M/S.HOTEL AND ALLIED TRADERS (P) LTD. vs. THE DEPUTY COMMISSIONER OF INCOMETAX

ITA/111/2001HC KeralaKLHC01019081200111 April 2007Author: HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR23 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal has no merit and dismissed it. The Court reasoned that Section 80HHD, in its relevant provisions, refers to "profits derived by him from services provided to foreign tourists" and "profits of the business (as computed under the head 'Profits and gains of business or profession)". The language of the statute, particularly the phrase "profits of the business," indicates that the computation of eligible deduction under Section 80HHD should be made with reference to the entire business of the assessee, not on a unit-wise basis. The Court found no basis in the statute for separate computation for each hotel unit, even if they were separately approved by the Department of Tourism. The ratio is that deductions under Section 80HHD are to be computed on the aggregate profits of the entire business, not on individual units within that business.

What were the facts?

The assessee, M/s. Hotel and Allied Trades (P) Ltd., operates two hotels: Casino Hotel in Cochin and Bangaram Island Resort in Lakshadweep. For assessment years 1992-93 and 1993-94, the Assessing Officer allowed deductions under Section 80HHD by treating each hotel as a separate unit. The Commissioner of Income Tax, finding this prejudicial to revenue, initiated proceedings under Section 263, setting aside the assessments and directing computation of Section 80HHD benefits for the assessee's business as a whole. The Income Tax Appellate Tribunal upheld the Commissioner's order. This appeal challenges the Tribunal's decision.

What were the issues?

1. Whether, for the purpose of Section 80HHD, the profits are to be computed in respect of each hotel unit separately, or with reference to the profits of the entire business of the assessee, as held by the Tribunal? The assessee argued that the Tribunal's stand is unsustainable and not in keeping with Apex Court principles, referencing several case laws including Commissioner of Income-Tax v. Buildwell Assam (P) Ltd., Commissioner of Income-Tax v. Siddaganga Oil Extractions Pvt. Ltd., and Bajaj Tempo Ltd. v. Commissioner of Income-Tax. The assessee contended that while Section 80HHD does not mandate separate computation for each unit, it specifically refers to "profits and gains of the business," implying the reckoning of the assessee's business income as a whole. The revenue contended that the words in the statute, "profits of business," clearly indicate computation on a whole-business basis, not unit-wise.

Which sections of the Income-tax Act were involved?

Section 80HHD,Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.M.JOSEPH WEDNE AY, THE 11TH APRIL 2007 / 21ST CHAITHRA 1929 ITA.No. 111 of 2001 --------------------- AGAINST THE ORDER DATED 28.2.2001 . IN ITA.134 & 135 (COCH) /1997 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- M/S. HOTEL AND ALLIED TRADES (P) LTD., REGISTERED OFFICE, CASINO HOTEL, WILLINGDON ISLAND, COCHIN-682 003, REPRESENTED BY ITS MANAGING DIRECTOR, SHRI JOSE DOMINIC, AGED 51 YEARS, SON OF SHRI DOMINIC JOSEPH. BY ADV. SRI.K.VINOD CHANDRAN & LISY DEVASSY. RESPONDENT: -------------------- THE DEPUTY COMMISSIONER OF INCOME-TAX (ASSESSMENT), SPECIAL RANGE-I, ERNAKULAM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FO

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 263

All 13,616 judgments and leading authorities on Section 263 →

Latest GST High Court judgments

Search GST case law →