C.I.T v. M/S Bharat Hotels

S. MURALIDHAR, J

VIBHU BAKHRU, J JULY 24, 2015/mg/b'nesh/rk

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 7th July 2015 Decided on: 24th July, 2015 + ITA 69/2000 CIT ..... Appellant Through: Mr. N.P.Sahni, Senior Standing counsel with Mr. Nitin Gulati, Junior standing counsel. versus M/S BHARAT HOTELS ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr Prakash Kumar and Ms Bhovita Kumar, Advocates. With ITA 70/2000 CIT ..... Appellant Through: Mr. N.P.Sahni, Senior Standing counsel with Mr. Nitin Gulati, Junior standing counsel. versus M/S BHARAT HOTELS LTD. ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr Prakash Kumar and Ms Bhovita Kumar, Advocates. With ITA 71/2000 CIT ..... Appellant Through: Mr. N.P.Sahni, Senior Standing counsel with Mr. Nitin Gulati, Junior standing counsel. versus M/S BHARAT HOTELS ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr Prakash Kumar and Ms Bhovita Kumar, Advocates. With ITA 72/2000 CIT ..... Appellant Through: Mr. N.P.Sahni, Senior Standing counsel with Mr. Nitin Gulati, Junior standing counsel. versus M/S BHARAT HOTELS LTD. ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr Prakash Kumar and Ms Bhovita Kumar, Advocates. And ITA 73/2000 CIT ..... Appellant Through: Mr. N.P.Sahni, Senior Standing counsel with Mr. Nitin Gulati, Junior standing counsel. versus M/S BHARAT HOTELS ..... Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr Prakash Kumar and Ms Bhovita Kumar, Advocates. CORAM: HON'BLE DR. JUSTICE S.MURALIDHAR HON'BLE MR. JUSTICE VIBHU BAKHRU Dr. S. Muralidhar, J. 1. These appeals by the Revenue under Section 260A of the Income Tax Act, 1961 ("Act") pertain to the Assessment Years ("AYs") 1989- 90, 1990-91, 1991-92, 1992-93, 1993-94. They are directed against a common order dated 14th February 2000 passed by the Income Tax Appellate Tribunal ("ITAT") in the appeals and the cross-appeals filed by the Revenue and the Assessee for the said AYs. 2. The facts are that New Delhi Municipal Council ("NDMC") invited an offer in 1976 from Delhi Automobiles(P) Ltd. ("DAL") for the construction of a five star hotel in a land located at Barakhamba Road. DAL submitted an offer of paying Rs.28,11,000 per annum as licence fee to the NDMC. However, no agreement as such was executed at that stage. A suit was filed by DAL against NDMC for specific performance with an alternative prayer for damages. The suit ended in a compromise and this led to an agreement dated 11th March 1981 being executed between DAL and NDMC. The key features of this agreement were as under: (i) The land was to be given to DAL on licence basis for a period of 99 years on payment of licence fee of Rs.1,45,00,000 pa. (ii) DAL would form a public limited company within a period of twelve months and the licence of the land was to be transferred to the said company. (iii) The building would be constructed on the land by DAL. Nevertheless, the land and the building were to vest in the NDMC. DAL would have the right to raise loans on the security of the structures/buildings/ fixtures and fittings etc. from any Indian or foreign licensed bank or from any financial corporation including ICICI and IDBI. (iv) The plans for the hotel building together with drawings had to be approved in advance from NDMC and the Director General of Tourism, Government of India. (v) Clause 12 of the said agreement stated that the licensee would not be at liberty to part with possession of the land or otherwise encumber or sublet the premises to any person directly or indirectly "without the previous written consent of the licensor". However, the "licensees shall have the right to sub-licence the licensed property as stipulated in Clause 30 of this licence agreement. (vi) Clauses 14 and 15 made it clear that DAL was only "bare licensee only of the land subject to payment of licence fee" and that nothing contained in the agreement should be construed as a demise of whole or part of the land so as to give DAL any legal title, right or interes