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2017 (1) TMI 725 - BOMBAY HIGH COURT

2017 (1) TMI 725 - BOMBAY HIGH COURT - TMI - Disallowance under Section 37(5) - payments made to Welcome Group of hotels under the executive holiday plan whereunder the assessee booked accommodation for 366 days for use of its employee while on leave - Held that:- The insertion of sub-section (5) into section 37 was only to restrict the application of sub-section (4) of section 37 to lodging or boarding provided to any person when he is on a tour or a visit to a place. It does not cover use of t .....

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Therefore, sub-section 5 of Section 37 of the Act can have no application when the guest house is used as a holiday home as defined in second proviso to section 37(4) of the Act. - Tribunal was not correct in invoking sub-section 5 of Section 37 to deny the benefit of the second proviso to section 37(4) of the Act available to the applicant assessee. This is so as section 37(5) of the Act will not apply to the cases covered by the second proviso to section 37(4) of the Act. - Decided in favo .....

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uestions of law : Question of law in Income Tax Reference No.423 of 1999 :- Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the disallowance under Section 37(5) of ₹ 57,560/- made by the Assessing Officer in respect of payments made to Welcome Group of hotels under the executive holiday plan whereunder the assessee booked accommodation for 366 days for use of its employee while on leave ? Question of law in Income Tax Reference No.42 of 2 .....

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mploying more than 100 persons. It is the case of the Applicant that the Applicant had paid a sum of ₹ 57,650/- to ITC Ltd. to reserve accommodation for 366 days during the assessment year 1984-85 for use by their employees, who are on leave. They sought deduction of the said amount towards maintenance of the guest house as contemplated under Section 37(4) of the Income Tax Act, 1961 (the 'Act'). 4. In the case of Reference No.42 of 2000 the amount paid was ₹ 40,000/- during .....

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y the assessee to provide boarding and/or lodging to any person including an employee, who was on tour or visit to the place at which accommodation is situated although the applicant complied with the condition requiring reservation of exceeding 182 days. The tribunal felt that it amounted maintenance of guest house and accordingly the contention of the applicant was rejected and the order of the Assessing Officer was restored. The question has thereafter been referred to this Court. 5. Mr.Surve .....

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he nature of guest house and, therefore, was in compliance with the second proviso which contemplated maintenance of such guest house as holiday home and complied with Section 37(4)(1) and the amount paid for maintenance for residential accommodation is in the nature of guest house. Mr.Surve further points out that as far as Section 37(5) was concerned, the same was not at all attracted, in view of the fact that Section 37(5) contemplated accommodation by whatever name called it was maintained, .....

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lowance shall be made in respect of any expenditure incurred by the assessee after the 28th day of February, 1970, on the maintenance of any residential accommodation in the nature of a guest house (such residential accommodation being hereafter in this sub-section referred to as 'guest house'); (ii) in relation to the assessment year commencing on the 1st day of April, 1971, or any subsequent assessment year, no allowance shall be made in respect of depreciation of any building used as .....

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who has throughout the previous year employed not less than one hundred wholetime employees in a business or profession carried on by him; and (b) is intended for the exclusive use of such employees while on leave. Explanation. - For the purposes of this subsection, - (i) residential accommodation in the nature of a guest house shall include accommodation hired or reserved by the assessee in a hotel for a period exceeding one hundred and eighty-two days during the previous year; and (ii) the exp .....

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company, also any director of, or the holder of any other office in, the company), on tour or visit to the place at which such accommodation is situated, is accommodation in the nature of a guest-house within the meaning of sub-section (4)." 6. In addition to above Mr.Surve relied upon a decision of the Division Bench of this Court in the Commissioner of Income Tax vs. Ocean Courier Pvt. Ltd. 211 ITR 357 and a decision of Andhra Pradesh High Court in Commissioner of Income Tax Vs. M/s. Mad .....

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