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2020 (8) TMI 757 - AT - Income TaxEligibility of deduction u/s 80ID - five year tax holiday to new hotels of two, three and four star categories and convention centers - AO has established that existing hotel building which was first given on rent for hotel business and then it was sold to the assessee thus the assessee had wrongly claimed deduction u/s 80ID - whether assessee commenced already established business by way of transfer to a new business of a building previously used as a hotel? - HELD THAT - Construction of the Hotel Rai Mahal was prior to April, 2008 and the earlier Hotel Rani Mahal was functioning till 04.10.2008. The business (Hotel SIRIS 18 AGRA) is formed by the leased agreement between the assessee and Bharti Sehgal which was thereafter sold by Bharti Sehgal to the assessee 08.06.2009. The assessee claimed the deduction from A.Y. 2009-10 till 2012-13. The assessee thus has commenced already established business by way of transfer to a new business of a building previously used as a hotel. The case laws submitted by the assessee are not on the issue of Section 80ID eligibility as the conditions/criteria are different in Section 80IA, 80IB deductions. The case laws are on different factual aspects and hence not applicable in the present case. CIT(A) also reiterated the same facts and correctly confirmed the Assessment order. There is no need to interfere with the observations made by the CIT(A) as the CIT(A) has given a detail finding after going through the facts and applying the provisions of Section 80ID of the Act, in assessee s case for non-eligibility of the deduction. Thus, appeal of the assessee is dismissed.
Issues Involved:
1. Disallowance of deduction under Section 80ID of the Income Tax Act. 2. Compliance with conditions specified under Section 80ID. 3. Formation of business by splitting, reconstruction, or transfer of an existing business. Detailed Analysis: 1. Disallowance of Deduction under Section 80ID: The primary issue in this appeal is the disallowance of a deduction amounting to ?56,03,969 under Section 80ID of the Income Tax Act. The assessee, engaged in the business of running hotels, claimed this deduction for profits derived from Hotel SIRIS 18 Agra. The Assessing Officer disallowed this claim, and the CIT(A) affirmed the disallowance. 2. Compliance with Conditions Specified under Section 80ID: The assessee argued that they complied with all the conditions specified under Section 80ID, which allows a deduction of 100% of profits derived from the business of hotels for five consecutive assessment years. The conditions include: - The hotel must be located in a specified district with a World Heritage Site or classified as a two-star, three-star, or four-star hotel. - The hotel must have been constructed and started functioning between April 1, 2008, and March 31, 2013. - The business must not be formed by splitting up or reconstructing an existing business. - The business must not be formed by transferring machinery or plant previously used for any purpose. - The business must not be formed by transferring a building previously used as a hotel or convention center. The assessee contended that they met these conditions and that the deduction should be allowed. They further argued that the exemption is property or business-specific, not assessee-specific, and should be available even if the property or operations are transferred. 3. Formation of Business by Splitting, Reconstruction, or Transfer of an Existing Business: The Assessing Officer and the CIT(A) found that the assessee violated the provisions of Section 80ID. The hotel in question, initially named Hotel Rani Mahal, was constructed before April 2008 and was operational until October 2008. The property was leased to the assessee in October 2008 and later sold to them in June 2009. The authorities concluded that the business was formed by transferring a building previously used as a hotel, thus violating Section 80ID(3). The CIT(A) confirmed that the hotel was not a new undertaking but a continuation of an existing business, disqualifying it from the deduction under Section 80ID. Judgment: The tribunal upheld the CIT(A)'s decision, agreeing that the assessee did not fulfill the conditions for claiming the deduction under Section 80ID. The appeal was dismissed, and the disallowance of the deduction was affirmed. The tribunal emphasized that the formation of the business by transferring an existing hotel building disqualified it from the benefits under Section 80ID. Conclusion: The appeal was dismissed, and the disallowance of the deduction under Section 80ID was upheld due to non-compliance with the specified conditions, particularly the formation of the business by transferring an existing hotel building. The tribunal found no need to interfere with the CIT(A)'s detailed findings and observations.
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