M/s M.K Hotels & Resorts Ltd, Amritsar. v. The Assistant Commissioner of Income Tax, Amritsar.

ITA 746/ASR/2014 | 2006-2007
Pronouncement Date: 28-10-2016 | Result: Allowed

Appeal Details

RSA Number 74620914 RSA 2014
Assessee PAN AABCM0913G
Bench Amritsar
Appeal Number ITA 746/ASR/2014
Duration Of Justice 1 year(s) 10 month(s) 16 day(s)
Appellant M/s M.K Hotels & Resorts Ltd, Amritsar.
Respondent The Assistant Commissioner of Income Tax, Amritsar.
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 28-10-2016
Date Of Final Hearing 20-09-2016
Next Hearing Date 20-09-2016
Assessment Year 2006-2007
Appeal Filed On 12-12-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY JUDICIAL MEMBER ITA NOS.745 746 & 747(ASR)/2014 ASSESSMENT YEARS:2005-06 2006-07 & 2009-10 PAN : AABCM0913G M/S. M.K. HOTELS & RESORTS LTD. VS. ASSTT. COMMR. OF INCOME TAX RANJIT AVENUE AMRITSAR. CIRCLE-5 AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. PADAM BAHL CA RESPONDENT BY: SH. RAHUL DHAWAN DR DATE OF HEARING: 20/09/2016 DATE OF PRONOUNCEMENT: 28/10/2016 ORDER PER T.S. KAPOOR AM: THESE ARE THREE APPEALS FILED BY THE ASSESSEE AG AINST THE SEPARATE ORDERS OF THE LD. CIT(A) AMRITSAR ALL DATED 03.09 .2014 FOR THE ASSESSMENT YEARS 2005-06 2006-07 & 2009-10 RESPEC TIVELY. 2. IN THE ASSESSMENT YEARS 2005-06 & 2006-07 THE A SSESSEE HAS TAKEN GROUND NO.1 AGAINST REOPENING OF THE CASES U NDER SECTION 148 OF THE INCOME TAX ACT ( IN SHORT THE ACT) 1961 WHEREAS NO SUCH GROUND HAS BEEN TAKEN IN THE ASSESSMENT YEAR 2009-10. 3. IN GROUND NO.2 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) ON ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 2 MERITS U/S 80IB OF THE ACT WHEREAS IN GROUND NO.1 FOR THE ASSESSMENT YEAR 2009-10 THE ASSESSEE HAS CHALLENGED THE DISAL LOWANCE ON MERITS. 4. AT THE OUTSET THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REOPENING OF THE CASES FOR THE ASSESSMENT YEARS 200 5-06 & 2006-07 WERE NOT AS PER LAW AS THE PERIOD OF FOUR YEARS H AD ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEARS FOR WHICH THE CASE S WERE REOPENED AND THEREFORE THE REOPENING WAS HIT BY THE PROVISO TO SECTION 147 OF THE ACT. IN THIS RESPECT HE RELIED UPON A NUMBER OF CASE LA WS FOR THE PROPOSITION THAT THE REOPENING UNDER SECTION 147 AFTER FOUR YE ARS WHERE THERE IS NO FAILURE ON THE PART OF THE ASSESSEE WAS NOT LEGAL. RELIANCE HAS BEEN PLACED ON THE FOLLOWING CASE LAWS: I) FENNER (INDIA) LTD. VS. DCIT REPORTED AT 268 I TR 203 (BOM) 2) ICICI BANK LTD. VS. K.J. RAO DCIT REPORTED AT 2 68 ITR 203 (BOM.) 3) CIT VS. INDIAN FARMARS FERTILIZER CO-OP. LTD. RE PORTED IN 171 TAXMAN 379 (DELHI) 5. AS REGARDS THE MERITS OF THE CASE THE LD. COUN SEL FOR THE ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE WAS SQUAREL Y COVERED IN ITS FAVOUR BY THE DECISION OF THE ITAT COCHIN BENCH IN THE CASE OF M/S. KUMARAKOM LAKE RESORT PVT. LTD. KOCHI VS. ACIT IN ITA NO.240- 242/COCH/2015 DATED 01.03.2016 AND HE INVITED OUR A TTENTION TO PB 13 TO 27 WHERE A COPY OF SUCH ORDER WAS PLACED. THE L D. COUNSEL FOR THE ASSESSEE PARTICULARLY DREW OUR ATTENTION TO PARA 9 .5 ONWARDS OF THE SAID ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 3 ORDER OF THE TRIBUNAL AND SUBMITTED THAT THE TRIBUN AL HAS HELD THAT CATERING INCOME IS A PART OF FOOD AND BEVERAGE REVE NUE OF THE HOTEL AND THEREFORE THE ASSESSEE WAS RIGHTLY ELIGIBLE FOR D EDUCTION U/S 80IB OF THE ACT. 6. THE LD. DR ON THE OTHER HAND SUBMITTED THAT TH E ASSESSEE HAD NOT FULLY DISCLOSED THE MATERIAL NECESSARY FOR COMP LETION OF ASSESSMENT ALONGWITH ITS RETURN OF INCOME THEREFORE THE PROV ISO TO SECTION 147 IS NOT APPLICABLE TO THE ASSESSEES CASE. HE FURTHER S UBMITTED THAT IF DURING ASSESSMENT PROCEEDINGS THE A.O. FOUND SOMETHING AFT ER DUE PROCESS OF QUESTIONING THE ASSESSEE CANNOT BE SAID TO HAVE DISCLOSED FULL AND TRUE PARTICULARS OF HIS INCOME. TO SUPPORT HIS CONTENTIO NS HE RELIED ON THE FOLLOWING CASE LAWS: I) DEV SON (P) LTD. VS. UNION OF INDIA 56 TAXMAN 122 (J & K) II) BANCHHANIDHI DASS VS. ITO & ORS 229 ITR 166 ( ORISSA) 7. AS REGARDS THE RELIANCE OF THE LD. COUNSEL FOR T HE ASSESSEE ON THE MERITS IN THE CASE OF M/S. KUMARAKOM LAKE RESORT P VT. LTD. KOCHI (SUPRA) (ITAT COCHIN BENCH) THE LD. DR STRONGLY R ELIED UPON THE ORDER OF THE LD. CIT(A). 8. IN THE REJOINDER THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAD DISCLOSED TRULY AND FULLY ALL MATERIAL FACTS WHI CH ARE APPARENT FROM THE FACT THAT THE ASSESSEE HAD DECLARED INCOME FROM CAT ERING BUSINESS AND HAD CLAIMED REFUND ON TDS DEDUCTED BY THE PARTIES A ND IN THIS RESPECT ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 4 OUR ATTENTION WAS INVITED TO COPY OF COMPUTATION PL ACED AT PB 1 TO 4 WHERE THE ASSESSEE HAD SPECIFICALLY MADE A CLAIM OF TDS AGAINST THE TAX DUE. THE LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION TO A COPY OF BALANCE SHEET PLACED AT PB 5 TO 37 AND FURTHER OUR ATTENTION WAS INVITED TO PB 34 TO 37 TO HIGHLIGHT THAT THE ASSESS EE HAD DECLARED THE PERSONS ON WHOSE BEHALF CATERING BUSINESS WAS DONE AS ITS DEBTORS AND THE SAID INFORMATION WAS AVAILABLE WITH THE AO AT T HE TIME OF ORIGINAL ASSESSMENT. THEREFORE IT WAS ARGUED THAT ALL NECES SARY MATERIAL EVIDENCE WAS AVAILABLE WITH THE A.O. AND NOTHING WAS CONCEAL ED AS SUCH THE PROVISO TO SECTION 147 OF THE ACT CLEARLY HIT THE REOPENING OF THE CASES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE PROVISO TO SE CTION 147 OF THE ACT CLEARLY STATES THAT THE AO IS NOT EMPOWERED TO REOP EN THE CASE AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 142(1) OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESS MENT YEAR. FROM THE DOCUMENTS HIGHLIGHTED BY THE LD. COUNSEL FOR THE AS SESSEE WE FIND THAT AT PAGES 2 & 4 FOR THE ASSESSMENT YEARS 2005-06 & 2 006-07 THE ASSESSEE HAD SPECIFICALLY MADE A CLAIM FOR TAX DEDU CTED AT SOURCE BY THE PARTIES TO WHOM CATERING SERVICES WERE PROVIDED. F URTHER WE FIND THAT ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 5 TDS CERTIFICATES ISSUED BY THESE PARTIES ARE PLACED AT PB 38 TO 55 WHICH CLEARLY INDICATE THAT THE ASSESSEE ACTED AS A CONTR ACTOR. THESE TDS CERTIFICATES ALONGWITH COMPUTATION OF INCOME WERE A VAILABLE WITH THE AO IN THE FORM OF ANNEXURES WITH THE RETURNS OF INCOME AND FURTHER WE FIND THAT THE ASSESSEE HAD DECLARED THESE PARTIES AS THE IR DEBTORS WHICH IS ALSO APPARENT FROM PB 34 TO 37. THESE LISTS OF CRE DITORS ALSO FORMED PART OF FINAL ACCOUNT OF THE ASSESSEE WHICH WAS AVAILAB LE TO THE AO AS ANNEXURE WITH THE RETURN OF INCOME. WE FURTHER FIND FROM THE PROFIT & LOSS ACCOUNT PLACED AT PB 24 THAT THE ASSESSEE HAD CLEARLY DECLARED OUTDOOR CATERING CHARGES AS ITS INCOME. THEREFORE FROM THESE FACTS IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. AS SUCH IT IS OBVIOUS THAT THE REOPENING IN THE PRESENT CASES WAS HIT BY THE PROVI SIONS OF SECTION 147 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION THE GRIEV ANCE OF THE ASSESSEE IS JUSTIFIED AND ACCORDINGLY GROUND NO.1 FOR THE ASSE SSMENT YEARS 2005-06 & 2006-07 ARE ALLOWED. 10. AS REGARDS THE MERITS OF THE CASE WE FIND THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT AND PROF ITS OF THE ASSESSEE INCLUDED INCOME FROM CATERING BUSINESS. THE AO DUR ING REASSESSMENT PROCEEDINGS DISALLOWED A PART OF DEDUCTION U/S 80IB OF THE ACT ON ACCOUNT OF INCOME FROM CATERING BUSINESS HOLDING TH AT SUCH INCOME WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IB. HOWEVER THE ITAT. COCHIN BENCH IN THE CASE OF M/S. KUMARAKOM LAKE RESORT PVT. LTD. KO CHI VS. ACIT IN ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 6 ITA NO.240-242/COCH/2015 VIDE ITS ORDER DATED 01.0 3.2016 HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE CATERING INCOME WAS NECESSARILY A PART OF PROFITS O F THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. FOR THE SAKE OF CONVENIENCE THE RELEVANT FINDINGS OF THE ORDER OF THE TRIBUNAL ARE REPRODUCED AS UNDER: 9.5. THE INSTITUTE OF CHARTERED ACCOUNTANTS OF IND IA (ICAI) HAS PRESCRIBED TECHNICAL GUIDE ON AUDIT IN HOTEL INDUS TRY. THE GUIDE PROVIDES FOR KEY REVENUE GENERATION ACTIVITIES IN C ASE OF HOTEL INDUSTRY WHICH HAS BEEN DETAILED AS FOLLOWS:- ROOM REVENUE; RETENTION CHARGES - DUE TO CANCELLATION; FOOD AND BEVERAGE (F&B) REVENUE FROM RESTAURANTS; F&B REVENUE FROM MINI BAR; F&B REVENUE FROM BANQUETS; HALL HIRE FROM BANQUETS. COMMUNICATION REVENUE (BOTH TELEPHONE & INTERNET); DISPOSAL OF EMPTIES/SALE OF SCRAP CAR HIRE INCOME; BUSINESS CENTRE REVENUE; ARCADE REVENUES; HEALTH CLUB/CLUB UE/SPA/BEAUTY PARLOUR REVENUES; LAUNDRY REVENUES; HOUSEKEEPING BILLS; 9.6 AS PER GENERALLY ACCEPTED UNIFORM SYSTEM OF ACC OUNTING FOLLOWED BY HOTEL INDUSTRIES IN INDIA REVENUE IS DI VIDED INTO FOUR CATEGORIES AS FOLLOWS:- PARTICULARS AMOUNT REVENUE: I) ROOMS XXX II) FOOD AND BEVERAGES XXX III)OTHER OPERATED DEPARTMENTS XXX IV)RENTALS AND OTHER INCOME XXX FOOD AND BEVERAGES REVENUE SHALL INCLUDE THE FOLLOW ING:- PARTICULARS AMOUNT FOOD AND BEVERAGE REVENUE: OUTLET FOOD REVENUE XXX ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 7 OUTLET BEVERAGE REVENUE XXX IN-ROOM DINING FOOD REVENUE XXX IN-ROOM DINING BEVERAGE REVENUE XXX BANQUET/CATERING FOOD REVENUE XXX BANQUET/CATERING BEVERAGE REVENUE XXX MINI BAR FOOD REVENUE XXX MINI BAR BEVERAGE REVENUE XXX OTHER FOOD REVENUE XXX OTHER BEVERAGE REVENUE XXX LESS:ALLOWANCES (XXX) RENTALS AND OTHER INCOME SHALL INCLUDE THE FOLLOWIN G:- PARTICULARS AMOUNT SPACE RENTAL AND CONCESSIONS XXX COMMISSIONS XXX CANCELLATION PENALTIES XXX GUEST LAUNDRY AND DRY CLEANING XXX 9.7 THE OTHER INCOME EARNED BY THE ASSESSEE AND THE GROUPING UNDER THE KEY REVENUE GENERATION CATEGORY CAN BE SU MMARIZED IN THE BELOW TABLE: SI. NO. OTHER INCOME RECEIVED BY THE COMPANY KEY REVENUE GENERATION CATEGORY AS PER THE ICAI GUIDELINES AND UNIFORM SYSTEM OF ACCOUNTING 1. RENT RECEIVED FROM HERIT AGE SHOP SPACE RENTALS ARCADE REVENUE HOUSEKEEPING BILLS. 2. RENT RECEIVED FOR SPACE AND AMENITIES GIVEN TO M/S. KUMARAKOM WATER TRANSPORT PVT. LTD. 3. REVENUE FROM STAFF MESS USED BY THE GUEST DRIVERS FOOD AND BEVERAGES 4. REVENUE FROM TELEPHONE USE D BY STAFF COMMUNICATIONS REVENUE(BOTH TELEPHONE AND INTERNET) 5. INCOME FROM CLUB CULTURAL PROGRAMS/DJ/ETC. CLUB USE REVENUE ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 8 6. INCOME FROM SALE OF USED PACKING MATERIALS RECOVERY OF MATERIAL DAMAGE FROM STAFF ETC. DISPOSAL OF EMPTIES/SALE OF SCRAP THUS IT CAN BE SEEN FROM THE ABOVE THAT RENT RECEI VED BY THE ASSESSEE OF RS. 180 000/- FROM HERITAGE SHOP WHICH REPRESENTS RENTAL INCOME FROM CURIO SHOP AND OF RS. 120 000/- FOR THE SPACE AND AMENITIES GIVEN TO KUMARAKOM WATER TRANSPORT PV T. LTD. WILL FALL WITHIN THE KEY REVENUE GENERATION CATEGORY OF 'SPACE RENTALS' AND 'ARCADE REVENUE' AND 'HOUSEKEEPING BILL' FOR A HOTEL INDUSTRY. REVENUE FROM STAFF MESS OF RS.7 139/- WILL ALSO FAL L WITHIN THE KEY REVENUE GENERATION CATEGORY OF 'FOOD AND BEVERAGES' FOR A HOTEL INDUSTRY. REVENUE FROM STAFF TELEPHONE OF R.90 048/ - WILL FALL WITHIN THE KEY REVENUE CATEGORY OF 'COMMUNICATION R EVENUE (BOTH TELEPHONE & INTERNET)' AS PER ICAI GUIDELINES. INCO ME FROM CLUB CULTURAL PROGRAM/DJ OF RS.475 216/- WILL FALL WITHI N THE KEY REVENUE GENERATION CATEGORY OF CLUB USE REVENUE. FU RTHER THE SALE OF USED PACKING MATERIALS RECOVERY OF MATERIAL DAM AGE FROM STAFF ETC. WILL FALL WITHIN THE KEY REVENUE CATEGORY OF ' DISPOSAL OF EMPTIES/SALE OF SCRAP' AS PER THE ICAI GUIDELINES. THUS IT CAN BE SEEN THAT THE OTHER INCOME EARNED BY THE ASSESSEE C OMPANY WOULD FALL WITHIN THE AMBIT OF KEY REVENUE GENERATING ACT IVITY IN CASE OF A HOTEL INDUSTRY AND ACCORDINGLY HAS A DIRECT NEXUS WITH THE HOTEL BUSINESS OF THE UNDERTAKING. 9.8 THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCT ION U/S. 80- IB(7)(A) OF THE ACT TOWARDS 'OTHER INCOME' ON THE C ONTENTION THAT THE ASSESSEE IN THE BOOKS OF ACCOUNT HAS TERMED IT AS 'OTHER INCOME' AND ACCORDINGLY THE SAME IS NOT DERIVED F ROM THE BUSINESS OF THE ASSESSEE. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD. VS. CIT (8 2 ITR 363) HAS HELD THAT 'WHETHER THE ASSESSEE IS ENTITLED TO A PARTIC ULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF ITS RIGHT NOR CAN THE EXISTE NCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER.' IN VIEW OF JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO . LTD. VS. CIT (SUPRA) IT IS VERY CLEAR THAT THE ASSESSEE WOULD B E ENTITLED TO ELIGIBLE DEDUCTION IRRESPECTIVE OF THE MANNER IN W HICH THE ENTRIES IN THE BOOKS OF ACCOUNT ARE MAINTAINED. 9.9 THE HIGH COURT OF MADRAS IN THE CASE OF FENNER (INDIA) LTD. VS. CIT (125 TAXMAN 386) HAS HELD THAT 'IN THE INDUSTR IAL UNDERTAKING IN THE MANUFACTURE OF V--BELTS OIL SEATS O-RINGS AND RUB BER MOULDED PRODUCTS CERTAIN SCRAP MATERIALS RESULTED WHICH HAVE A SALEABLE VALUE. TO SAY THAT THE SCRAP MATERIALS HAD NO ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 9 DIRECT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKIN G CANNOT AT ALL BE EXPECTED TO COMMEND ACCEPTANCE ESPECIALLY ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. IN THIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT PR OFITS AND GAINS FROM THE SALE OF SCRAP MATERIALS ARE ELIGIBLE FOR DEDUCTION IN AN AMOUNT E QUAL TO 20 PER CENT U/S. 80HH IN AS MUCH AS SUCH GAINS OR PROFITS ARE DERIVED FROM THE INDUSTRIAL UNDERTAKING AND INCLUDIBLE IN THE GROSS TOTAL INCOME OF THE ASSESSEE AND THE Q UESTION RELATABLE TO THE PROFIT ON THE SALE OF SCRAP IS THUS ANSWERED IN FAVOUR OF THE ASSESS EE.' THE DELHI HIGH COURT IN THE CASE OF CIT VS. SADHU FORGING LTD. (11 TAXMANN .COM 322) HAS HELD THAT 'KEEPING IN VIEW THE ACTIVITIES OF THE ASSES SEE IN GIVING HEAT TREATMENT FOR WHICH IT HAD EARNED LABOUR CHARGES AND JOB-WORK CHARGES IT CAN THUS BE SAID THAT THE APPELLANT HAD DONE A PROCESS ON THE RAW MATERIAL WHICH WAS NO THING BUT A PART AND PARCEL OF THE MANUFACTURING PROCESS OF THE INDUSTRIAL UNDERTAKING . THESE RECEIPTS CANNOT BE SAID TO BE INDEPENDENT INCOME OF THE MANUFACTURING ACTIVITIES OF THE UNDERTAKINGS OF THE ASSESSEE AND THUS COULD NOT BE EXCLUDED FROM THE PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80-IB. THESE WERE GAINS DERIVED FROM INDUSTRIAL UNDERTAKINGS AND SO ENTITLE D FOR THE PURPOSE OF COMPUTING DEDUCTION U/S. 80-IB. THERE CANNOT BE ANY TWO OPINI ONS THAT MANUFACTURING ACTIVITY OF THE TYPE OF MATERIAL BEING UNDERTAKEN BY THE ASSESS EE WOULD ALSO GENERATE SCRAP IN THE PROCESS OF MANUFACTURING. THE RECEIPTS OF SALE OF S CRAP BEING PART AND PARCEL OF THE ACTIVITY AND BEING PROXIMATE THERETO WOULD ALSO BE WITHIN TH E AMBIT OF GAINS DERIVED FROM INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF COMPUTING DEDUCTING U/S. 80-IB.' 9.10 IN THE INSTANT CASE THE FOLLOWING INCOME WHIC H HAS BEEN CLASSIFIED AS 'OTHER INCOME' IN THE BOOKS OF ACCOUN T:- 1. RENT RECEIVED FROM HERITAGE SHOP. 2. RENT RECEIVED FOR THE SPACE AND AMENITIES GIVEN TO KUMARAKOM WATER TRANSPORT PVT. LTD. 3. REVENUE FROM STAFF MESS USED BY GUEST DRIVERS. 4. REVENUE FROM TELEPHONE USED BY STAFF. 5. INCOME FROM CLUB CULTURAL PROGRAMS/DJ ETC. 6. INCOME FROM SALE OF USED PACKING MATERIALS RECO VERY OF MATERIAL DAMAGE FROM STAFF ETC. WOULD QUALIFY AS INCOME DERIVED FROM SPECIFIED BUSI NESS CONSIDERING THE FACT THAT THERE IS A DIRECT NEXUS AND A PROXIMA TE CONNECTION WITH THE BUSINESS OF THE ASSESSEE. THE 'OTHER INCOME' AS MENTIONED ABOVE IS NOT EARNED FROM A SEPARATE COST AND PROFIT CENTR E BUT IS DERIVED FROM THE MAIN PROFIT CENTRE OF HOTEL INDUSTRY ITSEL F. THE SOURCE OF THE PROFITS OF THE 'OTHER INCOME' AS MENTIONED ABOVE CO NTINUES TO BE THE BUSINESS PROFITS FROM THE HOTEL INDUSTRY AND THERE IS NO OTHER COMMERCIAL ACTIVITY WHICH IS CARRIED ON BY THE ASSE SSEE. 9.11 MOREOVER SECTION 80IB(7)(A) STATES THAT 50% O F THE PROFITS AND GAINS DERIVED FROM THE BUSINESS OF SUCH HOTEL. IN T HIS CONTEXT ALSO IT CAN BE STATED THAT THE TERM 'PROFITS AND GAINS DERI VED FROM THE ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 10 BUSINESS OF SUCH HOTEL' HAS WIDER MEANING THAN THE TERM 'PROFITS AND GAINS DERIVED FROM AN UNDERTAKING'. WE HAVE MENTION ED IN THE EARLIER PARAGRAPHS WITH REFERENCE TO THE ICAI AUDIT GUIDELINES THAT THESE ARE RECEIPTS DIRECTLY ON ACCOUNT OF RUNNING O F THE HOTEL BUSINESS AND IT IS NOT INCIDENTAL/ANCILLARY INCOME AND THEREFORE THESE RECEIPTS THOUGH TERMED AS 'OTHER INCOME' IS E NTITLED TO THE BENEFIT OF DEDUCTION U/S. 80IB OF THE ACT. HENCE T HE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR THE ASSESSMENT YEAR 2007-0 8. 9.12 THE DETAILS OF THE 'OTHER INCOME' FOR THE ASSE SSMENT YEARS 2008- 09 AND 2010-11 ARE AS FOLLOWS:- AY 2008-09 SI. NO. PARTICULARS NATURE OF INCOME AMOUNT (INR) 1. INTEREST INCOME INTEREST ON FIXED DEPOSIT FROM SIB 89 915 2. REVENUE FROM STAFF MESS REVENUE FROM STAFF MESS USED BY THE GUEST DRIVERS 2 121 5 REVENUE FROM STAF F TELEPHONE REVENUE FROM TELEPHONE USED BY STAFF 65 340 6 MISCELLANEOUS INCOME INCOME FROM CLUB CULTURAL PROGRAMME/DJ/ETC. 774 657 7. OTHER MISCELLANEOUS INCOME INCOME FROM SALE OF USED PACKING MATERIALS RECOVERY OF MATERIAL DAMAGE FROM STAFF ETC 254 795 8. REFUND INTEREST RECEIVED ON INCOME TAX REFUND 86 363 TOTAL 1 273 191 AY 2010-11 SI. NO. PARTICULARS NATURE OF INCOME AMOUNT (INR) 1. INTEREST INCOME INTEREST ON FIXED DEPOSIT FROM SIB(KUMARAKOM) 198 198 ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 11 2. RENT RECEIVED FROM M/S. KUMARAKOM WA TER TRANSPORT PVT. LTD. RENT ON SPACE AND AMENITIES GIVEN TO M/S. KUMARAKOM WATER TRANSPORT PVT. LTD. 120 000 3. REVENUE FROM STAFF MESS REVENUE FROM STAFF MESS USED BY THE GUEST DRIVERS 88 825 4. OTHER MISCELLANEOUS INCOME INCOME FROM SALE OF USED PACKI NG MATERIALS RECOVERY OF MATERIAL DAMAGE FROM STAFF ETC 85 279 5. INTEREST RECEIVED ON INCOME TAX REFUND INTEREST RECEIVED ON INCOME TAX REFUND 69 209 TOTAL 561 511 AFTER EXAMINING THE RECEIPTS FOR THE ASSESSMENT YEA R 2007-08 WE HAVE HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTIO N U/S. 80IB(7)(A) OF THE ACT. SIMILARLY IN RESPECT OF' OTHER INCOME' FOR AY'S 2008-09 AND 2010-11 EXCEPT FOR INTEREST INCOME AND INTERES T ON REFUND THE 'OTHER INCOME' ENUMERATED ABOVE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S. 80IB(7)(A). THEREFORE OUR FINDINGS AND CONCLUSIONS FOR THE ASSESSMENT YEAR 2007-08 WILL HOLD GOOD FOR THE ASSESSMENT YEAR 2008-09 AND 2010-11. IT IS ORDERED ACCORDINGLY . 10. IN THE RESULT THE APPEALS FILED BY THE ASSESSE E ARE ALLOWED. 11. WE FIND THAT IN THE ABOVE SAID CASE LAW THE HO NBLE TRIBUNAL HAD HELD VARIOUS INCOMES OF ASSESSEE OTHER THAN INTERES T AS INCOME ELIGIBLE FOR EXEMPTION U/S 80IB OF THE ACT. AS NOTED BY THE HONBLE TRIBUNAL THE ICAI HAS RECOGNIZED CATERING FOOD REVENUE AS ONE O F THE KEY REVENUE GENERATION ACTIVITIES IN THE CASE OF HOTEL INDUSTR Y. THE CATERING INCOME OF ASSESSEE HAS A DIRECT NEXUS AND PROXIMATE CONNECTI ON WITH THE BUSINESS OF ASSESSEE. THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE ITA NOS.745 746 & 747/ASR/2014 A.YS. 2005-06 2006-07 & 2009-10 12 BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KUMARAKO M LAKE RESORT PVT. LTD. KOCHI DATED 01.03.2016 (SUPRA) WE HOLD THAT INCOME FROM CATERING BUSINESS IS A PART OF INCOME OF ASSESSEE ELIGIBLE F OR DEDUCTION UNDER SECTION 80IB OF THE ACT AND THEREFORE GROUND NO.2 FOR THE ASSESSMENT YEARS 2005-06 & 2006-07 AND GROUND NO.1 FOR THE AS SESSMENT YEAR 2009-10 ARE ALLOWED. 12. IN NUTSHELL THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/10/20 16. SD/- SD/- (N.K. CHOUDHRY) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER /SKR/ DATED: 28/10/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. M.K. HOTELS & RESORTS LIMITED AM RITSAR. 2. THE ACIT CIRCLE-5 ASR. 3. THE CIT(A) ASR 4. THE CIT ASR. 5. THE SR DR ITAT AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.