Case Law Details

Case Name : Bidhi Chand Singhal Vs. ITO (ITAT Delhi)
Appeal Number : ITA No. 3419/Del/2009
Date of Judgement/Order : 04/11/2010
Related Assessment Year : 2006- 07
Courts : All ITAT (5374) ITAT Delhi (1224)

Bidhi Chand Singhal Vs. ITO (ITAT Delhi)

Assessment Year- 2006- 07

ITA No. 3419/Del/2009



This is an appeal filed by the assessee which is directed against the order of CIT(A) dated 22.4.2009 for the AY 2006-07. Grounds of appeal read as under:-

“1. Because the learned Commissioner of Income Tax (Appeals)-II, Dehradun has erred in misinterpreting the provisions of section 80IC of the Income Tax Act, 1961 and dismissing the appeal on that basis.

2. Because the Ld.Commissioner of Income Tax (Appeals)-II did not consider the very relevant fact that only two restrictions have been placed for not allowing the claim under this provision, viz

Sub-section (4)(i) – if is not formed by splitting up or the reconstruction of a business already in existence, or Sub-section (4)(ii) – it is not formed by the transfer of a new business of machinery or plant previously used for business.

And sub-section (5) – no deduction shall be allowed under any other provision of the Chapter VIA or section 10A and 10B of the Act in computing the total income of the assessee.

and the appellant is not hit by either of these provisions.

3. Because the learned first appellate authority failed to consider the fact that the term ECO-FRIENDLY has no where been defined under the Income Tax Act, and its true import has to be culled out from various circumstances which vary from case to case. The provision speaks of ECO-TOURISM including hotels, and not eco tourism only.

4. Because the learned first appellate authority failed to consider the true import and intention of the legislature in enacting this particular provision meant to encourage tourism in specified area including the State of Uttaranchal (now Uttarakhand). The provisions of Section 80IC have to be read in conjunction with Schedule XIV-IT 15 of Part C of Schedule XIV. This clearly refers to eco-tourism including hotels.

5. Because the learned first appellate authority failed to appreciate the fact that the enterprise, namely, the hotel has commenced operation specified in the XIVth Schedule as a new unit within the period beginning the 7th day of January 2003 and ending before the first day of April, 2012 in the state of Uttaranchal (now Uttarakhand).

6. Because in any view of the matter the findings of the first appellate authority are wrong and against the spirit of the legal position.”

2. The assessee being engaged in the business activity of running hotel, has claimed deduction u/s 80IC which has been denied by the AO on the ground that the assessee has not fulfilled the condition of “eco-tourism” as specified in Item No.15 of Schedule 14 of Income Tax Act, 1961. According to the AO, the hotel to be eligible for such deduction should also be a hotel which is environment friendly. For holding so, the AO has relied upon the definition of ‘eco-tourism’, ‘environment friendly tourism’ etc. and has arrived at the conclusion that the hotel of the assessee being simple hotel is not covered by Item No.15 of Schedule XIV of the Act and therefore, not eligible for such deduction. Learned CIT(A) has confirmed the decision of AO by relying upon the rules of interpretation known as ‘Noscitura sociis’and ‘Ejusdem Generis’.

3. The issue was argued at large by the learned counsel for the assessee. He submitted that the hotel being situated in the state of Uttarakhand and having the valid license to run the hotel activity is to be considered eligible for the purpose of deduction u/s 80IC and therefore, AO as well as CIT(A) both were wrong in denying such exemption to the assessee.

4. On the other hand, learned DR relying upon the order of the AO and CIT(A) vehemently pleaded that the action of CIT(A) should be confirmed as CIT(A) has covered all the aspects which were argued by the learned AR of the assessee.

5. We have heard both the parties, gone through the assessment order and order of CIT(A) and relevant provisions which have been referred by the AO and CIT(A). The provisions as contained in Section 80IC and as relevant to the case of the assessee are as under:-

“80-IC. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3).

(2) This section applies to any undertaking or enterprise,-


(b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning


(ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or

(iii)                   “

Item No.15 of Part C of the Fourteenth Schedule reads as under:-

“15. Eco-tourism including hotels, resorts, spa, entertainment/amusement parks and ropeways.”

6. From the above Section and Item No.15 of Part C of the Fourteenth Schedule, it can be observed that what is eligible for deduction is eco-tourism which include inter alia hotels. It has been the contention of the assessee that his hotel is approved by the Government. The hotel cannot be approved by the Government without obtaining No Objection from the Pollution Department. There is no material on record to show that Pollution Department of the Government has not given No Objection to the assessee. If it is so, then, it cannot be said that the assessee is running a hotel which is outside the norms prescribed by the Pollution Department. If a plain reading is given to Item No.15 reproduced above, then, eco-tourism inter alia include hotels. No material has been brought on record to show that “eco-tourism” status has been granted to any other hotel and which status assessee does not have. If the logic applied by the Assessing Officer and CIT (A) is made applicable, then, the hotels which are not having the alleged “eco-tourism” status cannot be held to be entitled to deduction u/s 80-IC. If none of the hotels can be granted deduction u/s 80-IC, then, the Item No.15 of Part C of the Fourteenth Schedule will be redundant. Therefore, in our opinion, in the absence of definition of “eco-tourism” the hotel as added into the Item No.15 of Part C is to be construed to be hotel situated in the State of Himachal Pradesh or the State of Uttaranchal having a valid licence on the basis of No Objection from Pollution Department which can be treated to be a hotel eligible for deduction u/s 80IC as per provisions of Section 80IC. Therefore, we allow the claim of deduction u/s 80-IC to the assessee and the appeal of the assessee is allowed.

7.  In the result, the appeal filed by the assessee is allowed.

Decision pronounced in the open Court on 4th November, 2010.

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