2015 (6) TMI 281 - AT - Income Tax

Exemption claimed u/s 80 IC denied - Held that - The assessee has been granted deduction u/s 80 IC for the AY 2005- 06, 2006-07 and 2007-08. The first year of claim was the A.Y. 2005-06. The impugned AY i.e. AY 2008-09 is the fourth year of the claim. The Assessing Officers over a period of three years being assessment years 1988-89, 1989-1990 and 1990-1991 have consistently accepted the claim of the assessee for deduction under section 80-I of the Act and it would not be open for the Assessing Officer to deny the deduction under section 80-1 of the Act on the ground of non fulfillment of the conditions under section 80- 1(2) of the Act without disturbing the assessment for the assessment years relevant to the previous year in which the Unit Nos. 2 & 3 were established. Thus where relief of a tax holiday had been granted to an assessee in an initial assessment year in which the conditions for grant of tax holiday had tobe examined, denial of relief in the subsequent years would not be permissible without disturbing the assessment in the initial assessment year. See CIT vs. Delhi Patra Prakashan Ltd. 2013 (6) TMI 70 - DELHI HIGH COURT , Saurashtra Cement 1979 (2) TMI 21 - GUJARAT High Court and Paul Brothers 1992 (10) TMI 5 - BOMBAY High Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80 IC of the Income Tax Act.
2. Classification of the hotel under eco-tourism for the purposes of Section 80 IC.
3. Consistency in granting deductions in subsequent years after initial approval.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80 IC:
The primary issue is the disallowance of Rs. 11,31,190/- claimed by the assessee under Section 80 IC of the Income Tax Act for the Assessment Year (AY) 2008-09. The Assessing Officer (AO) denied the exemption based on several grounds, including the lack of eco-tourism promotion by the hotel, the use of conventional energy sources, and the absence of environmental conservation measures. The AO initiated penalty proceedings for furnishing inaccurate particulars and concealing income.

2. Classification of the Hotel under Eco-Tourism:
The authorities contended that the hotel did not fall under the ambit of eco-tourism, which is a prerequisite for availing deductions under Section 80 IC. The AO observed that the hotel did not engage in activities promoting eco-tourism, such as investment in environmental conservation, use of non-conventional energy resources, water recycling, or waste treatment. Additionally, the hotel was found to use energy-intensive appliances and disposable materials, further disqualifying it from being considered an eco-tourism unit.

3. Consistency in Granting Deductions in Subsequent Years:
The assessee argued that the AO had granted deductions under Section 80 IC for the AYs 2005-06, 2006-07, and 2007-08, and therefore, should not re-examine the claim for the AY 2008-09. The Tribunal referred to the case of ITO vs. M/s Ganga Beach Resorts, which established that once a deduction is allowed in the initial year, the AO cannot take a contrary view in subsequent years without disturbing the initial assessment. The Tribunal cited the Delhi High Court's decision in CIT vs. Delhi Patra Prakashan Ltd., emphasizing that the conditions for deduction must be satisfied in the initial year and cannot be re-evaluated in subsequent years unless the initial assessment is altered.

Conclusion:
The Tribunal concluded that the AO could not deny the deduction under Section 80 IC for the AY 2008-09, as the deduction had been consistently allowed in previous years without any disturbances in the assessments. The Tribunal directed the AO to grant the deduction, aligning with the principle of finality in legal proceedings and consistency in tax assessments. The appeal of the assessee was allowed for statistical purposes, and the order was pronounced in the open court on 13th May 2015.