2010 (11) TMI 957 - AT - Income Tax

Deduction u/s 80IC - Eco-Tourism - denial on the ground that hotel of the assessee being simple hotel is not covered by Item No.15 of Schedule XIV of the Act and therefore not eligible for such deduction - HELD THAT - From the Section 80IC and Item No.15 of Part C of the Fourteenth Schedule it can be observed that what is eligible for deduction is eco-tourism which include inter alia hotels. It has been the contention of the assessee that his hotel is approved by the Government. The hotel cannot be approved by the Government without obtaining No Objection from the Pollution Department. There is no material on record to show that Pollution Department of the Government has not given no Objection to the assessee. If it is so then it cannot be said that the assessee is running a hotel which is outside the norms prescribed by the Pollution Department. If a plain reading is given to Item No.15 reproduced above then eco-tourism inter alia include hotels. No material has been brought on record to show that eco-tourism status has been granted to any other hotel and which status assessee does not have. If the logic applied by the AO and CIT (A) is made applicable then the hotels which are not having the alleged eco-tourism status cannot be held to be entitled to deduction u/s 80-IC. If none of the hotels can be granted deduction u/s 80-IC then the Item No.15 of Part C of the Fourteenth Schedule will be redundant. In the absence of definition of eco-tourism the hotel as added into the Item No.15 of Part C is to be construed to be hotel situated in the State of Himachal Pradesh or the State of Uttaranchal having a valid licence on the basis of No Objection from Pollution Department which can be treated to be a hotel eligible for deduction u/s 80IC as per provisions of Section 80IC. Therefore the claim of deduction u/s 80-IC to the assessee is allowed.

Summary

Issues:
Interpretation of Section 80IC of the Income Tax Act, 1961 for deduction claim by an assessee running a hotel; Definition of "eco-tourism" and eligibility criteria for deduction; Validity of denial of deduction by AO and CIT(A) based on interpretation of "eco-tourism"; Application of rules of interpretation "Noscitur a sociis" and "Ejusdem Generis" in denying deduction; Consideration of hotel's approval by the Government and compliance with Pollution Department norms for eligibility.

Analysis:
The appeal involved the interpretation of Section 80IC of the Income Tax Act, 1961, regarding a deduction claim by an assessee operating a hotel. The primary issue was the definition of "eco-tourism" and the eligibility criteria for claiming the deduction under this provision. The AO denied the deduction, asserting that the assessee's hotel did not meet the conditions of "eco-tourism" as specified in Schedule 14 of the Act. The CIT(A) upheld this decision based on the rules of interpretation known as "Noscitur a sociis" and "Ejusdem Generis."

During the proceedings, the assessee argued that their hotel, located in Uttarakhand and possessing a valid license, should qualify for the deduction under Section 80IC. The counsel contended that both the AO and CIT(A) erred in denying the exemption to the assessee. On the contrary, the DR supported the decisions of the AO and CIT(A), emphasizing that all relevant aspects were adequately considered by the CIT(A).

Upon reviewing the provisions of Section 80IC and the specific conditions applicable to the assessee, the Tribunal noted that the deduction was allowable for undertakings involved in eco-tourism, including hotels. The Tribunal observed that the assessee's hotel, approved by the Government and complying with Pollution Department norms, should be considered eligible for the deduction. Notably, the absence of a clear definition of "eco-tourism" led the Tribunal to interpret the term broadly, encompassing hotels in states like Himachal Pradesh or Uttarakhand with valid licenses and Pollution Department clearances.

Ultimately, the Tribunal allowed the assessee's claim for deduction under Section 80IC, emphasizing that the hotel's compliance with relevant regulations and governmental approvals rendered it eligible for the deduction. The decision was pronounced in favor of the assessee, overturning the earlier denials by the AO and CIT(A) and highlighting the importance of considering the broader context and practical implications in interpreting tax provisions related to specific industries like tourism.