THE DY. CIT, CIRCLE-3(1)(2),, AHMEDABAD vs. M/S. RAYSONS RESIDENCY PVT. LTD.,, AHMEDABAD

PER MAHAVIR PRASAD - JM:

This appeal has been preferred by the Revenue against the order of Ld. CIT(A) dated 24/08/2015 arising from assessment order dated 10/02/2015. Revenue has taken following ground that the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 6,26,69,610/- made 35AD(5)(aa) of the Act. The Ld. CIT(A) has erred in law and on facts by not appreciating the facts that the Indian Tourism, Ministry of Tourism, Govt. of India had given

ITA No.3214/Ahd/2015 [DCIT vs. Raysons Residency Pvt. Ltd.] A.Y. 2012-13 - 2 - approval with the condition that the assessee should apply

separately to avail the concession under the Act, however the

assessee failed to apply separately for the purpose of deduction

under the Act. Fact emanates from assessment order.

“(1)That assessee had made application to India Tourism Mumbai with a fees of Rs. 8,000/- by Demand Draft. India Tourism, Mumbai, a part of Ministry of Tourism, Govt. of India vide its letter No. ITM(750)(1111)/2010 dated 02/08/2010 had submitted that the demand draft submitted by the assessee of Rs. 8,000/- is returned for necessary amendment as same was payable at New Delhi, instead of Mumbai.

(2) Check list of facilities and services were not submitted. (3) Copy of land used/commencing service is not certified.

(4) In its para-2 of letter No. ITM(750)(AP)(723)/2010 dated 30/08/2010 addressed to the assessee, India Tourism had clarified that though permission for 3 star hotel is granted, the approval does not constitute an approval for fiscal concession under the Income Tax Act. For fiscal concession, if any, under the I.T. Act separate and specific approval is to be sought and applied for after hotel starts functioning. Relevant portion of the same is as under:-

“2. This approval does not constitute approval under the Income Tax Act, 1961. For fiscal concessions, if any, under the Income Tax Act, separate and specific approval will have to be sought and applied for after the hotel starts functioning. ”Further in para-3, it was mentioned that the benefit under the specified section of I.T. Act will approve from the date on which the Hotel approved at the project stage starts functioning subject to hotel expressing its intention to department to avail the same in writing. Relevant portion of the same is reproduced as under:-

“It may be noted that the benefits under the specified sanctions of the Income Tax Act, if any, will accrue from the date on which the hotel approved at the project stage starts functioning subject to the hotel expressing its intention to the Department of Tourism, Govt. of India, C-1 Hutments, Dalhousie Road, New Delhi 110011 to avail the same in writing.”

Further, the assessee had not furnished following licenses:- 1. Completion Certificate 2. Occupation Certificate 3. Treated Potable Water License 4. Weights and Measures Certificate

ITA No.3214/Ahd/2015 [DCIT vs. Raysons Residency Pvt. Ltd.] A.Y. 2012-13 - 3 - 5. Hygiene and Sanitary Certificate 6. Sewage License 7. Structural Safety Certificate In view of above, it is clear that the Indian Tourism, the Ministry of Tourism, Govt. of India had given its approval with the condition that the assessee should apply separately to avail the concession under Income Tax Act. The assessee had not applied separately nor furnished any evidence from which it can be established that a separate application is being made by the assessee to avail the concession under the I.T. Act. Further the assessee had not obtained all kind of licenses which are necessary for running of any hotel business. Therefore, it is very much clear that the assessee had not fulfilled all conditions which were specified to avail deduction u/s. 35AD of the I.T. Act and finally made disallowance of Rs. 6,26,69,610/-.”

under section 35AD(5)(aa) of the Act assessee preferred first

statutory appeal before the Ld. CIT(A) who allowed the appeal of

the assessee on the ground that no specific permission is laid down

in section 35AD and/or relevant income tax rules the action of AO

seems to be unjustified in denying deduction under section 35AD

and held that assessee had completed necessary formalities in terms

of obtaining licenses from different authorities were obtained by the

assessee.

CIT(A), we have gone through the relevant record and amount the

question before us is whether assessee is entitled for deduction

under section 35AD(5)(aa) of the Act or not and in order to avail the

benefits of sec. 35AD(5)(aa) of the Act assessee has to fulfill the

conditions being expenditure incurred prior to commencement of its

ITA No.3214/Ahd/2015 [DCIT vs. Raysons Residency Pvt. Ltd.] A.Y. 2012-13 - 4 - operation and the amount is capitalize in the books of accounts of

the assessee on the operation. As per provisions of section, any

capital expenditure incurred by the assessee prior to commencement

of operation of the new unit shall be allowed as deduction in the

previous year in which the assessee commences the operation of

hotel business. Sec. 35AD(5)(aa) is regarding deduction in respect of expenditure on specified business:- “on or after 1st day of April,

2010, where the specified business is in the nature of building and

operating a new hotel of Two Star or above category as classified by

the Central Government.” In respect of its contention assessee

submitted copy of permission granted by the Ministry of Tourism

letter dated 30/08/2010 wherein approval of three star hotel has

been granted by the Ministry and assessee has filed Building House

Permission issued by the municipal authority dated 18/10/2011 for

granting the permission of hotel and assessee submitted details with

the AO for following documents along with copies of assessee

submitted letter dated 09/02/2015 along with following documents

copy of:

“1. Eating house license 2. License for keeping of lodging house 3. Professional tax registration certificate 4. B.U. permission 5. Permit order under Gujarat tax on luxuries 6. Consent to operate (Pollution control) 7. Kitchen waste removal agreement 8. Lift license 9. License under food safety and standard Act, 2006 10. Certificate for fire safety measure 11. Checklist and details submitted with Tourism Department

ITA No.3214/Ahd/2015 [DCIT vs. Raysons Residency Pvt. Ltd.] A.Y. 2012-13 - 5 - 12. Approval of proposed three star hotel project”

favour of the assessee. Thus we dismiss the appeal of the Revenue.

This Order pronounced in Open Court on 28/02/2019

Sd/- Sd/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 28/02/2019 True Copy TANMAY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।