2019 (10) TMI 472 - HC - Income Tax

Deduction u/s.35AD - denial of deduction as absence of statutory certificates of classification for star rating which is mandatory as per the provision of section 35AD - HELD THAT - In the case on hand, the Central Government has approved the proposal of the assessee for Three Star Hotel project and therefore, the interpretation made by the tribunal considering the fact of the case is just and legal. The law laid down in the case of Ceebros Hotels Pvt. Ltd. 2018 (12) TMI 333 - MADRAS HIGH COURT is squarely applicable to the facts of the case on hand. Considering all the petitioner is approved for Three Star hotel project, it cannot be said that the tribunal has committed any error which requires interference of this Court. No substantial question of law involved.

Summary

Issues:
- Disallowance of deduction under section 35AD of the Income Tax Act for capital expenditure.
- Appeal against the order passed by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.
- Question of law regarding entitlement to deduction under section 35AD(5)(aa) of the Act in the absence of statutory certificates of classification for star rating.

Analysis:
1. The appellant, the revenue, challenged the order of the Income Tax Appellate Tribunal regarding the disallowance of a deduction under section 35AD of the Income Tax Act. The tribunal held that the assessee had submitted supporting documents entitling them to the deduction. The appellant raised the issue of the absence of statutory certificates of classification for star rating, questioning the tribunal's decision.

2. The appellant's counsel contended that the assessee failed to provide evidence of separate approval under section 35AD(5)(aa) of the Act, arguing that the tribunal's decision was erroneous and perverse. On the other hand, the respondent's counsel argued that the tribunal's decision was just and legal, pointing out the observations made in the impugned order and citing a relevant decision from the Madras High Court.

3. The tribunal, in its order, noted that the assessee had obtained necessary approvals and fulfilled conditions for the deduction under section 35AD(5)(aa) of the Act. The tribunal considered the documents submitted by the assessee, including approvals from relevant authorities, and concluded that the appellant was entitled to the deduction. The tribunal dismissed the revenue's appeal, upholding the decision in favor of the assessee.

4. Referring to a decision by the Madras High Court, the tribunal's interpretation of the law was found to be valid and justified. The court emphasized that the provision should be viewed as beneficial to encourage the establishment of hotels of a specific category. The court concluded that the tribunal's decision was just and legal based on the approvals obtained by the assessee for the Three Star Hotel project.

5. Ultimately, the High Court dismissed the appeal by the revenue, stating that no substantial question of law was involved. The court upheld the tribunal's decision based on the facts and circumstances of the case, in line with the legal principles established in relevant case law. The court found no grounds to interfere with the tribunal's order, considering the approval granted to the assessee for the Three Star hotel project.