Hotel Horizon P. Ltd. vs Secretary To The Department Of ...
1988 Latest Caselaw 221 Del

JUDGMENT

The short question which arises in this petition is whether the approval granted by the Central Government, Ministry of Tourism, to the petitioner for setting up a hotel in Bombay enures for the benefit of the petitioner to enable it to have the concessions contemplated in section 32(1)(v) regarding higher depreciation, section 33(1)(b)(B)(ii) for higher development rebate and relief under section 80j(6)(d).

The undisputed facts,in rief, are that on the application of the petitioner, vide letter No. 5-TH. I(62) /68, dated January 29, 1969, the Department of Tourism, Government of India, conveyed the approval of the Government for the hotel project Horizon to be constructed at Plot No. 37, Juhu Tara Road, Santacruz (West), Bombay, subject to the condition that the final tariff will be fixed in consultation with the Department and necessary license to run the premises as a hotel will be obtained from the authorities concerned and a quarterly progress report regarding the construction of the hotel to be sent to the Department. Parliament had made amendments in the Income-tax Act for giving certain concessions and reliefs to the hotel industry which was to be set up for encouraging tourism and with a view to augment foreign exchange earnings. The Finance (No. 2) Bill, 1967, gave the reasons for making the amendments in the Income-tax Act, Annexure-7 contains the said reasons given for introducing the said amendment. So, the aforesaid sections of the Income-tax Act were brought on the statute book on the basis of the said Finance Act. Section 32(1)(v) and section 33(1)(b)(B)(ii) and section 80J(6) (d) all clearly contemplate grant of concessions mentioned therein to a hotel if such hotel is for the time being approved in this behalf by the Central Government.

Admittedly, the petitioner had constructed a new hotel which started functioning in 1972 and for the assessment year 1973-74 pertaining to the year ending March 31, 1973, the petitioner claimed the concessions in the return year filed before the Income-tax Officer. Annexure-2 is the copy of the assessment order made by the Income-tax Officer on September 16, 1976. The petitioner was denied the benefits of the aforesaid provisions of the Income-tax Act on the short ground that no specific permission of the Central Government an envisaged in the said sections had been obtained by the petitioner.

According to the averments made in the petition, the petitioner had sent a letter dated November 3, 1972, to respondent No. 1, Ministry of Tourism, praying that approval may be granted to the petitioner to enable the petitioner to have to the benefits of the aforesaid provisions of the Income-tax Act. According to the petitioner, no reply was received to this letter and after the assessment order was made, the petitioner again sent a letter dated October 27, 1976, seeking approval of the Central Government for the purpose of having necessary reliefs and deductions under the Income-tax Act and as no reply was received to the said letter, another letter dated March 12, 1977, was sent Respondent No. 1 at first granted the necessary approval for the purpose of the Income-tax Act with effect from March 12, 1977, but now it is admitted that approval has been granted with effect from October 27, 1976, onwards. It has been contended on behalf of the petitioner that the initial approval granted in 1969 to the hotel project in question should be deemed to be the approval of the Central Government for the purpose of the Income-tax reliefs available to the hotels under the said provisions of the income-tax Act. In the alternative, it is pleaded that the Central Governments approval should be deemed to have been granted retrospectively when the petitioner sought such approval in 1972. In the petition, reference is also made to a letter dated March 9, 1978 (annexure-9), wherein the Secretary of the Ministry of Tourism had intimated to the President of the Federation of Hotels and Restaurant Associations of India, that the Central Board of Direct Taxes have accepted that when the Department of Tourism issued certificates approving the hotels, it was the intention of the Department of Tourism for the to approve the hotels also for the purpose of various sections of the Income-tax Act although those sections were not specifically mentioned in the approval certificates. So, it has been contended that with this clarification given by the Central Board of Direct Taxes, there should have remained no doubt that the approval granted by the Ministry of Tourism in 1969, to the hotel project of the petitioner should be deemed sufficient for the purpose of the Income-tax Act for getting necessarily reliefs under the aforesaid provisions of the said Act.

The writ has been opposed by the respondents. The Deputy Director-General(Tourism) has filed an affidavit where it has been pleaded that at no point of time any letter dated November 3, 1972, has been received by the Department. It was pleaded that under the Income-tax Act, approval of the Central Government has to be obtained in respect of the provisions of the Income-tax Act, and as soon as that permission was sought by the petitioner in 1976, the same was granted. Shri R. R. Chari, Commissioner of Income-tax, Bombay, in his affidavit, has also taken similar pleas that the assessment order in question was rightly made as approval of the Central Government, as required by the Income-tax Act, was not obtained by the petitioner at that time and as the approval had been granted only later, the necessary deductions and reliefs have been granted to the petitioner for the assessment year subsequent to the grant of approval. Shri K. Kumar, Director, Department of Tourism, has also filed an affidavit mentioning that the letter dated March 9, 1978, of the Central Board of Direct Taxes has been superseded by another letter dated March 10, 1980, wherein it has been clearly clarified that the approvals under the various sections of the Income-tax Act are to be specifically sought by the hotels which can either be applied separately or simultaneously and it means that without any specific request for according the approval under any of these sections, the same cannot be accorded. It was further mentioned in that very letter that the approval of hotel projects by the Department of Tourism, thus, cannot be equated with the approvals accorded for the purpose of various provisions of the Income-tax Act. A letter dated October 28, 1985, issued by the Central Board of Direct Taxes has also been referred to, copy of which is annexure-B, which also clarifies the position mentioning that the Board is of the view that in a case where the first application does not specify the section but the subsequent application does, the approval can be given with effect from the date of the first application.

Learned counsel for the petitioner has vehemently argued that the aforesaid provisions in the Income-tax Act were brought on the statute book only to give incentives for constructing new hotels which are to cater to foreign tourists to enable the country to earn more foreign exchange. He has argued that as soon as the said hotel is constructed with the approval of the Central Government, the necessary reliefs and concessions contemplated by the aforesaid provisions of the Income-tax Act should automatically be available to such hotels. He has argued that keeping in view the object and the reasons for introducing the said provisions in the Income-tax Act, this court should infer that the approval granted to the hotel project of the petitioner by the Central Government in the year 1969 is more than sufficient to enable the petitioner to avail of the benefits under the provisions of the said Act.

Learned counsel for the respondents, on the other hand, has urged that the provisions of the Income-tax Act referred to above clearly indicate that the approval of the Central Government has to be obtained in this behalf, meaning thereby that the approval had to be obtained pertaining to the reliefs incorporated in the said sections of the Income-tax Act. He has argued that any general approval granted by the Government for setting up a hotel would not by itself lead to an inference that the approval had been granted by the Central Government for the purpose of the Income-tax Act. He has further argued that at the time the approval was granted to the hotel project of the petitioner in the year 1969, the Ministry of Tourism was not at all competent to grant any approval for the purpose of the Income-tax Act. He has pointed out that it is only by letter F. No. 4/13/68 - ITA. I, Ministry of Finance dated August 26, 1970, that power has been delegated to the Ministry of Tourism and Civil Aviation to grant approvals under the various provisions of the Income-tax Act mentioned in that letter. He has also contended that the petitioner did not come to this court with clean hands inasmuch as the petitioner had tried to take a false plea that the petitioner had sent a letter dated November 3, 1972. to the Ministry of Tourism, claiming the reliefs under the Income-tax Act when as a matter of fact no such letter has been received by the Ministry of Tourism. At the outset, I may mention that the various orders made in this case show that opportunity was provided to the petitioner to furnish some proof that such a letter was issued but no proof has been furnished. So, it must be held that the petitioner had not come to set up a false letter dated November 3, 1972, as being sent to the Ministry of Tourism. On this short ground alone, this petition, deserves to be dismissed.

Be that as it may, it is evident that the approval which has been obtained in 1969 was only to the effect that the petitioner was to construct a hotel and thereafter he was to run the same after getting its tariffs approved from the Ministry. At that point of time, there could be no question of the petitioner praying for any approval with regard to the provisions of the Income-tax Act because the question of payment of any income-tax would have arisen only if any hotel had been constructed and had started doing any business. Admittedly, the hotel was constructed only in the year 1972. So, the question of getting relief under the Income-tax Act arose only when the hotel was constructed and was activated in business. The provisions of the Income-tax Act, as mentioned above, clearly contemplate taking of the Central Governments approval for the purpose of the said sections. So, it was absolutely incumbent on the part of the petitioner to have sought such approval from the Central Government in order to be entitled to the benefits contemplated by the said provisions of the Income-tax Act. Unfortunately, the petitioner, only for the first time, sought the necessary approval in the year 1976, when the Income-tax officer refused to grant him the necessary concessions in the absence of any such approval. The Central Board of Direct Taxes has, no doubt, in the first letter of the year 1978 had given the guidelines that if approval is granted in respect of a hotel initially by the Department of Tourism but the Department of Tourism intended, while granting such permission, that the income-tax benefits should be also granted to such hotel and if there had been no such mention in the approval letter, even then it would be deemed that such approval had been granted. Later on, this letter was superseded and the Central Board of Direct Taxes clarified that unless and until an application is moved seeking necessary reliefs under the Income-tax Act, the approval could not be granted and later on, it has been clarified that even though an application has been moved claiming the approval for the purposes of the Income-tax Act without specifying the various provisions of the said Act, even then such approval should be granted from the said letter. In the present case, the petitioner had been granted benefit of these particular instructions of the Central Board of Direct Taxes. It is true that these provisions have been introduced in the Income-tax Act for giving relief in income-tax to the new hotels with a view to encourage the hotel industry and on facts the petitioner, admittedly, is entitled to those benefits but the provisions of the Income-tax Act clearly contemplate getting approval of the Central Government "on this behalf" meaning thereby that the approval of the Central Government must be obtained for getting the benefits of the said provisions of the Income-tax Act. The language used in the said sections is not capable of two interpretations. The Ministry of Tourism, on the face of it, had no power to grant approval on behalf of the Central Government for the power of the Income-tax Act prior to 1970. So, any approval granted by the Ministry of Tourism for the hotel project of the petitioner in the year 1969 obviously could not have been intended as an approval for the purpose of the Income-tax Act as, a that time, the Ministry of Tourism was not competent to grant such approval. So, I hold that the petitioner is not entitled to have the benefits of the said provisions of the Income-tax Act for the period to October 27, 1976.

There is no merit in this writ petition which I, hereby, dismiss but leave the parties to bear their own costs.