C I T UDAIPUR vs. M/S THE LAKE PALACCE HOTELS and MOTELS PV

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ITA/20/2007HC RajasthanRJHC01017670200512 December 2012Author: NARENDRA KUMAR JAIN,RS CHAUHAN4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal's decision on the first issue, that Sales Tax and Expenditure Tax collected by the assessee cannot be added to the total business receipts for computing deduction under Section 80HHC, was upheld. The High Court noted that both parties agreed this issue was covered by the Supreme Court's judgment in Civil Appeal No.2331/2007 (arising from SLP(C) No.17838/2006), which dismissed the Revenue's appeal. The Supreme Court had held that expenditure tax, luxury tax, and sales-tax cannot be included in the total receipts in the formula under Section 80HHD(3), relying on its earlier decision in Commissioner of Income Tax, Coimbatore Vs. Laxmi Machine Works [2007] 290 ITR 667 (SC). The second issue regarding depreciation on cars was decided against the Revenue based on a prior judgment of this Court in D.B. Income Tax Appeal No.83/2001. The appeal was dismissed as having no merit.

What were the facts?

The assessee, M/s. Lake Palace Hotels & Motels Private Limited, filed its return of income. The Assessing Officer computed the gross receipts at Rs.18,83,68,741/-, significantly higher than the Rs.1,69,18,826/- declared in the Profit and Loss Account. The dispute centers on whether Sales Tax and Expenditure Tax collected by the assessee should be included in the total business receipts for calculating deduction under Section 80HHC. The Income-tax Appellate Tribunal, Jodhpur Bench, in its order dated November 15, 2004, held that these collected taxes should not be added to the gross receipts for this purpose. The Commissioner of Income-tax, Udaipur, has appealed this decision.

What were the issues?

1. Whether, for the purpose of computing deduction under Section 80HHD, the business turnover/gross receipts should be taken inclusive of sales tax and expenditure tax collected? (Question of law) 2. Whether, the learned Tribunal was justified in allowing full depreciation on imported cars and higher depreciation on Indian cars, treating them as used in the business of running them on hire, ignoring that running cars on hire is only an incidental activity to the assessee's business? (Question of mixed law and fact) Assessee's contentions: Not recorded in the judgment. Revenue's contentions: For issue 1, the Revenue contended that sales tax and expenditure tax collected should be included in gross receipts for Section 80HHD computation. For issue 2, the Revenue argued that car hire was an incidental activity, not the primary business, affecting depreciation claims. Authorities/Precedents relied on: For issue 2, the Revenue acknowledged the High Court's prior decision in D.B. Income Tax Appeal No.83/2001 (Commissioner of Income Tax Vs. Hotels & Motels Limited). For issue 1, both parties agreed the Tribunal's decision was based on a Madras High Court judgment. The Revenue had appealed this to the Supreme Court, which was dismissed.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 80HHD

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
[1] D.B. Income Tax Appeal No.20/2007 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR JUDGMENT D.B. INCOME TAX APPEAL NO.20/2007 C.I.T. UDAIPUR VS. M/S. LAKE PALACE HOTELS & MOTELS PRIVATE LIMITED DATE:12.12.2012 HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN HON'BLE MR. JUSTICE R.S. CHAUHAN Mr. K.K. Bissa, for the appellant. Mr. Ramit Mehta, for the respondent. **** This Income-tax Appeal is directed against order dated 15th November 2004 passed by Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur, whereby the Tribunal held that the Sales Tax, Expenditure Tax, which were collected by the assessee as authorized and collected amount having been credited to separate ledger account and the payment having been made from that account, and the gross receipts as computed by the assessing officer as Rs.18,83,68,741/- against Rs.1,69,18,826/- declared in the Profit and Loss Account by the assessee cannot be added in the total business receipts for the purpose of computing dedUction under Section 80 HHC. [2] D.B. Income Tax Appeal No.20/2007 This Court admitted the appeal of the Revenue on the following substantial aquestions of law. (1)Whether on the facts and in the circumstances of the case, for the purpose of computation of deduction u/s. 80 HHD, the business turnover/gross receipts should be taken inclusive of sales tax and expediture tax collected? (2)Whether on the facts and in the circumstances of the case, the learned Tribunal is justified in allowing full depreciation on imported cars and higher depreciation on Indian cars treating the same to have been used in the business of running them on hire ignoring the fact that running of cars on hire is only an incidental activity to the business of the assessee? So far as question No.2 is concerned, the same was decided against the Revenue while

admitting the appeal in view of the judgment delivered in D.B. Income Tax Appeal No.83/2001 (Commissioner of Income Tax Vs. Hotels & Motels Limited. So far as question No.1 is concerned, learned counsel for both the parties agreed that the judgment of the Income Tax Appellate Tribunal is based on the judgment of Madras

[3]

High Court. On the same point, there was another judgment of Madras High Court, which was decided against Revenue, against which a petition for Special Leave to Appeal (Civil) No.17838/2006 was preferred before Hon'ble Apex Court and it was registered as Civil Appeal No.2331/2007 after grant of leave. The Hon'ble Supreme Court ultimately dismissed the appeal of the Revenue vide judgment dated 3rd May 2007. The Hon'ble Supreme Court held that expenditure tax, luxury tax and sales-tax cannot be included in the total receipts in the formula under Section 80HHD(3). The Supreme Court has relied upon its earlier judgment in Commissioner of Income Tax, Coimbtore Vs. Laxmi Machine Works [2007] 290 ITR 667 (SC). Learned cousnel for both the parties conceded that question No.1 formulated in the present case is fully covered by the above judgment of the Hon'ble Apex Court. Hence the question No.1 is decided against the Revenue and it is held that the Sales Tax, Expenditure Tax, which were collected by assessee cannot be added in the total business receipts for the purpose of computing deduction u/s.80 HHC.

[4]

We find no merit in this appeal and the same is accordingly dismissed. (R.S. CHAUHAN),J. (NARENDRA KUMAR JAIN),J.

arora S.No.45

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