9911796707
TMI Blog2008 (1) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1956. The assessee filed the return of income on December 31, 1989, and the same was processed under section 143(1)(a) of the Income-tax Act, 1961 (for short the "Act"). The assessee is engaged in the hotel business activities. One such establishment was in Bangalore under the name and style "East West Hotel Ltd.", at Residency Road, Bangalore. The said hotel has been given to the Indian Hotels Company Limited under an agreement, dated June 1, 1987, for an initial period of 33 years and giving option to renew the same for a further period of 33 years. The said agreement is entered into under the name and style of "licence agreement". The assessee contended that the amount received by it from Indian Hotels Company Limited has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lease and cannot be held that the assessee herein is running the hotel and any income from such hotel building has to be treated as a business income of the assessee. 5. Aggrieved by the concurrent findings of all the authorities below, this appeal is filed by the assessee raising the following question of law: "Whether, on the facts and in the circumstances of the case, the authorities below were right in holding that the transaction between the assessee and the Indian Hotels Company Limited is in the nature of lease and not a licence and that the amount received by the assessee from the M/s. Indian Hotels Company Limited has to be treated as an income from other sources and not as business income?" 6. We have heard the learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the learned counsel also relied upon a Division Bench judgment of this court in the case of Dharak Ltd. v. CIT reported in [1987] 163 ITR 734 (Karn). Relying upon these two judgments and relying upon the agreement produced by the assessee along with the appeal memo and the supplemental agreement thereon, contends that it cannot be treated that the assessee has not given up its business and the assessee has no intention to resume the hotel business of the present unit and the amount received by the assessee from Indian Hotels Company Limited has to be treated as a business income. Therefore, he requests the court to dismiss the appeal. 10. Having heard the learned counsel for the parties, we notice the following undisputed facts in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mputing the licence fee, the parties have also computed the licence fee to be paid during the extended period of agreement. Clause 3.1 of the agreement reads that "The licence shall be for a period of thirty-three years commencing from the appointed date." Clause 3.2(i) reads that: "After expiry of 33 years, option open to the M/s. Indian Hotels Company Limited to extend it for a further period of 33 years." Clause 3.2(ii) reads that "M/s. Indian Hotels Company Limited after the expiry of 66 years has further option to renew it for the second time for a further period of thirty-three years." 14. From the above clause, it is clear that if the Indian Hotels Company Limited intended to renew the lease period, it has an option to renew t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein to arrive at a conclusion whether such transaction and the income received has to be treated as a lease amount or licence fee and whether the licence has been temporarily assigned to any other persons to carry on the business with an intention of reviving it. It is no doubt true that the Bombay High Court in Mohiddin Hotels P. Ltd.'s case [2006] 284 ITR 229 had held that after construction and furnishing of a hotel, the same had leased the property for a period of twenty years in favour of Salgaokars, still held that, the principles laid down in Universal Plast Ltd. [1999] 237 ITR 454 by the apex court has no application to the facts of the case therein. With all respects, we cannot follow the views expressed by the Bombay High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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