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TMI Blog2022 (2) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... led application much before date of commencement of business and has also incurred expenditure for specified business, merely for reason for delay in getting approval from authority, expenditure incurred for specified business cannot be disallowed. We are of the considered view that for ascertaining correct facts with regard to claim of the assessee that it was mistake of competent authority in granting approval for relevant assessment year, even though the assessee has filed application in time needs to be examined by the Assessing Officer in light of evidences filed by the assessee. Hence, we set aside order of the learned CIT(A) and restore the issue to file of the Assessing Officer and direct the A.O. to examine claim of the assessee in light of arguments of the assessee that there was no fault from their side in getting approval from competent authority. In case, the Assessing Officer finds that there is a delay from competent authority side in granting approval, then the Assessing Officer is directed to allow claim of deduction u/s. 35AD of the Act, in respect of expenditure incurred for specified business. Appeal filed by the assessee is treated as allowed for statistical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of capital expenditure incurred for purpose of development of hotel amounting to ₹ 5,30,65,42,205/-. During the course of assessment proceedings, the Assessing Officer, on the basis of information submitted by the assessee and also on analysis of provisions of section 35AD of the Income Tax Act, 1961, opined that in order to claim deduction 35AD of the Act, specified business should be carried on by the assessee in the previous year in which deduction is claimed. In the present case, the assessee has claimed deduction for whole of the capital expenditure incurred for development of hotel u/s. 35AD of the Act for assessment year 2014-15 and further, on perusal of details filed by the assessee, including approval to the assessee granted by the competent authority i.e Assistant Director-General (H R) and Member Secretary (HRACC) has certified and classified hotel of the assessee under five star category from 21.03.2014 to 20.03.2019, which is beyond assessment year in which the assessee has claimed deduction. Therefore, the Assessing Officer opined that deduction claimed by the assessee towards capital expenditure incurred for development of hotel is not allowable u/s. 35AD o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961. The relevant findings of the learned CIT(A) are as under:- 4.1 The only point for consideration in this appeal is whether the assessing officer was justified in denying the claim for deduction made by the appellant under section 35AD of the Act. The assessing officer denied the deduction as the appellant had not satisfied the conditions laid down in the provisions of the said section 35AD. According to the assessing officer, the appellant had failed to obtain the star classification for the hotel us required under section 35AD for the impugned year under consideration and therefore the appellant is not entitled to the deduction. 4.2 On the other hand, the AR submitted that section 35AD(1) does not mandate a prior approval from Central Government for claiming deduction. It only specifies that star classification needs to be obtained and. the appellant had obtained star classification in the financial year 2013-14 from the Ministry of Tourism though it had applied for such classification very much earlier, The AR therefore submitted that the appellant should not be unduly punished for the delay of the Ministry of Tourism in giving star classific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no dispute with regard to fact that the assessee has developed five star hotel and such specified business has been approved by the competent authority. Therefore, merely for the reason approval has been accorded from subsequent financial year, deduction claimed towards capital expenditure incurred for development of hotel cannot be rejected, when the assessee has proved with necessary facts that it has filed its application much prior to commencement of business and further, there is a delay from the side of competent authority to accord approval. In this regard, he relied upon decision of the Hon'ble Jurisdictional High Court of Madras in the case of CIT vs Ceebros Hotels P.Ltd. (2018) 409 ITR 422. 7. The learned DR, on the other hand, strongly supporting order of the learned CIT(A) submitted that as per the provisions of section 35AD of the Act, the assessee shall claim deduction towards expenditure incurred for specified business, in case such business has been commenced on or after specified period. In this case, the assessee has claimed deduction for impugned assessment year, even though the competent authority has not accorded approval to the facility. Althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f five years and further, the assessee has filed application for approval on 12th May, 2011. The assessee further contended that there was a delay at the Department of Tourism, for processing application filed by the assessee and the assessee had to submit fresh applications for several times and process took considerable time at the Department of Tourism. Therefore, in the process, they have visited our facility only on 19.03.2014 and has granted approval w.e.f 21.03.2014 for the period from 21.03.2014 to 20.03.2019 Therefore, when the assessee has filed application much before date of commencement of business and has also incurred expenditure for specified business, merely for reason for delay in getting approval from authority, expenditure incurred for specified business cannot be disallowed. 9. We have given our thoughtful consideration to the facts brought out by the Assessing Officer in light of arguments advanced by the learned A.R for the assessee and in principle, we are in agreement with the arguments advanced by the learned A.R for the assessee for reason that it is not in dispute that the assessee has carried out specified business of running five star category hotel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue has not disputed fact that the assessee is operating a new hotel of five star category from the relevant financial year and also had filed an application for classification of hotel before the assessment year in question. But, fact remains that the assessee is shifting onus on the competent authority in not according approval during the relevant assessment year. According to the assessee, it has filed an application in the year 2011 itself, but the competent authority has misplaced their application and the assessee had to resubmit application for many times and this process took considerable time. No doubt, if claim of the assessee is correct that competent authority has taken considerable time for granting approval, because of their fault, then the assessee cannot be penalized by denying deduction claimed under said section when all conditions prescribed therein are satisfied. But, claim of the assessee that there was considerable delay from the competent authority is not substantiated with necessary evidences. In case, claim of the assessee is correct that it has filed application in the year 2011 and pursued its application for getting approval, but competent authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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