TaxTMI 
TaxTMI 
2022 (2) TMI 588
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....on of taxable total income without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the conditions prescribed in section 35AD(5)(aa) of the Act were fully complied with and ought to have appreciated that the delay in issuing star classification by the Ministry of Tourism was completely overlooked, thereby vitiating the findings in para 4.3 of the impugned order. 4. The CIT (Appeals) failed to appreciate that having accepted the income generated for the running of the eligible hotel, the sustenance of the said disallowance based on technical reasons would defeat the purposive construction, thereby vitiating the findings in para 4.3 of the impugned order. 5. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of impugned order and any order passed in violation of principles of natural justice would be nullity in law." 3. Brief facts of the case are that the assessee company is engaged in the business of operation of hotels filed its return of income for assessment year 2013-14 on 29.09.2013 declaring total loss of Rs. 5,57,38,69,597/-. During the financial year relevan....
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....thority, for the reasons best known to them, has accorded approval after inspection of hotel on 19.03.2014 from 21.03.2014 to 20.03.2019. Therefore, the assessee contended that it is a fact that the assessee has developed five star hotel for which necessary approval has been taken from competent authority for commencement of construction and approval has been finally granted by the competent authority. Therefore, merely for the reason that there was delay in granting approval from the competent authority, deduction claimed u/s. 35AD of the Act, for capital expenditure incurred for development of hotel cannot be denied. 5. The learned CIT(A), after considering relevant facts and also taken note of provisions of section 35AD of the Act, observed that in order to claim deduction u/s.35AD, specified business should be carried out during relevant previous year and further, said specified business should be approved by the competent authority. In this case, it is not in dispute that assessee could not get recognition for assessment year 2013- 14 under consideration and thus, there is no error in the reasons given by the Assessing Officer to disallow deduction claimed u/s.35AD of the A....
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.... the Act and satisfy all the conditions Iaid down therein. The contention of the AR that prior approval of star classification is not required cannot be accepted. If this submission is accepted, any hotel can claim the deduction under section 35AD without getting any star classification. 4.4 All things considered,. the appellant is not entitled to deduction under section 35AD for the assessment year 2013-14 as it has not strictly compiled with the requirements of section 35AD and got the star classification for the impugned assessment year. The grounds taken by the appellant are dismissed." 6. The learned A.R for the assessee submitted that the learned CIT(A) has erred in sustaining disallowance of expenditure claimed u/s.35AD(5)(aa) of the Act, towards capital expenditure incurred for development of specified business, without appreciating fact that the assessee has fully complied with conditions specified under said provision to claim deduction and also competent authority has accorded five star category hotel to be constructed and operated by the assessee. The learned A.R for the assessee further referring to provisions of section 35AD of the Act, submitted that in o....
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....fied date. In this case, there is no dispute with regard to fact that the assessee has incurred expenditure for specified business of development and operation of hotel and further, the assessee commences its operations within specified period to be eligible for claiming deduction under said section. The only dispute is with regard to period of approval. The assessee has got approval from competent authority from the period 21.03.2014 to 20.03.2019 and the competent authority has classified hotel under five star category. The Assessing Officer was of the opinion that in order to get benefit of deduction u/s.35AD, the assessee should carry out specified business and expenditure incurred for specified business should be claimed in the year in which such expenditure has been incurred. In this case, the assessee has incurred expenditure for the financial year relevant to assessment year 2013-14. According to the Assessing Officer, the assessee has not carried out any specified business for the financial year relevant to assessment year 2013-14, when the assessee has claimed deduction for expenditure. It was explanation of the assessee before the Assessing Officer as well as learned CIT....
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..... In this case, specified business has been defined, as per which it should be a new hotel of two star or above category. There is no dispute that the assessee has constructed five star category hotel which has been approved by the competent authority, but such approval has been accorded from subsequent financial year. Since the provision makes it mandatory to incur expenditure for specified business, the Assessing Officer has to verify whether the assessee has incurred expenditure for specified business or not. As per approval granted by the competent authority, hotel operated by the assessee is not a specified business for impugned assessment year. In fact, the assessee has not disputed this fact. The only argument of the assessee to get benefit of deduction was that it has incurred expenditure for specified business and for this purpose, it has taken in principle approval from the competent authority in the year 2007 and further, the assessee has filed application on 12.05.2011 for approval of the business, but, the authority has taken considerable time for granting approval for which benefit of deduction cannot be denied to the assessee. 10. No doubt, once it is an admitted ....