TMI Blog2016 (3) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2008-09 and 2010-11. - Decided in favour of assessee - ITA Nos. 240-242/Coch/2015 - - - Dated:- 1-3-2016 - B. P. Jain, AM And George George K, JM For the Appellant : Shri Balakrishnan K, CA For the Respondent : Shri Shantam Bose, CIT(DR) Shri K P Gopakumar, Sr. DR ORDER Per Bench These three appeals at the instance of the assessee are directed against the two orders of the CIT(A) both dated 20/10/2015. The relevant assessment years are 2007-08, 2008-09 and 2010-11. 2. Since common issues are involved in these appeals and they pertain to the same assessee, these appeals were heard together and are being disposed of by this consolidated order. 3. Identical grounds are raised in these appeals, hence, the grounds relating to the assessment year 2007-08 are reproduced below: 1. On the facts and circumstances of the case and considering the provisions in law, the learned Commissioner of Income-tax(Appeals)-I ( CIT(A) while considering the claim of the Assessee for deduction u/s. 80IB(7) (a) of the Income Tax Act, 1961 ( Act ) has erred in disallowing the receipts earned by the Assessee under various heads of income which have a direct ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. With regard to the exclusion of other income for the purpose of calculating deduction u/s. 80IB(7)(a), the CIT(A) confirmed the assessment order. 7. Aggrieved by the CIT(A)'s order, the assessee is in appeal before us. The assessee has filed three sets of paper books for each of the assessment years, inter alia, containing computation statements, balance sheet and various judicial pronouncements. The Ld. Counsel for the assessee reiterated the submissions made before the first appellate authority. 8. The Ld. DR on the other hand submitted that the income is enumerated as 'other income' does not have direct nexus with the running of the hotel. It was submitted that in view of the judgment of the Apex Court in the case of CIT vs. Sterling Foods reported in 104 Taxman 204, the assessee is not entitled to the benefit of 80IB(7)(a) of the Act in respect of various receipts mentioned as other income . 9. We have heard the rival contentions and perused the material on record. The following issues arise for our consideration, namely:- i) Whether the CIT(A) is justified in disallowing the entire amount of other income derived from the business of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the I.T. Act. The Assessing Officer for the assessment year completed u/s. 143(3) r.w.s. 147 of the Act disallowing the claim of the assessee for the reason that 'other income' earned by the assessee is only incidental and does not have direct nexus with the business of the assessee company. The CIT(A) further held that though other income appears to have arisen from business and its related activities of the assessee, it cannot be said to have been derived from business of Hotel. 9.2 As regards the CIT(A)'s inclusion of interest income on FD from SIB amounting to ₹ 2,37,410/- for the purpose of denial of deduction u/s. 80IB(7)(a) of the Act, according to us, is misconceived because the assessee company itself had offered the same to tax. This is evident from the computation of total income for the relevant assessment year which is enclosed as Annexure A to the paper book filed for the assessment year 2007-08. When the assessee itself has added back the amount to the P L a/c, the CIT(A) is not justified in including the same under the head other income for the purpose of denying deduction u/s. 80IB(7)(a) of the Act. It is ordered accordingly. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Xxx II) Food and beverages Xxx III) Other operated departments Xxx IV) Rentals and other income Xxx Food and Beverages revenue shall include the following:- Particulars Amount Food and Beverage Revenue: Outlet Food Revenue Xxx Outlet Beverage Revenue Xxx In-Room Dining Food Revenue Xxx In-Room Dining Beverage Revenue Xxx Banquet/Catering Food Revenue Xxx Banquet/Catering Beverage Revenue Xxx Mini Bar Food Revenue Xxx Mini Bar Beverage Revenue Xxx Other Food Revenue Xxx Other Beverage Revenue Xxx Less:Allowances (xxx) Rentals and other incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue generation category of Club use revenue. Further the sale of used packing materials, recovery of material damage from staff etc. will fall within the key revenue category of 'Disposal of empties/sale of scrap' as per the ICAI guidelines. Thus it can be seen that the other income earned by the assessee company would fall within the ambit of key revenue generating activity in case of a hotel industry and, accordingly, has a direct nexus with the hotel business of the undertaking. 9.8 The Assessing Officer has disallowed the deduction u/s. 80-IB(7)(a) of the Act towards 'other income' on the contention that, the assessee in the books of account has termed it as Other Income and, accordingly, the same is not derived from the business of the assessee. The Hon'ble Supreme Court of India in the case of Kedarnath Jute Mfg. Co. Ltd. vs. CIT (82 ITR 363) has held that, Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of its right nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, the following income which has been classified as 'other income' in the books of account:- i) Rent received from Heritage Shop. ii) Rent received for the space and amenities given to Kumarakom Water Transport Pvt. Ltd. iii) Revenue from staff mess used by guest drivers. iv) Revenue from telephone used by staff. v) Income from club cultural programs/DJ etc. vi) Income from sale of used packing materials, recovery of material damage from staff etc. would qualify as income derived from specified business considering the fact that there is a direct nexus and a proximate connection with the business of the assessee. The 'other income' as mentioned above is not earned from a separate cost and profit centre, but is derived from the main profit centre of hotel industry itself. The source of the profits of the 'other income' as mentioned above continues to be the business profits from the hotel industry and there is no other commercial activity which is carried on by the assessee. 9.11 Moreover, section 80IB(7)(a) states that 50% of the profits and gains derived from the business of such Hotel. In this context also, it can be st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... staff mess used by the Guest drivers 88,825 4. Other Miscellaneous Income Income from sale of used packing materials, recovery of material damage from staff etc 85,279 5. Interest Received on Income Tax Refund Interest received on income tax Refund 69,209 Total 561,511 After examining the receipts for the assessment year 2007-08, we have held that the assessee is entitled to deduction u/s. 80IB(7)(a) of the Act. Similarly, in respect of 'other income' for AY's 2008-09 and 2010-11, except for interest income and interest on refund, the 'other income' enumerated above is entitled to the benefit of deduction u/s. 80IB(7)(a). Therefore, our findings and conclusions for the assessment year 2007-08 will hold good for the assessment year 2008-09 and 2010-11. It is ordered accordingly. 10. In the result, the appeals filed by the assessee are allowed. Pronounced in the open court on 1. 3. 2016. - - TaxTMI - TMITax - Income ..... 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