9911796707
TMI Blog2021 (12) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the assessee is entitled for deduction towards such expenditures u/s.32 of the Act by way of depreciation over a period of time. There is no loss to the revenue when the whole issue is viewed in its entirety, because when the assessee derives the benefit of Section 35AD of the Act it saves payment of tax in the initial years but in the subsequent years ends up paying higher tax as it is deprived of the benefit of depreciation u/s. 32 of the Act. Provisions of section 35AD of the Act, only helps the assessee to maintain higher cash liquidity during the initial years of its business. Once deduction u/s.35AD of the Act is claimed then by virtue of section 35AD(4) of the Act, no other deduction in respect of these expenditure shall be allowed as deduction - the beneficial provisions of the Act and our observations mentioned herein above in the instant case before us the assessee is entitled for the benefit of deduction u/s. 35AD towards the expenditure incurred by it for establishing its hotel business of specified category as provided under the Act - we hereby direct the Ld. AO to grant deduction to the assessee under the provisions of section 35AD - Appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 7. Intangibles 23,89,515 Total 1,01,98,52,291 4. It was further observed by the Ld.AO from Note-5 of the Balances Sheet that the expenditure incurred towards building pertained to improvements to leasehold building during the FY 2011-12. Further, in Note-2 to the Fixed assets schedule of the balance sheet it was stated that the land and building was taken on lease for 60 years extendable for further period of 30 years. The assessee vide its letter dated 8/3/2015 made the following submissions before the Ld. AO. 4.6 . With reference to your query on the admissibility of the deduction under section 35AD of the IT Act, we submit herewith the following: The Vivanta by Taj Begumpet hotel at Begumpet, Hyderabad was constructed on land that was leased with the bare shell constructed by the lessor. The bare shell comprised of the pillars and slabs for ground + 8 Floors and 3 basements for car parks as also brick walls on all the floors with one layer of plaster, a water tank and 2 passenger lifts and 1 service lift. TAJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction (eg software companies, shopping malls, multiplexes etc) where in just a shell with pillars and slabs with the basic plastering is sufficient to commence operations. Hence, we submit that owner of the land had constructed only core shell for part of the building and leased out the same to our company and it is the expenditure of capital nature incurred by our company amounting to ₹ 101.98 Crs that has resulted in setting up of the Hotel Vivanta by Taj Begumpet as a five-star hotel. We therefore submit that deduction claimed by our company under section 35AD complies with the requirement in the section. 4.1. However, the Ld.AO with the observations from the balance sheet and the submissions of the assessee came to a conclusion that the assessee neither owned the land or building nor constructed the building. 5. Accordingly, the ld. AO rejected the submission of the assessee and denied the claim of deduction U/s. 35AD of the Act by observing as under:- 4.7. The above submissions of the assessee were considered and found to be not acceptable for the following facts. i) S. 35AD(8)(c)(iv) of the Act, gives the meaning of specified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r slum re-development 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 and commences operation on or after the 1st day of April, 2010. 9.2.1 Sub-section (3) of section 35AD has been substituted so as to provide that where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of Chapter VI-A under the heading C.-Deductions in respect of certain incomes in relation to such specified business for the same or any other assessment year. A similar amendment has been made in section 80A. 9.2.2 Applicability - These amendments have been made applicable with effect from 1 st April, 2011 and will accordingly apply to the assessment year 2011-12 and subsequent assessment years. iii) In the light of the above, provisions, it would be pertinent to discuss the facts of the assessee s case as follows a) On perusal of the lease deed, it is seen that the said deed was executed on 14/12/2006 by and between Sri R. Surend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on U/s. 35AD of the Act. The Ld. DR on the other hand relied on the orders of the Ld. Revenue Authorities. 8. We have heard the rival submissions and carefully perused the material available on record. From the above it is apparent, that the Ld. Revenue Authorities had denied deduction U/s. 35AD of the Act to the assessee because of the following reasons: - (i) The assessee had not constructed the main structure of the building . (ii) The intention of section 35AD is for the purpose of promoting fresh investment in specified business and in the instant case the assessee had not made any investment in the land and building. (ii) The construction of the building was carried by the Lesser in the FY 2007-08. 8.1 At this juncture it is pertinent to mention that the meaning of the word building does not appear to be defined under the provisions of the Income Tax Act, 1961. When a word is not defined in the Act, it is permissible to refer to Dictionaries to find out the general sense in which the word understood in common parlance as held by the Hon ble Apex Court the case Nagulapatti Lakshmamma vs. Mupparaju Subbaiah (1998) 5 SCC 285. Further, the words of a S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) Interior of the Guest Rooms and Public Arears. 2) All Movable Assets. 3) Complete Plant Machinery 4) All equipment for operation of the hotel. 5) Elevators (2). 6) Sewerage Treatment Plant (STP). 7) Operating Supplies. 8) Air Conditioning Systems. 9) Fire Fighting Equipment. 10) All Electrical Works. 11) All Plumbing works with Fixtures and Fittings. 12) Any other works, item/equipment required to complete the hotel for the commencement of the operation and not included in the Annexure-1 hereto. Clause-5, Page No.7 specifies that the lessor shall construct only what he specified in Annexure-1. Any further construction has to be undertaken by the lessee(assessee). Clause-8, page No.8 specifies that on handing over the possession of the property to the lessee(assessee), the lessee shall take up the remaining construction work as mentioned in Annexure-II within a period of Nine Months. 11. From the above, it is apparent that the assessee is also required to spent considerable amount for constructing a portion of the building such as interior civil works, plumbing works, electrical works and other civi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
