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TMI Blog2017 (6) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hotel to the India Tourism and it was the delay on the part of HRACC to inspect the Hotel before end of the financial year for which the assessee cannot be penalized. Under these facts and circumstances, the disallowance made under section 35AD(5)(aa) stands deleted - decided in favour of assessee. Higher depreciation on building and plant and machinery - Held that:- Referring to rate of depreciation allowable under Income Tax Rules, we are of the considered opinion that the Assessing Officer has rightly allowed the 10% depreciation on building, which was confirmed by the ld. CIT(A). Thus, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ry is under process and consideration. Since, in the submission made by the assessee, the assessee has been granted the 'Three' Star Category only w.e.f. 10.05.2011 relevant from Financial Year 2011-12, clarification was sought from Regional Director & Convenor, India Tourism vide notice under section 133(6) dated 26.07.2013 directing him to clarify whether the assessee has been classified by the Central Government as 'Two' star or above category for the financial year 2010-11. In reply to the same, the Assistant Director (for Regional Director, South) vide letter In Indtour/Chennai/HRACC/2013(TN)/G dated 13.08.2013 has categorically stated that "M/s. Rain Tree, Mount Road, 636 Anna Salai, Teynampet, Chennai, has not been issued star classification under any category by this office for the period from 01.04.2010 to 31.03.2011". 2.3 Since the assessee has not been classified in 'two' Star or above category during the financial year 2010-11 (the year in which the business of the hotel rain tree has commenced), which is the pre-requirement for claiming deduction under section 35AD of the Act, by providing copy of the letter dated 13-08-2013 from Assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Tourism indicating the processing/ consideration of the application filed for categorization of the specified business as three star hotel. The India Tourism had issued the star classification order dated 30.05.2011 under the reference no. INDTOUR/CHENNAl/HRACC/2010(TN)/1171 and the assessee was accordingly classified as a three star hotel. The ACIT, has proposed for the disallowance of the said claim of deduction on the plain and literal reading of the said section and the assessee is pleading for grant of such deduction on the following various grounds: a) The star category classification obtained in the next Assessment Year would relate back to the date of application/the date of commencement of operations of the eligible business. Admittedly, the date of filing of the application as well as the date of commencement of the operations of the eligible business as mentioned in the preceding paragraphs would fall in the previous year relating to the Assessment Year under consideration. b) the belated issuance of the star category classification order would not stand in the way for obtaining the necessary benefit as envisaged in the provisions under consideration inasmuch as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable only in the year of commencement of operation of a new hotel and since the assessee has commenced the operations of the hotel at Mount Road, during the year 2010-11, the Assessing Officer has held that the assessee is not eligible to claim the investment allowance for the assessment year 2011-12 as star category classification was awarded to the assessee only w.e.f. 10.05.2011. 3. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) confirmed the disallowance made under section 35AD(5)(aa) of the Act. 4. On being aggrieved, the assessee is in appeal before the Tribunal. By reiterating the submissions as made before the authorities below, the ld. Counsel for the assessee has submitted that the assumption of obtaining star category classification for making such claim of deduction is not legally as well as factually correct on the plain reading of the said sub clause, there is no such prescription/condition so as to become eligible for such deduction. The assumption of non exiting condition in this regard as well as in conducting cross verification with the India Tourism is, therefore, irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 with all required details. After scrutiny of the application, the Southern Regional office has issued a letter dated 22.04.2010 indicating/informing the assessee about the spot inspection of the members of the approving committee on 27.04.2010. The inspection of the hotel was carried out on 27.04.2010 and it was found that the hotel was not fully functional. After inspection by the Approving Committee, another letter dated 28.04.2010 was received by the assessee from India Tourism indicating three star classification of the hotel is under process and consideration. Subsequently, vide letter dated 02.08.2010, the assessee has informed the India Tourism, Chennai that the hotel was soft opened on 09.07.2010 and would be fully operational by October, 2010 and requested to inspect the hotel. At the strength of application of the assessee dated 19.04.2010, and subsequent request dated 02.08.2010, the hotel was inspected by HRACC (South) on 22.04.2011 and without pointing out any discrepancy, the assessee was recommended by classification under three star category. In this case, admittedly, after visit of the Approval Committee on 27.04.2010, the application for star category classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ld. CIT(A) has erred in sustaining the restriction of the claim of depreciation on plant & machinery as well as building. In the computation statement, the assessee has not claimed depreciation on the asset capitalized towards the New Hotel since the assessee had claimed investment allowance under section 35AD of the Act. Since the Assessing Officer has not allowed investment allowance, he allowed depreciation on the asset @ 15% on building [₹.40,05,09,377/-] and @ 10% on plant and machinery [₹.38,12,76,393/-]. 6.1 On appeal, the assessee has claimed higher depreciation. The ld. CIT(A) has observed that there was no material before the Assessing Officer to suggest that the building and plant and machinery were eligible for depreciation at a higher rate being considered as a plant, he dismissed the ground raised by the assessee. 6.2 We have heard rival contentions. The Assessing Officer has allowed depreciation on the asset @ 15% on building and @ 10% on plant and machinery. Before the ld. CIT(A), the assessee has claimed higher depreciation for hotel. However, the ld. CIT(A) confirmed the order of the Assessing Officer. Before us, the ld. Counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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