The assessee company used to provide hotel services to different hotels. The assessee was required to prove its claim of deduction of Rs. 44,54,647 under section 80-ID of the Act for the period of September 21, 2013, to March 31, 2014, during the assessment. The assessee’s explanation was not deemed adequate by the AO.  According to the AO, the assessee only got rental revenue from the subletting of its assets after taking the hotel property on rent and subletting it to H. Because the prerequisites outlined in sub-section (2) of section 80-ID were not met, he dismissed the assessee’s request for a deduction under that provision of the Act, concluding that simple approval was insufficient. Hence an income of Rs.1,74,00,000 was treated as income from under source. The assessee appealed further after getting an unfavorable order from the Commissioner (Appeals).

The tribunal held that according to the agreement between the assessee and the hotel, both parties were responsible for running the business and getting their share of income from the hotel’s gross revenue. The revenue sharing agreement contained clauses for the inclusion and exclusion of specific revenues as contractually agreed upon between the parties for sharing of the income from the hotel. Since these clauses were based on the total revenue from the hotel and its services, they could not be interpreted to mean that the hotel was being rented out. Additionally, the assessee had submitted a form 10CCBBA with a report from a chartered accountant attesting that the assessee had complied with all requirements for claiming a deduction under section 80-ID of the Act. The Commissioner (Appeals) did not make any negative statement on this aspect. (AY.2015-16)