2014 (10) TMI 874 - AT - Income Tax

Deduction u/s 80IC(2) - Held that - AO has examined the condition of allowability of the claim u/s 80IC in the initial assessment year of the claims i.e. A.Y. 2005-06 itself in an order passed u/s 143(3) of the Act. This was followed in the subsequent A.Y. These assessments are not disturbed till date. There is no change in the facts and circumstances of the case. Only a fresh view, contrary to the earlier view is taken during this impugned Assessment year on the same set of facts and exemption is denied. This cannot be permitted as held by the Jurisdictional High Court in the case of Delhi Patra Prakasham Ltd. (2013 (6) TMI 70 - DELHI HIGH COURT). Respectfully following the same, we uphold the order of the Ld. CIT(A) for different reasons. - Decided in favour of assessee.

Summary

Issues Involved
1. Whether the Ld. CIT(A) erred in allowing the claim of the assessee for deduction u/s 80IC despite the failure to obtain NOC from the Pollution Control Board.
2. Whether the Ld. CIT(A) erred in not appreciating that ecotourism is a condition precedent for hotels claiming deduction u/s 80IC.
3. Whether the Ld. CIT(A) erred in holding that deduction should be allowed if the assessee satisfies the conditions of being a hotel, having a valid license, and not being denied an NOC from the Pollution Control Board.

Detailed Analysis

Issue 1: NOC from Pollution Control Board
The Revenue challenged the allowance of the assessee's claim for deduction u/s 80IC by the Ld. CIT(A), arguing that the rejection was not solely based on the failure to obtain an NOC from the Pollution Control Board but on factual grounds. The assessee, a partnership firm operating M/s. Tapovan Resorts, had claimed deduction u/s 80IC since the Assessment Year (A.Y.) 2007-08. The Assessing Officer (AO) disallowed the claim for A.Y. 2009-10 after receiving information from the Pollution Control Board that the assessee neither applied for nor was granted an NOC. However, the first appellate authority allowed the appeal by following precedents set in similar cases.

Issue 2: Ecotourism Condition
The Revenue argued that the Ld. CIT(A) did not appreciate that compliance with ecotourism conditions is a prerequisite for hotels to claim deduction u/s 80IC. The assessee countered that the Ld. CIT(A) had duly considered the aspect of ecotourism in depth when deciding the appeal in their favor.

Issue 3: Conditions for Deduction
The Revenue contended that the Ld. CIT(A) erred in holding that deduction should be allowed if the assessee satisfies the conditions of being a hotel, having a valid license, and not being denied an NOC from the Pollution Control Board. The assessee maintained that these conditions were indeed met, and the Ld. CIT(A) had considered all pertinent and relevant facts.

Judgment Analysis
The Tribunal held that the AO cannot disallow the claim for deduction u/s 80IC for A.Y. 2009-10 when the claim had not been disallowed or withdrawn in the first two years. The Tribunal referenced the decision in ITA No. 764/D/2013 for A.Y. 2009-10 in the case of ITO vs. Ganga Beach Resorts, which established that if the conditions for allowability of a deduction are examined and allowed by the AO in the initial year, they cannot be reviewed and denied in subsequent years without disturbing the initial year's assessment. This principle was supported by the Hon'ble Delhi High Court in the case of CIT vs. Delhi Patra Prakashan Ltd., which emphasized that there must be finality in legal proceedings and that conditions for deductions must be examined in the initial year.

The Tribunal found that the AO had examined the conditions for the deduction u/s 80IC in the initial assessment year (A.Y. 2005-06) and allowed it. This was followed in subsequent years without disturbance. The Tribunal concluded that a fresh view contrary to the earlier one on the same set of facts could not be taken, and the exemption could not be denied for the impugned assessment year.

Conclusion
The Tribunal dismissed the Revenue's appeal and upheld the order of the Ld. CIT(A), thereby allowing the assessee's claim for deduction u/s 80IC. The assessee's cross-objection was also allowed. The judgment underscores the importance of consistency and finality in tax assessments, particularly concerning deductions claimed over multiple years.