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2021 (12) TMI 1175 - ITAT HYDERABADClaim of deduction u/s. 35AD by stating that the appellant did not build the hotel building - HELD THAT:- Provisions of section 35AD of the Act does not specify that the assessee has to construct the entire building by itself or own the building and land. The provisions only specify that the specified business should be in the nature of building and operating a new hotel of 2 star or above category as classified by the Central Government - there is no doubt that the entire investment made by the assessee was for constructing a portion of the building and for operating a new hotel of the category specified under the Act - from the provisions of section 35AD it is obvious that these provisions are brought into the Act in order to promote certain specified business in the country. These provisions grant deduction to the assessee in respect of the entire capital expenditure incurred wholly and exclusively for the purpose of the specified business which has commenced during the previous year. Even otherwise, by virtue of section 32 of the Act, the assessee is entitled for deduction towards such expenditures u/s.32 of the Act by way of depreciation over a period of time. There is no loss to the revenue when the whole issue is viewed in its entirety, because when the assessee derives the benefit of Section 35AD of the Act it saves payment of tax in the initial years but in the subsequent years ends up paying higher tax as it is deprived of the benefit of depreciation u/s. 32 of the Act. Provisions of section 35AD of the Act, only helps the assessee to maintain higher cash liquidity during the initial years of its business. Once deduction u/s.35AD of the Act is claimed then by virtue of section 35AD(4) of the Act, no other deduction in respect of these expenditure shall be allowed as deduction - the beneficial provisions of the Act and our observations mentioned herein above in the instant case before us the assessee is entitled for the benefit of deduction u/s. 35AD towards the expenditure incurred by it for establishing its hotel business of specified category as provided under the Act - we hereby direct the Ld. AO to grant deduction to the assessee under the provisions of section 35AD - Appeal of the assessee is allowed.
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