In the case ITA No. 4901/Del/2019 for the assessment year 2015-16, the tribunal decision favored VG Properties Pvt. Ltd., upholding the deduction under Section 80-ID against the revenue’s appeal. The case was presided over by N.K. Billaiya, Accountant Member, and Ms. Astha Chandra, Judicial Member, at the Income Tax Appellate Tribunal Delhi Bench ‘F’.
The appeal was filed by the ITO Ward-26(1), New Delhi against the order of CIT(A)-9, New Delhi which pertained to the assessment year 2015-16. The main contention was regarding the classification of receipts of Rs. 1,74,00,000/- from a revenue sharing model with M/s Highest Cruises and Entertainment Pvt. Ltd. as business income and the eligibility for deduction under section 80-ID of the Income Tax Act.
The Revenue challenged the CIT(A)’s decision, arguing that the income should be treated as ‘Income from Other Sources’ rather than ‘Business Income.’ However, the tribunal supported the assessee’s stance that the arrangement was akin to a business operation rather than mere renting out of property. The tribunal noted that the assessee engaged in significant business operations including obtaining a three-star hotel rating and promoting the hotel, which substantiates its claim as a business income.
The tribunal also highlighted the consistency in the assessee’s treatment across previous years where similar income was accepted as business income, emphasizing the principle of consistency in tax rulings. The deduction under Section 80-ID was thus upheld as the assessee met all requisite conditions.
The tribunal’s decision reaffirmed that the income derived from complex commercial arrangements involving active participation in business operations can qualify as business income, eligible for specific deductions under the Income Tax Act. This case sets a precedent in interpreting revenue sharing agreements under tax law, providing clarity on such matters.
Revenue’s Appeal Denied, Deduction Allowed Under Section 80-ID in ITA 4901/DEL/2019
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