INCOME TAX ACT, 1961

Section 80ID

Deduction under section 80ID - Profits from business of running of hotel - AO held that assessee was not operating the business of running of hotel but it had given the premises for lease to PHPL -

Assessee entered into an agreement with M/s. PHPL as per which PHPL was to render professional services to assessee for running the hotel. As per the agreement, assessee was to pay Base Management Fee to PHPL and further Incentive Management Fee after PHIPL achieved an assured basic minimum operative profit of Rs. 41,00,000 per month. The assessee started hotel operation from July 2010. It claimed deduction under section 80ID. AO held that assessee was not operating the business of running of hotel but it had given the premises for lease to PHPL and hence, amount received by assessee was not eligible for deduction under section 80ID. Held: PHPL was providing services primarily in the nature of consultancy and professional services and it could not be deemed that entire operations had been relegated to PHPL.Receipts of the hotel from guests were credited to the bank account of assessee, the cheques, credit cards and other receipts. All expenses were paid from bank account in the name of assessee. All sale invoices also reflected name of the assessee. Service tax registration, VAT registration, Labour department registration, PF registration and ESIC registration were all in the name of assessee. The VAT returns, luxury tax return, service tax return had been filed in the name of assessee. Accordingly, assessee was in the business of running of hotel and accordingly, assesse was entitled to deduction under section 80ID.

REFERRED : Jai Mahal Hotel (P) Ltd. (1998) 65 ITD 362 (Del.) : 1998 TaxPub(DT) 0384 (Del-Trib)

FAVOUR : In assessee's favour.

A.Y. :

SUBSCRIBE FOR FULL CONTENT

OR Try Reload the Page