TMI Blog2020 (4) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... all the statutory requirements or complied by the assessee. All the receipts and payments pertaining to the operations of the hotel are being managed through the bank account of the assessee, we hereby hold that the assessee is in the business of running of hotel and accordingly, the provisions u/s 80ID of the Act are applicable to the case of the assessee in the instant year. - Appeal of the revenue is dismissed. - ITA No. 4083/Del/2016 - - - Dated:- 21-2-2020 - Ms. Sushma Chowla, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Dr. Rakesh Gupta, Adv. For the Revenue : Sh. Saras Kumar, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been fi led by the Revenue against the order of ld. CIT (A)-14, New Delhi dated 18.05.2016. 2. Following grounds have been raised by the Revenue: 1. On the facts and circumstances of the case in law, the Ld. CIT(A) is not justified in deleting the addition made by the Assessing Officer under the head income from House Property amounting to ₹ 3,44,40,000/- without appreciating the findings of the AO. 2. On the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to manage and operate the Hotel under the operator s Brand name/ Trade Mark/ Logo PEPPERMINT HOTEL GURGOAN and the operator agrees to manage and operate the Hotel. 2. The Operator shall supervise and direct the operations of the Hotel and shall have, within the limits stipulated in the Agreement, complete and exclusive control an discretion over the operation of the Hotel and all operating plans including use of space and facilities, prices, entertainment and amusement policies, labours policies, wage rates, hire and discharge of employees and all phases of promotion, publicity and advertising. 3. The Operator shall operate the Hotel and all its facilities and activities in the same manner as is customary and usual in the operation of other similar hotels including supervisory services provided by operators of Hotels of comparable class and standing consistent with the Hotel s facilities. 4. The Owner agrees to cooperate to the fullest extent with the Operator in applying for, obtaining and maintaining such licenses and permits. 5. The Operator shall have full discretion and control in the operation of the Hotel. 6. The Operator shall maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities, sources of Direction, budget control reporting functions, etc. (ii) Provide detailed assistance and guidance to specialists consultants, i.e. kitchen and laundry designers for the development of the house areas, including offices, maintenance, housekeeping etc. (iii) Review and guide on detailed layout drawings of all Hotel back of the houses areas, including offices, maintenance, housekeeping etc. (iv) Attend all design development meeting as required to develop the documents in a concise and orderly manner. 11. Operator has Net Minimum Guarantee MG Gross operating profit at ₹ 4100000/-, should the achieved Gross operating profit for the month be below ₹ 4100000/-, the operator shall reimburse the shortfall to the owner. On going through the agreement and more specifically as apparent from the clauses of agreement mentioned above. I have observed that the essence of the agreement is that you will receive a minimum sum of ₹ 41.00 lacs p.m. towards utilization of your property by Peppermint throughout the year. The entire operations are controlled by Peppermint and you basically receive amount towards rent/lease ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Jai Mahal Hotel Pvt. Ltd. 65 ITD 362 (Del.). The relevant analysis is at para 13 to 19 of the order which is as under: 13(a) That the term business as defined in s. 2(13) are of very wide import and it must be construed in a broad rather than in a restrictive sense. Such a view is clearly fortified by the provisions contained in s. 2(13) as well as the judgments reported in Mazagaon Dock Ltd. vs. CIT (supra), CIT vs. A. Dharma Reddy (Decd) (1969) 73 ITR 751 (SC), CIT vs. Calcutta National Bank Ltd. (supra) and CEPT vs. Shri Lakshmi Silk Mill Ltd. (supra). (b) The distinct heads of income specified in s. 14 of the Act are mutually exclusive. The income derived from different sources falling under specific heads has to be computed for the purpose of taxation in the manner provided by the appropriate section. If the income from a source falls within the specific head set out in s. 14, the fact that it may indirectly be covered by another head will not make the income chargeable under the latter head. (c) A commercial asset can be exploited in many ways. So long as a commercial asset is exploited as such and profits and gains earned from it, the same are profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, highly developed technology in the field of hotel-tourists understanding, the need of Indian and foreign tourist and travellers and meeting them through specialised techniques particularly in the context of hotel business and other hotel related services. 16. A careful scrutiny of various clauses of the said agreement executed between the appellant-company and IHC reveals that the said agreement was executed with the predominant motive of exploiting the hotel building and its fixtures in a more profitable, organised and a systematic manner. It is well-known that IHC is a company owning all the Taj groups of hotels and they have a long experience and expertise in carrying on the business of hotels. They are fully conversant with the modern technology and specialised skill required for running and managing five star hotels. The agreement in question was made effective from June, 1984. The period of this agreement was 60 years commencing from the appointed date which was 2nd June, 1984. For the first 5 years the appellant-company was entitled to minimum guaranteed business profits of ₹ 35 lakhs i.e. ₹ 7 lakhs per annum. Thereafter the minimum gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of commercial assets belonging to the assessee in such a manner. A reference of various clauses of memorandum of association has already been given in earlier parts of this order which shows that the company was entitled to carry on the business of running a hotel in any manner including by entering into any kind of arrangement or agreement with any other firm or company engaged in this line of business. 18. It is evident from the aforesaid discussions that in the instant case, the intention of the assessee was never to go out of hotel business but the company had all the intentions to very much continue the business. The intention of entering into the contract with IHC was that the offer given by IHC was found to be more lucrative and profitable. The company as a prudent businessman thought that by entering into such an agreement with IHC for a long term, it will ensure minimum guaranteed business profits as well as it will be entitled to retain 1 per cent share in the operating gross profit, whichever is higher. The past experience of running a hotel by the erstwhile firm was not a happy experience. The firm incurred loss by running the hotel in those very premises. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
