Case: BIR HOTELS PVT LTD vs ASSISTANT COMMISSIONER OF INCOME TAX AND ANR, HC Allahabad
- The assessee, a 3-star hotel entered into a franchise agreement with Lakme saloon and claimed deduction u/s 80IB on the receipts from saloon business.
- The saloon facility was available to outsiders and record of its customer wasn’t maintained.
- The hotel business started in the year 2001 while the saloon section started in the year 2005-06.
- The saloon is an integral part of a business like a restaurant and it is directly connected with the general needs of people.
- The phrase ‘derived from’ restricts to the qualifying profits directly arising from the particular activity and not from unrelated business activity.
- A saloon business is related to cosmetics and cannot be equated with food and refreshment.
- The saloon business could not be considered as an integral part of hotel activity.
- The department was right in denying the deduction.
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