Court Upholds Deduction for Operational Hotel under Section 35AD Despite Administrative Delays

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..... HIGH COURT addresses whether the assessee is entitled to claim a deduction u/s 35AD(5)(aa) of the Income Tax Act, 1961, for the Assessment Year 2011-12. The Revenue appealed against the ITAT's decision, which allowed the deduction despite the assessee obtaining a three-star classification in the subsequent assessment year. Arguments Presented Revenue's Argument: The Revenue, argued that .....

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..... cluded that the assessee was entitled to the deduction, as the hotel was operational and generating income accepted by the Revenue. Court's Analysis Tribunal's Findings: The Tribunal noted that the Department did not dispute the hotel's operation in 2010-11 and accepted the income generated. The Tribunal emphasized that the application for the star classification was timely, and the dela .....

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..... by the Local Authority on 04.5.2010, after the cut-off date of 31.3.2008. The Local Authority later clarified that the project's completion date was 27.2.2008. Based on this clarification, the assessee claimed a deduction u/s 80IB(10)(a). The Assessing Officer disallowed the claim because the completion certificate was not produced before 31.3.2008. This decision was valid as Explanation (ii) .....

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..... l. Therefore, the Tribunal's interpretation, considering the beneficial nature of the provision, to allow deduction, was valid and justified. Holistic Interpretation: The court adopted a holistic interpretation, stating that beneficial provisions intended to encourage certain businesses, such as hotels, should be applied liberally. Since the hotel was operational and generating income, and th .....

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..... : 2018 (12) TMI 333 - MADRAS HIGH COURT upheld the ITAT's decision, allowing the assessee to claim a deduction u/s 35AD(5)(aa) for the Assessment Year 2011-12. The court ruled that the delay in obtaining the three-star classification was due to procedural requirements beyond the assessee's control. Since the hotel was operational and generating income, the deduction was deemed valid. Full .....

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