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2017 (2) TMI 679 - ALLAHABAD HIGH COURT

2017 (2) TMI 679 - ALLAHABAD HIGH COURT - TMI - Claim for deduction under Section 80 IB(7) - lack of approval by Competent Authority - Held that:- Tribunal has observed that Assessee did not pursue matter diligently before Competent Authority and, therefore, cannot get any advantage if it has not been able to obtain approval from Competent Authority. In our view, approach of Tribunal in this regard is neither justified nor sustainable in law. - Under the statute, i.e., Section 80 IB(7)(c) de .....

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neral in the Directorate of Tourism, Government of India. The Director General in the Directorate of Tourism, Government of India, admittedly had granted approval and for that reason benefit of deduction under Clause (b) has been allowed by Revenue Authorities to Assessee. In order to attract Clause (a), no decision has been taken by Director General, Income Tax (Exemptions) though application has been filed by Assessee in this regard in 2002. Competent Authority for granting approval is an offi .....

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question of approval is pending before Competent Authority, who is a senior officer of Income Tax Department and has not been able to get enough time to take a decision on the application filed by Assessee on 28.08.2002. Observations of Tribunal that Assessee did not pursue matter are unwarranted for the reason that whatever could have been done by Assessee, it has done by submitting application and rest is the job of departmental authority, specified in Rule 18 BBC. - We, therefore, answer .....

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d manifest error. - Section 80A application - Held that:- In the present case, Assessee claimed deduction under a provision in Chapter VIA and in the return also it claimed deduction with reference to Section 80 IB(7) but sub-clause mentioned was (a) and not (b). Sub-clause (a) talks of a larger degree of deduction and if that was not admissible a smaller degree of deduction, under same section but in another sub-clause could have been allowed. Here it cannot be said that Assessee had not cl .....

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wered against it. - Concerned authority under Section 80 IB(7)(c)(iii) of Act, 1961 read with Rule 18 BBC of Rules, 1962 is directed to take a final decision on Assessee's application for grant of approval within a period of two months from the date of production of a certified copy of this order. In case approval is granted, Assessing Authority shall reconsider the matter in the light of aforesaid approval with regard to deduction under Section 80 IB(7)(a) and pass appropriate order in acco .....

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2014, 22 of 2014, 30 of 2014, 31 of 2014 and 32 of 2014 have arisen from common judgment dated 16.05.2014 passed by Income Tax Appellate Tribunal, Lucknow Bench "A", Lucknow (hereinafter referred to as the "Tribunal") and relate to Assessment Years 2006-07, 2008-09 and 2009-10. Appeal No. 38 of 2015 has arisen from judgment dated 16.01.2015 passed by Tribunal and relates to Assessment Year 2007-08. 3. Assessee's appeal, i.e., Appeals No. 20 of 2014, 21 of 2014, 22 of 2014 .....

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have been admitted on following substantial questions of law: "1) Whether the Income Tax Appellate Tribunal is justified under the facts and circumstances of the case in dismissing the department's appeal and confirming the order of CIT (A) when the assessee did not claim deduction under Section 80IB (7) (b) of the Income Tax Act, 1961 in its return or by filing a valid revised return as held by the Hon'ble Supreme Court in Goetze India Ltd. vs. CIT (2006) 284 ITR 323. 2) Whether t .....

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tory provision of Chapter VIA under Section 80A (5) of the Income Tax Act, 1961 which clearly provides that if assessee fails to make a claim in his return of income for any deduction, no deduction shall be allowed to him thereunder." 5. Brief facts necessary to understand the dispute and adjudicate aforesaid questions are as under. 6. M/s Shrikar Hotels Pvt. Ltd. (hereinafter referred to as the "Assessee") has set up a Hotel at 6, Shahnajaf Road, Lucknow after getting approval of .....

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re development undertakings. Sub-section (7) thereof deals with the amount of deduction in case of hotels. There are two level of deduction. One is 50% which is within the ambit of Clause (a) of Section 80 IB(7) and second is 30% which is within the ambit of Clause (b) of Section 80 IB(7). However, Clause (c) of Section 80 IB(7) specifically provides that deduction under Clauses (a) and (b) shall be available only if conditions set out in sub-clauses (i), (ii) and (iii) of Clause (c) are satisfi .....

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(Exemptions) and he has to grant approval on concurrence of Director General in the Directorate General of Tourism, Government of India in respect of hotels which qualified for 50% deduction under Section 80 IB(7)(a); and, hotels covered by Clause (b) on Section 80 IB(7), there, prescribed authority competent for granting approval is Director General in the Directorate General of Tourism, Government of India. 8. Assessee's hotel in Lucknow comes within the Buddhist Circuit which is a touris .....

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ication and first representation referred to in memo of appeal is dated 11.11.2014. In the meantime assessment order was passed on 24.12.2009 against Assessee by competent Assessing Authority. Matter went up to Tribunal who vide order dated 13.12.2011 remanded matter to Assessing Authority. Claim for deduction under Section 80 IB(7)(a) was rejected by Assessing Authority on the ground that Assessee was not granted approval by Prescribed Authority and hence no deduction was admissible in view of .....

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seeking approval, it filed an application before Tribunal on 27.11.2014 requesting to defer hearing of appeal. Said application was rejected by Tribunal and thereafter it has dismissed appeals of Assessee as well as Revenue both. Assessee's claim for exemption under Section 80 IB(7)(a) which has been denied on the ground of lack of approval by Competent Authority has been upheld. Deduction, however, granted under Section 80 IB(7)(b) has been upheld on the ground that there was an approval gr .....

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pplicable only if hotel is for the time being approved by Prescribed Authority. Authority has been prescribed under Rule 18 BBC. For attracting deduction under Clause (b) it is only one authority, namely, Director General in the Directorate of Tourism, Government of India but for attracting deduction under Clause (a), Competent Authority is Director General, Income Tax (Exemptions), who has to act upon with concurrence of Director General in the Directorate of Tourism, Government of India. The D .....

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dministrative control nor otherwise can compel said authority to act within a particular time and in a particular manner. It is the authority of Revenue itself, who has to grant approval. For own lethargy or inaction on the part of an officer of Income Tax Department, a deduction which otherwise may be available to Assessee, cannot be denied since it is not a case where Assessee is disqualified being ineligible for such deduction but question of approval is pending before Competent Authority, wh .....

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s to exercise such power within a reasonable time and in accordance with relevant considerations of law. Such authority cannot sit over matter for time immemorial and the person who suffers on account of inaction of authority cannot be denied a benefit which would have been admissible if approval is granted, by keeping matter pending for a long time and failing to take a decision. In our view, it is a fit case where Tribunal ought to have required Director General, Income Tax (Exemptions) to tak .....

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l of deduction to Assessee ignoring the fact that application seeking approval submitted by Assessee is still pending for consideration before Competent Authority, has committed manifest error. 15. Now coming to substantial questions of law formulated in Revenue's appeals, the basic argument is that no exemption could have been allowed unless claimed by Assessee and and for that purpose learned counsel appearing for Revenue relied on Section 80 A of Act, 1961. Reliance is placed on sub-secti .....

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says, where Assessee fails to make claim in his return of income for deduction under any provision of Chapter VIA, under the heading "C.-Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder. It is contended that since Assessee has not claimed deduction under Section 80 IB(7)(b), hence same could not have been granted. 17. Record shows that Assessee had claimed actual deduction of ₹ 30,20,198/- under Section 80 IB(7)(a) but same was declined .....

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n claimed by Assessee specifically under Chapter VIA. Assessing Authority declined deduction by referring to Section 80A and a judgment of Supreme Court in Goetze (India) Ltd. vs. Commissioner of Income Tax, 2006(284) ITR 323 but in our view the words mentioned in Section 80A have not been properly construed by Revenue inasmuch as Section 80A(5) says that if deduction under any provision of Chapter VIA is not claimed then it will not be allowed. Assessee has claimed specifically deduction under .....

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ar as these appeals are concerned. That was a case where deduction under a particular provision was not at all claimed in the return filed by Assessee. The question, whether deduction was admissible under one sub-clause or another, was not involved since deduction was not at all claimed in return. For Assessment Year 1995-96 return was filed on 30.11.1995 without claiming deduction. Thereafter Assessee claimed deduction by submitting letter to Assessing Authority. This was disallowed by Assessin .....

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