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2011 (12) TMI 247 - AT - Income TaxDeduction u/s 80IB(7)(a)/80IB(7)(b) Hotel business A.O. denied exemption u/s 80IB(7)(a) on the ground of non-obtention of approval by assessee from prescribed authority but did not adjudicated on availability of exemption u/s 80IB(7)(b) - assessee filed approval for exemption u/s 80IB(7)(b) obtained from the Department of Tourism but confined itself only with the claim u/s 80IB(7)(a) before A.O. Held that - It is strange to note that once the assessee has obtained approval u/s 80IB(7)(b), how it becomes eligible for deduction u/s 80IB(7)(a) because the percentages of deductions are different depending upon the location of the hotels. It cannot be said that if deduction under clause (a) is not allowed it should be allowed under clause (b). In the instant case, claim under clause (b) has not been adjudicated upon by the A.O. Thus, the order is set aside and matter is restored to file of A.O. for fresh adjudication Decided in favor of assessee for statistical purposes.
Issues Involved:
1. Rejection of claim of deduction under section 80IB(7)(a) of the Income-tax Act, 1961. 2. Admission of additional grounds for deduction under section 80IB(7)(b) of the Income-tax Act, 1961. 3. Examination of the duty of the Income Tax Officer in applying relevant provisions of the Act. 4. Powers of the Appellate Authority in admitting new grounds. Issue-wise Detailed Analysis: 1. Rejection of Claim of Deduction under Section 80IB(7)(a): The assessee claimed a deduction of Rs. 31,20,198 under section 80IB(7)(a), which was 50% of the business profit of Rs. 62,40,395. The claim was denied by the Assessing Officer because the assessee failed to obtain approval from the prescribed authorities as required under section 80IB(7)(a) read with Rule 18BBC of the Income-tax Rules. The assessee argued that the approval was delayed due to procedural lapses, but the requisite conditions were fulfilled, and thus the exemption should not be denied. 2. Admission of Additional Grounds for Deduction under Section 80IB(7)(b): The assessee sought admission of additional grounds for deduction under section 80IB(7)(b), arguing that the requisite certificate/approval was duly obtained from the prescribed authority (Director General, Tourism) and was available in the records. The Assessing Officer had not considered this approval for granting the deduction. The Tribunal noted that the duty of the Income Tax Officer is to apply relevant provisions to determine the true taxable income, and thus the additional grounds should be admitted and adjudicated. 3. Examination of the Duty of the Income Tax Officer: The Tribunal emphasized that it is the duty of the Income Tax Officer to apply the relevant provisions of the Income-tax Act to determine the true figure of the assessee's taxable income and consequential tax liability. This duty persists even if the assessee fails to claim a particular deduction. The Tribunal cited cases like Kedarnath Jute Mfg. Co. Ltd. v. CIT and Mahalaxmi Sugar Mills Co. Ltd. v. CIT to support this view. 4. Powers of the Appellate Authority in Admitting New Grounds: The Tribunal referred to judgments of the Hon'ble Apex Court in Jute Corpn. India Ltd. v. CIT and National Thermal Power Co. Ltd. v. CIT, which establish that the Appellate Authority has all the powers of the original authority and can admit new grounds if satisfied that they could not have been raised earlier due to bona fide reasons. The Tribunal also noted the Delhi High Court's ruling in CIT v. Jai Parabolic Springs Ltd., which held that the Tribunal can entertain additional grounds for a just decision. Conclusion and Directions: The Tribunal found that the assessee had filed the approval for exemption under section 80IB(7)(b) before the Assessing Officer, but the claim was not examined. The Tribunal noted that the percentage of deduction under sections 80IB(7)(a) and 80IB(7)(b) depends on the location of the hotel, and different prescribed authorities are involved in granting approvals under these sections. Considering these factors and the approval obtained for section 80IB(7)(b), the Tribunal set aside the order of the CIT(A) and remanded the matter to the Assessing Officer for fresh adjudication. The appeal of the assessee was allowed for statistical purposes.
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