2016 (6) TMI 1033 - HC - Income Tax

Benefit of deduction contemplated under Section 80-IC - whether the deduction is available in case of a hotel which does not take steps towards ecological balance? - only reason for denying the benefits is that hotel is a stand-alone hotel and not a parcel of Ecotourism activity project - Held that - Certainly, the mere procurement of a No Objection from the Pollution Control Board cannot be determinative of a question, whether the hotel fulfills the requirement under Section 80-IC of the Act. May be, it is not in dispute, in fact, according to Shri Pulak Raj Mullick that for all hotels of a particular type, satisfying a particular requirement, no objection is required from the Pollution Control Board. In this context, we bear in mind the argument of Shri H.M. Bhatia, that Pollution Control Board actually gives no objection consent to operate in the context of air and water Pollution. By no means, can this be the sole determinant of the question, as to whether the hotel is engaged in Ecotourism. Therefore, necessarily the order passed by the Tribunal cannot be sustained. The receipt of the subsidy cannot be a hurdle in our taking the view, which we are taking as we are called upon to decide the actual scope of the provision in this appeal. While we do not discount the fact that subsidy may have been given the actual interpretation of the provision is a task, which we cannot abdicate. The answer to the substantial question of law no.1 is given in favour of the revenue/appellant by holding that merely because a No Objection Certificate has been obtained from the Pollution Control Board, the conditions under Section 80-IC will not be fulfilled. - Decided against assessee

Issues Involved:
1. Availability of the benefit of deduction under Section 80-IC of the Indian Income Tax Act, 1961 for hotels in Uttarakhand.
2. Interpretation of the term "Eco-tourism" in the context of Section 80-IC.
3. Whether obtaining a No Objection Certificate (NOC) from the Pollution Control Board is sufficient to claim the deduction under Section 80-IC.
4. The relevance of geographical location and ecological measures in determining eligibility for deduction under Section 80-IC.

Issue-wise Detailed Analysis:

1. Availability of the Benefit of Deduction under Section 80-IC:
The primary issue is whether hotels set up in Uttarakhand are eligible for the deduction under Section 80-IC of the Indian Income Tax Act, 1961. Section 80-IC provides for a deduction from profits and gains derived by an undertaking or enterprise from any business referred to in sub-section (2), including operations specified in the Fourteenth Schedule, which includes "Eco-tourism including hotels, resorts, spa, entertainment/amusement parks, and ropeways."

2. Interpretation of the Term "Eco-tourism":
The interpretation of "Eco-tourism" is critical in determining eligibility for the deduction. The tribunal had previously held that hotels with a No Objection Certificate from the Pollution Control Board qualify for the deduction. However, the court emphasized that "Eco-tourism" involves responsible travel to natural areas that conserve the environment and improve the well-being of local people. The court referred to various definitions and principles, including the guidelines issued by the Ministry of Environment & Forests, which highlight the importance of low-impact tourism that protects ecological integrity and benefits local communities.

3. Sufficiency of Obtaining a No Objection Certificate (NOC):
The tribunal's view that obtaining a NOC from the Pollution Control Board suffices for claiming the deduction was challenged. The court held that merely having a NOC does not fulfill the conditions under Section 80-IC. The NOC primarily addresses air and water pollution and cannot be the sole determinant of whether a hotel qualifies as an Eco-tourism unit. The court emphasized that the hotel's operations and impact on the environment and local community are crucial factors.

4. Relevance of Geographical Location and Ecological Measures:
The court considered whether the location of the hotel (urban vs. rural) and the ecological measures taken by the hotel are relevant for eligibility. The court noted that the intention of the legislature was to promote Eco-tourism, which includes hotels that are nature-friendly and contribute to ecological balance. The court highlighted that hotels should not only be located in areas close to nature but also operate in a manner that minimizes environmental impact, provides local employment, and supports local culture and biodiversity. The court found that the tribunal did not adequately consider these factors and remanded the matter to the Assessing Officer for a fresh evaluation.

Conclusion:
The court set aside the tribunal's orders and remanded the cases to the Assessing Officer to re-evaluate the eligibility of the hotels for the deduction under Section 80-IC, considering the ecological and community impact of their operations. The court held that merely obtaining a NOC from the Pollution Control Board is insufficient to claim the deduction, and the term "Eco-tourism" must be interpreted in a manner that aligns with its intended purpose of promoting environmentally responsible tourism.

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