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TMI BlogCourt Upholds Deduction for Operational Hotel under Section 35AD Despite Administrative DelaysX X X X Extracts X X X X X X X X Extracts X X X X ..... IGH COURT addresses whether the assessee is entitled to claim a deduction u/s 35AD(5)(aa) of the Income Tax Act, 1961 , for the Assessment Year 2011-12. The Revenue appealed against the ITAT's decision, which allowed the deduction despite the assessee obtaining a three-star classification in the subsequent assessment year. Arguments Presented Revenue's Argument: The Revenue, argued that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee was entitled to the deduction, as the hotel was operational and generating income accepted by the Revenue. Court's Analysis Tribunal s Findings: The Tribunal noted that the Department did not dispute the hotel's operation in 2010-11 and accepted the income generated. The Tribunal emphasized that the application for the star classification was timely, and the delay in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cut-off date of 31.3.2008. The Local Authority later clarified that the project's completion date was 27.2.2008. Based on this clarification, the assessee claimed a deduction u/s 80IB(10)(a) . The Assessing Officer disallowed the claim because the completion certificate was not produced before 31.3.2008. This decision was valid as Explanation (ii) specifically stated that the completion da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, considering the beneficial nature of the provision, to allow deduction, was valid and justified. Holistic Interpretation: The court adopted a holistic interpretation, stating that beneficial provisions intended to encourage certain businesses, such as hotels, should be applied liberally. Since the hotel was operational and generating income, and the delay in classification was administrative, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITAT's decision, allowing the assessee to claim a deduction u/s 35AD(5)(aa) for the Assessment Year 2011-12. The court ruled that the delay in obtaining the three-star classification was due to procedural requirements beyond the assessee's control. Since the hotel was operational and generating income, the deduction was deemed valid. Full Text : 2018 (12) TMI 333 - MADRAS HIGH COURT - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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