No Tax Can Be Levied On The Principle Of Estoppels: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that no tax can be levied on the principle of estoppel. Just because the Assessee has shown the receipt or income in the wrong head does not make him liable for tax.

The bench of N. K. Choudhry (Judicial Member) has observed that management licence fees are taxable under the heading "Income from Business" and not "Income from House Property" when granting licences to manage and operate hotel premises.

The appellant/assessee declared its income by filing its original return of income, in which the revenue receipts generated from operations of "Hotel/Resort" were shown as "rental income". Subsequently, the assessee, by revising its return of income, declared its income and offered the ‘revenue receipts’ from the operation of the "Hotel" under the heading "Business Income".

The AO explained to the assessee why the receipts from M/s Four Seasons Hospitality Pvt. Ltd., which have been declared as "Income from Business & Profession" in its revised return, should not be assessed under the heading "Income from House Property" as per the original return.

The AO assessed the management license fees as income under the heading "House Property," as declared by the Assessee in the original return of income. The AO disallowed an amount paid to the director as not being incurred for the purpose of the business and consequently added it to the income of the Assessee and also made other additions.

The assessee contended that there is no fixed amount for giving the building or resort to M/s Four Seasons, and the management license fees fluctuate according to the revenue generated from the business. Therefore, under any circumstances, the receipt of revenue from M/s Seasons cannot be construed as "Rental income from House Property".

The department has contended that the Assessee itself has deducted the TDS, which deals with the rental income. The Assessee has earned rental income from House property, and therefore, no interference is warranted in the decision of the authorities below to treat the revenue receipts as rental income from house property.

The Tribunal has held that simply because the Assessee in the original return of income has inadvertently, mistakenly, or on wrong advice treated or shown the revenue receipt or income under the wrong ‘head of income’, it cannot be considered an estoppel and/or foundation for treating the income of the assessee or making the addition.

Case Title: Cornet Hotel Services & Suppliers Pvt. Ltd. Versus DCIT

Case No.: I.T.A. No. 4613/Del/2019

Date: 20.06.2023

Counsel For Appellant: R.S. Singhvi

Counsel For Respondent: Shankar Lal Verma

Click Here To Read The Order