The Income Tax Appellate Tribunal (ITAT), Delhi bench, has ruled that the tax imposed on the principle of estoppel should be exempted. The tribunal emphasised that incorrectly categorising receipts or income under the in does not render the taxpayer liable for taxation.
The bench, chaired by Judicial Member N.K. Choudhary noted that payments for management licences to operate hotels should be taxed under the “Income from Business” head, not “Income from House Property,” when granting licences to manage and run hotel premises.
Initially, the appellant/assessee disclosed its income by submitting the original return of income, wherein revenue receipts from “hotel/resort” operations were classified as “rental income.” Later, the assessee updated the income tax return and classified the revenue receipts from operating the hotel under the heading “Business Income.”
The assessing officer (AO) questioned why the receipts of M/s Four Seasons Hospitality Pvt. Ltd., included as “Income from Business & Profession” in the updated return, were not assessed under the heading “Income from House Property” category as per the original return.
The assessee had initially reported the management licence fees as income under the “House Property” head in the original return of income, as determined by the AO. The assessing officer (AO) increased the assessee’s revenue and disallowed a payment made to the director as it was not incurred for business purposes and also made other additions
The assessee argued that the management licence fees fluctuate based on the revenue generated and that there was no fixed fee for handing over the building or resort to M/s Four Seasons. Therefore, M/s Seasons’ payment could never be considered “Rental income from House Property” under any circumstances.
The department contended that the assessee had already considered the Tax Deducted at Source (TDS) which is related to the rental income. The authorities’ decision to classify the revenue received as rental income from the house property is not open to challenge, as the assessee has indeed generated rental income from the property.
According to the tribunal, mistakenly or erroneously treating or categorising the revenue receipt or income under the wrong “head of income” in the original return cannot be used as an estoppel or as a basis for determining the assessee’s income or making additions.
| Case Title | Cornet Hotel Services & Suppliers Pvt. Ltd. Versus DCIT |
| Citation | I.T.A. No. 4613/Del/2019 |
| Date | 20.06.2023 |
| Counsel For Appellant | R.S. Singhvi |
| Counsel For Respondent | Shankar Lal Verma |
| Delhi ITAT | Read Order |
