DCIT, SHIMLA vs. M/S HOTEL LANDMARK, SHIMLA

Per Sanjay Garg, Judicial Member:

The captioned are cross appeals. The appeal preferred by the

assessee for assessment year 2009-10 is against the Revision order

dated 12.03.2014 of the Commissioner of Income Tax [hereinafter

referred to as ‘CIT’] passed u/s 263 of the Income-tax Act, 1961 (in

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 2 short 'the Act') whereas the Revenue has preferred the captioned

appeal against the consolidated order dated 27.12.2016 of

Commissioner of Income Tax (Appeals), Shimla [hereinafter referred

to as ‘CIT(A)’].

these were heard together and are being disposed of by this common

and consolidated order. First we take up the assessee’s appeal ITA

No. 481/Chd/2014 agitating the invoking of the revisionary

Jurisdiction by the Ld. CIT u/s 263 of the I.T. Act.

Pradesh and the said business is the sole business of the assessee.

The assessee claimed deduction u/s 80IC of the Act having started its

business within the stipulated dates as provided u/s 80IC of the Act

to be eligible to claim deduction and further that the hotel business

of the assessee falls under the item No.15 of Part C of Schedule

XIV. The relevant provisions for the sake of convenience are

reproduced as under:-

“Section 80IC

Special provisions in respect of certain undertakings or enterprises in certain special category States.

(1) …… (2) ……. (3) 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

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 3 specified in that Schedule and undertakes substantial expansion during the period beginning. (i)……. (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……

The relevant extracts of the Fourteenth Schedule of the Act are also reproduced herein as:

“…..THE FOURTEENTH SCHEDULE

[see section 80-IC(2)] list of Articles of things or operations …… Part C …… 15. Eco-tourism including

Hotels resorts, spa, entertainment / amusement parks and ropeways …….”

assessee, the hotels established during stipulated period as per the

provisions of section 80IC are eligible to claim deduction u/s 80IC of

the Act under the item Eco-tourism including hotels, resorts, spa,

entertainment / amusement parks and ropeways. On the other

hand, the Ld. CIT held that every hotel established in the State of

Himachal Pradesh would not constitute as an Eco-Tourism unit. That

there were certain conditions / guidelines for terming the units

including a hotel as an Eco-Tourism unit. That a hotel established in

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 4 the city or at a commercial place would not fall in the definition of

Eco-tourism unit.

the decision of this Tribunal in the case of Shri Raghunath Singh

Thakur, Hotel Martina, Shimla in ITA Nos. 152, 469 & 1144 (CHD)

of 2010 for assessment years 2006-07 to 2008-09 dated June 22,2012.

However, the Ld. CIT observed that the interpretation of Eco-

Tourism as interpreted by the Tribunal had not attained finality as

the Department was already in appeal before the Hon'ble High Court,

which was pending for adjudication. Secondly, that in somewhat

similar facts and circumstances, in the case of ‘M/s Sirmour Hotels

(P) Ltd. Vs. DCIT’, in ITA No. 604/Chd/2012 for the assessment

year 2007-08 (ITAT, Chandigarh Bench ‘A’), the assessee challenged

the order passed u/s 263 of the Income Tax Act. That the facts of the

said case were squarely applicable to the present case. In that case

also, the Assessing officer had made no enquiry to examine whether

the assessee’s business was entitled for deduction u/s 80-IC or not.

In the said case, the Tribunal vide its order dated 24.9.2012, held the

assessment order passed in the case was erroneous and prejudicial to

the interest of Revenue and confirmed the findings of the CIT.

has been that the Assessing officer had duly applied his mind while

passing the assessment order. That the view taken by the Assessing

officer was one of the possible views as per law and, hence, it cannot

be said that the order passed by the Assessing officer was erroneous.

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 5 The Ld. Counsel has further contended that for invoking the

jurisdiction u/s 263 of the Act, the order of the Assessing Officer

must be erroneous as well prejudicial to the interest of Revenue. The

Ld. Counsel for the assessee has also placed reliance upon the

decision dated 28.9.2015 in the own case of the assessee for

assessment year 2010-11 wherein the Tribunal while relying on the

decision in the case of Raghunath Singh Thakur (supra) has upheld

the order of the Ld. CIT(A) directing the Assessing officer to give

the benefit to the assessee u/s 80IC of the Act which was denied by

the Assessing officer during the assessment proceedings. The Ld.

Counsel has further relied upon the decision of the ‘SMC Bench’ of

the Tribunal in the case of Asia Health Resorts dated 23.3.2017

passed in ITA Nos. 1297/Chd/2016 and 1221/Chd/2016. The Ld.

counsel has further relied upon the decision of the Hon'ble

Jurisdictional High Court in the case of ‘CIT Vs. Max India Ltd’

[2004] 268 ITR 128 (P&H) wherein the Hon'ble High Court has held

that if the view taken by the Assessing officer was a possible view,

Commissioner had no jurisdiction to exercise powers u/s 263 and to

treat the order as erroneous in any manner. The Ld. counsel has

further submitted that the Revenue has challenged the aforesaid

decision before the Hon'ble Supreme Court, however, the Hon'ble

Supreme Court vide its order November 1, 2007 reported in ‘CIT Vs.

Max India Ltd.’ [(2008] 168 Taxman 188 (SC) has upheld the

findings of the Hon'ble High Court. The Hon'ble Supreme Court

further held that even the subsequent amendment in the statue, even

though retrospective, will not attract the provision of section 263 of

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 6 the Act, particularly, when the position of law as it stood on the date

when the Commissioner passed the order u/s 263 had been taken into

account. The Ld. counsel has also placed reliance on the decision of

the Hon'ble Supreme Court in the case of ‘Malabar Industrial Co. Ltd

v CIT’ in [2000] 109 Taxman 66 (SC) in this respect to state that in

order to invoke section 263, the Assessing officer’s order must be

erroneous as well as prejudicial to the interest of Revenue and that if

one of the condition is absent, the Commissioner cannot exercise

jurisdiction u/s 263 of the Act

Hon'ble High Court of Uttarakhand in the case of ‘CIT Vs. Anchal

Hotel (P) Ltd.’ reported in [2016] 70 taxman.com 330. The relevant

provisions of section 80IC since are also applicable in case of units

established in the state of Uttarakhand, the Hon'ble Uttarakhand

High Court on an identical controversy has held that only hotel which

are set up as Eco-Tourism unit would be entitled for deduction u/s

80IC of the Act. The Hon'ble High Court while holding so, has

considered the guidelines for Eco-Tourism in an around protected

areas by Ministry of Environment, Forest Government of India. The

Ld. DR, therefore, has submitted that in the absence of any decision

of any other higher Court, the decision of the Hon'ble Uttarakhand

High Court has settled the law and in the light of the aforesaid

decision, the assessment order passed by the Assessing officer can be

well said to be erroneous and prejudicial to the interest of Revenue.

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 7 8. We have considered the rival contentions and have also gone

through the records. We find that in this case, not only at the time of

the assessment order but also at the time of passing of the impugned

order dated 12.3.2014 u/s 263, the view taken by the Assessing

officer was one of the possible view which was fortified by the

decision of the Tribunal in the case of ‘Raghunath Singh Thakur

(supra). The said decision of the Tribunal was also available and had

been discussed by the Ld. CIT in his impugned order passed u/s 263

of the Act, hence, under the circumstances, the Assessing officer had

taken one of the possible view and, therefore, in the light of the

decision of the Hon'ble Supreme Court in the case of ‘Malabar

Industrial Co. Ltd v CIT’ (supra) and in the case of CIT Vs. Max

India Ltd.’ (supra) there was no justification on the part of the Ld.

CIT to invoke the jurisdiction u/s 263 of the Act.

So far as the arguments of the Ld. DR that the issue is

squarely covered by the decision of the Hon'ble Uttarakhand High

Court in the case of ‘CIT Vs. Anchal Hotel (P) Ltd’., with all the due

respect, it is to be noted that the Hon'ble Uttarakhad High Court is

not the jurisdictional High Court of this Tribunal. Hence, the said

decision of the Hon'ble Uttarakhand High Court does not hold a

binding precedent. Hence, the proposition that the interpretation of a

provision by the subsequent decision of a Supreme Court or

Jurisdictional High Court acts retrospectively and that the view

expressed in the later decision would have to be regarded having

always been a law as on the date of its incorporation, cannot be

applied in this case to hold that the order of the Assessing officer is

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 8 erroneous. The benefit of the subsequent decision of the Hon'ble

Uttrakhand High Court in the case of CIT Vs. Anchal Hotel (P) Ltd.’

(supra) was not available with the Assessing officer at the time of

assessment proceedings. In view of this, the order of the Assessing

officer cannot be held to be erroneous on this account also. Reliance

in this respect can be placed on the decision of the Jurisdictional

Punjab & Haryana High Court in the case of ‘Commissioner of

Income Tax Vs. Vardhman Spinning’ (1997) 93 Taxman 453 (P&H).

The view adopted by the Assessing Officer, thus, was one of the

possible views. In view of this, it cannot be said that the order of the

Assessing officer was erroneous in so far as it was prejudicial to the

interest of Revenue and, therefore, there is no justification on the

part of the Commissioner of Income Tax to invoke the jurisdiction

u/s 263 of the Act. Therefore, the impugned order u/s 263 of the Act

is set aside and consequent additions in compliance of the said order

are ordered to be deleted.

9 The appeal filed by the Revenue is in relation to the action of

the CIT(A) in deleting the additions made by the Assessing Officer in

the assessment framed u/s 143(3) read with section 263 of the Act in

compliance of the directions issued by the CIT in his order passed u/s

263 of the Act. Since, we have set aside the order of the Ld. CIT

passed u/s 263 of the Act, hence the consequential assessment made

by the AO becomes infructuous and the additions if any, made there

in stand deleted.

ITA Nos.481/Chd/2014 & 417 /Chd/2017/ - Hotel Landmark, Shimla 9 In the result, the appeal of the assessee (ITA No.

481/Chd/2014) is allowed whereas the appeal of the Revenue (ITA Nos. 417 /Chd/2017) is hereby dismissed. Order pronounced in the Open Court on 11/06/2018 Sd/- Sd/-

(B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 11.06.2018 Rkk

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR