M/S.TAMILNADU TOURISM DEVELO vs. THE ASSISTANT COMMISSIONER

T.C.A.Nos.118 & 119 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.02.2020 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARAN and THE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.Nos.118 & 119 of 2020 and C.M.P.No.4150 of 2020 M/s.Tamil Nadu Tourism Development Corporation Ltd., 2, Wallajah Road, Chennai - 600 002. ... Appellant in both the appeals. Vs The Assistant Commissioner of Income Tax, Corporate Ward - 3 (1), Chennai - 600 034. ...Respondent in both the appeals. COMMON PRAYER: Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 against the order dated 10.07.2017 in I.T.A.Nos.534 & 535/Mds/2017 on the file of the Income Tax Appellate Tribunal, 'D' Bench, Chennai. For Appellant : Mr.M.Venkat Narayanan. For Respondent : Mr.M.Swaminathan, Senior Standing Counsel. 1/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020

C O M M O N J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J)

These tax case appeal have been filed against the order of the Income Tax Appellate Tribunal dated 10.07.2017 in I.T.A.Nos.534 & 535/Mds/2017 in dismissing the appeals filed by the assessee. 2.The facts of the case are as follows: The Assessee is a wholly owned Government of Tamil Nadu undertaking engaged in the business of conducting Tours, Operating Hotels and Exhibitions etc. For the Assessment Year 2007-08, assessee filed a return of income on 30.10.2007 admitting a total in Rs.2,97,35,550/-. The return was processed under Section 143 (1) of the Act. Subsequently, the assessment was reopened under Section 147 and notice under Section 148 dated 31.03.2014 was issued on 02.04.2014. Thereafter, notice under Section 143 (2) dated 19.05.2014 was issued incorporating the reasons recorded for reopening the 2/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020 assessment. 3.After considering the objections made vide letter dated 05.06.2014, the assessment was completed under Section 143 (3) read with Section 147 of the Act on 27.03.2015 determining the total income at Rs.3,64,39,240/-. While completing the assessment, the Assessing Officer among others assessed the franchise fees received of Rs.1,97,94,431/- under the head income from Business as against the claim of income from house property and disallowed the statutory deduction under Section 24 of 30% amounting to Rs.59,38,329/-. 4.Aggrieved by the Order of the assessing officer, assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide his order in I.T.A.No.174/CIT(A)-13/AY 2007-08 dated 29.12.2016 by following the decision of the Hon'ble Madras High Court in the Appellant's own case in TC(A) Nos.341 & 342 of 2014 dated 24.09.2014 confirmed the Order of the Assessing Officer disallowing deduction claimed by the Appellant 3/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020 under Section 24 on the Franchise fee. 5.Aggrieved by the Order of the Commissioner of Income Tax (Appeals), the assessee preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal vide its common order in I.T.A.Nos.534 & 535/Mds/2017 for the assessment years 2007-08 and 2012-13 and confirmed the order of the Commissioner of Income Tax (Appeals). Aggrieved by the order of the Tribunal, the assessee has filed the present appeals. 6.Heard Mr.M.Venkat Narayanan, learned Counsel for the appellant and Mr.M.Swaminathan, learned Senior Standing Counsel for the respondent. 7.These Tax Case Appeals are admitted on the following substantial questions of law; "1.Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the 4/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020 franchise fees should be assessed as business income and not under the head income from house property without appreciating that leasing of Hotels and Restaurants is distinct from its business of operating and maintaining the Hotels? (ii)Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the rental income from lease/franchise should be assessed as business income and not under the head income from house property without appreciating that the assessee had ceased to carry on hotel business in the impugned properties and had chosen to exploit the same as their owner by leasing out the land and building for long periods? (iii)Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that only if the assessee corporation had ceases to carry on its regular business of tourism development only then the income from leasing would constitute income from house property?" 8.The issue raised in this case is only whether the franchise fees charged by the appellant should be assessed as income from 5/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020 house property or business income. The learned Counsel for the respondent submits that the issue has already been decided in the Judgment of this Court in the case of "Tamil Nadu Toursim N.KIRUBAKARAN, J. and P.VELMURUGAN, J. ay Development Corporation Ltd., Vs. Deputy Commissioner of Income Tax" reported in "(2014) 90 CCH 0087 ChenHC" and "(2014) 368 ITR 053 (Mad)". Hence, in view of the above, the appeals are liable to be dismissed. The questions of law framed are answered against the appellant. 9.In the result, these appeals are dismissed. No costs. Consequently, connected miscellaneous petition is closed.

(N.K.K.,J.) (P.V.,J.) 21.02.2020 ay To The Assistant Commissioner of Income Tax, Corporate Ward - 3 (1), Chennai - 600 034. 6/7 http://www.judis.nic.in T.C.A.Nos.118 & 119 of 2020 T.C.A.Nos.118 & 119 of 2020 and C.M.P.No.4150 of 2020 7/7 http://www.judis.nic.in