THE CONDITIONS FOR RELIEF UNDER SECTION 80J OF THE INCOME-TAX ACT, 1961, IN RESPECT OF NEWLY ESTABLISHED HOTEL BUSINESSES, INCLUDING THE REQUIREMENT OF A MINIMUM NUMBER OF GUEST ROOMS AND AMENITIES, MUST BE STRICTLY COMPLIED WITH.

( 1 ) AT the instance of the assessee, M/s. U. P. Hotel and Restaurants Ltd. , Varanasi, the Income-tax appellate Tribunal, Allahabad, has, for the assessment year 1972-73, the previous year for which ended on 30th September, 1971, stated the case and referred the following two questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the assessee was entitled to relief under Section 80j of the Income-tax Act, 1961, in respect of the new wing added in the hotel ? 2. Whether, on the facts and in the circumstances of the case, an appeal is maintainable against an order directing the levy of interest under Section 215 of the Act ?"

( 2 ) BRIEFLY stated, the facts giving rise to the first question are that the assessee is a limited company which derives income from a five star hotel known as Hotel Clarks Shiraj at Agra. The assessee commenced the aforesaid hotel business at Agra some time after the year 1961. During the years 1969 and 1970 it added a new wing to the Hotel Clarks Shiraj employing a capital of rs. 16,35,088. In the relevant assessment year, the assessee claimed benefit under Section 80j in respect of the capital employed by it in the new wing. The ITO disallowed the relief under section 80j claimed by the assessee on the ground that the business in respect of the new wing had not been recognised by the Central Govt. In appeal, the AAC observed that as the population of Agra exceeded five lakhs, the benefit of Section 80j could be given to the assessee only if the new wing added by it to Hotel Clarks Shiraj had fifty separate guest rooms with attached bathrooms equipped with sanitary fittings, etc. Since the wing had only forty rooms, the assessee was not entitled to any relief in respect thereof under Section 80j of the Act.

( 3 ) THE assessee then went up in appeal before the Income-tax Appellate Tribunal, Allahabad, which following its own decision for the earlier years, affirmed the disallowance of the relief claimed by the assessee.

( 4 ) RELEVANT portion of Section 80j, as it stood at the material, time ran thus :

"80j. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases.-- (1) Where the gross total income of an assessee includes any profits and grains derived from. . . . . . business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains. . . . . . (6) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (a) the business of the hotel starts functioning on or after the 1st day of April, 1961, and is not formed by the splitting up or the reconstruction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose ; (b) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (c) the hotel has such number and types of guest rooms and provides such amenities as may be prescribed, having regard to the population and the tourist importance of the place in which the hotel is located ; and (d) the hotel is for the time being approved for the purposes of this sub-section by the Central government. . . . . . "

"rule 18 of the Income-tax Rules laid down that for the purpose of Clause (c) of Sub-section (6)of Section 80j, a hotel should have- (a) not less then fifty guest rooms, with attached bathrooms, equipped with modern sanitary fittings if it is situated in a town with a population of five lakhs or more ; or (b) not less than twenty-five guest rooms, with attached bathrooms, equipped with modern sanitary fittings, if it is situated in a town with a popul