COMMISSIONER OF INCOME TAX Vs. ITC HOTELS LTD.

JUDGEMENT

(1.) THIS appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') is directed against the order dated 31.10.2001 passed in ITA. No. 280/Bang/01 by the Income Tax Appellate Tribunal, Bangalore Bench. The Tribunal as per the order had allowed the appeal of the assessee by reversing the findings and conclusions arrived at by the Assessing Authority and the First Appellate Authority particularly, in the context of ascertainment of profits attributable to the receipts in the nature of foreign exchange receipts received by the Assessee engaged in the activity of hotelering, which activity in turn earns or fetches foreign exchange for the country. The dispute between the assessee and the revenue mainly revolves around the manner in which such profits are to be ascertained for the purpose of extending the special benefit provided as an incentive in terms of Section 80HHD of the Act, which reads as under : -

(2.) WHILE the Assessing Officer as well as the First Appellate Authority were of the view that in ascertainment of such profits attributable to the receipts in the nature of foreign exchange receipts of the assessee, which had chain of hotels, some of which were eligible and enabled to claim the benefit of Section 80HHD of the Act and some of which though had been receiving foreign exchange payments were nevertheless not getting the benefit for not having undergone the procedure in terms of sub -section (2) of Section 80HHD of the Act and therefore, there being a dispute in the manner of ascertainment of the profits attributable to the foreign exchange receipts of the assessee, the assessee's claim that such ascertainment of profits attributable to the foreign exchange receipts should be computed in terms of formula provided under sub -section (3) can only be with reference to the over all profits earned from such of the hotels which had been qualified and recognized in terms of sub -sections (1) and (2) and that the total profits earned from out of such hotels which had been qualified for the benefit under sub -section (1) is the criteria in working the formula under sub -section (3). On the other hand, the Assessing Authority and the First Appellate Authority having taken the view that for the purpose of foreign exchange receipts and for the purpose of sub -section (3), the over all profits of the assessee attributable to the very business of running or managing the hotels as a whole should be taken and such a controversy having reached the Tribunal and the Tribunal in the appeal of the assessee having opined that the claim made by the assessee was the proper one and in terms of the statutory provision, it is the turn of the revenue to feel aggrieved now and to approach this court for settlement of law on this aspect and for such purpose, this appeal has been admitted to examine the following substantial questions of law suggested for examination by the revenue as arising out of the order of the Tribunal, which reads as under : -

(3.) THE Income Tax Act, 1961, though is a piece of legislation to raise revenue to the State and a law made by the parliament with reference to Entry 81 of List I schedule VII to the Constitution of India and being a piece of legislation for supporting Governmental activities and in turn being dependent on the policies and programs of government, at a given point of time, may have and also being dependent on meeting the other requirements to support and meeting the other functions of the State which are essential and India being a welfare country, it is also used as a tool for giving the expression to the policies of the Government governing the people.