Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (3) TMI 934 - AT - Income TaxDeduction u/s 35AD disallowed - relevant certificate has been granted in accordance with the Guidelines issued by the Ministry of Tourism, on the assessee, obviously, having fulfilled the requisite conditions for the grant of classification as a four-star hotel, despite the fact that the certificate was issued in the subsequent assessment year and was for a specific period of five years from 29/1/2018 to 28/1/2023, as above - classification for three-star category having been obtained by that assessee only during the subsequent assessment year, i.e., assessment year 2012-13, the year under consideration being assessment year 2011-12 - HELD THAT:- Hon'ble Madras High Court, in 'Ceebros' [2018 (12) TMI 333 - MADRAS HIGH COURT] has held that section 35AD(5)(aa) of the Act does not mandate that the date of the certificate should be with effect from a particular date; that therefore, the provision, i.e., section 35AD, which is obviously to encourage establishment of hotels of a particular category, should be read as a beneficial provision. No decision contrary to 'Ceebros' (supra), which is directly on the issue and on exactly similar facts as those doing the rounds in the case before us, has been cited before us. The "specified business" has also not been disputed to be that of building and operating a new hotel of a two-star or above category, in keeping with the provisions of section 35AD(5)(aa) [which was the provision under consideration in 'Ceebros' (supra) too]. Then, the incurrence of expenditure for the construction of The Gateway Hotel by the assessee has also not been disputed as having been done prior io the commencement of the operations of the business. Further, neither of the authorities below has made out that the amount was not capitalized in the books of account of the assessee. Rather, the taxing authorities have accepted the income offered to tax by the assessee, it is the deduction claimed under section 35AD, which has been disallowed. It is, thus, seen that none of the conditions of the provisions of section 35AD of the Act has been violated at the hands of the assessee. The provisions of this section stand explained in the Memorandum explaining the provisions of Finance Bill, 2010, wherein, it has been noted that "In view of the high employment potential of this sector, it is proposed to provide investment linked incentive to the hotel sector, irrespective of location, under section 35AD - The investment-linked tax incentive allows 100 per cent deduction in respect of the whole of any expenditure of capital nature (other than on land, goodwill and financial instrument) incurred wholly and exclusively, for the purposes of the "specified business" during the previous year in which such expenditure is incurred." Therefore, it is quite evident that it is an incentive provision by way of section 35AD, which was introduced in the statute book. (i) The ld. CIT (A) has erred in confirming the assessment order in refusing to allow the deduction claimed under section 35AD of the Act. (ii) The certificate of classification issued in favour of the assessee has not been doubted. (iii) The date of issuance of this certificate/the period for which the classification has been granted, is irrelevant for the grant of deduction under section 35AD of the Act. (iv) 'Ceebros' (supra) is categorical in this regard. (v) No decision contrary to 'Ceebros' (supra) has been cited before us. (vi) The ld. CIT (A) did not have the benefit of 'Ceebros' (supra) while passing the order under consideration, 'Ceebros' (supra) having been rendered post-the passing of the ld. CIT (A)'s order. (vii) The facts with regard to the certificate having been granted in the year subsequent to the year under consideration, are not of any detriment to the assessee, in keeping with 'Ceebros' (supra). (viii) Even if, arguendo, these facts were to be accepted, they do not detract from the settled position [as per 'Ceebros' (supra)], that once the conditions of section 35AD are fulfilled, the section, per se, not requiring any specific date of operation, the deduction thereunder cannot be disallowed. Finding the grievance of the assessee by way of Ground No.1, to be justified, we accept the same. The disallowance of deduction claimed under section 35AD of the Act, as upheld by the ld. CIT (A), is, therefore, deleted.
|