the needful in the matter. For statistical purposes, the appeal is treated as allowed. 10.1 In the background of the aforesaid detailed discussions by the Ld. CIT(A) in his impugned order, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has decided the issue in dispute in favor of the assessee by holding after appreciating the evidence filed by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has stated that AO has not disputed that no subsidy received in the instant year. He has in fact held that the assessee had received subsidy of ₹ 29,23,251/- under 15 percent Central Investment Subsidy Scheme as on 19.2.2007 which has shown by the assessee in its balance sheet and reflected as Capital Subsidy at ₹ 29,23,251/- He further stated that in other words, subsidy was received in AY 2007-08 and, not instant year. It was also stated before us by him that the AO held the same to revenue in nature since the subsidy received for capital purposes has now acquired the nature of revenue receipt being it is not used for acquiring the assets in the business and it is used by the assessee for smooth functioning of business. To support this view, he filed the following evidences:- i) Registration dated 18.8.2006 under Central Capital Investment Subsidy Scheme 2003. ii) Copy of Notification issued by the Govt. of India, Ministry of Commerce Industry. iii) Copy of approval dated 19.2.2007 from Directorate of Industries, Uttranchal in respect of 15 percent Central Investment Subsidy Scheme. Finally, Ld. Counsel for the assessee stated that the issue in dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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