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TMI Blog2018 (7) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... te in this Statute. The assessee thus fulfills the criterion prescribed under the Statute and is entitled to deduction on capital expenditure incurred by him prior to the commencement of its operation and therefore we find no infirmity in the order passed by the CIT(A) and thus we uphold the same. Revenue’s appeal on this ground stands dismissed. Addition/disallowance made by the AO is hereby deleted. - Decided against revenue - I.T.A. No.1799/Ahd/2016 - - - Dated:- 6-6-2018 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Ms.Vashundhara Upmanyu, CIT-DR For The Respondent : Shri P.M. Patel, AR ORDER PER Ms. MADHUMITA ROY JM: The instant appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax(Appeals), Ahmedabad-5 [CIT(A) in short] dated 21/04/2016 arising out of the assessment order under S.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 27.03.2015 for the Assessment Year (AY) 2012-13. 2. The sole ground has been raised by the Revenue in its appeal reads as under:- ( 1) The Ld.CIT(A) has erred in law and on facts in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s:- Deduction in respect of expenditure on specified business. 35AD. ( 1) An assessee shall be allowed a deduction in respect of the whole of any expenditure of capital nature incurred, wholly and exclusively, for the purposes of any specified business carried on by him during the previous year in which such expenditure is incurred by him : Provided that the expenditure incurred, wholly and exclusively, for the purposes of any specified business, shall be allowed as deduction during the previous year in which he commences operations of his specified business, if- ( a) the expenditure is incurred prior to the commencement of its operations; and ( b) the amount is capitalised in the books of account of the assessee on the date of commencement of its operations. ( 1A) [***] ( 2) This section applies to the specified business which fulfils all the following conditions, namely :- ( i) it is not set up by splitting up, or the reconstruction, of a business already in existence; ( ii) it is not set up by the transfer to the specified business of machinery or plant previously used for any purpose; ( iii) where the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations,- ( a) on or after the 1st day of April, 2007, where the specified business is in the nature of laying and operating a cross-country natural gas pipeline network for distribution, including storage facilities being an integral part of such network; [***] on or after the 1st day of April, 2010, where the specified business is in the [( aa) nature of building and operating a new hotel of two-star or above category as classified by the Central Government; ( ab) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hospital with at least one hundred beds for patients; ( ac) on or after the 1st day of April, 2010, where the specified business is in the nature of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and which is notified by the Board in this behalf in accordance with the guidelines as may be prescribed; [***]] [( ad) on or after the 1st day of April, 2011, where the specified business is in the nature of developing and building a housing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h amount has been allowed or is allowable to the assessee in any earlier previous year. [( 6A) Where the assessee builds a hotel of two-star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation thereof to another person, the assessee shall be deemed to be carrying on the specified business referred to in sub-clause () of clause () of subsection (8).] ( 7) The provisions contained in sub-section (6) of section 80A and the provisions of sub-sections (7) and (10) of section 80-IA shall, so far as may be, apply to this section in respect of goods or services or assets held for the purposes of the specified business. [( 7A) Any asset in respect of which a deduction is claimed and allowed under this section shall be used only for the specified business, for a period of eight years beginning with the previous year in which such asset is acquired or constructed. ( 7B) Where any asset, in respect of which a deduction is claimed and allowed under this section, is used for a purpose other than the specified business during the period specified in sub-section (7A), otherwise than by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the following business, namely :- ( i) setting up and operating a cold chain facility; ( ii) setting up and operating a warehousing facility for storage of agricultural produce; ( iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network; [( iv) building and operating, anywhere in India, a [hotel] of two-star or above category as classified by the Central Government; ( v) building and operating, anywhere in India, a [hospital] with at least one hundred beds for patients; ( vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;] [( vii) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed ; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of section 35AD of the Act has to fulfill the conditions being (i) expenditure incurred prior to commencement of its operation and (ii) the amount is capitalized in the books of accounts of the assessee on the date of its operation. The admitted facts are this that - ( a) First application was made to the Indian Tourism Department, Mumbai along with application fees of ₹ 8000/- and by DD No.6222292 dated 16.08.2011. ( b) Further online application/compliance vides our letter dated 23.04.2012. ( c) Indian Tourism Det. Vide the letter dated 29.05.2012, informed further compliance in respect of classification of our hotel under 3 star categories. ( d) Thereafter the assessee firm addressed letter to Tourism Dept. vide letter dated 07.06.2013 in compliance of their letter and requesting to grant 3 star category to the assessee firm from the date of operation. ( e) The Indian Tourism Dept. carried out inspection of our hotel on 16.08.2013 for classification under 3 star categories. ( f) After observing all formalities and procedures the Tourism Dept. of India issued 3 star category certificates for five years. ( g) In sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the specified business which is present in the case in hand. Furthermore, the assessee commenced its business on 17.11.2011 and he applied for the star classification certificate on 07.06.2013 which was granted by the concerned department on 24.09.2013 with effect from 11.09.2013 till 10.09.2018. In fact, the application was made by the assessee in due time, inspection was conducted by the concerned department and ultimately certificate was issued. There is no fault on the part of the assessee to apply and/or obtain the said certificate so far delay is concerned nor there any time limit specified for obtaining such certificate in this Statute. The assessee thus fulfills the criterion prescribed under the Statute and is entitled to deduction on capital expenditure incurred by him prior to the commencement of its operation and therefore we find no infirmity in the order passed by the Ld.CIT(A) and thus we uphold the same. Revenue s appeal on this ground stands dismissed. Consequently, addition/disallowance made by the AO is hereby deleted. 11. In the result, Revenue s appeal is dismissed. This Order pronounced in Open Court on 06 /06/2018 - - TaxTMI - TMITax - I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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