CIT Vs. BHARAT HOTELS AND ORS.

JUDGEMENT

(1.) These appeals by the Revenue under Section 260A of the Income Tax Act, 1961 ("Act") pertain to the Assessment Years ("AYs") 1989- 90, 1990-91, 1991-92, 1992-93, 1993-94. They are directed against a common order dated 14th February 2000 passed by the Income Tax Appellate Tribunal ("ITAT") in the appeals and the cross-appeals filed by the Revenue and the Assessee for the said AYs.

(2.) The facts are that New Delhi Municipal Council ("NDMC") invited an offer in 1976 from Delhi Automobiles(P) Ltd. ("DAL") for the construction of a five star hotel in a land located at Barakhamba Road. DAL submitted an offer of paying Rs.28,11,000 per annum as licence fee to the NDMC. However, no agreement as such was executed at that stage. A suit was filed by DAL against NDMC for specific performance with an alternative prayer for damages. The suit ended in a compromise and this led to an agreement dated 11th March 1981 being executed between DAL and NDMC. The key features of this agreement were as under:

(3.) Pursuant to the above agreement, Bharat Hotels Ltd. ("BHL") came to be incorporated. On 18th June 1981 an agreement was entered into between BHL and DAL which anticipated the transfer of the licence in respect of the land from DAL to BHL. The obligations of DAL as incorporated in the agreement dated 11th March 1981 were set out as obligations of BHL in the agreement dated 18th June 1981. Clause 4 of this agreement permitted BHL to allow use of the shopping complex by way of a licence to one or more persons or their nominees with information to DAL. It was, inter alia, provided in Clause 4(a) that BHL would accept "interest-free-deposit from the user at an agreed rate per sq. ft. of the area to be licensed to any party". The deposit would vary from party to party and from time to time. Of the deposit, the DAL was permitted to retain 25% on the agreed terms and conditions and the balance 75% was to be retained by BHL. DAL was bound to repay the deposit. It was further provided that BHL would be bound to repay the deposit of any licensee as and when the licensee becomes entitled to receive it.