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Facts
The assessee appealed against the orders of the Ld. CIT(A) which confirmed the Assessing Officer's disallowance of deduction claimed under Section 80ID. The disallowance was related to a hotel business, which the revenue argued was formed by reconstruction or transfer of an existing business, thus not eligible for deduction.
Held
The Tribunal held that the hotel business was formed by the transfer of a previously used building and that the assessee did not meet the conditions for deduction under Section 80ID. Additionally, a loss claimed for a Gurgaon hotel was allowed as it was inadvertently omitted from the original return.
Key Issues
Whether the assessee is eligible for deduction under Section 80ID for a hotel business formed by transfer of an existing property; and whether a small loss claimed for a Gurgaon hotel should be allowed.
Sections Cited
80ID, 143(3), 80IA, 80IB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH, ‘SMC’: NEW DELHI
Before: SHRI MAHAVIR SINGH
Date of Hearing 02.09.2025 Date of Pronouncement 02.09.2025 ORDER These two appeals by the assessee are arising out of the orders of the Ld. CIT(A)-14, in Appeal Nos.130/16-17/CIT(A)-14 and 131/16- 17/CIT(A)-14, New Delhi, vide orders of different dates i.e. 03.12.2018 and 10.12.2018. The assessments were framed by ITO, Ward-41(4) and ITO, Ward-42(5), New Delhi, for the Assessment Years 2013-14 and 2014- 15, u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide their orders of different dates 21.11.2016 and 09.02.2016 respectively.
The first common issue in these two appeals of the assessee is as regards to the order of the Ld. CIT(A) confirming the action of the Assessing Officer in disallowing the claim of deduction u/s 80ID of the Act. The facts and circumstances are exactly identical in both the years and the grounds raised in AY 2014-15 reads as under:-
“1. Under the facts and circumstances of the case, the ld. First Appellate Authority has grossly erred in affirming the action of ld. Assessing Officer disallowing deduction o 19,15,436/- u/s 80ID of the Act, which is grossly injudicious, unwarranted, against the facts of the case and untenable at law. Tax Effect relating to above mentioned ground of appeal is Rs.4,16,770/-.”
3. Despite fixation of this appeal, none was present on behalf of the assessee even otherwise this appeal is adjourned atleast 50 times. It seems that the assessee is not interested in prosecuting the appeal. At the time of hearing before me, ld. Sr. DR filed a copy of the Tribunal’s order in assessee’s own case for AY 2012-13 in order dated 24.08.2020, wherein, the Tribunal exactly on identical issue i.e. claim of deduction u/s 80ID is disallowed by observing as under:-
“It is pertinent to note here that as per sub-section (3) of 80ID, the deduction is not available to the eligible business if it is formed by the splitting up, or the reconstruction, of a business already in existence as well as when the eligible business is formed by the transfer to a new business of a building previously used as a hotel or a convention centre, as the case may be. Here the fact emerging from the records shows that the seller Bharti Sehgal and Sunil Kumar had purchased the plot C- 2/3, Taj Nagri, Phase II, Fatehabad Road, Agra, in 21.03.2007 and subsequently carried out construction of Hotel in the name and style of Hotel Rani Mahal during F.Y. 2007-08. The said hotel building was let out to the assessee during F.Y. 2008-09 relevant to A.Y. 2009- 10 vide lease/rent agreement dated 01.10.2008. This lease agreement clearly set out that the lease/rent period was for eleven months only. From perusal of paper book submitted by the Ld. AR at page 51, there is a Form IV under UPVAT Act, 2008 submitted by Bharti Sehgal dated 25.10.2008 thereby stating that the said Bharti Sehgal has surrendered the registration certificate as the business of HOTEL Rani Mahal was closed w.e.f. 05.10.2008. But Form No. 10CCBBA as per Rule 18DE of the assessee which is at page 67 of the paper book mentioned the said property under the name HOTEL SIRIS 18 situated at C 2/3, Taj Nagri, Phase –II, Agra – 282001 commencing its operation on 08/2010. From the above facts it can be seen that the construction of the Hotel Rai Mahal was prior to April, 2008 and the earlier Hotel Rani Mahal was functioning till 04.10.2008. The business (Hotel SIRIS 18 AGRA) is formed by the leased agreement between the assessee and Bharti Sehgal which was thereafter sold by Bharti Sehgal to the assessee 08.06.2009. The assessee claimed the deduction from A.Y. 2009-10 till 2012-13. The assessee thus has commenced already established business by way of transfer to a new business of a building previously used as a hotel. The case laws submitted by the assessee are not on the issue of Section 80ID eligibility as the conditions/criteria are different in Section 80IA, 80IB deductions. The case laws are on different factual aspects and hence not applicable in the present case. The CIT(A) also reiterated the same facts and correctly confirmed the Assessment order. There is no need to interfere with the observations made by the CIT(A) as the CIT(A) has given a detail finding after going through the facts and applying the provisions of Section 80ID of the Act, in assessee’s case for non-eligibility of the deduction. Thus, appeal of the assessee is dismissed.
I noted that this issue being covered against the assessee and in favour of revenue, I dismiss this common issue in both the appeals.
The next issue, which remains for adjudication is for AY 2014-15 is as regards to allowance of loss of Rs.5,562/- incurred by the assessee in respect of Gurgaon hotel. For this, the assessee has raised following grounds no.3:-
“3. Under the facts and circumstances of the case, the Id. First Appellate Authority has grossly erred in affirming the action of ld. Assessing Officer disallowing the loss of 5562/- incurred by the assessee in respect of its Gurgaon hotel alleging that the said hotel is not functional, which is grossly injudicious, unwarranted, against the facts of the case and bad at law. Tax Effect relating to above mentioned ground of appeal is Rs.1,719/-.”
6. I have heard the ld. Sr. DR and gone through the facts and circumstances of the case. I noted that the assessee has claimed loss of Rs.5,562/- and it is noted that the Assessing Officer and the Ld. CIT(A) disallowed the loss only on the premise that this was not claimed by the assessee in its return of income. I noted that assessee made this claim during the course of assessment proceedings and this fact is noted by Assessing Officer in the assessment order. It seems that the return of income filed as per the assessment order is within due date and the assessee due to inadvertent could not claim the loss. I feel that the assessee is entitle to this claim of loss and accordingly allowed the claim of loss.
Order pronounced in the open court on 02nd September, 2025