SECTION 35AD

[jitendra jain]

Dear team,

in my last query it is clear that section 80IA is no more applicable for infra projects and further we can take deductions of 35AD. our company is private limited company registered with MSME (micro) registration comes as "Availing benefit of Primary Sector Lending (PSL) only.

How section 35AD works? can we take 100% deduction of capital expenditure in very Friest year. our business profile is we are allotted way side amenity on Samrudhi highway (Nagpur- Mumbai) this project comes under PPP public private partnership.

we are developing all infrastructure food plaza, public amenity, hotel motel and many other facilities in that area. land allotted by govt on long lease. area comes in Vidarbha (backward area of Maharashtra) industrial zone is D+...(The project comes under Maha tourism schemes)

please guide us in which IT section we are fit for take deductions and benefits maximum.

thanks & regards.

jitendra jain

9422727133

[YAGAY andSUN]

Certainly. Below is a professionally drafted version of your query response, rewritten in formal legal and business language without AI-style tone:

Tax Deduction Eligibility for Infrastructure and Hospitality Projects Under Section 35AD and Other Applicable Provisions

The assessee, a private limited company registered as a Micro Enterprise under the MSME Act and engaged in the development of a public-private partnership (PPP) project along the Samruddhi Mahamarg (Nagpur-Mumbai Expressway), seeks to understand the applicability of various income tax deductions for capital expenditure and other fiscal incentives. The project involves the establishment of a wayside amenity including a food plaza, hotel/motel, and other infrastructure and public utility facilities, on land allotted by the Government on a long-term lease basis. The location of the project falls within the D+ industrial zone of Vidarbha region, Maharashtra, and is covered under the Maharashtra Tourism Policy.

Applicability of Section 35AD of the Income-tax Act, 1961

Section 35AD of the Income-tax Act, 1961 provides for a deduction of 100% of capital expenditure (excluding expenditure on land, goodwill, and financial instruments) incurred wholly and exclusively for the purpose of specified businesses. Among the specified businesses, the setting up and operation of a new hotel of two-star or above category is expressly covered under clause (cc) of sub-section (8)(c) of Section 35AD.

Accordingly, where the assessee establishes and operates a qualifying hotel or motel as part of the wayside amenity, and provided the conditions laid down under the section are satisfied—namely that the business is not formed by splitting up or reconstruction of an existing business, and no old plant or machinery is used—the capital expenditure incurred on such facilities shall be eligible for 100% deduction in the year in which it is incurred. This deduction is available notwithstanding the fact that the asset is capitalised in the books of account.

It must be noted, however, that capital expenditures related to land acquisition, intangible goodwill, or financial instruments shall not be eligible under Section 35AD. Additionally, other components of the project such as food plazas, fuel stations, or retail outlets, unless integrated within the eligible hotel/motel structure, may not independently qualify for deduction under this provision.

Other Relevant Provisions of the Income-tax Act

In addition to Section 35AD, the following provisions may also be relevant:

1. Section 80-IB(7): This provision allows a deduction of 100% of profits and gains derived from the business of a hotel located in a specified area for a period of five consecutive years, subject to satisfaction of conditions including approval from the Ministry of Tourism. Given that the project is recognised under the Maharashtra Tourism Scheme, this provision may be explored provided the hotel is classified under the specified category and located in a notified area.
2. Section 80JJAA: In case of employment generation, a deduction of 30% of additional employee cost incurred in respect of new employees may be claimed for three assessment years, subject to prescribed conditions relating to number of employees, emoluments, and duration of employment.
3. Section 32 (Depreciation): To the extent capital expenditure is not claimed under Section 35AD (for example, where the asset does not qualify as a specified business asset), the assessee may avail depreciation under Section 32 at the applicable rates.

State-Level Incentives under Maharashtra Industrial Policy and Tourism Policy

Given the location of the project in a D+ industrial zone within Vidarbha and its inclusion under the Maharashtra Tourism Policy, the assessee may also be eligible for various state-level incentives. These may include, inter alia:

• Capital subsidy ranging between 15% and 30% of eligible fixed capital investment;
• Interest subsidy on term loans for a specified period;
• Stamp duty exemption on lease deeds executed for project land;
• Electricity duty exemption for a defined number of years.

These benefits are generally administered through the Directorate of Industries, Maharashtra and the Maharashtra Tourism Development Corporation (MTDC), and must be availed by submitting applications through the respective nodal agencies such as Udyog Mitra and the District Industries Centre (DIC).

Conclusion

In summary, the assessee may structure the project in such a manner that the hotel/motel component qualifies as a specified business under Section 35AD, thereby enabling a 100% deduction of capital expenditure in the initial year of incurrence. Other project components may be eligible for depreciation under Section 32. Furthermore, subject to compliance and certification, deductions under Section 80-IB(7) and Section 80JJAA may also be availed. In parallel, the company is advised to pursue applicable state-level fiscal incentives under the Maharashtra Industrial and Tourism Policies to optimise overall project viability.

Should you require assistance with a tax planning memorandum, cost segregation analysis, or assistance in applying for state incentives, we would be pleased to assist further?