COMMISSIONER OF INCOME TAX, KOTTAYAM vs. M/S. HOTEL YUVARANI, RANNY, PTA

ITA/1206/2009HC KeralaKLHC01025967200905 September 2016Author: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC5 pages
AI SummaryDismissed

What were the facts?

The Revenue, Commissioner of Income Tax, Kottayam, filed an appeal before the High Court of Kerala against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The ITAT, in its order in ITA No. 10 of 2007, had followed its earlier common order in ITA Nos. 114 to 117 of 2003. The ITAT held that the assessee, M/s. Hotel Yuvarani, a partnership firm, was entitled to be treated as a registered firm under Section 185 of the Income Tax Act and assessed accordingly. This was despite the FL-3 licence issued under the Foreign Liquor Rules being in the name of only one of its partners. The assessment had initially been completed treating the assessee as an Association of Persons (AOP).

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court noted that the ITAT had arrived at its conclusion in favour of the assessee by following its earlier judgment in Thodupuzha Wines v. DCIT (ITA Nos. 114 to 117 of 2003). The Revenue had filed appeals against that judgment and similar orders before the High Court. A Division Bench of the High Court, in a common judgment reported as Commissioner of Income Tax v. Hotel New Indraprastha, 335(2011)ITR 87, had confirmed the ITAT's order. In that judgment, the High Court held that the business being carried on by partnership firms with a licence held by only one partner was known to the Excise Commissioner and done with his permission and approval. The Court concluded that this was a permissible activity under Rule 13 of the Foreign Liquor Rules and Condition 13 of the FL-3 licence. Therefore, the firms so constituted were genuine and entitled to be assessed in the status of firms, and for periods requiring registration under Section 185, they were entitled to be assessed as registered firms, subject to satisfying other conditions. Consequently, the High Court found that the impugned order of the ITAT did not give rise to any questions of law.

What were the issues?

The High Court was called upon to decide the following questions of law: 1. Whether the Tribunal was right in interfering with the assessment completed on the Association of Persons. 2. Whether the exploitation of an individual licence by the firm against Rule 6(22) of the Abkari Rule read with Section 11 of the Contract Act rendered it not a firm in the eye of law. 3. Whether the impugned assessment adopting the status of the assessee as A.O.P. was valid and in accordance with law. The Revenue contended that the firm was not validly constituted as a firm in the eyes of law due to the licence being in the name of only one partner, and that the assessment as an AOP was valid. The Revenue relied on Rule 6(22) of the Abkari Rule and Section 11 of the Contract Act. The ITAT, in its impugned order, had held in favour of the assessee, treating it as a registered firm. The judgment notes that the Revenue was heard, but there was no appearance or representation for the assessee.

Which sections of the Income-tax Act were involved?

Section 185,Section 11

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU MONDAY, THE 5TH DAY OF SEPTEMBER 2016/14TH BHADRA, 1938 ITA.No. 1206 of 2009 ( ) ------------------------- AGAINST THE ORDER IN ITA 10/2007 of INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN . APPELLANT/APPELLANT: ---------------------- THE COMMISSIONER OF INCOME TAX,

KOTTAYAM.

BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: -------------- M/S.HOTEL YUVARANI, PAZHAVANGADI, RANNY.

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 05-09-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ============================== I.T.Appeal No. 1206 of 2009 ============================== Dated this the 5th day of September, 2016 JUDGMENT Antony Dominic,J. This appeal is filed by the revenue aggrieved by the order passed by the Income Tax Appellate Tribunal, Cochin Bench, in I.T.A.No. 10 of 2007. By the said order, following the Tribunal's common earlier order in I.T.A.Nos. 114 to 117 of 2003,

The order continues below.

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