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2017 (2) TMI 679 - HC - Income TaxClaim for deduction under Section 80 IB(7) - lack of approval by Competent Authority - Held that - Tribunal has observed that Assessee did not pursue matter diligently before Competent Authority and, therefore, cannot get any advantage if it has not been able to obtain approval from Competent Authority. In our view, approach of Tribunal in this regard is neither justified nor sustainable in law. Under the statute, i.e., Section 80 IB(7)(c) deduction under Clause (a) or (b), as the case may be, would be applicable only if hotel is for the time being approved by Prescribed Authority. Authority has been prescribed under Rule 18 BBC. For attracting deduction under Clause (b) it is only one authority, namely, Director General in the Directorate of Tourism, Government of India but for attracting deduction under Clause (a), Competent Authority is Director General, Income Tax (Exemptions), who has to act upon with concurrence of Director General in the Directorate of Tourism, Government of India. The Director General in the Directorate of Tourism, Government of India, admittedly had granted approval and for that reason benefit of deduction under Clause (b) has been allowed by Revenue Authorities to Assessee. In order to attract Clause (a), no decision has been taken by Director General, Income Tax (Exemptions) though application has been filed by Assessee in this regard in 2002. Competent Authority for granting approval is an officer of Income Tax Department itself. Assessee has neither any administrative control nor otherwise can compel said authority to act within a particular time and in a particular manner. It is the authority of Revenue itself, who has to grant approval. For own lethargy or inaction on the part of an officer of Income Tax Department, a deduction which otherwise may be available to Assessee, cannot be denied since it is not a case where Assessee is disqualified being ineligible for such deduction but question of approval is pending before Competent Authority, who is a senior officer of Income Tax Department and has not been able to get enough time to take a decision on the application filed by Assessee on 28.08.2002. Observations of Tribunal that Assessee did not pursue matter are unwarranted for the reason that whatever could have been done by Assessee, it has done by submitting application and rest is the job of departmental authority, specified in Rule 18 BBC. We, therefore, answer the substantial question of law involved in Assessee s appeals in its favour and hold that it was inappropriate and illegal on the part of Director General, Income Tax (Exemptions) not to take a decision on Assessee s application filed for seeking approval as required under Section 80 IB(7)(c). Tribunal in upholding denial of deduction to Assessee ignoring the fact that application seeking approval submitted by Assessee is still pending for consideration before Competent Authority, has committed manifest error. Section 80A application - Held that - In the present case, Assessee claimed deduction under a provision in Chapter VIA and in the return also it claimed deduction with reference to Section 80 IB(7) but sub-clause mentioned was (a) and not (b). Sub-clause (a) talks of a larger degree of deduction and if that was not admissible a smaller degree of deduction, under same section but in another sub-clause could have been allowed. Here it cannot be said that Assessee had not claimed any deduction whatsoever in return, therefore, is not entitled in view of Section 80 A. We have no hesitation in holding that in the present case Section 80 A has no application. We are not impressed that while declining exemption under Section 80 IB(7)(a) for want of approval by Competent Authority, Tribunal has erred in law in confirming order of CIT(A) in allowing deduction under Section 80 IB(7)(b) of Act, 1961. Therefore, the questions formulated in appeals filed by Revenue are answered against it. Concerned authority under Section 80 IB(7)(c)(iii) of Act, 1961 read with Rule 18 BBC of Rules, 1962 is directed to take a final decision on Assessee s application for grant of approval within a period of two months from the date of production of a certified copy of this order. In case approval is granted, Assessing Authority shall reconsider the matter in the light of aforesaid approval with regard to deduction under Section 80 IB(7)(a) and pass appropriate order in accordance with law.
Issues Involved:
1. Whether the Tribunal's finding regarding the appellant's pursuit of approval under Section 80-IB (7)(a) is perverse. 2. Whether the Tribunal was justified in dismissing the department's appeal and confirming the CIT(A)'s order when the assessee did not claim deduction under Section 80-IB (7)(b) in its return or by filing a valid revised return. 3. Whether the Tribunal was justified in confirming the CIT(A)'s order directing the Assessing Officer to give the deduction under Section 80-IB (7)(b). 4. Whether the Tribunal was justified in confirming the CIT(A)'s order which allegedly traveled beyond the statutory provision of Chapter VIA under Section 80A (5). Detailed Analysis: Issue 1: Tribunal's Finding on Appellant's Pursuit of Approval under Section 80-IB (7)(a) The Tribunal's observation that the appellant did not diligently pursue the approval from the Director General of Income Tax under Section 80-IB (7)(a) was challenged. The Court found this approach unjustified, noting that the appellant had submitted the necessary application in 2002 and had made subsequent representations. The delay was attributed to the inaction of the prescribed authority, an officer of the Income Tax Department, rather than any fault of the appellant. The Tribunal was criticized for not directing the authority to decide on the application within a specific timeframe. The Court held that the appellant should not be penalized for the authority's lethargy. Issue 2: Justification of Tribunal in Dismissing Department's Appeal Regarding Deduction under Section 80-IB (7)(b) The Revenue argued that the deduction under Section 80-IB (7)(b) should not have been allowed since the assessee did not claim it in the return or through a revised return, as required by Section 80A (5). The Court noted that the assessee had claimed a deduction under Section 80-IB (7)(a), which covers a higher percentage of deduction. The difference between clauses (a) and (b) pertains to the percentage of deduction, not the eligibility for deduction itself. The Court found that the assessee had indeed claimed a deduction under Chapter VIA, and the mere difference in the sub-clause cited did not invalidate the claim. The Tribunal's decision to allow the deduction under Section 80-IB (7)(b) was upheld. Issue 3: Tribunal's Confirmation of CIT(A)'s Order Directing Deduction under Section 80-IB (7)(b) The Court examined whether the CIT(A)'s direction to the Assessing Officer to grant the deduction under Section 80-IB (7)(b) was beyond statutory provisions. It was concluded that since the assessee had claimed a deduction under Section 80-IB (7) and the only issue was the percentage of deduction, the CIT(A)'s direction was not beyond the statutory provisions. The Tribunal's confirmation of this order was deemed appropriate. Issue 4: Tribunal's Confirmation of CIT(A)'s Order Beyond Statutory Provision of Chapter VIA under Section 80A (5) The Revenue's reliance on the Supreme Court decision in Goetze (India) Ltd. was found inapplicable. The Court distinguished the present case, noting that the assessee had claimed a deduction under Section 80-IB (7) in the return, albeit under a different sub-clause. The Tribunal's decision to allow the deduction under Section 80-IB (7)(b) was found to be in line with the statutory provisions, and Section 80A (5) did not preclude the allowance of the deduction since the claim was made under the relevant chapter. Conclusion: The appeals by the assessee were partly allowed, directing the authority to decide on the pending approval application within two months. The appeals by the Revenue were dismissed, affirming the Tribunal's decisions that upheld the deductions under Section 80-IB (7)(b) and addressed the procedural aspects of the assessee's claims. The Court clarified that the assessee could seek further legal remedies if the approval was denied.
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